Registration No. 333-____
As filed with the Securities and Exchange Commission on July 15, 1998
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. __ [ ] Post-Effective Amendment No. __
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PHOENIX INCOME AND GROWTH FUND
(Exact Name of Registrant as Specified in Charter)
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices)
c/o Phoenix Equity Planning Corporation-Equity Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
Thomas N. Steenburg, Esq.
Vice President, Counsel and Secretary
Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115-0479
(Name and Address of Agent for Service)
Copies of Communications to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
------------------------------------
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
------------------------------------
Registrant is relying on Section 24(f) of the Investment Company Act of
1940, as amended, which permits registration of an indefinite number of shares
of beneficial interest, $.0001 par value per share of the Registrant.
Accordingly, no filing fee is due in connection with this Registration
Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
PHOENIX INCOME AND GROWTH FUND
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Caption or Location in
Form N-14 Item No. and Caption Prospectus/Proxy Statement
- ------------------------------ --------------------------
Part A Information Required in Prospectus/Proxy Statement
------
<S> <C> <C>
1. Beginning of Registration Statement Cover Page; Cross Reference Sheet
and Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Table of Contents
Page of Prospectus
3. Fee Table, Synopsis Information and Risk Factors Summary; Principal Risk Factors; Comparison of
Investment Objectives and Policies
4. Information about the Transaction Summary; The Proposed Reorganization;
Comparative Information on Shareholder Rights;
Exhibit A (Agreement and Plan of
Reorganization)
5. Information about the Registrant Cover Page; Summary; Principal Risk Factors;
Comparison of Investment Objectives and
Policies; The Proposed Reorganization;
Comparative Information on Distribution
Arrangements; Comparative Information on
Shareholder Services; Comparative Information
on Shareholder Rights; Management and Other
Service Providers; Additional Information About
The Funds; Current Prospectus of Registrant
6. Information about the Company Being Acquired Summary; Comparison of Investment Objectives
and Policies; The Proposed Reorganization;
Comparative Information on Distribution
Arrangements; Comparative Information on
Shareholder Services; Comparative Information
on Shareholder Rights; Additional Information
About The Funds; Prospectus of the Phoenix
Convertible Fund Series dated February 28, 1998
7. Voting Information Summary; The Proposed Reorganization;
Comparative Information on Shareholder Rights;
Voting Information
8. Interest of Certain Persons and Experts The Proposed Reorganization
9. Additional Information Required for Not Applicable
Reoffering By Persons Deemed to be Underwriters
<PAGE>
Caption or Location in
Form N-14 Item No. and Caption Prospectus/Proxy Statement
- ------------------------------ --------------------------
Part B: Information Required in Statement of Additional Information
------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information about the Registrant Cover Page; Statement of Additional Information
of Registrant dated August 28, 1997
13. Additional Information about the Cover Page; Statement of Additional Information
Company Being Acquired of the Phoenix Series Fund dated February 28,
1998
14. Financial Statements Annual Report of the Registrant for the year
ended April 30, 1998; the Annual Report of
Phoenix Series Fund for the year ended
October 31, 1997; Semi-Annual Report of the
Phoenix Series Fund for the six-month period
ended April 30, 1998; and Pro Forma Financial
Statements
Part C: Other Information
------
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
</TABLE>
<PAGE>
PART A
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
a series of
Phoenix Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
-----------------------------------------------------
August __, 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 [_____] 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 __, 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) [________].
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
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On 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 [____] 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
August __, 1998
101 Munson Street
Greenfield, Massachusetts 01301
<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 __, 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 [________] 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
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 current Prospectus for the Income and Growth Fund, dated August 28,
1997, (the "Income and Growth Prospectus") is included with this
Prospectus/Proxy Statement and is incorporated by reference herein.
<PAGE>
A Prospectus and Statement of Additional Information for the Convertible
Fund, each dated February 28, 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, 1997, 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 __, 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 __, 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 __, 1998
<PAGE>
TABLE OF CONTENTS
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................................18
FISCAL YEAR..................................................................20
MANAGEMENT AND OTHER SERVICE PROVIDERS.......................................21
VOTING INFORMATION...........................................................21
ADDITIONAL INFORMATION ABOUT THE FUNDS.......................................23
MISCELLANEOUS................................................................24
<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 __, 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 (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
<PAGE>
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>
[Note: to be updated based on 4/30/98 financial statements.]
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
following the reorganization.
Income and Growth Fund
Convertible Fund
-------------------------
<TABLE>
<CAPTION>
Class A Class B
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........... 4.75% None
Maximum Sales Load Imposed on Reinvested
Dividends..................................... None None
Deferred Sales Load (as a percentage
of original purchase price or redemption
proceeds, as applicable)...................... None 5% during the first
year, decreasing 1%
annually to 2%
during the fourth
and fifth years;
dropping from 2% to
0% after the fifth year
3
<PAGE>
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 for the Income and Growth Fund would be .30%
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>
Pro Forma Combined Income and Growth Fund
1 Year 3 Years 5 Years 10 Years
Class A shares.................. $58 $81 $106 $177
Class B shares(1)............... $59 $79 $101 $199
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>
Pro Forma Combined Income and Growth Fund
1 Year 3 Years 5 Years 10 Years
Class A shares.................. $58 $81 $106 $177
Class B shares(1)............... $19 $59 $101 $199
- --------------
(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.
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 __, 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. 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
5
<PAGE>
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 contemplated 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.
6
<PAGE>
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 Income and Growth 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 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.
7
<PAGE>
<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 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 and the year-to-date returns reflect
the deduction of a 5% 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.
8
<PAGE>
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.
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
9
<PAGE>
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."
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
10
<PAGE>
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).
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Borrowing The Convertible Fund may borrow The Income and Growth Fund
money (a) for temporary may 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.
- --------------------------------------------------------------------------------------------------------
Pledging The Convertible Fund may not The Income and Growth Fund
pledge, mortgage or hypothecate its may not pledge, mortgage or
assets to an extent greater than 10% hypothecate any securities or
of the value of its total assets and other property. (F)
any such pledge, mortgage or
hypothecation must be to secure
permitted borrowings. (F)
- --------------------------------------------------------------------------------------------------------
Debt Securities-Credit The Convertible Fund may invest The Income and Growth Fund
Quality up to 100% of its total assets in may invest up to 35% of its
non-rated or non-investment grade assets in non-rated or
convertible securities. (nf) non-investment grade high
risk fixed income securities.
(nf)
- --------------------------------------------------------------------------------------------------------
Foreign Securities The Convertible Fund may invest The Income and Growth Fund
up to 25% of its net assets in may invest up to 100% of its
foreign securities. (nf) total assets in foreign
securities. (nf)
- --------------------------------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------------------------------
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- --------------------------------------------------------------------------------------------------------
Lending The Convertible Fund may not The Income and Growth Fund
make cash loans, except that it may may not make loans, except
(a) purchase bonds, notes or similar that it may lend portfolio
obligations customarily purchased securities up to 25% of net
by institutional investors and (b) assets at the time the loan is
enter into repurchase agreements made to broker/dealers or
(except that no more than 10% of other financial institutions not
the Convertible Fund' net assets affiliated with the Trust or the
may be subject to repurchase Adviser, subject to conditions
agreements maturing in more than established by the Adviser
seven days). (F) and may enter into repurchase
transactions in accordance
The Convertible Fund may not with the Income and Growth
make securities loans except that it Fund Prospectus. (F)
may make loans of its portfolio
securities up to 25% of the value of The purchase of bonds, notes
its total assets. (F) or similar obligations
customarily purchased by
institutional investors is not
considered as making loans
by the Income and Growth
Fund. (nf)
- --------------------------------------------------------------------------------------------------------
Illiquid Securities/Restricted The Convertible Fund may purchase The Income and Growth Fund
Securities illiquid securities, (including may not invest more than
repurchase agreements providing 15% of the value of its net
for settlement more than seven days assets in illiquid securities,
after notice) or restricted securities including (i) restricted
if such illiquid securities do not securities (except that the
constitute more than 15% of its net Board of Trustees may
assets. (F) determine that certain Rule
144A securities are liquid),
(ii) 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
purchase securities on margin, may not purchase securities
except that the Fund may obtain on margin or engage in short
such short-term credits as may be sales. (F)
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)
- --------------------------------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------------------------------
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- --------------------------------------------------------------------------------------------------------
Unseasoned Issuers The Convertible Fund may not The Income and Growth Fund
purchase securities of any issuer may not invest more than 5%
which together with predecessors of its net assets in securities
has a record of less than 3 years' of issuers (including their
continuous operation if as a result predecessors) who have been
more than 5% of its net assets in business for less than three
would be so invested. (F) years. (nf)
- --------------------------------------------------------------------------------------------------------
Other Investment Companies The Convertible Fund may not The Income and Growth Fund
purchase securities of other may not purchase any
investment companies, except in the security of an investment trust
open market at customary broker's except for purchases in the
commissions or as part of a plan of open market with no
merger or consolidation. (F) commission other than a
customary broker's
commission. (F)
- --------------------------------------------------------------------------------------------------------
Diversification The Convertible Fund may not The Income and Growth Fund
purchase securities of an issuer may not purchase any
(other than obligations issued or securities (other than U.S.
guaranteed by the U.S. government Government obligations) if,
or its agencies or instrumentalities) as a result, more than 5% of
if immediately thereafter (i) more the value of its total assets
than 5% of its total assets would be would be invested in
invested in the securities of such securities of a single issuer or
issuer or (ii) more than 10% of the more than 10% of any class
outstanding securities of any class of securities or more than
of such issuer would be held by the 10% of the outstanding voting
Convertible Fund or by all series of securities of any issuer would
the Trust in the aggregate. (F) be held. (F).
- --------------------------------------------------------------------------------------------------------
Industry Concentration The Convertible Fund may not The Income and Growth Fund
purchase any security if such may not invest more than
purchase would cause its aggregate 25% of its total assets in any
investment in any one industry to one industry or group of
exceed 25% of its total assets. (F) industries. (F)
- --------------------------------------------------------------------------------------------------------
Oil & Gas The Convertible Fund may not The Income and Growth Fund
invest in oil, gas and other mineral may not invest in interests
exploration programs although it (including leases) in oil, gas
may purchase securities of issuers or mineral development
which engage in whole or in part in programs. (nf)
such activities. (F)
- --------------------------------------------------------------------------------------------------------
Senior Securities The Convertible Fund may not issue The Income and Growth Fund
senior securities as defined in the may not issue senior
1940 Act except that it may borrow securities. (F)
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)
- --------------------------------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------------------------------
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- --------------------------------------------------------------------------------------------------------
Futures and Options The Convertible Fund may not The Income and Growth Fund
invest in puts, calls, straddles, or may write covered call
combinations thereof, except that options on securities and
the Convertible Fund may (a) write securities indices up to 25%
exchange-traded covered call of the value of its net assets.
options on portfolio securities and (nf)
enter into closing purchase
transactions with respect to such The Income and Growth Fund
options, and (b) invest up to 2% of does not have any investment
its total assets in exchange-traded restriction regarding
call and put options on securities investments in financial
and securities indices. (F) futures contracts and related
options. (nf)
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)
- --------------------------------------------------------------------------------------------------------
Securities held by Trustees The Convertible Fund may not The Income and Growth Fund
and Officers purchase or retain securities of any may not purchase or retain
issuer if any officer or Trustee of securities of any issuer if the
the Trust or officer or director of officers or trustees of the
PIC owns beneficially more than 1/2 Fund who own beneficially
of 1% of the outstanding securities more than 1/2 of 1% of such
of the issuer or all such persons issuer, together own
owning more than 1/2 of 1% of such beneficially more than 5% of
securities together own beneficially such issuer's securities. (nf)
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 or may not deal in real estate but
commodities or commodity may purchase marketable
contracts although the Convertible securities of companies that
Fund may purchase securities of deal in real estate or interests
issuers which deal in real estate or therein, including real estate
commodities and may purchase investments by excluding real
securities which are secured by real estate limited partnerships.
estate interests such as real estate (F)
investment trusts. (F)
The Income and Growth Fund
may not deal in commodities
or commodities contracts.
(F)
- --------------------------------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------------------------------
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- --------------------------------------------------------------------------------------------------------
Mortgage-Related and Other No fundamental or non-fundamental The Income and Growth Fund
Asset-Backed Securities restriction may invest in securities that
directly or indirectly
represent an ownership
participation in, or are
secured by or payable from
mortgage loans in real
property. The Income and
Growth Fund may invest up
to 5% of its assets in
privately-issued asset backed
securities, including
collateralized mortgage
obligations. (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
Planning 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
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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.
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 January 1, 1994 (the "Phoenix
Income and Growth Fund
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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 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.
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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.
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
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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 approximately
[______] and [_______] 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 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
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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 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
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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. Based on holdings and total shares outstanding as of March
31, 1998, and assuming consummation of the Reorganization, no person would own
beneficially or of record 5% or more of the outstanding shares of the
Convertible Fund or the Combined Income and Growth Fund.
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.
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, 1997, 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 28, 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 28, 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.
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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 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.
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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
1/3/92 to
1 Year 5 Years 10 Years 4/30/98
<S> <C> <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>
PLOT POINTS FOR INCOME & GROWTH AT 4/30/98
OLD NEW
BALANCED BALANCED INCOME &
S&P 500 BENCHMARK BENCHMARK GROWTH A
------- --------- --------- --------
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
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.
25
<PAGE>
*** 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.
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.
PHOENIX INCOME AND GROWTH FUND
Financial Highlights
For a share of beneficial interest outstanding throughout each period
Year Ended April 30, 1998
-------------------------
<TABLE>
<CAPTION>
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.
26
<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.
27
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this _____ day of _____________, 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").
<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
2
<PAGE>
contain the names 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 and reports have been paid or provision has been made for the payment
thereof, and to
3
<PAGE>
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.
(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
4
<PAGE>
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.
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
<PAGE>
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.
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
6
<PAGE>
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 respects, of the transactions contemplated hereby shall have been
obtained, except
7
<PAGE>
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
8
<PAGE>
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.
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.
9
<PAGE>
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.
10
<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
By: __________________________________________
Name:
Title:
PHOENIX SERIES FUND, on behalf of the Phoenix
Convertible Fund Series
By: __________________________________________
Name:
Title:
11
<PAGE>
[cover]
PHOENIX FUNDS
PROSPECTUS
AUGUST 28, 1997
Phoenix Income and Growth Fund
[logo] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX INCOME AND GROWTH FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
August 28, 1997
Phoenix Income and Growth Fund (the "Fund") is a diversified, open-end
management investment company with a primary investment objective of investing
in a diversified group of securities that are selected for current yield
consistent with preservation of capital. The secondary objective of the Fund,
which is a non-fundamental policy, is to achieve capital appreciation when it
is consistent with the Fund's primary objective.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. No dealer, salesperson or
any other person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Fund, Adviser or Distributor. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state in which or to any person to whom it is
unlawful to make such offer. Neither the delivery of this Prospectus nor any
sale hereunder shall, under any circumstances, create an implication that
information herein is correct at any time subsequent to its date. Investors
should read and retain this Prospectus for future reference. Additional
information about the Fund is contained in the Statement of Additional
Information, dated August 28, 1997, which has been filed with the Securities
and Exchange Commission (the "Commission") and is available upon request at no
charge by calling (800) 243-4361 or by writing to Phoenix Equity Planning
Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200. The Statement of Additional Information is incorporated herein by
reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity, and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board, or any other agency and involve
investment risk, including possible loss of principal.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
TABLE OF CONTENTS
Page
-----
INTRODUCTION ................................. 3
FUND EXPENSES ................................. 4
FINANCIAL HIGHLIGHTS ........................ 5
PERFORMANCE INFORMATION ..................... 6
INVESTMENT OBJECTIVES AND POLICIES ............ 6
INVESTMENT TECHNIQUES AND RELATED RISKS ...... 7
INVESTMENT RESTRICTIONS ..................... 10
MANAGEMENT OF THE FUND ........................ 10
DISTRIBUTION PLANS ........................... 11
HOW TO BUY SHARES ........................... 13
INVESTOR ACCOUNT SERVICES ..................... 17
NET ASSET VALUE .............................. 18
HOW TO REDEEM SHARES ........................ 19
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 20
ADDITIONAL INFORMATION ........................ 21
2
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of
Phoenix Income and Growth Fund (the "Fund"). The Fund is a diversified,
open-end management investment company established as a Massachusetts business
trust. The Fund's primary investment objective is to invest in a diversified
group of securities that are selected for current yield consistent with
preservation of capital. The secondary objective of the Fund is to achieve
capital appreciation when it is consistent with the Fund's primary objective.
Investment Adviser
National Securities & Research Corporation (the "Adviser" or "National")
is the investment adviser of the Fund. The Adviser is a subsidiary of Phoenix
Duff & Phelps Corporation and an indirect subsidiary of Phoenix Home Life
Mutual Insurance Company. See "Management of the Fund" for a description of the
Investment Advisory Agreement and management fees.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Fund's shares. See "Distribution Plans"
and the Statement of Additional Information. Equity Planning also acts as
financial agent of the Fund and as such receives a fee. See "The Financial
Agent." Equity Planning also serves as the Fund's transfer agent. See "The
Custodian and Transfer Agent."
The Fund has adopted separate distribution plans pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended (the "1940 Act") for all
classes. Pursuant to the distribution plan adopted for Class A Shares, the Fund
shall reimburse the Distributor up to a maximum annual rate of 0.30% of the
Fund's average daily Class A Share net assets for distribution expenditures
incurred in connection with the sale and promotion of Class A Shares and for
furnishing of shareholder services. Although the Class A Shares Plan provides
for a 0.30% distribution fee, the Distributor has voluntarily agreed to limit
the 12b-1 fee charged to Class A Shares to 0.25% for the fiscal year 1998.
Pursuant to the distribution plan adopted for Class B Shares, the Fund shall
reimburse the Distributor up to a maximum annual rate of 1.00% of the Fund's
average daily Class B Share net assets for distribution expenditures incurred
in connection with the sale and promotion of Class B Shares and for furnishing
of shareholder services. See "Distribution Plans."
Purchase of Shares
The 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 (the
"Class A Shares") or (ii) on a contingent deferred basis (the "Class B
Shares"). Completed applications for the purchase of shares should be mailed to
the Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301.
Class A Shares are offered to the public at the next determined net asset
value after receipt of the order by State Street Bank and Trust Company plus a
maximum sales charge of 4.75% of the offering price (4.99% of the amount
invested) on single purchases of less than $50,000. The sales charge for Class
A Shares is reduced on a graduated scale on single purchases of $50,000 or more
and subject to other conditions stated below. See "How to Buy Shares," "How to
Obtain Reduced Sales Charges on Class A Shares," and "Net Asset Value."
Class B Shares are offered to the public at the next determined net asset
value after receipt of an order by State Street Bank and Trust Company, with no
sales charge. Class B Shares are subject to a sales charge if they are redeemed
within five years of purchase. See "How to Buy Shares" and "Deferred Sales
Charge Alternative--Class B Shares."
Shares of each Class represent an identical interest in the investment
portfolio of the Fund and have the same rights, except that Class B Shares bear
the cost of the higher distribution fees which cause the Class B Shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. See "How
to Buy Shares."
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investment program designated "Investo-Matic") and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment amounts
are available under certain circumstances. See "How to Buy Shares."
Redemption of Shares
Class A Shares may be redeemed at any time at the net asset value per
share next computed after receipt of a redemption request by Equity Planning,
the Fund's transfer agent. Class B shareholders redeeming shares within five
years of the date of purchase will normally be assessed a contingent deferred
sales charge. See "How to Redeem Shares."
Risk Factors
There can be no assurance that the Fund will achieve its investment
objectives. In addition, special risks may be presented by the particular types
of securities in which the Fund may invest. For example, investment in
lower-rated securities is speculative and involves risks not associated with
investment in higher rated securities, including overall greater risk of
non-payment of interest and principal and potentially greater sensitivity to
general economic conditions and changes in interest rates. See "Investment
Objectives and Policies."
3
<PAGE>
FUND EXPENSES
The following table illustrates all fees and expenses a shareholder will
incur. The fees and expenses set forth in the table are for the fiscal year
ended April 30, 1997.
<TABLE>
<CAPTION>
Class A Shares
----------------
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) 4.75%
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds, None
as applicable)
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.70%
12b-1 Fees (a) 0.25%
Other Operating Expenses 0.23%
-----
Total Fund Operating Expenses 1.18%
=====
<CAPTION>
Class B Shares
-------------------------
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds, 5% during the first
as applicable) year, decreasing 1%
annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year.
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.70%
12b-1 Fees (a) 1.00%
Other Operating Expenses 0.23%
----
Total Fund Operating Expenses 1.93%
====
</TABLE>
- -----------
(a) "Rule 12b-1 fees" represent an asset based sales charge that, for a
long term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
While the Class A Share Distribution Plan continues to provide for a 0.30%
distribution fee, the Distributor has voluntarily agreed to limit the fee to
0.25% for the fiscal year 1998. Rule 12b-1 fees stated for Class B Shares
include a service fee.
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
Example* 1 year 3 years 5 years 10 years
- --------------------------------------------------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, (1) a 5% annual return and (2) redemption at the
end of each time period:
Class A Shares $59 $83 $109 $184
Class B Shares $60 $81 $104 $206
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of each
time period:
Class A Shares $59 $83 $109 $184
Class B Shares $20 $61 $104 $206
</TABLE>
*The purpose of the above table is to help the investor understand the various
costs and expenses the investor will bear directly or indirectly. The example
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown. Class B Share figures assume
conversion to Class A Shares after eight years. See "Management of the Fund,"
"Distribution Plans" and "How to Buy Shares."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for
respective fiscal years of the Fund. The financial information has been audited
by Price Waterhouse LLP, independent accountants. Their opinion and the Fund's
financial statements and notes thereto are incorporated by reference in the
Statement of Additional Information. The Statement of Additional Information
and the Fund's most recent Annual Report (containing the report of Independent
Accountants and additional information relating to Fund performance) are
available at no charge upon request by calling (800) 243-4361.
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------
Year Ended April 30
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.08 $ 8.88 $9.33 $9.92 $9.13
Income from investment operations:
Net investment income 0.40 0.44 0.46 0.45 0.43(1)
Net realized and
unrealized gain (loss) 0.66 1.22 0.03 (0.08) 0.88
-------- -------- -------- -------- ---------
Total from
investment operations 1.06 1.66 0.49 0.37 1.31
-------- -------- -------- -------- ---------
Less distributions:
Dividends from net
investment income (0.40) (0.42) (0.45) (0.44) (0.44)
Dividends from net
realized gains (0.88) (0.04) (0.33) (0.52) (0.08)
In excess of
accumulated net
realized gains -- -- (0.16) -- --
-------- -------- -------- -------- ---------
Total distributions (1.28) (0.46) (0.94) (0.96) (0.52)
-------- -------- -------- -------- ---------
Change in net asset value (0.22) 1.20 (0.45) (0.59) 0.79
-------- -------- -------- -------- ---------
Net asset value, end of period $ 9.86 $10.08 $8.88 $9.33 $9.92
======== ======== ======== ======== =========
Total return(2) 10.93% 19.01% 5.95% 3.38% 14.78%
Ratios/supplemental data:
Net assets,
end of period (thousands) $451,439 $493,454 $490,225 $524,855 $514,803
Ratio to average net assets of:
Expenses 1.18% 1.18% 1.16% 1.23% 1.33%
Net investment income 3.82% 4.39% 5.07% 4.57% 4.60%
Portfolio turnover rate 111% 107% 90% 88% 44%
Average commission rate paid(5) $0.0515 N/A N/A N/A N/A
<CAPTION>
Class B
-----------------------------------
Year Ended April 30
1992 1991 1990 1989 1988 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.48 $7.89 $8.31 $7.50 $8.21 $10.09 $ 8.88 $9.32
Income from investment operations:
Net investment income 0.45 0.45 0.50 0.50 0.49 0.31 0.36 0.39
Net realized and
unrealized gain (loss) 0.88 0.65 (0.08) 1.05 (0.38) 0.67 1.23 0.04
-------- -------- -------- -------- -------- -------- -------- --------
Total from
investment operations 1.33 1.10 0.42 1.55 0.11 0.98 1.59 0.43
-------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income (0.44) (0.44) (0.50) (0.52) (0.44) (0.32) (0.34) (0.38)
Dividends from net
realized gains (0.24) (0.07) (0.34) (0.22) (0.38) (0.88) (0.04) (0.33)
In excess of
accumulated net
realized gains -- -- -- -- -- -- -- (0.16)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.68) (0.51) (0.84) (0.74) (0.82) (1.20) (0.38) (0.87)
-------- -------- -------- -------- -------- -------- -------- --------
Change in net asset value 0.65 0.59 (0.42) 0.81 (0.71) (0.22) 1.21 (0.44)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $9.13 $8.48 $7.89 $8.31 $7.50 $9.87 $10.09 $8.88
======== ======== ======== ======== ======== ======== ======== ========
Total return(2) 16.28% 14.60% 4.58% 21.72% 1.63% 10.05% 18.14% 5.23%
Ratios/supplemental data:
Net assets,
end of period (thousands) $357,366 $254,013 $201,249 $158,190 $141,298 $370,929 $396,169 $386,515
Ratio to average net assets of:
Expenses 1.38% 1.43% 1.22% 0.95% 0.91% 1.93% 1.93% 1.91%
Net investment income 4.99% 5.52% 5.58% 6.37% 6.22% 3.06% 3.64% 4.32%
Portfolio turnover rate 32% 38% 19% 23% 33% 111% 107% 90%
Average commission rate paid(5) N/A N/A N/A N/A N/A $0.0515 N/A N/A
<CAPTION>
From
inception
1/3/92 to
1994 1993 4/30/92
-------- --------- ----------
<S> <C> <C> <C>
Net asset value,
beginning of period $9.92 $9.13 $8.98
Income from investment operations:
Net investment income 0.38 0.25(1) 0.08
Net realized and
unrealized gain (loss) (0.08) 1.00 0.15
-------- --------- ----------
Total from
investment operations 0.30 1.25 0.23
-------- --------- ----------
Less distributions:
Dividends from net
investment income (0.38) (0.38) (0.08)
Dividends from net
realized gains (0.52) (0.08) --
In excess of
accumulated net
realized gains -- -- --
-------- --------- ----------
Total distributions (0.90) (0.46) (0.08)
-------- --------- ----------
Change in net asset value (0.60) 0.79 0.15
-------- --------- ----------
Net asset value, end of period $9.32 $9.92 $9.13
======== ========= ==========
Total return(2) 2.62% 14.09% 2.69%(4)
Ratios/supplemental data:
Net assets,
end of period (thousands) $378,847 $217,432 $21,983
Ratio to average net assets of:
Expenses 1.91% 2.03% 2.08%(3)
Net investment income 3.98% 3.73% 4.07%(3)
Portfolio turnover rate 88% 44% 32%
Average commission rate paid(5) N/A N/A N/A
</TABLE>
(1)Computed using average shares outstanding.
(2)Maximum sales charge is not reflected in total return calculation.
(3)Annualized
(4)Not annualized
(5)For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
5
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements, sales literature or reports to shareholders or prospective
investors. Both yield and total return figures are computed separately for
Class A and Class B Shares in accordance with formulas specified by the
Securities and Exchange Commission and are based on historical earnings and are
not intended to indicate future performance.
The yield of the Fund will be computed by dividing the Fund's net
investment income over a 30-day period by an average value of invested assets
(using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount will be compounded for six
months and then annualized for a twelve-month period to derive the Fund's
yield.
Standardized quotations of average annual total return for Class A and
Class B Shares will be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in either Class A or Class B Shares over
a period of 1, 5 and 10 years (or up to the life of the class of shares).
Standardized total return quotations reflect the deduction of a proportional
share of each Class's expenses (on an annual basis), deduction of the maximum
initial sales load in the case of Class A Shares and the maximum contingent
deferred sales charge applicable to a complete redemption of the investment in
the case of Class B Shares, and assume that all dividends and distributions on
Class A and Class B Shares are reinvested when paid. It is expected that the
performance of Class A Shares will be better than that of Class B Shares as a
result of lower distribution fees paid by Class A Shares. The Fund also may
quote supplementally a rate of total return over different periods of time by
means of aggregate, average, and year-by-year or other types of total return
figures. In addition, the Fund may from time to time publish materials citing
historical volatility for shares of the Fund.
The Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Fund may compare its performance results to other investment
or savings vehicles (such as certificates of deposit) and may refer to results
published in various publications such as Changing Times, Forbes, Fortune,
Money, Barrons, Business Week and Investor's Daily, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street
Journal, The New York Times, Consumer Reports, Registered Representative,
Financial Planning, Financial Services Weekly, Financial World, U.S. News and
World Report, Standard & Poor's The Outlook, and Personal Investor. The Fund
may from time to time illustrate the benefits of tax deferral by comparing
taxable investments to investments made through tax-deferred retirement plans.
The total return may also be used to compare the performance of the Fund
against certain widely acknowledged outside standards or indices for stock and
bond market performance, such as the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia Far
East Index (EAFE), Consumer Price Index, Lehman Brothers Corporate Index and
Lehman Brothers T-Bond Index. The S&P 500 is a commonly quoted measure of stock
market performance and represents common stocks of companies of varying sizes
segmented across 90 different industries which are listed on the New York Stock
Exchange, the American Stock Exchange or traded over the NASDAQ National Market
System.
Advertisements, sales literature and other communications may contain
information about the Fund or Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund to
respond quickly to changing market and economic conditions. From time to time
the Fund may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital
gains components; or cite separately as a return figure the equity or bond
portion of the Fund's portfolio; or compare the Fund's equity or bond return
figure to well-known indices of market performance including but not limited
to: the S&P 500, Dow Jones Industrial Average, CS First Boston High Yield Index
and Salomon Brothers Corporate Bond and Government Bond Indices.
Performance information for the Fund reflects only the performance of a
hypothetical investment in Class A or Class B Shares of the Fund during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objective
and policies, characteristics and qualities of the portfolio, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future. For a description of the
methods used to determine total return for the Fund, see the Statement of
Additional Information.
The Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of the Fund and a comparison of that
performance to a securities market index.
INVESTMENT OBJECTIVES
AND POLICIES
The primary investment objective of the Fund is to provide an investment
in a diversified group of securities that are selected for current yield
consistent with preservation of capital. The primary investment objective of
the Fund is a fundamental policy which may not be changed without the approval
of the holders of a majority of the outstanding shares of the Fund. The
secondary investment objective of the Fund is to achieve capital appreciation
when that is consistent with the Fund's primary investment objective. The
secondary investment objective of the Fund is a non-fundamental policy
6
<PAGE>
that is changeable by a vote of the Trustees. At least 65% of the Fund's total
assets will be invested in securities that produce income and achieve capital
growth.
The Fund's portfolio will contain income producing securities, including
equity securities such as common stock, securities convertible to common stock,
debt securities, U.S. government securities and options on securities,
securities indexes and currencies. The proportion of holdings in each class of
securities will vary in accordance with the level of return that can be
obtained from these various types of securities. The Fund may invest up to 35%
of its total net assets in high risk fixed income securities (commonly referred
to as "junk" bonds.) The Fund may, but is not required to, dispose of debt
securities whose credit quality falls below investment grade. There is no
assurance that the Fund will meet its investment objectives.
Risk Considerations
Securities rated BBB/Baa by Standard & Poor's Corporation and Moody's
Investor's Services Inc., respectively, are medium grade investment obligations
that may have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments in the case of such obligations, than is the
case for higher grade securities. See the Appendix in the Statement of
Additional Information for a description of certain bond ratings.
While the Fund's management will seek to minimize risk through
diversification and continual evaluation of current developments in interest
rates and economic conditions, the market prices of lower rated securities
generally fluctuate in response to changes in interest rates and economic
conditions more than those of higher rated securities. Using credit ratings
helps to evaluate the safety of principal and interest payments but does not
assess market risk. Fluctuations in the market value of portfolio securities
subsequent to acquisition by the Fund will not normally affect cash income from
such securities but will be reflected in the Fund's net asset value.
Additionally, with lower rated securities, there is a greater possibility that
an adverse change in the financial condition of the issuer, particularly a
highly leveraged issuer, may affect its ability to make payments of income and
principal and increase the expenses of the Fund seeking recovery from the
issuer. Also, because the Fund intends to invest in securities in lower rating
categories, the achievement of its goals will be more dependent on the
Adviser's ability than would be the case if the Fund were investing in
securities in the higher rating categories. Lower-rated securities may be
thinly traded and less liquid than higher rated securities and therefore harder
to value and more susceptible to adverse publicity concerning the issuer.
Securities are selected for long-term investment and it is generally not
the policy of the Fund to purchase securities for trading purposes, although
there may be a limited number of short-term transactions. In general, the
assets of the Fund are kept fully invested in securities selected to meet the
investment objective of the Fund, but for temporary defensive purposes (as when
the Adviser believes that market conditions are adverse) any part of the assets
may be held, from time to time, in cash or money market instruments including
U.S. Government obligations maturing within one year from the date of purchase.
INVESTMENT TECHNIQUES
AND RELATED RISKS
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to U.S.
Government Securities. Repurchase agreements may be entered into only with
registered broker/ dealers or Government Securities dealers ("dealers") and
depository institutions ("banks") believed by National to present minimum
credit risk in accordance with guidelines approved by the Fund's Trustees.
National will review and monitor the creditworthiness of such dealers and
banks. Under such agreements, the dealer or bank agrees, upon entering into the
contract, to repurchase a security it sells at a time and price mutually agreed
upon with the purchaser of the security, thereby determining the yield during
the term of the agreement. This results in a fixed rate of return insulated
from market fluctuations during such period. The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the agreement at not less than the repurchase price, and such value will be
determined on a daily basis by marking the underlying securities to their
market value. With respect to any repurchase agreements with a maturity of
greater than one day, such agreement shall be collateralized in an amount at
least equal to 102 percent of the repurchase price. The Fund does not bear the
risk of a decline in value of the underlying security unless the seller
defaults under its repurchase obligation. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and losses, including (a)
possible decline in the value of the underlying securities during the period
while the Fund seeks to enforce its rights thereto; (b) possible subnormal
levels of income and lack of access to income during this period; and (c)
expenses of enforcing rights. The Fund may invest up to 10% of its net assets
in repurchase agreements; however, during temporary defensive periods, up to
50% of the Fund's net assets may be so invested.
When-Issued Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place more
than seven days in the future or after a period longer than the customary
settlement period for the particular security. Customary settlement for
newly-issued mortgage-backed securities occurs only when the composition of the
underlying mortgage pool is set, typically once a month.
At the time the Fund makes the commitment to purchase a security on a
when-issued or delayed delivery basis, it will record the transaction and
reflect the value of the security and
7
<PAGE>
the liability to pay the purchase price in determining the Fund's net asset
value. The value of the security on the settlement date may be more or less
than the price paid as a result of, among other things, changes in the level of
interest rates or other market factors. Thus there is a risk of loss which is
in addition to the risk of decline in the value of the Fund's other assets. No
interest accrues on the security between the time the Fund enters into the
commitment and the time the security is delivered. The Fund will establish a
segregated account with the Custodian in which it will maintain cash and liquid
high grade debt securities equal in value to commitments for when-issued or
delayed delivery securities. Such segregated securities either will mature or,
if necessary, be sold on or before the settlement date. While when-issued or
delayed delivery securities may be sold prior to the settlement date, it is
intended that the Fund will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons,
in which case the Fund may sell its interest in the securities rather than take
delivery, and may reinvest the proceeds in similar or other securities. The
Fund may not invest more than 5% of its net assets at the time of investment in
securities purchased on a when-issued or delayed delivery basis.
Investing in Foreign Securities
The Fund may invest in the securities of foreign issuers. The Fund may
invest in a broad range of foreign securities including equity, debt and
convertible securities and foreign government securities. While the Fund may
purchase the securities of issuers from various countries, it is anticipated
that its foreign investments will be primarily in securities of issuers from
the major industrialized nations such as the United Kingdom, France, Canada,
Germany and Japan. The Fund may also invest in domestic securities denominated
in foreign currencies.
Investing in the securities of foreign companies involves special risks
and considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, 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 of the
foreign securities held by the Fund will not be registered with, nor the
issuers thereof be subject to the reporting requirements of, the U.S.
Securities and Exchange Commission (the "SEC"). Accordingly, there may be less
publicly available information about the securities and about the foreign
company or government issuing them than is available about a domestic company
or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the United States economy in such respects as
growth of Gross National Product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payment positions.
Certain foreign countries are less stable politically than the United
States. The possibility exists that certain foreign governments may adopt
policies providing for expropriation or nationalization of assets, confiscatory
taxation, currency blockage or limitations on the use or removal of monies or
other assets of an investment company. Finally, the Fund may encounter
difficulty in obtaining and enforcing judgments against issuers of foreign
securities. The economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been and may continue to be adversely affected by economic conditions
in the countries with which they trade.
In investing in securities denominated in foreign currencies, the Fund
will be subject to the additional risk of currency fluctuations. An adverse
change in the value of a particular foreign currency as against the U.S.
dollar, to the extent that such change is not offset by a gain in other foreign
currencies, will result in a decrease in the Fund's assets. Any such change may
also have the effect of decreasing or limiting the income available for
distribution. Foreign currencies may be affected by revaluation, adverse
political and economic developments, and governmental restrictions. Although
the Fund will invest only in securities denominated in foreign currencies that
are fully convertible into U.S. dollars without legal restriction at the time
of investment, no assurance can be given that currency exchange controls will
not be imposed on any particular currency at a later date.
Securities of U.S. issuers denominated in foreign currencies may be less
liquid and their prices more volatile than securities issued by domestic
issuers and denominated in U.S. dollars. In addition, investing in securities
denominated in foreign currencies often entails costs not associated with
investment in U.S. dollar-denominated securities of U.S. issuers, such as the
cost of converting foreign currency to U.S. dollars, higher brokerage
commissions, custodial expenses and other fees. Non-U.S. dollar denominated
securities may be subject to certain withholding and other taxes of the
relevant jurisdiction, which may reduce the yield on the securities to the Fund
and which may not be recoverable by the Fund or its investors.
The Fund will calculate its net asset value and complete orders to
purchase, exchange or redeem shares only on a Monday-Friday basis (excluding
holidays on which the New York Stock Exchange is closed). Foreign securities in
which the Fund may invest may be primarily listed on foreign stock
8
<PAGE>
exchanges which may trade on other days (such as Saturdays). As a result, the
net asset value of the Fund's portfolio may be affected by such trading on days
when a shareholder has no access to the Fund.
Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source.
Investors are urged to consult their tax attorney with respect to specific
questions regarding foreign, federal, state or local taxes.
Forward Foreign Currency Exchange Contracts
In order to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward foreign currency exchange contracts
("forward currency contracts") for the purchase or sale of a specified currency
at a specified future date. Such contracts may involve the purchase or sale of
a foreign currency against the U.S. dollar or may involve two foreign
currencies. The Fund may enter into forward currency contracts either with
respect to specific transactions or with respect to the Fund's portfolio
positions. For example, when the Fund anticipates making a purchase or sale of
a security, it may enter into a forward currency contract in order to set the
rate (either relative to the U.S. dollar or another currency) at which a
currency exchange transaction related to the purchase or sale will be made.
Further, when the Adviser believes that a particular currency may decline
compared to the U.S. dollar or another currency, the Fund may enter into a
forward contract to sell the currency that the Adviser expects to decline in an
amount approximating the value of some or all of the Fund's portfolio
securities denominated in that currency.
The Fund's use of forward currency contracts involves certain investment
risks and transaction costs to which it might not otherwise be subject. These
include: (1) the Adviser may not always be able to accurately predict movements
within currency markets, (2) the skills and techniques needed to use forward
currency contracts are different from those needed to select the securities in
which the Fund invests and (3) there is no assurance that a liquid secondary
market will exist that would enable the Adviser to "close out" existing
(current) contracts when doing so is desirable. The Fund's successful use of
forward currency contracts, options on foreign currencies, futures contracts on
foreign currencies and options on such contracts depends upon the Adviser's
ability to predict the direction of the market and political conditions, which
require different skills and techniques than predicting changes in the
securities markets generally. For instance, if the value of the securities
being hedged moves in a favorable direction, the advantage to the Fund would be
wholly or partially offset by a loss in the forward contracts or futures
contracts. Further, if the value of the securities being hedged does not
change, the Fund's net income would be less than if the Fund had not hedged
since there are transactional costs associated with the use of these investment
practices. These practices are subject to various additional risks. The
correlation between movements in the price of options and futures contracts and
the price of the currencies being hedged is imperfect. The use of these
instruments will hedge only the currency risks associated with investments in
foreign securities, not market risks. In addition, if the Fund purchases these
instruments to hedge against currency advances before it invests in securities
denominated in such currency and the currency market declines, the Fund might
incur a loss on the futures contract. The Fund's ability to establish and
maintain positions will depend on market liquidity. The ability of the Fund to
close out a futures position or an option depends upon a liquid secondary
market. There is no assurance that liquid secondary markets will exist for any
particular futures contract or option at any particular time. The loss from
investing in futures contracts is potentially unlimited.
U.S. Treasury and Corporate Zero Coupon Bonds
The Fund invests from time to time in U.S. Treasury and corporate zero
coupon bonds. Zero coupon bonds are issued and traded at a discount from their
face amount. The amount of the discount varies depending on such factors as the
time remaining until maturity of the bonds and prevailing interest rates. The
market price of U.S. Treasury zero coupon bonds are generally more volatile
than the U.S. Treasury securities that pay interest periodically and zero
coupon bonds are likely to respond to changes in interest rates to a greater
degree than do securities on which regular cash payments of interest are being
made that have similar maturities. In order to satisfy a requirement for
qualification as a "regulated investment company" under the Code, the Fund must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon bonds. Because the Fund will not receive on a
current basis cash payments in respect of accrued original issue discount on
zero coupon bonds during the period before maturity, the Fund will distribute
cash obtained from other sources in order to satisfy the distribution
requirement under the Code. See "Dividends, Distributions and Taxes."
Private Placements and Rule 144A Securities
The Fund may purchase securities which have been privately issued and are
subject to legal restrictions on resale or which are issued to qualified
institutional investors under special rules adopted by the SEC. Such securities
may offer higher yields than comparable publicly traded securities. Such
securities ordinarily can be sold by the Fund in secondary market transactions
to certain qualified investors pursuant to rules established by the SEC, in
privately negotiated transactions to a limited number of purchasers or in a
public offering made pursuant to an effective registration statement under the
Securities Act of 1933 (the "1933 Act"). Public sales of such securities by the
Fund may involve significant delays and expense. Private sales often require
negotiation with one or more purchasers and may produce less favorable prices
than the sale of similar unrestricted securities. Public sales generally
involve the time and expense of the preparation and processing of a
registration statement under the 1933 Act (and the possible decline in value of
the securities during such period) and may involve the payment of underwriting
commissions. In some instances, the Fund may have to bear certain costs of
registration in order to sell such shares
9
<PAGE>
publicly. Except in the case of securities sold to qualifying institutional
investors under special rules adopted by the SEC for which the Trustees of the
Fund determine the secondary market is liquid, Rule 144A securities will be
considered illiquid. Trustees of the Fund may determine the secondary market is
liquid based upon the following factors which will be reviewed periodically as
required pursuant to procedures adopted by the Fund: the number of dealers
willing to purchase or sell the security; the frequency of trades; dealer
undertakings to make a market in the security, and the nature of the security
and its market. Investing in Rule 144A Securities could have the effect of
increasing the level of the Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. The Fund may invest up to 15% of its net assets in illiquid
securities.
Mortgage-Related Securities
The Fund may invest in mortgage-related securities which are securities
that directly or indirectly represent an ownership participation in, or are
secured by and payable from, mortgage loans on real property ("Mortgage-Related
Securities"). Such securities include pass-through securities representing
participation interests in pools of residential mortgage loans originated by
U.S. governmental or private lenders and guaranteed, to the extent provided in
such securities, by the U.S. government or one of its agencies or
instrumentalities. Mortgage pass-through securities, which are ownership
interests in the underlying mortgage loans, differ from conventional debt
securities, which provide for periodic payment of interest in fixed amounts
(usually semi-annually) and principal payments at maturity or on specified call
dates. Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments, including any
prepayments, made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. The underlying mortgages may be prepaid at any time
and such payments are passed through to the certificate holder as a prepayment
of principal. As a result, if the Fund purchases such a Mortgage-Related
Security at a premium, a prepayment rate that is faster than expected will
reduce the yield to maturity, while a prepayment rate that is slower than
expected will have the opposite effect of increasing the yield to maturity.
Conversely, if the Fund purchases a Mortgage-Related Security at a discount,
faster than expected prepayments will increase, while slower than expected
prepayment will reduce the yield to maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. Generally, however,
prepayments on fixed rate mortgage loans will increase during a period of
falling interest rates and decrease during a period of rising interest rates.
Mortgage-Related Securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities from
declining interest rates because of the risk of prepayment. Accelerated
prepayments on Mortgage-Related Securities purchased by the Fund at a premium
also impose a risk of loss of principal because the premium may not have been
fully amortized at the time the principal is repaid in full.
Mortgage-Related Securities are also subject to maturity extension risk
which is the possibility that rising interest rates may cause prepayments to
occur at a slower than expected rate. This particular risk may effectively
change a security which was considered short or intermediate-term at the time
of purchase to a long-term security. Long-term securities generally fluctuate
more widely in response to changes in interest rates than short or
intermediate-term securities.
The Mortgage-Related Securities in which the Fund may invest include those
issued and guaranteed by the Government National Mortgage Association ("Ginnie
Mae"), the Federal National Mortgage Association ("Fannie Mae") and the Federal
Home Loan Mortgage Corporation ("Freddie Mac"). Ginnie Mae is a wholly-owned
corporate instrumentality of the United States and is authorized to borrow from
the U.S. Treasury without limitation to meet its payment obligations on the
mortgage-related securities which it issues and guarantees. Fannie Mae is a
federally chartered but privately owned corporation which guarantees the timely
payment of principal of and interest on the certificates it issues; the
guarantee is not backed by the U.S. government. Freddie Mac is a corporate
instrumentality of the United States which guarantees the timely payment of
interest on and the ultimate payment of principal of its certificates; the
guarantee is not backed by the U.S. government.
Other Investments
The Fund may also lend portfolio securities; invest up to 5% of its assets
in privately-issued asset backed securities, including collateralized mortgage
obligations ("CMO's"); and write options on securities (the Fund will limit
this technique to writing covered call option contracts on securities held by
the Fund). See the Fund's Statement of Additional Information for further
information.
INVESTMENT RESTRICTIONS
Not more than 25% of the total assets of the Fund will be concentrated in
the securities of any one industry. No security can be purchased by the Fund if
as a result (a) more than 5% of the value of the total assets of the Fund would
then be invested in the securities of a single issuer (other than U.S.
Government obligations) or (b) more than 10% of any class of securities, or
more than 10% of the outstanding voting securities of an issuer, would be held
by the Fund.
A detailed description of the Fund's investment restrictions is contained
in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund is a mutual fund, technically known as an open-end investment
management company. The Trustees of the Trust are responsible for the overall
supervision of the operations of the Fund and perform the various duties
imposed on Trustees by the 1940 Act and of Massachusetts business trust law.
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The Adviser
The investment adviser to the Fund is National, which is located at 56
Prospect Street, Hartford, CT 06115-0486. National is a direct subsidiary of
Phoenix Duff & Phelps Corporation. Phoenix Home Life Mutual Insurance Company
is a majority shareholder of Phoenix Duff & Phelps Corporation.
National also acts as the investment adviser or manager for Phoenix
Multi-Sector Short Term Bond Fund, Phoenix California Tax Exempt Bonds, Inc.,
Phoenix Equity Opportunity Fund Series of Phoenix Strategic Equity Series Fund,
Phoenix Multi-Sector Fixed Income Fund, Inc. and the Phoenix Worldwide
Opportunities Fund. The Adviser currently has approximately $1.6 billion in
assets under management.
As compensation for its services, National receives a fee, which is
accrued daily against the value of the Fund's net assets and is paid monthly by
the Fund. The fee is computed at an annual rate of .70% of the Fund's average
daily net assets of up to $1 billion, .65% of the Fund's average daily net
assets from $1 billion to $2 billion and .60% of the Fund's average daily net
assets in excess of $2 billion.
The ratio of the management fees to average net assets for the fiscal year
ended April 30, 1997 for Class A Shares and Class B Shares was .70%.
The Portfolio Manager
Mr. John Hamlin serves as Portfolio Manager of the Fund. As such, Mr.
Hamlin is primarily responsible for the day to day management of the Fund's
portfolio. Mr. Hamlin is also the Portfolio Manager of the Phoenix Convertible
Fund Series of the Phoenix Series Fund, advised by Phoenix Investment Counsel,
Inc., an affiliate of National. Mr. Hamlin has served as Portfolio Manager of
the Phoenix Convertible Fund since 1992. Mr. Hamlin is also Portfolio Manager,
Common Stock, Phoenix Home Life Mutual Insurance Company. From 1989 to 1992 Mr.
Hamlin was Associate Portfolio Manager for that Fund. Since May 14, 1993, he
has served as Investment Officer of National.
The Financial Agent
Equity Planning acts as financial agent of the Fund and, as such, performs
administrative, bookkeeping and pricing functions for the Fund. As
compensation, Equity Planning is entitled to a fee, payable monthly and based
upon (a) the average of the aggregate daily net asset values of the Fund, at
the following incremental annual rates:
<TABLE>
<S> <C>
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
</TABLE>
(b) a minimum fee of $60,000; and (c) an annual fee of $12,000 for each
class of shares beyond one. For its services during the Fund's fiscal year
ended April 30, 1997, Equity Planning received $256,528 or .03% of average net
assets.
The Custodian and Transfer Agent
The custodian of the assets of the Fund is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts 02101 (the "Custodian").
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Fund (the "Transfer Agent") for
which it is paid $14.95 plus out of pocket expenses for each designated
shareholder account. The Transfer Agent engages sub-agents to perform certain
shareholder servicing functions from time to time for which such agents shall
be paid a fee by Equity Planning.
Brokerage Commissions
Although the Conduct Rules of the National Association of Securities
Dealers, Inc. prohibit its members from seeking orders for the execution of
investment company portfolio transactions on the basis of their sales of
investment company shares, under such Rules, sales of investment company shares
may be considered in selecting brokers to effect portfolio transactions.
Accordingly, some portfolio transactions are, subject to such Rules and to
obtaining best prices and executions, effected through dealers (excluding
Equity Planning) who sell shares of the Fund.
DISTRIBUTION PLANS
The offices of Equity Planning, the national distributor of the Fund's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of the
Fund and a director and officer of Equity Planning. David R. Pepin, a Director
and officer of Equity Planning, is an officer of the Fund. Michael E. Haylon, a
director of Equity Planning, is an officer of the Fund. G. Jeffrey Bohne, Nancy
G. Curtiss, William E. Keen, III, William R. Moyer, Leonard J. Saltiel and
Thomas N. Steenburg are officers of the Fund and officers of Equity Planning.
Equity Planning and the Fund have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Fund shares sold subject to an initial sales charge and those
sold subject to a contingent deferred sales charge. The Fund has granted Equity
Planning the exclusive right to purchase from the Fund and resell, as
principal, shares needed to fill unconditional orders for Fund shares. Equity
Planning may sell Fund shares through its registered representatives or through
securities dealers with whom it has sales agreements. Equity Planning may also
sell Fund shares pursuant to sales agreements entered into with banks or
bank-affiliated securities brokers who, acting as agent for their customers,
place orders for Fund shares with Equity Planning. Although the Glass-Steagall
Act prohibits banks and bank affiliates from engaging in the business of
underwriting, distributing or selling securities (including mutual fund
shares), banking regulators have not indicated that such institutions are
prohibited from purchasing mutual fund shares upon the order and for the
account of their customers. If, because of changes in law or regulations, or
because of new interpretations of existing law, it is determined that agency
transactions of banks or bank-affiliated securities
11
<PAGE>
brokers are not permitted under the Glass-Steagall Act, the Trustees will
consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with banks or bank-affiliated securities
brokers would result in a loss to their customers or a change in the net asset
value per share of the Fund.
The sale of Fund shares through a securities broker affiliated with a
particular bank is not expected to preclude the Fund from borrowing from such
bank or from availing itself of custodial or transfer agency services offered
by such bank.
The Trustees have adopted separate distribution plans under Rule 12b-1 of
the 1940 Act for each class of shares of the Fund (the "Class A Plan," the
"Class B Plan," and collectively the "Plans"). The Plans permit the Fund to
reimburse the Distributor for expenses incurred in connection with the sale and
promotion of Fund shares and the furnishing of shareholder services. Pursuant
to the Class A Plan, the Fund may reimburse the Distributor for actual expenses
of the Distributor up to 0.30% annually for the average daily net assets of the
Fund's Class A Shares. However, the Distributor has voluntarily agreed to limit
the maximum amount of reimbursement under the Class A Plan for the current
fiscal year to 0.25% annually of the average daily net assets of the Fund's
Class A Shares. Under the Class B Plan, the Fund may reimburse the Distributor
monthly for actual expenses of the Distributor up to 1.00% annually of the
average daily net assets of the Fund's Class B Shares.
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Fund (including underwriting
commissions and finance charges related to the payment of commissions for sales
of Class B Shares); (ii) compensation, sales incentives and payments to sales,
marketing and service personnel; (iii) payments to broker-dealers and other
financial institutions which have entered into agreements with the Distributor
for services rendered in connection with the sale and distribution of shares of
the Fund; (iv) payment of expenses incurred in sales and promotional activities
including expenditures related to the Fund; (v) the costs of preparing and
distributing promotional materials; (vi) the costs of printing the Fund's
Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of shares of
the Fund; provided, however, that a portion of such amount paid to the
Distributor, which portion shall be equal to or less than 0.25% annually of the
average daily net assets of the Fund shares, may be paid for reimbursing the
costs of providing services to shareholders, including assistance in connection
with inquiries related to shareholder accounts (the "Service Fee"). From the
Service Fee the Distributor expects to pay a quarterly fee to qualifying
broker/dealer firms, as compensation for providing personal services and/or the
maintenance of shareholder accounts, with respect to shares sold by such firms.
This fee will not exceed on an annual basis 0.25% of the average annual net
asset value of such shares, and will be in addition to sales charges on Fund
shares which are reallowed to such firms. To the extent that the entire amount
of the Service Fee is not paid to such firms, the balance will serve as
compensation for personal and account maintenance services furnished by the
Distributor.
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor,
such as services to the Fund's shareholders; or services providing the Fund
with more efficient methods of offering shares to groups of clients, members or
prospects of a participant; or services permitting bulking of purchases or
sales, or transmission of such purchases or sales by computerized tape or other
electronic equipment; or other batch processing.
Under the Class A Plan, reimbursement or payment of expenses may not be
made unless such payment or reimbursement occurs prior to the earliest of (a)
the last day of the one-year period commencing on the last day of the calendar
quarter during which the specific service or activity was performed, or (b) the
last day of the one-year period commencing on the last day of the calendar
quarter during which payment for the service or activity was made by a third
party on behalf of the Fund. The Class B Plan, however, does not limit the
reimbursement of distribution related expenses to expenses incurred in
specified time periods.
For the fiscal year ended April 30, 1997, the Fund paid the Distributor
$1,178,775 under the Class A Plan and $3,831,208 under the Class B Plan. The
fees were used to compensate unaffiliated broker-dealers for servicing
shareholder's accounts, including $53,355 paid to W.S. Griffith & Co., Inc., an
affiliate, compensating sales personnel and reimbursing the Distributor for
commission expenses and expenses related to preparation of the marketing
material. On a quarterly basis, the Fund's Trustees review a report on
expenditures under each Plan and the purposes for which expenditures were made.
The Trustees conduct an additional more extensive review annually in
determining whether each Plan will be continued. By its terms, continuation of
each Plan from year to year is contingent on annual approval by a majority of
the Fund's Trustees and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of either Plan or any related agreements
(the "Plan Trustees"). Each Plan provides that it may not be amended to
increase materially the costs which the Fund may bear without approval of the
applicable class of shareholders of the Fund and that other material amendments
must be approved by a majority of the Plan Trustees by vote cast in person at a
meeting called for the purpose of considering such amendments. Each Plan
further provides that while it is in effect, the selection and nomination of
Trustees who are not "interested persons" shall be committed to the discretion
of the Trustees who are not "interested persons." Each Plan may be terminated
at any time by vote of a majority of the Plan Trustees or a majority of the
applicable class of outstanding shares of the Fund.
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit the Fund and all classes of shareholders. The Class A Plan
and the Class B Plan were
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<PAGE>
approved by shareholders of the Fund at a special meeting of shareholders held
on April 30, 1993.
The National Association of Securities Dealers, Inc. ("NASD") regards
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend either or both Plans.
HOW TO BUY SHARES
The minimum initial purchase is $500 and the minimum subsequent investment
is $25. Both the minimum initial and subsequent investment amounts are $25 for
investments pursuant to the "Investo-Matic" plan, a bank draft investing
program administered by Equity Planning, or pursuant to the Systematic Exchange
Privilege (see Statement of Additional Information). Completed applications for
the purchase of shares should be mailed to The Phoenix Funds, c/o State Street
Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, has the same rights, and is identical to the other in
all respects, except that Class B Shares bear the expenses of the deferred
sales arrangement and any expenses (including the higher distribution services
fee and any incremental transfer agency costs) resulting from such sales
arrangement. Each class has exclusive voting rights with respect to provisions
of the Rule 12b-1 distribution plan pursuant to which its distribution services
fee is paid and each class has different exchange privileges. Only the Class B
Shares are subject to a conversion feature. The net income attributable to
Class B Shares and the dividends paid on Class B Shares will be reduced by the
amount of the higher distribution services fee and incremental expenses
associated with such distribution services fee; likewise, the net asset value
of the Class B shares will be reduced by such amount to the extent the Fund has
undistributed net income.
Subsequent investments for the purchase of full and fractional shares in
amounts of $25 or more may be made through an investment dealer or by sending a
check to Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301. Shares issued will be electronically recorded in book
entry form. A fee may be incurred by the shareholder for a previously issued
lost or stolen share certificate. Sales personnel of broker-dealers
distributing the Fund's shares may receive differing compensation for selling
Class A or Class B Shares.
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges.
Certain privileges may not be available in connection with Class B shares.
Shares of the Fund or shares of any other Phoenix Fund may be exchanged for
shares of the same class on the basis of the relative net asset values per
share at the time of the exchange. Exchanges are subject to the minimum initial
investment requirement of the designated Phoenix Fund, except if made in
connection with the Systematic Exchange Privilege. Shareholders may exchange
shares held in book-entry form for an equivalent number (value) of the same
class of shares from any other Phoenix Fund. On Class B Share exchanges, the
contingent deferred sales charge schedule of the original shares purchased
continues to apply.
Alternative Sales Arrangements
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Fund, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated continuing distribution fee and contingent deferred sales
charges on Class B Shares prior to conversion would be less than the initial
sales charge and accumulated distribution fee on Class A Shares purchased at
the same time, and to what extent such differential would be offset by the
higher yield of Class A Shares. In this regard, Class A Shares will be more
beneficial to the investor who qualifies for certain reduced initial sales
charges. For this reason, the Distributor intends to limit sales of Class B
Shares sold to any shareholder to a maximum total value of $250,000. Class B
Shares sold to unallocated qualified employer sponsored plans will be limited
to a maximum total value of $1,000,000.
Class B Shares sold to allocated qualified employer sponsored plans,
including 401(k) plans, will be limited to a maximum total value of $250,000
for each participant. The Distributor reserves the right to decline the sale of
Class B Shares to allocated qualified employer sponsored plans not utilizing an
approved participant tracking system. In addition, Class B Shares will not be
sold to any qualified employee benefit plan, endowment fund or foundation if,
on the date of the initial investment, the plan, fund or foundation has assets
of $10,000,000 or more or at least 100 eligible employees. Class B Shares will
also not be sold to investors who have reached the age of 85 because of such
persons' expected distribution requirements.
Class A Shares are subject to a lower distribution fee and, accordingly,
pay correspondingly higher dividends per share. However, because initial sales
charges are deducted at the time of purchase, such investors would not have all
their funds invested initially and, therefore, would initially own fewer
shares. Investors not qualifying for reduced initial sales charges who expect
to maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution
charges on Class B Shares may exceed the initial sales charge on Class A Shares
during the life of the investment. Again, however, such investors must weigh
this consideration against the fact that, because of such initial sales charge,
not all their funds will be invested initially. However, other investors might
determine that it would be more advantageous to purchase Class B Shares to have
all their funds invested initially, although remaining subject to higher
continuing distribution charges and, for a five-year period, being subject to a
contingent deferred sales charge.
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<PAGE>
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge, as set forth below. Offering prices become effective at the close
of the general trading session of the New York Stock Exchange. Orders received
by dealers prior to such time are confirmed at the offering price effective at
that time, provided the order is received by State Street Bank and Trust
Company prior to its close of business.
The sales charge varies with the size of the purchase and reduced charges
apply to the aggregate of purchases of the Fund made at one time by "any
person," which term includes an individual, an individual and his/her spouse
and their children under the age of 21, or a trustee or other fiduciary
purchasing shares for a single trust, estate or fiduciary account although more
than one beneficiary is involved.
Class A Shares of the Fund are offered to the public at the net asset
value next computed after the purchase order is received by State Street Bank
and Trust Company, plus a maximum sales charge of 4.75% of the offering price
(4.99% of the amount invested) on single purchases of less than $50,000. The
sales charge is reduced on a graduated scale on single purchases of $50,000 or
more as shown below.
Sales Charge Sales Charge Dealer Discount
Amount of as Percentage as Percentage or Agency Fee
Transaction of Offering of Amount as Percentage of
at Offering Price Price Invested Offering Price*
- -------------------- --------------- --------------- -----------------
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under
$100,000 4.50% 4.71% 4.00%
$100,000 but under
$250,000 3.50% 3.63% 3.00%
$250,000 but under
$500,000 3.00% 3.09% 2.75%
$500,000 but under
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None**
- ---------
*Equity Planning will sponsor sales contests, training and educational meetings
and provide to all qualifying dealers, from its own profits and resources,
additional compensation in the form of trips, merchandise or expense
reimbursement. Brokers and dealers other than Equity Planning may also make
customary additional charges for their services in effecting purchases, if they
notify the Fund of their intention to do so. Equity Planning shall also pay
service and retention fees, from its own profits and resources, to qualified
wholesalers in connection with the sale of shares of Phoenix Funds (exclusive
of Class A Shares of Phoenix Money Market Series) by registered financial
institutions and related third party marketers.
**In connection with Class A Share purchases (or subsequent purchases in any
amount) by accounts held in the name of qualified employee benefit plans with
at least 100 eligible employees, Equity Planning may pay broker/dealers, from
its own resources, an amount equal to 1% on the first $3 million of purchases,
0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million.
In connection with Class A Share purchases of $1,000,000 or more (or subsequent
purchases in any amount), excluding purchases by qualified employee benefit
plans as described above, Equity Planning may pay broker/dealers, from its own
profits and resources, a percentage of the net asset value of any shares sold
as set forth below:
Purchase Amount Payment to Broker-Dealer
- -------------------------- -------------------------
$1,000,000 to $3,000,000 1%
$3,000,001 to $6,000,000 0.50 of 1%
$6,000,001 or more 0.25 of 1%
If part or all of such investment, including investments by qualified
employee benefit plans, is subsequently redeemed within one year of the
investment date, the broker/dealer will refund to the Distributor such amounts
paid with respect to the investment.
How to Obtain Reduced Sales Charges On Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares
to (1) any Phoenix Fund trustee, director or officer; (2) any director or
officer, or any full-time employee or sales representative (who has acted as
such for at least 90 days) of the Adviser or employee of Equity Planning; (3)
registered representatives and employees of securities dealers with whom Equity
Planning has sales agreements; (4) any qualified retirement plan exclusively
for persons described above; (5) any officer, director or employee of a
corporate affiliate of the Adviser or Equity Planning; (6) any spouse, child,
parent, grandparent, brother or sister of any person named in (1), (2), (3) or
(5) above; (7) employee benefit plans for employees of the Adviser, Equity
Planning and/or their corporate affiliates; (8) any employee or agent who
retires from the Adviser, Equity Planning and/or a corporate affiliates; (9)
any account held in the name of a qualified employee benefit plan, endowment
fund or foundation if, on the date of initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 100 eligible
employees; (10) any person with a direct rollover transfer of shares from an
established Phoenix Fund qualified plan; (11) any Phoenix Home Life separate
account which funds group annuity contracts offered to qualified employee
benefit plans; (12) any state, county, city, instrumentality, department,
authority or agency prohibited by law from paying a sales charge; (13) any
fully matriculated student in a U.S. service academy; (14) any unallocated
accounts held by a third party administrator, registered investment adviser,
trust company, or bank trust department which exercises discretionary authority
and holds the account in a fiduciary, agency, custodial or similar capacity if
in the aggregate such accounts held by such entity equal or exceed $1,000,000;
(15) any person who is investing redemption proceeds from investment companies
other than the Phoenix Funds if, in connection with the purchases or redemption
of the redeemed shares, the investor paid a prior sales charge provided such
investor supplies verification that the redemption occurred within 90 days of
the Phoenix Fund purchase and that a sales charge was paid; or (16)
14
<PAGE>
any account established by financial institutions, broker/dealers or registered
investment advisers for which an account management fee or transaction fee is
charged and, provided such entity has entered into an agreement with the
Distributor for this program; provided that sales to persons listed in (1)
through (15) above are made upon the written assurance of the purchaser that
the purchase is made for investment purposes and that the shares so acquired
will not be resold except to the Fund.
In addition, Class A Shares purchased by the following investors are not
subject to any Class A sales charge: (1) investment advisors and financial
planners who charge an advisory, consulting or other fee for their services and
buy shares for their own accounts or the accounts of their clients, and (2)
retirement plans and deferred compensation plans and trusts used to fund those
plans (including, for example, plans qualified or created under sections
401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi trusts" that
buy shares for their own accounts, in each case if those purchases are made
through a broker or agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases; (3) clients of such
investment advisors or financial planners who buy shares for their own accounts
may also purchase shares without sales charge but only if their accounts are
linked to a master account of their investment advisor or financial planner on
the books and records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements (each of these investors may
be charged a fee by the broker, agent or financial intermediary for purchasing
shares).
Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to any sales charges. The Fund
receives the entire net asset value of its Class A Shares sold to investors.
The Distributor's commission is the sales charge shown above less any
applicable discount or commission "re-allowed" to selected dealers and agents.
The Distributor will re-allow discounts to selected dealers and agents in the
amounts indicated in the table above. In this regard, the Distributor may elect
to re-allow the entire sales charge to selected dealers and agents for all
sales with respect to which orders are placed with the Distributor. A selected
dealer who receives re-allowance in excess of 90% of such a sales charge may be
deemed to be an "underwriter" under the Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Fund or shares of any other Phoenix Fund
(including Class B Shares and excluding Money Market Series Class A Shares), if
made at a single time by a single purchaser, will be combined for the purpose
of determining whether the total dollar amount of such purchases entitles the
purchaser to a reduced sales charge on any such purchases of Class A shares.
Each purchase of Class A Shares will then be made at the public offering price,
as described in the then current Prospectus relating to such shares, which at
the time of such purchase is applicable to a single transaction of the total
dollar amount of all such purchases. The term "single purchaser" includes an
individual, or an individual, his spouse and their children under the age of
majority purchasing for his or their own account (including an IRA account)
including his or their own trust, commonly known as a living trust; a trustee
or other fiduciary purchasing for a single trust, estate or single fiduciary
account, although more than one beneficiary is involved; multiple trusts or
403(b) plans for the same employer; multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party administrator;
or trust companies, bank trust departments, registered investment advisers, and
similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial or similar capacity,
provided all shares are held in record in the name, or nominee name, of the
entity placing the order.
Letter of Intent. Class A Shares or shares of any other Phoenix Fund
(including Class B shares and excluding Money Market Class A Shares) may be
purchased by a "single purchaser" (as defined above) within a period of
thirteen months pursuant to a Letter of Intent, in the form provided by Equity
Planning, stating the investor's intention to invest in such shares during such
period an amount which, together with the value (at their maximum offering
prices on the date of the Letter) of the Class A Shares of the Fund or Class A
or Class B shares of any other Phoenix Fund then owned by such investor, equals
a specified dollar amount. Each purchase of shares made pursuant to a Letter of
Intent will be made at the public offering price, as described in the then
current Prospectus relating to such shares, which at the time of purchase is
applicable to a single transaction of the total dollar amount specified in the
Letter of Intent.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Fund or Equity Planning to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete his
investment (valued at the purchase price thereof) is held in escrow in the form
of shares registered in the investor's name until he completes his investment,
at which time escrowed shares are deposited to his account. If the investor
does not complete his investment and does not within 20 days after written
request by Equity Planning or his dealer pay the difference between the sales
charge on the dollar amount specified in his Letter and the sales charge on the
dollar amount of actual purchases, the difference will be realized through the
redemption of an appropriate number of the escrowed shares and any remaining
escrowed shares will be deposited to his account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the Fund, or any other Phoenix Fund, made over time.
Reduced sales charges are offered to investors whose shares, in the aggregate,
are valued (i.e., the dollar amount of such purchases plus the current value
(at the public offering price as described in the then current prospectus
relating to such shares) of shares of the Phoenix Funds owned) in excess of the
threshold amount
15
<PAGE>
described in the Section entitled "Initial Sales Charge Alternative--Class A
Shares." To use this option, the investor must supply sufficient information as
to account registrations and account numbers to permit verification that one or
more of his purchases qualifies for a reduced sales charge.
Associations. A group or association may be treated as a "single
purchaser" and qualify for reduced initial sales charges under the Combination
Privilege and Right of Accumulation if the group or association (1) has been in
existence for at least six months; (2) has a legitimate purpose other than to
purchase mutual fund shares at a reduced sales charge; (3) gives its
endorsements or authorization to the investment program to facilitate
solicitation of the membership by the investment dealer, thus effecting
economies of sales effort; and (4) is not a group whose sole organizational
nexus is that the members are credit card holders of a company, policyholders
of an insurance company, customers of a bank or a broker-dealer or clients of
an investment adviser.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge at
the time of purchase. The Class B Shares are being sold without an initial
sales charge, but are subject to a sales charge if redeemed within five years
of purchase.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used in whole or in part by the Distributor to defray the
expenses of the Distributor related to providing distribution-related services
to the Fund in connection with the sale of the Class B shares, such as the
payment of compensation to selected dealers and agents for selling Class B
shares. The combination of the contingent deferred sales charge and the
distribution fee facilitates the ability of the Fund to sell the Class B shares
without a sales charge being deducted at the time of purchase.
Contingent Deferred Sales Charge. Class B Shares which are redeemed within
five years of purchase will be subject to a contingent deferred sales charge at
the rates set forth below charged as a percentage of the dollar amount subject
thereto. The charge will be assessed on an amount equal to the lesser of the
current market value or the cost of the shares being redeemed. Accordingly, no
sales charge will be imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
The Distributor intends to pay investment dealers a sales commission of 4%
of the sale price of Class B Shares sold by such dealers, subject to future
amendment or termination. The Distributor will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by shareholders
on the redemption of shares to finance the 4% commission plus interest and
related marketing expenses.
The amount of the contingent deferred sales charges, if any, will vary
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such shares. Solely for purposes
of determining the number of years from the time of any payment for the
purchases of shares, all payments during a month will be aggregated and deemed
to have been made on the last day of the previous month.
Contingent Deferred
Sales Charge as
a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- --------------------- ---------------------
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 2%
Sixth 0%
In determining whether a contingent deferred sales charge is applicable to
a redemption, it will be assumed that any Class A Shares are being redeemed
first. Class B Shares held for over 5 years and shares acquired pursuant to
reinvestment of dividends or distributions are redeemed next. Any Class B
Shares held longest during the five-year period are redeemed next unless the
shareholder directs otherwise. The charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of purchase.
To provide an example, assume in 1990, an investor purchased 100 Class B
Shares. In 1993, the investor purchased another 100 Class B Shares at $12 per
share. In 1995, the investor purchased 100 Class A Shares. Assume that in 1996,
the investor owns 225 Class B Shares (15 Class B Shares resulting from dividend
reinvestment and distributions upon the Class B Shares purchased in 1990 and 10
Class B Shares resulting from dividend reinvestment and distributions upon the
Class B Shares purchased in 1993) as well as 100 Class A Shares. If the
investor wished to then redeem 300 shares and had not specified a preference in
redeeming shares; first, 100 Class A Shares would be redeemed without charge.
Second, 115 Class B Shares purchased in 1990 (including 15 shares issued as a
result of dividend reinvestment and distributions) would be redeemed next
without charge. Finally, 85 Class B Shares purchased in 1993 would be redeemed
resulting in a deferred sales charge of $27 [75 shares (85 shares minus 10
shares resulting from dividend reinvestment) - $12 (original price) - 3%
(applicable rate in the third year after purchase)].
The contingent deferred sales charge is waived on redemptions of shares
(a) if redemption is made within one year of death (i) of the sole shareholder
on an individual account, (ii) of a joint tenant where the surviving joint
tenant is the deceased's spouse, or (iii) of the beneficiary of Uniform Gifts
to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) if redemption is made within one year of disability, as defined in
Section 72(m)(7) of the Code; (c) in connection with mandatory distributions
upon reaching age 70-1/2 under any retirement plan qualified under Sections
401, 408 or 403(b) of the Code or any redemption
16
<PAGE>
resulting from the tax-free return of an excess contribution to an IRA; (d) in
connection with redemptions by 401(k) plans using an approved participant
tracking system for participant hardships, death, disability or normal
retirement, and loans which are subsequently repaid; (e) in connection with the
exercise of certain exchange privileges among Class B Shares of the Fund and
Class B Shares of other Phoenix Funds; (f) in connection with any person with a
direct rollover transfer of shares from an established Phoenix Fund qualified
plan into a Phoenix Fund IRA by participants terminating from the qualifying
plan; and (g) in accordance with the terms specified under the Systematic
Withdrawal Program. If, upon the occurrence of a death as outlined above, the
account is transferred to an account registered in the name of the deceased's
estate, the contingent deferred sales charge will be waived on any redemption
from the estate account occurring within one year of the death. If the Class B
Shares are not redeemed within one year of the death, they will remain Class B
Shares and be subject to the applicable contingent deferred sales charge when
redeemed.
Class B Shares of the Fund will automatically convert to Class A Shares
without a sales charge at the relative net asset values of each of the classes
after eight years from the acquisition of the Class B Shares, and as a result,
will thereafter be subject to the lower distribution fee under the Class A
Plan. Such conversion will be on the basis of the relative net asset value of
the two classes without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to relieve the holders of Class B
Shares that have been outstanding for a period of time sufficient for the
Distributor to have been compensated for distribution-related expenses from the
burden of such distribution-related expenses.
For purposes of conversion, Class B Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Fund account
(other than those in the sub-account) are converted to Class A Shares, an equal
pro rata portion of the Class B Shares in the sub-account will also be
converted to Class A Shares.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel or a ruling from the Internal
Revenue Service ("IRS") to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B Shares does
not result in any dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that the conversion of shares does not
constitute a taxable event under federal income tax law. The conversion of
Class B Shares to Class A Shares may be suspended if such an opinion or ruling
is no longer available. In that event, no further conversions of Class B Shares
would occur, and shares might continue to be subject to the higher distribution
fee for an indefinite period which may extend beyond the period ending eight
years after the end of the month in which affected Class B Shares were
purchased. If the Fund were unable to obtain such assurances, it might make
additional distributions if doing so would assist in complying with the Fund's
general practice of distributing sufficient income to reduce or eliminate U.S.
federal taxes.
INVESTOR ACCOUNT SERVICES
The Fund mails periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one
copy of most Fund reports will be mailed to households for multiple accounts
with the same surname at the same household address. Please contact Equity
Planning to request additional copies of shareholder reports toll free at (800)
243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to
the shareholder account services can be found in the Fund's Statement of
Additional Information ("SAI").
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, you may authorize the
bank named in the form to draw $25 or more from your personal bank account to
be used to purchase additional shares for your account. The amount you
designate will be made available, in form payable to the order of the Transfer
Agent, by the bank on the date the bank draws on your account and will be used
to purchase shares at the applicable offering price.
Distribution Option. The Fund currently declares all income dividends and
all capital gain distributions, if any, payable in shares of the Fund at net
asset value or, at your option, in cash. By exercising the distribution option,
you may elect to: (1) receive both dividends and capital gain distributions in
additional shares or (2) receive dividends in cash and capital gain
distributions in additional shares or (3) receive both dividends and capital
gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed that the proceeds are undeliverable.
Additional shares will be purchased in your account at the then current net
asset value. Dividends and capital gain distributions received in shares are
taxable to you and credited to your account in full and fractional shares
computed at the closing net asset value on the next business day after the
record date. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows
you to periodically redeem a portion of your account on a predetermined
monthly, quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal
17
<PAGE>
Program also provides for redemptions to be tendered on or about the 10th, 15th
or 25th of the month with proceeds to be directed through Automated Clearing
House (ACH) to your bank account. In addition to the limitations stated below,
withdrawals may not be less than $25 and minimum account balance requirements
shall continue to apply.
Class A and B shareholders participating in the Systematic Withdrawal
Program must own shares of the Fund worth $5,000 or more, as determined by the
then current net asset value per share, and elect to have all dividends
reinvested. The purchase of shares while participating in the withdrawal
program will ordinarily be disadvantageous to the Class A Shares investor since
a sales charge will be paid by the investor on the purchase of Class A Shares
at the same time as other shares are being redeemed. For this reason, investors
in Class A Shares may not participate in an automatic investment program while
participating in the Systematic Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
Accordingly, the purchase of Class B Shares will generally not be suitable for
an investor who anticipates withdrawing sums in excess of the above limits
shortly after purchase.
Tax Sheltered Retirement Plans. Shares of the Fund are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE IRA, SIMPLE 401(k), Profit-Sharing and Money
Purchase Pension Plans which can be adopted by self-employed persons ("Keogh")
and by corporations and 403(b) Retirement Plans. Write or call Equity Planning
at (800) 243-4631 for further information about the plans.
Exchange Privileges
You may exchange shares of one Phoenix Fund for shares of another Phoenix
Fund without paying any fees or sales charges. On exchanges with share classes
that carry a contingent deferred sales charge, the CDSC schedule of the
original shares purchased continues to apply. Shares held in book-entry form
may be exchanged for shares of the same class of other Phoenix Funds, provided
the following conditions are met: (1) the shares that will be acquired in the
exchange (the "Acquired Shares") are available for sale; (2) the Acquired
Shares are the same class as the shares to be surrendered (the "Exchanged
Shares"); (3) the Acquired Shares will be registered to the same shareholder
account as the Exchanged Shares; (4) the account value of the Fund whose shares
are to be acquired must equal or exceed the minimum initial investment amount
required by that Phoenix Fund after the exchange is made; and (5) if you have
elected not to use the telephone exchange privilege (see below), a properly
executed exchange request must be received by the Distributor. Exchanges may be
made over the telephone or in writing and may be made at one time or
systematically over a period of time. Note, each Phoenix Fund has different
investment objectives and policies. You should read the prospectus of the
Phoenix Fund into which the exchange is to be made before making any exchanges.
This privilege may be modified or terminated at any time on 60 days' notice.
Market Timer Restrictions. Because excessive trading can hurt Fund
performance and harm shareholders, the Fund reserves the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These
privileges are limited under those agreements. The Distributor has the right to
reject or suspend these privileges upon reasonable notice.
Telephone Exchanges. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Fund and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk that the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by following the procedure outlined for selling shares
represented by certificate(s).
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
regular trading of the New York Stock Exchange (the "Exchange") on days when
the Exchange is open for trading. The net asset value per share of the Fund is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the total number of outstanding shares
of the Fund. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
18
<PAGE>
The Fund's investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Short term investments
having a remaining maturity of less than sixty-one days are valued at amortized
cost, which the Trustees have determined approximates market value. For further
information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
You have the right to have the Fund buy back shares at the net asset value
next determined after receipt of a redemption order, and any other required
documentation in proper form, by Phoenix Funds c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301. In the case of a Class B Share
redemption, you will be subject to the applicable deferred sales charge, if
any, for such shares (see "Deferred Sales Charge Alternative--Class B Shares,"
above). Subject to certain restrictions, shares may be redeemed by telephone,
by check or in writing. In addition, shares may be sold through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The Fund does not charge any redemption fees. Payment for
shares redeemed is made within seven days; provided, however, that redemption
proceeds will not be disbursed until each check used for purchases of shares
has been cleared for payment by your bank, which may take up to 15 days after
receipt of the check.
The requirements to redeem shares are outlined in the table below.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRA's or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Fund at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
How can I sell my Shares?
<TABLE>
<S> <C> <C>
[graphic of phone] By Phone [bullet] Sales up to $50,000
[bullet] Not available on most retirement accounts
(800) 243-1574 [bullet] Requests received after 4PM will be executed
on the following business day
[bullet] Letter of instruction from the registered owner
[graphic of envelope] In Writing including the fund and account number and
the number of shares or dollar amount you
wish to sell
[bullet] No signature guarantee is required if your
shares are registered individually, jointly, or
as custodian under the Uniform Gifts to
Minors Act or Uniform Transfers to Minors
Act, the proceeds of the redemption do not
exceed $50,000, and the proceeds are payable
to the registered owners(s) at the address of
record
</TABLE>
Shares previously issued in certificate form can not be redeemed until the
certificated shares have been deposited to your account.
Telephone Redemptions. The Fund and the Transfer Agent will employ
reasonable procedures to confirm that telephone instructions are genuine.
Address and bank account information will be verified, telephone redemption
instructions will be recorded on tape, and all redemptions will be confirmed in
writing to you. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Fund and/or the Transfer Agent may be liable for following
telephone instructions for redemption transactions that prove to be fraudulent.
Broker/dealers other than Equity Planning have agreed to bear the risk of any
loss resulting from any unauthorized telephone redemption instruction from the
firm or its registered representatives. However, you would bear the risk of
loss resulting from instructions entered by an unauthorized third party that
the Fund and/or the Transfer Agent reasonably believe to be genuine. The
Telephone Redemption Privilege may be modified or terminated at any time on 60
days' notice to shareholders. In addition, during times of drastic economic or
market changes, the Telephone Redemption Privilege may be difficult to exercise
or may be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
Written Redemptions. Ownership of shares is recorded electronically in
book entry form; no share certificates are available. If you elect not to use
the telephone redemption or telephone exchange privileges or if the shares
being exchanged are represented by a previously issued certificate(s), you must
submit your request in writing. If the shares are being exchanged between
accounts that are not identically registered, the signature on such request
must be guaranteed by an eligible guarantor institution as defined by the
Transfer Agent in accordance with its signature guarantee procedures.
Currently, such procedures generally permit guarantees by banks, broker
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Any outstanding
certificate or certificates for the tendered shares must be duly endorsed and
submitted. The Distributor reserves the right to charge you for lost or stolen
certificates.
Account Reinstatement Privilege. You have a one time privilege of using
redemption proceeds from Class A and B Shares to purchase Class A Shares of any
Phoenix Fund with
19
<PAGE>
no sales charge (at net asset value next determined after the request for
reinvestment is made). For Federal income tax purposes, a redemption and
reinvestment will be treated as a sale and purchase of shares. Special rules
may apply in computing the amount of gain or loss in these situations. (See
"Dividends, Distributions and Taxes" for information on the Federal income tax
treatment of a disposition of shares.) A written request to reinstate your
account must be received by the Transfer Agent within 180 days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption value). Class B shareholders who have had the contingent deferred
sales charge waived through participation in the Systematic Withdrawal Program
are not eligible to use the Reinstatement Privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Fund redeems these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be
allowed 30 days to make an additional investment in an amount which will
increase the value of the account to at least $200.
A shareholder should contact his/her broker/dealer if he/she wishes to
transfer shares from an existing broker/dealer street name account to a street
name account with another broker/ dealer. The Fund has no specific procedures
governing such account transfers.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
The Fund intends to continue to qualify annually as a regulated investment
company under Subchapter M of the Code, and to distribute annually to
shareholders substantially all of its net investment income and net realized
capital gains, after utilization of any capital loss carryovers. If the Fund so
qualifies, it generally will not be subject to Federal income tax on the income
it distributes. The discussion below is based upon the assumption that the Fund
will continue to qualify as a regulated investment company.
The Fund intends to make distributions from net investment income
quarterly, and intends to distribute net realized capital gains, if any, at
least annually.
The Fund will be subject to a nondeductible 4% excise tax if it fails to
meet certain calendar year distribution requirements. In order to prevent
imposition of the excise tax, it may be necessary for the Fund to make
distributions more frequently than described in the previous paragraph.
Unless a shareholder elects to receive distributions in cash, dividends
and capital gain distributions will be paid in additional shares of the Fund
credited at the net asset value per share on the ex-date. Dividends and
distributions, whether received in cash or in additional shares of the Fund,
generally are subject to Federal income tax and may be subject to state, local,
and other taxes. Shareholders will be notified annually about the amount and
character of distributions made to them by the Fund.
Long-term capital gains, if any, distributed to shareholders and which are
designated by the Fund as capital gain distributions, are taxable to
shareholders as long-term capital gain distributions regardless of the length
of time shares of the Fund have been held by the shareholder. Distributions of
short-term capital gains and net investment income, if any, are taxable to
shareholders as ordinary income.
Dividends and distributions generally will be taxable to shareholders in
the taxable year of the shareholder in which they are received. However,
dividends and distributions declared by the Fund in October, November or
December of any calendar year, with a record date in such a month, and paid
during the following January, will be treated as if they were paid by the Fund
and received by shareholders on December 31 of the calendar year in which they
were declared.
A redemption or other disposition (including an exchange) of shares of the
Fund generally will result in the recognition of a taxable gain or loss, which
will be a long- or short-term capital gain or loss (assuming the shares were a
capital asset in the hands of the shareholder), depending upon a shareholder's
holding period for his or her shares. In addition, if shares of the Fund are
disposed of at a loss and are replaced (either through purchases or through
reinvestment of dividends) within a period commencing thirty days before and
ending thirty days after the disposition of such shares, the realized loss will
be disallowed and appropriate adjustments to the tax basis of the new shares
will be made. In addition, special rules may apply to determine the amount of
gain or loss realized on any exchange.
Legislation may be enacted in the future that could affect the tax
consequences described above. Foreign shareholders may be subject to U.S.
Federal income tax rules that differ from those described above. For more
information regarding distributions and taxes, see "Dividends, Distributions
and Taxes" in the Statement of Additional Information.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Fund may be required to withhold 31% of
all reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds for any account which does not have
a taxpayer identification number or social security number and certain required
certifications.
The Fund reserves the right to refuse to open an account for any person
failing to provide a taxpayer identification number along with the required
certifications.
The Fund sends to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing federal income tax returns.
20
<PAGE>
Investors are urged to consult their attorney or tax adviser regarding
specific questions as to Federal, foreign, state or local taxes.
ADDITIONAL INFORMATION
Organization of the Fund
The Fund was organized under Massachusetts law in 1986 as a business
trust. On August 29, 1986, the Fund purchased all of the assets and assumed all
of the liabilities of the Total Income Series of National Securities Funds.
National Securities Funds, as such, had been in existence since 1940. The Fund
is continuing the business of the Total Income Series. On December 15, 1989,
the Fund purchased all of the assets and assumed all of the liabilities of the
National Preferred Fund. On May 30, 1990, the Fund purchased all of the assets
and assumed all of the liabilities of the National Premium Income Fund. On June
30, 1993, the Trustees voted to change the name of the Fund to "Phoenix Income
and Growth Fund" to reflect the purchase of the Adviser by Phoenix Home Life
and the affiliation with the other Phoenix Funds.
The Declaration of Trust provides that the Fund's 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
and to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interests in the series.
All shares have equal voting rights, except that only shares of the respective
series or separate classes within a series are entitled to vote on matters
concerning only that series or class. At the date of this Prospectus, there is
only one existing series of the Fund, which has two classes of shares.
The shares of the Fund, when issued, will be fully paid and
non-assessable, have no preference, preemptive, or similar rights, and will be
freely transferable. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Shareholders may, in accordance with the Declaration of Trust,
cause a meeting of shareholders to be held for the purpose of voting on the
removal of Trustees. Meetings of the shareholders will be called upon written
request of shareholders holding in the aggregate not less than 10% of the
outstanding shares having voting rights. Except as set forth above and subject
to the 1940 Act, the Trustees will continue to hold office and appoint
successor Trustees. Shares do not have cumulative voting rights and the holders
of more than 50% of the shares of the Fund voting for the election of Trustees
can elect all of the Trustees of the Fund if they choose to do so and in such
event the holders of the remaining shares would not be able to elect any
Trustees. Shareholders are entitled to redeem their shares as set forth under
"How to Redeem Shares."
The Declaration of Trust establishing the Fund, dated June 25, 1986 (a
copy of which, together with all amendments thereto, is on file in the office
of the Secretary of the Commonwealth of Massachusetts), provides that the
Fund's name refers to the Trustees under the Declaration of Trust collectively
as Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the Fund shall be held to any personal liability,
nor shall report be had to their private property for the satisfaction of any
obligation or claim of said Fund but the "Trust Property" only shall be liable.
Registration Statement
This Prospectus omits certain information included in the Statement of
Additional Information and Part C of the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the
1940 Act. A copy of the Registration Statement may be obtained from the
Securities and Exchange Commission in Washington, D.C.
21
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
- -------------------------------------------------------------------------------------------------------
<S> <C>
Individual Individual
- -------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- -------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- -------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- -------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- -------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- -------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- -------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- -------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you will
be treated as negligent and subject to an IRS 5% penalty tax on any
resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix Income
and Growth (the "Fund") which you should know before investing. Please read it
carefully and retain it for future reference.
The Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information about the Fund, dated August 28, 1997. The Statement
contains more detailed information about the Fund and is incorporated into this
Prospectus by reference. You may obtain a free copy of the Statement by writing
the Fund c/o Phoenix Equity Planning Corporation, 100 Bright Meadow, P.O. Box
2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Fund is contained in the Annual Report to
Shareholders for the year ended April 30, 1997 and is incorporated into the
Statement of Additional Information by reference.
[recycle symbol] Printed on recycled paper using soybean ink
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[back cover]
[indicia]
Phoenix Income and Growth Fund BULK RATE MAIL
PO Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
[logo] PHOENIX
DUFF & PHELPS
PDP 693 (8/97)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
PHOENIX CONVERTIBLE FUND SERIES
a series of
Phoenix Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
(800) 243-1574
By and in Exchange for Shares of
PHOENIX INCOME AND GROWTH FUND
a series of
Phoenix Income and Growth Fund
101 Munson Street
Greenfield, Massachusetts 01301
(800) 243-1574
This Statement of Additional Information, relating specifically to the
proposed transfer of all or substantially all of the assets and certain
identified liabilities of Phoenix Convertible Fund Series (the "Convertible
Fund"), a series of Phoenix Series Fund, to Phoenix Income and Growth Fund (the
"Income and Growth Fund"), the sole portfolio series of Phoenix Income and
Growth Fund, in exchange for shares of the corresponding class of the Income and
Growth Fund, consists of this cover page and the following described documents,
each of which is attached hereto and incorporated by reference herein:
(1) the Statement of Additional Information of the Income and Growth
Fund dated August 28, 1997;
(2) the Statement of Additional Information of the Phoenix Series Fund
dated February 28, 1998;
(3) the Annual Report of the Income and Growth Fund for the year
ended April 30, 1998;
(4) the Annual Report of the Phoenix Series Fund for the year ended
October 31, 1997; and
(5) the Semiannual Report of the Phoenix Series Fund for the
six-month period ended April 30, 1998;
(6) the Pro Forma Financial Statements.
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus/Proxy
Statement dated August [____], 1998. A copy of the Prospectus/Proxy Statement
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.
The date of this Statement of Additional Information is August [____],
1998.
B-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Statement of Additional Information of the
Phoenix Income and Growth Fund dated
August 28, 1997......................................................................... B-
Statement of Additional Information of
Phoenix Series Fund dated February 28, 1998............................................. B-
Annual Report of the Phoenix Income and Growth
Fund for the year ended April 30, 1998.................................................... B-
Annual Report of the Phoenix Series Fund
for the year ended October 31, 1997..................................................... B-
Semi-Annual Report of the Phoenix
Series Fund for the six-month period ended
April 30, 1998.......................................................................... B-
Pro Forma Financial Statements............................................................ B-
</TABLE>
B-2
<PAGE>
PHOENIX INCOME AND GROWTH FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
August 28, 1997
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Income and Growth Fund (the "Fund"), dated August 28, 1997, and should
be read in conjunction with it. The Fund's Prospectus may be obtained by
calling Phoenix Equity Planning Corporation ("Equity Planning") at (800)
243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O.
Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
PAGE
THE FUND .................................... 1
INVESTMENT OBJECTIVES AND POLICIES (6) ...... 1
INVESTMENT RESTRICTIONS (10) .................. 1
INVESTMENT TECHNIQUES (7) ..................... 2
PERFORMANCE INFORMATION (6) .................. 3
PORTFOLIO TURNOVER ........................... 5
PORTFOLIO TRANSACTIONS AND BROKERAGE ......... 5
SERVICES OF THE ADVISER (11) .................. 6
NET ASSET VALUE (18) ........................ 7
HOW TO BUY SHARES (13) ........................ 7
ALTERNATIVE PURCHASE ARRANGEMENTS (13) ...... 7
INVESTOR ACCOUNT SERVICES (17) ............... 9
REDEMPTION OF SHARES (19) ..................... 10
DIVIDENDS, DISTRIBUTIONS AND TAXES (20) ...... 10
TAX SHELTERED RETIREMENT PLANS (18) ......... 12
THE DISTRIBUTOR (11) ........................ 12
PLANS OF DISTRIBUTION (11) .................. 13
TRUSTEES AND OFFICERS ........................ 14
OTHER INFORMATION ........................... 22
APPENDIX .................................... 23
Numbers appearing in parentheses correspond to
related disclosures in the Fund's Prospectus.
Customer Service--(800) 243-1574
Marketing--(800) 243-4361
Telephone Orders--(800) 367-5877
Telecommunication Device (TTY)--(800) 243-1926
PDP 693B (8/97)
<PAGE>
THE FUND
Phoenix Income and Growth Fund is an open-end diversified management
investment company which was organized under Massachusetts law in 1986 as a
business trust. The Fund's Prospectus describes the investment objectives of
the Fund. The following discussion supplements the description of the Fund's
investment policies and investment techniques in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is to provide an investment
in a diversified group of securities that are selected for current yield
consistent with preservation of capital. The investment objective of the Fund
is a fundamental policy which may not be changed without the approval of the
holders of a majority of the outstanding shares of the Fund. The secondary
objective of the Fund is to achieve capital appreciation when it is consistent
with the Fund's primary objective. The secondary objective is a non-fundamental
policy and may be changed by a vote of the Trustees without shareholder
approval. The Fund will contain income producing securities, including domestic
or foreign equity, debt, options, convertible securities and government
securities. The proportion of holdings in bonds, preferred stocks and equities
will vary with the level of return obtained from these various classes of
securities. Only securities producing income at the time of purchase will be
included in the portfolio. There is no assurance that the Fund will achieve its
investment objectives.
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions constitute fundamental policies of
the Fund which may be changed only upon approval by the holders of a majority
of the outstanding shares of the Fund. The Fund cannot:
1. Borrow money;
2. Underwrite the securities of others;
3. Deal in real estate except that it may purchase marketable securities of
companies that deal in real estate or interests therein including real
estate investment trusts but, excluding real estate limited partnerships;
4. Deal in commodities or commodities contracts;
5. Make loans to other persons except that it may lend portfolio securities
(up to 25% of net assets at the time the loan is made) to brokers or
dealers or other financial institutions not affiliated with the Fund or
the Adviser, subject to conditions established by the Adviser (See
"Lending of Securities") and enter into repurchase transactions (in
accordance with the Fund's current Prospectus);
6. Participate in any joint trading accounts;
7. Pledge, mortgage or hypothecate any securities or other property;
8. Purchase on margin;
9. Engage in short sales;
10. Issue senior securities;
11. Invest more than 25% of its assets in any one industry or group of
industries;
12. Purchase any securities (other than U.S. Government obligations) if, as a
result, more than 5% of the value of the total assets of the Fund would be
invested in securities of a single issuer;
13. Purchase any security if, as a result, more than 10% of any class of
securities or more than 10% of the outstanding voting securities of any
issuer would be held;
14. Purchase any security of an investment trust except for purchases in the
open market where no commission or profit to a sponsor or dealer results
from such purchases, other than a customary broker's commission; and
15. Make an investment for the purpose of exercising control or management.
Other Policies
The following investment restrictions do not constitute fundamental
policies and may be changed without shareholder approval. The Fund cannot:
1. Invest more than 15% of its net assets in illiquid securities, including
(a) securities with legal or contractual restrictions on resale (except in
the case of securities issued pursuant to Rule 144A sold to qualifying
institutional investors under special
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rules adopted by the Securities and Exchange Commission for which the
Trustees of the Fund determine the secondary market is liquid) (b)
repurchase agreements maturing in more than seven days and (c) securities
that are not readily marketable;
2. Purchase or retain any securities of any issuer if the officers, or
Trustees of the Fund, the Adviser who individually own beneficially more
than 1/2 of 1% of such issuer, together own beneficially more than 5% of
such issuer's securities;
3. Invest more than 5% of total net assets in securities of issuers
(including their predecessors) who have been in business for less than
three years; or
4. Invest in interests (including leases) in oil, gas or other mineral
exploration development programs.
INVESTMENT TECHNIQUES
The Fund may utilize the following practices or techniques in pursuing its
investment objectives.
Options
The Fund may, from time to time write covered call option contracts as a
means of increasing the total return of the Fund's portfolio and also as a
means of providing limited protection against increases in market value of the
Fund's portfolio. Such contracts will be written on securities in which the
Fund has authority to invest and on securities indices listed on an organized
national securities exchange. The aggregate value of the securities will be
limited to not more than 25% of the net assets of the Fund.
A call option on a security gives the purchaser of the option the right to
buy the underlying security from the writer at the exercise price at any time
prior to the expiration of the contract, regardless of the market price of the
security during the option period. A written call option is "covered" if,
throughout the life of the option (1) the Fund owns the optioned securities,
(2) the Fund maintains in a pledged account with its Custodian, any asset,
including equity securities, as long as the asset is liquid, unencumbered and
marked to market daily with a value sufficient to meet its obligations under
the call, or (3) if the Fund owns an offsetting call option. The premium paid
to the writer is the consideration for undertaking the obligations under the
option contract. The Fund will only write call option contracts when it is
believed that the total return to the Fund can be increased through such
premiums consistent with the Fund's investment objective.
The Fund may also write covered call options on securities indices.
Through the writing of call index options, the Fund can achieve many of the
same objectives as through the use of call options on individual securities.
Call options on securities indices are similar to call options on a security
except that, rather than the right to take delivery of a security at a
specified price, a call option on a securities index gives the holder the right
to receive, upon the exercise of the option, an amount of cash if the closing
level of the securities index upon which the call option is based is greater
than the exercise price of the option. The writing of such index call options
would be subject to the present limitation of covered call option writing of
not more than 25% of the net assets of the Fund. The writing of option
contracts is a highly specialized activity which involves investment techniques
and risks different from those ordinarily associated with investment companies,
and the restrictions listed above would tend to reduce such risks. The Fund has
not written call options in the last fiscal year and does not intend to do so
in the future with respect to more than 5% of the Fund's net assets.
The Fund may purchase options to close out a position, (i.e. a "closing
purchase transaction"--the purchase of a call option on the same security with
the same exercise price and expiration date as the call option which it has
previously written on any particular security). When a security is sold from
the Fund's portfolio, the Fund will first effect a closing purchase transaction
so as to close out any existing call option on that security, realizing a
profit or loss depending on whether the amount paid to purchase a call option
is less or more than the amount received from the sale thereof. In addition,
the Fund may wish to purchase a call option to hedge its portfolio against any
anticipated increase in the price of securities it intends to purchase or to
purchase a put option to hedge its portfolio against an anticipated decline in
securities prices. No more than 5% of the assets of the Fund may be invested in
the purchase of put and call options including index options.
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price. If a
call option purchased by the Fund is not sold when it has remaining value, and
if the market price of the underlying security remains less than or equal to
the exercise price, the Fund will lose its entire investment in the option.
Also, where an option on a particular security is purchased to hedge against
price movements in a related security, the price of the option may move more or
less than the price of the related security. There can be no assurance that a
liquid market will exist when the Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
market, the Fund may be unable to close out an option position.
Lending of Securities
The Fund may lend portfolio securities to broker/dealers or other
institutional borrowers, but only when the borrower pledges cash collateral to
the Fund and agrees to maintain such so that it amounts at all times to at
least 100% of the value of the securities
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loaned. Furthermore, the Fund may terminate such loans at any time, and must
receive reasonable interest on the collateral as well as dividends, interest,
or other distributions paid on the security during the loan period. Upon
expiration of the loan, the borrower of the securities will be obligated to
return to the Fund the same number and kind of securities as those loaned
together with duly executed stock powers. The Fund must be permitted to vote
the proxies if a material event affecting the value of the security is to
occur. The Fund may pay reasonable fees in connection with the loan, including
reasonable fees to the Fund's Custodian for its services.
Privately Issued Asset-Backed Securities and Collateralized Mortgage-Backed
Obligations ("CMO")
The Fund may invest up to 5% of its assets in asset-backed securities,
which represent a participation in, or are secured by and payable from a stream
of payments generated by particular assets, most often a pool of assets similar
to one another, such as motor vehicle and credit card receivables.
Collateralized mortgage obligations or "CMO's" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
Typically, privately issued CMO's are collateralized by Ginnie Mae, Fannie Mae
or Freddie Mac Certificates, but also may be collateralized by whole loans or
private pass-throughs (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are equity interests in
a trust composed of Mortgage Assets. Unless the context indicates otherwise,
all references herein to CMO's include multiclass pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, are the sources of funds used to pay debt service
on the CMO's or make scheduled distributions on the multiclass pass-through
securities.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMO's, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMO's to be
retired substantially earlier than their stated maturities or final
distribution dates. The principal of and interest on the Mortgage Assets may be
allocated among the several classes of a CMO in innumerable ways. The Fund may
also invest in, among others, parallel pay CMO's and Planned Amortization Class
CMO's ("PAC Bonds"). Parallel pay CMO's are structured to provide payments of
principal on each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated maturity date or
final distribution date of each class, which, as with other CMO structures,
must be retired earlier. PAC Bonds generally call for payments of a specified
amount of principal on each payment date.
Stripped mortgage-backed securities ("SMBS") are derivative multiclass
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
SMBS are structured with two or more classes of securities that receive
different proportions of the interest and principal distributions on a pool of
Mortgage Assets. A common type of SMBS will have at least one class receiving
only a small portion of the interest and a larger portion of the principal from
the Mortgage Assets, while the other classes will receive primarily interest
and only a small portion of the principal. In the most extreme case, one class
will receive all of the interest (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying
Mortgage Assets, and a rapid rate of principal payments may have a material
adverse effect on such security's yield to maturity. If the underlying Mortgage
Assets experience greater than anticipated prepayments of principal, the Fund
may fail to recoup fully its initial investment in these securities.
Forward Foreign Currency Exchange Contracts
In order to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward foreign currency exchange contracts
("forward currency contracts") for the purchase or sale of a specified currency
at a specified future date. Such contracts may involve the purchase or sale of
a foreign currency against the U.S. dollar or may involve two foreign
currencies. The Fund may enter into forward currency contracts either with
respect to specific transactions or with respect to the Fund's portfolio
positions.
PERFORMANCE INFORMATION
The Fund may, from time to time, include performance information in
advertisements, sales literature or reports to shareholders or prospective
investors. Performance information in advertisements and sales literature may
be expressed as a yield of a class and as a total return of any class of the
Fund.
Standardized quotations of average annual total return for Class A or
Class B shares will be expressed in terms of the average annual compounded rate
of return for a hypothetical investment in either Class A or Class B shares
over periods of 1, 5 and 10 years or up to the life of the class of shares),
calculated for each class separately pursuant to the following formula: P(1+T)n
= ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period).
All total return figures
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reflect the deduction of a proportional share of each Class's expenses (on an
annual basis), deduction of the maximum initial sales load in the case of Class
A shares and the maximum contingent deferred sales charge applicable to a
complete redemption of the investment in the case of Class B shares, and assume
that all dividends and distributions are on Class A and Class B shares
reinvested when paid.
The Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Fund may compare its performance results to other investment
or savings vehicles (such as certificates of deposit) and may refer to results
published in various publications such as Changing Times, Forbes, Fortune,
Money, Barrons, Business Week and Investor's Daily, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street
Journal, The New York Times, Consumer Reports, Registered Representative,
Financial Planning, Financial Services Weekly, Financial World, U.S. News and
World Report, Standard & Poor's The Outlook, and Personal Investor. The Fund
may from time to time illustrate the benefits of tax deferral by comparing
taxable investments to investments made through tax-deferred retirement plans.
The total return may also be used to compare the performance of the Fund
against certain widely acknowledged outside standards or indices for stock and
bond market performance, such as the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia Far
East Index (EAFE), Consumer Price Index, Lehman Brothers Corporate Index and
Lehman Brothers T-Bond Index.
Advertisements, sales literature and other communications may contain
information about the Fund and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund to
respond quickly to changing market and economic conditions. From time to time
the Fund may include specific portfolio holdings or industries, such as IBM or
health care, in such communications. To illustrate components of overall
performance, the Fund may separate is cumulative and average annual returns
into income and capital gains components; or cite separately as a return figure
the equity or bond portion of the Fund's portfolio; or compare the Fund's
equity or bond return future to well-known indices of market performance,
including, but not limited to: the S&P 500, Dow Jones Industrial Average, CS
First Boston High Yield Index and Salomon Brothers Corporate Bond and
Government Bond Indices.
Quotations of yield for the Fund will be based on all investment income
per share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and is computed by dividing net investment income by the value of a share on
the last day of the period according to the following formula:
Yield = 2[(a-b+1)(6)-1]
---
cxd
Where a = dividends and interest earned during the period by the Fund,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
For the period ended April 30, 1997, the yield of the Class A Shares and
Class B Shares was 3.16% and 2.59%, respectively.
For the 1, 5 and 10 year periods ended April 30, 1997, the average annual
total return of the Class A Shares was 5.69%, 9.58% and 10.55%, respectively.
For the 1 and 5 year periods ended April 30, 1997, and since inception (January
3, 1992), for Class B Shares, the average annual total return was 6.14%, 9.88%
and 9.79%, respectively. Performance information reflects only the performance
of a hypothetical investment in each class during the particular time period on
which the calculations are based. Performance information should be considered
in light of the Fund's investment objectives and policies, characteristics and
quality of the portfolio, and the market condition during the given time
period, and should not be considered as a representation of what may be
achieved in the future.
The Fund may also compute aggregate total return for specified periods
based on a hypothetical Class A or Class B account with an assumed initial
investment of $10,000. The aggregate total return is determined by dividing the
net asset value of this account at the end of the specified period by the value
of the initial investment and is expressed as a percentage. Calculation of
aggregate total return reflects payment of the Class A shares's maximum sales
charge of 4.75% and assumes reinvestment of all income dividends and capital
gain distributions during the period. Based on the foregoing, the Class A
share's aggregate cumulative total return quotation for the period commencing
September 7, 1940 and ending April 30, 1997 was 27,178%. Class B aggregate
cumulative total return quotation for the period commencing with the offering
of the Class B Shares on January 3, 1992 and ending April 30, 1997 was 64%.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, for both classes of shares of the
Fund, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such data
will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate
rate of return calculations.
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PORTFOLIO TURNOVER
Portfolio turnover is calculated by dividing the lesser of purchases or
sales of portfolio securities during the fiscal year by the monthly average of
the value of the Fund's securities (excluding from the computation all
securities, including options, with maturities at the time of acquisition of
one year or less). A high rate of portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which must be borne
directly by the Fund. Turnover rates may vary greatly from year to year as well
as within a particular year and may also be affected by cash requirements for
redemptions of Fund shares and by requirements which enable the Fund to receive
certain favorable tax treatment (see "Dividends, Distributions and Taxes").
Historical annual rates of portfolio turnover for the Fund are set forth in the
prospectus, a copy of which must precede or accompany this Statement of
Additional Information.
For the fiscal years ended April 30, 1996 and April 30, 1997,
respectively, the turnover rates for the equity portion of the Fund were 104%
and 148%. The turnover rates for the fixed income securities were 112% and 42%
for the same periods.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser places orders for the purchase and sale of securities,
supervises their execution and negotiates brokerage commissions on behalf of
the Fund. It is the practice of the Adviser to seek the best prices and best
execution of orders and to negotiate brokerage commissions which in the
Adviser's opinion are reasonable in relation to the value of the brokerage
services provided by the executing broker. Brokers who have executed orders for
the Fund are asked to quote a fair commission for their services. If the
execution is satisfactory and if the requested rate approximates rates
currently being quoted by the other brokers selected by the Adviser, the rate
is deemed by the Adviser to be reasonable. Brokers may ask for higher rates of
commission if all or a portion of the securities involved in the transaction
are positioned by the broker, if the broker believes it has brought the Fund an
unusually favorable trading opportunity, or if the broker regards its research
services as being of exceptional value, and payment of such commissions is
authorized by the Adviser after the transaction has been consummated. If the
adviser more than occasionally differs with the broker's appraisal of
opportunity or value, the broker would not be selected to execute trades in the
future.
The Adviser believes that the Fund benefits with a securities industry
comprised of many and diverse firms and that the long-term interest of
shareholders of the Fund is best served by its brokerage policies which include
paying a fair commission rather than seeking to exploit its leverage to force
the lowest possible commission rate. The primary factors considered in
determining the firms to which brokerage orders are given are the Adviser's
appraisal of: the firm's ability to execute the order in the desired manner,
the value of research services provided by the firm, and the firm's attitude
toward and interest in mutual funds in general including the sale of mutual
funds managed and sponsored by the Adviser. The Adviser does not offer or
promise to any broker an amount or percentage of brokerage commissions as an
inducement or reward for the sale of shares of the Fund. Over-the-counter
purchases and sales are transacted directly with principal market-makers except
in those circumstances where in the opinion of the Adviser better prices and
execution are available elsewhere.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to
lower commission costs on a per-share and per-dollar basis. According to the
bunching procedures, the Adviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is inconsistent with its
duty to seek best execution (which shall include the duty to seek best price)
for the Fund. No advisory account of the Adviser is to be favored over any
other account and each account that participates in an aggregated order is
expected to participate at the average share price for all transactions of the
Adviser in that security on a given business day, with all transaction costs
shared pro rata based on the Fund's participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
Adviser's accounts in accordance with the allocation order, and if the order it
partially filled, it shall be allocated pro rata based on the allocation order.
Notwithstanding the foregoing, the order may be allocated on a basis different
from that specified in the allocation order if all accounts of the Adviser
whose orders are allocated receive fair and equitable treatment and the reason
for such different allocation is explained in writing and is approved in
writing by the Adviser's compliance officer as soon as practicable after the
opening of the markets or the trading day following the day on which the order
is executed. If an aggregated order is partially filled and allocated on a
basis different from that specified in the allocation order, no account that is
benefited by such different allocation may intentionally and knowingly effect
any purchase or sale for a reasonable period following the execution of the
aggregated order that would result in it receiving or selling more shares than
the amount of shares it would have received or sold had the aggregated order
been completely filled. The Trustees will annually review these procedures or
as frequently as shall appear appropriate.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry
groups, and individual issues. Research services will vary from firm to firm,
with broadest coverage generally from the large full-line firms. Smaller firms
in general tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor
federal, state, local and foreign political
5
<PAGE>
developments; many of the brokers also provide access to outside consultants.
The outside research assistance is particularly useful to the Adviser's staff
since the brokers as a group tend to monitor a broader universe of securities
and other matters than the Adviser's staff can follow. In addition, it provides
the Adviser with a diverse perspective on financial markets. Research and
investment information is provided by these and other brokers at no cost to the
Adviser and is available for the benefit of other accounts advised by the
Adviser and its affiliates and not all of this information will be used in
connection with the Fund. While this information may be useful in varying
degrees and may tend to reduce the Adviser's expenses, it is not possible to
estimate its value and in the opinion of the Adviser it does not reduce the
Adviser's expenses in a determinable amount. The extent to which the Adviser
makes use of statistical, research and other services furnished by brokers is
considered by the Adviser in the allocation of brokerage business but there is
no formula by which such business is allocated. The Adviser does so in
accordance with its judgment of the best interest of the Funds and their
shareholders.
Purchases and sales of fixed-income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Fund
will also purchase such securities in underwritten offerings and will, on
occasion, purchase securities directly from the issuer. Generally, fixed-income
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing fixed-income securities transactions consists primarily
of dealer spreads and underwriting commissions.
In purchasing and selling fixed-income securities, it is the policy of the
Fund to obtain the best results taking into account the dealer's general
execution and operational facilities, the type of transaction involved and
other factors, such as the dealer's risk in positioning the securities
involved. While the Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily pay the lowest spread or commission
available.
The Fund may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Fund. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of other securities firms.
During the fiscal years ended April 30, 1995, 1996 and 1997, brokerage
commissions paid by the Fund totaled $1,211,199, $1,189,884 and $1,778,732,
respectively. None of such commissions was paid to a broker who was an
affiliated person of the Fund or an affiliated person of such a person or, to
the knowledge of the Fund, to a broker an affiliated person of which was an
affiliated person of the Fund or the Adviser. Total brokerage commissions paid
during the fiscal year ended April 30, 1997 included brokerage commissions of
$1,119,918 on portfolio transactions aggregating $839,174,659 executed by
brokers who provided research and other statistical and factual information.
SERVICES OF THE ADVISER
The Adviser provides certain services and facilities required to carry on
the day-to-day operations of the Fund (for which it receives a management fee)
other than the costs of printing and mailing proxy materials, reports and
notices to shareholders; outside legal and auditing accounting services;
regulatory filing fees and expenses of printing the Fund's registration
statements (but the Distributor purchases such copies of the Fund's
prospectuses and reports and communications to shareholders as it may require
for sales purposes); insurance expense; association membership dues; brokerage
fees; and taxes.
As compensation for its services, the Adviser receives a fee, which is
accrued daily against the value of the Fund's net assets and is paid monthly by
the Fund. The fee is computed at an annual rate of 0.70% of the Fund's average
daily net assets up to $1 billion, 0.65% of the Fund's average daily net assets
from $1 billion to $2 billion and 0.60% of the Fund's average daily net assets
in excess of $2 billion. For the fiscal years 1995, 1996 and 1997, the net
management fees paid by the Fund to the Adviser were $6,338,744, $6,253,253 and
$5,982,415, respectively.
The Adviser has agreed that if, in any fiscal year, the aggregate expenses
of the Fund, exclusive of taxes, distribution fees, brokerage, interest and
(with the prior consent of any necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed the most
restrictive expense limitations applicable to the Fund under state securities
laws or published regulations thereunder, the Adviser will refund to the Fund
the excess over such amount. Currently, the most restrictive of such
limitations would require the Adviser to reimburse the Fund to the extent that
in any fiscal year such aggregate expenses exceed 2.5% of the first $30,000,000
of the average net assets and 2.0% of the next $70,000,000, of the average net
assets and 1.5% of any amount of the average net assets in excess of
$100,000,000. In the event legislation were to be adopted in each state so as
to eliminate this restriction, the Fund would take such action necessary to
eliminate this expense limitation.
The Adviser is a direct subsidiary of Phoenix Duff & Phelps Corporation.
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") owns a
majority interest in Phoenix Duff & Phelps Corporation. Phoenix Home Life is a
mutual insurance company engaged in the insurance and investment businesses.
Phoenix Home Life's principal place of business is located at One American Row,
Hartford, Connecticut. The Adviser also acts as the investment adviser or
manager for Phoenix Multi-Sector Short Term Bond Fund, Phoenix California Tax
Exempt Bonds, Inc., Equity Opportunities Fund Series of Phoenix Strategic
Equity Series
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Fund, Phoenix Multi-Sector Fixed Income Fund, Inc. and the Phoenix Worldwide
Opportunities Fund. The Adviser currently has approximately $1.6 billion in
assets under management. The Adviser has acted as an investment adviser for
over sixty years.
The Management Agreement was approved by the Trustees of the Fund on March
16, 1993, and by the shareholders of the Fund on May 13, 1993. The Management
Agreement will continue in effect from year to year if specifically approved
annually (a) by the Trustees of the Fund, including a majority of the
disinterested Trustees, or by (b) a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act. Shareholders were asked to
approve the Management Agreement at a Special Meeting of Shareholders held on
May 7, 1993 due to a change in control of National which resulted in the
termination of the Management Agreement which was previously in effect. The
Management Agreement may be terminated without penalty at any time by a similar
vote upon 60 days' notice or by the adviser upon 60 days' written notice and
will automatically terminate in the event of its assignment as defined in
Section 2(a)(4) of the 1940 Act.
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
regular trading of the New York Stock Exchange (the "Exchange") on days when
the Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Since the Fund does not price securities on weekends or
United States national holidays, the net asset value of the Fund's foreign
assets may be significantly affected on days when the investor has no access to
the Fund. The net asset value per share of the Fund is determined by adding the
values of all securities and other assets of the Fund, subtracting liabilities,
and dividing by the total number of outstanding shares of the Fund. Assets and
liabilities are determined in accordance with generally accepted accounting
principles and applicable rules and regulations of the Securities and Exchange
Commission. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world,
the calculation of net asset value may not take place for the Fund if it
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of the Fund. All assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time the Fund has investments where market quotations are
not readily available, such investments are valued at the fair value thereof as
determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25. However, both the minimum initial and subsequent investment
amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank
draft investing program administered by Distributor, or pursuant to the
Systematic Exchange privilege or for an individual retirement account (IRA). In
addition, there are no subsequent investment minimum amounts in connection with
the reinvestment of dividend or capital gain distributions. Completed
applications for the purchase of shares should be mailed to: Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares of the Fund may be purchased from investment dealers at a price
equal to their net asset value per share, plus a sales charge which, at the
election of the purchaser, may be imposed either (i) at the time of the
purchase (the "initial sales charge alternative"), or (ii) on a contingent
deferred basis (the "deferred sales charge alternative").
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Fund, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated continuing distribution services fee and contingent deferred
sales charges on Class B shares prior to conversion would be less than the
initial sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such differential would
be offset by the lower expenses attributable to Class A shares.
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Class A shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends, to the extent any dividends
are paid, per share. However, because initial sales charges are deducted at the
time of purchase, such investors would not have all their funds invested
initially and, therefore, would initially own fewer shares. Investors not
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on Class B
shares may exceed the initial sales charge on Class A shares during the life of
the investment. Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not all their
funds will be invested initially. However, other investors might determine that
it would be more advantageous to purchase Class B shares to have all their
funds invested initially, although remaining subject to higher continuing
distribution charges and, for a five-year period, being subject to a contingent
deferred sales charge.
The distribution expenses incurred by the Distributor in connection with
the sale of the shares will be paid, in the case of Class A shares, from the
proceeds of the initial sales charge and the ongoing distribution services fee
and, in the case of Class B shares, from the proceeds of the ongoing
distribution services fee and the contingent deferred sales charge incurred
upon redemption within five years of purchase. Sales personnel of
broker-dealers distributing the Fund's shares may receive differing
compensation for selling Class A or Class B shares. Investors should understand
that the purpose and function of the contingent deferred sales charge and
ongoing distribution services fee with respect to the Class B shares are the
same as those of the initial sales charge and ongoing distribution services
fees with respect to the Class A shares.
Dividends paid by the Fund, if any, with respect to Class A and Class B
shares will be calculated in the same manner at the same time on the same day,
except that the higher distribution services fee and any incremental transfer
agency costs relating to Class B shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
The Trustees of the Fund have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis,
the Trustees of the Fund, pursuant to their fiduciary duties under the 1940 Act
and state laws, will seek to ensure that no such conflict arises.
Class A Shares
An investor who elects the initial sales charge alternative acquires Class
A shares. Class A shares incur a sales charge when they are purchased and enjoy
the benefit of not being subject to any sales charge when they are redeemed.
Class A shares are subject to an ongoing distribution services fee at an annual
rate of up to 0.30% of the Fund's aggregate average daily net assets
attributable to the Class A shares. However, for the current fiscal year, the
Distributor has voluntarily agreed to limit the distribution services fee for
Class A Shares to 0.25%. In addition, certain purchases of Class A shares
qualify for reduced initial sales charges. See the Fund's current Prospectus.
Class B Shares
An investor who elects the deferred sales charge alternative acquires
Class B shares. Class B shares do not incur a sales charge when they are
purchased, but they are subject to a sales charge if they are redeemed within
five years of purchase. The deferred sales charge may be waived in connection
with certain qualifying redemptions. See the Fund's current Prospectus.
Class B shares are subject to an ongoing distribution services fee at an
annual rate of up to 1.00% of the Fund's aggregate average daily net assets
attributable to the Class B shares. Class B shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment
is made. The higher ongoing distribution services fee paid by Class B shares
will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related to Class A
shares. Class B shares will automatically convert to Class A shares eight years
after the end of the calendar month in which the shareholder's order to
purchase was accepted, in the circumstances and subject to the qualifications
described in the Fund's Prospectus.
Class B shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B shares will automatically convert to Class A shares
and will no longer be subject to the higher distribution services fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge. The
purpose of the conversion feature is to relieve the holders of Class B shares
that have been outstanding for a period of time sufficient for the Distributor
to have been compensated for distribution expenses related to the Class B
shares from most of the burden of such distribution-related expenses.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's Fund account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B shares in the sub-account will also convert to Class A.
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<PAGE>
INVESTOR ACCOUNT SERVICES
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges.
Certain privileges may not be available in connection with all classes. In most
cases, changes to account services may be accomplished over the phone.
Inquiries regarding policies and procedures relating to shareholder account
services should be directed to Shareholder Services at (800) 243-1574.
Exchanges. Class A Shares of the Fund held under six months are not
eligible for the exchange privilege. Under certain circumstances, shares of any
Phoenix Fund may be exchanged for shares of the same Class on the basis of the
relative net asset values per share at the time of the exchange. Exchanges are
subject to the minimum initial investment requirement of the designated Series,
Fund, or Portfolio, except if made in connection with the Systematic Exchange
privilege. Shareholders may exchange shares held in book-entry form for an
equivalent number (value) of the same class of shares of any other Phoenix
Fund, if currently offered. On exchanges with share classes that carry a
contingent deferred sales charge, the CDSC schedule of original shares
purchased continues to apply.The exchange of shares is treated as a sale and
purchase for federal income tax purposes (see also "Dividends, Distributions
and Taxes").
Systematic Exchanges. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund automatically on a monthly,
quarterly, semi-annual or annual basis or may cancel this privilege at any
time. If you maintain an account balance of at least $5,000, or $2,000 for tax
qualified retirement benefit plans (calculated on the basis of the net asset
value of the shares held in a single account), you may direct that shares be
automatically exchanged at predetermined intervals for shares of the same class
of another Phoenix Fund. This requirement does not apply to Phoenix "Self
Security" program participants. Systematic exchanges will be executed upon the
close of business on the 10th day of each month or the next succeeding business
day. Systematic exchange forms are available from the Distributor. Exchanges
will be based upon each Fund's net asset value per share next computed after
the close of business on the 10th day of each month (or succeeding business
day), without sales charge. On Class B Share exchanges, the CDSC schedule of
the original shares purchased continues to apply.
Dividend Reinvestment Across Accounts. If you maintain an account balance
of at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Phoenix Funds at net asset value. You should obtain a current
prospectus and consider the objectives and policies of each Fund carefully
before directing dividends and distributions to another Fund. Reinvestment
election forms and prospectuses are available from Equity Planning.
Distributions may also be mailed to a second payee and/or address. Requests for
directing distributions to an alternate payee must be made in writing with a
signature guarantee of the registered owner(s). To be effective with respect to
a particular dividend or distribution, notification of the new distribution
option must be received by the Transfer Agent at least three days prior to the
record date of such dividend or distribution. If all shares in your account are
repurchased or redeemed or transferred between the record date and the payment
date of a dividend or distribution, you will receive cash for the dividend or
distribution regardless of the distribution option selected.
Invest-By-Phone. This expedited investment service allows you to make an
investment in an account by requesting a transfer of funds from the balance of
your bank account. Once a request is phoned in, the Transfer Agent will
initiate the transaction by wiring a request for monies to your commercial
bank, savings bank or credit union via Automated Clearing House (ACH). Your
bank, which must be an ACH member, will in turn forward the monies to the
Transfer Agent for credit to your account. ACH is a computer based clearing and
settlement operation established for the exchange of electronic transactions
among participating depository institutions. This service may also be used to
sell shares of the Fund and direct proceeds of sale through ACH to your bank
account.
To establish this service, please complete the Invest-by-Phone Application
and attach a voided check. Upon the Transfer Agent's acceptance of the
authorization form (usually within two weeks) you may call toll free (800)
367-5877 prior to 3:00 p.m. (Eastern Time) to place your purchase request.
Instructions as to the account number and amount to be invested must be
communicated to the Transfer Agent. The Transfer Agent will then contact your
bank via ACH with appropriate instructions. The purchase is normally credited
to your account the day following receipt of the verbal instructions. The Fund
may delay the mailing of a check for redemption proceeds of Fund shares
purchased with a check or via Invest-by-Phone service until the Fund has
assured itself that good payment has been collected for the purchase of the
shares, which may take up to 15 days after receipt of the check.
The Fund and the Transfer Agent reserve the right to modify or terminate
the Invest-by-Phone service for any reason or to institute charges for
maintaining an Invest-by-Phone account.
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<PAGE>
REDEMPTION OF SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Fund to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days after receipt of
the check. Redemptions by Class B shareholders will be subject to the
applicable deferred sales charge, if any. See the Fund's current Prospectus for
further information.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Fund redeems these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be
allowed 30 days to make an additional investment in an amount which will
increase the value of the account to at least $200.
A shareholder should contact his/her broker/dealer if he/she wishes to
transfer shares from an existing broker/dealer street name account to a street
name account with another broker/dealer. The Fund has no specific procedures
governing such account transfers.
By Mail
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written
request to Equity Planning that the Fund redeem the shares. See the Fund's
current Prospectus for more information.
Telephone Redemption
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Fund's current Prospectus for
additional information.
Reinvestment Privilege
Shareholders who may have overlooked features of their investment at the
time they redeemed have a privilege of reinstatement of their investment at net
asset value. See the Fund's current Prospectus for more information and
conditions attached to the privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to remain qualified as a regulated investment company
under certain provisions of the Code. Under such provisions, the Fund will not
be subject to Federal income tax on such part of its ordinary income and net
realized capital gains which it distributes to shareholders provided it meets
certain distribution requirements. To qualify for treatment as a regulated
investment company, the Fund generally must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest
payments with respect to security loans and gains from the sale or disposition
of stock or securities and certain other items and (b) diversify its holdings
so that, at the end of each quarter of the taxable year (i) at least 50% of the
market value of the Fund's assets are represented by cash, U.S. Government
securities, securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for purposes
of this calculation to an amount not greater than 5% of the Fund's total assets
and 10% of the outstanding voting securities of any one issuer and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies). If, in any taxable year, the Fund does
not qualify as a regulated investment company all of its taxable income will be
taxed to the Fund at corporate rates.
It is the Fund's intention to distribute to its shareholders at least 98%
of net investment taxable income due to the Code imposing a 4% nondeductible
excise tax on a regulated investment company, such as the Fund, if it does not
distribute to its shareholders during the calendar year an amount equal to 98%
of its net ordinary income, with certain adjustments, plus 98% of the Fund's
net capital gains for the 12-month period ending on October 31 of such calendar
year. In addition, an amount equal to any undistributed investment company
taxable income or capital gain net income from the previous reporting year must
also be distributed to avoid the excise tax. The excise tax is imposed on the
amount by which the regulated investment company does not meet the foregoing
distribution requirements. If the Fund has taxable income that would be subject
to the excise tax, the Fund intends to distribute such income so as to avoid
payment of the excise tax.
Under another provision of the Code, any dividend declared by the Fund to
shareholders of record in October, November or December of any year will be
deemed to have been received by, and will be taxable to shareholders as of
December 31, provided that the dividend is actually paid by the Fund in January
of the following year.
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Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on
the disposition of those shares. This rule applies where shares of the Fund are
disposed of within 90 days after the date on which they were acquired and new
shares of a regulated investment company are acquired without a sales charge or
at a reduced sales charge. In that case, the gain or loss realized on the
disposition will be determined by excluding from the charge incurred in
acquiring those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced as
a result of the shareholder having incurred a sales charge initially. The
portion of the sales charge affected by this rule will be treated as a sales
charge paid for the new shares.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value of a share below a
shareholder's cost for the share, such a distribution nevertheless generally
would be taxable to the shareholder as ordinary income or long-term capital
gain, even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution by the Fund. The
price of shares purchased at that time may include the amount of the
forthcoming distribution, but the distribution generally would be taxable to
them.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from the Fund backup withholding at the rate
of 31%. Corporate shareholders and certain other shareholders specified in the
Code generally are exempt from such backup withholding. Generally, shareholders
subject to backup withholding will be (i) those for whom a certified taxpayer
identification number is not on file with the Fund, (ii) those about whom
notification has been received (either by the shareholder or the Fund) from the
Internal Revenue Service that they are subject to backup withholding or (iii)
those who, to the Fund's knowledge, have furnished an incorrect taxpayer
identification number. Generally, to avoid backup withholding, an investor
must, at the time an account is opened, certify under penalties of perjury that
the taxpayer identification number furnished is correct and that he or she is
not subject to backup withholding.
The Fund may invest in certain debt securities that are originally issued
or acquired at a discount. Special rules apply under the Code to the
recognition of income with respect to such debt securities. Under the special
rules, the Fund may recognize income for tax purposes without a corresponding
current receipt of cash. In addition, gain on a disposition of a debt security
subject to the special rules may be treated wholly or partially as ordinary
income, not capital gain.
The Fund intends to accrue dividend income for Federal income tax purposes
in accordance with the rules applicable to regulated investment companies. In
some cases, these rules may have the effect of accelerating (in comparison to
other recipients of the dividend) the time at which the dividend is taken into
account by the Fund as taxable income.
Transactions in options on stock indexes are subject to the Code rules of
section 1256. Pursuant to these rules, such options, whether sold by the Fund
during a taxable year or held by the Fund at the close of its taxable year,
will be treated as if sold for their market value. Generally, 60% of any net
gain or loss recognized on the deemed sale, as well as 60% of the gain or loss
with respect to any actual termination (including expiration), will be treated
as long-term capital gain or loss and the remaining 40% will be treated as
short-term capital gain or loss.
The Fund may be subject to tax on dividend or interest income received
from securities of non-U.S issuers withheld by a foreign country at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of tax or exemption from tax on
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested within various
countries is not known. The Fund intends to operate so as to qualify for treaty
tax benefits where applicable. To the extent that the Fund is liable for
foreign income taxes withheld at the source, the Fund may operate so as to meet
the requirements of the Code to "pass through" to the Fund's shareholders tax
benefits attributable to foreign income taxes paid by the Fund. If more than
50% of the value of the Fund's total assets at the close of its taxable year is
comprised of securities issued by foreign corporations, the Fund may elect with
the Internal Revenue Service to "pass through" to the Fund's shareholders the
amount of foreign income taxes paid by the Fund. Pursuant to this election,
shareholders will be required to (i) include in gross income, even though no
actually received, their respective pro rata share of foreign taxes paid by the
Fund; (ii) treat their pro rata share of foreign taxes as paid by them; (iii)
either deduct their pro rata share of foreign taxes in computing their taxable
income, or use such share as foreign tax credit against U.S. income tax (but
not both). No deduction for foreign taxes may be claimed by a non-corporate
shareholder who does not itemize deductions. The Fund may meet the requirements
to "pass through" to its shareholders foreign income taxes paid, but there can
be no assurance that the Fund will be able to do so. Each shareholder will be
notified within 60 days after the close of each taxable year of the Fund if the
foreign taxes paid by the Fund will "pass through" for that year, and, if so,
the amount of each shareholder's pro rata share (by country) or (i) the foreign
taxes paid and (ii) the Fund's gross income from foreign sources. Shareholders
who are not liable for federal income taxes will not be affected by such "pass
through" of foreign tax credits.
The foregoing is a general summary of the applicable provisions of the
Code and Treasury Regulations presently in effect. For the complete provisions,
reference should be made to the pertinent Code sections and the Treasury
Regulations promulgated thereunder. The Code and these Treasury Regulations are
subject to change by legislative or administrative action either
11
<PAGE>
prospectively or retroactively. Distributions and the transactions referred to
above may be subject to state and local income tax, and the treatment thereof
may differ from the federal treatment discussed herein.
Shareholders are advised to consult with their tax advisor or attorney
regarding specific questions as to Federal, foreign, state or local taxes.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund and other Phoenix Funds may be offered in connection
with employer-sponsored 401(k) plans. National and its affiliates may provide
administrative services to these plans and to their participants, in addition
to the services that National and its affiliates provide to the Phoenix Funds,
and receive compensation therefor. For information on the terms and conditions
applicable to employee participation in such plans, including information on
applicable plan administrative charges and expenses, prospective investors
should consult the plan documentation and employee enrollment information which
is available from participating employers.
THE DISTRIBUTOR
Pursuant to a Distribution Agreement with the Fund, Phoenix Equity
Planning Corporation (the "Distributor"), an indirect less than wholly-owned
subsidiary of Phoenix Home Life and an affiliate of National, serves as
distributor for the Fund. The address of the Distributor is P.O. Box 2200, 100
Bright Meadow Blvd., Enfield, Connecticut 06083-2200. As such, the Distributor
conducts a continuous offering pursuant to a "best efforts" arrangement
requiring the Distributor to take and pay for only such securities as may be
sold to the public. During the fiscal years 1995, 1996 and 1997, purchasers of
the Fund shares paid aggregate sales charges of $3,664,991, $2,500,197 and
$1,478,251, respectively, of which the principal Distributor of the Fund
received net commissions of $2,230,339, $1,910,302 and $1,028,526,
respectively, for its services, the balance being paid to dealers. The fees
were used to compensate sales and services persons for selling shares of the
Fund and for providing services to shareholders. In addition, the fees were
used to compensate the Distributor for sales and promotional activities.
The Distribution Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Fund, or by vote
of a majority of the Fund's Trustees who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Distribution Plan or in any related agreements. The Distribution Agreement
will terminate automatically in the event of its assignment.
Dealers with whom the Distributor has entered into sales agreements
receive sales charges in accordance with the commission table set forth in the
Prospectus. The Distributor may from time to time pay, from its own resources
or pursuant to the Plan of Distribution described below, a bonus or other
incentive to dealers (other than the Distributor) which employ a registered
representative who sells a minimum dollar amount of the shares of the Fund
during a specific period of time. Such bonus or other incentive may take the
form of payment for travel expenses, including lodging, incurred in connection
with trips taken by qualifying registered representatives and members of their
families to places within or without the United States or other bonuses such as
gift certificates or the cash equivalent of such bonuses. The Distributor may,
from time to time, reallow the entire portion of the sales charge which it
normally retains to individual selling dealers. However, such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
Equity Planning also acts as administrative agent of the Fund and as such
performs administrative, bookkeeping and pricing functions for the Fund. As
compensation for such services, effective as of January 1, 1997, Equity
Planning is entitled to a fee, payable monthly and based upon the average of
the aggregate daily net asset values of the Fund, at the following incremental
annual rates:
First $100 million .05% subject to a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum charge of $60,000 is applicable. In addition, Equity Planning is
paid $12,000 for each class of shares beyond one. Until December 31, 1996,
Equity Planning's fee for these services was based on an annual rate of 0.03%
of the Fund's aggregate daily net asset value. For its services during the
Fund's fiscal year ended April 30, 1997, Equity Planning received $256,528.
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PLANS OF DISTRIBUTION
The Fund has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Fund (the "Class A Plan," the "Class B
Plan," and collectively the "Plans"). The Plans permit the Fund to reimburse
the Distributor for expenses incurred in connection with activities intended to
promote the sale of shares of each class of shares of the Fund. Pursuant to the
Class A Plan, the Fund may reimburse the Distributor for actual expenses of the
Distributor up to 0.30% of the average daily net assets of the Fund's Class A
shares. For fiscal year 1998, the Distributor has voluntarily agreed to limit
the Rule 12b-1 fee for Class A Shares to 0.25%. Under the Class B Plan, the
Fund may reimburse the Distributor monthly for actual expense of the
Distributor up to 1.00% of the average daily net assets of the Fund's Class B
shares.
Expenditures under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Fund (including distribution fees and
financing expenses incurred in connection with the sale of Class B shares);
(ii) compensation, sales incentives and payments to sales, marketing and
service personnel; (iii) payments to broker-dealers and other financial
institutions which have entered into agreements with the Distributor in the
form of the Dealer Agreement for Phoenix Funds for services rendered in
connection with the sale and distribution of shares of the Fund; (iv) payment
of expenses incurred in sales and promotional activities, including advertising
expenditures related to the Fund; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Fund's Prospectus and
Statement of Additional Information for distribution to potential investors;
and (vii) such other similar services that the Trustees of the Fund determines
are reasonably calculated to result in the sale of shares of the Fund; provided
however, a portion of such amount paid to the Distributor, which portion shall
be equal to or less than 0.25% annually of the average daily net assets of the
Fund shares may be paid for reimbursing the costs of providing services to the
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee").
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor,
such as services to the Fund's shareholders; or services providing the Fund
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment; or other processing.
The fee received by the Distributor under the early years of the Plans is
not likely to reimburse the Distributor for the total distribution expenses it
will actually incur as a result of the Fund having fewer assets and the
Distributor incurring greater promotional expenses during the start-up phase.
No amounts paid or payable by the Fund under the Plan for Class A shares may be
used to pay for, or reimburse payment for, sales or promotional services or
activities unless such payment or reimbursement takes place prior to the
earliest of (a) the last day of the one year period commencing on the last day
of the calendar quarter during which the specific service or activity was
performed, or (b) the last day of the one year period commencing on the last
day of the calendar quarter during which payment for the services or activity
was made by a third party on behalf of the Fund. The Class B Plan, however,
does not limit the reimbursement of distribution related expenses to expenses
incurred in specific time periods. If the Plans are terminated in accordance
with their terms, the obligations of the Fund to make payments to the
Distributor pursuant to the Plans will cease and the Fund will not be required
to make any payments past the date on which each Plan terminates.
For the fiscal year ended April 30, 1997, the Fund paid Rule 12b-1 Fees in
the amount of $5,009,983 of which the principal Distributor received $3,126,095,
unaffiliated broker-dealers received $1,830,533 and W.S. Griffith & Co., Inc.,
an affiliate, received $53,355. The Rule 12b-1 payments for the fiscal year
ended April 30, 1997 were used for (1) compensation of dealers ($4,276,346),
(2) compensation to sales personnel ($303,938), (3) advertising ($163,935),
(4) printing and mailing prospectuses to other than current shareholders
($22,304), (5) service costs ($130,789) and (6) other costs ($112,671).
On a quarterly basis, the Fund's Trustees review a report on expenditures
under the Plans and the purposes for which expenditures were made. The Trustees
conduct an additional, more extensive review annually in determining whether
the Plans will be continued. By its terms, continuation of the Plans from year
to year is contingent on annual approval by a majority of the Fund's Trustees
and by a majority of the Trustees who are not "interested persons" (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plans or any related agreements (the "Plan Trustees"). The
Plans provide that they may not be amended to increase materially the costs
which the Fund may bear pursuant to the Plans without approval of the
shareholders of the Fund and that other material amendments to the Plans must
be approved by a majority of the Plan Trustees by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plans
further provides that while it is in effect, the selection and nomination of
Trustees who are not "interested persons" shall be committed to the discretion
of the Trustees who are not "interested persons." The Plans may be terminated
at any time by vote of a majority of the Plan Trustees or a majority of the
outstanding shares of the relevant class of the Fund.
The National Association of Securities Dealers, Inc. (the "NASD") regards
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend the Plans.
13
<PAGE>
TRUSTEES AND OFFICERS
The following table sets forth information concerning the Trustees and
executive officers of the Fund, including their principal occupations during
the past five years. Unless otherwise noted, the address of each executive
officer and Trustee is 56 Prospect Street, Hartford, Connecticut, 06115.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ------------------------ ---------------- ------------------------------------------------------
<S> <C> <C>
C. Duane Blinn (69)** Trustee Partner in the law firm of Day, Berry & Howard.
Day, Berry & Howard Director/Trustee, Phoenix Funds (1980-present).
CityPlace Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Hartford, CT 06103 Duff & Phelps Institutional Mutual Funds (1996-
present). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-
49 Old Post Road 1994), Phoenix Funds. Trustee, Phoenix-Aberdeen
Wethersfield, CT 06109 Series Fund and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance
Company (1980-1994). Director/Trustee, the National
Affiliated Investment Companies (until 1993).
E. Virgil Conway (68) Trustee Chairman, Metropolitan Transportation Authority
9 Rittenhouse Road (1992-present). Trustee/Director, Consolidated Edison
Bronxville, NY 10708 Company of New York, Inc. (1970-present), Pace
University (1978-present), Atlantic Mutual Insurance
Company (1974-present), HRE Properties (1989-
present), Greater New York Councils, Boy Scouts of
America (1985-present), Union Pacific Corp. (1978-
present), Blackrock Freddie Mac Mortgage Securities
Fund (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr.,
Foundation (1975-present), The Harlem Youth
Development Foundation (1987-present), Accuhealth
(1994-present), Trism, Inc. (1994-present), Realty
Foundation of New York (1972-present), New York
Housing Partnership Development Corp. (Chairman)
(1981-present) and Fund Directions (Advisory
Director) (1993-present). Director/Trustee, Phoenix
Funds (1993-present). Trustee, Phoenix-Aberdeen
Series Fund and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1995-
present). Chairman, Audit Committee of the City of
New York (1981-1996). Advisory Director, Blackrock
Fannie Mae Mortgage Securities Fund (1989-1996).
Chairman, Financial Accounting Standards Advisory
Council (1992-1995). Director/Trustee, the National
Affiliated Investment Companies (until 1993).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ---------------------------- --------------- -------------------------------------------------------
<S> <C> <C>
Harry Dalzell-Payne (68) Trustee Director/Trustee, Phoenix Funds (1983-present).
330 East 39th Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Apartment 29G Duff & Phelps Institutional Mutual Funds (1996-
New York, NY 10022 present). Director, Duff & Phelps Utilities Tax-Free
Income Inc. and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present). Director, Farragut
Mortgage Co., Inc. (1991-1994). Director/Trustee, the
National Affiliated Investment Companies (1983-
1993). Formerly a Major General of the British Army.
*Francis E. Jeffries (66) Trustee Director/Trustee, Phoenix Funds (1995-present).
6585 Nicholas Blvd. Trustee, Phoenix-Aberdeen Series Inc. and Phoenix
Apt. 1601 Duff & Phelps Institutional Mutual Funds (1996-
Naples, FL 33963 present). Director, Duff & Phelps Utilities Income
Fund (1987-present), Duff & Phelps Utilities Tax-
Free Income Inc. (1991-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1993-present).
Director, The Empire District Electric Company
(1984-present). Director (1989-1997), Chairman of
the Board (1993-1997), President (1989-1993), and
Chief Executive Officer (1989-1995), Phoenix Duff &
Phelps Corporation.
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson
Chairman and Chief Products Company (1995-present). Director/Trustee,
Executive Officer Phoenix Funds (1980-present). Trustee, Phoenix-
Carson Products Company Aberdeen Series Fund and Phoenix Duff & Phelps
64 Ross Road Institutional Mutual Funds (1996-present). Director,
Savannah, GA 30750 Equifax Corp. (1991-present) and Keystone
International Fund, Inc. (1989-present). Trustee,
Keystone Liquid Trust, Keystone Tax Exempt Trust,
Keystone Tax Free Fund, Master Reserves Tax Free
Trust, and Master Reserves Trust. President,
Morehouse College (1987-1994). Chairman and Chief
Executive Officer, Keith Ventures (1992-1994).
Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director, Blue Cross/Blue
Shield (1989-1993) and First Union Bank of Georgia
(1989-1993).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- ----------------------------------------------------------
<S> <C> <C>
*Philip R. McLoughlin (50) Trustee and Chairman (1997-present), Vice Chairman (1995-1997)
President and Chief Executive Officer (1995-present), Phoenix
Duff & Phelps Corporation. Director (1994-present) and
Executive Vice President, Investments (1988-present),
Phoenix Home Life Mutual Insurance Company.
Director/Trustee and President, Phoenix Funds (1989-
present). Trustee and President, Phoenix-Aberdeen
Series Fund and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Director, Duff & Phelps
Utilities Tax-Free Income Inc. (1995-present) and Duff
& Phelps Utility and Corporate Bond Trust Inc. (1995-
present). Director (1983-present) and Chairman (1995-
present), Phoenix Investment Counsel, Inc. Director
(1984-present) and President (1990-present), Phoenix
Equity Planning Corporation. Director (1993-present),
Chairman (1993-present) and Chief Executive Officer
(1993-1995), National Securities & Research
Corporation. Director, Phoenix Realty Group, Inc.
(1994-present), Phoenix Realty Advisors, Inc. (1987-
present), Phoenix Realty Investors, Inc. (1994-present),
Phoenix Realty Securities, Inc. (1994-present), PXRE
Corporation (Delaware) (1985-present), and World Trust
Fund (1991-present). Director and Executive Vice
President, Phoenix Life and Annuity Company (1996-
present). Director and Executive Vice President, PHL
Variable Insurance Company (1995-present). Director,
Phoenix Charter Oak Trust Company (1996-present).
Director and Vice President, PM Holdings, Inc. (1985-
present). Director and President, Phoenix Securities
Group, Inc. (1993-1995). Director (1992-present) and
President (1992-1994), W.S. Griffith & Co., Inc.
Director (1992-present) and President (1992-1994),
Townsend Financial Advisers, Inc. Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Everett L. Morris (69) Trustee Vice President, W.H. Reaves and Company (1993-
164 Laird Road present). Director/Trustee, Phoenix Funds (1995-
Colts Neck, NJ 07722 present). Trustee, Phoenix-Aberdeen Series Fund and
Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities
Tax-Free Income Inc. (1991-present) and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1993-
present). Director, Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief
Operating Officer, Enterprise Diversified Holdings,
Incorporated (1989-1993).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- --------------------------------------------------------
<S> <C> <C>
*James M. Oates (51) Trustee Chairman, IBEX Capital Markets LLC (1997-
Managing Director present). Managing Director, Wydown Group (1994-
The Wydown Group present). Director, Phoenix Duff & Phelps
IBEX Capital Markets LLC Corporation (1995-present). Director/Trustee, Phoenix
60 State Street Fund (1987-present). Trustee, Phoenix-Aberdeen
Suite 950 Series Fund and Phoenix Duff & Phelps Institutional
Boston, MA 02109 Mutual Funds (1996-present). Director, Govett
Worldwide Opportunity Funds, Inc. (1991-present),
Blue Cross and Blue Shield of New Hampshire
(1994-present), Investors Financial Service
Corporation (1995-present), Investors Bank & Trust
Corporation (1995-present), Plymouth Rubber Co.
(1995-present) and Stifel Financial (1996-present).
Member, Chief Executives Organization (1996-
present). Director (1984-1994), President (1984-
1994) and Chief Executive Officer (1986-1994),
Neworld Bank. Director/Trustee, the National
Affiliated Investment Companies (until 1993).
*Calvin J. Pedersen (55) Trustee Director (1986-present), President (1993-present) and
Phoenix Duff & Phelps Executive Vice President (1992-1993), Phoenix Duff
Corporation & Phelps Corporation. Director/Trustee, Phoenix
55 East Monroe Street Funds (1995-present). Trustee, Phoenix-Aberdeen
Suite 3600 Series Fund and Phoenix Duff & Phelps Institutional
Chicago, IL 60603 Mutual Funds (1996-present). President and Chief
Executive Officer, Duff & Phelps Utilities Tax-Free
Income Inc. (1995-present), Duff & Phelps Utilities
Income Inc. (1994-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present).
Philip R. Reynolds (70)** Trustee Director/Trustee, Phoenix Funds (1984-present).
43 Montclair Drive Trustee, Phoenix-Aberdeen Series Fund and Phoenix
West Hartford, CT 06107 Duff & Phelps Institutional Mutual Funds (1996-
present). Director, Vestaur Securities, Inc. (1972-
present). Trustee and Treasurer, J. Walton Bissell
Foundation, Inc. (1988-present). Director/Trustee, the
National Affiliated Investment Companies (until
1993).
Herbert Roth, Jr. (68) Trustee Director/Trustee, Phoenix Funds (1980-present).
134 Lake Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix
P.O. Box 909 Duff & Phelps Institutional Mutual Funds (1996-
Sherborn, MA 01770 present). Director, Boston Edison Company (1978-
present), Phoenix Home Life Mutual Insurance
Company (1972-present), Landauer, Inc. (medical
services) (1970-present),Tech Ops./Sevcon, Inc.
(electronic controllers) (1987-present), and Mark IV
Industries (diversified manufacturer) (1985-present).
Director, Key Energy Group (oil rig service) (1988-
1994). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- --------------------------------------------------------
<S> <C> <C>
Richard E. Segerson (51) Trustee Managing Director, Mullin Associates (1993-present).
102 Valley Road Director/Trustee, Phoenix Funds (1993-present).
New Canaan, CT 06840 Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-
present). Vice President and General Manager, Coats
& Clark, Inc. (previously Tootal American, Inc.)
(1991-1993). Director/Trustee, the National Affiliated
Investment Companies (1984-1993).
Lowell P. Weicker, Jr. (66) Trustee Trustee/Director, Phoenix Funds (1995-present).
731 Lake Avenue Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Greenwich, CT 06830 Duff & Phelps Institutional Mutual Funds (1996-
present). Director, UST Inc. (1995-present), HPSC
Inc. (1995-present), Duty Free International, Inc.
(1997-present) and Compuware (1996-present).
Visiting Professor, University of Virginia (1997-
present). Chairman, Dresing, Lierman, Weicker
(1995-1996). Governor of the State of Connecticut
(1991-1995).
Michael E. Haylon (39) Executive Director and Executive Vice President--Investments,
Vice Phoenix Duff & Phelps Corporation (1995-present).
President Executive Vice President, Phoenix Funds (1993-
present) and Phoenix-Aberdeen Series Fund (1996-
present). Executive Vice President (1997-present),
Vice President (1996-1997), Phoenix Duff & Phelps
Institutional Mutual Funds. Director (1994-present),
President (1995-present), Executive Vice President
(1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director (1994-present),
President (1996-present), Executive Vice President
(1994-1996), Vice President (1993-1994), National
Securities & Research Corporation. Director, Phoenix
Equity Planning Corporation (1995-present). Senior
Vice President, Securities Investments, Phoenix
Home Life Mutual Insurance Company (1993-1995).
Various other positions with Phoenix Home Life
Mutual Insurance Company (1990-1993).
David R. Pepin (54) Executive Executive Vice President, Phoenix Funds and
Vice Phoenix-Aberdeen Series Fund (1996-present).
President Director (1997-present) and Executive Vice President
(1996-present), Phoenix Duff & Phelps Corporation.
Managing Director, Phoenix-Aberdeen International
Advisers, LLC (1996-present). Director and
Executive Vice President, Phoenix Equity Planning
Corp. (1996-present). Director, Phoenix Investment
Counsel, Inc. and National Securities & Research
Corporation (1996-present). Various positions with
Phoenix Home Life Mutual Insurance Company
(1994-1995). Vice President and General Manager,
Finance and Health, Digital Equipment Corporation
(1980-1994).
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- -----------------------------------------------------
<S> <C> <C>
William J. Newman (58) Senior Vice Executive Vice President (1995-present) and Chief
President Investment Strategist (1996-present), Phoenix
Investment Counsel, Inc. Executive Vice President
and Chief Investment Strategist (1996-present),
Senior Vice President (1995-present), National
Securities & Research Corporation, Senior Vice
President, Phoenix Equity Planning Corporation
(1995-1996), Phoenix Strategic Equity Series Fund
(1996-present), The Phoenix Edge Series Fund
(1995-present), Phoenix Multi-Portfolio Fund (1995-
present), Phoenix Income and Growth Fund (1996-
present), Phoenix Series Fund (1996-present),
Phoenix Strategic Allocation Fund, Inc. (1996-
present), Phoenix Worldwide Opportunities Fund
(1996-present), Phoenix-Aberdeen Series Fund
(1996-present) and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Vice
President, Common Stock and Chief Investment
Strategist, Phoenix Home Life Mutual Insurance
Company (April, 1995-November, 1995). Chief
Investment Strategist, Kidder, Peabody Co., Inc.
(1993-1994). Managing Director, Equities, Bankers
Trust Company (1991-1993).
John M. Hamlin (38) Vice Portfolio Manager, Equities (1996-present), Vice
President President (1995-1996), Phoenix Investment Counsel,
Inc. Portfolio Manager, Equities (1996-present),
Investment Officer (1993-1996), National Securities
& Research Corporation. Vice President, Phoenix
Income and Growth Fund (1993-present) and
Phoenix Series Fund (1994-present). Portfolio
Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company (1989-1995).
William E. Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning
100 Bright Meadow Blvd. President Corporation (1996-present). Vice President, Phoenix
P. O. Box 2200 Funds, Phoenix Duff & Phelps Institutional Mutual
Enfield, CT 06083-2200 Funds and Phoenix-Aberdeen Series Fund (1996-
present). Assistant Vice President, USAffinity
Investments LP (1994-1995). Treasurer and
Secretary, USAffinity Funds (1994-1995). Manager,
Fund Administration, SEI Corporation (1991-1994).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ------------------------- --------------- -------------------------------------------------------
<S> <C> <C>
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer,
100 Bright Meadow Blvd. President Phoenix Duff & Phelps Corporation (1995-present).
P. O. Box 2200 Senior Vice President, Finance (1990-present), Chief
Enfield, CT 06083-2200 Financial Officer (1996-present), and Treasurer
(1994-1996), Phoenix Equity Planning Corporation.
Senior Vice President (1990-present), Chief Financial
Officer (1996-present) and Treasurer (1994-present),
Phoenix Investment Counsel, Inc. Senior Vice
President, Finance (1993-present), Chief Financial
Officer (1996-present), and Treasurer (1994-present),
National Securities & Research Corporation. Senior
Vice President and Chief Operating Officer, Duff &
Phelps Investment Management Co. (1996-present).
Vice President, Phoenix Funds (1990-present),
Phoenix-Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Senior Vice President and Chief
Financial Officer, W. S. Griffith & Co., Inc. (1992-
1995) and Townsend Financial Advisers, Inc. (1993-
1995). Vice President, the National Affiliated
Investment Companies (until 1993). Vice President,
Investment Products Finance, Phoenix Home Life
Mutual Insurance Company (1990-1995).
Leonard J. Saltiel (43) Vice Managing Director (1996-present), Senior Vice
President President (1994-1996), Phoenix Equity Planning
Corporation. Vice President, Phoenix Funds (1994-
present), Phoenix Duff & Phelps Institutional Mutual
Funds (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Vice President, Investment
Operations, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various positions with Home
Life Insurance Company and Phoenix Home Life
Mutual Insurance Company (1987-1994).
G. Jeffrey Bohne (49) Secretary Vice President and General Manager, Phoenix Home
101 Munson St. Life Mutual Insurance Co. (1993-present). Vice
Greenfield, MA 03101 President, Mutual Fund Customer Service, Phoenix
Equity Planning Corporation (1993-present).
Secretary, Phoenix Funds (1993-present). Clerk,
Phoenix Strategic Allocation Fund, Inc. (1994-
present). Secretary, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and
Phoenix-Aberdeen Series Fund (1996-present).
Vice President, Home Life of New York Insurance
Company (1984-1992).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------- --------------- -------------------------------------------------------
<S> <C> <C>
Nancy G. Curtiss (44) Treasurer Vice President, Fund Accounting (1994-present) and
Treasurer (1996-present), Phoenix Equity Planning
Corporation. Treasurer, Phoenix Funds (1994-present),
Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Second Vice President and Treasurer,
Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions
with Phoenix Home Life Mutual Insurance Company
(1987-1994).
</TABLE>
- -----------
*Indicates that the Trustee is an "interested person" of the Trust within the
meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Blinn and
Reynolds will retire from the Board of Trustees effective January 1, 1998.
For services rendered to the Fund for the fiscal year ended April 30,
1997, the Trustees received aggregate remuneration of $19,505. For services on
the Boards of Directors/Trustees of the Phoenix Funds, each Trustee who is not
a full-time employee of the Adviser or any of its affiliates currently receives
a retainer at the annual rate of $40,000 and a fee of $2,500 per joint meeting
of the Boards. Each Trustee who serves on the Audit Committee receives a
retainer at the annual rate of $2,000 and a fee of $2,000 per joint Audit
Committee meeting attended. Each Trustee who serves on the Nominating Committee
receives a retainer at the annual rate of $1,000 and a fee of $1,000 per joint
Nominating Committee meeting attended. Each Trustee who serves on the Executive
Committee and who is not an interested person of the Fund receives a retainer
at the annual rate of $1,000 and $1,000 per joint Executive Committee meeting
attended. The function of the Executive Committee is to serve as a contract
review, compliance review and performance review delegate of the full Board of
Trustees. Costs are allocated equally to each of the Series and Funds within
the Fund Complex. The foregoing fees do not include the reimbursement of
expenses incurred in connection with meeting attendance. Officers and employees
of the Adviser who are interested persons are compensated for their services by
the Adviser and receive no compensation from the Fund.
21
<PAGE>
For the Fund's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (12 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ -------------- --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $ 1,845* $63,250
Robert Chesek $ 1,623 $56,250
E. Virgil Conway+ $ 1,908 $66,000
Harry Dalzell-Payne+ $ 1,623 None None $56,750
Francis E. Jeffries $ 375* for any for any $15,000
Leroy Keith, Jr. $ 1,623 Trustee Trustee $56,250
Philip R. McLoughlin+ $ 0 $ 0
Everett L. Morris+ $ 1,520* $54,000
James M. Oates+ $ 1,695 $58,500
Calvin J. Pedersen $ 0 $ 0
Philip R. Reynolds $ 1,623 $56,250
Herbert Roth, Jr.+ $ 2,010 $68,750
Richard E. Segerson $ 1,815 $62,750
Lowell P. Weicker, Jr. $ 1,845 $63,250
</TABLE>
- -----------
*This compensation (and the earnings thereon) will be deferred pursuant to the
Directors' Deferred Compensation Plan. At June 30, 1997, the total amount of
deferred compensation (including interest and other accumulation earned on the
original amounts deferred) accrued for Messrs. Blinn, Jeffries, Morris and Roth
was $349,026.91, $28,561.41, $85,849.73 and $132,587.69, respectively. At
present, by agreement among the Fund, the Distributor and the electing
director, director fees that are deferred are paid by the Fund to the
Distributor. The liability for the deferred compensation obligation appears
only as a liability of the Distributor.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
On April 30, 1997, the Trustees and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
OTHER INFORMATION
Independent Accountants
Price Waterhouse LLP has been selected as the independent accountants for
the Fund. Price Waterhouse LLP audits the Fund's annual financial statements
and expresses an opinion thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company, serves as custodian of the Fund's
assets (the "Custodian") and, Equity Planning acts as Transfer Agent for the
Fund (the "Transfer Agent").
Reports to Shareholders
The fiscal year of the Fund ends on April 30th. The Fund will send
financial statements to its shareholders at least semi-annually. An annual
report containing financial statements audited by the Fund's independent
accountants, will be sent to shareholders each year.
Financial Statements
The Financial Statements for the fiscal year ended April 30, 1997
appearing in the Fund's 1997 Annual Report to Shareholders, are incorporated
herein by reference.
22
<PAGE>
APPENDIX
Standard and Poor's Corporation's Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's Investors Service, Inc.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protective nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Note: Those bonds in the Aa, A and Baa groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1 and Baa1.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well safe
guarded during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
and interest.
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PHOENIX SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
February 27, 1998
This Statement of Additional Information is not the Prospectus but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Series Fund (the "Trust"), dated February 27, 1998 and should be read in
conjunction with it. The Trust's Prospectus may be obtained by calling Phoenix
Equity Planning Corporation ("Equity Planning") at (800) 243-4361, or by writing
to Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston,
MA 02266-8301.
TABLE OF CONTENTS*
PAGE
INVESTMENT POLICIES...................................................... 1
INVESTMENT RESTRICTIONS.................................................. 7
PERFORMANCE INFORMATION.................................................. 8
PERFORMANCE COMPARISONS.................................................. 10
PORTFOLIO TURNOVER....................................................... 10
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................... 10
THE INVESTMENT ADVISER................................................... 11
NET ASSET VALUE.......................................................... 13
HOW TO BUY SHARES........................................................ 14
ALTERNATIVE PURCHASE ARRANGEMENTS........................................ 14
Purchases of Shares of the Money Market Fund.......................... 15
INVESTOR ACCOUNT SERVICES................................................ 15
HOW TO REDEEM SHARES..................................................... 16
TAX-SHELTERED RETIREMENT PLANS........................................... 17
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................... 17
THE DISTRIBUTOR AND DISTRIBUTION PLANS................................... 18
MANAGEMENT OF THE TRUST.................................................. 20
OTHER INFORMATION........................................................ 28
Customer Service: (800) 243-1574
Sales Information: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device TTY: (800) 243-1926
PDP427B (2/98)
<PAGE>
INVESTMENT POLICIES
The investment objectives and policies of each Fund are described in the
"Investment Objectives and Policies" section of the Prospectus. The following
specific policies supplement the information contained in that section of the
Prospectus.
MONEY MARKET INSTRUMENTS. Certain money market instruments used extensively
by the Money Market Fund, and to a lesser extent by the other Funds, are
described below.
REPURCHASE AGREEMENTS. Repurchase Agreements are agreements by which a Fund
purchases a security and obtains a simultaneous commitment from the seller (a
member bank of the Federal Reserve System or, to the extent permitted by the
Investment Company Act of 1940, a recognized securities dealer) that the seller
will repurchase the security at an agreed upon price and date. The resale price
is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security.
A repurchase transaction is usually accomplished either by crediting the
amount of securities purchased to the account of the custodian of the Trust
maintained in a central depository of book-entry system or by physical delivery
of the securities to the Trust's custodian in return for delivery of the
purchase price to the seller. Repurchase transactions are intended to be
short-term transactions with the seller repurchasing the securities, usually
within seven days.
Even though repurchase transactions usually do not impose market risks on the
purchasing Fund, if the seller of the repurchase agreement defaults and does not
repurchase the underlying securities, the Fund might incur a loss if the value
of the underlying securities declines, and disposition costs may be incurred in
connection with liquidating the underlying securities. In addition, if
bankruptcy proceedings are commenced regarding the seller, realization upon the
underlying securities may be delayed or limited, and a loss may be incurred if
the underlying securities decline in value.
CERTIFICATES OF DEPOSIT. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
TIME DEPOSITS. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received.
BANKER'S ACCEPTANCES. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
COMMERCIAL PAPER. Commercial paper refers to short-term, unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity at the time of
issuance not exceeding nine months.
CORPORATE DEBT SECURITIES. Corporate debt securities with a remaining
maturity of less than one year tend to become extremely liquid and are traded as
money market securities.
U. S. GOVERNMENT OBLIGATIONS. Securities issued or guaranteed as to principal
and interest by the United States Government include a variety of Treasury
securities, which differ only in their interest rates, maturities, and times of
issuance. Treasury bills have maturities of one year or less. Treasury notes
have maturities of one to ten years, and Treasury bonds generally have
maturities of greater than ten years.
Agencies of the United States Government which issue or guarantee obligations
include, among others, Export-Import Banks of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration and The
Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued or guaranteed by, among others, the
Federal National Mortgage Association, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Banks for
Cooperatives, and the U.S. Postal Service. Some of these securities are
supported by the full faith and credit of the U.S. Government; others are
supported by the right of the issuer to borrow from the Treasury, while still
others are supported only by the credit of the instrumentality. The U.S.
Government Securities Series will invest primarily in securities which are
supported by the full faith and credit of the U.S. Government.
SECURITIES AND INDEX OPTIONS. All Funds, except the Money Market Fund and
U.S. Government Securities Fund, may write covered call options and purchase
call and put options. Options and the related risks are summarized below.
WRITING AND PURCHASING OPTIONS. The exercise price of a call option written
by a Fund may be below, equal to or above the current market value of the
underlying security or securities index at the time the option is written. Call
options written by a Fund normally will have expiration dates between three and
nine months from the date written. During the option period a Fund may be
assigned an exercise notice by the broker-dealer through which the call option
was sold, requiring the Fund to deliver
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the underlying security (or cash in the case of securities index calls) against
payment of the exercise price. This obligation is terminated upon the expiration
of the option period or at such earlier time as the Fund effects a closing
purchase transaction. A closing purchase transaction cannot be effected with
respect to an option once the Fund has received an exercise notice.
A multiplier for an index option performs a function similar to the unit of
trading for an option on an individual security. It determines the total dollar
value per contract of each point between the exercise price of the option and
the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices, Computer/Business
Equipment Index, Major Market Index, Amex Market Value Index, Computer
Technology Index, Oil and Gas Index, NYSE Options Index, Gaming/Hotel Index,
Telephone Index, Transportation Index, Technology Index, and Gold/Silver Index.
A Fund may write call options and purchase call and put options on any other
indices traded on a recognized exchange.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option written by a Fund, to prevent an underlying
security from being called, or to enable a Fund to write another call option
with either a different exercise price or expiration date or both. A Fund may
realize a net gain or loss from a closing purchase transaction, depending upon
whether the amount of the premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. If a call option
written by a Fund expires unexercised, a Fund will realize a gain in the amount
of the premium on the option less the commission paid.
The option activities of a Fund may increase its portfolio turnover rate and
the amount of brokerage commissions paid. A Fund will pay a commission each time
it purchases or sells a security in connection with the exercise of an option.
These commissions may be higher than those which would apply to purchases and
sales of securities directly.
LIMITATIONS ON OPTIONS. A Fund may write call options only if they are
covered and if they remain covered so long as a Fund is obligated as a writer.
If a Fund writes a call option on an individual security, a Fund will own the
underlying security at all times during the option period. A Fund will write
call options on indices only to hedge in an economically appropriate way
portfolio securities which are not otherwise hedged with options or financial
futures contracts. Call options on securities indices written by a Fund will be
"covered" by identifying the specific portfolio securities being hedged.
To secure the obligation to deliver the underlying security, the writer of a
covered call option on an individual security is required to deposit the
underlying security or other assets in escrow with the broker in accordance with
clearing corporation and exchange rules. In the case of an index call option
written by a Fund, a Fund will be required to deposit qualified securities. A
"qualified security" is a security against which a Fund has not written a call
option and which has not been hedged by a Fund by the sale of a financial
futures contract. If at the close of business on any day the market value of the
qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts, a Fund will deposit an amount of cash
or liquid assets equal in value to the difference. In addition, when a Fund
writes a call on an index which is "in-the-money" at the time the call is
written, a Fund will segregate with its custodian bank cash or liquid assets
equal in value to the amount by which the call is "in-the-money" times the
multiplier times the number of contracts. Any amount segregated may be applied
to a Fund's obligation to segregate additional amounts in the event that the
market value of the qualified securities falls below 100% of the current index
value times the multiplier times the number of contracts.
A Fund may invest up to 2% of its total assets in exchange-traded call and
put options. A Fund may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the sale
(in the case of a put) of the underlying security. Any such sale of a call
option or a put option would result in a net gain or loss, depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid.
In connection with a Fund qualifying as a regulated investment company under
the Internal Revenue Code, other restrictions on a Fund's ability to enter into
option transactions may apply from time to time. See "Dividends, Distributions
and Taxes."
RISKS RELATING TO OPTIONS. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that a Fund may lose
the premium it paid plus transaction costs. If a Fund does not exercise the
option and is unable to close out the position prior to expiration of the
option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although a Fund will write
and purchase options only when the Adviser believes that a liquid secondary
market will exist for options of the same series, there can be no assurance that
a liquid secondary market will exist for a particular option at a particular
time and that a Fund if it so desires, can close out its position by effecting a
closing transaction. If the writer of a covered call
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<PAGE>
option is unable to effect a closing purchase transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Accordingly, a covered call writer may not be able to sell the underlying
security at a time when it might otherwise be advantageous to do so.
Possible reasons for the absence of a liquid secondary market on an exchange
include the following: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) inadequacy of the facilities of
an exchange or the clearing corporation to handle trading volume; and (v) a
decision by one or more exchanges to discontinue the trading of options or
impose restrictions on orders.
Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written on one or more
accounts or through one or more brokers). An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions. The Adviser believes that the position limits
established by the exchanges will not have any adverse impact upon a Fund or all
of the Funds, in the aggregate.
RISKS OF OPTIONS ON INDICES. Because the value of an index option depends
upon movements in the level of the index rather than movements in the price of a
particular security, whether a Fund will realize a gain or loss on the purchase
or sale of an option on an index depends upon movements in the level of prices
in the market generally or in an industry or market segment rather than upon
movements in the price of an individual security. Accordingly, successful use by
a Fund of options on indices will be subject to the Adviser's ability to predict
correctly movements in the direction of the market generally or in the direction
of a particular industry. This requires different skills and techniques than
predicting changes in the prices of individual securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, a Fund would not be able to
close out options which it had written or purchased and, if restrictions on
exercise were imposed, might be unable to exercise an option it purchased, which
would result in substantial losses to a Fund. However, it is the Trust's policy
to write or purchase options only on indices which include a sufficient number
of securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, a Fund will write call options on indices only subject to the
limitations described above.
Price movements in securities in a Fund's portfolio will not correlate
perfectly with movements in the level of the index and, therefore, a Fund bears
the risk that the price of the securities held by the Fund may not increase as
much as the level of the index. In this event, the Fund would bear a loss on the
call which would not be completely offset by movements in the prices of a Fund's
portfolio securities. It is also possible that the index may rise when the value
of a Fund's portfolio securities does not. If this occurred, the Fund would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and might also experience a loss in the market value of
portfolio securities.
Unless a Fund has other liquid assets which are sufficient to satisfy the
exercise of a call on an index, a Fund will be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be settled
within hours after receiving the notice of exercise, if a Fund fails to
anticipate an exercise, it may have to borrow from a bank (in an amount not
exceeding 10% of a Fund's total assets) pending settlement of the sale of
securities in its portfolio and pay interest on such borrowing.
When a Fund has written a call on an index, there is also a risk that the
market may decline between the time a Fund has the call exercised against it, at
a price which is fixed as of the closing level of the index on the date of
exercise, and the time a Fund is able to sell securities in its portfolio. As
with options on portfolio securities, a Fund will not learn that a call has been
exercised until the day following the exercise date but, unlike a call on a
portfolio security where a Fund would be able to deliver the underlying security
in settlement, a Fund may have to sell part of its portfolio securities in order
to make settlement in cash, and the price of such securities might decline
before they could be sold.
If a Fund exercises a put option on an index which it has purchased before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money" a Fund will be required
to pay the difference between the closing index value and the exercise price of
the option (multiplied by the applicable multiplier) to the assigned writer.
Although a Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
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FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS. All of the Funds except the
Money Market Fund and the U.S. Government Securities Fund may use financial
futures contracts and related options to hedge against changes in the market
value of its portfolio securities or securities which it intends to purchase.
Hedging is accomplished when an investor takes a position in the futures market
opposite to his cash market position. There are two types of hedges, long (or
buying) and short (or selling) hedges. Historically, prices in the futures
market have tended to move in concert with cash market prices, and prices in the
futures market have maintained a fairly predictable relationship to prices in
the cash market. Thus, a decline in the market value of securities in a Fund's
portfolio may be protected against to a considerable extent by gains realized on
futures contracts sales. Similarly, it is possible to protect against an
increase in the market price of securities which a Fund may wish to purchase in
the future by purchasing futures contracts.
A Fund may purchase or sell any financial futures contracts which are traded
on a recognized exchange or board of trade. Financial futures contracts consist
of interest rate futures contracts and securities index futures contracts. A
public market presently exists in interest rate futures contracts covering
long-term U.S. Treasury bonds, U.S. Treasury notes, three-month U.S. Treasury
bills and GNMA certificates. Securities index futures contracts are currently
traded with respect to the Standard & Poor's 500 Composite Stock Price Index and
such other broad-based stock market indices as the New York Stock Exchange
Composite Stock Index and the Value Line Composite Stock Price Index. A clearing
corporation associated with the exchange or board of trade on which a financial
futures contract trades assumes responsibility for the completion of
transactions and also guarantees that open futures contracts will be performed.
In contrast to the situation when a Fund purchases or sells a security, no
security is delivered or received by a Fund upon the purchase or sale of a
financial futures contract. Initially, a Fund will be required to deposit in a
pledged account with its custodian cash, U.S. Government obligations or fully
paid marginable securities. This amount is known as initial margin and is in the
nature of a performance bond or good faith deposit on the contract. The current
initial margin deposit required per contract is approximately 5% of the contract
amount. Brokers may establish deposit requirements higher than this minimum.
Subsequent payments, called variation margin, will be made to and from the
account on a daily basis as the price of the futures contract fluctuates. This
process is known as marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although financial futures contracts by their terms call for actual delivery
or acceptance of securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out is
accomplished by effecting an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.
A Fund will pay commissions on financial futures contracts and related
options transactions. These commissions may be higher than those which would
apply to purchases and sales of securities directly.
LIMITATIONS ON FUTURES CONTRACTS AND RELATED OPTIONS. A Fund may not engage
in transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of its portfolio securities or securities which it intends to
purchase. A Fund may not purchase or sell financial futures contracts or related
options if, immediately thereafter, the sum of the amount of initial margin
deposits on a Fund's existing futures and related options positions and the
premiums paid for related options would exceed 2% of the market value of a
Fund's total assets after taking into account unrealized profits and losses on
any such contracts. At the time of purchase of a futures contract or a call
option on a futures contract, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, equal to the market value of the futures contract minus
the Fund's initial margin deposit with respect thereto will be deposited in a
pledged account with the Fund's custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged.
The extent to which a Fund may enter into financial futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company. See
"Dividends, Distributions and Taxes."
RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS. Positions in futures
contracts and related options may be closed out only on an exchange which
provides a secondary market for such contracts or options. A Fund will enter
into an option
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or futures position only if there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular option or futures contract at any specific time. Thus, it may not
be possible to close out a futures or related option position. In the case of a
futures position, in the event of adverse price movements a Fund would continue
to be required to make daily margin payments. In this situation, if a Fund has
insufficient cash to meet daily margin requirements it may have to sell
portfolio securities to meet its margin obligations at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to take or make
delivery of the securities underlying the futures contracts it holds. The
inability to close out futures positions also could have an adverse impact on a
Fund's ability to hedge its portfolio effectively.
There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also limit a hedger's opportunity to benefit fully from
a favorable market movement. In addition, investing in futures contracts and
options on futures contracts will cause a Fund to incur additional brokerage
commissions and may cause an increase in a Fund's portfolio turnover rate.
The successful use of futures contracts and related options also depends on
the ability of the Adviser to forecast correctly the direction and extent of
market movements, interest rates and other market factors within a given time
frame. To the extent market prices remain stable during the period a futures
contract or option is held by a Fund or such prices move in a direction opposite
to that anticipated, a Fund may realize a loss on the hedging transaction which
is not offset by an increase in the value of its portfolio securities. Options
and futures may also fail as a hedging technique in cases where the movements of
the securities underlying the options and futures do not follow the price
movements of the hedged portfolio securities. As a result, a Fund's total return
for the period may be less than if it had not engaged in the hedging
transaction. The loss from investing in futures transactions is potentially
unlimited.
Utilization of futures contracts by a Fund involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are being hedged. If the price of the futures
contract moves more or less than the price of the securities being hedged, a
Fund will experience a gain or loss which will not be completely offset by
movements in the price of the securities. It is possible that, where a Fund has
sold futures contracts to hedge its portfolio against a decline in the market,
the market may advance and the value of securities held in the Fund's portfolio
may decline. If this occurred, a Fund would lose money on the futures contract
and would also experience a decline in value in its portfolio securities. Where
futures are purchased to hedge against a possible increase in the prices of
securities before a Fund is able to invest its cash (or cash equivalents) in
securities (or options) in an orderly fashion, it is possible that the market
may decline; if a Fund then determines not to invest in securities (or options)
at that time because of concern as to possible further market decline or for
other reasons, a Fund will realize a loss on the futures that would not be
offset by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in the
futures market elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such case,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities rather than
to engage in closing transactions because such action would reduce the liquidity
of the futures market. In addition, from the point of view of speculators,
because the deposit requirements in the futures markets are less onerous than
margin requirements in the cash market, increased participation by speculators
in the futures market could cause temporary price distortions. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends may still not result in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for a Fund
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to a Fund while the purchase
or sale of the futures contract would not have resulted in a loss, such as when
there is no movement in the price of the underlying securities.
LEVERAGE. The Trust may from time to time increase the Convertible Fund's
ownership or the Aggressive Growth Fund's ownership of securities holdings above
the amounts otherwise possible by borrowing from banks at fixed amounts of
interest and investing the borrowed funds. The Trust will borrow only from
banks, and only if immediately after such borrowing the value of the assets of a
Fund (including the amount borrowed) less its liabilities (not including any
borrowings) is at least three times the amount of funds borrowed for investment
purposes. The effect of this provision is to permit the Trust to borrow up to
25% of the total assets of a Fund, including the proceeds of any such
borrowings. However, the amount of the borrowings will be dependent upon the
availability and cost of credit from time to time. If, due to market
fluctuations or other reasons, the value of such Fund's assets computed as
provided above becomes at any time less than three times the amount of the
borrowings for investment purposes, the Trust, within three business days, is
required to reduce bank debt to the extent necessary to meet the required 300%
asset coverage.
Interest on money borrowed will be an expense of the Fund with respect to
which the borrowing has been made. Because such expense would not otherwise be
incurred, the net investment income of such Fund is not expected to be as high
as it otherwise would be during periods when borrowings for investment purposes
are substantial.
Bank borrowings for investment purposes must be obtained on an unsecured
basis. Any such borrowing must also be made subject to an agreement by the
lender that any recourse is limited to the assets of the Fund with respect to
which the borrowing has been made.
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Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of a Fund's shares to rise faster
than would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the monies borrowed) to the Fund, the net asset
value of the Fund will decrease faster than would otherwise be the case.
FOREIGN SECURITIES. Each of the Funds, except the Money Market Fund and the
U.S. Government Securities Fund may purchase foreign securities, including those
issued by foreign branches of U.S. banks. In any event, such investments in
foreign securities will be limited to 25% of the total net asset value of the
Balanced Fund, Convertible Fund and Growth Fund. The Aggressive Growth Fund may
invest up to 10% of its total net asset value in foreign securities and the High
Yield Fund may invest up to 35% of its total net asset value in foreign
securities. Investments in foreign securities, particularly those of
non-governmental issuers, involve considerations which are not ordinarily
associated with investing in domestic issues. These considerations include
changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under foreign
securities markets, the impact of political, social or diplomatic developments,
difficulties in invoking legal process abroad and the difficulty of assessing
economic trends in foreign countries.
The Trust may use a foreign custodian in connection with its purchases of
foreign securities and may maintain cash and cash equivalents in the care of a
foreign custodian. The amount of cash or cash equivalents maintained in the care
of eligible foreign custodians will be limited to an amount reasonably necessary
to effect the Trust's foreign securities transactions. The use of a foreign
custodian invokes considerations which are not ordinarily associated with
domestic custodians. These considerations include the possibility of
expropriations, restricted access to books and records of the foreign custodian,
inability to recover assets that are lost while under the control of the foreign
custodian, and the impact of political, social or diplomatic developments.
MORTGAGE-BACKED SECURITIES. Securities issued by Government National Mortgage
Association ("GNMA") are, and securities issued by Federal National Mortgage
Association ("FNMA") include, mortgage-backed securities representing part
ownership of a pool of mortgage loans.
In the case of GNMA, the mortgages are insured by the Federal Housing
Administration or Farmers' Home Administration or guaranteed by the Veteran's
Administration. In the case of FNMA, the mortgages are not insured by an agency
of the U.S. Government.
The prices of mortgage-backed securities are inversely affected by changes in
interest rates and, therefore, are subject to the risk of market price
fluctuations. Mortgage-backed securities issued by GNMA and FNMA currently offer
yields which are higher than those available on other securities of the U.S.
Government and its agencies and instrumentalities, but may be less effective
than these other securities as a means of "locking in" attractive long-term
interest rates. This is a result of the need to reinvest prepayment of principal
and the possibility of significant unscheduled prepayments resulting from
declines in mortgage interest rates. As a result, these securities have less
potential for capital appreciation during periods of declining interest rates
than other investments of comparable risk of decline in value during periods of
rising rates.
LOWER RATED CONVERTIBLE SECURITIES. Convertible securities which are not
rated in the four highest categories, in which the Convertible Fund may invest,
are predominantly speculative with respect to the issuer's capacity to repay
principal and interest and may include issues on which the issuer defaults.
NONPUBLICLY OFFERED DEBT SECURITIES. The High Yield Fund may purchase
securities which cannot be sold in the public market without first being
registered with the Securities and Exchange Commission ("SEC") provided that the
Adviser has determined that such securities meet prescribed standards for being
considered as "liquid" securities. See "Investment Restrictions." Liquid
restricted securities may offer higher yields than comparable publicly traded
securities. Such securities ordinarily can be sold by the Trust in secondary
market transactions to certain qualified investors pursuant to rules established
by the SEC, in privately negotiated transactions to a limited number of
purchasers or in a public offering made pursuant to an effective registration
statement under governing law. Private sales of such securities may involve
significant delays and expense. Private sales often require negotiation with one
or more purchasers and may produce less favorable prices than the sale of
similar unrestricted securities. Public sales of previously restricted
securities generally involve the time and expense of the preparation and
processing of a registration statement (and the possible decline in value of the
securities during such period) and may involve the payment of underwriting
commissions. In some instances, the Trust may have to bear certain costs of
registration in order to sell such shares publicly.
DEFERRED COUPON DEBT SECURITIES. The High Yield Fund may invest in debt
obligations that do not make any interest payments for a specified period of
time prior to maturity ("deferred coupon" obligations). Because the deferred
coupon bonds do not make interest payments for a certain period of time, they
are purchased by the Fund at a deep discount and their value fluctuates more in
response to interest rate changes than does the value of debt obligations that
make current interest payments. The degree of fluctuation with interest rate
changes is greater when the deferred period is longer. Therefore, there is a
risk that the value of the Fund shares may decline more as a result of an
increase in interest rates than would be the case if the Fund did not invest in
deferred coupon bonds.
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LENDING PORTFOLIO SECURITIES. In order to increase its return on investments,
the Trust may make loans of the portfolio securities of any Fund, as long as the
market value of the loaned securities does not exceed 25% of the value of that
Fund's total assets. Loans of portfolio securities will always be fully
collateralized at no less than 100% of the market value of the loaned securities
(as marked to market daily) and made only to borrowers considered to be
creditworthy. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities and possibly the loss of the collateral if the
borrower fails financially.
LOAN PARTICIPATIONS. The High Yield Fund may invest up to 5% of its net
assets, determined at the time of investment, in loan participations. A loan
participation agreement involves the purchase of a share of a loan made by a
bank to a company in return for a corresponding share of the borrower's
principal and interest payments. Loan participations of the type in which the
Fund may invest include interests in both secured and unsecured corporate loans.
In the event that a corporate borrower failed to pay its scheduled interest or
principal payments on participations held by the Fund, the market value of the
affected participation would decline, resulting in a loss of value of such
investment to the Fund. Accordingly, such participations are speculative and may
result in the income level and net assets of the Fund being reduced. Moreover,
loan participation agreements generally limit the right of a participant to
resell its interest in the loan to a third party and, as a result, loan
participations will be deemed by the Trust to be illiquid investments.
INVESTMENT RESTRICTIONS
The Trust's fundamental policies as they affect any Fund cannot be changed
without the approval vote of a majority of the outstanding shares of such Fund,
which is the lesser of (i) 67% or more of the voting securities of such Fund
present at a meeting if the holders of more than 50% of the outstanding voting
securities of such Fund are present or represented by proxy or (ii) more than
50% of the outstanding voting securities of such Fund. A proposed change in
fundamental policy or investment objective will be deemed to have been
effectively acted upon with respect to any Fund if a majority of the outstanding
voting securities of that Fund votes for the approval of the proposal as
provided above, notwithstanding (1) that such matter has not been approved by a
majority of the outstanding securities of any other Fund affected by such matter
and (2) that such matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The following investment restrictions are fundamental policies of the Trust
with respect to all Funds and may not be changed except as described above. The
Trust may not:
1. Purchase for any Fund securities of any issuer, other than obligations
issued or guaranteed as to principal and interest by the United States
Government or its agencies or instrumentalities, if immediately thereafter (i)
more than 5% of such Fund's total assets (taken at market value) would be
invested in the securities of such issuer or (ii) more than 10% of the
outstanding securities of any class of such issuer would be held by such Fund or
by all Funds of the Trust in the aggregate.
2. Concentrate the portfolio investments of any Fund in any one industry. To
comply with this restriction, no security may be purchased for a Fund if such
purchase would cause the value of the aggregate investment of such Fund in any
one industry to exceed 25% of that Fund's total assets (taken at market value).
However, the Money Market Fund may invest more than 25% of its assets in the
domestic banking industry.
3. Act as securities underwriter except as it technically may be deemed to be
an underwriter under the Securities Act of 1933 in selling a portfolio security.
4. Purchase securities on margin, but it may obtain short-term credit as may
be necessary for the clearance of purchases and sales of securities.
5. Make short sales of securities or maintain a short position.
6. Make cash loans, except that the Trust may (i) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not, and (ii) enter into
repurchase agreements, provided that no more than 10% of any Fund's net assets
(taken at market value) may be subject to repurchase agreements maturing in more
than seven days.
7. Make securities loans, except that the Trust may make loans of the
portfolio securities of any Fund, provided that the market value of the
securities subject to any such loans does not exceed 25% of the value of the
total assets (taken at market value) of such Fund.
8. Make investments in real estate or commodities or commodity contracts,
although (i) the Trust may purchase securities of issuers which deal in real
estate or commodities and may purchase securities which are secured by interests
in real estate, specifically, securities issued by real estate investment trusts
and (ii) any Fund (excluding the Money Market Fund and the U.S. Government
Securities Fund) may engage in transactions in financial futures contracts and
related options, provided that the sum of the initial margin deposits on such
Fund's existing futures positions and the premiums paid for related options
would not exceed in the aggregate 2% of such Fund's total assets.
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9. Invest in oil, gas or other mineral exploration or development programs,
although the Trust may purchase securities of issuers which engage in whole or
in part in such activities.
10. Invest in puts, calls, straddles and any combination thereof, except that
any Fund (excluding the Money Market Fund and the U.S. Government Securities
Fund) may (i) write (sell) exchange-traded covered call options on portfolio
securities and on securities indices and engage in related closing purchase
transactions and (ii) invest up to 2% of its total assets in exchange-traded
call and put options on securities and securities indices.
11. Purchase securities of companies for the purpose of exercising management
or control.
12. Participate in a joint or joint and several trading account in
securities.
13. Purchase securities of any other investment company except in the open
market at customary brokers' commission rates or as a part of a plan of merger
or consolidation.
14. Purchase for any Fund securities of any issuer which together with
predecessors has a record of less than three years' continuous operation, if as
a result more than 5% of the total net assets (taken at market value) of such
Fund would then be invested in such securities.
15. Purchase or retain securities of any issuer if any officer or Trustee of
the Trust, or officer or director of its investment adviser, owns beneficially
more than 1/2 of 1% of the outstanding securities or shares, or both, of such
issuer and all such persons owning more than 1/2 of 1% of such securities or
shares together own beneficially more than 5% of such securities or shares.
16. Borrow money, except that the Trust may (i) borrow money for any Fund for
temporary administrative purposes provided that any such borrowing does not
exceed 10% of the value of the total assets (taken at market value) of such Fund
and (ii) borrow money for any Fund for investment purposes, provided that any
such borrowing for investment purposes with respect to any such Fund is (a)
authorized by the Trustees prior to any public distribution of the shares of
such Fund or is authorized by the shareholders of such Fund thereafter, (b) is
limited to 25% of the value of the total assets (taken at market value and
including any borrowings) of such Fund, and (c) is subject to an agreement by
the lender that any recourse is limited to the assets of that Fund with respect
to which the borrowing has been made. With the exception of the Convertible Fund
and the Aggressive Growth Fund, no Fund may invest in portfolio securities while
the amount of borrowing of the Fund exceeds 5% of the total assets of such Fund.
Borrowing for investment purposes has not been authorized for any Fund (except
the Convertible Fund and the Aggressive Growth Fund) whose shares are offered by
the Trust.
17. Pledge, mortgage or hypothecate the assets of any Fund to an extent
greater than 10% of the total assets (taken at market value) of such Fund to
secure borrowings made pursuant to the provisions of item 16 above.
18. Issue senior securities as defined in the Investment Company Act of 1940,
except to the extent that it is permissible to (a) borrow monthly from banks
pursuant to the Trust's investment restrictions regarding the borrowing of
money, and (b) enter into transactions involving forward foreign currency
contracts, foreign currency contracts and options thereon, as described in the
Trust's Prospectus and this Statement of Additional Information.
The Trust may purchase illiquid securities including repurchase agreements
providing for settlement more than seven days after notice and restricted
securities (securities that must be registered with the Securities and Exchange
Commission before they can be sold to the public) deemed to be illiquid provided
such securities will not constitute more than 15% (or 10% in the case of the
Money Market Fund) of each Fund's net assets. The Board of Trustees, or the
Adviser acting at its direction, values these securities, taking into
consideration quotations available from broker-dealers and pricing services and
other information deemed relevant.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of portfolio securities or amount of net assets shall not be
considered a violation of the restrictions.
PERFORMANCE INFORMATION
Performance information for each Fund (and Class of a Fund) may appear in
advertisements, sales literature, or reports to shareholders or prospective
shareholders. Performance information in advertisements and sales literature may
be expressed as yield and effective yield of the Money Market Fund, as yield of
the other Funds offered, or any Class of such Fund, and as total return of any
Fund or Class thereof. The current yield for the Money Market Fund will be based
on the change in the value of a hypothetical investment (exclusive of capital
changes) over a particular 7-day period, less a hypothetical charge reflecting
deductions for expenses during the period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Fund (and each Class of
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<PAGE>
such Fund) assumes that all dividends received during an annual period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return) + 1) (365/7)] -1
For the 7-day period ending October 31, 1997, the yield of the Class A Shares
of the Money Market Fund was 4.79% and the effective yield of the Class A Shares
of this Fund was 4.89%.
Quotations of yield for the High Yield, Convertible, U.S. Government
Securities and Balanced Funds will be based on all investment income per share
earned during a particular 30-day period (including dividends and interest),
less expenses (including pro rata Trust expenses and expenses applicable to each
particular Fund or Class of a Fund) accrued during the period ("net investment
income"), and are computed by dividing net investment income by the value of a
share of the Fund or Class on the last day of the period, according to the
following formula:
YIELD = 2[(a-b)+ 1)(6) -1]
---
cd
where a = dividends and interest earned during the period by the Fund, b =
expenses accrued for the period (net of any reimbursements), c = the
average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period.
For the period ended October 31, 1997, the yield of the Class A Shares of the
Funds were as follows: 8.95% for the High Yield Fund; 1.35% for the Convertible
Fund; 4.89% for the U.S. Government Securities Fund; and 2.40% for the Balanced
Fund. For the same period, the yield of the Class B Shares of the Funds were as
follows: High Yield 8.63%; Convertible 0.65%; U.S. Government 4.38%; and
Balanced 1.77%.
As summarized in the Prospectus under the heading "Performance History,"
total return is a measure of the change in value of an investment in a Fund, or
Class thereof, over the period covered. The formula for total return used herein
includes four steps: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Fund or a Class of a Fund; (2) calculating
the value of the hypothetical initial investment of $1,000 as of the end of the
period by multiplying the total number of shares of a class owned at the end of
the period by the net asset value on the last trading day of the period; (3)
assuming maximum sales charge deducted and reinvestment of all dividends at net
asset value and (4) dividing this account value for the hypothetical investor by
the initial $1,000 investment. Total return will be calculated for one year,
five years and ten years or the time period during which the registration
statement including the Fund was in effect if a Fund has not been in existence
for at least ten years.
The manner in which total return will be calculated for public use is
described above. The following table summarizes the calculation of total return
for each Fund, where applicable, through October 31, 1997.
AVERAGE ANNUAL TOTAL RETURN AS OF OCTOBER 31, 1997
<TABLE>
<CAPTION>
PERIODS ENDED
------------------------------------------------------
10 YEAR OR
FUND 1 YEAR 5 YEAR SINCE INCEPTION*
- ------------------------------ ------ ------ -----------------
<S> <C> <C> <C>
BALANCED (CLASS A) 12.41% 9.12% 10.71%
BALANCED (CLASS B) 13.13% N/A 12.60%
CONVERTIBLE (CLASS A) 11.82% 9.44% 10.02%
CONVERTIBLE (CLASS B) 12.49% N/A 11.67%
GROWTH (CLASS A) 18.88% 13.39% 13.40%
GROWTH (CLASS B) 19.89% N/A 19.53%
AGGRESSIVE GROWTH (CLASS A) 13.98% 15.75% 12.82%
AGGRESSIVE GROWTH (CLASS B) 14.70% N/A 20.95%
HIGH YIELD (CLASS A) 9.57% 10.89% 10.75%
HIGH YIELD (CLASS B) 10.18% N/A 7.74%
U.S. GOVERNMENT SECURITIES (CLASS A) 2.75% 5.37% 7.56%
U.S. GOVERNMENT SECURITIES (CLASS B) 2.94% N/A 4.84%
</TABLE>
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* Since inception, July 15, 1994 for Class B Balanced, Convertible and Growth;
July 21, 1994 for Class B Aggressive Growth; February 16, 1994 for Class B
High Yield; and February 24, 1994 for U.S. Government Class B.
NOTE: Average annual total return assumes a hypothetical initial payment of
$1,000. At the end of each period, a total redemption is assumed. The
ending redeemable value is divided by the original investment to
calculate total return.
Performance information for any Fund or Class reflects only the performance
of a hypothetical investment in the Fund or Class during the particular time
period on which the calculations are based. Performance information should be
considered in light of the investment objectives and policies, characteristics
and quality of the particular Fund, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future.
PERFORMANCE COMPARISONS
Each Fund or Class of a Fund may from time to time include in advertisements
containing total return the ranking of those performance figures relative to
such figures for groups of mutual funds having similar investment objectives as
categorized by ranking services such as Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Weisenberger Financial Services, Inc. and rating
services such as Morningstar, Inc. Additionally, a Fund or Class of a Fund may
compare its performance results to other investment or savings vehicles (such as
certificates of deposit) and may refer to results published in various
publications such as Changing Times, Forbes, Fortune, Money, Barrons, Business
Week and Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger Register,
Stanger's Investment Adviser, The Wall Street Journal, The New York Times,
Consumer Reports, Registered Representative, Financial Planning, Financial
Services Weekly, Financial World, U.S. News and World Report, Standard and Poors
The Outlook, and Personal Investor. A Fund may, from time to time, illustrate
the benefits of tax deferral by comparing taxable investments to investments
made through tax-deferred retirement plans. The total return may also be used to
compare the performance of the Fund or the Class of a Fund against certain
widely acknowledged outside standards or indices for stock and bond market
performance, such as the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500"), Dow Jones Industrial Average, Europe Australia Far East Index
(EAFE), Consumer Price Index, Lehman Brothers Corporate Index and Lehman
Brothers T-Bond Index. The S&P 500 is a commonly quoted measure of stock market
performance and represents common stocks of companies of varying sizes segmented
across 90 different industries which are listed on the New York Stock Exchange,
the American Stock Exchange and traded over the NASDAQ National Market System.
Advertisements, sales literature, and other communications may contain
information about the Adviser's current investment strategies and management
style. Current strategies and style may change to allow the Trust to respond
quickly to changing market and economic conditions. From time to time the Trust
may include specific portfolio holdings or industries. To illustrate components
of overall performance, the Trust may separate its cumulative and average annual
returns into income and capital gains components; or cite separately as a return
figure the equity or bond portion of the Trust's portfolio; or compare the
Trust's equity or bond return figure to well-known indices of market
performance, including but not limited to: the S&P 500 Index, Dow Jones
Industrial Average, Russell 2000 Growth Index, Salomon Brothers 90-Day Treasury
Bill Index, CS First Boston High Yield Index and Salomon Brothers Corporate Bond
and Government Bond Indices.
PORTFOLIO TURNOVER
Each Fund has a different expected annual rate of portfolio turnover, which
is calculated by dividing the lesser of purchases or sales of portfolio
securities during the fiscal year by the monthly average of the value of the
Funds' securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less). A high
rate of portfolio turnover generally involves correspondingly greater brokerage
commission expenses, which must be borne directly by the Fund. Turnover rates
may vary greatly from year to year as well as within a particular year and may
also be affected by cash requirements for redemptions of each Fund's shares and
by requirements which enable the Trust to receive certain favorable tax
treatment (see "Taxes"). Historical annual rates of portfolio turnover for all
Funds except the Money Market Fund (which for this purpose does not calculate a
portfolio turnover rate) are set forth in the prospectus, a copy of which must
precede or accompany this Statement of Additional Information.
BALANCED FUND
In the fiscal years ended October 31, 1996 and October 31, 1997, the turnover
rates for the equity portion of the Balanced Fund were 170% and 193%,
respectively. The turnover rates for the fixed income securities were 229% and
225%, respectively for the same periods.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In effecting portfolio transactions for the Trust, the Adviser adheres to the
Trust's policy of seeking best execution and price, determined as described
below, except to the extent it is permitted to pay higher brokerage commissions
for "brokerage and research services" as defined herein. The Adviser may cause
the Trust to pay a broker an amount of commission for effecting a securities
transaction in excess of the amount of commission which another broker or dealer
would have charged for effecting the transaction
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<PAGE>
if the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or that any offset of direct expenses of a Fund yields
the best net price. As provided in Section 28(e) of the Securities Exchange Act
of 1934, "brokerage and research services" include giving advice as to the value
of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities; furnishing analyses and reports
concerning issuers, industries, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Brokerage and research services provided by brokers to the Trust or to the
Adviser are considered to be in addition to and not in lieu of services required
to be performed by the Adviser under its contract with the Trust and may benefit
both the Trust and other clients of the Adviser. Conversely, brokerage and
research services provided by brokers to other clients of the Adviser may
benefit the Trust.
If the securities in which a particular Fund of the Trust invests are traded
primarily in the over-the-counter market, where possible the Fund will deal
directly with the dealers who make a market in the securities involved unless
better prices and execution are available elsewhere. Such dealers usually act as
principals for their own account. On occasion, securities may be purchased
directly from the issuer. Bonds and money market instruments are generally
traded on a net basis and do not normally involve either brokerage commission or
transfer taxes. In addition, transactions effected on foreign securities
exchanges which do not permit the negotiation of brokerage commissions and where
the Adviser would, under the circumstances, seek to obtain best price and
execution on orders for the Trust.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Trust (involving both price paid or received and any net
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, the availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Such considerations are judgmental and are weighed by the Adviser in
determining the overall reasonableness of brokerage commissions paid by the
Trust. Some portfolio transactions are, subject to the Conduct Rules of the
National Association of Securities Dealers, Inc. and subject to obtaining best
prices and executions, effected through dealers (excluding Equity Planning) who
sell shares of the Trust.
The Trust has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser shall aggregate transactions unless it believes in its
sole discretion that such aggregation is inconsistent with its duty to seek best
execution (which shall include the duty to seek best price) for the Trust. No
advisory account of the Adviser is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the Adviser in that security on
a given business day, with all transaction costs shared pro rata based on the
Trust's participation in the transaction. If the aggregated order is filled in
its entirety, it shall be allocated among the Adviser's accounts in accordance
with the allocation order, and if the order is partially filled, it shall be
allocated pro rata based on the allocation order. Notwithstanding the foregoing,
the order may be allocated on a basis different from that specified in the
allocation order if all accounts of the Adviser whose orders are allocated
receive fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by the Adviser's
compliance officer as soon as practicable after the opening of the markets on
the trading day following the day on which the order is executed. If an
aggregated order is partially filled and allocated on a basis different from
that specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or sale
for a reasonable period following the execution of the aggregated order that
would result in it receiving or selling more shares than the amount of shares it
would have received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall appear
appropriate.
For the fiscal years ended October 31, 1995, 1996 and 1997, brokerage
commissions paid by the Trust on portfolio transactions totaled $10,324,000,
$9,322,374 and $13,168,358 respectively. Brokerage commissions of $8,318,038
paid during the fiscal year ended October 31, 1997, were paid on portfolio
transactions aggregating $8,226,419,731 executed by brokers who provided
research and other statistical and factual information. None of such commissions
was paid to a broker who was an affiliated person of the Trust or an affiliated
person of such a person or, to the knowledge of the Trust, to a broker an
affiliated person of which was an affiliated person of the Trust, its adviser or
its national distributor.
THE INVESTMENT ADVISER
The offices of the Adviser, Phoenix Investment Counsel, Inc., are located at
56 Prospect Street, Hartford, Connecticut 06115. Philip R. McLoughlin, a Trustee
and officer of the Trust, is a director of the Adviser. All other executive
officers of the Trust are officers of the Adviser.
All of the outstanding stock of the Adviser is owned by Phoenix Equity
Planning Corporation ("Equity Planning"), a subsidiary of Phoenix Duff & Phelps
Corporation. Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life")
owns a controlling interest in Phoenix Duff & Phelps Corporation. Phoenix Home
Life is in the business of writing ordinary and group life and health
11
<PAGE>
insurance and annuities. Equity Planning, the Distributor of the Trust's shares,
also performs bookkeeping, pricing, and administrative services for the Trust.
(See "The Distributor and Distribution Plans"). Equity Planning is registered as
a broker-dealer in fifty states. The principal office of Phoenix Home Life is
located at One American Row, Hartford, Connecticut 06115. The principal office
of Equity Planning is located at 100 Bright Meadow Blvd., P.O.
Box 2200, Enfield, Connecticut 06083-2200.
All costs and expenses (other than those specifically referred to as being
borne by the Adviser) incurred in the operation of the Trust are borne by the
Trust. Each Fund pays expenses incurred in its own operation and also pays a
portion of the Trust's general administration expenses allocated on the basis of
the asset size of the respective Fund, except where allocation of direct
expenses to each Fund or an alternative allocation method can be more fairly
made. Such expenses include, but shall not be limited to, all expenses incurred
in the operation of the Trust and any public offering of its shares, including,
among others, interest, taxes, brokerage fees and commissions, fees of Trustees
who are not fulltime employees of the Adviser or any of its affiliates, expenses
of Trustees' and shareholders' meetings, including the cost of printing and
mailing proxies, expenses of insurance premiums for fidelity and other coverage,
expenses of repurchase and redemption of shares, expenses of issue and sale of
shares (to the extent not borne by Equity Planning under its agreement with the
Trust), expenses of printing and mailing stock certificates representing shares
of the Trust, association membership dues, charges of custodians, transfer
agents, dividend disbursing agents and financial agents, bookkeeping, auditing,
and legal expenses. The Trust will also pay the fees and bear the expense of
registering and maintaining the registration of the Trust and its shares with
the Securities and Exchange Commission and registering or qualifying its shares
under state or other securities laws and the expense of preparing and mailing
prospectuses and reports to shareholders.
The investment advisory agreement provides that the Adviser shall not be
liable to the Trust or to any shareholder of the Trust for any error of judgment
or mistake of law or for any loss suffered by the Trust or by any shareholder of
the Trust in connection with the matters to which the investment advisory
agreement relates, except a loss resulting from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of the Adviser in the
performance of its duties thereunder.
As full compensation for the services and facilities furnished to the Trust,
the Adviser is entitled to a fee, payable monthly, as described in the
Prospectus. There is no assurance that the Trust will reach net asset levels
high enough to realize reductions in the rates of the advisory fees.
The Adviser has agreed to reimburse the Trust for the amount, if any, by
which the total operating and management expenses of any Fund (including the
Adviser's compensation, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level of
expenses which such Fund is permitted to bear under the most restrictive expense
limitation imposed on mutual funds by any state in which shares of such Fund are
then qualified for sale. Present expense limitations, to the knowledge of the
Trust, require that the Adviser reimburse the Trust, to the extent of the
compensation received by it from the Trust, for the amount, if any, by which
total operating and management expenses (excluding interest, taxes, brokerage
fees and commissions and extraordinary expenses) of any Fund in any fiscal year
exceed 2.5% of the first $30,000,000, 2% of the next $70,000,000 and 1.5% of any
excess over $100,000,000 of such Fund's average net asset value for such fiscal
year. In the event legislation were to be adopted in each state so as to
eliminate this restriction, the Trust would take such action necessary to
eliminate this expense limitation.
The Adviser has agreed to assume expenses and reduce the advisory fee for the
benefit of the Money Market Fund to the extent that operating expenses
(excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) exceed 0.85% and 1.60% of average daily net asset values for Class A
Shares and Class B Shares, respectively. Such reimbursement will be made
monthly.
The agreement continues in force from year to year for all Funds, provided
that, with respect to each Fund, the agreement must be approved at least
annually by the Trustees or by vote of a majority of the outstanding voting
securities of the Funds. In addition, and in either event, the terms of the
agreement and any renewal thereof must be approved by the vote of a majority of
the Trustees who are not parties to the agreement or interested persons (as that
term is defined in the Investment Company Act of 1940) of any such party, cast
in person at a meeting called for the purpose of voting on such approval. The
agreement will terminate automatically if assigned and may be terminated at any
time, without payment of any penalty, either by the Trust or by the Adviser, on
sixty (60) days written notice. The investment advisory agreement provides that
upon termination of the agreement, or at the request of the Adviser, the Trust
will eliminate all reference to Phoenix from its name, and will not thereafter
transact business in a name using the word Phoenix.
For services to the Trust during the fiscal years ended October 31, 1995,
1996, and 1997, the Adviser received fees of $34,684,220, $35,372,083 and
$34,413,328 respectively under the investment advisory agreements in effect. Of
these totals, the Adviser received fees from each Fund as follows:
1995 1996 1997
----------- ----------- -----------
Growth Fund $14,508,081 $15,914,996 $16,439,785
Aggressive Growth Fund 1,052,902 1,537,430 1,735,384
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1995 1996 1997
----------- ----------- -----------
High Yield Fund 3,336,889 3,366,120 3,713,370
U.S. Government Fund 1,137,873 1,016,243 885,257
Convertible Fund 1,438,064 1,444,901 1,361,661
Balanced Fund 12,384,575 11,281,357 9,489,765
Money Market Fund 825,836 811,036 788,106
For the fiscal years ended October 31, 1995, 1996 and 1997, the Adviser was
not reimbursed for any expenses incurred in providing services which would
otherwise have been provided at the expense of the Trust.
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Since the Trust does not price securities on weekends or
United States national holidays, the net asset value of a Fund's foreign assets
may be significantly affected on days when the investor has no access to the
Trust. The net asset value per share of a Fund is determined by adding the
values of all securities and other assets of the Fund, subtracting liabilities,
and dividing by the total number of outstanding shares of the Fund. Assets and
liabilities are determined in accordance with generally accepted accounting
principles and applicable rules and regulations of the Securities and Exchange
Commission. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Fund which invests in
foreign securities contemporaneously with the determination of the prices of the
majority of the portfolio securities of such Fund. All assets and liabilities
initially expressed in foreign currency values will be converted into United
States dollar values at the mean between the bid and ask quotations of such
currencies against United States dollars as last quoted by any recognized
dealer. If an event were to occur after the value of an investment was so
established but before the net asset value per share was determined, which was
likely to materially change the net asset value, then the instrument would be
valued using fair value considerations by the Trustees or their delegates. If at
any time a Fund has investments where market quotations are not readily
available, such investments are valued at the fair value thereof as determined
in good faith by the Trustees although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.
MONEY MARKET FUND
The assets of the Money Market Fund are valued on the basis of amortized cost
absent extraordinary or unusual market conditions. Under the amortized cost
method of valuation, securities are valued at cost on the date of purchase.
Thereafter the value of a security is increased or decreased incrementally each
day so that at maturity any purchase discount or premium is fully amortized and
the value of the security is equal to its principal amount. Due to fluctuations
in interest rates, the amortized cost value of the Money Market Fund securities
may at times be more or less than their market value. By using amortized cost
valuation, the Money Market Fund seeks to maintain a constant net asset value of
$1.00 per share despite minor shifts in the market value of its portfolio
securities.
The yield on a shareholder's investment may be more or less than that which
would be recognized if the Fund's net asset value per share was not constant and
was permitted to fluctuate with the market value of the Fund's portfolio
securities. However, as a result of the following procedures, it is believed
that any difference will normally be minimal. The deviation is monitored
periodically by comparing the Fund's net asset value per share as determined by
using available market quotations with its net asset value per share as
determined through the use of the amortized cost method of valuation. The
Adviser makes such comparisons at least weekly and will advise the Trustees
promptly in the event of any significant deviation. If the deviation exceeds 1/2
of l%, the Trustees will consider what action, if any, should be initiated to
provide fair valuation of the Fund's portfolio securities and prevent material
dilution or other unfair results to shareholders. Such action may include
redemption of shares in kind, selling portfolio securities prior to maturity,
withholding dividends or utilizing a net asset value per share as determined by
using available market quotations. Furthermore, the assets of the Fund will not
be invested in any security with a maturity of greater than 397 days, and the
average weighted maturity of its portfolio will not exceed 90 days. Portfolio
investments will be limited to U.S. dollar-denominated securities which present
minimal credit risks and are of high quality as determined either by a major
rating service or, if not rated, by the Trustees.
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HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent investment
is $25. However, both the minimum initial and subsequent investment amounts are
$25 for investments pursuant to the "Investo-Matic" plan, a bank draft investing
program administered by the Distributor, or pursuant to the Systematic Exchange
privilege or for an individual retirement account (IRA). In addition, there are
no subsequent investment minimum amounts in connection with the reinvestment of
dividend or capital gain distributions. Completed applications for the purchase
of shares should be mailed to: Phoenix Funds, c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their net
asset value per share, plus a sales charge which (except Class A Shares of the
Money Market Fund), at the election of the purchaser, may be imposed either (i)
at the time of the purchase (the "initial sales charge alternative") or (ii) on
a contingent deferred basis (the "deferred sales charge alternative"). Orders
received by dealers prior to the close of trading on the New York Stock Exchange
are confirmed at the offering price effective at that time, provided the order
is received by the Distributor prior to its close of business.
The alternative purchase arrangements permit an investor to choose the method
of purchasing shares that is more beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares, whether the investor
wishes to receive distributions in cash or to reinvest them in additional shares
of the Funds, and other circumstances. Investors should consider whether, during
the anticipated life of their investment in the Fund, the accumulated continuing
distribution services fee and contingent deferred sales charges on Class B or C
Shares would be less than the initial sales charge and accumulated distribution
services fee on Class A or M Shares purchased at the same time. Note, only the
High Yield Fund offers Class C and Class M Shares.
Dividends paid by the Fund, if any, with respect to each Class of Shares will
be calculated in the same manner at the same time on the same day, except that
fees such as higher distribution services fee and any incremental transfer
agency costs relating to each Class of Shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
CLASS A SHARES
Class A Shares incur a sales charge when they are purchased and enjoy the
benefit of not being subject to any sales charge when they are redeemed. Class A
Shares are subject to an ongoing distribution services fee at an annual rate of
0.25% of the Fund's aggregate average daily net assets attributable to the Class
A Shares. In addition, certain purchases of Class A Shares qualify for reduced
initial sales charges. See the Funds' current Prospectus for additional
information.
CLASS B SHARES
Class B Shares do not incur a sales charge when they are purchased, but they
are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions. See the Funds' current Prospectus for additional
information.
Class B Shares are subject to an ongoing distribution and services fee at an
aggregate annual rate of up to 1.00% of the Fund's aggregate average daily net
assets attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment is
made. The higher ongoing distribution and services fee paid by Class B Shares
will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related to Class A
Shares. Class B Shares will automatically convert to Class A Shares eight years
after the end of the calendar month in which the shareholder's order to purchase
was accepted, in the circumstances and subject to the qualifications described
in the Funds' Prospectus. The purpose of the conversion feature is to relieve
the holders of the Class B Shares that have been outstanding for a period of
time sufficient for the adviser and the Distributor to have been compensated for
distribution expenses related to the Class B Shares from most of the burden of
such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution and services fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge.
For purposes of conversion to Class A Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares in
a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class
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B Shares in the shareholder's Fund account (other than those in the sub-account)
convert to Class A, an equal pro rata portion of the Class B Share dividends in
the sub-account will also convert to Class A Shares.
CLASS C SHARES--HIGH YIELD FUND ONLY
Class C Shares are purchased without an initial sales charge but are subject
to a deferred sales charge if redeemed within one year of purchase. The deferred
sales charge may be waived in connection with certain qualifying redemptions.
Shares issued in conjunction with the automatic reinvestment of income
distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to an ongoing distribution and services fee
at an aggregate annual rate of up to 1.00% of the Fund's aggregate average daily
net assets attributable to Class C Shares. See the Funds' current Prospectus for
more information.
CLASS M SHARES--HIGH YIELD FUND ONLY
Class M Shares incur a sales charge at the time of purchase but are not
subject to any sales charge when redeemed. Certain purchases of Class M Shares
may qualify for reduced initial sales charges as described in the Funds'
Prospectus. Class M Shares are subject to an ongoing distribution and services
fee at an aggregate annual rate of up to 0.50% of the Fund's aggregate average
daily net assets attributable to Class M Shares.
PURCHASES OF SHARES OF THE MONEY MARKET FUND
The minimum initial investment and the minimum subsequent investment for the
purchase of shares of the Money Market Fund is set forth in the Prospectus.
Shares of the Money Market Fund are sold through registered representatives of
Equity Planning or through brokers or dealers with whom Equity Planning has
sales agreements. (See "Distribution Plans"). Initial purchases of shares may
also be made by mail by completing an application and mailing it directly to
Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA
02266-8301. Subsequent purchases should be sent to State Street Bank and Trust
Company. An investment is accepted when funds are credited to the purchaser.
Investments are credited not later than the second business day after receipt by
the Trust of checks drawn on U.S. banks payable in U.S. funds. Shares purchased
begin earning dividends the day after funds are credited. Certified checks are
not necessary.
INVESTOR ACCOUNT SERVICES
The Funds offer combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges as
described in the Funds' current Prospectus. Certain privileges may not be
available in connection with all classes. In most cases, changes to account
services may be accomplished over the phone. Inquiries regarding policies and
procedures relating to shareholder account services should be directed to
Shareholder Services at (800) 243-1574.
EXCHANGES. Under certain circumstances, shares of any Phoenix Fund (except
Class A Shares of the Money Market Fund) may be exchanged for shares of the same
Class of another Phoenix Fund or any other Affiliated Phoenix Fund on the basis
of the relative net asset values per share at the time of the exchange.
Exchanges are subject to the minimum initial investment requirement of the
designated Fund, Series, or Portfolio, except if made in connection with the
Systematic Exchange privilege. Shareholders may exchange shares held in
book-entry form for an equivalent number (value) of the same class of shares of
any other Phoenix Fund, if currently offered. On exchanges with share classes
that carry a contingent deferred sales charge, the CDSC schedule of the original
shares purchased continues to apply. The exchange of shares is treated as a sale
and purchase for federal income tax purposes (see also "Dividends, Distributions
and Taxes").
SYSTEMATIC EXCHANGES. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund or any other Affiliated Phoenix
Fund automatically on a monthly, quarterly, semi-annual or annual basis or may
cancel this privilege at any time. If you maintain an account balance of at
least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated
on the basis of the net asset value of the shares held in a single account), you
may direct that shares be automatically exchanged at predetermined intervals for
shares of the same class of another Phoenix Fund. This requirement does not
apply to Phoenix "Self Security" program participants. Systematic exchanges will
be executed upon the close of business on the 10th day of each month or the next
succeeding business day. Systematic exchange forms are available from the
Distributor. Exchanges will be based upon each Fund's net asset value per share
next computed after the close of business on the 10th day of each month (or next
succeeding business day), without sales charge.
DIVIDEND REINVESTMENT ACROSS ACCOUNTS. If you maintain an account balance of
at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of one
of the other Phoenix Funds or any other Affiliated Phoenix Fund at net asset
value. You should obtain a current prospectus and consider the objectives and
policies of each Fund carefully before directing dividends and distributions to
another Fund. Reinvestment election forms and prospectuses are available from
Equity Planning. Distributions may also be mailed to a second payee and/or
address. Requests for directing distributions to an alternate payee must be made
in writing with a signature guarantee of the registered owner(s). To be
effective with respect to a particular dividend or distribution, notification of
the new distribution option must be received by the Transfer Agent at least
three days prior to the record date of such dividend or distribution. If all
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shares in your account are repurchased or redeemed or transferred between the
record date and the payment date of a dividend or distribution, you will receive
cash for the dividend or distribution regardless of the distribution option
selected.
INVEST-BY-PHONE. This expedited investment service allows a shareholder to
make an investment in an account by requesting a transfer of funds from the
balance of their bank account. Once a request is phoned in, Equity Planning will
initiate the transaction by wiring a request for monies to the shareholder's
commercial bank, savings bank or credit union via Automated Clearing House
(ACH). The shareholder's bank, which must be an ACH member, will in turn forward
the monies to Equity Planning for credit to the shareholder's account. ACH is a
computer based clearing and settlement operation established for the exchange of
electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application and
attach a voided check if applicable. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) shareholders may call toll free
(800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. This service may also be used to request redemption of
shares of the Money Market Fund, the proceeds of which are transferred to the
shareholder's bank the second day following receipt of the verbal request. The
Trust may delay the mailing of a check for redemption proceeds of Trust shares
purchased with a check or via Invest-by-Phone service until the Trust has
assured itself that good payment has been collected for the purchase of the
shares, which may take up to 15 days.
The Trust and Equity Planning reserve the right to modify or terminate the
Invest-by-Phone service for any reason or to institute charges for maintaining
an Invest-by-Phone account.
HOW TO REDEEM SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Trust to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days or more after
receipt of the check. See the Funds' current Prospectus for further information.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
Redemptions by Class B and Class C shareholders will be subject to the
applicable deferred sales charge, if any.
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the giving
of not less than 30 days written notice to the shareholder mailed to the address
of record. During the 60 day period the shareholder has the right to add to the
account to bring its value to $200 or more. See the Funds' current Prospectus
for more information.
BY MAIL
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written request
to Equity Planning that the Trust redeem the shares. See the Funds' current
Prospectus for more information.
TELEPHONE REDEMPTIONS
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Funds' current Prospectus for
additional information.
BY CHECK (U.S. GOVERNMENT SECURITIES FUND, HIGH YIELD FUND AND MONEY MARKET
FUND ONLY)
Any shareholder of these Funds may elect to redeem shares held in his Open
Account by check. Checks will be sent to an investor upon receipt by Equity
Planning of a completed application and signature card (attached to the
application). If the signature card accompanies an individual's initial account
application, the signature guarantee section of the form may be disregarded.
However, the Trust reserves the right to require that all signatures be
guaranteed prior to the establishment of a check writing service account. When
an authorization form is submitted after receipt of the initial account
application, all signatures must be guaranteed regardless of account value.
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Checks may be drawn payable to any person in an amount of not less than $500,
provided that immediately after the payment of the redemption proceeds the
balance in the shareholder's Open Account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient number
of full and fractional shares in the shareholder's Open Account will be redeemed
to cover the amount of the check. The number of shares to be redeemed will be
determined on the date the check is received by the Transfer Agent. Presently
there is no charge to the shareholder for the check writing service, but this
may be changed or modified in the future upon two weeks written notice to
shareholders. Checks drawn from Class B and Class C accounts are subject to the
applicable deferred sales charge, if any.
The checkwriting procedure for redemption enables a shareholder to receive
income accruing on the shares to be redeemed until such time as the check is
presented to Equity Planning for payment. Inasmuch as canceled checks are
returned to shareholders monthly, no confirmation statement is issued at the
time of redemption.
Shareholders utilizing withdrawal checks will be subject to Equity Planning's
rules governing checking accounts. A shareholder should make sure that there are
sufficient shares in his Open Account to cover the amount of any check drawn. If
insufficient shares are in the account and the check is presented to Equity
Planning on a banking day on which the Trust does not redeem shares (for
example, a day on which the New York Stock Exchange is closed), or if the check
is presented against redemption proceeds of an investment made by check which
has not been in the account for at least fifteen calendar days, the check may be
returned marked "Non-sufficient Funds" and no shares will be redeemed. A
shareholder may not close his account by a withdrawal check because the exact
value of the account will not be known until after the check is received by
Equity Planning.
REINVESTMENT PRIVILEGE
Shareholders who may have overlooked features of their investment at the time
they redeemed have a privilege of reinvestment of their investment at net asset
value. See the Funds' current Prospectus for more information and conditions
attached to this privilege.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Trust are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing and Money
Purchase Pension Plans which can be adopted by self-employed persons ("Keogh")
and by corporations, and 403(b) Retirement Plans. Write or call Equity Planning
(800) 243-4361 for further information about the plans.
DIVIDENDS, DISTRIBUTIONS AND TAXES
As stated in the Prospectus, it will be the policy of the Trust and of each
Fund that each comply with provisions of the Internal Revenue Code (the "Code")
relieving investment companies which distribute substantially all of their net
income from Federal income tax on the amounts distributed.
The Federal tax laws also impose a four percent nondeductible excise tax on
each regulated investment company with respect to an amount, if any, by which
such company does not meet distribution requirements specified in such tax laws.
The Trust intends that each Fund will comply with such distribution requirements
and thus does not expect to incur the four percent nondeductible excise tax.
As stated in the Prospectus, the Trust believes that each of its Funds will
be treated as a single entity. Prior to November 1, 1986, the Trust was treated
as a single entity.
To qualify for treatment as a regulated investment company ("RIC") each Fund
must, among other things: (a) derive in each taxable year at least 90% of its
gross income from dividends, interest and gains from the sale or other
disposition of securities; and (b) meet certain diversification requirements
imposed under the Code at the end of each quarter of the taxable year. Under
certain state tax laws, each Fund must also comply with the "short-short" test
to qualify for treatment as a RIC for state tax purposes. Under the
"short-short" test the Fund must derive less than 30% of its gross income each
taxable year as gains (without deduction for losses) from the sale or other
disposition of securities for less than three months. If in any taxable year
each Fund does not qualify as a regulated investment company, all of its taxable
income will be taxed at corporate rates. In addition, if in any tax year the
Fund does not qualify as a RIC for state tax purposes a capital gain dividend
may not retain its character in the hands of the shareholder for state tax
purposes.
Income dividends and short-term capital gains distributions, whether received
in shares or in cash, are treated by shareholders as ordinary income for Federal
income tax purposes. Prior to January 1, 1987, income dividends were eligible
for the dividends received exclusion of $100 ($200 for a joint return) available
to individuals and the 85% dividends received deduction available to corporate
shareholders, subject, in either case, to reduction, for various reasons,
including the fact that dividends received from domestic corporations in any
year were less than 95% of the distributing Fund's gross income, in the case of
individual distributees, or 100% of the distributing Fund's gross income, in the
case of corporate distributees. Any income dividends received after December 31,
1987 do not qualify for dividend exclusion on an individual tax return but
corporate shareholders are eligible for a 70% dividends received deduction (80%
in the case of a 20% shareholder) subject to a reduction for various reasons
including
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the fact that dividends received from domestic corporations in any year are less
than 100% of the distributing Fund's gross income. Gross income includes the
excess of net short-term capital gains over net long-term capital losses.
Distributions which are designated by the Trust as long-term capital gains,
whether received in shares or in cash, are taxable to shareholders as long-term
capital gains (regardless of how long such person has been a shareholder) and
are not eligible for the dividends received exclusion. Any loss from the sale of
shares held for six months or less will be treated as long-term capital loss to
the extent of any capital gain distributions paid with respect to such shares.
Individuals are entitled to deduct "miscellaneous itemized deductions"
specified in the Code only to the extent they exceed two percent of the
individuals' "adjusted gross income." Effective January 1, 1988, included within
the miscellaneous itemized deductions subject to the two percent "floor" are
indirect deductions through certain pass-through entities such as the Funds. The
Secretary of the Treasury is authorized to prescribe regulations relating to the
manner in which the floor will be applied with respect to indirect deductions
and to the manner in which pass-through entities such as the Funds will report
such amounts to the individual shareholders. Individual shareholders are advised
that, pursuant to these rules, they may be required to report as income amounts
in excess of actual distributions made to them.
The Trust is required to withhold for income taxes, 31% of dividends,
distributions and redemption payments, if any of the following circumstances
exist: i) a shareholder fails to provide the Trust with a correct taxpayer
identification number ("TIN"); ii) the Trust is notified by the Internal Revenue
Service that the shareholder furnished an incorrect TIN; or iii) the Trust is
notified by the Internal Revenue Service that withholding is required because
the shareholder failed to report the receipt of dividends or interest from other
sources. Withholding may also be required for accounts with respect to which a
shareholder fails to certify that i) the TIN provided is correct and ii) the
shareholder is not subject to such withholding. However, withholding will not be
required from certain exempt entities nor those shareholders complying with the
procedures as set forth by the Internal Revenue Service. A shareholder is
required to provide the Trust with a correct TIN. The Trust in turn is required
to report correct taxpayer identification numbers when filing all tax forms with
the Internal Revenue Service. Should the IRS levy a penalty on the Trust for
reporting an incorrect TIN and that TIN was provided by the shareholder, the
Trust will pass the penalty onto the shareholder.
Dividends paid by a Fund from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien individual,
a foreign trust or estate, a foreign corporation or a foreign partnership (a
"foreign shareholder") will be subject to United States withholding tax at a
rate of 30% unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Foreign shareholders are urged to consult
their own tax advisors concerning the applicability of the United States
withholding tax and any foreign taxes.
The discussion of "Dividends, Distributions and Taxes" in the Prospectus, in
conjunction with the foregoing, is a general and abbreviated summary of
applicable provisions of the Code and Treasury regulations now in effect as
currently interpreted by the courts and the Internal Revenue Service. The Code
and these Regulations, as well as the current interpretations thereof, may be
changed at any time by legislative, judicial, or administrative action.
Shareholders ordinarily will also be subject to state income taxes on the
dividends and distributions they receive from each Fund. Shareholders are urged
to consult counsel or other competent tax advisers regarding specific questions
as to Federal, state or local taxes.
THE DISTRIBUTOR AND DISTRIBUTION PLANS
Phoenix Equity Planning Corporation ("Equity Planning"), which has undertaken
to use its best efforts to find purchasers for shares of the Trust, serves as
the national distributor of the Trust's shares. Shares of each Fund are offered
on a continuous basis. Pursuant to distribution agreements for each class of
shares or distribution method, the Distributor will purchase shares of the Trust
for resale to the public, either directly or through securities dealers or
agents, and is obligated to purchase only those shares for which it has received
purchase orders. Equity Planning may also sell Trust shares pursuant to sales
agreements entered into with bank-affiliated securities brokers who, acting as
agent for their customers, place orders for Trust shares with Equity Planning.
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting, distributing or selling securities
(including mutual fund shares), banking regulators have not indicated that such
institutions are prohibited from purchasing mutual fund shares upon the order
and for the account of their customers. In addition, state securities laws on
this issue may differ from the interpretations of federal law and banks and
financial institutions may be required to register as dealers pursuant to state
law. If, because of changes in law or regulations, or because of new
interpretations of existing law, it is determined that agency transactions of
bank-affiliated securities brokers are not permitted, the Trustees will consider
what action, if any, is appropriate. It is not anticipated that termination of
sales agreements with bank-affiliated securities brokers would result in a loss
to their customers or a change in the net asset value per share of a Fund.
For the fiscal years ended October 31, 1995, 1996, and 1997, Equity
Planning's gross commissions on sales of Trust shares totaled $6,774,491,
$6,512,356 and $5,398,731, respectively. Of these gross selling commissions,
$856,873, $912,483 and $1,156,623, respectively, were allowed to Equity Planning
as dealer.
18
<PAGE>
Equity Planning also acts as administrative agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Trust. As
compensation for such services, Equity Planning is entitled to a fee, payable
monthly and based upon the average of the aggregate daily net asset values of
each Fund, at the following incremental annual rates:
First $100 million .05% plus a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum fee applies to each Fund as follows:
Money Market Fund $35,000
Aggressive Growth Fund $50,000
Growth Fund $50,000
Balanced Fund $60,000
Convertible Fund $60,000
High Yield Fund $70,000
U.S. Government Securities Fund $70,000
In addition, Equity Planning is paid $12,000 for each class of shares of each
Fund beyond one. For its services during the Trust's fiscal year ended October
31, 1997, Equity Planning received $1,567,552.
DISTRIBUTION PLANS
The Funds have adopted separate amended and restated distribution plans under
Rule 12b-1 of the 1940 Act for each class of shares of the Funds other than
Class A Shares of the Money Market Fund (the "Class A Plan," the "Class B Plan,"
the "Class C Plan," the "Class M Plan" and collectively the "Plans"). The Plans
permit the Funds to reimburse the Distributor for expenses incurred in
connection with activities intended to promote the sale of shares of each class
of shares of the Funds.
Pursuant to the Class B Plan, each Fund may reimburse the Distributor monthly
for actual expense of the Distributor up to 0.75% (0.50% for the Money Market
Fund) of the average daily net assets of the Class B Shares of such Fund. Under
the Class C and Class M Plans, each Fund may reimburse the Distributor monthly
for actual expenses of the Distributor up to 0.75% and 0.25% of the average
daily net assets of the Fund's Class C and Class M Shares, respectively.
Expenditures under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Funds; (ii) compensation, sales incentives
and payments to sales, marketing and service personnel; (iii) payments to
broker-dealers and other financial institutions which have entered into
agreements with the Distributor in the form of the Dealer Agreement for Phoenix
Funds for services rendered in connection with the sale and distribution of
shares of the Funds; (iv) payment of expenses incurred in sales and promotional
activities, including advertising expenditures related to the Funds; (v) the
costs of preparing and distributing promotional materials; (vi) the cost of
printing the Funds' Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Funds determine are reasonably calculated to result in the
sale of shares of the Funds. In addition, the Funds will pay the Distributor
0.25% annually of the average daily net assets of the Funds' shares for
providing services to the shareholders, including assistance in connection with
inquiries related to shareholder accounts (the "Service Fee").
Each Plan requires that at least quarterly the Trustees of the Trust review a
written report with respect to the amounts expended under the Plan and the
purposes for which such expenditures were made. While each Plan is in effect,
the Trust will be required to commit the selection and nomination of candidates
for Trustees who are not interested persons of the Trust to the discretion of
other Trustees who are not interested persons. Each Plan continues in effect
from year to year only provided such continuance is approved annually in advance
by votes of the majority of both (a) the Board of Trustees of the Trust and (b)
the Rule 12b-1 Trustees, cast in person at a meeting called for the purpose of
voting on the Plan and any agreements related to each Plan. No interested person
of the Trust and no Trustee who is not an interested person of the Trust, as
that term is defined in the Investment Company Act of 1940, has any direct or
indirect financial interest in the operation of the Plans.
For the fiscal year ended October 31, 1997, the Funds paid Rule l2b-l Fees in
the amount of $14,979,097, of which the principal underwriter received
$3,044,353, W.S. Griffith & Co., Inc., an affiliate received $1,358,415 and
unaffiliated broker-dealers received $10,576,329. Distributor expenses under the
Plans consisted of: (1) advertising ($1,202,861); (2) printing and mailing of
prospectuses to other than current shareholders ($48,128); (3) compensation to
dealers ($14,234,376); (4) compensation to sales personnel ($2,292,849); (5)
service costs ($815,113) and (6) other ($455,735).
19
<PAGE>
MANAGEMENT OF THE TRUST
The trustees and executive officers of the Trust and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and trustee is 56
Prospect Street, Hartford, Connecticut 06115-0480.
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
E. Virgil Conway (68) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Freddie Mac
Mortgage Securities Fund (Advisory Director) (1990-present),
Centennial Insurance Company (1974-present), Josiah Macy, Jr.,
Foundation (1975-present), The Harlem Youth Development
Foundation (1987-present), Accuhealth (1994-present), Trism, Inc.
(1994-present), Realty Foundation of New York (1972-present), New
York Housing Partnership Development Corp. (Chairman)
(1981-present) and Fund Directions (Advisory Director)
(1993-present). Director/Trustee, Phoenix Funds (1993-present).
Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility
and Corporate Bond Trust Inc. (1995-present). Chairman, Audit
Committee of the City of New York (1981-1996). Advisory Director,
Blackrock Fannie Mae Mortgage Securities Fund (1989-1996).
Chairman, Financial Accounting Standards Advisory Council
(1992-1995). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Harry Dalzell-Payne (68) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York, NY 10016 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present). Director, Farragut Mortgage
Co., Inc. (1991-1994). Director/Trustee, the National Affiliated
Investment Companies (1983-1993). Formerly a Major General of the
British Army.
*Francis E. Jeffries (67) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff &
Naples, FL 33963 Phelps Utilities Income Inc. (1987-present), Duff & Phelps
Utilities Tax-Free Income Inc. (1991-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1993-present). Director,
The Empire District Electric Company (1984-present). Director
(1989-1997), Chairman of the Board (1993- 1997), President
(1989-1993), and Chief Executive Officer (1989- 1995), Phoenix
Duff & Phelps Corporation.
20
<PAGE>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Carson Product Company Institutional Mutual Funds (1996-present). Director, Equifax
64 Ross Road Corp. (1991-present) and Keystone International Fund, Inc.
Savannah, GA 30750 (1989-present). Trustee, Keystone Liquid Trust, Keystone Tax
Exempt Trust, Keystone Tax Free Fund, Master Reserves Tax Free
Trust, and Master Reserves Trust. President, Morehouse College
(1987-1994). Chairman and Chief Executive Officer, Keith Ventures
(1992-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993).
*Philip R. McLoughlin (51) Trustee and Chairman (1997-present), Vice Chairman (1995-1997) and
President Chief Executive Officer (1995-present), Phoenix Duff & Phelps
Corporation. Director (1994-present) and Executive Vice President,
Investments (1988-present), Phoenix Home Life Mutual Insurance
Company. Director/Trustee and President, Phoenix Funds
(1989-present). Trustee and President, Phoenix-Aberdeen Series Fund
and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1995-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-present). Director (1983-present) and Chairman
(1995-present), Phoenix Investment Counsel, Inc. Director
(1984-present) and President (1990-present), Phoenix Equity
Planning Corporation. Director (1993-present), Chairman
(1993-present) and Chief Executive Officer (1993-1995), National
Securities & Research Corporation. Director, Phoenix Realty Group,
Inc. (1994-present), Phoenix Realty Advisors, Inc. (1987-present),
Phoenix Realty Investors, Inc. (1994-present), Phoenix Realty
Securities, Inc. (1994-present), PXRE Corporation (Delaware)
(1985-present), and World Trust Fund (1991-present). Director and
Executive Vice President, Phoenix Life and Annuity Company
(1996-present). Director and Executive Vice President, PHL Variable
Insurance Company (1995-present). Director, Phoenix Charter Oak
Trust Company (1996-present). Director and Vice President, PM
Holdings, Inc. (1985-present). Director and President, Phoenix
Securities Group, Inc. (1993-1995). Director (1992-present) and
President (1992-1994), W.S. Griffith & Co., Inc. Director
(1992-present) and President (1992-1994), Townsend Financial
Advisers, Inc. Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Everett L. Morris (69) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, NJ 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1993-present). Director, Public Service Enterprise
Group, Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings, Incorporated
(1989-1993).
21
<PAGE>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
*James M. Oates (51) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing
Managing Director Director, Wydown Group (1994-present). Director, Phoenix Duff &
The Wydown Group Phelps Corporation (1995-present). Director/Trustee, Phoenix
IBEX Capital Markets LLC Funds (1987-present). Trustee, Phoenix-Aberdeen Series Fund and
60 State Street Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Suite 950 Director, Govett Worldwide Opportunity Funds, Inc.
Boston, MA 02109 (1991-present), Blue Cross and Blue Shield of New Hampshire
(1994-present), Investors Financial Service Corporation
(1995-present), Investors Bank & Trust Corporation
(1995-present), Plymouth Rubber Co. (1995-present) and Stifel
Financial (1996-present). Member, Chief Executives Organization
(1996-present). Director (1984-1994), President (1984-1994) and
Chief Executive Officer (1986-1994), Neworld Bank.
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
*Calvin J. Pedersen (55) Trustee Director (1986-present), President (1993-present) and Executive
Phoenix Duff & Phelps Vice President (1992-1993), Phoenix Duff & Phelps Corporation.
Corporation Director/Trustee, Phoenix Funds (1995-present). Trustee,
55 East Monroe Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 3600 Institutional Mutual Funds (1996-present). President and Chief
Chicago, IL 60603 Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present), Duff & Phelps Utilities Income Inc.
(1994-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present).
Herbert Roth, Jr. (69) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-present), Phoenix Home Life Mutual Insurance
Company (1972-present), Landauer, Inc. (medical services)
(1970-present), Tech Ops./Sevcon, Inc. (electronic controllers)
(1987-present), and Mark IV Industries (diversified manufacturer)
(1985-present). Director, Key Energy Group (oil rig service)
(1988-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Richard E. Segerson (51) Trustee Managing Director, Mullin Associates (1993-present). Director/
102 Valley Road Trustee, Phoenix Funds (1993-present). Trustee, Phoenix-Aberdeen
New Canaan, CT 07840 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Vice President and General Manager, Coats &
Clark, Inc. (previously Tootal American, Inc.) (1991-1993).
Director/Trustee, the National Affiliated Investment Companies
(1984-1993).
Lowell P. Weicker, Jr. (66) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), HPSC Inc. (1995-present), Duty Free International, Inc.
(1997-present) and Compuware (1996-present). Visiting Professor,
University of Virginia (1997-present). Chairman, Dresing, Lierman,
Weicker (1995-1996). Governor of the State of Connecticut (1991-1995).
22
<PAGE>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
Michael E. Haylon (40) Executive Vice Director and Executive Vice President--Investments, Phoenix Duff &
President Phelps Corporation (1995-present). Executive Vice President,
Phoenix Funds (1993-present) and Phoenix-Aberdeen Series Fund
(1996-present). Executive Vice President (1997-present), Vice
President (1996-1997), Phoenix Duff & Phelps Institutional Mutual
Funds. Director (1994-present), President (1995-present), Executive
Vice President (1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director (1994-present), President
(1996-present), Executive Vice President (1994-1996), Vice President
(1993-1994), National Securities & Research Corporation. Director,
Phoenix Equity Planning Corporation (1995-present). Senior Vice
President, Securities Investments, Phoenix Home Life Mutual
Insurance Company (1993-1995). Various other positions with Phoenix
Home Life Mutual Insurance Company (1990-1993).
William J. Newman (58) Senior Vice Executive Vice President (1995-present) and Chief Investment Strategist
President (1996-present), Phoenix Investment Counsel, Inc. Senior Vice President
(1995-1996), Executive Vice President and Chief Strategist
(1996-present), National Securities & Research Corporation. Senior
Vice President, Phoenix Equity Planning Corporation (1995-1996).
Vice President, Common Stock and Chief Investment Strategist, Phoenix
Home Life Insurance Company (April, 1995-November, 1995). Senior
Vice President, Phoenix Strategic Equity Series Fund (1996-present), The
Phoenix Edge Series Fund (1995-present), Phoenix Multi-Portfolio Fund
(1995-present), Phoenix Income and Growth Fund (1996-present), Phoenix
Series Fund (1996-present), Phoenix Strategic Allocation Fund, Inc.
(1996-present), Phoenix Worldwide Opportunities Fund (1996-present),
Phoenix Duff & Phelps Institutional Funds (1996-present), and
Phoenix-Aberdeen Series Fund (1996-present). Chief Investment
Strategist, Kidder, Peabody Co., Inc. (1993-1994). Managing Director,
Equities, Bankers Trust Company (1991-1993).
James D. Wehr (40) Senior Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director, Fixed
Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Senior Vice President
(1997-present), Vice President (1988-1997) Phoenix Multi-Portfolio
Fund; Senior Vice President (1997-present), Vice President
(1990-1997) Phoenix Series Fund; Senior Vice President
(1997-present), Vice President (1991-1997) The Phoenix Edge Series
Fund; Senior Vice President (1997-present), Vice President
(1993-1997) Phoenix California Tax Exempt Bonds, Inc., and Senior
Vice President (1997-present), Vice President (1996-1997) Phoenix
Duff & Phelps Institutional Mutual Funds. Senior Vice President
(1997-present) Phoenix Multi-Sector Fixed Income Fund, Inc., Phoenix
Multi-Sector Short Term Bond Fund, Phoenix Income and Growth Fund
and Phoenix Strategic Allocation Fund, Inc. Managing Director,
Public Fixed Income, Phoenix Home Life Insurance Company
(1991-1995).
23
<PAGE>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
David L. Albrycht (36) Vice Managing Director, Fixed Income (1996-present) and Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present) and Investment Officer (1994-1996),
National Securities & Securities Research Corporation. Vice
President, Phoenix Multi-Portfolio Fund (1993-present), Phoenix
Multi-Sector Short Term Bond Fund (1993-present), Phoenix
Multi-Sector Fixed Income Fund, Inc. (1994-present), The Phoenix
Edge Series Fund (1997-present) and Phoenix Series Fund
(1997-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1995-1996).
Curtiss O. Barrows (46) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Series
Fund (1985-present), The Phoenix Edge Series Fund (1986-present) and
Phoenix Multi-Portfolio Fund (1995-1997). Portfolio Manger, Public
Bonds, Phoenix Home Life Insurance Company (1991-1995). Various
positions with Phoenix Home Life Mutual Insurance Company
(1985-1995).
Steven L. Colton (38) Vice Managing Director/Senior Portfolio Manager, Phoenix Investment
President Counsel, Inc. (1997-present). Vice President/Senior Portfolio
Manager, American Century Investment Management (1987-1997).
Portfolio Manager, American Century/Benham Income and Growth Fund
(1990-1997), American Century/Benham Equity Growth Fund (1991-1996)
and American Century/Benham Utilities Income Fund (1993-1997). Vice
President, The Phoenix Edge Series Fund, Phoenix Series Fund,
Phoenix Equity Series Fund (1997-present).
Roger Engemann (57) Vice Vice President (1998-present), Phoenix Series Fund and Phoenix
600 North Rosemead Blvd. President Investment Counsel, Inc. President and Director (1969-present),
Pasadena, CA 91107 Roger Engemann & Associates, Inc. Owner (1996-present), Pasadena
National Trust Company. President and Director (1988-present),
Pasadena Capital Corporation. Chairman of the Board, President
and Trustee (1986-present), Phoenix-Engemann Funds. President and
Director (1985-present), Roger Engemann Management Co., Inc.
John M. Hamlin (39) Vice Portfolio Manager, Equities (1996-present), Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Portfolio Manager,
Equities (1996-present), Investment Officer (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Income
and Growth Fund (1993-present) and Phoenix Series Fund (1994-
present). Portfolio Manager, Common Stock, Phoenix Home Life
Insurance Company (1989-1995).
John D. Kattar (42) Vice Managing Director/Senior Portfolio Manager (1997-present),
President Phoenix Investment Counsel, Inc. Vice President (1997-present),
The Phoenix Edge Series Fund, Phoenix Series Fund and
Phoenix-Aberdeen Series Fund. Director (1989-1997), Senior Vice
President (1993-1996) Baring Asset Management Company, Inc.
Director, (1995-1997) Baring Mutual Fund Management (Luxembourg).
24
<PAGE>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
William E. Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning Corporation
100 Bright Meadow Blvd. President (1996-present). Vice President, Phoenix Funds, Phoenix Duff &
P.O. Box 2200 Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series
Enfield, CT 06083-2200 Fund (1996-present). Assistant Vice President, USAffinity
Investments LP (1994-1995). Treasurer and Secretary, USAffinity
Funds (1994-1995). Manager, Fund Administration, SEI Corporation
(1991-1994).
Christopher J. Kelleher (42) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Series Fund
(1989-present), The Phoenix Edge Series Fund (1989-1997) and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present). Portfolio
Manager, Public Bonds, Phoenix Home Life Insurance Company
(1991-1995).
James E. Mair (56) Vice Vice President (1998-present), Phoenix Series Fund and Phoenix
600 North Rosemead Blvd. President Investment Counsel, Inc. Executive Vice President (1994-present)
Pasadena, CA 91107 and Senior Vice President (1983-1994), Roger Engemann &
Associates, Inc. Executive Vice President (1994-present) and
Security Analyst (1985-1994), Roger Engemann Management Co., Inc.
Executive Vice President and Director (1994-present), Senior Vice
President and Director (1990-1994), Pasadena Capital Corporation.
Director (1989-present), Pasadena National Trust Company.
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. President Phelps Corporation (1995-present). Senior Vice President, Finance
P.O. Box 2200 (1990-present), Chief Financial Officer (1996-present), and
Enfield, CT 06083-2200 Treasurer (1994-1996), Phoenix Equity Planning Corporation.
Senior Vice President (1990-present), Chief Financial Officer
(1996-present) and Treasurer (1994-present), Phoenix Investment
Counsel, Inc. Senior Vice President, Finance (1993-present),
Chief Financial Officer (1996-present), and Treasurer
(1994-present), National Securities & Research Corporation.
Senior Vice President and Chief Financial Officer, Duff & Phelps
Investment Management Co. (1996-present). Vice President, Phoenix
Funds (1990-present), Phoenix-Duff & Phelps Institutional Mutual
Funds (1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Senior Vice President and Chief Financial
Officer, W. S. Griffith & Co., Inc. (1992-1995) and Townsend
Financial Advisers, Inc. (1993-1995). Vice President, the
National Affiliated Investment Companies (until 1993). Vice
President, Investment Products Finance, Phoenix Home Life Mutual
Insurance Company (1990-1995).
Leonard J. Saltiel (43) Vice Managing Director, Operations and Senice (1996-present), Senior
President Vice President (1994-1996), Phoenix Equity Planning Corporation.
Vice President, Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen
Series Fund (1996-present). Vice President, National Securities &
Research Corporation (1994-1995). Vice President, Investment
Operations, Phoenix Home Life Mutual Insurance Company (1994-1995).
Various positions with Home Life Insurance Company and Phoenix Home
Life Mutual Insurance Company (1987-1994).
25
<PAGE>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
Julie L. Sapia (40) Vice Director, Money Market Trading (1997-present), Head Money Market
President Trader (1997), Money Market Trader (1995-1997), Phoenix
Investment Counsel, Inc. Vice President (1997-present), The
Phoenix Edge Series Fund, Phoenix Series Fund, Phoenix Duff &
Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series
Fund. Various positions with Phoenix Home Life Mutual Insurance
Company (1985-1995).
Dorothy J. Skaret (45) Vice Director, Money Market Trading (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel Inc. Director, Money
Market Trading (1996-present), Vice President (1993-1996),
National Securities & Research Corporation. Vice President,
Phoenix Series Fund (1990-present), The Phoenix Edge Series Fund
(1990-present), Phoenix-Aberdeen Series Fund (1996-present),
Phoenix Realty Securities, Inc. (1995-present), and Phoenix Duff
& Phelps Institutional Mutual Funds (1996-present). Director,
Public Fixed Income, Phoenix Home Life Mutual Insurance Company
(1991-1995). Various positions with Phoenix Home Life Mutual
Insurance Company (1986-1991).
John S. Tilson (53) Vice Vice President (1998-present), Phoenix Series Fund and Phoenix
600 North Rosemead Blvd. President Investment Counsel, Inc. Executive Vice President (1994-present),
Pasadena, CA 91107 Senior Vice President (1983-1994), Roger Engemann & Associates,
Inc. Executive Vice President and Director (1994-present), Senior
Vice President and Director (1990-1994), Pasadena Capital
Corporation. Executive Vice President (1994-present) and Security
Analyst (1985-1994), Roger Engemann Management Co., Inc. Chief
Financial Officer and Secretary (1988-present), Phoenix-Engemann
Funds.
Pierre G. Trinque (42) Vice Vice President (1997-present), The Phoenix Edge Series Fund and
President Phoenix Series Fund. Managing Director, Equities (March,
1997-November, 1997), Managing Director, Director of Equity Research
(October, 1996-March, 1997), Senior Research Analyst, Equities
(January, 1996-October, 1996) and Associate Portfolio
Manager-Institutional Funds (1992-1995), Phoenix Investment Counsel,
Inc.
Nancy G. Curtiss (45) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Second Vice President and Treasurer, Fund
Accounting, Phoenix Home Life Mutual Insurance Company
(1994-1995). Various positions with Phoenix Home Life Insurance
Company (1987-1994).
G. Jeffrey Bohne (50) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations (1993-1996). Vice President, Mutual Fund Customer
Service (1996-present), Phoenix Equity Planning Corporation,
Secretary and/or Clerk, Phoenix Funds (1993-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present) and
Phoenix-Aberdeen Series Fund (1996-present). Vice President, Home
Life of New York Insurance Company (1984-1992).
</TABLE>
- ------------------
*Trustees identified with an asterisk are considered to be interested persons of
the Trust (within the meaning of the Investment Company Act of 1940, as
amended) because of their affiliation with Phoenix Investment Counsel, Inc., or
Phoenix Equity Planning Corporation or Phoenix Duff & Phelps Corporation.
26
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of October 31, 1997 with
respect to each person who owns of record or is known by the Trust to own of
record or beneficially own 5% or more of any class of the Trust's equity
securities.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NAME OF FUND NUMBER OF SHARES PERCENT OF CLASS
<S> <C> <C> <C>
Trustees of Phoenix Savings and Aggressive 877,591.291 6.18%
Investment Plan Growth Fund
100 Bright Meadow Blvd Class A
PO Box 1900
Enfield, CT 06083-1900
Phoenix Securities Group Inc. Money Market 29,576,711.080 14.26%
100 Bright Meadow Blvd Fund Class A
Enfield, CT 06082
MLPF&S for the sole benefit of its U.S. Government 90,650.000 15.44%
customers* Securities Fund
ATTN: Fund Administration Class B
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit of its High Yield Fund 960,215.000 15.69%
customers* Class B
ATTN: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit of its Convertible Fund 87,702.000 22.20%
customers* Class B
ATTN: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit of its Growth Fund 135,582.839 5.45%
customers* Class B
ATTN: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
</TABLE>
*Record owner only for its individual customers. To the Trust's knowledge, no
customer beneficially owned 5% or more of the total outstanding shares of any
Class of any Fund.
At October 31, 1997, the Trustees and officers as a group owned less than 1%
of the then outstanding shares of the Trust.
For services rendered to the Trust during the fiscal year ended October 31,
1997, the Trustees received an aggregate of $141,173 from the Trust as Trustees'
fees. For services on the Board of Trustees of the Phoenix Funds, each Trustee
who is not a full-time employee of the Adviser or any of its affiliates
currently receives a retainer at the annual rate of $40,000 and $2,500 per joint
meeting of the Boards. Each Trustee who serves on the Audit Committee receives a
retainer at the annual rate of $2,000 and a fee of $2,000 per joint Audit
Committee meeting attended. Each Trustee who serves on the Nominating Committee
receives an annual retainer at the annual rate of $1,000 and a fee of $1,000 per
joint Nominating Committee meeting attended. Each Trustee who serves on the
Executive Committee and who is not an interested person of the Trust receives a
retainer at the annual rate of $1,000 and $1,000 per joint Executive Committee
meeting attended. The function of the Executive Committee is to serve as a
contract review, compliance review and performance review delegate of the full
Board of Trustees. Costs are allocated equally to each of the Series and the
Funds within the Phoenix Fund complex. The foregoing fees do not include
reimbursement of expenses incurred in connection with meeting attendance.
Officers and employees of the Adviser who are not interested persons are
compensated for their services by the Adviser and receive no compensation from
the Trust.
27
<PAGE>
For the Trust's last fiscal year ending October 31, 1997, the Trustees
received the following compensation:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS ESTIMATED FUND COMPLEX
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS (13 FUNDS)
NAME FROM FUND OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES
---- --------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
C. Duane Blinn** $12,600* $132,500
Robert Chesek $11,078 $118,000
E. Virgil Conway+ $13,860 $146,500
Harry Dalzell-Payne+ $12,075 $130,000
Francis E. Jeffries $ 7,875* $ 85,000
Leroy Keith, Jr. $11,078 None None $118,000
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $11,498* Trustee Trustee $126,000
James M. Oates+ $11,498 $124,500
Calvin J. Pedersen $ 0 $ 0
Philip R. Reynolds** $11,078 $118,000
Herbert Roth, Jr. + $14,438* $152,500
Richard E. Segerson $12,285 $131,000
Lowell P. Weicker, Jr. $11,813 $125,000
</TABLE>
*This compensation (and the earnings thereon) will be deferred pursuant to the
Deferred Compensation Plan. At October 31, 1997, the total amount of deferred
compensation (including interest and other accumulation earned on the original
amounts deferred) accrued for Messrs. Blinn, Jeffries, Morris and Roth was
$395,602, $49,350, $108,675 and $135,965, respectively. At present, by
agreement among the Fund, the Distributor and the electing director, director
fees that are deferred are paid by the Fund to the Distributor. The liability
for the deferred compensation obligation appears only as a liability of the
Distributor.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Blinn and
Reynolds retired from the Board of Trustees effective January 1, 1998.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
OTHER INFORMATION
FINANCIAL STATEMENTS
Financial information relating to the Trust is contained in the Annual Report
to Shareholders for the year ended October 31, 1997 and is available by calling
Equity Planning at (800) 243-4361, or by writing to Equity Planning at 100
Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200. The Annual
Report is incorporated into this Statement of Additional Information by
reference. A copy of the Annual Report must precede or accompany this Statement
of Additional Information.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, has been selected
independent accountants for the Trust. Price Waterhouse LLP audits the Trust's
annual financial statements and expresses an opinion thereon.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston,
MA 02101, serves as custodian of the Trust's assets (the "Custodian") and Equity
Planning acts as Transfer Agent for the Trust (the "Transfer Agent").
REPORT TO SHAREHOLDERS
The fiscal year of the Trust ends on October 31. The Trust will send
financial statements to its shareholders at least semiannually. An Annual Report
containing financial statements audited by the Trust's independent accountants
will be sent to shareholders each year.
28
<PAGE>
-----------------------------------------------------------------------
April 30, 1997
PHOENIX
FUNDS
-----------------------------------------------------------------------
ANNUAL REPORT
Phoenix Income
and Growth Fund
(Phoenix Duff & Phelps logo)
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PHOENIX INCOME AND GROWTH FUND
INVESTOR PROFILE
Phoenix Income and Growth Fund is designed for risk-averse investors seeking
current yield and conservation of capital as well as the potential for long-
term capital appreciation.
INVESTMENT ADVISER'S REPORT
Phoenix Income and Growth Fund provided strong absolute returns for the 12
months ended April 30, 1997. Class A shares returned 10.93% and Class B
shares 10.05%. The Fund performed consistently in an increasingly volatile
market in keeping with its conservative bias. A composite index equal to 55%
of the S&P 500 Stock Index, 35% Lehman Brothers Aggregate Bond Index, and 10%
90-day Treasury bills was up 16.73%. All performance figures assume
reinvestment of dividends and exclude the effect of sales charges.
During the reporting period, the equity markets continued to post strong
gains fueled by rising corporate earnings and large cash flows into mutual
funds, coupled with strong economic growth and low inflation. Blue-chip
stocks led the way with mid- and small-sized companies significantly
underperforming their larger counterparts. Bonds posted respectable gains
with the Lehman Brothers Aggregate Bond Index returning 7.08% for the year.
Financial services and health-care holdings were the primary positive
contributors to performance. Some of the top performers included Warner
Lambert, Perkin Elmer, Western National Corporation and Rite Aid. The Fund
also benefited from continued strong relative performance of the fixed-income
segment of the portfolio. Performance was held back by a moderately low
weighting in consumer staples and poor relative performance of some cable
holdings. While the Fund's relatively conservative bias provided consistent
returns over the 12-month reporting period, it also limited performance in a
rapidly rising market.
OUTLOOK
Looking forward, the Fund's focus will continue to be on providing low-risk
equity market participation, with a bias toward providing a suitable current
yield and preservation of capital. We expect ongoing market volatility given
a Federal Reserve Board that appears resolved to contain any perceived
inflationary pressures. Our primary thematic concentration remains 21st
Century Medicine. We are also emphasizing rising energy demand through the
themes Energy Technology and Clean Energy Demand.
The fixed-income segment of the portfolio remains well-diversified, and
positioned to exploit undervalued market sectors. As of April 30, the Fund's
asset allocation was 59% equity (common stocks and convertible securities),
35% fixed-income and 6% cash equivalents.
1
<PAGE>
PHOENIX INCOME AND GROWTH FUND
(graph:plot points)
dates Income and Growth Balanced S&P 500
Fund-Class A Benchmark** Stock Index*
4/30/87 9525 10000 10000
4/30/88 9680 10048 9346
4/30/89 11783 11649 11467
4/30/90 12322 12807 12663
4/30/91 14121 14863 14896
4/30/92 16419 16680 16976
4/30/93 18847 18362 18545
4/30/94 19484 19020 19536
4/30/95 20645 21424 22950
4/30/96 24569 25666 29898
4/30/97 27255 29959 37434
Average Annual Total Returns
for Periods Ending 4/30/97
<TABLE>
<CAPTION>
From Inception
1/3/92 to
1 Year 5 Years 10 Years 4/30/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A with 4.75% sales charge 5.69% 9.58% 10.55% --
- --------------------------------------------------------------------------------
Class A at net asset value 10.93% 10.67% 11.09% --
- --------------------------------------------------------------------------------
Class B with CDSC 6.14% 9.88% -- 9.79%
- --------------------------------------------------------------------------------
Class B at net asset value 10.05% 9.88% -- 9.79%
- --------------------------------------------------------------------------------
Balanced Benchmark** 16.73% 12.43% 11.60% 11.82%***
- --------------------------------------------------------------------------------
S&P 500 Stock Index* 25.20% 17.14% 14.11% 20.11%***
- --------------------------------------------------------------------------------
</TABLE>
This chart assumes an initial investment of $10,000 made on April 30, 1987
for Class A shares. The total return for Class A shares 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 reflect
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 your 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 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.
***Index information from 1/1/92 to 4/30/97.
2
<PAGE>
Phoenix Income and Growth Fund
INVESTMENTS AT APRIL 30, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--7.3%
U.S. Treasury Notes--3.9%
U.S. Treasury Notes 7.375%, '97 AAA $ 5,000 $ 5,040,200
U.S. Treasury Notes 5.25%, '98 AAA 2,250 2,229,210
U.S. Treasury Notes 5%, '99 .. AAA 15,700 15,371,273
U.S. Treasury Notes 6%, '99 .. AAA 2,000 1,984,374
U.S. Treasury Notes 6.375%, '01 AAA 5,000 4,973,200
U.S. Treasury Strip, P.O., 0%, '17 AAA 10,000 2,428,000
---------------
32,026,257
---------------
Agency Mortgage-Backed Securities--3.4%
GNMA 6.50%, '23-'24 .......... AAA 30,034 28,382,781
---------------
TOTAL U.S. GOVERNMENT AND
AGENCY SECURITIES
(Identified cost $61,120,080) ............................... 60,409,038
---------------
NON-CONVERTIBLE BONDS--14.2%
Asset-Backed Securities--1.3%
Airplanes Pass Through Trust
1D 10.875%, '19 ............. BB 1,400 1,547,784
Fleetwood Credit Corp. 96-B,
Class A 6.90%, '12 .......... AAA 2,419 2,421,288
Green Tree Financial Corp.
96-4, A6 7.40%, '27 ......... AAA 1,500 1,489,687
Green Tree Financial Corp.
96-2, M1 7.60%, '27 ......... AA- 3,325 3,306,297
Green Tree Financial Corp.
96-4, M1 7.75%, '27 ......... AA- 1,500 1,527,188
---------------
10,292,244
---------------
Entertainment, Leisure & Gaming--1.5%
Turner Broadcasting 8.375%,
'13 ......................... BB+ 3,000 3,008,670
Viacom International Sub.
Debenture 8%, '06 ........... BB- 10,000 9,300,000
---------------
12,308,670
---------------
Hospital Management & Services--0.6%
Tenet Healthcare Corp. Sr.
Note 9.625%, '02 ........... BB 5,000 5,312,500
---------------
Lodging & Restaurants--0.6%
Host Marriott Travel Plaza,
Inc. 9.50%, '05 ............. BB- 5,000 5,112,500
---------------
Non-Agency Mortgage-Backed Securities--7.1%
DLJ Mortgage Acceptance
Corp. 96-CF1, A1B 144A
7.58%, '28 (b) .............. AAA 1,400 1,426,688
G.E. Capital Mortgage Service
94-9, M 6.50%, '24 .......... AA 11,576 10,530,635
G.E. Capital Mortgage Service
96-8, M 7.25%, '26 .......... AA 496 479,258
Non-Agency Mortgage-Backed Securities--continued
Lehman Structured Securities
Corp. 96-1, E-1 7.995%, '26. NR $ 2,987 $ 3,022,139
Nationslink Funding Corp.
96-1, B 7.69%, '05 .......... AA 1,500 1,523,438
Prudential Home Mortgage
Securities 94-15, M 6.80%,
'24 ......................... Aa(d) 8,466 7,841,758
Residential Asset
Securitization Trust 96-A8,
A1 8%, '26 .................. AAA 3,535 3,564,838
Residential Funding Mortgage
96-S1, A11 7.10%, '26 ....... AAA 2,800 2,691,063
Residential Funding Mortgage
96-S4, M1 7.25%, '26 ........ AA 2,970 2,862,194
Resolution Trust Corp. 92-C8,
D 8.835%, '23 ............... BBB- 7,206 7,388,547
Resolution Trust Corp. 95-C2,
B 6.80%, '27 ................ Aa(d) 5,866 5,649,551
Securitized Asset Sales 93-J,
2B 6.808%, '23 .............. A(d) 4,447 4,128,880
Structured Asset Securities
Corp. 95-C1, C 7.375%, '24 .. A 2,500 2,491,406
Structured Asset Securities
Corp. 95-C4, B 7%, '26 ...... AA 5,198 5,134,359
---------------
58,734,754
---------------
Paper & Forest Products--0.6%
Buckeye Cellulose Corp.
8.50%, '05 ................. BB- 5,000 4,900,000
---------------
Publishing, Broadcasting, Printing & Cable--0.3%
Cablevision Systems Corp.
9.875%, '06 ................ B 2,500 2,500,000
---------------
REITS--0.4%
Meditrust Corp. 7.375%, '00 .. BBB- 3,000 3,003,300
---------------
Telecommunications Equipment--1.0%
Rogers Cablesystems Ltd.
9.625%, '02 ................ BB+ 8,000 8,230,000
---------------
Textile & Apparel--0.6%
Westpoint Stevens 8.75%, '01 BB- 5,000 5,087,500
---------------
Truckers & Marine--0.2%
Teekay Shipping Corp.
8.32%, '08 .................. BB 1,645 1,612,100
---------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $117,588,629) .............................. 117,093,568
---------------
FOREIGN GOVERNMENT SECURITIES--4.6%
Argentina--1.1%
Republic of Argentina Bearer
FRB 6.75%, '05 (e) ......... BB- 728 668,391
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Phoenix Income and Growth Fund
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
<S> <C> <C> <C>
Argentina--continued
Republic of Argentina
Discount L-GL Euro
6.375%, '23 (e) ............. BB- $ 5,850 $ 4,840,875
Republic of Argentina Global
Bond 11.375%, '17 ........... BB 1,000 1,062,250
Republic of Argentina Par
L-GP 5.25%, '23 (e) ......... BB- 4,000 2,610,000
---------------
9,181,516
---------------
Brazil--0.6%
Republic of Brazil DCB-L
Euro 6.938%, '12 (e) ........ B+ 3,100 2,472,250
Republic of Brazil Discount
Z-L Euro 6.875%, '24 (e) .... B+ 3,125 2,517,578
---------------
4,989,828
---------------
Colombia--0.2%
Republic of Colombia Euro
9%, '97 ..................... BBB- 1,500 1,500,315
---------------
Mexico--0.8%
United Mexican States 144A
7.625%,'01 (b) (e) .......... Baa(d) 1,600 1,620,800
United Mexican States
Discount A 6.867%,
'19 (e) (f) ................. BB 500 443,125
United Mexican States Euro D
6.352%,'19 (e) (f) .......... BB 1,500 1,329,375
United Mexican States Series
B Euro 6.25%, '19 (f) ....... BB 4,250 3,089,218
---------------
6,482,518
---------------
Morocco--0.4%
Morocco R&C Agreement
Series A 6.375%, '09 (e) .... NR 3,800 3,344,000
---------------
Panama--0.3%
Panama IRB Series 18 Yr.
3.50%, '14 (e) .............. BB+ 1,700 1,261,187
Panama PDI 6.563%, '16 (e) ... BB+ 1,521 1,299,267
---------------
2,560,454
---------------
Poland--0.4%
Poland Discount Euro 6.938%,
'24 (e) .................... BBB- 1,250 1,215,625
Poland PDI B 4%, '14 (e) ..... BBB- 3,000 2,445,000
---------------
3,660,625
---------------
Venezuela--0.8%
Republic of Venezuela
Discount 6.813%, '20 (e) (f) Ba 5,100 4,197,938
Republic of Venezuela Par
6.75%, '20 (f) .............. Ba 2,150 1,560,093
---------------
5,758,031
---------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $35,434,582) ............................... 37,477,287
---------------
FOREIGN NON-CONVERTIBLE BONDS--1.0%
Chile--0.4%
CSAV 7.3751%, '03
(Industrial) ................ BBB $ 580 $ 561,150
Petropower I Funding 144A
7.36%, '14 (Utility-Gas) (b) BBB 2,400 2,254,440
---------------
2,815,590
---------------
Indonesia--0.3%
Asia Pulp & Paper Co. Yankee
11.75%, '05 (Paper &
Forest Products) ............ BB 2,500 2,640,625
---------------
Netherlands--0.3%
Astra Overseas Financial
144A 8.75%, '03
(Diversified Financial
Services) (b) ............... NR 2,500 2,525,000
---------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $7,928,265) ................................ 7,981,215
---------------
MUNICIPAL BONDS--2.7%
California--2.7%
Kern County Pension Oblig.
Taxable 7.26%, '14 .......... AAA 4,350 4,181,263
Long Beach Pension Oblig.
Taxable 6.87%, '06 .......... AAA 3,000 2,941,620
Orange County Pension Series
A Taxable 7.60%, '08 ........ AAA 4,520 4,583,325
Sacramento County 95-A
Taxable 6.625%, '06 ......... AAA 3,400 3,275,900
San Bernardino County Oblig.
Revenue Taxable 6.87%, '08 .. AAA 1,335 1,291,906
San Bernardino County Oblig.
Revenue Taxable 6.94%, '09 .. AAA 3,625 3,516,613
Ventura County Pension
Taxable 6.54%, '05 .......... AAA 2,200 2,127,774
---------------
21,918,401
---------------
TOTAL MUNICIPAL BONDS
(Identified cost $22,405,166) ............................... 21,918,401
---------------
CONVERTIBLE BONDS--9.0%
Autos & Trucks--0.1%
Volkswagen Cv. 144A 3%,
'02 (Germany) (b) ........... NR 1,000 1,240,000
---------------
Computer Software & Services--0.3%
Macronix International Co. Cv.
1%, '07 ..................... NR 2,000 2,150,000
---------------
Electrical Equipment--0.1%
Itron, Inc. Cv. 144A 6.75%,
'04 (b) ..................... NR 1,000 1,075,000
---------------
Entertainment, Leisure & Gaming--0.8%
Comcast Corp. Cv. (SIRENS)
3.375%, '05 (e) ............. BB- 7,500 6,825,000
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Phoenix Income and Growth Fund
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
<S> <C> <C> <C>
Food--1.6%
Grand Metropolitan PLC Cv.
144A 6.50%, '00 (United
Kingdom) (b) ................ A+ $10,750 $13,222,500
---------------
Healthcare--Diversified--0.8%
Roche Holdings, Inc. Cv. 144A
0%, '12 (Switzerland) (b) ... NR 5,500 2,145,000
Sandoz Capital BVI Ltd. Cv. 144A
2%, '02 (Switzerland) (b) ... NR 3,500 4,383,750
---------------
6,528,750
---------------
Hospital Management & Services--0.7%
Tenet Healthcare Cv. 6%, '05 . B+ 5,000 6,075,000
---------------
Insurance--0.1%
Chubb Corp. Cv. 6%, '98 ...... AA 1,000 1,285,000
---------------
Medical Products & Supplies--0.2%
Heartport, Inc. Cv. 144A
7.25%, '04 (b) .............. NR 1,250 1,312,500
---------------
Metals & Mining--0.2%
Still Water Mining Cv. 7%, '03 NR 1,500 1,522,500
---------------
Natural Gas--1.5%
Apache Corp. Cv. 144A 6%,
'02 (b) ...................... BBB- 6,000 7,192,500
Consolidated Natural Gas Co.
Cv. 7.25%, '15 .............. A+ 5,300 5,604,750
---------------
12,797,250
---------------
Office & Business Equipment--0.2%
Comverse Technology Cv.
144A 5.75%, '06 (b) ......... NR 1,250 1,343,750
---------------
Oil Service & Equipment--0.3%
Nabors Industries, Inc. Cv.
5%, '06 ..................... BBB- 2,000 2,450,000
---------------
Pollution Control--0.5%
WMX Technologies, Inc. Sub.
Notes Cv. 2%, '05 ........... A 4,350 3,762,750
---------------
Publishing, Broadcasting, Printing & Cable--0.4%
Times Mirror Co. Cv. 144A
0%, '17 (b) ................. NR 7,500 2,971,875
---------------
REITS--2.0%
Health Care Property, Inc. Cv.
144A 6%, '00 (b) ............ BBB 1,500 1,477,500
---------------
Retail--0.2%
Home Depot, Inc. Cv. 3.25%,
'01 .......................... A+ 2,000 2,047,500
---------------
Retail--Drug--0.6%
Rite Aid Corp. Cv. 0%, '06 ... BBB 7,000 5,171,250
---------------
Telecommunications Equipment--0.2%
BBN Corp. Cv. 6%, '12 ........ B(d) 1,650 1,608,750
---------------
TOTAL CONVERTIBLE BONDS
(Identified cost $69,484,223) ............................... 74,866,875
---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS--12.1%
Banks--0.6%
H. F. Ahmanson & Co. Series D Cv.
Pfd. 6% ................................ 60,000 $ 4,740,000
--------------
Chemical--0.2%
Merrill Lynch, IGL (STRYPES) 6.25% 35,000 1,356,250
--------------
Computer Software & Services--0.5%
Microsoft Corp. Series A Cv. Pfd.
$2.196 ................................. 50,500 4,324,063
--------------
Conglomerates--0.4%
Rouse Co. Series B Cv. Pfd. $3.00 39,000 1,769,625
USX Corp. Cv. Pfd. 6.75% ................ 75,000 1,556,250
--------------
3,325,875
--------------
Diversified Financial Services--0.3%
Morgan Stanley Group, TBR (PERQS)
6% ..................................... 40,000 2,830,000
--------------
Electronics--0.3%
Morgan Stanley Group, AMD (PERQS)
10% .................................... 51,800 2,078,475
--------------
Entertainment, Leisure & Gaming--0.5%
Mattel, Inc. Series C Cv. Pfd. $0.4125 320,000 3,680,000
--------------
Lodging & Restaurants--0.6%
Felcor Suite Hotels, Inc. Series A Cv.
Pfd. $1.95 ............................. 51,000 1,453,500
Host Marriott Financial Trust Cv. Pfd.
144A 6.75% (b) ......................... 60,000 3,345,000
--------------
4,798,500
--------------
Machinery--0.7%
Cooper Industries, Wyman notes (DECS)
6% ..................................... 325,000 6,134,375
--------------
Metals & Mining--1.4%
Coeur d'Alene Cv. Pfd. 7% ............... 210,000 3,386,250
Freeport-McMoRan Copper Cv. Pfd.
7% ..................................... 150,000 4,050,000
Inco Limited Cv. Pfd. Series E 5.50%
(Canada) ............................... 46,700 2,352,513
Titanium Metals Cv. Pfd. 144A
6.625% (b) ............................. 30,000 1,380,000
--------------
11,168,763
--------------
Oil--3.0%
Occidental Petroleum Corp. Cv. Pfd.
144A $3.875 (b)............. 220,000 12,045,000
Tosco Financing Trust Cv. Pfd. 144A
5.75% (b) .............................. 16,000 876,000
Unocal Corp. Cv. Pfd. 6.25% .. 176,100 9,597,450
Valero Energy Corp. Cv. Pfd. $3.125 ..... 30,500 1,982,500
--------------
24,500,950
--------------
Oil Service & Equipment--0.5%
Mesa, Inc. Series A PIK 8%... 688,500 4,389,187
--------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Phoenix Income and Growth Fund
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------------
<S> <C> <C>
Publishing, Broadcasting, Printing & Cable--0.9%
Cablevision Systems Corp. Series I Cv.
Pfd. 8.50% .............................. 165,000 $ 3,650,625
Merrill Lynch, Cox (STRYPES) 6% .......... 215,000 4,246,250
--------------
7,896,875
--------------
Telecommunications Equipment--0.7%
Qualcomm, Inc. 144A Cv. Pfd.
5.75% (b) ............................... 77,000 3,426,500
TCI Pacific Communications Pfd. 5% ....... 25,000 2,356,250
--------------
5,782,750
--------------
Utility--Electric--0.5%
AES Trust I Series A Cv. Pfd. 5.375% ..... 30,000 1,638,750
California Energy Capital Trust Cv. Pfd.
6.25% ................................... 35,000 2,476,250
--------------
4,115,000
--------------
Utility--Gas--0.5%
MCN Energy Group, Inc. Cv. Pfd.
8.75% ................................... 148,100 3,943,163
--------------
Utility--Telephone--0.5%
US West, Inc. Series D Cv. Pfd. 4.50% .... 90,000 4,016,250
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $95,703,645) ...................... 99,080,476
--------------
PREFERRED STOCKS--4.9%
Banks--0.5%
Fleet Financial Group, Inc. Pfd. 9.30% ... 150,000 3,862,500
--------------
Insurance--0.5%
Aon Corp. 8% Pfd. ........................ 166,500 4,224,937
--------------
Natural Gas--0.7%
Enron Capital $2.00 Pfd. Series C ........ 225,000 5,596,875
--------------
Publishing, Broadcasting, Printing & Cable--1.2%
News Corp. Overseas Ltd. Series A
8.625% Pfd. ............................. 400,000 10,050,000
--------------
REITS--2.0%
Home Ownership Funding 2 Step-down
Pfd. 144A 13.338% (b) ................... 5,000 4,899,880
Marquette Real Estate Fund Step-down Pfd.
144A 13.701% (b) ........................ 12,000 11,805,120
--------------
16,705,000
--------------
TOTAL PREFERRED STOCKS
(Identified cost $41,035,550) ...................... 40,439,312
--------------
COMMON STOCKS--34.3%
Advertising--1.0%
Interpublic Group Companies, Inc. ........ 75,200 4,258,200
Omnicom Group, Inc. ...................... 81,600 4,324,800
--------------
8,583,000
--------------
Banks--1.6%
BankAmerica Corp. ........................ 14,700 1,718,062
Barnett Banks, Inc. ...................... 124,790 6,099,111
Banks--continued
Chase Manhattan Corp. .................... 17,000 $ 1,574,625
Citicorp ................................. 17,900 2,015,988
Mellon Bank Corp. ........................ 25,600 2,128,000
--------------
13,535,786
--------------
Beverages--0.5%
PepsiCo, Inc. ............................ 121,600 4,240,800
--------------
Chemical--Specialty--0.7%
Praxair, Inc. ............................ 114,100 5,890,412
--------------
Computer Software & Services--0.3%
Computer Associates International, Inc. .. 42,200 2,194,400
--------------
Conglomerates--0.4%
Thermo Electron Corp. (c) ................ 94,100 3,246,450
--------------
Cosmetics & Soaps--0.6%
Colgate Palmolive Co. .................... 46,900 5,205,900
--------------
Diversified Miscellaneous--0.9%
Hillenbrand Industries, Inc. ............. 113,400 4,876,200
Jostens, Inc. ............................ 98,000 2,339,750
--------------
7,215,950
--------------
Electronics--5.2%
Intel Corp. .............................. 22,400 3,430,000
LSI Logic Corp. (c) ...................... 112,100 4,287,825
Perkin Elmer Corp. ....................... 431,400 31,330,425
Tektronix, Inc. .......................... 61,300 3,317,863
--------------
42,366,113
--------------
Healthcare--Diversified--0.7%
Warner-Lambert Co. ....................... 61,100 5,987,800
--------------
Healthcare--Drugs--1.7%
Amgen, Inc. (c) .......................... 86,900 5,116,238
Genzyme Corp. (c) ........................ 180,200 4,167,125
Merck & Co., Inc. ........................ 50,000 4,525,000
--------------
13,808,363
--------------
Hospital Management & Services--1.0%
Oxford Health Plans (c) .................. 51,800 3,412,325
Pacificare Health Systems, Inc.
Class B (c) ............................. 24,500 1,966,125
United Healthcare Corp. .................. 54,400 2,645,200
--------------
8,023,650
--------------
Insurance--3.0%
Aetna, Inc. .............................. 44,200 4,027,725
Allstate Corp. ........................... 39,200 2,567,600
Chubb Corp. .............................. 137,300 7,929,075
ITT Hartford Group, Inc. ................. 55,300 4,119,850
Western National Corp. ................... 206,000 5,304,500
--------------
23,948,750
--------------
Medical Products & Supplies--2.1%
Baxter International, Inc. ............... 182,600 8,741,975
Johnson & Johnson ........................ 60,000 3,675,000
U.S. Surgical Corp. ...................... 119,125 4,080,031
--------------
16,497,006
--------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix Income and Growth Fund
<TABLE>
<CAPTION>
SHARES VALUE
--------- ----------
<S> <C> <C>
Metals & Mining--2.6%
Alumax, Inc. (c) ............................ 45,500 $ 1,660,750
Aluminum Company of America ................. 121,200 8,468,850
Century Aluminum Co. ........................ 152,100 2,509,650
Kaiser Aluminum Corp. (c) ................... 148,200 1,593,150
Reynolds Metals Co. ......................... 29,800 2,022,675
Stillwater Mining Co. (c) ................... 274,300 5,520,288
-----------
21,775,363
-----------
Natural Gas--3.8%
Burlington Resources, Inc. .................. 57,400 2,432,325
Columbia Gas System, Inc. ................... 40,000 2,475,000
Consolidated Natural Gas Co. ................ 46,400 2,337,400
Enron Corp. ................................. 105,600 3,973,200
Equitable Resources, Inc. ................... 85,600 2,535,900
KN Energy, Inc. ............................. 51,800 1,929,550
New Jersey Resources Corp. .................. 58,300 1,683,412
Questar Corp. ............................... 51,800 1,968,400
Tejas Gas Corp. (c) ......................... 51,800 2,149,700
Washington Gas Light Co. .................... 79,700 1,833,100
Williams Companies, Inc. .................... 173,650 7,618,894
-----------
30,936,881
-----------
Office & Business Equipment--0.5%
Seagate Technology, Inc. (c) ................ 94,930 4,354,898
-----------
Oil--1.9%
Barrett Resources Corp. (c) ................. 128,500 4,208,375
NGC Corp. ................................... 170,800 3,010,350
Noble Affiliates, Inc. ...................... 114,000 4,075,500
USX-Marathon Group .......................... 102,900 2,842,612
Valero Energy Corp. ......................... 43,100 1,513,888
-----------
15,650,725
-----------
Oil Service & Equipment--2.3%
Baker Hughes, Inc. .......................... 132,600 4,574,700
Diamond Offshore Drilling, Inc. (c) ......... 15,000 965,625
ENSCO International, Inc. (c) ............... 87,600 4,161,000
Noble Drilling Corp. (c) .................... 193,123 3,355,512
Parker Drilling Co. (c) ..................... 131,200 1,016,800
Precision Drilling Corp. (c) ................ 20,300 705,425
Reading & Bates Corp. (c) ................... 106,200 2,376,225
Tidewater, Inc. ............................. 50,400 2,022,300
-----------
19,177,587
-----------
Pollution Control--0.8%
Republic Industries, Inc. (c) ............... 187,600 4,654,825
WMX Technologies, Inc. ...................... 67,700 1,988,688
-----------
6,643,513
-----------
Professional Services--0.0%
CellNet Data Systems (c) ...................... 24,000 180,000
-----------
REITS--0.9%
IRT Property Co. .............................. 150,000 1,706,250
Meditrust Corp. ............................... 96,296 3,514,804
Patriot American Hospitality .................. 110,000 2,365,000
-----------
7,586,054
-----------
Telecommunications Equipment--0.8%
Cisco Systems, Inc. (c) ....................... 39,500 $ 2,044,125
Motorola, Inc. ................................ 72,600 4,156,350
-----------
6,200,475
-----------
Truckers & Marine--0.1%
Hvide Marine, Inc. Class A (c) ................ 51,000 879,750
-----------
Utility--Electric--0.6%
CMS Energy Corp. .............................. 150,000 4,762,500
-----------
Utility--Gas--0.3%
Eastern Enterprises ........................... 50,000 1,693,750
MCN Energy Group, Inc. ........................ 35,900 1,027,637
-----------
2,721,387
-----------
TOTAL COMMON STOCKS
(Identified cost $234,305,839) ................................ 281,613,513
-----------
FOREIGN COMMON STOCKS--4.2%
Banks--0.5%
Credit Communial Holding/Dexia 144A
(Belgium) (b) (c) ............................ 38,000 3,801,140
-----------
Beverages--0.5%
PanAmerican Beverages, Inc. Class A
(Mexico) ..................................... 155,800 4,518,200
-----------
Engineering & Construction--0.2%
Chicago Bridge & Iron Co. NV
(Netherlands)(c) .............................. 75,000 1,275,000
-----------
Insurance--0.6%
GCR Holdings Ltd. (Bermuda) ................... 40,000 865,000
LaSalle Re Holdings Ltd. (Bermuda) ............ 40,000 1,110,000
Mid Ocean Ltd. (Bermuda) ...................... 20,000 917,500
Partner Re Ltd. (Bermuda) ..................... 35,000 1,176,875
Renaissancere Holdings Ltd. (Bermuda) ......... 30,000 1,110,000
-----------
5,179,375
-----------
Oil--0.4%
Ensign Resource Service Group, Inc.
(Canada) (c) ................................. 45,000 788,796
Shell Transport & Trading Co. ADR
(United Kingdom) ............................. 23,000 2,446,625
-----------
3,235,421
-----------
Rails--0.6%
Canadian Pacific Ltd. (Canada) ................ 195,500 4,765,313
-----------
Truckers & Marine--0.4%
Knightsbridge Tankers Ltd. (Bermuda) .......... 150,000 3,412,500
-----------
Utility--Telephone--1.0%
BCE, Inc. (Canada) ............................ 175,000 8,159,375
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $29,891,217) ................................. 34,346,324
-----------
TOTAL LONG-TERM INVESTMENTS--94.3%
(Identified cost $714,897,196) ................................ 775,226,009
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Phoenix Income and Growth Fund
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.0%
Commercial Paper--1.0%
Vermont American Corp.
5.52%, 5-1-97 .................. A-1+ $ 3,985 $ 3,985,000
Du Pont (E.I) De Nemours &
Co. 5.28%, 5-5-97 .............. A-1+ 85 84,950
Preferred Receivables Funding
Corp. 5.50%, 5-7-97 ............ A-1 2,795 2,792,438
Campbell Soup Co. 5.50%,
5-8-97 ......................... A-1+ 1,510 1,508,385
--------------
8,370,773
--------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
---------------
<S> <C>
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $8,370,773) ................. $ 8,370,773
--------------
TOTAL INVESTMENTS--95.3%
(Identified cost $723,267,969) ............... 783,596,782(a)
Cash and receivables, less liabilities--4.7% . 38,770,707
--------------
NET ASSETS--100.0% ............................ $822,367,489
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $75,942,538 and gross
depreciation of $16,167,455 for income tax purposes. At April 30, 1997,
the aggregate cost of securities for federal income tax purposes was
$723,821,699.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1997, these securities amount to a value of $85,769,943 or 10.4% of net
assets.
(c) Non-income producing.
(d) As rated by Moody's, Fitch or Duff & Phelps.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(f) Rights incorporated as a unit.
See Notes to Financial Statements
8
<PAGE>
Phoenix Income and Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $723,267,969) $783,596,782
Cash 137,964
Receivables
Investment securities sold 38,042,993
Fund shares sold 159,269
Dividends and interest 5,112,934
---------------
Total assets 827,049,942
---------------
Liabilities
Payables
Investment securities purchased 2,145,605
Fund shares repurchased 1,294,641
Investment advisory fee 466,606
Distribution fee 392,443
Transfer agent fee 183,927
Financial agent fee 20,438
Trustees' fee 4,516
Accrued expenses 174,277
---------------
Total liabilities 4,682,453
---------------
Net Assets $822,367,489
===============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $732,477,810
Undistributed net investment income 2,320,683
Accumulated net realized gain 27,240,183
Net unrealized appreciation 60,328,813
---------------
Net Assets $822,367,489
===============
Class A
Shares of beneficial interest outstanding, $0.0001 par
value, unlimited authorization
(Net Assets $451,438,500) 45,801,216
Net asset value per share $9.86
Offering price per share
$9.86/(1-4.75%) $10.35
Class B
Shares of beneficial interest outstanding, $0.0001 par
value, unlimited authorization
(Net Assets $370,928,989) 37,580,543
Net asset value and offering price per share $9.87
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
<TABLE>
<S> <C>
Investment Income
Interest $28,309,597
Dividends 14,393,420
--------------
Total investment income 42,703,017
--------------
Expenses
Investment advisory fee 5,982,415
Distribution fee--Class A 1,178,775
Distribution fee--Class B 3,831,208
Financial agent 256,528
Transfer agent 1,333,163
Printing 135,492
Custodian 88,002
Registration 54,150
Professional 52,219
Trustees 22,674
Miscellaneous 32,923
--------------
Total expenses 12,967,549
--------------
Net investment income 29,735,468
--------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 58,030,503
Net realized loss on foreign currency transactions (63,547)
Net change in unrealized appreciation (depreciation)
on investments (2,222,870)
--------------
Net gain on investments 55,744,086
--------------
Net increase in net assets resulting from operations $85,479,554
==============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Phoenix Income and Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 1997 April 30, 1996
--------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 29,735,468 $ 36,235,156
Net realized gain 57,966,956 74,561,424
Net change in unrealized appreciation (depreciation) (2,222,870) 41,747,703
--------------- ---------------
Increase in net assets resulting from operations 85,479,554 152,544,283
--------------- ---------------
From Distributions to Shareholders
Net investment income--Class A (18,481,864) (21,775,957)
Net investment income--Class B (12,058,093) (13,920,528)
Net realized gains--Class A (39,142,002) (1,790,547)
Net realized gains--Class B (31,924,691) (1,413,822)
--------------- ---------------
Decrease in net assets from distributions to shareholders (101,606,650) (38,900,854)
--------------- ---------------
From Share Transactions
Class A
Proceeds from sales of shares (3,227,767 and 4,186,098 shares, respectively) 32,305,915 40,001,714
Net asset value of shares issued from reinvestment of distributions
(4,817,814 and 1,892,290 shares, respectively) 47,024,383 18,094,132
Cost of shares repurchased (11,192,137 and 12,338,773 shares, respectively) (112,400,718) (118,161,444)
--------------- ---------------
Total (33,070,420) (60,065,598)
--------------- ---------------
Class B
Proceeds from sales of shares (2,616,679 and 3,371,066 shares, respectively) 26,139,385 32,278,099
Net asset value of shares issued from reinvestment of distributions
(3,430,811 and 1,165,398 shares, respectively) 33,531,068 11,169,191
Cost of shares repurchased (7,729,516 and 8,800,122 shares, respectively) (77,728,213) (84,143,012)
--------------- ---------------
Total (18,057,760) (40,695,722)
--------------- ---------------
Decrease in net assets from share transactions (51,128,180) (100,761,320)
--------------- ---------------
Net increase (decrease) in net assets (67,255,276) 12,882,109
Net Assets
Beginning of period 889,622,765 876,740,656
--------------- ---------------
End of period (including undistributed net investment income of $2,320,683 and
$2,996,598, respectively) $ 822,367,489 $ 889,622,765
=============== ===============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
Phoenix Income and Growth Fund
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
Year Ended April 30,
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.08 $8.88 $9.33 $9.92 $9.13
Income from investment operations:
Net investment income 0.40 0.44 0.46 0.45 0.43
Net realized and unrealized gain (loss) 0.66 1.22 0.03 (0.08) 0.88
-------- -------- -------- --------- --------
Total from investment operations 1.06 1.66 0.49 0.37 1.31
-------- -------- -------- --------- --------
Less distributions:
Dividends from net investment income (0.40) (0.42) (0.45) (0.44) (0.44)
Dividends from net realized gains (0.88) (0.04) (0.33) (0.52) (0.08)
In excess of accumulated net realized gains -- -- (0.16) -- --
-------- -------- -------- --------- --------
Total distributions (1.28) (0.46) (0.94) (0.96) (0.52)
-------- -------- -------- --------- --------
Change in net asset value (0.22) 1.20 (0.45) (0.59) 0.79
-------- -------- -------- --------- --------
Net asset value, end of period $9.86 $10.08 $8.88 $9.33 $9.92
======== ======== ======== ========= ========
Total return(2) 10.93% 19.01% 5.95% 3.38% 14.78%
Ratios/supplemental data:
Net assets, end of period (thousands $451,439 $493,454 $490,225 $524,855 $514,803
Ratio to average net assets of:
Expenses 1.18% 1.18% 1.16% 1.23% 1.33%
Net investment income 3.82% 4.39% 5.07% 4.57% 4.60%
Portfolio turnover 111% 107% 90% 88% 44%
Average commission rate paid(3) $0.0515 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------------
Year Ended April 30,
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.09 $8.88 $9.32 $9.92 $9.13
Income from investment operations:
Net investment income 0.31 0.36 0.39 0.38 0.25
Net realized and unrealized gain (loss) 0.67 1.23 0.04 (0.08) 1.00
-------- -------- -------- --------- --------
Total from investment operations 0.98 1.59 0.43 0.30 1.25
-------- -------- -------- --------- --------
Less distributions:
Dividends from net investment income (0.32) (0.34) (0.38) (0.38) (0.38)
Dividends from net realized gains (0.88) (0.04) (0.33) (0.52) (0.08)
In excess of accumulated net realized gains -- -- (0.16) -- --
-------- -------- -------- --------- --------
Total distributions (1.20) (0.38) (0.87) (0.90) (0.46)
-------- -------- -------- --------- --------
Change in net asset value (0.22) 1.21 (0.44) (0.60) 0.79
-------- -------- -------- --------- --------
Net asset value, end of period $9.87 $10.09 $8.88 $9.32 $9.92
======== ======== ======== ========= =========
Total return(2) 10.05% 18.14% 5.23% 2.62% 14.09%
Ratios/supplemental data:
Net assets, end of period (thousands) $370,929 $396,169 $386,515 $378,847 $217,432
Ratio to average net assets of:
Expenses 1.93% 1.93% 1.91% 1.91% 2.03%
Net investment income 3.06% 3.64% 4.32% 3.98% 3.73%
Portfolio turnover 111% 107% 90% 88% 44%
Average commission rate paid(3) $0.0515 N/A N/A N/A N/A
</TABLE>
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in total return calculation.
(3) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
11
<PAGE>
PHOENIX INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Income and Growth Fund (the "Fund") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company. The Fund's
primary investment objective is to invest in a diversified group of
securities that are selected for current yield consistent with preservation
of capital. The Fund offers both Class A and Class B shares. Class A shares
are sold with a front-end sales charge of up to 4.75%. Class B shares are
sold with a contingent deferred sales charge which declines from 5% to zero
depending on the period of time the shares are held. Both classes of shares
have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except that each class bears different distribution
expenses and has exclusive voting rights with respect to its distribution
plan. Income and expenses of the Fund are borne pro rata by the holders of
both classes of shares, except that each class bears distribution expenses
unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
A. Security valuation:
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Debt securities are valued on the basis
of broker quotations or valuations provided by a pricing service which
utilizes information with respect to market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short- term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at their fair value as
determined in good faith by or under the direction of the Trustees.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign
securities, as soon as the Fund is notified. Interest income is recorded on
the accrual basis. Discounts are amortized to income using the effective
interest method. Realized gains and losses are determined on the identified
cost basis.
C. Income taxes:
It is the policy of the Fund to comply with the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders. In
addition, the Fund intends to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Code. Therefore, no
provision for federal income taxes or excise taxes has been made.
D. Distributions to shareholders:
Distributions to shareholders are recorded on the ex-dividend date. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, expiring
capital loss carryforwards, foreign currency gain/loss, partnerships, and
losses deferred due to wash sales and excise tax regulations. Permanent book
and tax basis differences relating to shareholder distributions will result
in reclassifications to paid in capital.
E. Foreign currency translation:
Foreign securities, other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement dates of a portfolio transaction is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates between the date income is
accrued and paid is treated as a gain or loss on foreign currency. The Fund
does not separate that portion of the results of operations arising from
changes in exchange rates and that portion arising from changes in the market
prices of securities.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled
to a fee at an annual rate of 0.70% of the average daily net assets of the
Fund for the first $1.0 billion and 0.65% for the second $1.0 billion.
12
<PAGE>
PHOENIX INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (Continued)
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of $56,591 for Class A shares and
deferred sales charges of $971,935 for Class B shares for the year ended
April 30, 1997. In addition, the Fund pays PEPCO a distribution fee at an
annual rate of 0.25% for Class A shares and 1.00% for Class B shares of the
average daily net assets of the Fund. The Distribution Plan for Class A
shares provides for fees to be paid up to a maximum on an annual basis of
0.30%; the Distributor has voluntarily agreed to limit the fee to 0.25%. The
Distributor has advised the Fund that of the total amount expensed for the
year ended April 30, 1997, $3,126,095 was earned by the Distributor and
$1,883,888 was earned by unaffiliated participants.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the
average daily net assets of the Fund through December 31, 1996, and starting
on January 1, 1997, at an annual rate of 0.05% of average daily net assets up
to $100 million, 0.04% of average daily net assets of $100 million to $300
million, 0.03% of average daily net assets of $300 million through $500
million, and 0.015% of average daily net assets greater than $500 million; a
minimum fee may apply. PEPCO serves as the Fund's Transfer Agent with State
Street Bank and Trust Company as sub-transfer agent. For the year ended April
30, 1997, transfer agent fees were $1,333,163 of which PEPCO retained
$496,785 which is net of fees paid to State Street.
At April 30, 1997, PHL and affiliates held 120 Class A shares and 17 Class B
shares of the Fund with a combined value of $1,348.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
options, for the year ended April 30, 1997 aggregated $883,564,825 and
$1,039,092,454, including $24,846,276 and $40,519,832 of U.S. Government and
Agency securities, respectively.
4. CAPITAL LOSS CARRYOVERS
Under current tax law, capital losses realized after October 31, 1996 may be
deferred and treated as occurring on the first day of the following fiscal
year. For the year ended April 30, 1997, the Fund deferred foreign currency
losses of $38,947.
5. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Fund has recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Fund and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of April 30, 1997,
the Fund decreased capital paid in on shares of beneficial interest by
$99,138, increased undistributed net investment income by $128,574 and
decreased accumulated net realized gains by $29,436.
TAX INFORMATION NOTICE (Unaudited)
For federal income tax purposes, 21.6% of the ordinary income dividends paid
by the Fund qualify for the dividends received deduction of corporate
shareholders.
For the fiscal year ended April 30, 1997, the Fund distributed $43,970,488
of long-term capital gain dividends.
This report is not authorized for distribution to prospective investors in
the Phoenix Income & Growth Fund unless preceded or accompanied by an
effective prospectus which includes information concerning the sales charge,
the Fund's record and other pertinent information.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP (Price Waterhouse logo)
To the Trustees and Shareholders of
Phoenix Income and Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Phoenix Income and Growth Fund (the "Fund") at April 30, 1997,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at April 30, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
June 10, 1997
14
<PAGE>
Phoenix Income and Growth Fund
101 Munson Street
Greenfield, Massachusetts 01301
Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
David R. Pepin, Executive Vice President
William J. Newman, Senior Vice President
John M. Hamlin, Vice President
William E. Keen, III, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
National Securities & Research Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Principal Underwriter
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Phoenix Income and Growth Fund
PO Box 2200
Enfield CT 06083-2200
(Phoenix Duff & Phelps logo)
PDP 743 (6/97)
<PAGE>
October 31, 1997
PHOENIX FUNDS
ANNUAL REPORT
- -- PHOENIX BALANCED FUND
- -- PHOENIX CONVERTIBLE FUND
- -- PHOENIX GROWTH FUND
- -- PHOENIX AGGRESSIVE
GROWTH FUND
- -- PHOENIX HIGH YIELD FUND
- -- PHOENIX U.S. GOVERNMENT
SECURITIES FUND
[Phoenix Logo] PHOENIX
DUFF & PHELPS
<PAGE>
Chairman's
Message
Dear Fellow Shareholder:
We're pleased to provide this consolidated report for Phoenix Series Fund
for the fiscal year ended October 31, 1997. This has been a remarkable time for
the financial markets, particularly equities. For the latest 12 months, the S&P
500 Stock Index rose over 32%, substantially above the historical average return
of 10.7%. In fact, the S&P 500 has had a positive return each year since
1990--the longest bull run in history and one of the most volatile.
As we discussed in our semiannual report, in a volatile market
environment, it's important to keep in mind a few "investment basics." The first
rule of investing is to periodically review your long-term investment plan.
Managing your investments in changing markets can be challenging, and your
adviser knows some time-tested strategies that can help.
Rebalancing your portfolio is one strategy to reduce risk. As the stock
market has moved higher, your equity investments may have increased in value so
that now they represent a higher percentage of your total portfolio than you
originally intended. Your financial adviser may recommend a shift in asset
allocation to bring your portfolio in line with your investment goals and
tolerance for risk.
Diversifying your portfolio is an effective strategy to smooth out the
effects of volatility. Spreading your investments across a broad mix of
securities, such as stocks and bonds, reduces risk. You can also diversify by
investment style. For example, balance an investment in growth stocks with a
fund that focuses on value-oriented stocks.
Dollar-cost averaging is a time-tested investment approach to making
market fluctuations work to your advantage. By using a systematic savings plan,
you buy fewer shares when prices are high and more when prices fall. Periodic
investment plans don't ensure a profit, however, and you should consider your
ability to continue to make purchases through periods of low prices.
During periods of market volatility, your most important asset may be
your financial adviser. A recent study showed that investors who work with a
financial adviser are most likely to maintain a long-term investment plan and as
a result, build assets over time. Our mission is also to help you achieve your
long-term financial goals. We look forward to continuing to serve your
investment needs.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
President and Chairman
Phoenix Funds
<PAGE>
Table of Contents
Equity Funds
The Balanced Fund Series ........................ 2
The Convertible Fund Series ..................... 11
The Growth Fund Series ........................... 19
The Aggressive Growth Fund Series ............... 26
Fixed Income Funds
The High Yield Fund Series ..................... 33
The U.S. Government Securities Fund Series ...... 41
The Money Market Fund Series ..................... 48
Notes to Financial Statements ..................... 55
Fund Features and General Information ............ 60
<PAGE>
PHOENIX BALANCED FUND SERIES
INVESTOR PROFILE
Phoenix Balanced Fund is designed for investors seeking to supplement
current income while maintaining the potential for future growth and
conservation of capital.
INVESTMENT ADVISER'S REPORT
Phoenix Balanced Fund posted double-digit gains over this latest fiscal
reporting period. For the 12 months ended October 31, 1997, the Fund's Class A
shares earned 18.04% and Class B shares returned 17.13%. Over the same reporting
cycle, the Balanced Benchmark provided a total return of 21.16%. All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges. Positive contributors to overall results during the fiscal year
included strong stock selection and modest overweightings in the energy and
financial services groups, which were among the best-performing sectors. With
interest rates trending downward since mid-April, our decision to raise the
average duration of the portfolio's bond holdings also boosted returns.
Performance was held back by some of our technology and consumer cyclical
holdings, and to a lesser degree, exposure to the poorly performing basic
materials group.
OUTLOOK
Looking ahead, our long-term outlook remains constructive. Although
valuation levels have obviously risen for most of the market, the economy
continues to grow at a sustainable pace, inflation remains benign and the
outlook for overall corporate earnings is still positive. Stock selection
continues to focus on large- and mid-cap firms that possess above-average
earnings growth potential, superior management and global reach. The Fund is
currently overweighted in energy, health-care and financial services--sectors we
believe will continue to provide some of the best long-term growth
opportunities. On the fixed-income side, the Fund is well-diversified in a
number of traditional and non-traditional sectors, and our long-term outlook for
the bond market remains positive. The fixed-income segment of the portfolio
currently has an average credit quality of "AA" and a duration of approximately
5.6 years, slightly longer than our benchmark, the Lehman Brothers Aggregate
Bond Index. As of October 31, 1997, the Fund's asset allocation was 55%
equities, 32% fixed-income and 13% cash equivalents.
2
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
[LINE CHART]
(tabular representation of plot points)
BALANCED FUND
Balanced Benchmark S&P 500 Phoenix Balanced Fund
Index** Stock Index -- Class A
10/31/87 10000 10000 9525
10/31/88 11284 11449 9732
10/31/89 13476 14451 11736
10/31/90 13328 13364 12289
10/31/91 16574 17841 15516
10/31/92 18143 19618 17032
10/31/93 20441 22540 18721
10/31/94 20701 23427 18701
10/31/95 24935 29615 20917
10/31/96 28835 36782 23433
10/31/97 34937 48672 27661
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/97
From Inception
7/15/94 to
1 Year 5 Years 10 Years 10/31/97
- --------------------------------------------------------------------------------
Class A with 4.75% sales charge 12.41% 9.12% 10.71% --
- --------------------------------------------------------------------------------
Class A at net asset value 18.04% 10.18% 11.25% --
- --------------------------------------------------------------------------------
Class B with CDSC 13.13% -- -- 12.60%
- --------------------------------------------------------------------------------
Class B at net asset value 17.13% -- -- 13.06%
- --------------------------------------------------------------------------------
Balanced Benchmark** 21.16% 14.00% 13.33% 18.08%***
- --------------------------------------------------------------------------------
S&P 500 Stock Index* 32.33% 19.93% 17.15% 26.62%
- --------------------------------------------------------------------------------
This chart assumes an initial investment of $10,000 made on 10/31/87 for Class A
shares. The total return for Class A shares 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 7/15/94) for Class B shares 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 your
shares, when redeemed, may be worth more or less than the original cost.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance. The S&P 500 performance does not reflect sales
charges.
**The Balanced Benchmark is calculated based upon the performance of the
following indexes: 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.
***Index information from 7/31/94 to 10/31/97.
3
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--18.6%
U.S. Treasury Bonds--2.7%
U.S. Treasury Bonds 6.375%,
8/15/27 .................................... AAA $44,700 $ 46,068,938
------------
U.S. Treasury Notes--10.7%
U.S. Treasury Notes 6.875%,
3/31/00 .................................... AAA 61,000 62,561,600
U.S. Treasury Notes 6%,
8/15/00 .................................... AAA 46,000 46,373,750
U.S. Treasury Notes 5.75%,
10/31/02 .................................... AAA 31,500 31,549,203
U.S. Treasury Notes 6.50%,
10/15/06 .................................... AAA 44,005 45,697,872
------------
186,182,425
------------
Agency Mortgage-Backed Securities--5.2%
FNMA 6.85%, 5/17/20 ........................... AAA 13,600 13,668,000
GNMA 6.50%, '23-26 ........................... AAA 76,494 76,089,771
------------
89,757,771
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $318,536,384) ....................................... 322,009,134
------------
NON-CONVERTIBLE BONDS--7.5%
Asset-Backed Securities--1.8%
AESOP Funding II LLC 144A
97-1, A2 6.40%, 10/20/03 (c) .AAA 8,500 8,561,094
Associates Manufactured
Housing Pass Through 97-2
A6 7.075%, 3/15/28 ........................ AAA 3,000 3,015,000
Fleetwood Credit Corp. 96-B, A
6.90%, 3/15/12 .............................. AAA 3,103 3,143,347
Green Tree Financial Corp.
96-2, M1 7.60%, 4/15/27 ..................... AA- 9,150 9,610,359
Green Tree Financial Corp.
96-4, A6 7.40%, 6/15/27 ..................... AAA 4,500 4,649,063
TLFC Equipment Lease Trust
96-1, A 5.98%, 11/20/02 ..................... AAA 1,845 1,843,695
------------
30,822,558
------------
Non-Agency Mortgage-Backed Securities--5.4%
CS First Boston Mortgage 95-
AE, B 7.182%, 11/25/27 ..................... AA- 6,260 6,322,600
Chase Commercial Mortgage
Securities Corp. 96-2, A1
6.70%, 7/19/03 .............................. AAA 1,045 1,067,101
DLJ Mortgage Acceptance Corp.
96-CF1, A1B 144A 7.58%,
3/13/28 (c) ................................. AAA 4,975 5,303,039
First Union Lehman Bros.
97-C1, B 7.43%, 4/18/07 ..................... Aa(d) 8,532 8,951,934
G.E. Capital Mortgage Services,
Inc. 96-8, M 7.25%, 5/25/26 .AA 5,133 5,199,943
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
Non-Agency Mortgage-Backed Securities--continued
Lehman Large Loan 97-LL1, B
6.95%, 3/12/07 .............................. AA $10,500 $ 10,714,922
Nationslink Funding Corp. 96-1,
B 7.69%, 12/20/05 ........................... AA 5,907 6,245,709
Prudential Home Mortgage
Securities 93-L, 2B3 144A
6.641%, 12/25/23 (c) ........................ A 5,000 4,892,187
Residential Asset Securitization
Trust 96-A8, A1 8%,
12/25/26 .................................... AAA 3,276 3,341,807
Residential Funding Mortgage
Securities I 96-S1, A11
7.10%, 1/25/26 .............................. AAA 7,000 7,096,250
Residential Funding Mortgage
Securities I 96-S4, M1 7.25%,
2/25/26 .................................... AA 5,930 5,965,380
Residential Funding Mortgage
Securities I 96-S8, A4 6.75%,
3/25/11 .................................... AAA 2,670 2,702,969
Resolution Trust Corp. 93-C1, B
8.75%, 5/25/24 .............................. Aa(d) 4,541 4,541,200
Resolution Trust Corp. 95-2, M2
7.009%, 5/25/29 ........................... Aa(d) 4,061 4,102,442
Securitized Asset Sales 93-J 2B
6.807%, 11/28/23 ........................... A 7,252 7,088,594
Structured Asset Securities
Corp. 93-C1, B 6.60%,
10/25/24 .................................... A+ 4,415 4,338,095
Structured Asset Securities
Corp. 95-C4, B 7%, 6/25/26 .................. AA 5,000 5,067,188
------------
92,941,360
------------
Paper & Forest Products--0.2%
Buckeye Cellulose Corp. 9.25%,
9/15/08 .................................... BB- 4,185 4,383,787
------------
Truckers--0.1%
Teekay Shipping Corp. 8.32%,
2/1/08 .................................... BB 1,675 1,725,250
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $126,448,775) ............................................129,872,955
------------
FOREIGN GOVERNMENT SECURITIES--1.9%
Argentina--0.5%
Republic of Argentina Discount
L-GL Euro 6.875%, 3/31/23 (f). BB 5,100 4,035,375
Republic of Argentina Global
Bond 11.375%, 1/30/17 ..................... BB 800 764,000
Republic of Argentina Par L-GP
5.50%, 3/31/23 (f) ........................ BB 6,050 4,076,188
------------
8,875,563
------------
See Notes to Financial Statements
4
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- ------------
Brazil--0.4%
Republic of Brazil Discount Z-L
Euro 6.688%, 4/15/24 (f) ......... BB- $ 5,200 $ 4,043,000
Republic of Brazil Par Z-L Euro
5.25%, 4/15/24 (f) ............... BB- 5,000 3,306,250
-----------
7,349,250
-----------
Colombia--0.5%
Republic of Colombia 7.25%,
2/15/03 ........................ BBB- 8,950 8,685,259
-----------
Mexico--0.5%
United Mexican States Discount
B Euro 6.836%, 12/31/19 (e)(f) . BB 6,900 6,248,812
United Mexican States Series B
Euro 6.25%, 12/31/19 (e) ......... BB 1,500 1,200,000
-----------
7,448,812
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $29,872,715) .............................. 32,358,884
-----------
FOREIGN NON-CONVERTIBLE BONDS--0.2%
Chile--0.2%
Petropower I Funding Trust
144A 7.36%, 2/15/14 (c) ......... BBB 2,900 2,866,592
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $2,900,000) .............................. 2,866,592
-----------
MUNICIPAL BONDS--2.7%
California--1.7%
Kern County Pension Obligation
Taxable 7.26%, 8/15/14 ......... AAA 6,830 7,093,979
Long Beach Pension Obligation
Taxable 6.87%, 9/1/06 ............ AAA 3,090 3,164,284
Orange County Pension Series A
Taxable 7.62%, 9/1/08 ............ AAA 9,545 10,275,479
San Bernardino County
Obligation Revenue Taxable
6.87%, 8/1/08 .................. AAA 1,480 1,518,406
San Bernardino County
Obligation Revenue Taxable
6.94%, 8/1/09 .................. AAA 4,035 4,153,468
Ventura County Pension Taxable
6.58%, 11/1/06 .................. AAA 3,560 3,577,800
-----------
29,783,416
-----------
Florida--0.9%
Miami Beach Special Obligation
Taxable 8.60%, 9/1/21 ............ AAA 11,675 13,041,559
University of Miami
Exchangeable Revenue Series
A Taxable 7.65%, 4/1/20 ......... AAA 1,940 2,007,201
-----------
15,048,760
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- ------------
Virginia--0.1%
Newport News Taxable Series B
7.05%, 1/15/25 .................. AA- $ 1,500 $ 1,490,550
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $44,833,632) ............................ 46,322,726
-----------
CONVERTIBLE BONDS--0.7%
Retail (General Merchandise)--0.7%
Staples, Inc. Subordinate
Debenture Cv. 144A 4.50%,
10/1/00 (c) ..................... BB- 10,000 12,687,500
-----------
TOTAL CONVERTIBLE BONDS
(Identified cost $10,000,000) ............................ 12,687,500
-----------
SHARES
---------
PREFERRED STOCKS--1.1%
REITS--1.1%
Home Ownership Funding 2, Step-down
Pfd. 144A 13.338% (c) ..................... 20,000 19,826,900
-----------
TOTAL PREFERRED STOCKS
(Identified cost $19,371,530) ........................ 19,826,900
-----------
COMMON STOCKS--51.6%
Air Freight--0.2%
Federal Express Corp. (b) ..................... 53,400 3,564,450
-----------
Banks (Major Regional)--4.2%
AmSouth Bancorporation ........................ 64,700 3,109,644
BankBoston Corp. .............................. 60,400 4,896,175
Compass Bankshares, Inc. ..................... 50,100 1,888,144
First Union Corp. ........................... 35,000 1,717,188
Fleet Financial Group, Inc. .................. 80,100 5,151,431
Mellon Bank Corp. ........................... 380,000 19,593,750
NationsBank Corp. ........................... 420,400 25,171,450
Washington Mutual, Inc. ..................... 158,800 10,867,875
-----------
72,395,657
-----------
Banks (Money Center)--1.1%
BankAmerica Corp. ........................... 139,800 9,995,700
Citicorp .................................... 67,100 8,391,694
-----------
18,387,394
-----------
Biotechnology--0.1%
Centocor, Inc. (b) ........................... 35,600 1,566,400
-----------
Broadcasting (Television, Radio, & Cable)--0.1%
Chancellor Media Corp. (b) .................. 28,700 1,574,912
-----------
Chemicals--0.5%
Monsanto Co. ................................. 196,100 8,383,275
-----------
Communications Equipment--0.7%
Ciena Corp. (b) .............................. 66,800 3,674,000
Lucent Technologies, Inc. ..................... 107,000 8,820,812
-----------
12,494,812
-----------
Computers (Hardware)--2.0%
International Business Machines Corp. . 360,100 35,312,306
-----------
See Notes to Financial Statements
5
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
SHARES VALUE
--------- ------------
Computers (Networking)--0.6%
Cisco Systems, Inc. (b) ..................... 131,150 $10,758,392
-----------
Computers (Peripherals)--0.6%
EMC Corp. (b) ................................. 189,900 10,634,400
-----------
Computers (Software & Services)--1.7%
Adaptec, Inc. (b) ........................... 243,900 11,813,906
BMC Software, Inc. (b) ........................ 190,800 11,519,550
Compuware Corp. (b) ........................... 76,300 5,045,338
Edwards (J.D.) & Co. (b) ..................... 46,000 1,564,000
-----------
29,942,794
-----------
Distributors (Food & Health)--1.5%
Cardinal Health, Inc. ........................ 348,200 25,853,850
-----------
Electrical Equipment--1.2%
General Electric Co. ........................ 301,900 19,491,419
Honeywell, Inc. .............................. 10,500 714,656
-----------
20,206,075
-----------
Electronics (Instrumentation)--1.1%
Linear Technology Corp. ..................... 125,900 7,915,962
Perkin Elmer Corp. ........................... 192,700 12,043,750
-----------
19,959,712
-----------
Electronics (Semiconductors)--1.2%
National Semiconductor Corp. (b) ............ 262,800 9,460,800
Texas Instruments, Inc. ..................... 113,500 12,109,031
-----------
21,569,831
-----------
Entertainment--0.6%
Tele-Comm Liberty Media Group (b) ............ 56,100 1,952,981
Walt Disney Co. .............................. 103,900 8,545,775
-----------
10,498,756
-----------
Financial (Diversified)--1.7%
American Express Co. ........................ 48,700 3,798,600
Franklin Resources, Inc. ..................... 138,200 12,420,725
Price (T. Rowe) Associates .................. 209,600 13,886,000
-----------
30,105,325
-----------
Health Care (Diversified)--1.1%
Bristol-Myers Squibb Co. ..................... 215,000 18,866,250
-----------
Health Care (Drugs--Major Pharmaceuticals)--3.7%
Lilly (Eli) & Co. ........................... 271,600 18,163,250
Merck & Co., Inc. ........................... 164,900 14,717,325
Pfizer, Inc. ................................. 382,400 27,054,800
Watson Pharmaceuticals, Inc. (b) ............ 159,400 5,060,950
-----------
64,996,325
-----------
Health Care (Hospital Management)--0.9%
HBO & Co. .................................... 369,900 16,090,650
-----------
Health Care (Medical Products & Supplies)--1.7%
Baxter International, Inc. .................. 202,000 9,342,500
Guidant Corp. ................................. 195,600 11,247,000
Medtronic, Inc. .............................. 188,800 8,212,800
-----------
28,802,300
-----------
Household Furn. & Appliances--0.2%
Sunbeam Corp., Inc. ........................... 79,300 3,593,281
-----------
SHARES VALUE
--------- ------------
Household Products (Non-Durables)--1.6%
Colgate-Palmolive Co. ........................ 207,700 $13,448,575
Procter & Gamble Co. ........................ 202,000 13,736,000
-----------
27,184,575
-----------
Insurance (Multi-Line)--1.6%
Hartford Financial Services Group, Inc. 107,100 8,675,100
Travelers Group, Inc. ........................ 274,200 19,194,000
-----------
27,869,100
-----------
Insurance (Property-Casualty)--1.1%
Allstate Corp. .............................. 230,100 19,083,919
-----------
Investment Banking/Brokerage--0.9%
Merrill Lynch & Co., Inc. ..................... 239,400 16,189,425
-----------
Machinery (Diversified)--0.6%
Deere & Co. ................................. 193,800 10,198,725
-----------
Manufacturing (Diversified)--1.0%
Tyco International Ltd. ..................... 480,000 18,120,000
-----------
Natural Gas--0.4%
Columbia Gas System, Inc. ..................... 88,600 6,401,350
-----------
Oil (Domestic Integrated)--1.1%
Tosco Corp. ................................. 561,200 18,519,600
-----------
Oil & Gas (Drilling & Equipment)--5.4%
BJ Services Co. (b) ........................... 41,400 3,508,650
Diamond Offshore Drilling, Inc. ............... 90,700 5,646,075
ENSCO International, Inc. ..................... 127,800 5,375,588
Halliburton Co. .............................. 299,600 17,863,650
Nabors Industries, Inc. (b) .................. 158,000 6,497,750
Noble Drilling Corp. (b) ..................... 557,300 19,818,981
Rowan Companies, Inc. (b) ..................... 87,300 3,393,788
Schlumberger Ltd. ........................... 205,600 17,990,000
Transocean Offshore, Inc. ..................... 219,200 11,836,800
Veritas DGC, Inc. (b) ........................ 43,000 1,760,313
-----------
93,691,595
-----------
Oil & Gas (Exploration & Production)--0.7%
Apache Corp. ................................. 295,900 12,427,800
-----------
Paper & Forest Products--0.6%
Fort James Corp. .............................. 246,700 9,790,906
-----------
Personal Care--1.1%
Gillette Co. ................................. 206,700 18,409,219
-----------
Publishing (Newspapers)--0.6%
Gannett Co, Inc. .............................. 197,600 10,386,350
-----------
Retail (Building Supplies)--0.6%
Home Depot, Inc. .............................. 180,200 10,023,625
-----------
Retail (Drug Stores)--1.5%
CVS Corp. .................................... 261,700 16,045,481
Rite Aid Corp. .............................. 169,700 10,075,938
-----------
26,121,419
-----------
Retail (Food Chains)--0.6%
Safeway, Inc. (b) ........................... 180,900 10,514,812
-----------
Retail (General Merchandise)--1.2%
Borders Group, Inc. (b) ..................... 206,100 5,345,719
Staples, Inc. (b) ........................... 572,800 15,036,000
-----------
20,381,719
-----------
See Notes to Financial Statements
6
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
SHARES VALUE
--------- ---------------
Telecommunications (Cellular/Wireless)--1.2%
AirTouch Communications, Inc. (b) ......... 518,400 $20,023,200
-------------
Telephone--0.1%
LCI International, Inc. (b) ............... 65,200 1,687,050
-------------
Tobacco--1.8%
Philip Morris Companies, Inc. ............ 768,100 30,435,962
-------------
Waste Management--1.2%
U.S. Filter Corp. (b) ..................... 516,800 20,736,600
-------------
TOTAL COMMON STOCKS
(Identified cost $783,673,628) .................. 893,754,098
-------------
FOREIGN COMMON STOCKS--2.9%
Banks (Major Regional)--0.2%
Banco Rio de La Plata SA ADR
(Argentina) (b) ........................ 355,000 3,727,500
-------------
Household Furn. & Appliances--1.8%
Philips Electronics NV ADR NY
Registered (Netherlands) ............... 400,000 31,350,000
-------------
Oil (Domestic Integrated)--0.4%
YPF Sociedad Anonima Sponsored
ADR Class D (Argentina) ............... 244,400 7,820,800
-------------
Oil (International Integrated)--0.5%
Elf Aquitane Sponsored ADR (France) (b) 134,700 8,317,725
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $50,522,802)................... 51,216,025
-------------
TOTAL LONG-TERM INVESTMENTS--87.2%
(Identified cost $1,386,159,466) ............. 1,510,914,814
-------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
SHORT-TERM OBLIGATIONS--10.2%
Commercial Paper--8.5%
Cargill Inc. 5.65%, 11/3/97 ...... A-1+ $ 3,765 3,763,818
Pitney Bowes Credit Corp.
5.57%, 11/4/97 ............... A-1+ 7,520 7,516,510
International Lease Finance
Corp. 5.50%, 11/5/97 ......... A-1 10,000 9,993,889
Sara Lee Corp. 5.51%, 11/5/97 .A-1+ 4,505 4,502,242
Sara Lee Corp. 5.50%, 11/7/97 .A-1+ 11,000 10,989,917
Ciesco L.P. 5.52%, 11/10/97 ...... A-1+ 2,775 2,771,171
General Re Corp. 5.50%,
11/10/97 ..................... A-1+ 12,895 12,877,269
Kimberly-Clark Corp. 5.57%,
11/10/97 ..................... A-1+ 8,000 7,988,860
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- ----------------------
Commercial Paper--continued
Kellogg Co. 5.52%,
11/13/97 .................. A-1+ $ 5,300 $ 5,290,248
Enterprise Funding Corp.
5.57%, 11/17/97 ............ A-1+ 2,192 2,186,574
Kimberly-Clark Corp.
5.48%, 11/18/97 ............ A-1+ 7,560 7,540,436
Preferred Receivables
Funding Corp. 5.53%,
11/18/97 .................. A-1 7,150 7,131,329
Albertson's Inc. 5.49%,
11/19/97 .................. A-1 7,800 7,778,589
Albertson's Inc. 5.50%,
11/19/97 .................. A-1 10,665 10,635,671
AlliedSignal Inc. 5.53%,
11/19/97 .................. A-1 1,870 1,864,829
Abbott Laboratories,
5.50%, 11/20/97 ............ A-1+ 200 199,419
Receivables Capital Corp.
5.55%, 11/20/97 ............ A-1+ 5,121 5,106,000
Private Export Funding
Corp. 5.48%, 12/3/97 ...... A-1+ 5,000 4,975,644
Private Export Funding
Corp. 5.51%, 12/3/97 ...... A-1+ 15,000 14,926,533
Private Export Funding
Corp. 5.57%, 12/4/97 ...... A-1+ 5,000 4,974,471
Preferred Receivables
Funding Corp. 5.52%,
12/11/97 .................. A-1 5,790 5,753,224
Heinz (H.J.) Co. 5.52%,
12/15/97 .................. A-1 8,540 8,482,383
--------------
147,249,026
--------------
Federal Agency Securities--1.7%
FFCB 5.50%, 11/3/97 ..................... 5,000 5,000,091
FHLMC 5.47%, 11/12/97 ..................... 11,785 11,765,303
FHLMC 5.46%, 11/13/97 ..................... 5,835 5,824,380
FNMA 5.46%, 11/24/97 ..................... 6,170 6,148,477
--------------
28,738,251
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $175,988,440) ..................... 175,987,277
--------------
TOTAL INVESTMENTS--97.4%
(Identified cost $1,562,147,906)..................... 1,686,902,091(a)
Cash and receivables, less liabilities--2.6% ...... 45,698,172
--------------
NET ASSETS--100.0% $1,732,600,263
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $145,763,717 and gross
depreciation of $24,122,475 for income tax purposes. At October 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$1,565,260,849.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities amounted to a value of $54,137,312 or 3.1% of net
assets.
(d) As rated by Moody's, Fitch or Duff & Phelps.
(e) Rights incorporated as a unit.
(f) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
7
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $1,562,147,906) $1,686,902,091
Short-term investments held as collateral for loaned
securities 539,973
Cash 971,706
Receivables
Investment securities sold 48,531,371
Dividends and interest 5,249,560
Fund shares sold 889,210
--------------
Total assets 1,743,083,911
--------------
Liabilities
Payables
Investment securities purchased 5,641,600
Fund shares repurchased 2,408,668
Collateral on securities loaned 539,973
Investment advisory fee 798,944
Distribution fee 397,940
Transfer agent fee 358,400
Financial agent fee 33,481
Trustees' fee 3,636
Accrued expenses 301,006
--------------
Total liabilities 10,483,648
--------------
Net Assets $1,732,600,263
==============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $1,355,489,730
Undistributed net investment income 4,441,011
Accumulated net realized gain 247,915,337
Net unrealized appreciation 124,754,185
--------------
Net Assets $1,732,600,263
==============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,702,384,566) 94,226,804
Net asset value per share $ 18.07
Offering price per share
$18.07/(1-4.75%) $ 18.97
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $30,215,697) 1,675,102
Net asset value and offering price per share $ 18.04
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Interest $ 52,009,109
Dividends 12,458,844
Security lending 844,196
------------
Total investment income 65,312,149
------------
Expenses
Investment advisory fee 9,489,765
Distribution fee--Class A 4,424,138
Distribution fee--Class B 282,982
Financial agent fee 423,306
Transfer agent 2,590,350
Printing 350,915
Custodian 147,813
Professional 35,929
Registration 31,799
Trustees 19,365
Miscellaneous 67,620
------------
Total expenses 17,863,982
------------
Net investment income 47,448,167
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 250,102,191
------------
Net realized gain on written options 59,252
------------
Net change in unrealized appreciation (depreciation)
on investments 404,566
------------
Net gain on investments 250,566,009
------------
Net increase in net assets resulting from
operations $298,014,176
============
See Notes to Financial Statements
8
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 47,448,167 $ 59,439,739
Net realized gain 250,161,443 195,766,527
Net change in unrealized appreciation (depreciation) 404,566 (9,808,717)
-------------- --------------
Increase in net assets resulting from operations 298,014,176 245,397,549
-------------- --------------
From Distributions to Shareholders
Net investment income--Class A (48,278,671) (62,440,078)
Net investment income--Class B (561,622) (463,570)
Net realized gains--Class A (194,038,812) (124,234,079)
Net realized gains--Class B (2,800,356) (996,128)
-------------- --------------
Decrease in net assets from distributions to shareholders (245,679,461) (188,133,855)
-------------- --------------
From Share Transactions
Class A
Proceeds from sales of shares (4,597,468 and 8,800,790 shares, respectively) 78,630,179 149,289,059
Net asset value of shares issued from reinvestment of distributions
(13,753,866 and 10,383,411 shares, respectively) 223,224,574 172,128,352
Cost of shares repurchased (32,162,386 and 48,762,578 shares, respectively) (548,027,979) (825,995,436)
-------------- --------------
Total (246,173,226) (504,578,025)
-------------- --------------
Class B
Proceeds from sales of shares (319,964 and 616,550 shares, respectively) 5,480,183 10,464,882
Net asset value of shares issued from reinvestment of distributions
(189,697 and 80,135, respectively) 3,074,179 1,326,954
Cost of shares repurchased (329,164 and 199,574 shares, respectively) (5,630,228) (3,374,422)
-------------- --------------
Total 2,924,134 8,417,414
-------------- --------------
Decrease in net assets from share transactions (243,249,092) (496,160,611)
-------------- --------------
Net decrease in net assets (190,914,377) (438,896,917)
Net Assets
Beginning of period 1,923,514,640 2,362,411,557
-------------- --------------
End of period (including undistributed net investment income of
$4,441,011 and $4,825,975, respectively) $1,732,600,263 $1,923,514,640
============== ==============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Phoenix Balanced Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
----------------- ---------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.56 $17.04 $15.23 $16.64 $15.92
Income from investment operations
Net investment income 0.48 0.48 0.52 0.48 0.46
Net realized and unrealized gain (loss) 2.38 1.46 1.80 (1.01) 1.08
------------- ------------ ------------ ----------- ------------
Total from investment operations 2.86 1.94 2.32 (0.53) 1.54
------------- ------------ ------------ ----------- ------------
Less distributions
Dividends from net investment income ( 0.48) ( 0.49) (0.51) (0.49) (0.46)
Dividends from net realized gains ( 1.87) ( 0.93) -- (0.39) (0.36)
------------- ------------ ------------ ----------- ------------
Total distributions ( 2.35) ( 1.42) (0.51) (0.88) (0.82)
------------- ------------ ------------ ----------- ------------
Change in net asset value 0.51 0.52 1.81 (1.41) 0.72
------------- ------------ ------------ ----------- ------------
Net asset value, end of period $18.07 $17.56 $17.04 $15.23 $16.64
============= ============ ============ =========== ============
Total return(1) 18.04 % 12.03 % 15.52% (3.28)% 9.92%
Ratios/supplemental data:
Net assets, end of period (thousands) $1,702,385 $1,897,306 $2,345,440 $2,601,808 $3,126,014
Ratio to average net assets of:
Operating expenses 0.98 % 1.01 % 1.02% 0.96% 0.95%
Net investment income 2.65 % 2.74 % 3.27% 3.03% 2.88%
Portfolio turnover 206% 191% 197% 159% 130%
Average commission rate paid(4) $0.0541 $0.0546 N/A N/A N/A
Class B
------------------------------------------------------------
From
Inception
Year Ended October 31, 7/15/94 to
1997 1996 1995 10/31/94
----------- ----------- ------------ -----------------
Net asset value, beginning of period $17.54 $17.01 $15.23 $15.27
Income from investment operations
Net investment income 0.35 0.35 0.40 0.09
Net realized and unrealized gain (loss) 2.37 1.47 1.80 (0.04)
-------- -------- ------- ----------
Total from investment operations 2.72 1.82 2.20 0.05
-------- -------- ------- ----------
Less distributions
Dividends from net investment income (0.35) (0.36) (0.42) (0.09)
Dividends from net realized gains (1.87) (0.93) -- --
-------- -------- ------- ----------
Total distributions (2.22) (1.29) (0.42) (0.09)
-------- -------- ------- ----------
Change in net asset value 0.50 0.53 1.78 (0.04)
-------- -------- ------- ----------
Net asset value, end of period $18.04 $17.54 $17.01 $15.23
======== ======== ======= ==========
Total return(1) 17.13% 11.24% 14.68% 0.34%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $30,216 $26,209 $16,971 $4,629
Ratio to average net assets of:
Operating expenses 1.73% 1.76% 1.78% 1.65%(2)
Net investment income 1.90% 1.96% 2.46% 2.36%(2)
Portfolio turnover 206% 191% 197% 159%
Average commission rate paid(4) $ 0.0541 $0.0546 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
See Notes to Financial Statements
10
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
INVESTOR PROFILE
Phoenix Convertible Fund is designed for an investor seeking to supplement
current income, while maintaining the potential for growth.
INVESTMENT ADVISER'S REPORT
For the 12 months ended October 31, 1997, Phoenix Convertible Fund Class A
and B shares posted strong returns of 17.40% and 16.49%, respectively, compared
with a 19.71% return for CS First Boston Convertible Securities Index. All
performance figures assume reinvestment of dividends and exclude the effect of
sales charges.
Several factors contributed positively to performance during this latest
reporting cycle. Our energy technology holdings, particularly Nabors Industries,
Diamond Offshore Drilling and Key Energy, had very strong results. Other
positive contributors included exposure to the cable industry, which performed
well, and some individual stocks, such as Rite Aid and Home Depot. Performance
was held back slightly by our underweighting in the financial services sector
and the Fund's overall conservative profile in a rapidly rising equity market.
OUTLOOK
Our long-term outlook for the stock market remains constructive. Although
valuation levels have risen for most of the market, the economy continues to
grow at a moderate pace, inflation remains benign and the outlook for overall
corporate earnings is still good. Our security selection continues to focus on
large- and mid-cap firms that possess above-average earnings growth potential,
superior management and positive industry fundamentals. We are currently
emphasizing the energy and health-care sectors, which we believe will continue
to provide some of the best long-term growth opportunities. As always, we remain
committed to the Fund's overall objective of providing low-risk equity exposure.
As of October 31, 1997, the Fund's asset allocation was 71% convertible
securities, 13% common stock, and 16% cash equivalents.
11
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
[LINE CHART]
(tabular representation of plot points)
CS First Boston
Convertible S&P 500 Convertible Fund
Securities Index Stock Index* -- Class A
10/31/87 10000 10000 9525
10/31/88 11461 11449 9881
10/31/89 12899 14451 11544
10/31/90 11411 13364 11815
10/31/91 15281 17841 13702
10/31/92 17643 19618 15588
10/31/93 21975 22540 17550
10/31/94 21583 23427 17290
10/31/95 24920 29615 19270
10/31/96 28934 36782 21881
10/31/97 34635 48672 25687
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/97
From Inception
7/15/94 to
1 Year 5 Years 10 Years 10/31/97
- --------------------------------------------------------------------------------
Class A with 4.75% sales charge 11.82% 9.44% 10.02% --
- --------------------------------------------------------------------------------
Class A at net asset value 17.40% 10.51% 10.55% --
- --------------------------------------------------------------------------------
Class B with CDSC 12.49% -- -- 11.67%
- --------------------------------------------------------------------------------
Class B at net asset value 16.49% -- -- 12.14%
- --------------------------------------------------------------------------------
CS First Boston Convertible
Securities Index** 19.71% 14.44% 13.23% 16.00%***
- --------------------------------------------------------------------------------
S&P 500 Stock Index* 32.33% 19.93% 17.15% 26.62%
- --------------------------------------------------------------------------------
This chart assumes an initial investment of $10,000 made on 10/31/87 for Class A
shares. The total return for Class A shares 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
(from inception 7/15/94) for Class B shares 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 your
shares, when redeemed, may be worth more or less than the original cost.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance. The S&P 500 performance does not reflect sales
charges.
**The CS First Boston Convertible Securities Index is an unmanaged but commonly
used index that tracks the returns of 250 to 300 convertible bonds and
preferreds rated B- or better by Standard & Poor's. The index's performance does
not reflect sales charges.
***Index information from 7/31/94 to 10/31/97.
12
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
CONVERTIBLE BONDS--47.8%
Advertising--1.3%
Interpublic Group Cv. 144A
1.80%, 9/16/04 (c) ..................... NR $ 2,500 $ 2,034,375
Omnicom Group, Inc. Cv. 144A
4.25%, 1/3/07 (c) ..................... A- 510 640,050
-----------
2,674,425
-----------
Communications Equipment--0.7%
BBN Corp. Cv. 6%, 4/1/12 .................. B(d) 1,500 1,447,500
-----------
Computers (Software & Services)--3.0%
Adaptec, Inc. Cv. 4.75%,
2/1/04 ................................. NR 2,000 2,297,500
EMC Corp. Cv. 144A 3.25%,
3/15/02 (c) ........................... BB+ 1,000 1,372,500
System Software Association
14%, 9/15/02 ........................... NR 2,750 2,681,250
-----------
6,351,250
-----------
Electrical Equipment--1.9%
Thermo Electron Corp. Cv.
144A 4.25%, 1/1/03 (c) ............... A- 3,500 3,950,625
-----------
Electronics (Instrumentation)--0.9%
Xilinx, Inc. Cv. 144A 5.25%,
11/1/02 (c) ........................... B 1,850 1,803,750
-----------
Health Care (Hospital Management)--1.0%
Tenet Healthcare Cv. 6%,
12/1/05 .............................. B+ 2,075 2,023,125
-----------
Health Care (Long Term Care)--0.8%
Sunrise Assisted Living Cv.
144A 5.50%, 6/15/02 (c) ............... B- 1,500 1,773,750
-----------
Leisuretime (Products)--6.0%
Family Golf Centers, Inc. Cv.
144A 5.75%, 10/15/04 (c) ............... NR 1,000 972,500
Imax Corp. Cv. 5.75%, 4/1/03 ............ NR 2,500 3,271,875
Time Warner, Inc. Cv. 0%,
12/17/12 .............................. BBB- 3,000 1,188,750
Time Warner, Inc. Cv. 0%,
6/22/13 .............................. BBB- 14,635 7,207,738
-----------
12,640,863
-----------
Lodging--Hotels--0.4%
Marriott International, Inc. Cv.
144A 0%, 3/25/11 (c) .................. BBB 1,390 900,025
-----------
Metals Mining--3.7%
Coeur d'Alene Euro Cv. 6%,
6/10/02 .............................. CCC+ 1,000 858,750
Coeur d'Alene Cv. 144A 7.25%,
10/31/05 (c) ........................... NR 6,000 5,475,000
Stillwater Mining Co. Cv. 7%,
5/1/03 ................................. NR 1,500 1,477,500
-----------
7,811,250
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
Oil (Domestic Integrated)--0.5%
Pennzoil Co. Series US Cv.
4.75%, 10/1/03 ........................ BBB $ 730 $ 1,031,125
-----------
Oil & Gas (Drilling & Equipment)--5.2%
Baker Hughes, Inc. Cv. 0%,
5/5/08 ................................. A 2,100 1,858,500
Halter Marine Group, Inc. Cv.
144A 4.50%, 9/15/04 (c) ............... B+ 2,175 2,745,937
Key Energy Group Cv. 144A
5%, 9/15/04 (c) ........................ NR 2,000 2,037,500
Loews Corp. Cv. 3.125%,
9/15/07 .............................. A+ 2,000 2,277,500
Nabors Industries, Inc. Cv. 5%,
5/15/06 .............................. BBB- 805 1,873,638
-----------
10,793,075
-----------
Oil & Gas (Exploration & Production)--1.3%
Apache Corp. Cv. 144A 6%,
1/15/02 (c) ........................... BBB 2,000 2,750,000
-----------
Professional Services--1.5%
CORESTAFF, Inc. Cv. 2.94%,
8/15/04 .............................. NR 4,000 3,240,000
-----------
Publishing--1.1%
Hollinger, Inc. Yankee Series
US (LYONS) Cv. 0%,
10/5/13 .............................. BB- 6,000 2,280,000
-----------
Publishing (Newspapers)--0.7%
Times Mirror Co. Cv. 144A 0%,
4/15/17 (c) ........................... A 3,500 1,408,750
-----------
Retail (Drug Stores)--2.7%
Rite Aid Corp. Cv. 144A
5.25%, 9/15/02 (c) ..................... BBB 5,175 5,550,187
-----------
Retail (General Merchandise)--6.4%
Home Depot, Inc. Cv. 3.25%,
10/1/01 .............................. A+ 3,125 4,023,437
Office Depot, Inc. Cv. 0%,
11/1/08 .............................. BB- 5,000 3,112,500
Pep Boys Cv. 0%, 9/20/11 .................. BBB 7,775 4,169,344
Saks Holdings, Inc. Cv. 5.50%,
9/15/06 .............................. B 1,250 1,064,062
Sports Authority, Inc. (The) Cv.
144A 5.25%, 9/15/01 (c) ............... B 1,000 923,750
-----------
13,293,093
-----------
Telecommunications (Cellular/Wireless)--1.6%
Itron, Inc. Cv. 6.75%,
3/31/04 .............................. NR 1,000 1,110,000
U.S. Cellular Corp. Cv. 0%,
6/15/15 .............................. BBB- 6,000 2,205,000
-----------
3,315,000
-----------
See Notes to Financial Statements
13
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
Utility--Water--0.9%
Atria Communities, Inc. Cv.
144A 5%, 10/15/02 (c) ......... NR $ 1,000 $ 1,006,250
World Access, Inc. Cv. 144A
4.50%, 10/1/02 (c) ............ CCC+ 1,000 960,000
------------
1,966,250
------------
Waste Management--6.2%
Chemical Waste Management,
Inc. Cv. 0%, 8/16/10 ......... BBB+ 14,150 6,509,000
U.S.A. Waste Services, Inc. Cv.
4%, 2/1/02 .................. BBB- 2,650 2,822,250
WMX Technologies, Inc.
Subordinate Notes Cv. 2%,
1/24/05 ..................... BBB+ 4,485 3,700,125
------------
13,031,375
------------
TOTAL CONVERTIBLE BONDS
(Identified cost $96,840,155)........................... 100,035,418
------------
CONVERTIBLE FOREIGN BONDS--6.8%
Germany--0.6%
Volkswagen Cv. 144A 3%,
1/24/02 (c) .................. A+ 1,000 1,172,500
------------
Ireland--0.8%
Elan International Finance
(LYON) Cv. 0%, 10/16/12 ...... BBB- 1,500 1,629,375
------------
Switzerland--4.4%
Roche Holdings, Inc. Cv. 144A
0%, 5/6/12 (c) ............... NR 11,450 4,980,750
Sandoz Capital BVI Ltd. Cv.
144A 2%, 10/6/02 (c) ......... Aaa(d) 2,830 4,145,950
------------
9,126,700
------------
United Kingdom--1.0%
Grand Metropolitan PLC Cv.
144A 6.50%, 1/31/00 (c) ...... A+ 1,640 2,132,000
------------
TOTAL CONVERTIBLE FOREIGN BONDS
(Identified cost $12,059,638)........................... 14,060,575
------------
SHARES
--------
CONVERTIBLE PREFERRED STOCKS--16.8%
Airlines--1.0%
Trans World Air Cv. Pfd. 8% (b) ............ 72,000 2,106,000
---------
Broadcasting (Television, Radio & Cable)--0.9%
Merrill Lynch & Co. Series Cox
(STRYPES) Cv. Pfd. 6% ..................... 49,100 1,331,837
TCI Pacific Communications Cv. Pfd.
5% ....................................... 5,000 696,875
---------
2,028,712
---------
Computers (Software & Services)--0.4%
Microsoft Corp. Series A Cv. Pfd. $2.196 . 8,500 750,125
---------
SHARES VALUE
--------- -------------
Conglomerates--0.5%
USX Corp. Cv. Pfd. 6.75% ..................... 50,000 $ 1,125,000
-----------
Electric Companies--1.7%
AES Trust I Series A (TECONS) Cv. Pfd.
5.375% .................................... 20,000 1,280,000
Houston Industries, Inc. (ACES) Cv. Pfd.
7% (b) .................................... 40,300 2,206,425
-----------
3,486,425
-----------
Health Care (Diversified)--0.7%
McKesson Corp. Cv. Pfd. 144A $2.50 (c) . 20,500 1,566,969
-----------
Insurance (Multi-Line)--1.9%
St. Paul Capital LLC (MIPS) Cv. Pfd. 6% ...... 56,000 3,920,000
-----------
Metals Mining--0.8%
Coeur d'Alene Cv. Pfd. 7% ..................... 35,000 549,063
Timet Capital Trust I Cv. Pfd. 144A
6.625% (c) ................................. 20,000 1,040,000
-----------
1,589,063
-----------
Natural Gas--0.5%
MCN Energy Group, Inc. (PRIDES) Cv.
Pfd. 8.75% (b) ........................... 34,900 1,057,906
-----------
Oil & Gas (Drilling & Equipment)--1.0%
EVI, Inc. Cv. Pfd. 144A 5%,
11/1/27 (c) .............................. 42,000 2,115,750
-----------
Oil (Domestic Integrated)--4.2%
Lomak Petroleum Cv. Pfd. 144A 5.75% (c). 50,000 2,531,250
Occidental Petroleum Corp. Series 1993
Cv. Pfd. 144A $3.875 (c) .................. 101,000 6,274,625
-----------
8,805,875
-----------
Savings & Loan Companies--0.7%
Ahmanson (H. F.) & Co. Series D Cv.
Pfd. 6% .................................... 12,900 1,560,900
-----------
Telecommunications (Cellular/wireless)--1.9%
Airtouch Communication Series C Cv.
Pfd. 4.25% (b) ........................... 65,000 3,900,000
-----------
Telephone--0.6%
US West, Inc. Series D Cv. Pfd. 4.50% ......... 21,000 1,204,875
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $30,644,298).............................. 35,217,600
-----------
COMMON STOCKS--12.2%
Communications Equipment--0.4%
Ciena Corp. (b) .............................. 19,000 1,045,000
-----------
Electronics (Instrumentation)--1.7%
Perkin Elmer Corp. ........................... 58,500 3,656,267
-----------
Health Care (Diversified)--0.5%
Warner-Lambert Co. ........................... 7,300 1,045,269
-----------
Health Care (Drugs--Major Pharmaceuticals)--1.5%
Lilly (Eli) & Co. ........................... 23,200 1,551,500
Pfizer, Inc. ................................. 21,600 1,528,200
-----------
3,079,700
-----------
See Notes to Financial Statements
14
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
SHARES VALUE
-------- -------------
Metals Mining--1.0%
NS Group, Inc. (b) ..................... 36,500 $ 976,375
Stillwater Mining Co. (b) ............... 49,300 1,022,975
------------
1,999,350
------------
Natural Gas--1.3%
El Paso Natural Gas Co. .................. 46,400 2,781,140
------------
Oil (Domestic Integrated)--0.8%
Forcenergy, Inc. (b) ..................... 12,100 394,763
Houston Exploration Co. (The) (b) ...... 29,000 703,250
Noble Affiliates, Inc. .................. 12,500 513,281
------------
1,611,294
------------
Oil & Gas (Drilling & Equipment)--1.5%
BJ Services Co. (b) ..................... 12,600 1,067,850
Noble Drilling Corp. (b) ............... 30,393 1,080,851
Rowan Companies, Inc. (b) ............... 26,800 1,041,850
------------
3,190,551
------------
Oil & Gas (Exploration & Production)--1.3%
Anadarko Petroleum Corp. ............... 9,000 659,250
Newfield Exploration Co. (b) ............ 15,300 415,013
United Meridian Corp. (b) ............... 46,300 1,571,306
------------
2,645,569
------------
Retail (Drug Stores)--1.1%
Rite Aid Corp. ........................... 39,297 2,333,259
------------
Telecommunications (Long Distance)--1.1%
AT&T Corp. .............................. 45,400 2,221,768
------------
TOTAL COMMON STOCKS
(Identified cost $23,630,452)........................ 25,609,167
------------
FOREIGN COMMON STOCKS--0.5%
Oil & Gas (Drilling & Equipment)--0.5%
Bouygues Offshore SA ADR (France) ...... 44,800 1,086,400
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,154,663) ........................ 1,086,400
------------
TOTAL LONG-TERM INVESTMENTS--84.1%
(Identified cost $164,329,206) ..................... 176,009,160
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- -------- -----------------
SHORT-TERM OBLIGATIONS--11.5%
Commercial Paper--11.5%
Ciesco L.P. 5.70%, 11/3/97 ......... A-1+ $1,005 $ 1,004,682
Preferred Receivables Funding
Corp. 5.55%, 11/4/97 ............ A-1 3,425 3,423,416
Schering Corp. 5.52%, 11/4/97 .A-1+ 3,240 3,238,510
Asset Securitization Cooperative
Corp. 5.60%, 11/6/97 ............ A-1+ 500 499,611
Exxon Imperial U.S., Inc.
5.53%, 11/7/97 .................. A-1+ 3,380 3,376,885
General Electric Capital Corp.
5.53%, 11/17/97 ............... A-1+ 3,365 3,356,730
Kimberly-Clark Corp. 5.48%,
11/20/97 ........................ A-1+ 3,400 3,390,166
Abbott Laboratories 5.50%,
11/26/97 ........................ A-1+ 1,200 1,195,417
DuPont (E.I.) de Nemours &
Co. 5.50%, 12/2/97 ............ A-1+ 1,100 1,094,639
Preferred Receivables Funding
Corp. 5.55%, 12/8/97 ............ A-1 1,115 1,108,512
Preferred Receivables Funding
Corp. 5.55%, 12/18/97 ......... A-1 675 670,109
Corporate Receivables Corp.
5.58%, 1/28/98 .................. A-1 1,590 1,568,805
--------------
23,927,482
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $23,927,267) ........................ 23,927,482
--------------
TOTAL INVESTMENTS--95.6%
(Identified cost $188,256,473)........................ 199,936,642(a)
Cash and receivables, less liabilities--4.4% ......... 9,296,371
--------------
NET ASSETS--100.0% .................................... $209,233,013
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $16,055,557 and gross
depreciation of $4,383,965 for income tax purposes. At October 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$188,265,050.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities amounted to a value of $62,264,743 or 29.8% of net
assets.
(d) As rated by Moody's.
See Notes to Financial Statements
15
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $188,256,473) $199,936,642
Short-term investments held as collateral for loaned
securities 4,200,000
Cash 15,168
Receivables
Investment securities sold 10,387,476
Fund shares sold 1,047,115
Dividends and interest 771,822
------------
Total assets 216,358,223
------------
Liabilities
Payables
Collateral on securities loaned 4,200,000
Investment securities purchased 2,341,734
Fund shares repurchased 317,345
Investment advisory fee 119,007
Distribution fee 51,008
Transfer agent fee 34,580
Financial agent fee 9,192
Trustees' fee 3,636
Accrued expenses 48,708
------------
Total liabilities 7,125,210
------------
Net Assets $209,233,013
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $171,077,545
Undistributed net investment income 422,034
Accumulated net realized gain 26,053,265
Net unrealized appreciation 11,680,169
------------
Net Assets $209,233,013
============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $201,169,632) 9,808,361
Net asset value per share $ 20.51
Offering price per share
$20.51/(1-4.75%) $ 21.53
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $8,063,381) 394,604
Net asset value and offering price per share $ 20.43
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Interest $ 6,784,461
Dividends 2,038,259
Security lending 33,035
-----------
Total investment income 8,855,755
-----------
Expenses
Investment advisory fee 1,361,661
Distribution fee--Class A 505,949
Distribution fee--Class B 71,069
Financial agent fee 98,407
Transfer agent 240,071
Printing 38,324
Custodian 21,258
Professional 19,969
Trustees 19,368
Registration 15,618
Miscellaneous 10,492
-----------
Total expenses 2,402,186
-----------
Net investment income 6,453,569
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 26,029,187
-----------
Net realized gain on foreign currency transactions 1,395
-----------
Net change in unrealized appreciation (depreciation) on
investments 1,273,001
-----------
Net gain on investments 27,303,583
-----------
Net increase in net assets resulting from
operations $33,757,152
===========
See Notes to Financial Statements
16
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 6,453,569 $ 8,303,695
Net realized gain 26,030,582 13,764,508
Net change in unrealized appreciation (depreciation) 1,273,001 6,532,321
------------- -------------
Increase in net assets resulting from operations 33,757,152 28,600,524
------------- -------------
From Distributions to Shareholders
Net investment income--Class A (6,482,244) (8,803,953)
Net investment income--Class B (177,737) (164,704)
Net realized gains--Class A (13,252,457) (6,839,551)
Net realized gains--Class B (398,476) (129,752)
------------- -------------
Decrease in net assets from distributions to shareholders (20,310,914) (15,937,960)
------------- -------------
From Share Transactions
Class A
Proceeds from sales of shares (701,929 and 906,746 shares, respectively) 13,664,448 16,946,702
Net asset value of shares issued from reinvestment of distributions (854,224 and
703,569 shares, respectively) 16,093,284 12,908,037
Cost of shares repurchased (2,904,061 and 2,489,652 shares, respectively) (56,421,242) (46,749,267)
------------- -------------
Total (26,663,510) (16,894,528)
------------- -------------
Class B
Proceeds from sales of shares (131,986 and 125,709 shares, respectively) 2,562,597 2,344,422
Net asset value of shares issued from reinvestment of distributions (21,826 and
11,529 shares, respectively) 410,540 211,321
Cost of shares repurchased (68,900 and 31,996 shares, respectively) (1,343,541) (602,797)
------------- -------------
Total 1,629,596 1,952,946
------------- -------------
Decrease in net assets from share transactions (25,033,914) (14,941,582)
------------- -------------
Net decrease in net assets (11,587,676) (2,279,018)
Net Assets
Beginning of period 220,820,689 223,099,707
------------- -------------
End of period (including undistributed net investment income of
$422,034 and $657,595, respectively) $ 209,233,013 $ 220,820,689
============= =============
</TABLE>
See Notes to Financial Statements
17
<PAGE>
Phoenix Convertible Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
--------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.26 $18.23 $17.56 $19.34 $18.86
Income from investment operations
Net investment income 0.61(4) 0.70(4) 0.87 0.78 0.68
Net realized and unrealized gain (loss) 2.54 1.68 1.04 (1.06) 1.53
----------- ----------- ---------- --------- ----------
Total from investment operations 3.15 2.38 1.91 (0.28) 2.21
----------- ----------- ---------- --------- ----------
Less distributions
Dividends from net investment income (0.64) (0.77) (1.05) (0.69) (0.73)
Dividends from net realized gains (1.26) (0.58) (0.19) (0.81) (1.00)
----------- ----------- ---------- --------- ----------
Total distributions (1.90) (1.35) (1.24) (1.50) (1.73)
----------- ----------- ---------- --------- ----------
Change in net asset value 1.25 1.03 0.67 (1.78) 0.48
----------- ----------- ---------- --------- ----------
Net asset value, end of period $20.51 $19.26 $18.23 $17.56 $19.34
============ ============ ========== ========= ==========
Total return(1) 17.40% 13.55% 11.45% (1.48)% 12.58%
Ratios/supplemental data:
Net assets, end of period (thousands) $201,170 $214,874 $219,384 $226,294 $252,072
Ratio to average net assets of:
Operating expenses 1.12% 1.17% 1.18% 1.14% 1.15%
Net investment income 3.11% 3.75% 4.78% 4.27% 3.70%
Portfolio turnover 152% 141% 79% 91% 94%
Average commission rate paid(5) $0.0661 $0.0619 N/A N/A N/A
Class B
-----------------------------------------------------------------------
From
Inception
Year Ended October 31, 7/15/94 to
1997 1996 1995 10/31/94
--------------- --------------- --------------- -----------------
Net asset value, beginning of period $19.20 $18.17 $17.55 $17.59
Income from investment operations
Net investment income 0.46(4) 0.55(4) 0.70(4) 0.15
Net realized and unrealized gain (loss) 2.52 1.68 1.07 (0.06)
----------- ----------- ----------- ---------
Total from investment operations 2.98 2.23 1.77 0.09
----------- ---------- ----------- ---------
Less distributions
Dividends from net investment income (0.49) (0.62) (0.96) (0.13)
Dividends from net realized gains (1.26) (0.58) (0.19) --
----------- ----------- ----------- ---------
Total distributions (1.75) (1.20) (1.15) (0.13)
----------- ----------- ----------- ---------
Change in net asset value 1.23 1.03 0.62 (0.04)
----------- ----------- ----------- ---------
Net asset value, end of period $20.43 $19.20 $18.17 $17.55
============ ============ =========== =========
Total return(1) 16.49% 12.72% 10.59% 0.49%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $8,063 $5,947 $3,715 $856
Ratio to average net assets of:
Operating expenses 1.87% 1.92% 1.95% 1.83%(2)
Net investment income 2.33% 2.95% 3.92% 3.29%(2)
Portfolio turnover 152% 141% 79% 91%
Average commission rate paid(5) $0.0661 $0.0619 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
See Notes to Financial Statements
18
<PAGE>
PHOENIX GROWTH FUND SERIES
INVESTOR PROFILE
Phoenix Growth Fund is designed for investors seeking long-term capital
appreciation.
INVESTMENT ADVISER'S REPORT
Phoenix Growth Fund provided strong returns over the last 12 months. For
the fiscal year ended October 31, 1997, Class A shares returned 24.81% and Class
B shares earned 23.89%. For the same reporting period, the Standard & Poor's 500
Composite Stock Index returned 32.33%, and the average return for 799 growth
funds was 27.28%, according to Lipper Analytical Services, Inc. All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
Strong stock selection in the energy, consumer cyclical and consumer
staples sectors contributed to performance, particularly positions in Diamond
Offshore Drilling, Philips Electronics, Liberty Media and Cisco Systems.
However, some of our technology and capital goods holdings underperformed
relative to the market. OUTLOOK
The combination of moderate economic growth, low inflation, falling
interest rates and good profit growth should continue to provide a positive
environment for U.S. equities. Our focus continues to be on large- and
mid-capitalization companies with above-average earnings growth potential,
strong management capabilities and global markets.
The Fund is overweighted in the health-care and financial services sectors,
which are expected to provide good long-term growth opportunities. We are also
overweighted in fast growing energy services companies, which we believe are in
the early stages of a sustained secular upswing.
19
<PAGE>
Phoenix Growth Fund Series
- --------------------------------------------------------------------------------
[LINE CHART]
(tabular representation of plot points)
10/31/87 10000 9525
10/31/88 11449 10145
10/31/89 14451 12230
10/31/90 13364 12696
10/31/91 17841 16628
10/31/92 19618 17784
10/31/93 22540 19064
10/31/94 23427 19457
10/31/95 29615 24109
10/31/96 36782 28048
10/31/97 48672 35007
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/97
From Inception
7/15/94 to
1 Year 5 Years 10 Years 10/31/97
- --------------------------------------------------------------------------------
Class A with 4.75% sales charge 18.88% 13.39% 13.40% --
- --------------------------------------------------------------------------------
Class A at net asset value 24.81% 14.51% 13.95% --
- --------------------------------------------------------------------------------
Class B with CDSC 19.89% -- -- 19.53%
- --------------------------------------------------------------------------------
Class B at net asset value 23.89% -- -- 19.93%
- --------------------------------------------------------------------------------
S&P 500 Stock Index* 32.33% 19.93% 17.15% 26.67%
- --------------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 10/31/87 for
Class A shares. The total return for Class A shares 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 dates, fees and sales charges. The total
return (since inception 7/15/94) for Class B shares 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 your shares, when redeemed, may be worth more or less than the original
cost.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of common
stock total return performance. The S&P 500's performance does not reflect sales
charges.
20
<PAGE>
Phoenix Growth Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<S> <C> <C>
COMMON STOCKS--83.5%
Air Freight--0.9%
Federal Express Corp. (b) ...... 340,000 $ 22,695,000
------------
Banks (Major Regional)--5.5%
AmSouth Bancorporation ......... 145,000 6,969,062
BankBoston Corp. ............... 310,000 25,129,375
Compass Bankshares, Inc. ...... 185,100 6,975,956
Fleet Financial Group, Inc. ... 385,000 24,760,313
Mellon Bank Corp. ............... 800,000 41,250,000
Nationsbank Corp. ............... 625,000 37,421,875
------------
142,506,581
------------
Banks (Money Center)--2.9%
BankAmerica Corp. ............... 671,900 48,040,850
Citicorp ........................ 220,000 27,513,750
------------
75,554,600
------------
Broadcasting (Televison, Radio, &
Cable)--0.2%
Chancellor Media Corp. (b) ...... 105,100 5,767,363
------------
Communications Equipment--1.5%
Ciena Corp. (b) ............... 250,000 13,750,000
Lucent Technologies, Inc. ...... 317,100 26,140,931
------------
39,890,931
------------
Computers (Hardware)--4.2%
International Business Machines 1,100,000 107,868,750
------------
Corp.
Computers (Networking)--1.0%
Cisco Systems, Inc. (b) ......... 325,000 26,660,140
------------
Computers (Peripherals)--1.5%
EMC Corp. (b) .................. 700,000 39,200,000
------------
Computers (Software &
Services)--2.7%
Adaptec, Inc. (b) ............... 600,000 29,062,500
BMC Software, Inc. (b) ......... 400,000 24,150,000
Compuware Corp. (b) ............ 225,000 14,878,125
Edwards (J.D.) & Co. (b) ...... 64,500 2,193,000
------------
70,283,625
------------
Chemicals--1.3%
Monsanto Co. .................. 758,400 32,421,600
------------
Chemicals (Specialty)--0.6%
Solutia, Inc. (b) ............... 650,000 14,381,250
------------
Distributors (Food & Health)--1.7%
Cardinal Health, Inc. ......... 575,000 42,693,750
------------
Electrical Equipment--2.0%
General Electric Co. ............ 762,300 49,215,994
Honeywell, Inc. ............... 35,100 2,388,994
------------
51,604,988
------------
Electronics (Instrumentation)--0.5%
Linear Technology Corp. ......... 190,000 11,946,250
------------
Electronics (Semiconductors)--2.6%
National Semiconductor Corp. (b) 1,050,000 37,800,000
Texas Instruments, Inc. ......... 270,000 28,805,625
------------
66,605,625
------------
SHARES VALUE
----------- --------------
Entertainment--1.9%
Tele-Comm Liberty Media Group (b) ....1,400,000 . $ 48,737,500
------------
Financial (Diversified)--2.4%
American Express Co. ............ 505,000 39,390,000
Franklin Resources, Inc. ...... 160,000 14,380,000
Price (T. Rowe) Associates ...... 135,200 8,957,000
------------
62,727,000
------------
Health Care (Diversified)--1.9%
Bristol-Myers Squibb Co. ...... 550,000 48,262,500
------------
Health Care (Drugs--Major
Pharmaceuticals)--7.2%
Lilly (Eli) & Co. ............... 668,400 44,699,250
Merck & Co., Inc. ............... 500,000 44,625,000
Pfizer, Inc. .................. 1,200,000 84,900,000
Watson Pharmaceuticals, Inc. (b) 400,000 12,700,000
------------
186,924,250
------------
Health Care (Hospital
Management)--1.2%
HBO & Co. ..................... 720,000 31,320,000
------------
Health Care (Medical Products &
Supplies)--2.7%
Guidant Corp. .................. 774,300 44,522,250
Medtronic, Inc. ............... 600,000 26,100,000
------------
70,622,250
------------
Household Furn. & Appliances--0.5%
Sunbeam Corp., Inc. ............ 300,000 13,593,750
------------
Household Products
(Non-Durables)--1.0%
Colgate-Palmolive Co. ......... 385,000 24,928,750
------------
Insurance (Multi-Line)--2.9%
Hartford Financial Services Group, 375,000 30,375,000
Inc.
Travelers Group, Inc. ......... 625,000 43,750,000
------------
74,125,000
------------
Insurance (Property-Casualty)--1.8%
Allstate Corp. .................. 550,000 45,615,625
------------
Investment Banking/Brokerage--0.9%
Merrill Lynch & Co., Inc. ...... 360,000 24,345,000
------------
Machinery (Diversified)--1.2%
Deere & Co. ..................... 590,000 31,048,750
------------
Manufacturing (Diversified)--1.5%
Tyco International Ltd. ......... 1,000,000 37,750,000
------------
Oil (Domestic Integrated)--1.5%
Tosco Corp. ..................... 1,140,000 37,620,000
------------
Oil & Gas (Drilling & Equipment)--7.9%
BJ Services Co. (b) ............ 155,000 13,136,250
Diamond Offshore Drilling, Inc. 640,000 39,840,000
Halliburton Co. ............... 800,000 47,700,000
Nabors Industries, Inc. (b) ... 425,000 17,478,125
Schlumberger Ltd. ............... 500,000 43,750,000
Transocean Offshore, Inc. ...... 800,000 43,200,000
------------
205,104,375
------------
Oil & Gas (Refining &
Marketing)--1.1%
Santa Fe International Corp. (b) 560,000 27,545,000
------------
See Notes to Financial Statements
21
<PAGE>
Phoenix Growth Fund Series
- --------------------------------------------------------------------------------
SHARES VALUE
----------- ---------------
Paper & Forest Products--0.9%
Fort James Corp. ..................... 617,000 $ 24,487,188
--------------
Personal Care--1.7%
Gillette Co. ........................ 500,000 44,531,250
--------------
Retail (Building Supplies)--1.7%
Home Depot, Inc. ..................... 780,000 43,387,500
--------------
Retail (Drug Stores)--3.3%
CVS Corp. ........................... 700,000 42,918,750
Rite Aid Corp. ........................ 700,000 41,562,500
--------------
84,481,250
--------------
Retail (Food Chains)--2.2%
Safeway, Inc. (b) ..................... 1,000,000 58,125,000
--------------
Retail (General Merchandise)--1.6%
Borders Group, Inc. (b) ............... 625,000 16,210,938
Staples, Inc. (b) ..................... 1,000,000 26,250,000
--------------
42,460,938
--------------
Telecommunications
(Cellular/Wireless)--2.7%
AirTouch Communications, Inc. (b) ... 1,800,000 69,525,000
--------------
Tobacco--2.7%
Philip Morris Companies, Inc. ......... 1,750,000 69,343,750
--------------
TOTAL COMMON STOCKS
(Identified cost $1,879,996,673) ..................... 2,156,692,079
--------------
FOREIGN COMMON STOCKS--10.6%
Banks (Major Regional)--0.3%
Banco Rio de La Plata SA ADR
(Argentina) (b) ..................... 825,000 8,662,500
--------------
Biotechnology--2.6%
Elan PLC Sponsored ADR (Ireland) (b) 221,200 11,032,350
SmithKline Beecham PLC Sponsored
ADR (United Kingdom) (b) ............ 1,200,000 57,150,000
--------------
68,182,350
--------------
Household Furn. & Appliances--4.5%
Philips Electronics NV ADR NY
Registered (Netherlands) ............ 1,500,000 117,562,500
--------------
Oil (Domestic Integrated)--0.9%
YPF Sociedad Anonima Sponsored ADR
Class D (Argentina) ............... 735,000 23,520,000
--------------
Oil (International Integrated)--2.3%
Elf Aquitane Sponsored ADR (France) (b) 950,000 58,662,500
--------------
VALUE
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $181,238,257) $ 276,589,850
--------------
TOTAL LONG-TERM INVESTMENTS--94.1%
(Identified cost $2,061,234,930) 2,433,281,929
--------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
SHORT-TERM OBLIGATIONS--3.9%
Commercial Paper--3.9%
Associates Corp. of North
America 5.73%, 11/3/97 ......... A-1+ $12,250 12,246,100
Deutsche Bank Financial, Inc.
5.51%, 11/3/97 .................. A-1+ 1,575 1,574,518
Merrill Lynch & Co., Inc.
5.63%, 11/3/97 .................. A-1+ 12,000 11,996,246
Wal-Mart Stores, Inc. 5.55%,
11/4/97 ........................ A-1+ 19,476 19,466,992
Deutsche Bank Financial, Inc.
5.57%, 11/5/97 .................. A-1+ 24,105 24,090,082
AT&T Corp. 5.60%, 11/6/97 ......... A-1+ 20,000 19,984,444
AlliedSignal, Inc. 5.50%,
11/10/97 ........................ A-1 400 399,450
Corporate Asset Funding Co.,
Inc. 5.52%, 11/12/97 ............ A-1+ 1,250 1,247,720
Kellogg Co. 5.56%, 11/21/97 ...... A-1+ 8,000 7,975,289
General Electric Capital Corp.
5.58%, 11/26/97 ............... A-1+ 850 846,623
Campbell Soup Co. 5.52%,
1/9/98 ........................ A-1+ 190 188,042
Beta Finance, Inc. 5.58%,
3/12/98 ........................ A-1+ 1,180 1,156,530
----------
101,172,036
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $101,171,750).............................. 101,172,036
-----------
TOTAL INVESTMENTS--98.0%
(Identified cost $2,162,406,680) ........................... 2,534,453,965(a)
Cash and receivables, less liabilities--2.0% ............... 51,857,022
----------------
NET ASSETS--100.0% ......................................... $ 2,586,310,987
================
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $427,589,665 and gross
depreciation of $56,102,666 for income tax purposes. At October 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$2,162,966,966.
(b) Non-income producing.
22 See Notes to Financial Statements
<PAGE>
Phoenix Growth Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $2,162,406,680) $2,534,453,965
Short-term investments held as collateral for loaned
securities 13,308,400
Cash 3,377
Receivables
Investment securities sold 64,495,306
Fund shares sold 2,418,914
Dividends and interest 1,899,387
--------------
Total assets 2,616,579,349
--------------
Liabilities
Payables
Collateral on securities loaned 13,308,400
Investment securities purchased 10,953,876
Fund shares repurchased 3,049,196
Investment advisory fee 1,494,692
Distribution fee 615,359
Transfer agent fee 409,890
Financial agent fee 44,969
Trustees' fee 3,636
Accrued expenses 388,344
--------------
Total liabilities 30,268,362
--------------
Net Assets $2,586,310,987
==============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $1,716,018,070
Accumulated net realized gain 498,245,632
Net unrealized appreciation 372,047,285
--------------
Net Assets $2,586,310,987
==============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,518,288,840) 90,493,451
Net asset value per share $ 27.83
Offering price per share
$27.83/(1-4.75%) $ 29.22
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $68,022,147) 2,472,870
Net asset value and offering price per share $ 27.51
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Dividends $ 27,254,978
Interest 13,218,976
Security lending 212,693
------------
Total investment income 40,686,647
------------
Expenses
Investment advisory fee 16,439,785
Distribution fee--Class A 6,077,417
Distribution fee--Class B 589,972
Financial agent fee 540,063
Transfer agent 3,475,347
Printing 436,266
Custodian 142,661
Registration 44,577
Professional 35,805
Trustees 19,652
Miscellaneous 56,974
------------
Total expenses 27,858,519
------------
Net investment income 12,828,128
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 499,375,470
------------
Net realized loss on foreign currency transactions (88,868)
------------
Net change in unrealized appreciation (depreciation) on
investments 37,069,225
------------
Net gain on investments 536,355,827
------------
Net increase in net assets resulting from
operations $549,183,955
============
See Notes to Financial Statements
23
<PAGE>
Phoenix Growth Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 12,828,128 $ 18,992,565
Net realized gain 499,286,602 403,021,799
Net change in unrealized appreciation (depreciation) 37,069,225 (60,960,282)
-------------- --------------
Increase in net assets resulting from operations 549,183,955 361,054,082
-------------- --------------
From Distributions to Shareholders
Net investment income--Class A (17,472,939) (22,644,345)
Net investment income--Class B (64,123) (98,685)
Net realized gains--Class A (395,993,712) (149,324,628)
Net realized gains--Class B (8,267,051) (1,479,427)
-------------- --------------
Decrease in net assets from distributions to shareholders (421,797,825) (173,547,085)
-------------- --------------
From Share Transactions
Class A
Proceeds from sales of shares (10,576,129 and 9,835,907 shares, respectively) 270,447,275 250,496,105
Net asset value of shares issued from reinvestment of distributions
(16,237,740 and 6,641,514 shares, respectively) 381,717,419 158,927,977
Cost of shares repurchased (23,676,500 and 21,426,723 shares, respectively) (604,530,141) (546,897,194)
-------------- --------------
Total 47,634,553 (137,473,112)
-------------- --------------
Class B
Proceeds from sales of shares (938,817 and 1,000,869 shares, respectively) 23,549,010 25,339,947
Net asset value of shares issued from reinvestment of distributions
(325,555 and 59,359 shares, respectively) 7,574,359 1,409,232
Cost of shares repurchased (493,546 and 171,122 shares, respectively) (12,629,905) (4,348,366)
-------------- --------------
Total 18,493,464 22,400,813
-------------- --------------
Increase (decrease) in net assets from share transactions 66,128,017 (115,072,299)
-------------- --------------
Net increase in net assets 193,514,147 72,434,698
Net Assets
Beginning of period 2,392,796,840 2,320,362,142
-------------- --------------
End of period (including undistributed net investment income of $0 and
$4,797,802, respectively) $2,586,310,987 $2,392,796,840
============== ==============
</TABLE>
24 See Notes to Financial Statements
<PAGE>
Phoenix Growth Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
---------------------------------------
Year Ended October 31,
1997 1996
------------------- -------------------
<S> <C> <C>
Net asset value, beginning of period $ 26.87 $ 24.92
Income from investment operations(5)
Net investment income 0.14 (4) 0.20 (4)
Net realized and unrealized gain 5.62 3.63
-------------- --------------
Total from investment operations 5.76 3.83
-------------- --------------
Less distributions
Dividends from net investment income ( 0.21) ( 0.25)
Dividends from net realized gains ( 4.59) ( 1.63)
-------------- --------------
Total distributions ( 4.80) ( 1.88)
-------------- --------------
Change in net asset value 0.96 1.95
-------------- --------------
Net asset value, end of period $ 27.83 $ 26.87
============== ==============
Total return(1) 24.81 % 16.34 %
Ratios/supplemental data:
Net assets, end of period (thousands) $2,518,289 $2,347,471
Ratio to average net assets of:
Operating expenses 1.10 % 1.17 %
Net investment income 0.53 % 0.80 %
Portfolio turnover 196% 116%
Average commission rate paid(6) $ 0.0518 $ 0.0534
<CAPTION>
1995 1994 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 21.24 $ 21.53 $ 20.76
Income from investment operations(5)
Net investment income 0.26 0.26 0.32
Net realized and unrealized gain 4.53 0.17 1.15
------------ ------------ ------------
Total from investment operations 4.79 0.43 1.47
------------ ------------ ------------
Less distributions
Dividends from net investment income (0.30) (0.24) (0.32)
Dividends from net realized gains (0.81) (0.48) (0.38)
------------ ------------ ------------
Total distributions (1.11) (0.72) (0.70)
------------ ------------ ------------
Change in net asset value 3.68 (0.29) 0.77
------------ ------------ ------------
Net asset value, end of period $ 24.92 $ 21.24 $ 21.53
============ ============ ============
Total return(1) 23.91% 2.06% 7.20%
Ratios/supplemental data:
Net assets, end of period (thousands) $2,300,251 $2,140,458 $2,563,442
Ratio to average net assets of:
Operating expenses 1.20% 1.19% 1.18%
Net investment income 0.92% 1.22% 1.55%
Portfolio turnover 109% 118% 176%
Average commission rate paid(6) N/A N/A N/A
<CAPTION>
Class B
--------------------------------------------------------------------
From
Inception
Year Ended October 31, 7/15/94 to
1997 1996 1995 10/31/94
------------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.63 $24.74 $ 21.19 $ 20.48
Income from investment operations(5)
Net investment income (loss) (0.06) (4) --(4) --(4) 0.01
Net realized and unrealized gain 5.57 3.61 4.60 0.70
--------- --------- --------- ---------
Total from investment operations 5.51 3.61 4.60 0.71
--------- --------- --------- ---------
Less distributions
Dividends from net investment income ( 0.04) ( 0.09) (0.24) --
Dividends from net realized gains ( 4.59) ( 1.63) (0.81) --
--------- --------- --------- ---------
Total distributions ( 4.63) ( 1.72) (1.05) --
--------- --------- --------- ---------
Change in net asset value 0.88 1.89 3.55 0.71
--------- --------- --------- ---------
Net asset value, end of period $ 27.51 $26.63 $ 24.74 $ 21.19
========= ========= ========= =========
Total return(1) 23.89 % 15.48 % 23.02% 3.47%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 68,022 $ 45,326 $20,111 $ 2,966
Ratio to average net assets of:
Operating expenses 1.85 % 1.93 % 1.97% 1.87%(2)
Net investment income ( 0.25 %) 0.01 % 0.01% 0.32%(2)
Portfolio turnover 196% 116% 109% 118%
Average commission rate paid(6) $ 0.0518 $ 0.0534 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the time of share purchases and redemptions.
(6) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
See Notes to Financial Statements
25
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
INVESTOR PROFILE
Phoenix Aggressive Growth Fund is designed for long-term investors willing
to assume above-average risk in return for above-average capital growth
potential.
INVESTMENT ADVISER'S REPORT
Phoenix Aggressive Growth Fund posted double-digit returns over this latest
reporting cycle. For the 12 months ended October 31, 1997, Class A shares
returned 19.67% and Class B shares earned 18.70%. During the same period, the
Russell 2000 Growth Index returned 21.17%. All performance figures assume
reinvestment of dividends and exclude the effect of sales charges.
Over reasonably long time frames, small and mid-sized companies are
generally able to achieve more rapid growth in sales and net income than larger,
well-established companies. We believe that above-average growth leads to
above-average stock market performance over time. The Russell 2000 Growth Index
is an unmanaged index of companies with characteristics that are more
representative of those the Fund favors than is the S&P 500 Index. As a result,
the Fund's benchmark has been changed from the S&P 500 Index to the Russell 2000
Growth Index.
Over the last year, we have experienced significant swings in world equity
markets. The U.S. market was clearly driven by large-capitalization stocks in
the first six months of the fiscal year. This trend began to slow, allowing our
holdings to post good gains in the past six months.
The Fund has focused on mid-cap stocks, which offer more opportunities for
thematic investing, higher sales and earnings growth rates and more attractive
valuations compared with large-cap stocks. Moreover, mid-cap stocks have less
international earnings exposure than large- cap multinationals, which should
help insulate them against international earnings disappoint-ments given our
concern over ongoing problems in Asia and South America.
Performance was helped by our Energy Technology theme, which is
capitalizing on rising global energy demand. This theme represents companies
that provide productivity-enhancing solutions to the world's exploration and
production companies. Internet Commerce Ignition, a new theme, represents
companies benefiting from the explosive growth of the number of people and
businesses utilizing the Internet for retailing, advertising and
business-to-business commerce. Unfortunately, the Fund's performance was
hindered by its technology and consumer cyclical holdings.
OUTLOOK
We believe the Fund is well-positioned for the current investment climate,
which is characterized by worries of the Asian contagion. Our long-term outlook
remains constructive. Although valuation levels have risen for most of the
market, the economy continues to grow, inflation remains benign and the outlook
for overall corporate earnings is still positive. Our driving investment themes
should serve us well in this climate. As of October 31, the Fund's asset
allocation mix was 96% equities and 4% cash equivalents.
26
<PAGE>
Phoenix Aggressive Growth Fund Series
- --------------------------------------------------------------------------------
[LINE CHART]
(tabular representation of plot points)
S&P 500 Aggressive Russell 2000
Stock Index* Growth Fund - Class A Growth Index
10/31/87 10,000 9,525 9,525
10/31/88 11,449 9,843 9,958
10/31/89 14,451 11,673 11,809
10/31/90 13,364 10,123 10,241
10/31/91 17,841 14,171 14,336
10/31/92 19,618 15,146 15,322
10/31/93 22,540 17,327 17,529
10/31/94 23,427 17,392 17,594
10/31/95 29,615 23,503 23,777
10/31/96 36,782 27,599 27,921
10/31/97 48,672 33,027 33,412
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/97
From Inception
7/21/94 to
1 Year 5 Years 10 Years 10/31/97
- --------------------------------------------------------------------------------
Class A with 4.75% sales charge 13.98% 15.75% 12.82% --
- --------------------------------------------------------------------------------
Class A at net asset value 19.67% 16.87% 13.37% --
- --------------------------------------------------------------------------------
Class B with CDSC 14.70% -- -- 20.95%
- --------------------------------------------------------------------------------
Class B at net asset value 18.70% -- -- 21.34%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index* 21.17% 15.94% 14.11% 19.65%
- --------------------------------------------------------------------------------
S&P 500 Stock Index** 32.33% 19.93% 17.15% 26.91%
- --------------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 10/31/87 for
Class A shares. The total return for Class A shares 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 dates, fees and sales charges. The total
return (since inception 7/21/94) for Class B shares 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 your shares, when redeemed, may be worth more or less than the original
cost.
*The Russell 2000 Growth Index contains those Russell 2000 securities with a
greater-than-average growth orientation. Securities in this index generally have
higher price-to-book and price-earnings ratios than those in the Russell 2000
Value Index.
**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.
27
<PAGE>
Phoenix Aggressive Growth Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
See Notes to Financial Statements
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCKS--90.9%
Airlines--3.7%
AMR Corp. (b) ................................. 35,000 $ 4,075,313
Southwest Airlines Co. ........................ 100,000 3,262,500
U.S. Air Group, Inc. (b) ..................... 50,000 2,343,750
-----------
9,681,563
-----------
Banks (Major Regional)--2.4%
Southtrust Corp. .............................. 50,000 2,400,000
Zions Bancorporation ........................... 100,000 3,887,500
-----------
6,287,500
-----------
Biotechnology--4.2%
BioChem Pharma, Inc. (b) ..................... 100,000 2,506,250
Centocor, Inc. (b) ........................... 50,000 2,200,000
Immunex Corp. (b) .............................. 95,000 6,080,000
-----------
10,786,250
-----------
Broadcasting (Televison, Radio & Cable)--4.1%
Clear Channels Communications, Inc. (b) ...... 60,000 3,960,000
Heftel Broadcasting Corp. Class A (b) ......... 25,000 1,662,500
Univision Communications, Inc. Class A (b) 80,000 4,960,000
-----------
10,582,500
-----------
Communications Equipment--8.3%
Antec Corp. (b) .............................. 76,100 1,198,575
Ciena Corp. (b) .............................. 55,000 3,025,000
Intermedia Communications, Inc. (b) ............ 100,000 4,537,500
Lucent Technologies, Inc. ..................... 50,000 4,121,875
Newbridge Networks Corp. (b) .................. 40,000 2,120,000
Nextel Communications, Inc. Class A (b) ...... 100,000 2,625,000
QUALCOMM, Inc. (b) ........................... 70,000 3,946,250
-----------
21,574,200
-----------
Computers (Hardware)--0.6%
Compaq Computer Corp. (b) ..................... 25,000 1,593,750
-----------
Computers (Networking)--1.5%
Bay Networks, Inc. (b) ........................ 125,000 3,953,125
-----------
Computers (Software & Services)--10.0%
America Online, Inc. (b) ..................... 50,000 3,850,000
Citrix Systems, Inc. (b) ..................... 71,500 5,250,781
Concord Communications, Inc. (b) ............... 57,300 1,017,075
Excite, Inc. (b) .............................. 50,000 1,246,875
Genesys Telecommunications Laboratories,
Inc. (b) .................................... 50,000 1,600,000
Intuit, Inc. (b) .............................. 50,000 1,631,250
Microsoft Corp. (b) ........................... 35,000 4,550,000
Pinnacle Systems, Inc. (b) ..................... 75,000 2,025,000
RWD Technologies, Inc. (b) ..................... 26,200 589,500
Security Dynamics Technologies, Inc. (b) ...... 50,000 1,693,750
Veritas Software Corp. (b) ..................... 60,000 2,497,500
-----------
25,951,731
-----------
Consumer Finance--1.8%
Providian Financial Corp. ..................... 125,000 4,625,000
-----------
Electrical Equipment--1.0%
Westinghouse Electric Corp. .................. 100,000 2,643,750
-----------
SHARES VALUE
--------- ------------
Electronics (Instrumentation)--0.5%
Uniphase Corp. (b) ........................... 20,000 $ 1,342,500
-----------
Financial (Diversified)--2.1%
Amresco, Inc. (b) .............................. 100,000 3,137,500
Paine Webber Group, Inc. ..................... 50,000 2,209,375
-----------
5,346,875
-----------
Footwear--1.1%
Stage Stores, Inc. (b) ........................ 80,000 2,920,000
-----------
Health Care (Diversified)--2.3%
Pharmacopeia, Inc. (b) ........................ 100,000 1,762,500
Warner-Lambert Co. ........................... 30,000 4,295,625
-----------
6,058,125
-----------
Health Care (Drugs--Major Pharmaceuticals)--6.3%
Agouron Pharmaceuticals, Inc. (b) ............ 25,000 1,140,625
Coulter Pharmaceutical, Inc. (b) ............... 125,000 1,796,875
Dura Pharmaceuticals, Inc. (b) ............... 100,000 4,837,500
Guilford Pharmaceuticals, Inc. (b) ............ 50,000 1,218,750
Medicis Pharmaceuticals Corp. Class A (b) . 40,000 1,925,000
Pfizer, Inc. ................................. 75,000 5,306,250
-----------
16,225,000
-----------
Health Care (Hospital Management)--1.5%
HBO & Co. .................................... 90,000 3,915,000
-----------
Health Care (Medical Products & Supplies)--5.1%
Arterial Vascular Engineering, Inc. (b) ...... 70,000 3,718,750
Guidant Corp. ................................. 125,000 7,187,500
IDEC Pharmaceuticals Corp. (b) ............... 60,000 2,287,500
-----------
13,193,750
-----------
Household Furn. & Appliances--3.6%
Pier 1 Imports, Inc. ........................... 240,000 4,380,000
Sunbeam Corp., Inc. ........................... 110,000 4,984,375
-----------
9,364,375
-----------
Insurance (Multi-Line)--0.2%
PAULA Financial (b) ........................... 20,000 505,000
-----------
Investment Banking/Brokerage--1.1%
Merrill Lynch & Co., Inc. ..................... 40,000 2,705,000
-----------
Lodging--Hotels--1.5%
CKE Restaurants, Inc. ........................ 100,000 3,993,750
-----------
Metals Mining--0.5%
NS Group, Inc. (b) ........................... 50,000 1,337,500
-----------
Oil (Domestic Integrated)--1.6%
Brown (Tom), Inc. (b) ........................ 125,000 3,093,750
Forcenergy, Inc. (b) ........................... 30,000 978,750
-----------
4,072,500
-----------
Oil & Gas (Exploration & Production)--2.0%
Ocean Energy, Inc. (b) ........................ 30,000 1,852,500
Santa Fe Energy Resources, Inc. (b) ............ 250,000 3,265,625
-----------
5,118,125
-----------
See Notes to Financial Statements
28
<PAGE>
Phoenix Aggressive Growth Fund Series
- --------------------------------------------------------------------------------
SHARES VALUE
--------- -------------
Oil & Gas (Drilling & Equipment)--12.4%
BJ Services Co. (b) ........................... 70,000 $ 5,932,500
Camco International, Inc. ..................... 50,000 3,612,500
Diamond Offshore Drilling, Inc. ............... 60,000 3,735,000
Falcon Drilling Co., Inc. (b) .................. 100,000 3,637,500
Nabors Industries, Inc. (b) .................. 150,000 6,168,750
Transocean Offshore, Inc. ..................... 50,000 2,700,000
UTI Energy Corp. (b) ........................... 100,000 4,462,500
Veritas DGC, Inc. (b) ........................ 50,000 2,046,875
------------
32,295,625
------------
Publishing--1.5%
HSN, Inc. (b) ................................. 100,000 4,000,000
------------
Retail (General Merchandise)--1.1%
A.C. Moore Arts & Crafts, Inc. (b) ............ 14,000 212,625
Abercrombie & Fitch Co. Class A (b) ............ 100,000 2,600,000
------------
2,812,625
------------
Services (Commercial & Consumer)--0.9%
ABR Information Services, Inc. (b) ............ 100,000 2,350,000
------------
Telecommunications (Cellular/Wireless)--2.4%
AirTouch Communications, Inc. (b) ............ 100,000 3,862,500
Qwest Communications International, Inc. (b) . 40,000 2,470,000
------------
6,332,500
------------
Telecommunications (Long Distance)--1.6%
Star Telecommunication, Inc. (b) ............... 175,000 4,046,875
------------
Telephone--4.0%
ICG Communications, Inc. (b) .................. 150,000 3,450,000
Pacific Gateway Exchange, Inc. (b) ............ 55,000 2,103,750
Teleport Communications Group, Inc.
Class A (b) ................................. 100,000 4,837,500
------------
10,391,250
------------
TOTAL COMMON STOCKS
(Identified cost $221,798,758) ........................ 236,005,744
------------
SHARES VALUE
--------- -------------
FOREIGN COMMON STOCKS--4.7%
Biotechnology--1.9%
Elan PLC Sponsored ADR (Ireland) (b) ......... 100,000 $ 4,987,500
------------
Communications Equipment--0.7%
RSL Communications, Ltd. (Bermuda) (b) ......... 76,000 1,786,000
------------
Computers (Software & Services)--1.0%
Check Point Software Technologies Ltd.
(Israel) (b) .............................. 62,200 2,651,275
------------
Oil & Gas (Drilling & Equipment)--1.1%
Coflexip SA Sponsored ADR (France) ............ 50,000 2,750,000
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $11,387,942) .................. 12,174,775
------------
TOTAL LONG-TERM INVESTMENTS--95.6%
(Identified cost $233,186,700) ............... 248,180,519
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
SHORT-TERM OBLIGATIONS--4.0%
Commercial Paper--4.0%
Associates Corporation of
North America 5.73%,
11/3/97 (b) .............................. A-1+ $10,270 10,266,730
-------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $10,266,730) ............... 10,266,730
-------------
TOTAL INVESTMENTS--99.6%
(Identified cost $243,453,430) ............... 258,447,249(a)
Cash and receivables, less liabilities--0.4% 1,166,276
----------------
NET ASSETS--100.0% ........................... $ 259,613,525
================
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $25,671,323 and gross
depreciation of $11,061,919 for income tax purposes. At October 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$243,837,845.
(b) Non-income producing.
See Notes to Financial Statements
29
<PAGE>
Phoenix Aggressive Growth Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $243,453,430) $258,447,249
Short-term investments held as collateral for loaned
securities 20,087,632
Cash 5,469
Receivables
Investment securities sold 1,428,817
Fund shares sold 222,606
Dividends and interest 10,450
------------
Total assets 280,202,223
------------
Liabilities
Payables
Collateral on securities loaned 20,087,632
Fund shares repurchased 147,605
Investment advisory fee 164,760
Transfer agent fee 39,230
Distribution fee 68,315
Financial agent fee 11,283
Trustees' fee 3,636
Accrued expenses 66,237
------------
Total liabilities 20,588,698
------------
Net Assets $259,613,525
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $192,874,610
Accumulated net realized gain 51,745,096
Net unrealized appreciation 14,993,819
------------
Net Assets $259,613,525
============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $246,002,105) 14,303,846
Net asset value per share $ 17.20
Offering price per share
$17.20/(1-4.75%) $ 18.06
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $13,611,420) 812,371
Net asset value and offering price per share $ 16.76
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Dividends $ 855,997
Interest 679,291
Security lending 136,950
------------
Total investment income 1,672,238
------------
Expenses
Investment advisory fee 1,735,384
Distribution fee--Class A 588,719
Distribution fee--Class B 124,245
Financial agent fee 113,460
Transfer agent 357,665
Printing 56,110
Registration 30,447
Professional 22,459
Custodian 21,651
Trustees 19,598
Miscellaneous 8,070
------------
Total expenses 3,077,808
------------
Net investment loss (1,405,570)
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 54,155,507
------------
Net change in unrealized appreciation (depreciation) on
investments (8,722,108)
------------
Net gain on investments 45,433,399
------------
Net increase in net assets resulting from
operations $ 44,027,829
============
30 See Notes to Financial Statements
<PAGE>
Phoenix Aggressive Growth Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment loss $ (1,405,570) $ (1,821,362)
Net realized gain 54,155,507 39,039,816
Net change in unrealized appreciation (depreciation) (8,722,108) (4,196,804)
-------------- --------------
Increase in net assets resulting from operations 44,027,829 33,021,650
-------------- --------------
From Distributions to Shareholders
Net investment income--Class A -- (230,621)
Net investment income--Class B -- --
Net realized gains--Class A (33,833,409) (24,390,155)
Net realized gains--Class B (1,733,847) (370,937)
-------------- --------------
Decrease in net assets from distributions to shareholders (35,567,256) (24,991,713)
-------------- --------------
From Share Transactions
Class A
Proceeds from sales of shares (4,764,191 and 20,593,244 shares, respectively) 76,429,442 339,736,195
Net asset value of shares issued from reinvestment of distributions
(2,152,050 and 1,566,906 shares, respectively) 31,462,960 22,579,121
Cost of shares repurchased (6,476,002 and 19,216,354 shares, respectively) (103,491,166) (316,940,541)
-------------- --------------
Total 4,401,236 45,374,775
-------------- --------------
Class B
Proceeds from sales of shares (787,300 and 739,574 shares, respectively) 12,236,599 12,090,017
Net asset value of shares issued from reinvestment of distributions
(104,653 and 23,041 shares, respectively) 1,500,729 329,024
Cost of shares repurchased (711,043 and 277,273 shares, respectively) (10,939,843) (4,550,009)
-------------- --------------
Total 2,797,485 7,869,032
-------------- --------------
Increase in net assets from share transactions 7,198,721 53,243,807
-------------- --------------
Net increase in net assets 15,659,294 61,273,744
Net Assets
Beginning of period 243,954,231 182,680,487
-------------- --------------
End of period (including undistributed net investment income of $0 and
$0, respectively) $ 259,613,525 $ 243,954,231
============== ==============
</TABLE>
See Notes to Financial Statements
31
<PAGE>
Phoenix Aggressive Growth Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
----------------- ------------------ --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.84 $ 16.51 $ 13.33 $ 14.56 $ 13.56
Income from investment operations(5)
Net investment income (loss) ( 0.08)(4) ( 0.13)(4) 0.06(4) 0.27 0.22
Net realized and unrealized gain (loss) 2.95 2.64 4.21 (0.21) 1.62
--------- ------------ ----------- ---------- ----------
Total from investment operations 2.87 2.51 4.27 0.06 1.84
--------- ------------ ----------- ---------- ----------
Less distributions
Dividends from net investment income -- ( 0.02) (0.19) (0.22) (0.23)
Dividends from net realized gains ( 2.51) ( 2.16) (0.90) (1.07) (0.61)
--------- ------------ ----------- ---------- ----------
Total distributions ( 2.51) ( 2.18) (1.09) (1.29) (0.84)
--------- ------------ ----------- ---------- ----------
Change in net asset value 0.36 0.33 3.18 (1.23) 1.00
--------- ------------ ----------- ---------- ----------
Net asset value, end of period $ 17.20 $ 16.84 $ 16.51 $ 13.33 $ 14.56
========= ============ =========== ========== ==========
Total return(1) 19.67 % 17.43 % 35.14% 0.37% 14.15%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 246,002 $233,488 $180,288 $140,137 $143,035
Ratio to average net assets of:
Operating expenses 1.20 % 1.20 % 1.29% 1.26% 1.17%
Net investment income (loss) ( 0.53)% ( 0.81)% 0.43% 1.97% 1.58%
Portfolio turnover 518 % 401 % 331% 306% 192%
Average commission rate paid(6) $ 0.0586 $ 0.0655 N/A N/A N/A
<CAPTION>
Class B
------------------------------------------------------------------------------
Year Ended October 31,
From
Inception
7/21/94 to
1997 1996 1995 10/31/94
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.57 $ 16.38 $ 13.31 $ 13.09
Income from investment operations(5)
Net investment income (loss) ( 0.20)(4) ( 0.25)(4) (0.12) (4) 0.02
Net realized and unrealized gain 2.90 2.60 4.26 0.20
--------- --------- --------- ---------
Total from investment operations 2.70 2.35 4.14 0.22
--------- --------- --------- ---------
Less distributions
Dividends from net investment income -- -- (0.17) --
Dividends from net realized gains ( 2.51) ( 2.16) (0.90) --
--------- --------- --------- ---------
Total distributions ( 2.51) ( 2.16) (1.07) --
--------- --------- --------- ---------
Change in net asset value 0.19 0.19 3.07 0.22
--------- --------- --------- ---------
Net asset value, end of period $ 16.76 $ 16.57 $ 16.38 $ 13.31
========= ========= ========= =========
Total return(1) 18.70 % 16.52 % 34.15 % 1.68%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 13,611 $ 10,466 $ 2,393 $ 330
Ratio to average net assets of:
Operating expenses 1.96 % 1.95 % 2.04 % 1.81%(2)
Net investment income (loss) ( 1.28)% ( 1.57)% (0.83)% 1.45%(2)
Portfolio turnover 518 % 401 % 331 % 306%
Average commission rate paid(6) $ 0.0586 $ 0.0655 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
(6) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
32 See Notes to Financial Statements
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
INVESTOR PROFILE
Phoenix High Yield Fund is appropriate for aggressive investors seeking
high current income as well as the potential for long-term capital
appreciation. The Fund invests in corporate and government securities issued by
the U.S. and emerging-market countries. Foreign investing involves special
risks, such as currency fluctuation, less public disclosure and economic and
political risks.
INVESTMENT ADVISER'S REPORT
The Phoenix High Yield Fund continued to provide investors with
above-average returns. For the 12 months ended October 31, 1997, Class A shares
provided a total return of 15.03% and Class B shares earned 14.18% compared with
a return of 14.75% for CS First Boston High Yield Index. All performance figures
assume reinvestment of dividends and exclude the effect of sales charges.
The most significant contributor to the Fund's strong performance over the
last 12 months was our shift into international high-yield issues, particularly
companies domiciled in Europe. Our overweighting in high-yield issues in the oil
and gas sector as well as telecommunications and media companies also helped
performance.
OUTLOOK
We will continue, selectively, to take advantage of undervalued credits
within the high-yield sector. Areas we believe will provide good returns for the
portfolio include international high-yield issues. The Fund is well-diversified
by country, and we believe the outlook for global high-yield issues remains
positive. We also believe such domestic industries as telecommunications and
media, which are currently out of favor, offer good long-term appreciation
potential.
33
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
[LINE CHART]
(tabular representation of plot points)
CS First Boston High Yield Fund
High Yield Index* - Class A
10/31/87 10000 9525
10/31/88 11992.6 11137
10/31/89 12173.5 11208
10/31/90 11091 10649
10/31/91 16094.8 13500
10/31/92 18572.8 15697
10/31/93 22109.2 19131
10/31/94 22474.1 18640
10/31/95 25899.3 20725
10/31/96 28611.3 24031
10/31/97 32830.8 27644
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/97
From Inception
2/16/94 to
1 Year 5 Years 10 Years 10/31/97
- -------------------------------------------------------------------------------
Class A with 4.75% sales charge 9.57% 10.89% 10.75 % --
- -------------------------------------------------------------------------------
Class A at net asset value 15.03% 11.98% 11.29% --
- -------------------------------------------------------------------------------
Class B with CDSC 10.18% -- -- 7.74%
- -------------------------------------------------------------------------------
Class B at net asset value 14.18% -- -- 8.16%
- -------------------------------------------------------------------------------
CS First Boston High Yield Index* 14.75% 12.07% 12.62% 10.03%**
- -------------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 10/31/87 for
Class A shares. The total return for Class A shares 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 dates, fees and sales charges. The total
return (since inception 2/16/94) for Class B shares 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 your shares, when redeemed, may be worth more or less than the original
cost.
*The CS First Boston High Yield Index is an unmanaged but commonly used index
that tracks the returns of all new publicly offered debt of more than $75
million rated below BBB or BBB/BB+. The index's performance does not reflect
sales charges.
**Index information from 2/28/94 to 10/31/97.
34
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--3.5%
U.S. Treasury Notes--3.5%
U.S. Treasury Notes 6.125%,
8/15/07 .................................... Aaa $20,000 $20,437,500
-----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $20,125,781) .......................................... 20,437,500
-----------
NON-CONVERTIBLE BONDS--60.7%
Asset-Backed Securities--0.5%
DLJ Mortgage Acceptance
Corp. 94-MF4, B2 8.50%,
4/18/01 .................................... BB(c) 3,000 2,920,313
-----------
Building & Materials--0.8%
Neenah Corp. Series B
11.125%, 5/1/07 ........................... B 4,120 4,449,600
-----------
Containers (Metal & Glass)--1.8%
Portola Packaging, Inc. Sr.
Note 10.75%, 10/1/05 ........................ B 10,000 10,500,000
-----------
Electronics--1.2%
Anacomp, Inc. 10.875%,
4/1/04 .................................... NR 7,000 7,262,500
-----------
Health Care--0.7%
Integrated Health Services
144A 9.25%, 1/15/08 (b) ..................... B 4,000 4,090,000
-----------
Industrial--1.0%
Polymer Group, Inc. 9%,
7/1/07 .................................... NR 6,000 6,075,000
-----------
Leasing/Rental--0.6%
Williams Scotsman, Inc.
144A 9.875%, 6/1/07 (b) ..................... B(c) 3,700 3,801,750
-----------
Leisure Time (Products)--0.9%
Autotote Corp. 144A
10.875%, 8/1/04 (b) ........................ B 5,000 5,175,000
-----------
Natural Gas--1.2%
Forcenergy, Inc. 8.50%,
2/15/07 .................................... B 7,000 7,017,500
-----------
Non-Agency Mortgage-Backed Securities--3.9%
First Chicago/Lennar Trust
97-CHL1, E 144A 8.11%,
2/28/11 (b) ................................. B(c) 10,000 8,381,250
Fund America Structured
Trust 96-1, A 144A 0%,
10/25/30 (b) .............................. Baa 2,313 1,810,300
Ryland Mortgage Security
Corp. III 92-A, 1C 8.27%,
3/29/30 .................................... BB(c) 1,000 815,781
SML, Inc. 94-C1, B2 10.30%,
9/20/99 .................................... BB(c) 5,000 4,950,000
Salomon Brothers Mortgage
VII 95, C1 144A 6.801%,
9/30/08 (b) ................................. B 8,220 6,576,169
-----------
22,533,500
-----------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
Oil--8.4%
Benton Oil & Gas Co.
11.625%, 5/1/03 (f) ........................ B $ 9,800 $10,927,000
Benton Oil & Gas Co. 144A
9.375%, 11/1/07 (b) ........................ B 2,750 2,770,625
Flores & Rucks, Inc. 9.75%,
10/1/06 (f) ................................. B 5,000 5,350,000
Lomak Petroleum, Inc.
8.75%, 1/15/07 .............................. B 2,000 2,015,000
Nuevo Energy Co. 9.50%,
4/15/06 .................................... B 13,500 14,242,500
Ocean Energy, Inc. 8.875%,
7/15/07 .................................... NR 7,000 7,245,000
Snyder Oil Corp. 8.75%,
6/15/07 .................................... B 6,750 6,817,500
-----------
49,367,625
-----------
-----------
Oil Service & Equipment--1.5%
Bellwether Exploration Co.
10.875%, 4/1/07 ..................... B 8,000 8,680,000
-----------
Paper & Forest Products--4.1%
Buckeye Cellulose Corp.
9.25%, 9/15/08 (f) .................. Ba 5,500 5,761,250
Riverwood International Corp.
144A 10.625%, 8/1/07 (b) .B 6,900 7,245,000
Riverwood International Corp.
10.875%, 4/1/08 (f) .................. Caa 6,000 5,940,000
SD Warren Co. Series B Sr.
Subordinate Notes 12%,
12/15/04 .............................. B 4,250 4,791,875
-----------
23,738,125
-----------
Personal Care--1.4%
Revlon Worldwide Corp.
Series B 0%, 3/15/01 .................. B 12,000 8,340,000
-----------
Publishing, Broadcasting, Printing & Cable--16.2%
Cablevision Systems Corp.
9.875%, 4/1/23 (f) .................. B 6,750 7,155,000
Comcast Cellular 144A
9.50%, 5/1/07 (b) ..................... Ba 12,500 12,937,500
Fox Kids Worldwide 144A
0%, 11/1/07 (b) (e) .................. B 43,000 24,402,500
Fox/Liberty Networks LLC
144A 0%, 8/15/07 (b) (e) ............ B 13,000 8,255,000
Fox/Liberty Networks LLC
144A 8.875%, 8/15/07 (b) .B 5,000 5,012,500
Hollinger International Publishing,
Inc. 9.25%, 3/15/07 .................. B 3,400 3,502,000
ITT Publimedia 144A
9.375%, 9/15/07 (b) .................. B 14.375 14,698,437
Outdoor Communications
9.25%, 8/15/07 ........................ B 6,500 6,500,000
Poland Communications, Inc.
Series B 9.875%, 11/1/03 .B 12,200 12,261,000
-----------
94,723,937
===========
See Notes to Financial Statements 35
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- --------------
Retail (General Merchandise)--0.5%
Scotty's, Inc. Series A Debentures
11.25%, 12/15/15 ............ NR $ 3,018 $ 2,882,190
------------
Telecommunications--13.9%
Brooks Fiber Properties 0%,
3/1/06 (e) .................. NR 8,500 6,927,500
Call-Net Enterprises 0%,
12/1/04 (e) .................. B 7,000 6,282,500
CommNet Cellular
Subordinate Notes 11.25%,
7/1/05 ........................ Caa 4,000 4,620,000
Hermes Europe Railtel B.V.
144A 11.50%, 8/15/07 (b) B 6,500 7,052,500
InterAmericas
Communications Corp. Unit
144A 14%, 10/27/07
(b) (h) ..................... NR 11,990 12,109,900
NTL, Inc. 10%, 2/15/07 (f) ...... B 8,000 8,280,000
NTL, Inc. Series B 0%,
2/1/06 (e) .................. B 7,000 5,145,000
Orion Network Systems 0%,
1/15/07 (e) .................. B 8,000 5,720,000
RCN Corp. 144A 0%,
10/15/07 (b) (e) ............ B 17,250 10,048,125
Sprint Spectrum L. P. 0%,
8/15/06 (e) (f) ............... B 19,950 15,261,750
------------
81,447,275
------------
Truckers & Marine--1.2%
Global Ocean Carriers 144A
10.25%, 7/15/07 (b) ......... B 7,000 6,982,500
------------
Waste Management--0.9%
Allied Waste Industries 144A
0%, 6/1/07 (b) (e) ............ B 7,500 5,062,500
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $345,679,464) ........................... 355,049,315
------------
FOREIGN GOVERNMENT SECURITIES--5.2%
Dominican Republic--0.3%
Dominican Republic 6.875%,
8/30/24 (e) .................. B(c) 2,500 1,778,125
------------
Mexico--0.9%
United Mexican States Global
Bond 11.50%, 5/15/26 ......... Ba 5,000 5,281,250
------------
Russia--2.0%
Russia Principal Loans WI
6.719%, 12/15/20 (g) ......... NR 20,000 11,800,000
------------
Venezuela--2.0%
Banco Central Venezuela
NMB B-NP 6.75%,
12/18/05 (e) .................. Ba 1,000 887,500
Republic of Venezuela Series A
NMB 6.875%, 12/18/05 (e) .Ba 4,000 3,550,000
Republic of Venezuela 144A
9.125%, 6/18/07 (b) ......... Ba 8,100 7,330,500
------------
11,768,000
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $33,702,170) ........................... 30,627,375
------------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
FOREIGN NON-CONVERTIBLE BONDS--25.2%
Argentina--2.5%
Bridas Corp. Yankee, Sr.
Notes, 12.50%, 11/15/99 ......... Ba $ 6,500 $ 6,987,500
CEI Citicorp Holdings 144A
9.75%, 2/14/07 (b) ............ BB(c) 8,500 7,735,000
-----------
14,722,500
-----------
Bahamas--1.1%
Sun International Hotels 9%,
3/15/07 (f) ..................... Ba 6,000 6,150,000
-----------
Bermuda--1.4%
AES China Generating Co.
Yankee 10.125%, 12/15/06 .Ba 8,220 8,261,100
-----------
Brazil--6.5%
Arisco Prod Alimenticios
144A 10.75%, 5/22/05 (b) .NR 3,750 3,468,750
Globo Communicacoes
Participacoes 144A
10.50%, 12/20/06 (b) ............ B 10,000 9,400,000
Localiza Rent a Car 144A
10.25%, 10/1/05 (b) ............ B 8,000 7,200,000
Paging Network Do Brasil
144A 13.50%, 6/6/05 (b) ......... NR 5,000 4,750,000
RBS Participacoes SA 144A
11%, 4/1/07 (b) ............... BB(c) 5,000 4,925,000
Tevecap SA 12.625%,
11/26/04 ........................ NR 8,225 8,389,500
-----------
38,133,250
-----------
Canada--0.8%
Metronet Communications Units
144A 12%, 8/15/07 (b) (h) ...... NR 4,000 4,510,000
-----------
China--0.3%
Greater Beijing 144A 9.50%,
6/15/07 (b) ..................... Ba 1,650 1,501,500
-----------
Germany--1.8%
Kabelmedia Holding 0%,
8/1/06 (e) ..................... B 15,000 10,612,500
-----------
Greece--2.0%
Antenna TV SA 144A 9%,
8/1/07 (b) ..................... Ba 4,250 4,228,750
Fage Dairy Industries SA 9%,
2/1/07 ........................ B 8,000 7,720,000
-----------
11,948,750
-----------
Hong Kong--0.3%
Road King Infrastructure
144A 9.50%, 7/15/07 (b) ......... BB(c) 2,000 1,860,000
-----------
Mexico--4.7%
Copamex Industries SA 144A
11.375%, 4/30/04 (b) ............ B 8,000 8,560,000
Hylsa SA de C.V. 144A
9.25%, 9/15/07 (b) ............ BB(c) 5,000 4,912,500
Ispat Mexicana SA Euro
10.375%, 3/15/01 ............... NR 12,000 12,000,000
Petroleos Mexicanos 144A
9.50%, 9/15/27 (b) ............ NR 2,000 1,820,000
-----------
27,292,500
-----------
See Notes to Financial Statements
36
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
Netherlands--1.0%
Netia Holdings 144A 0%,
11/1/07 (b) (e) ............... NR $ 9,750 $ 5,874,375
------------
United Kingdom--2.3%
Diamond Cable Co. 0%,
2/15/07 (e) .................. B 15,000 9,787,500
Telewest Communications
PLC 0%, 10/1/07 (e) ......... B 5,000 3,737,500
------------
13,525,000
------------
Venezuela--0.5%
CanTV Finance Ltd. VNT
9.25%, 2/1/04 (f) ............ Ba 3,000 2,955,000
------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $150,184,266) ........................... 147,346,475
------------
FOREIGN CONVERTIBLE BONDS--0.5%
Russia--0.5%
Lukinter Finance Cv. WI
144A 1%, 11/3/03 (b) (g) . NR 3,500 3,115,000
------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $3,380,000).............................. 3,115,000
------------
SHARES
---------
PREFERRED STOCKS--2.7%
Paper & Forest Products--0.7%
SD Warren Co. Series B Pfd.
PIK 14% ..................... 115,000 4,082,587
---------
Publishing--2.0%
American Radio Systems Pfd.
PIK 11.375% .................. 100,017 11,902,034
----------
TOTAL PREFERRED STOCKS
(Identified cost $12,523,141) ............ 15,984,621
----------
CONVERTIBLE PREFERRED STOCKS--0.3%
Publishing--0.3%
Granite Broadcasting Corp.
Cv. Pfd. $1.938............... 30,000 1,488,750
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $2,025,000) ............ 1,488,750
----------
SHARES VALUE
--------- -------------
COMMON STOCKS--0.0%
Publishing--0.0%
Sullivan Holdings, Inc.
Class C (d) .................. 76 $ 0
------------
TOTAL COMMON STOCKS
(Identified cost $357,881) ............... 0
------------
WARRANTS--0.1%
Orion Network Systems,
Inc. Warrants (d) ............ 8,000 140,000
SD Warren Warrants 144A
(b) (d) ..................... 115,000 575,000
------------
715,000
------------
TOTAL WARRANTS
(Identified cost $568,100) ............... 715,000
------------
TOTAL LONG-TERM INVESTMENTS--98.2%
(Identified cost $568,545,803) ............ 574,764,036
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- --------
SHORT-TERM OBLIGATIONS--1.9%
Commercial Paper--1.3%
Associates Corporation of
North America 5.73%,
11/3/97 .................. A-1+ $7,240 7,237,695
---------
Repurchase Agreement--0.6%
State Street Bank
Repurchase Agreement 4% dated 10/31/97 due 11/3/97, repurchase price
$3,558,186, collateralized by U.S. Treasury Note 8.875%, 2/15/19, market
value
$3,630,363 ............... 3,557 3,557,000
---------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $10,794,695) ..................... 10,794,695
----------
TOTAL INVESTMENTS--100.1%
(Identified cost $579,340,498)..................... 585,558,731(a)
Cash and receivables, less liabilities--(0.1%) ... (468,944)
-----------
NET ASSETS--100.0% ................................. $ 585,089,787
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $19,805,751 and gross
depreciation of $13,677,743 for income tax purposes. At October 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$579,430,723.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities amounted to a value of $228,177,931 or 39% of net
assets.
(c) As rated by Standard & Poor's, Duff & Phelps or Fitch. (d) Non-income
producing. (e) Variable or step coupon security; interest rate shown reflects
the rate
currently in effect.
(f) All or a portion segregated as collateral.
(g) When issued.
(h) Warrants incorporated as a unit.
See Notes to Financial Statements
37
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $579,340,498) $ 585,558,731
Receivables
Investment securities sold 42,813,392
Dividends and interest 11,854,601
Fund shares sold 1,253,055
-------------
Total assets 641,479,779
-------------
Liabilities
Payables
Custodian 7,377,577
Investment securities purchased 47,419,697
Fund shares repurchased 853,797
Investment advisory fee 341,921
Distribution fee 165,332
Transfer agent fee 95,525
Financial agent fee 18,677
Trustees' fee 3,636
Accrued expenses 113,830
-------------
Total liabilities 56,389,992
-------------
Net Assets $ 585,089,787
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $ 658,238,146
Undistributed net investment income 1,920,695
Accumulated net realized loss (81,287,287)
Net unrealized appreciation 6,218,233
-------------
Net Assets $ 585,089,787
=============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $532,905,726) 58,643,449
Net asset value per share $ 9.09
Offering price per share
$9.09/(1-4.75%) $ 9.54
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $52,184,061) 5,754,039
Net asset value and offering price per share $ 9.07
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Interest $ 54,780,941
Dividends 1,605,229
Security lending 11,206
-------------
Total investment income 56,397,376
-------------
Expenses
Investment advisory fee 3,713,370
Distribution fee--Class A 1,335,223
Distribution fee--Class B 371,984
Financial agent fee 205,073
Transfer agent 759,805
Printing 107,246
Custodian 30,271
Registration 29,693
Professional 26,945
Trustees 19,555
Miscellaneous 10,560
-------------
Total expenses 6,609,725
-------------
Net investment income 49,787,651
-------------
Net Realized and Unrealized Gain (Loss) on Investments Net realized gain on
securities 43,737,254 Net change in unrealized appreciation (depreciation) on
investments (14,877,655)
-------------
Net gain on investments 28,859,599
-------------
Net increase in net assets resulting from
operations $ 78,647,250
=============
See Notes to Financial Statements
38
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 49,787,651 $ 47,719,085
Net realized gain 43,737,254 26,433,066
Net change in unrealized appreciation (depreciation) (14,877,655) 2,635,081
-------------- --------------
Increase in net assets resulting from operations 78,647,250 76,787,232
-------------- --------------
From Distributions to Shareholders
Net investment income--Class A (47,205,499) (46,688,677)
Net investment income--Class B (3,142,933) (1,579,272)
-------------- --------------
Decrease in net assets from distributions to shareholders (50,348,432) (48,267,949)
-------------- --------------
From Share Transactions
Class A
Proceeds from sales of shares (19,095,734 and 8,790,783 shares, respectively) 171,457,073 73,572,017
Net asset value of shares issued from reinvestment of distributions (2,704,031 and
2,806,249 shares, respectively) 24,329,132 23,385,527
Cost of shares repurchased (21,233,985 and 15,647,656 shares, respectively) (191,152,369) (131,021,265)
-------------- --------------
Total 4,633,836 (34,063,721)
-------------- --------------
Class B
Proceeds from sales of shares (4,404,860 and 1,998,410 shares, respectively) 39,804,503 16,749,310
Net asset value of shares issued from reinvestment of distributions (142,554 and
76,435 shares, respectively) 1,286,205 639,323
Cost of shares repurchased (1,757,872 and 616,763 shares, respectively) (15,793,311) (5,170,475)
-------------- --------------
Total 25,297,397 12,218,158
-------------- --------------
Increase (decrease) in net assets from share transactions 29,931,233 (21,845,563)
-------------- --------------
Net increase in net assets 58,230,051 6,673,720
Net Assets
Beginning of period 526,859,736 520,186,016
-------------- --------------
End of period (including undistributed net investment income of
$1,920,695 and $2,038,026, respectively) $ 585,089,787 $ 526,859,736
============== ==============
</TABLE>
See Notes to Financial Statements
39
<PAGE>
Phoenix High Yield Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.63 $ 8.17 $ 8.11 $ 9.11 $ 8.14
Income from investment operations
Net investment income 0.80 0.78 0.80 0.76 0.74
Net realized and unrealized gain (loss) 0.46 0.46 0.04 (0.97) 0.97
------ ------ ------ ------ ------
Total from investment operations 1.26 1.24 0.84 (0.21) 1.71
------ ------ ------ ------ ------
Less distributions
Dividends from net investment income (0.80) (0.78) (0.78) (0.76) (0.74)
Tax return of capital -- -- -- (0.03) --
------ ------ ------ ------ ------
Total distributions (0.80) (0.78) (0.78) (0.79) (0.74)
------ ------ ------ ------ ------
Change in net asset value 0.46 0.46 0.06 (1.00) 0.97
------ ------ ------ ------ ------
Net asset value, end of period $ 9.09 $ 8.63 $ 8.17 $ 8.11 $ 9.11
====== ====== ====== ====== ======
Total return(1) 15.03% 15.95% 11.19% (2.57)% 21.87%
Ratios/supplemental data:
Net assets end of period (thousands) $532,906 $501,265 $507,855 $531,773 $182,333
Ratio to average net assets of:
Operating expenses 1.11% 1.17% 1.21% 1.19% 1.04%
Net investment income 8.76% 9.21% 10.01% 9.01% 8.46%
Portfolio turnover 167% 162% 147% 222% 157%
<CAPTION>
Class B
------------------------------------------------------
From
Inception
Year Ended October 31, 2/16/94 to
1997 1996 1995 10/31/94
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.63 $ 8.19 $ 8.13 $ 9.38
Income from investment operations
Net investment income 0.73 0.71 0.72 0.54
Net realized and unrealized gain (loss) 0.46 0.45 0.07 (1.25)
------ ------ ------ -------
Total from investment operations 1.19 1.16 0.79 (0.71)
------ ------ ------ -------
Less distributions
Dividends from net investment income (0.75) (0.72) (0.73) (0.52)
Tax return of capital -- -- -- (0.02)
------ ------ ------ -------
Total distributions (0.75) (0.72) (0.73) (0.54)
------ ------ ------ -------
Change in net asset value 0.44 0.44 0.06 (1.25)
------ ------ ------ -------
Net asset value, end of period $ 9.07 $ 8.63 $ 8.19 $ 8.13
====== ====== ====== =======
Total return(1) 14.18% 14.88% 10.44% (7.67)%(3)
Ratios/supplemental data:
Net assets end of period (thousands) $52,184 $25,595 $12,331 $6,056
Ratio to average net assets of:
Operating expenses 1.86% 1.92% 1.97% 1.80%(2)
Net investment income 8.00% 8.47% 9.18% 9.12%(2)
Portfolio turnover 167% 162% 147% 222%
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
See Notes to Financial Statements
40
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
INVESTOR PROFILE
Phoenix U.S. Government Securities Fund is designed for conservative
investors seeking current income and conservation of capital.
INVESTMENT ADVISER'S REPORT
Phoenix U.S. Government Securities Fund Class A shares provided a total
return of 7.85% and Class B shares returned 6.94% for the fiscal year ended
October 31, 1997. These results slightly lagged the general market as measured
by the Lehman Brothers Government Bond Index, which earned 8.65% for the period.
All performance figures assume reinvestment of dividends and exclude the effect
of sales charges.
As spreads between Treasuries and Agency mortgage-backed issues began to
narrow, we gradually reduced our weighting in mortgage-backed securities from
about 80% of the Fund in January to approximately 10% at the end of the
reporting period and shifted our emphasis to U.S. Treasuries. We have
selectively added non-Agency mortgage-backed securities and "AAA"-rated
municipal issues when we found attractive values.
OUTLOOK
The bond market is likely to continue to be quite volatile given the
current uncertainty over the strength of the economy and the outlook for
inflation. We will continue to monitor yield spreads to determine the best
values.
The Fund's duration will be kept equal to its benchmark to minimize
interest-rate surprises. It is currently 5.8 years. We will continue to
conservatively manage the Fund, emphasizing those sectors that we believe
possess the best risk/reward potential.
41
<PAGE>
Phoenix U.S. Government Securities Fund Series
- --------------------------------------------------------------------------------
[LINE CHART]
(tabular representation of plot points)
Lehman Brothers U.S. Government Securities
Government Bond Index* Fund - Class A
10/31/87 10000 9525
10/31/88 10972 10560
10/31/89 12293 11464
10/31/90 13022 12131
10/31/91 14923 13858
10/31/92 16463 15208
10/31/93 18626 16757
10/31/94 17795 16090
10/31/95 20530 18473
10/31/96 21580 19222
10/31/97 23447 20731
[/LINE CHART]
Average Annual Total Returns for Periods Ending 10/31/97
From Inception
2/24/94 to
1 Year 5 Years 10 Years 10/31/97
- --------------------------------------------------------------------------------
Class A with 4.75% sales charge 2.75% 5.37% 7.56% --
- --------------------------------------------------------------------------------
Class A at net asset value 7.85% 6.39% 8.09% --
- --------------------------------------------------------------------------------
Class B with CDSC 2.94% -- -- 4.84%
- --------------------------------------------------------------------------------
Class B at net asset value 6.94% -- -- 5.32%
- --------------------------------------------------------------------------------
Lehman Brothers Government Bond Index* 8.65% 7.33% 8.90% 6.90%**
- --------------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 10/31/87 for
Class A shares. The total return for Class A shares 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 dates, fees and sales charges. The total
return (from inception 2/24/94) for Class B shares 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 your shares, when redeemed, may be worth more or less than the original
cost.
*The Lehman Brothers Government Bond Index is an unmanaged but commonly used
measure of non-mortgaged government securities performance. The index's
performance does not reflect sales charges.
**Index information from 2/28/94 to 10/31/97.
42
<PAGE>
Phoenix U.S. Government Securities Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------------------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--61.0%
U.S. Treasury Bonds--2.7%
U.S. Treasury Bonds 6.375%,
8/15/27 ........................ AAA $ 1,000 $ 1,030,625
U.S. Treasury Bonds WI
6.125%, 11/15/27 (h) ............ AAA 4,000 3,997,200
------------
5,027,825
------------
U.S. Treasury Notes--49.0%
U.S. Treasury Inflation Index
Notes 3.375%, 1/15/07 (i) . AAA 9,165 9,176,200
U.S. Treasury Notes 5.625%,
10/31/99 ........................ AAA 24,220 24,227,557
U.S. Treasury Notes 6.25%,
8/31/02 (e) ..................... AAA 43,000 43,791,630
U.S. Treasury Notes 6.625%,
5/15/07 ........................ AAA 10,800 11,373,750
U.S. Treasury Notes 6.125%,
8/15/07 ........................ AAA 3,350 3,423,281
------------
91,992,418
------------
Agency Mortgage-Backed Securities--9.3%
FNMA 10%, 5/25/04 ............... AAA 3,003 3,200,211
FNMA 6.50%, 5/25/18 ............... AAA 1,500 1,513,125
FNMA 8.50%, 11/25/19 ............ AAA 58 57,509
FNMA 6.85%, 5/17/20 ............... AAA 10,000 10,050,000
FNMA 6.75%, '19-'21 ............... AAA 2,000 2,045,010
GNMA 8%, '05-'06 .................. AAA 141 148,769
GNMA 8.50%, '01-'22 ............... AAA 446 467,935
------------
17,482,559
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $112,858,455) ....................................... 114,502,802
------------
MUNICIPAL BONDS--20.6%
Atlanta Downtown
Development Authority
Lease Revenue Taxable
6.875%, 2/1/21 (e) (f) ......... AAA 5,100 5,142,381
Chicago Public Building
Taxable 6.25%, 1/1/99 (c) ...... AAA 2,000 2,009,500
Chicago Public Building
Taxable 6.65%, 1/1/01 (c) ...... AAA 1,000 1,017,180
Chicago Public Building
Taxable 7%, 1/1/06 (c) ......... AAA 2,000 2,088,280
Chicago Public Building
Taxable 7%, 1/1/07 (c) ......... AAA 1,050 1,097,974
E-470 Public Highway
Authority Colorado Revenue
5%, 9/1/26 ..................... AAA 5,000 4,765,900
Harristown Development
Corporation PA Special
Taxable 6.15%, 2/1/16 ......... Aaa(g) 5,000 4,668,550
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------------------- -------------
MUNICIPAL BONDS--continued
Massachusetts Turnpike
Authority Metropolitan
Highway System Revenue
5%, 1/1/27 ..................... AAA $ 5,000 $ 4,750,600
Port St. Lucie, Florida Utility
Revenue 5.125%, 9/1/27 ......... AAA 5,000 4,848,350
San Francisco City & County
Redevelopment Agency
Revenue Taxable 9.75%,
6/1/13 (c) (e) .................. AAA 4,800 6,300,816
Texas Water Development
Board Revenue-ST
Revolving Fund 5%,
7/15/19 ........................ AAA 2,000 1,945,680
------------
TOTAL MUNICIPAL BONDS
(Identified cost $38,067,152).........................................................
38,635,211
------------
NON-CONVERTIBLE BONDS--6.2%
Leisure Time (Products)--2.3%
Mashantucket Pequot Revenue
144A 6.91%, 9/1/12 (b) ......... AAA 4,200 4,273,710
------------
Non-Agency Mortgage-Backed Securities--3.9%
PNC Mortgage Securities Corp.
96-3, A5 8%, 12/25/26 ......... Aaa(g) 4,588 4,854,498
Resolution Trust Corp. 95-2,
M1 7.15%, 5/25/29 ............... Aa(g) 2,509 2,551,563
------------
7,406,061
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $11,507,396).........................................................
11,679,771
------------
SHARES
------
PREFERRED STOCKS--5.3%
REITS--5.3%
Home Ownership Funding 2,
Step-down Pfd. 144A
13.338% (b) (d) ............... 10,000 9,913,450
------------
TOTAL PREFERRED STOCKS
(Identified cost $9,660,265) .......................................... 9,913,450
------------
TOTAL LONG-TERM INVESTMENTS--93.1%
(Identified cost $172,093,268) ......................................................
174,731,234
------------
See Notes to Financial Statements
43
<PAGE>
Phoenix U.S. Government Securities Fund Series
- --------------------------------------------------------------------------------
PAR
VALUE
(000) VALUE
--------- ------------
SHORT-TERM OBLIGATIONS--8.2%
Federal Agency Securities--8.2%
FHLMC 5.65%, 11/3/97 ...... $15,315 $15,310,193
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $15,310,193) ...... 15,310,193
===========
VALUE
------------
TOTAL INVESTMENTS--101.3%
(Identified cost $187,403,461) $190,041,427(a)
Cash and receivables, less
liabilities--(1.3%) (2,469,860)
------------
NET ASSETS--100.0% $187,571,567
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,580,887 and gross
depreciation of $307,456 for income tax purposes. At October 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$187,767,996.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997 these securities amounted to a value of $14,187,160 or 7.6% of net
assets.
(c) These bonds are fully defeased by U.S. Government Treasury Obligations. (d)
Dividend payments backed by FHLMC ("Freddie Mac") Participation
Certificates.
(e) All or a portion segregated as collateral.
(f) The revenue from this security is backed by the U.S. Government. (g) As
rated by Moody's, Fitch or Duff & Phelps.
(h) When issued.
(i) Variable or step coupon security; interest rate shown reflects rate
currently in effect.
See Notes to Financial Statements
44
<PAGE>
Phoenix U.S. Government Securities Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $187,403,461) $ 190,041,427
Cash 3,344
Receivables
Interest and dividends 1,754,606
Fund shares sold 438,157
-------------
Total assets 192,237,534
-------------
Liabilities
Payables
Investment securities purchased 3,995,045
Fund shares repurchased 443,481
Investment advisory fee 71,336
Distribution fee 42,882
Transfer agent fee 40,785
Financial agent fee 8,209
Trustees' fee 3,636
Accrued expenses 60,593
-------------
Total liabilities 4,665,967
-------------
Net Assets $ 187,571,567
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $ 195,357,302
Undistributed net investment income 694,705
Accumulated net realized loss (11,118,406)
Net unrealized appreciation 2,637,966
-------------
Net Assets $ 187,571,567
=============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $182,250,364) 18,874,419
Net asset value per share $ 9.66
Offering price per share
$9.66/(1-4.75%) $ 10.14
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $5,321,203) 554,129
Net asset value and offering price per share $ 9.60
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Interest $12,482,271
Dividends 446,860
Security lending 71,932
-----------
Total investment income 13,001,063
-----------
Expenses
Investment advisory fee 885,257
Distribution fee--Class A 479,186
Distribution fee--Class B 50,496
Financial agent fee 93,466
Transfer agent 314,694
Printing 48,172
Registration 26,304
Professional 22,032
Trustees 19,633
Custodian 18,620
Miscellaneous 3,531
-----------
Total expenses 1,961,391
-----------
Net investment income 11,039,672
-----------
Net Realized and Unrealized Gain (Loss) on Investments Net realized gain on
securities 517,260 Net change in unrealized appreciation (depreciation) on
investments 2,715,533
-----------
Net gain on investments 3,232,793
-----------
Net increase in net assets resulting from
operations $14,272,465
===========
See Notes to Financial Statements
45
<PAGE>
Phoenix U.S. Government Securities Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 11,039,672 $ 12,502,080
Net realized gain (loss) 517,260 (2,717,827)
Net change in unrealized appreciation (depreciation) 2,715,533 (904,425)
------------- -------------
Increase in net assets resulting from operations 14,272,465 8,879,828
------------- -------------
From Distributions to Shareholders
Net investment income--Class A (10,634,100) (11,752,701)
Net investment income--Class B (259,835) (201,921)
------------- -------------
Decrease in net assets from distributions to shareholders (10,893,935) (11,954,622)
------------- -------------
From Share Transactions
Class A
Proceeds from sales of shares (2,629,037 and 3,190,243 shares, respectively) 24,689,395 30,366,623
Net asset value of shares issued from reinvestment of distributions (639,861 and
680,397 shares, respectively) 6,046,315 6,412,886
Cost of shares repurchased (6,412,210 and 6,419,884 shares, respectively) (60,334,761) (61,087,957)
------------- -------------
Total (29,599,051) (24,308,448)
------------- -------------
Class B
Proceeds from sales of shares (165,395 and 241,903 shares, respectively) 1,565,869 2,287,444
Net asset value of shares issued from reinvestment of distributions (16,313 and
11,893 shares, respectively) 153,651 111,576
Cost of shares repurchased (143,485 and 119,425 shares, respectively) (1,354,825) (1,122,209)
------------- -------------
Total 364,695 1,276,811
------------- -------------
Decrease in net assets from share transactions (29,234,356) (23,031,637)
------------- -------------
Net decrease in net assets (25,855,826) (26,106,431)
Net Assets
Beginning of period 213,427,393 239,533,824
------------- -------------
End of period (including undistributed net investment income of
$694,705 and $264,123, respectively) $ 187,571,567 $ 213,427,393
============= =============
</TABLE>
See Notes to Financial Statements
46
<PAGE>
Phoenix U.S. Government Securities Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
------- --------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.47 $ 9.60 $8.88 $ 9.87 $ 9.91
Income from investment operations
Net investment income 0.55 0.52 0.55 0.64 0.62(1)
Net realized and unrealized gain (loss) 0.17 (0.15) 0.72 (1.02) 0.34
------ ------ ----- ------ -------
Total from investment operations 0.72 0.37 1.27 (0.38) 0.96
------ ------ ----- ------ -------
Less distributions
Dividends from net investment income (0.53) (0.50) 0.55) (0.45) (0.62)
Dividends from net realized gains -- -- -- (0.02) (0.38)
Tax return of capital -- -- -- (0.14) --
------ ------ ----- ------ -------
Total distributions (0.53) (0.50) 0.55) (0.61) (1.00)
------ ------ ----- ------ -------
Change in net asset value 0.19 (0.13) 0.72 (0.99) (0.04)
------ ------ ----- ------ -------
Net asset value, end of period $ 9.66 $ 9.47 $9.60 $ 8.88 $ 9.87
====== ====== ===== ====== =======
Total return(2) 7.85% 4.05% 14.81% (3.98)% 10.18%
Ratios/supplemental data:
Net assets, end of period (thousands) $182,250 $208,552 $235,879 $262,157 $57,072
Ratio to average net assets of:
Operating expenses 0.98% 1.03% 0.99% 0.98% 0.75%
Net investment income 5.63% 5.55% 6.01% 5.92% 6.19%
Portfolio turnover 377% 379% 178% 101% 264%
<CAPTION>
Class B
---------------------------------------------------------
From
Inception
Year Ended October 31, 2/24/94 to
1997 1996 1995 10/31/94
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.45 $ 9.58 $ 8.86 $9.61
Income from investment operations
Net investment income 0.47 0.44 0.48 0.39
Net realized and unrealized gain (loss) 0.17 (0.14) 0.72 (0.75)
------ ------ ------ -----
Total from investment operations 0.64 0.30 1.20 (0.36)
------ ------ ------ -----
Less distributions
Dividends from net investment income (0.49) (0.43) (0.48) (0.30)
Dividends from net realized gains -- -- -- --
Tax return of capital -- -- -- (0.09)
------ ------ ------ -----
Total distributions (0.49) (0.43) (0.48) (0.39)
------ ------ ------ -----
Change in net asset value 0.15 (0.13) 0.72 (0.75)
------ ------ ------ -----
Net asset value, end of period $ 9.60 $ 9.45 $ 9.58 $8.86
====== ====== ====== =====
Total return(2) 6.94% 3.39% 13.82% (3.83)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $5,321 $4,875 $3,655 $1,238
Ratio to average net assets of:
Operating expenses 1.71% 1.78% 1.73% 2.00%(3)
Net investment income 4.91% 4.79% 5.23% 4.49%(3)
Portfolio turnover 377% 379% 178% 101%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.03.
(2) Maximum sales load is not reflected in the total return calculation. (3)
Annualized (4) Not annualized
See Notes to Financial Statements
47
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
INVESTOR PROFILE
Phoenix Money Market Fund is designed for conservative investors seeking
high current income with minimal risk of capital.
INVESTMENT ADVISER'S REPORT
Phoenix Money Market Fund continued to perform well for the fiscal year
ended October 31, 1997. Current yield was 4.79% for Class A shares and 4.10% for
Class B shares. Current yield is a seven-day annualized yield computed by
dividing the average net income earned per share during the seven days preceding
the date of calculation by the average daily net asset value per share for the
same period multiplied by 365.
Short-term money markets experienced high volatility over the last 12
months. In the fourth quarter of 1996, GDP rose 4.3%, showing strength in the
employment and wages components. Continued strength into the first quarter of
1997 and growing concern over inflation prompted the Federal Reserve to
preemptively raise rates from 5.25% to 5.50%.
In the months following the tightening, economic data continued to show
pockets of strength. Concerns over the strength of the economy and fears of
rekindled inflation increased cash flows in the short end of the market.
However, moderate growth with little evidence of inflation kept the Federal
Reserve on hold.
The summer months were marked by mixed economic data. Remarks from the
Federal Reserve about an overly enthusiastic stock market and signs of rising
inflation led to increasing market volatility. By fall the markets were
expecting another Fed tightening. Subsequently, turmoil in Southeast Asia,
causing unstable markets globally, kept the Fed on hold.
During this time, we kept the Fund's average maturity relatively neutral.
Our focus has been to maintain a market neutral strategy rather than forecast
interest-rate movements. Increased market volatility has proven this strategy to
be effective. We continue to emphasize high-quality commercial paper and
variable-rate securities to enhance yield. The Fund's average credit quality
remains A1/P1.
OUTLOOK
Near term we anticipate slower U.S. economic growth as a result of the
recent shake up in world markets. Growth should decelerate with inflation
remaining subdued. However, if inflation fears are rekindled, the Fed will be
diligent in raising rates.
We continue to emphasize credit quality, focusing on higher yielding
issues, such as commercial paper and variable-rate securities. Given the
uncertainty in the market, we will be monitoring any movement in interest rates
or shifts in yield spreads to identify attractive trading opportunities.
48
<PAGE>
Phoenix Money Market Fund Series
- --------------------------------------------------------------------------------
Monthly Yield Comparison
[LINE CHART]
(tabular representation of plot points)
IBC Donoghue Money Market Fund
Money Fund Report* - Class A
11/96 4.75 4.56
12/96 4.78 4.63
1/97 4.77 4.64
2/97 4.75 4.6
3/97 4.75 4.66
4/97 4.85 4.81
5/97 4.91 4.85
6/97 4.95 4.87
7/97 4.94 4.88
8/97 4.94 4.86
9/97 4.93 4.86
10/97 4.92 4.84
[/LINE CHART]
The above graph covers the period from October 31, 1996 to October 31, 1997. The
results are not indicative of the rate of return which may be realized from an
investment made in the Money Market Fund today. The Money Market Fund Series is
neither insured nor guaranteed by the U.S. Government, and there can be no
assurance that the Fund will be able to maintain a stable Net Asset Value at
$1.00 per share.
*Average monthly yield of taxable Money Market Funds as reported by IBC's Money
Fund Report.
49
<PAGE>
Phoenix Money Market Fund Series
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
Face
Value Interest Maturity
(000) Description Rate Date Value
- -------- -------------------------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
FEDERAL AGENCY SECURITIES--10.1%
$3,500 FHLB ........................... 5.69 % 11/20/97 $ 3,500,000
3,000 FHLB ........................... 5.79 1/21/98 3,000,000
6,500 FHLB ........................... 5.78 1/28/98 6,500,000
7,500 SLMA ........................... 6.00 6/30/98 7,500,000
-----------
TOTAL FEDERAL AGENCY SECURITIES ........................... 20,500,000
-----------
FEDERAL AGENCY SECURITIES--VARIABLE--18.9% (b)
Reset
Date
--------
4,500 FFCB (final maturity 4/1/99) ... 5.28 11/1/97 4,500,000
10,500 FFCB (final maturity 7/24/00) 5.79 11/1/97 10,503,231
1,000 SLMA (final maturity
11/24/97) ..................... 5.27 11/4/97 1,000,000
3,500 SLMA (final maturity
11/10/98) ..................... 5.29 11/4/97 3,498,106
2,000 SLMA (final maturity 2/22/99) . 5.30 11/4/97 2,000,000
5,000 SLMA (final maturity 2/8/99) ... 5.31 11/4/97 5,000,000
3,000 SLMA (final maturity 3/7/01) ... 5.36 11/4/97 3,000,000
3,000 FHLMC (final maturity
6/22/98) ..................... 5.405 11/20/97 2,999,055
3,000 FNMA (final maturity
12/14/98) ..................... 5.36 12/14/97 2,998,158
3,000 SBA (final maturity 10/25/22) 6.00 1/1/98 2,996,251
-----------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE 38,494,801
-----------
Standard
& Poor's
Rating Maturity
(Unaudited) Date
------------- ----------
COMMERCIAL PAPER--65.7%
502 Heinz (H.J.) Co. ......... A-1 5.50 11/3/97 501,847
1,060 Merrill Lynch & Co., Inc. A-1+ 5.54 11/3/97 1,059,674
1,000 Pfizer, Inc. ............ A-1+ 5.52 11/3/97 999,693
5,235 Pitney Bowes Credit
Corp. ..................... A-1+ 5.70 11/3/97 5,233,342
500 Preferred Receivables
Funding Corp. ............ A-1 5.80 11/3/97 499,839
750 BellSouth
Telecommunications,
Inc. ..................... A-1+ 5.57 11/4/97 749,652
747 Receivables Capital Corp. A-1+ 5.54 11/4/97 746,655
500 Du Pont (E.I.) de
Nemours & Co. ............ A-1+ 5.55 11/6/97 499,615
3,000 Goldman, Sachs & Co. A-1+ 5.62 11/6/97 2,997,656
1,642 Receivables Capital Corp. A-1+ 5.55 11/6/97 1,640,734
2,500 Kimberly-Clark Corp. ...... A-1+ 5.65 11/7/97 2,497,646
4,570 Colgate-Palmolive Co. A-1 5.54 11/10/97 4,563,671
Standard
Face & Poor's
Value Rating Interest Maturity
(000) Description (Unaudited) Rate Date Value
- --------- ----------------------- ------------- ---------- ---------- -----------
COMMERCIAL PAPER--continued
$ 2,700 Corporate Asset
Funding Co., Inc. . A-1+ 5.55% 11/10/97 $2,696,254
3,300 CXC, Inc. ............ A-1+ 5.52 11/12/97 3,294,434
1,200 Coca-Cola Co. ......... A-1+ 5.52 11/12/97 1,197,976
565 Corporate Asset
Funding Co., Inc. . A-1+ 5.51 11/12/97 564,049
2,750 Exxon Imperial U.S.,
Inc. .................. A-1+ 5.52 11/12/97 2,745,370
1,550 Cargill, Inc. ......... A-1+ 5.50 11/13/97 1,547,158
3,000 Enterprise Funding
Corp. ............... A-1+ 5.73 11/13/97 2,994,270
3,470 AlliedSignal, Inc. ... A-1 5.55 11/14/97 3,463,046
450 Beta Finance, Inc. ... A-1+ 5.55 11/14/97 449,098
3,000 Corporate Receivables
Corp. ............... A-1 5.35 11/14/97 2,994,204
1,000 Gannett Co. ......... A-1 5.52 11/14/97 998,007
3,500 General Electric
Capital Corp. ......... A-1+ 5.53 11/17/97 3,491,398
1,465 Pitney Bowes Credit
Corp. ............... A-1+ 5.65 11/17/97 1,461,321
2,516 Receivables Capital
Corp. ............... A-1+ 5.54 11/17/97 2,509,805
1,800 General Electric
Capital Corp. ......... A-1+ 5.50 11/19/97 1,795,050
3,255 Greenwich Funding
Corp. ............... A-1+ 5.53 11/20/97 3,245,500
3,165 Preferred Receivables
Funding Corp. ......... A-1 5.52 11/21/97 3,155,294
700 Cargill, Inc. ......... A-1+ 5.52 11/24/97 697,531
1,129 Greenwich Funding
Corp. ............... A-1+ 5.55 11/24/97 1,124,997
4,170 Beta Finance, Inc. ... A-1+ 5.52 11/25/97 4,154,654
600 Beta Finance, Inc. ... A-1+ 5.55 11/25/97 597,780
1,600 Enterprise Funding
Corp. ............... A-1+ 5.71 11/25/97 1,593,909
3,650 General Electric
Capital Corp. ......... A-1+ 5.54 11/26/97 3,635,958
5,000 Goldman, Sachs & Co. A-1+ 5.53 11/28/97 4,979,263
315 Enterprise Funding
Corp. ............... A-1+ 5.53 12/1/97 313,548
600 Enterprise Funding
Corp. ............... A-1+ 5.57 12/1/97 597,215
3,680 Greenwich Funding
Corp. ............... A-1+ 5.56 12/1/97 3,662,949
1,600 Receivables Capital
Corp. ............... A-1+ 5.54 12/1/97 1,592,613
3,645 Du Pont (E.I.) de
Nemours & Co. ......... A-1+ 5.50 12/2/97 3,627,737
See Notes to Financial Statements
50
<PAGE>
Phoenix Money Market Fund Series
- --------------------------------------------------------------------------------
Standard
Face & Poor's
Value Rating Interest Maturity
(000) Description (Unaudited) Rate Date Value
- --------- ------------------------- ------------- ---------- ---------- --------------------
COMMERCIAL PAPER--continued
$ 3,000 Private Export
Funding Corp. ......... A-1+ 5.53% 12/4/97 $ 2,984,792
5,000 Private Export
Funding Corp. ......... A-1+ 5.51 12/5/97 4,973,981
2,000 Private Export
Funding Corp. ......... A-1+ 5.57 12/5/97 1,989,479
377 International Lease
Finance Corp. ......... A-1 5.55 12/9/97 374,791
1,875 Receivables Capital
Corp. .................. A-1+ 5.53 12/10/97 1,863,767
1,075 Receivables Capital
Corp. .................. A-1+ 5.55 12/10/97 1,068,537
2,500 Kimberly-Clark Corp. .A-1+ 5.50 12/12/97 2,484,340
2,800 Preferred Receivables
Funding Corp. ......... A-1 5.55 12/18/97 2,779,712
500 General Re Corp. ...... A-1+ 5.51 12/26/97 495,791
790 International Lease
Finance Corp. ......... A-1 5.55 1/20/98 780,257
3,500 CXC, Inc. ............... A-1+ 5.57 1/27/98 3,452,887
2,000 Corporate Receivables
Corp. .................. A-1 5.58 1/28/98 1,972,720
3,250 Merrill Lynch & Co.,
Inc. .................. A-1+ 5.58 1/30/98 3,204,662
3,000 Pitney Bowes Credit
Corp. .................. A-1+ 5.52 1/30/98 2,958,600
Standard
Face & Poor's
Value Rating Interest Maturity
(000) Description (Unaudited) Rate Date Value
- --------- ------------------------- ------------- ---------- ---------- --------------------
COMMERCIAL PAPER--continued
$ 900 AT&T Corp. ............ A-1+ 5.57% 2/12/98 $ 885,657
2,500 Corporate Receivables
Corp. .................. A-1 5.55 2/18/98 2,457,990
2,890 Preferred Receivables
Funding Corp. ......... A-1 5.56 2/23/98 2,839,117
3,816 Enterprise Funding
Corp. .................. A-1+ 5.69 2/27/98 3,744,829
850 Du Pont (E.I.) de
Nemours & Co. ......... A-1+ 5.57 3/9/98 833,561
1,800 Beta Finance, Inc. ...... A-1+ 5.58 3/12/98 1,763,451
2,900 Beta Finance, Inc. ...... A-1+ 5.60 4/29/98 2,819,251
---------
TOTAL COMMERCIAL PAPER
133,898,584
--------------
MEDIUM-TERM NOTES--1.5%
3,100 Associates Corporation
of North America ...... AA- 6.38 8/15/98 3,110,600
---------
TOTAL MEDIUM-TERM NOTES
3,110,600
--------------
CERTIFICATES OF DEPOSIT--1.2%
2,500 Deutsche Bank N.Y. Yankee ......................................................
5.64 1/15/98 2,500,000
---------
TOTAL CERTIFICATES OF DEPOSIT
2,500,000
--------------
TOTAL INVESTMENTS--97.4%
(Identified cost $198,503,985) ............... 198,503,985(a)
Cash and receivables, less liabilities--2.6% 5,204,094
--------------
NET ASSETS--100.0% $203,708,079
===== ============
</TABLE>
(a) Federal Income Tax Information: At October 31, 1997, the aggregate cost of
securities was the same for book and tax purposes.
(b) Variable rate demand notes. The interest rates shown reflect the rates
currently in effect.
See Notes to Financial Statements
51
<PAGE>
Phoenix Money Market Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
Assets
Investment securities at value
(Identified cost $198,503,985) $198,503,985
Receivables
Fund shares sold 6,960,757
Interest 1,058,585
------------
Total assets 206,523,327
------------
Liabilities
Payables
Custodian 13,876
Fund shares repurchased 2,440,746
Dividend distributions 108,695
Transfer agent fee 87,680
Investment advisory fee 63,558
Financial agent fee 8,224
Distribution fee 6,388
Trustees' fee 3,636
Accrued expenses 82,445
------------
Total liabilities 2,815,248
------------
Net Assets $203,708,079
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $203,708,079
------------
Net Assets $203,708,079
============
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $188,694,703) 188,694,703
Net asset value and offering price per share $ 1.00
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $15,013,376) 15,013,376
Net asset value and offering price per share $ 1.00
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
Investment Income
Interest $10,948,988
-----------
Total investment income 10,948,988
-----------
Expenses
Investment advisory fee 788,106
Distribution fee--Class B 77,717
Financial agent fee 93,776
Transfer agent fee 492,272
Registration 55,120
Printing 51,923
Custodian 29,261
Professional 27,499
Trustees 19,555
Miscellaneous 6,745
-----------
Total expenses 1,641,974
-----------
Net investment income $ 9,307,014
===========
See Notes to Financial Statements
52
<PAGE>
Phoenix Money Market Fund Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -------------------
<S> <C> <C>
From Operations
Net investment income $ 9,307,014 $ 9,418,637
-------------- ----------------
From Distributions to Shareholders
Net investment income--Class A (8,890,389) (9,064,115)
Net investment income--Class B (416,625) (354,522)
-------------- ----------------
Decrease in net assets from distributions to shareholders (9,307,014) (9,418,637)
-------------- ----------------
From Share Transactions
Class A
Proceeds from sales of shares (732,054,689 and 1,212,801,272 shares, respectively) 732,054,689 1,212,801,272
Net asset value of shares issued from reinvestment of distributions (8,138,566 and
8,374,618
shares, respectively) 8,138,566 8,374,618
Cost of shares repurchased (744,357,959 and 1,221,850,524 shares, respectively) (744,357,959) (1,221,850,524)
-------------- ----------------
Total (4,164,704) (674,634)
-------------- ----------------
Class B
Proceeds from sales of shares (35,539,707 and 16,991,839 shares, respectively) 35,539,707 16,991,839
Net asset value of shares issued from reinvestment of distributions (329,335 and 281,654
shares, respectively) 329,335 281,654
Cost of shares repurchased (31,078,203 and 15,556,837 shares, respectively) (31,078,203) (15,556,837)
-------------- ----------------
Total 4,790,839 1,716,656
-------------- ----------------
Increase in net assets from share transactions 626,135 1,042,022
-------------- ----------------
Net increase in net assets 626,135 1,042,022
Net Assets
Beginning of period 203,081,944 202,039,922
-------------- ----------------
End of period $ 203,708,079 $ 203,081,944
============== ================
</TABLE>
See Notes to Financial Statements
53
<PAGE>
Phoenix Money Market Fund Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
--------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.048 0.047 0.053 0.032 0.025(1)
-------- -------- -------- -------- ---------
Total from investment operations 0.048 0.047 0.053 0.032 0.025
-------- -------- -------- -------- ---------
Less distributions
Dividends from net investment income (0.048) (0.047) (0.053) (0.032) (0.025)
-------- -------- -------- -------- ---------
Change in net asset value -- -- -- -- --
-------- -------- -------- -------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =========
Total return 4.76% 4.67% 5.32% 3.20% 2.50%
Ratios/supplemental data:
Net assets, end of period (thousands) $188,695 $192,859 $193,534 $196,566 $170,334
Ratio to average net assets of:
Operating expenses 0.79% 0.84% 0.71% 0.85% 0.85%
Net investment income 4.76% 4.68% 5.31% 3.19% 2.53%
<CAPTION>
Class B
---------------------------------------------------
From
Inception
7/15/94
Year Ended October 31, to
1997 1996 1995 10/31/94
-------- ------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $1.00
Income from investment operations
Net investment income 0.040 0.039 0.046 0.007
------- ------- ------- -------
Total from investment operations 0.040 0.039 0.046 0.007
------- ------- ------- -------
Less distributions
Dividends from net investment income (0.040) (0.039) (0.046) (0.007)
------- ------- ------- --------
Change in net asset value -- -- -- --
------- ------- ------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $1.00
======= ======= ======= ========
Total return 4.02 % 3.93 % 4.63 % 0.70%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $15,013 $10,223 $ 8,506 $2,086
Ratio to average net assets of:
Operating expenses 1.55 % 1.59 % 1.44 % 1.60%(2)
Net investment income 4.02 % 3.92 % 4.62 % 3.46%(2)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.0001.
(2) Annualized. (3) Not annualized.
See Notes to Financial Statements
54
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Series Fund (the "Trust") is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. Each Series has distinct
investment objectives. The Balanced Fund Series seeks to provide reasonable
income, long-term capital growth and conservation of capital. The Convertible
Fund Series seeks as its investment objectives income and the potential for
capital appreciation; these objectives are to be considered as relatively equal.
The Growth Fund Series seeks long-term appreciation of capital. The Aggressive
Growth Fund Series seeks appreciation of capital through the use of aggressive
investment techniques. The High Yield Fund Series seeks to provide high current
income. The U.S. Government Securities Fund Series seeks a high level of current
income by investing in U.S. Government guaranteed or backed securities. The
Money Market Fund Series seeks to provide as high a level of current income
consistent with capital preservation and liquidity.
Each Series offers both Class A and Class B shares. Class A shares are sold
with a front-end sales charge of up to 4.75%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Both classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. Income and
expenses of each Series are borne pro rata by the holders of both classes of
shares, except that each class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. Security valuation:
Equity securities are valued at the last sale price, or if there had been
no sale that day, at the last bid price. Debt securities are valued on the basis
of broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at their fair value as
determined in good faith by or under the direction of the Trustees.
The Money Market Fund Series uses the amortized cost method of security
valuation which, in the opinion of the Trustees, represents the fair value of
the particular security. The Trustees monitor the deviations between the
classes' net asset value per share as determined by using available market
quotations and its amortized cost per share. If the deviation exceeds -1/2 of
1%, the Board of Trustees will consider what action, if any, should be initiated
to provide a fair valuation. This valuation procedure allows each class of the
Series to maintain a constant net asset value of $1 per share.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign securities,
as soon as the Series is notified. Interest income is recorded on the accrual
basis. The Trust does not amortize premiums except for the Money Market Fund
Series, but does amortize discounts using the effective interest method.
Realized gains and losses are determined on the identified cost basis.
C. Income taxes:
Each of the Series is treated as a separate taxable entity. It is the
policy of each Series in the Trust to comply with the requirements of the
Internal Revenue Code (the Code), applicable to regulated investment companies,
and to distribute all of its taxable income to its shareholders. In addition,
each Series intends to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Code. Therefore, no provision for
federal income taxes or excise taxes has been made.
D. Distributions to shareholders:
Distributions are recorded by each Series on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, expiring
capital loss carryforwards, foreign currency gain/loss, partnerships, and losses
deferred due to wash sales and excise tax regulations. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications to paid in capital.
E. Foreign currency translation:
Foreign securities, other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at the
trade date. The gain or loss resulting from a change in currency exchange rates
between the trade and settlement dates of a portfolio transaction is treated as
a gain or loss on foreign currency. Likewise, the gain or loss resulting from a
change in currency exchange rates, between the date income is accrued
55
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 (Continued)
and paid, is treated as a gain or loss on foreign currency. The Trust does not
separate that portion of the results of operations arising from changes in
exchange rates and that portion arising from changes in the market prices of
securities.
F. Forward currency contracts:
Each of the Series, except U.S. Government Securities Fund Series and Money
Market Fund Series, may enter into forward currency contracts in conjunction
with the planned purchase or sale of foreign denominated securities in order to
hedge the U.S. dollar cost or proceeds. Forward currency contracts involve, to
varying degrees, elements of market risk in excess of the amount recognized in
the statement of assets and liabilities. Risks arise from the possible movements
in foreign exchange rates or if the counterparty does not perform under the
contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in market
value is recorded by each Series as an unrealized gain (or loss). When the
contract is closed, the Series records a realized gain (or loss) equal to the
change in the value of the contract when it was opened and the value at the time
it was closed.
G. Security lending:
The Trust loans securities to qualified brokers through an agreement with
State Street Bank & Trust (the Custodian). Under the terms of the agreement, the
Trust receives collateral with a market value not less than 100% of the market
value of loaned securities. Collateral is adjusted daily in connection with
changes in the market value of securities on loan. Collateral consists of cash,
securities issued or guaranteed by the U.S. Government or its agencies and the
sovereign debt of foreign countries. Interest earned on the collateral and
premiums paid by the borrower are recorded as income by the Trust net of fees
charged by the Custodian for its services in connection with this securities
lending program. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities or in the foreclosure on collateral. At
October 31, 1997, the Trust had the following amounts of security loans:2
Value of
Value of Securities
Collateral on Loan
-------------- -------------
Balanced Fund Series ............... $143,021,673 $140,115,192
Convertible Fund Series ............ 4,200,000 4,034,490
Growth Fund Series .................. 31,830,000 31,018,950
Aggressive Growth Fund Series ...... 20,087,632 19,421,015
U.S. Government Securities Fund Series 11,062,500 10,841,880
H. Expenses:
Expenses incurred by the Trust with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation method
can be more fairly made.
I. Options:
The Trust, except for U.S. Government and Money Market Series, may write
covered options or purchase options contracts for the purpose of hedging against
changes in the market value of the underlying securities or foreign currencies.
The Series will realize a gain or loss upon the expiration or closing of
the option transaction. Gains and losses on written options are reported
separately in the Statement of Operations. When a written option is exercised,
the proceeds on sales or amounts paid are adjusted by the amount of premium
received. Options written are reported as a liability in the Statement of Assets
and Liabilities and subsequently marked-to-market to reflect the current value
of the option. The risk associated with written options is that the change in
value of options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the value of
the underlying instruments, or if a liquid secondary market does not exist for
the contracts.
Each Series, except for U.S. Government and Money Market Series, may
purchase options which are included in the Series' Schedule of Investments and
subsequently marked-to-market to reflect the current value of the option. When a
purchased option is exercised, the cost of the security is adjusted by the
amount of premium paid. The risk associated with purchased options is limited to
the premium paid.
J. When-issued and delayed delivery transactions:
Each Series may engage in when-issued or delayed delivery transactions. The
Series record when-issued securities on the trade date and maintain collateral
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
NOTE 2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Adviser, Phoenix
Investment Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home
Life Mutual Insurance Company ("PHL"), is entitled to a fee based upon the
following annual rates as a percentage of the average daily net assets of each
separate Series:
1st $1 $1-2 $2+
Series Billion Billion Billion
- ----------------------------------------- --------- --------- --------
Growth Fund Series ..................... 0.70% 0.65% 0.60%
Aggressive Growth Fund Series ......... 0.70% 0.65% 0.60%
Convertible Fund Series ............... 0.65% 0.60% 0.55%
High Yield Fund Series .................. 0.65% 0.60% 0.55%
Balanced Fund Series .................. 0.55% 0.50% 0.45%
U.S. Government Securities Fund Series 0.45% 0.40% 0.35%
Money Market Fund Series ............... 0.40% 0.35% 0.30%
56
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 (Continued)
The Adviser has agreed to assume expenses and reduce the advisory fee for
the benefit of the Money Market Fund Series to the extent that total expenses
(excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) exceed 0.85% for Class A shares and 1.60% for Class B shares of the
average of the aggregate daily net asset value.
Phoenix Equity Planning Corporation (PEPCO), an indirect majority-owned
subsidiary of PHL, which serves as the national distributor of the Trust's
shares, has advised the Trust that it retained selling commissions of $525,072
for Class A shares and deferred sales charges of $631,551 for Class B shares,
for the year ended October 31, 1997. In addition, each Series except the Money
Market Fund Series pays PEPCO a distribution fee of an annual rate of 0.25% for
Class A shares and 1.00% for Class B shares applied to the average daily net
assets of each Series; the distribution fee for the Money Market Fund Series is
0% and 0.75% for Class A and Class B, respectively. The distributor has advised
the Series that of the total amount expensed for the year ended October 31,
1997, $3,044,353 was earned by the Distributor, $10,576,329 was earned by
unaffiliated participants, and $1,358,415 was paid to W.S. Griffith, an indirect
subsidiary of PHL.
As Financial Agent of the Trust, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the average
daily net assets of the Fund through December 31, 1996, and starting on January
1, 1997, at an annual rate of 0.05% of average daily net assets up to $100
million, 0.04% of average daily net assets of $100 million to $300 million,
0.03% of average daily net assets of $300 million through $500 million, and
0.015% of average daily net assets greater than $500 million; a minimum fee may
apply. PEPCO serves as the Trust's Transfer Agent with State Street Bank and
Trust Company as sub-transfer agent. For the year ended October 31, 1997,
transfer agent fees were $8,230,205 of which PEPCO retained $3,505,548 which is
net of fees paid to State Street.
At October 31, 1997, PHL and affiliates held Phoenix Series Fund shares
which aggregated the following:
Aggregate
Net Asset
Shares Value
----------- -----------
Aggressive Growth Fund Series Class B 11,387 $ 190,735
High Yield Fund Series Class A ...... 395 3,592
U.S. Government Securities Fund Series
Class A ........................... 298 2,883
Money Market Fund Series Class A ... 7,197,226 7,197,226
NOTE 3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended October 31, 1997
(excluding U.S. Government and agency securities and short-term securities)
aggregated the following:
Purchases Sales
---------------- ---------------
Balanced Fund Series ......... $2,007,465,298 $2,398,704,549
Convertible Fund Series ...... 279,807,350 347,511,171
Growth Fund Series ............ 4,367,595,466 4,592,376,556
Aggressive Growth Fund Series 1,238,101,677 1,268,403,142
High Yield Fund Series ......... 837,633,569 827,550,266
U.S. Government Securities
Fund Series .................. 56,183,141 2,628,609
Purchases and sales of U.S. Government and agency securities during the
year ended October 31, 1997, aggregated the following:
Purchases Sales
---------------- ---------------
Balanced Fund Series ......... $1,354,721,837 $1,486,596,557
Convertible Fund Series ...... 7,663,219 7,778,563
High Yield Fund Series ...... 112,710,173 98,383,816
U.S. Government Securities
Fund Series ............... 663,320,784 736,681,917
Written option activity for the year ended October 31, 1997, aggregated the
following:
Balanced Fund Series Call Options
- ------------------------------- --------------------------
Number of Amount
Options of Premiums
----------- ------------
Options outstanding at
October 31, 1996 ............ -- $ --
Options written ............... 8,362 1,114,302
Options canceled in closing
purchase transactions ...... (1,060) (256,733)
Options expired ............... (4,274) (363,130)
Options exercised ............ (3,028) (494,439)
------ ---------
Options outstanding at
October 31, 1997 ............ -- --
====== =========
NOTE 4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts.
57
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 (Continued)
NOTE 5. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Series have recorded
several reclassifications in the capital accounts. These reclassifications have
no impact on the net asset value of the Series and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of October 31, 1997,
the Series recorded the following reclassifications to increase (decrease) the
accounts listed below:
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income (loss) gains (losses) interest
---------------- ---------------- --------------
Balanced Fund Series $1,007,162 $ (259,853) $ (747,309)
Convertible Fund
Series ............ (29,149) 32,223 (3,074)
Growth Fund Series ... (88,868) 88,868 --
Aggressive Growth
Fund Series ...... 1,405,570 (1,405,570) --
High Yield Fund
Series ............ 443,450 (43,907,142) 43,463,692
U.S. Government
Securities Fund
Series ............ 284,845 (516,595) 231,750
NOTE 6. CAPITAL LOSS CARRYOVERS
The following Series have capital loss carryforwards which may be used to
offset future capital gains.
U.S.
Government
Expiration High Yield Securities
Date Fund Series Fund Series
- -------------- -------------- ------------
1998 ......... $ 66,472,552 $ 1,816,304
2002 ......... 14,103,053 8,684,579
2003 ......... 46,929,335 --
2004 ......... -- 2,433,827
------------ -----------
Total ...... $127,504,940 $12,934,710
============ ===========
Included in the High Yield Fund Series amount expiring in 1998, $46,426,813
was acquired in connection with the merger of the National Bond Fund.
For the years ended October 31, 1997, the following Series had losses
deferred in the prior year which were utilized or expired in the current year.
U.S. Government
High Yield Securities Fund
Fund Series Series
-------------- ----------------
Utilized ...... $ 43,463,693 $ 596,285
Expired ...... 133,573,091 13,326,574
TAX INFORMATION NOTICE (Unaudited)
For the fiscal year ended October 31, 1997, the following Series
distributed long-term capital gains dividends as follows:
Balanced Fund Series ............... $ 96,737,966
Convertible Fund Series ............ 4,550,151
Growth Fund Series .................. 334,316,017
Aggressive Growth Fund Series ...... 7,965,676
For federal income tax purposes, 4.0% and 11.5% of the ordinary income
dividends paid by the Balanced Fund Series and the Growth Fund Series,
respectively, qualify for the dividends received deduction for corporate
shareholders.
This report is not authorized for distribution to prospective investors in
the Phoenix Series Fund unless preceded or accompanied by an effective
Prospectus which includes information concerning the sales charge, Fund's record
and other pertinent information.
58
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGOTYPE]Price Waterhouse LLP [LOGO]
To the Shareholders and Trustees of
Phoenix Series Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Balanced Fund Series, the Convertible Fund Series, the Growth Fund Series,
the Aggressive Growth Fund Series, the High Yield Fund Series, the U.S.
Government Securities Fund Series and the Money Market Fund Series (constituting
the Phoenix Series Fund, hereinafter referred to as the "Fund") at October 31,
1997, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
December 12, 1997
59
<PAGE>
WHAT IS THE PHOENIX SERIES FUND?
Phoenix Series Fund is your investment for a lifetime! Consisting of seven
individual portfolios, each with a separate investment objective, the Series
Fund is a mutual fund designed to provide you with convenience and flexibility
in making your investment decisions. As your personal financial needs change,
you can easily redirect your investment to a more suitable portfolio within the
Series Fund.
WHO MANAGES MY FUND?
Phoenix Investment Counsel, Inc. provides skilled and professional
management services, including investment selection and portfolio supervision.
WHY ARE THERE SEVEN FUNDS?
We have designed seven separate funds, each with different investment
objectives, in order to meet a variety of investment goals.
Phoenix Balanced Fund Series seeks as its investment objectives reasonable
income, long-term capital growth and conservation of capital.
Phoenix Convertible Fund Series seeks as its investment objectives income
and the potential for capital appreciation; these objectives are to be
considered relatively equal.
Phoenix Growth Fund Series seeks as its investment objective long-term
appreciation of capital. Since income is not an objective, any income generated
by the investment of this Series' assets will be incidental to its objective.
Phoenix High Yield Fund Series seeks as its investment objective high
current income. Capital growth is a secondary objective which will also be
considered when consistent with the primary objective of high current income.
Phoenix Money Market Fund Series seeks as its investment objective as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity.
Phoenix Aggressive Growth Fund Series seeks as its investment objective
appreciation of capital through the use of aggressive investment techniques.
Phoenix U.S. Government Securities Fund Series seeks as its investment
objective a high level of current income consistent with safety of principal.
WHAT IF MY FINANCIAL NEEDS CHANGE?
Just call us. At your request, the value of shares in any account can be
exchanged toward the purchase of shares of any other fund within the Series Fund
by using the Exchange Privilege.
HOW DOES THE EXCHANGE PRIVILEGE WORK?
Our Exchange Privilege offers the flexibility needed to assure the most
suitable portfolio throughout your lifetime. At any time you may redirect some
or all of your present holdings into another fund in the Series Fund which
better serves your needs. Just call us with the details. We'll process the
exchange free of charge. The toll-free number to call with your exchange request
is 800-367-5877. The exchange privilege may be modified or terminated, as noted
in the prospectus.
HOW DO I MAKE ADDITIONAL INVESTMENTS?
Send your check directly to State Street Bank and Trust Company, P.O. Box
8301, Boston, MA 02266-8301. Please include either the bottom section of your
confirmation statement or a simple letter of instruction.
CAN I MAKE AUTOMATIC MONTHLY INVESTMENTS?
You may authorize automatic monthly investments for as little as $25 to be
made directly from your personal checking account. An application is available
from the Series Fund.
CAN I ESTABLISH AN INDIVIDUAL RETIREMENT ACCOUNT (IRA) WITH PHOENIX SERIES
FUND?
Yes! The Phoenix Series Fund is an appropriate investment vehicle for
qualified retirement plans including IRAs, Keoghs, Pension and Profit Sharing
Plans.
HOW DO I ESTABLISH AN IRA?
Just call us at 800-243-4361.
HOW MUCH CAN I INVEST INTO AN IRA?
Individuals may invest up to $2,000 or 100% of earned income, whichever is
less. If you have an unemployed spouse, the maximum contribution could increase
to $2,250.
WHAT ARE THE TAX ADVANTAGES OF ESTABLISHING AN IRA?
Individuals who meet the deductibility requirements may deduct their yearly
IRA contributions from their taxable income, and thus, pay less tax.
Additionally, the account's earnings still accumulate tax-free until you
withdraw your money at retirement.
WHO CAN ANSWER MY QUESTIONS?
Most questions can be answered by our Customer Service Department. We are
equipped with computer terminals which allow quick and easy access to
information on your account. In most cases, your questions can be answered by
calling us toll-free at 800-243-1574.
60
<PAGE>
PHOENIX SERIES FUND 101 Munson Street
Greenfield, Massachusetts 01301
Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
David R. Pepin, Executive Vice President
William J. Newman, Senior Vice President
James D. Wehr, Senior Vice President
Curtiss O. Barrows, Vice President
Mary E. Canning, Vice President
John M. Hamlin, Vice President
Van Harissis, Vice President
William E. Keen, III, Vice President
Christopher J. Kelleher, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Julie L. Sapia, Vice President
Dorothy J. Skaret, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
Principal Underwriter
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
APRIL 30, 1998
P H O E N I X
F U N D S
SEMIANNUAL REPORT
- - PHOENIX BALANCED FUND
- - PHOENIX CONVERTIBLE FUND
- - PHOENIX GROWTH FUND
- - PHOENIX AGGRESSIVE GROWTH FUND
- - PHOENIX HIGH YIELD FUND
- - PHOENIX U.S. GOVERNMENT SECURITIES FUND
- - PHOENIX MONEY MARKET FUND
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Equity Funds
The Balanced Fund Series......................................................................... 2
The Convertible Fund Series...................................................................... 12
The Growth Fund Series........................................................................... 19
The Aggressive Growth Fund Series................................................................ 26
Fixed Income Funds
The High Yield Fund Series....................................................................... 32
The U.S. Government Securities Fund Series....................................................... 40
The Money Market Fund Series....................................................................... 46
Notes to Financial Statements...................................................................... 52
Fund Features and General Information.............................................................. 56
</TABLE>
Mutual funds are not insured by the FDIC; are not deposits or
other obligations of a bank and are not guaranteed by a bank;
and are subject to investment risks, including possible loss of
the principal invested.
<PAGE>
CHAIRMAN'S
MESSAGE
Dear Phoenix Funds Shareholder:
I'm pleased to make you aware that we recently changed
our corporate name to Phoenix Investment Partners, Ltd. We
feel this new name better fits the growing investment
management firm we have been building and reflects our
commitment to partnership and excellence in serving the
financial needs of investors like you.
Over the past year, we have added several of the
industry's most experienced and talented money managers to
our team to provide you with a wider variety of quality
investment products. Phoenix Investment Partners offers you
access to the distinct investment styles of independent
money managers across the U.S. and around the world:
Aberdeen Fund Managers, Inc.
Duff & Phelps Investment Management Co.
Phoenix Investment Counsel, Inc.
Roger Engemann & Associates, Inc.
Seneca Capital Management LLC
Classic Value group, led by Chris Bertelsen
Quantitative Value group, led by Steve Colton and Dong Hao
Zhang
As always, we are committed to providing you with sound
investments and outstanding service--now with even more
choices, including value-style mutual funds. To learn more
about our new partners and their distinctive investment
styles, contact your financial adviser or call a marketing
specialist at 1-800-243-4361.
Sincerely,
[SIGNATURE]
Philip R. McLoughlin
PRESIDENT, PHOENIX FUNDS
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
INVESTOR PROFILE
Phoenix Balanced Fund is designed for investors seeking to supplement current
income while maintaining the potential for future growth and conservation of
capital.
INVESTMENT ADVISER'S REPORT
Aided by a strong U.S. equity market, the Phoenix Balanced Fund posted strong
gains over this latest fiscal reporting period. For the six-month reporting
cycle ended April 30, 1998, Class A shares returned 11.62% and Class B shares
earned 11.23%. During the same period, the Fund's benchmark index* provided a
total return of 13.59%, and the average return for 392 balanced funds was
11.55%, according to Lipper Analytical Services Inc. All performance figures
assume reinvestment of dividends and exclude the effect of sales charges.
COMMON STOCK SUMMARY
Positive contributors to equity performance during this latest reporting cycle
included the Fund's overweighted position in the "red-hot" health-care sector as
well as strong stock selection in capital goods, consumer staples and financial
services. Individual stocks which produced stellar gains included such names as
Pfizer, HBO & Company, Gillette, BMC Software and Tyco International. On the
other side of the equation, negative contributors over the last six months
included the portfolio's exposure to the poorly performing energy group and
weakness in some of our technology and consumer cyclical holdings.
FIXED-INCOME SUMMARY
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 six months into the most undervalued sectors and out of
sectors determined to be overvalued. Early in the year we were increasing our
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. We took advantage of this spread widening, increasing our
exposure to investment-grade corporates, taxable municipals, commercial
mortgage-backed securities and emerging markets.
OUTLOOK
Looking ahead, we expect economic growth to moderate later in the year as the
impact of the Asian crisis begins to take hold in the United States. Although we
expect the U.S. economy to slow, we do not foresee a recession on the immediate
horizon. As it relates to corporate profits, we believe earnings growth will
continue to slow, creating a challenging environment for investors and further
fueling the volatility and rotation in the market.
Specific to the equity portion of the Fund, we are maintaining our
overweighted positions in health care and technology, and are pleased with the
recent strong performance we received from these two sectors. Because of the
current speculative merger and acquisition environment in the financial services
arena, we believe that some of the group has become overbought and have elected
to selectively take profits in this sector. Lastly, given the attractive
risk/reward opportunities in the energy group, it is our intention to add to
these stocks as crude oil prices begin to show further signs of stabilization.
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 credit
quality assigned to the Fund is based solely on the creditworthiness of the
investments in the portfolio and does not apply to the stability or safety of
the Fund. 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.
As of April 30, 1998, the Phoenix Balanced Fund's asset allocation was 57%
equities, 38% fixed-income and 5% cash equivalents.
* The benchmark index is a composite of 55% S&P 500 Index, 35% Lehman Brothers
Aggregate Index, and 10% 90-day Treasury bills. This composite index is not
available for direct investment.
2
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- ----------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--3.7%
U.S. TREASURY NOTES--3.7%
U.S. Treasury Notes 5.375%, 1/31/00....................... AAA $ 62,000 $ 61,794,774
U.S. Treasury Notes 6.875%, 3/31/00....................... AAA 2,900 2,967,715
--------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $65,019,076)........................................................... 64,762,489
--------------
AGENCY MORTGAGE-BACKED SECURITIES--4.2%
GNMA 6.50%, '23-'26....................................... AAA 72,947 72,753,753
--------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $70,789,985)........................................................... 72,753,753
--------------
MUNICIPAL BONDS--6.7%
CALIFORNIA--2.7%
California State Department Water System Series S 5%,
12/1/29................................................. AA 3,460 3,282,675
Fresno County Pension Taxable 6.21%, 8/15/06.............. AAA 5,150 5,104,937
Kern County Pension Obligation Taxable 7.26%, 8/15/14..... AAA 6,830 7,239,800
Long Beach Pension Obligation Taxable 6.87%, 9/1/06....... AAA 3,090 3,209,737
Los Angeles County Public Works 5.125%, 12/1/29........... AAA 5,250 5,053,125
Orange County General Obligation Revenue Taxable 7.62%
9/1/08.................................................. AAA 9,545 10,404,050
San Bernardino County Obligation Revenue Taxable 6.87%,
8/1/08.................................................. AAA 1,480 1,528,100
San Bernardino County Obligation Revenue Taxable 6.94%,
8/1/09.................................................. AAA 4,035 4,196,400
Sonoma County Pension Obligation 6.625%, 6/1/13........... AAA 3,600 3,613,500
Ventura County Pension Taxable 6.58%, 11/1/06............. AAA 3,560 3,631,200
--------------
47,263,524
--------------
FLORIDA--1.1%
Florida State Department of Transportation 5%, 7/1/27..... AA+ 4,200 4,011,000
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- ----------- --------------
FLORIDA--CONTINUED
Miami Beach Special Obligation Taxable 8.60%, 9/1/21...... AAA $ 11,675 $ 13,061,406
University of Miami Exchangeable Revenue Series A Taxable
7.65%, 4/1/20........................................... AAA 1,940 2,027,300
--------------
19,099,706
--------------
MASSACHUSETTES--0.4%
Massachusetts State Port Authority Revenue 6.05%,
7/1/02.................................................. AA- 3,280 3,263,600
Massachusetts State Water Authority 5%, 8/1/24............ AAA 4,200 3,990,000
--------------
7,253,600
--------------
NEW YORK--0.6%
New York State Taxable Series C 6.35%, 03/01/07 (e)....... AAA 10,055 10,080,138
--------------
PENNSYLVANIA--0.5%
Pittsburgh Pension Taxable 6.50%, 3/1/17.................. AAA 9,245 8,979,206
--------------
TEXAS--1.0%
Dallas-Fort Worth Texas International Taxable 6.50%,
11/1/09................................................. AAA 1,900 1,900,000
Dallas-Fort Worth Texas International Taxable 6.60%,
11/1/12................................................. AAA 6,250 6,281,250
Houston Texas Water & Sewer Refunding Jr Series D 5%,
12/1/25................................................. AAA 5,250 4,994,063
Texas State Taxable - Veterans Limited Series B 6.10%,
12/1/03................................................. AA 4,500 4,455,000
--------------
17,630,313
--------------
VIRGINIA--0.1%
Newport News Taxable Series B 7.05%, 1/15/25 (e).......... AA 2,500 2,503,125
--------------
WASHINGTON--0.3%
Washington State Series E Taxable 5%, 7/1/22.............. AA+ 5,250 4,954,688
--------------
TOTAL MUNICIPAL BONDS
(Identified cost $116,322,719).......................................................... 117,764,300
--------------
See Notes to Financial Statements 3
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
ASSET-BACKED SECURITIES--2.5% ---------- ----------- --------------
AESOP Funding II LLC 144A 97-1, A2 6.40%, 10/20/03 (c).... AAA $ 8,500 $ 8,603,594
Associates Manufactured Housing Pass Through 97-2 A6
7.075%, 3/15/28......................................... AAA 3,000 3,043,125
Capital Equipment Receivables Trust 97-1B, 6.45%,
8/15/02................................................. A+ 4,900 4,958,187
Chase Credit Card Master Trust 97-2A 6.30%, 4/15/03....... AAA 9,000 9,050,976
Fleetwood Credit Corp. 96-B, A 6.90%, 3/15/12............. AAA 2,716 2,741,223
Green Tree Financial Corp. 96-2, M1 7.60%, 4/15/27........ AA- 9,150 9,513,141
Green Tree Financial Corp. 96-4, A6 7.40%, 6/15/27........ AAA 4,500 4,673,672
Green Tree Home Improvement Loan 6.90%, 7/15/21........... AAA 886 893,620
--------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $42,691,942)........................................................... 43,477,538
--------------
CORPORATE BONDS--4.0%
BANKS (MONEY CENTER)--0.8%
IBJ Preferred Capital Co. 144A 8.79%, 12/29/49 (c)........ BBB- 6,680 6,332,453
SB Treasury Co. 9.125%, 12/29/49.......................... BBB- 6,680 6,780,200
--------------
13,112,653
--------------
COMMUNICATIONS EQUIPMENT--0.4%
Panamsat Corp 144A 6.125%, 1/15/05 (c).................... A- 7,000 6,833,750
--------------
CONSUMER FINANCE--0.4%
Ford Motor Credit 6%, 1/14/03............................. A 6,900 6,848,250
--------------
DISTRIBUTORS (FOOD & HEALTH)--0.4%
McKesson Corp. 144A 6.40%, 3/1/08 (c)..................... A- 7,100 7,011,250
--------------
HEALTH CARE (DIVERSIFIED)--0.3%
Buckeye Cellulose Corp. 9.25%, 9/15/08.................... BB- 4,185 4,425,637
--------------
INVESTMENT BANKING/BROKERAGE--0.4%
Merrill Lynch & Co., 6%, 2/12/03.......................... AA- 7,000 6,947,500
--------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- ----------- --------------
MEDICAL PRODUCTS & SUPPLIES--0.4%
Boston Scientific Corp. 6.625%, 3/15/05................... A- $ 7,000 $ 7,017,500
--------------
RETAIL (FOOD CHAINS)--0.3%
Fred Meyer 7.45%, 3/1/08.................................. BB+ 5,800 5,785,500
--------------
TELEPHONE--0.4%
Century Telephone Enterprises Series F 6.30%, 1/15/08..... BBB+ 7,000 6,895,000
--------------
TRUCKERS & MARINE--0.1%
Teekay Shipping Corp. 8.32%, 2/1/08....................... BB 1,675 1,735,719
--------------
TRUCKS & PARTS--0.1%
Cummins Engine 6.45%, 3/1/05.............................. BBB+ 2,350 2,332,375
--------------
TOTAL CORPORATE BONDS
(Identified cost $69,233,676)........................................................... 68,945,134
--------------
NON-AGENCY MORTGAGE BACKED SECURITIES--8.2%
CS First Boston Mortgage 95-AE, B 7.182%, 11/25/27........ AA- 6,260 6,299,125
CS First Boston Mortgage Securities Corp. 97-C2, B 6.72%,
11/17/07................................................ AA(d) 9,000 9,118,125
CS First Boston Corp. 97-SPCE, D 144A 7.332%, 3/15/09
(c)..................................................... NR 4,039 4,066,768
Case Equipment Loan Trust 98-A A4, 5.83% 2/15/05.......... AAA 11,600 11,572,044
DLJ Mortgage Acceptance Corp. 96-CF1, A1B 144A 7.58%,
3/13/28 (c)............................................. AAA 6,475 6,883,734
Equicredit Home Equity Loan Trust 6.28%, 5/15/12.......... AAA 725 725,131
First Union Lehman Bros. 97-C1, B 7.43%, 4/18/07.......... AA(d) 8,532 8,961,266
G.E. Capital Mortgage Services, Inc. 96-8, M 7.25%,
5/25/26................................................. AA 5,093 5,204,420
GMAC Commercial Mortgage Securities, Inc. 97-B, C2 6.70%,
12/15/07................................................ AA(d) 5,000 5,045,312
Lehman Large Loan LL1, B 6.95%, 3/12/07................... AA 10,500 10,795,312
Nationslink Funding Corp. 96-1, B 7.69%, 12/20/05......... AA 5,907 6,246,632
New Century Home Equity Loan Trust 6.78%, 8/25/25......... AAA 9,000 9,022,500
4 See Notes to Financial Statements
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
NON-AGENCY MORTGAGE BACKED SECURITIES--CONTINUED ---------- ----------- --------------
Newcourt Receivables Asset Trust 97-1 A3 6.11%, 5/20/01... AAA $ 2,100 $ 2,104,594
Premier Auto Trust 98-1, A4 5.70%, 1/6/03................. Aaa(d) 4,000 3,976,250
Prudential Home Mortgage Securities 93-L, 2B3 144A 6.641%,
12/25/23 (c)............................................ A(d) 5,000 4,935,938
Residential Asset Securitization Trust 96-A8, A1 8%,
12/25/26................................................ AAA 2,273 2,286,704
Residential Funding Mortgage Securities I 96-S1, A11
7.10%, 1/25/26.......................................... AAA 7,000 7,052,500
Residential Funding Mortgage Securities I 96-S4, M1 7.25%,
2/25/26................................................. AA 5,890 5,939,834
Residential Funding Mortgage Securities, I 96-S8, A4
6.75%, 3/25/11.......................................... AAA 2,607 2,637,588
Securitized Asset Sales 93-J 2B 6.808%, 11/28/23.......... A(d) 7,237 7,252,811
Structured Asset Securities Corp. 93-C1, B 6.60%,
10/25/24................................................ A+ 4,415 4,347,753
Structured Asset Securities Corp. 95-C4, B 7%, 6/25/26.... AA 5,000 5,040,625
Triangle Funding Ltd. 97-3A, 1B 5.846%, 10/15/05.......... AA 6,000 5,988,750
Wings Commercial Loan Master Trust I, 98-AA, AZ, 144A
5.905%, 3/20/06 (c)..................................... AAA 8,000 8,007,500
--------------
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(Identified cost $140,771,336).......................................................... 143,511,216
--------------
FOREIGN GOVERNMENT SECURITIES--6.9%
ARGENTINA--0.9%
Republic of Argentina Bearer FRB 6.25%, 3/31/05 (f)....... BB 11,210 10,299,187
Republic of Argentina 9.75%, 9/19/27...................... BB 5,080 4,904,740
--------------
15,203,927
--------------
BRAZIL--0.6%
Republic of Brazil NMB-L 6.75%, 4/15/09 (f)............... BB- 12,625 10,644,453
--------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- ----------- --------------
BULGARIA--0.3%
Bulgaria FLIRB Bearer Series A Euro 2.25%, 7/28/12 (f).... B(d) $ 8,350 $ 5,615,375
--------------
COLOMBIA--0.6%
Republic of Colombia Global Bond 7.25%, 2/15/03........... BBB- 8,950 8,703,875
Republic of Colombia Global Bond 7.25%, 2/23/04........... BBB- 1,750 1,653,750
--------------
10,357,625
--------------
CROATIA--0.6%
Croatia Series B 6.50%, 7/31/06 (f)....................... BBB- 5,084 4,668,174
Croatia Series A 6.625%, 7/31/10 (f)...................... BBB- 6,100 5,417,562
--------------
10,085,736
--------------
ECUADOR--0.3%
Ecuador Bearer PDI Euro, PIK interest capitalization
6.625%, 2/27/15 (f)..................................... B(d) 8,122 5,195,856
--------------
KOREA--0.2%
Republic of Korea 8.875%, 4/15/08......................... BB+ 3,130 3,086,180
--------------
MEXICO--0.9%
United Mexican States Global Bond 11.50%, 5/15/26......... BB 12,575 15,168,594
--------------
PANAMA--0.8%
Republic of Panama 8.875%, 9/30/27........................ BB+ 15,470 15,152,865
--------------
PERU--0.3%
Peru PDI 4%, 3/7/17 (f)................................... BB 7,850 5,362,531
--------------
POLAND--0.8%
Poland Bearer PDI 4%, 10/27/14 (f)........................ BBB- 16,000 14,640,000
--------------
RUSSIA--0.3%
Russia Ian Principal Loans 144A 6.719%, 12/15/15 (c)(f)... NR 7,585 5,465,941
--------------
VENEZUELA--0.3%
Republic of Venezuela 9.25%, 9/15/27...................... B+ 5,695 5,031,532
--------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $116,131,478).......................................................... 121,010,615
--------------
See Notes to Financial Statements 5
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
VENEZUELA--CONTINUED ---------- ----------- --------------
FOREIGN CORPORATE BONDS--0.4%
ARGENTINA--0.2%
Telefonica de Argentina 9.125%, 5/7/08.................... BBB- $ 3,850 $ 3,869,250
--------------
CHILE--0.2%
Petropower I Funding Trust 144A 7.36%, 2/15/14 (c)........ BBB 2,900 2,876,945
--------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $6,725,938)............................................................ 6,746,195
--------------
SHARES
-----------
PREFERRED STOCKS--1.1%
REITS--1.1%
Home Ownership Funding 2, Step-down Pfd. 144A 13.338%
(c)..................................................... 20,000 19,353,780
--------------
TOTAL PREFERRED STOCKS
(Identified cost $18,772,330)........................................................... 19,353,780
--------------
COMMON STOCKS--54.1%
AEROSPACE/DEFENSE--1.1%
Boeing Co.............................................................. 379,300 18,988,706
--------------
BANKS (MAJOR REGIONAL)--2.6%
Banc One Corp.......................................................... 171,370 10,078,698
BankBoston Corp........................................................ 70,100 7,566,419
Mellon Bank Corp....................................................... 67,400 4,852,800
NationsBank Corp....................................................... 140,700 10,658,025
U.S. Bancorp........................................................... 102,400 13,004,800
--------------
46,160,742
--------------
BANKS (MONEY CENTER)--1.3%
BankAmerica Corp....................................................... 100,600 8,551,000
Citicorp............................................................... 49,100 7,389,550
NDB Bancorp, Inc....................................................... 82,600 7,671,475
--------------
23,612,025
--------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.7%
CBS Corp............................................................... 510,200 18,175,875
Chancellor Media Corp. (b)............................................. 245,500 11,645,906
--------------
29,821,781
--------------
CHEMICALS--0.9%
Monsanto Co............................................................ 284,900 15,064,087
--------------
CHEMICAL (SPECIALTY)--0.4%
Solutia, Inc........................................................... 265,200 7,525,050
--------------
SHARES VALUE
----------- --------------
COMMUNICATIONS EQUIPMENT--0.4%
Ciena Corp. (b)........................................................ 112,200 $ 6,255,150
--------------
COMPUTERS (HARDWARE)--3.0%
International Business Machines Corp................................... 454,000 52,607,250
--------------
COMPUTERS (NETWORKING)--0.6%
Cisco Systems, Inc. (b)................................................ 132,025 9,670,831
--------------
COMPUTERS (PERIPHERALS)--0.4%
EMC Corp. (b).......................................................... 164,600 7,592,175
--------------
COMPUTERS (SOFTWARE & SERVICES)--4.6%
America Online, Inc. (b)............................................... 38,700 3,093,581
BMC Software, Inc. (b)................................................. 232,200 21,725,212
Comdisco, Inc.......................................................... 127,000 5,619,750
Computer Associates International, Inc................................. 292,600 17,135,387
Compuware Corp. (b).................................................... 419,500 20,503,062
Edwards (J.D.) & Co. (b)............................................... 183,300 6,530,062
Sterling Commerce...................................................... 118,400 5,039,400
--------------
79,646,454
--------------
CONSUMER FINANCE--0.7%
American Express Co.................................................... 50,200 5,120,400
Household International, Inc........................................... 58,600 7,702,237
--------------
12,822,637
--------------
DISTRIBUTORS (FOOD & HEALTH)--0.7%
Cardinal Health, Inc................................................... 128,100 12,329,625
--------------
ELECTRICAL EQUIPMENT--0.9%
General Electric Co.................................................... 194,900 16,590,862
--------------
ELECTRONICS (INSTRUMENTATION)--0.3%
Linear Technology Corp................................................. 75,000 6,037,500
--------------
ELECTRONICS (SEMICONDUCTORS)--0.6%
Intel Corp............................................................. 127,100 10,271,269
--------------
FINANCIAL (DIVERSIFIED)--1.0%
American General Corp.................................................. 34,600 2,305,225
FHLMC.................................................................. 337,800 15,644,363
--------------
17,949,588
--------------
HEALTH CARE (LONG TERM CARE)--0.9%
HEALTHSOUTH Corp. (b).................................................. 511,100 15,428,831
--------------
HEALTH CARE (DIVERSIFIED)--2.6%
Bristol-Myers Squibb Co................................................ 224,600 23,779,525
Warner-Lambert Co...................................................... 117,900 22,305,206
--------------
46,084,731
--------------
6 See Notes to Financial Statements
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
SHARES VALUE
----------- --------------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--2.6%
Pfizer, Inc............................................................ 192,400 $ 21,897,525
Schering Plough Corp................................................... 128,500 10,296,062
Watson Pharmaceuticals, Inc. (b)....................................... 306,100 13,162,300
--------------
45,355,887
--------------
HEALTH CARE (HOSPITAL MANAGEMENT)--1.6%
HBO & Co............................................................... 330,700 19,779,994
Tenet Healthcare Corp.................................................. 203,400 7,614,788
--------------
27,394,782
--------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.4%
Guidant Corp........................................................... 155,900 10,425,813
Medtronic, Inc......................................................... 252,900 13,308,863
--------------
23,734,676
--------------
HOUSEHOLD FURN. & APPLIANCES--0.1%
Sunbeam Corp., Inc..................................................... 50,500 1,268,813
--------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--0.8%
Colgate-Palmolive Co................................................... 157,200 14,098,875
--------------
INSURANCE (LIFE/HEALTH)--0.4%
UNUM Corp.............................................................. 146,000 7,847,500
--------------
INSURANCE (MULTI-LINE)--1.6%
American International Group, Inc...................................... 82,200 10,814,438
Reliastar Financial Corp............................................... 108,700 4,959,438
Travelers Group, Inc................................................... 204,000 12,482,250
--------------
28,256,126
--------------
INSURANCE (PROPERTY-CASUALTY)--0.8%
Allstate Corp.......................................................... 137,700 13,253,625
--------------
MACHINERY (DIVERSIFIED)--0.8%
Deere & Co............................................................. 164,600 9,618,813
Thermo Electron Corp................................................... 126,600 5,040,262
--------------
14,659,075
--------------
MANUFACTURING (DIVERSIFIED)--0.9%
Tyco International Ltd................................................. 279,700 15,243,650
--------------
OIL (DOMESTIC INTEGRATED)--1.0%
Tosco Corp............................................................. 484,500 17,260,313
--------------
OIL & GAS (DRILLING & EQUIPMENT)--2.7%
Cooper Cameron Corp. (b)............................................... 81,900 5,441,231
Diamond Offshore Drilling, Inc......................................... 174,400 8,829,000
Halliburton Co......................................................... 196,700 10,818,500
Schlumberger Ltd....................................................... 158,600 13,143,975
Transocean Offshore, Inc............................................... 155,400 8,682,975
--------------
46,915,681
--------------
SHARES VALUE
----------- --------------
PAPER & FOREST PRODUCTS--0.5%
International Paper Co................................................. 161,200 $ 8,412,625
--------------
PERSONAL CARE--1.1%
Gillette Co............................................................ 162,300 18,735,506
--------------
RETAIL (BUILDING SUPPLIES)--0.8%
Home Depot, Inc........................................................ 197,400 13,743,975
--------------
RETAIL (DRUG STORES)--2.1%
CVS Corp............................................................... 238,500 17,589,375
Rite Aid Corp.......................................................... 601,100 19,310,338
--------------
36,899,713
--------------
RETAIL (FOOD CHAINS)--1.4%
Safeway, Inc. (b)...................................................... 621,800 23,783,850
--------------
RETAIL (GENERAL MERCHANDISE)--2.4%
Borders Group, Inc. (b)................................................ 225,300 7,237,763
Consolidated Stores Corp. (b).......................................... 394,300 15,772,000
Fred Meyer, Inc. (b)................................................... 184,390 8,262,977
Staples, Inc. (b)...................................................... 414,050 10,221,859
--------------
41,494,599
--------------
RETAIL (SPECIALTY-APPAREL)--0.4%
TJX Companies, Inc..................................................... 144,500 6,394,125
--------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.3%
MCI Communications Corp................................................ 195,300 9,826,031
AT&T Corp.............................................................. 505,900 30,385,619
--------------
40,211,650
--------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.6%
Airtouch Communications, Inc. (b)...................................... 560,200 29,760,625
Tele-Comm Liberty Media Group (b)...................................... 463,400 15,379,088
--------------
45,139,713
--------------
WASTE MANAGEMENT--1.1%
U.S.A. Waste Services, Inc. (b)........................................ 401,500 19,698,594
--------------
TOTAL COMMON STOCKS
(Identified cost $775,309,150).......................................................... 944,262,647
--------------
FOREIGN COMMON STOCKS--3.0%
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.4%
Elan PLC Sponsored ADR (Ireland) (b)................................... 102,900 6,392,662
--------------
HOUSEHOLD FURN. & APPLIANCES--1.6%
Philips Electronics NV ADR NY Registered (Netherlands)................. 317,100 28,539,000
--------------
TELECOMMUNICATIONS EQUIPMENT--0.3%
Telefonaktiebolaget LM Ericsson ADR (Sweden)........................... 95,800 4,927,713
--------------
See Notes to Financial Statements 7
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
SHARES VALUE
----------- --------------
TELEPHONE--0.7%
Telecom Brasil ADR (Brazil)............................................ 99,900 $ 12,169,069
--------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $46,721,977)........................................................... 52,028,444
--------------
TOTAL LONG-TERM INVESTMENTS --94.8%
(Identified cost $1,468,489,607)........................................................ 1,654,616,111
--------------
STANDARD PAR
& POOR'S VALUE
RATING (000)
---------- -----------
SHORT-TERM OBLIGATIONS--4.6%
COMMERCIAL PAPER--4.6%
Campbell Soup Co. 5.47%, 5/1/98........................... A-1+ $ 4,324 4,320,058
Corporate Receivables Capital 5.50%, 5/1/98............... A-1+ 900 900,000
Exxon Imperial U.S., Inc. 5.50%, 5/4/98................... A-1+ 5,000 4,997,708
Preferred Receivables Funding Corp. 5.60%, 5/4/98......... A-1 4,300 4,297,993
Deutsche Bank Financial 5.51%, 5/6/98..................... A-1+ 5,000 4,996,174
Greenwich Funding Corp. 5.55%, 5/6/98..................... A-1 5,155 5,151,026
Campbell Soup Co. 5.47%, 5/7/98........................... A-1+ 5,076 5,071,372
Kimberly-Clark Corp., 5.51% 5/7/98........................ A-1+ 1,720 1,718,421
AlliedSignal, Inc., 5.52%, 5/8/98......................... A-1 5,000 4,994,633
Merrill Lynch Co. 5.52%, 5/12/98.......................... A-1+ 4,140 4,133,017
Corporate Financial 5.51%, 5/13/98........................ A-1 2,500 2,495,408
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
---------- ----------- --------------
Corporate Receivables Corp. 5.50%, 5/13/98................ A-1+ $ 1,855 $ 1,851,568
Potomac Electric Power Co. 5.52%, 5/14/98................. A-1 3,890 3,882,246
BellSouth Capital Funding Corp. 5.50%, 5/15/98............ A-1+ 4,510 4,500,354
Private Export Funding Corp. 5.50%, 5/15/98............... A-1+ 4,500 4,490,377
Private Export Funding Corp. 5.48%, 5/21/98............... A-1+ 10,464 10,432,142
Greenwich Funding Corp. 5.52%, 5/22/98.................... A-1+ 3,800 3,787,764
CXC, Inc. 5.41%, 6/15/98.................................. A-1+ 5,000 4,992,500
Private Export Funding Corp. 5.36%, 8/3/98................ A-1+ 2,405 2,402,836
CXC, Inc. 5.47%, 9/16/98.................................. A-1+ 1,000 976,753
--------------
80,392,350
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $80,336,823)........................................................... 80,392,350
--------------
TOTAL INVESTMENTS--99.4%
(Identified cost $1,548,826,430)........................................................ 1,735,008,461(a)
Cash and receivables, less liabilities--0.6%............................................ 10,726,492
--------------
NET ASSETS--100.0%........................................................................ $1,745,734,953
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $194,269,019 and gross
depreciation of $8,086,988 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$1,548,826,430.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1998, these securities amounted to a value of $80,371,653 or 4.6% of net
assets.
(d) As rated by Moody's, Fitch or Duff & Phelps (e) Segregated as collateral.
(f) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
8 See Notes to Financial Statements
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $1,548,826,430) $ 1,735,008,461
Short-term investments held as collateral for loaned
securities 7,069,900
Cash 5,048
Receivables
Investment securities sold 23,645,731
Interest and dividends 7,497,769
Fund shares sold 238,428
----------------
Total assets 1,773,465,337
----------------
LIABILITIES
Payables
Investments securities purchased 16,255,119
Fund shares repurchased 2,637,040
Collateral on securities loaned 7,069,900
Investment advisory fee 761,089
Transfer agent fee 255,797
Distribution fee 380,907
Financial agent fee 32,006
Trustees' fee 9,300
Accrued expenses 329,226
----------------
Total liabilities 27,730,384
----------------
NET ASSETS $ 1,745,734,953
----------------
----------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 1,450,603,541
Undistributed net investment income 3,533,725
Accumulated net realized gain 105,415,656
Net unrealized appreciation 186,182,031
----------------
NET ASSETS $ 1,745,734,953
----------------
----------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,712,082,369) 100,988,830
Net asset value per share $16.95
Offering price per share
$16.95/(1-4.75%) $17.80
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $33,652,584) 1,990,896
Net asset value and offering price per share $16.90
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Interest $ 23,906,772
Dividends 5,044,907
Security lending 143,555
--------------
Total investment income 29,095,234
--------------
EXPENSES
Investment advisory fee 4,529,453
Distribution fee-Class A 2,101,588
Distribution fee-Class B 156,637
Financial agent fee 191,391
Transfer agent 1,037,019
Printing 142,580
Custodian 69,830
Professional 27,066
Registration 19,219
Trustees 10,674
Miscellaneous 42,149
--------------
Total expenses 8,327,606
--------------
NET INVESTMENT INCOME 20,767,628
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 107,757,123
Net change in unrealized appreciation (depreciation) on
investments 61,427,846
--------------
NET GAIN ON INVESTMENTS 169,184,969
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 189,952,597
--------------
--------------
See Notes to Financial Statements 9
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 20,767,628 $ 47,448,167
Net realized gain 107,757,123 250,161,443
Net change in unrealized appreciation (depreciation) 61,427,846 404,566
---------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 189,952,597 298,014,176
---------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (21,388,908) (48,278,671)
Net investment income--Class B (286,006) (561,622)
Net realized gains--Class A (245,758,798) (194,038,812)
Net realized gains--Class B (4,498,006) (2,800,356)
---------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (271,931,718) (245,679,461)
---------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (2,479,573 and 4,597,468
shares, respectively) 40,323,199 78,630,179
Net asset value of shares issued from reinvestments of
distributions
(16,161,592 and 13,753,866 shares, respectively) 246,831,649 223,224,574
Cost of shares repurchased (11,879,139 and 32,162,386
shares, respectively) (196,942,009) (548,027,979)
---------------- -----------------
Total 90,212,839 (246,173,226)
---------------- -----------------
CLASS B
Proceeds from sales of shares (181,625 and 319,964 shares,
respectively) 3,051,430 5,480,183
Net asset value of shares issued from reinvestments of
distributions
(289,442 and 189,697 shares, respectively) 4,411,570 3,074,179
Cost of shares repurchased (155,273 and 329,164 shares,
respectively) (2,562,028) (5,630,228)
---------------- -----------------
Total 4,900,972 2,924,134
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 95,113,811 (243,249,092)
---------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS 13,134,690 (190,914,377)
---------------- -----------------
NET ASSETS
Beginning of period 1,732,600,263 1,923,514,640
---------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF
$3,533,725 AND $4,441,011, RESPECTIVELY) $ 1,745,734,953 $ 1,732,600,263
---------------- -----------------
---------------- -----------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
PHOENIX BALANCED FUND SERIES
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 18.07 $ 17.56 $ 17.04 $ 15.23 $ 16.64 $ 15.92
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.21 0.48 0.48 0.52 0.48 0.46
Net realized and unrealized
gain (loss) 1.54 2.38 1.46 1.80 (1.01) 1.08
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.75 2.86 1.94 2.32 (0.53) 1.54
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.22) (0.48) (0.49) (0.51) (0.49) (0.46)
Dividends from net realized
gains (2.65) (1.87) (0.93) -- (0.39) (0.36)
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (2.87) (2.35) (1.42) (0.51) (0.88) (0.82)
--------- --------- --------- --------- --------- ---------
Change in net asset value (1.12) 0.51 0.52 1.81 (1.41) (0.72)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 16.95 $ 18.07 $ 17.56 $ 17.04 $ 15.23 $ 16.64
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return(1) 11.62%(3) 18.04% 12.03% 15.52% (3.28)% 9.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $1,712,082 $1,702,385 $1,897,306 $2,345,440 $2,601,808 $3,126,014
RATIO TO AVERAGE NET ASSETS
OF:
Operating expenses 0.96%(2) 0.98% 1.01% 1.02% 0.96% 0.95%
Net investment income 2.44%(2) 2.65% 2.74% 3.27% 3.03% 2.88%
Portfolio turnover 82%(3) 206% 191% 197% 159% 130%
Average commission rate
paid(4) $0.0487 $0.0541 $0.0546 N/A N/A N/A
<CAPTION>
CLASS B
-----------------------------------------------------------------
SIX FROM
MONTHS INCEPTION
ENDED 7/15/94
4/30/98 YEAR ENDED OCTOBER 31, TO
(UNAUDITED) 1997 1996 1995 10/31/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 18.04 $ 17.54 $ 17.01 $ 15.23 $ 15.27
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.15 0.35 0.35 0.40 0.09
Net realized and unrealized
gain (loss) 1.52 2.37 1.47 1.80 (0.04)
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT
OPERATIONS 1.67 2.72 1.82 2.20 0.05
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.16) (0.35) (0.36) (0.42) (0.09)
Dividends from net realized
gains (2.65) (1.87) (0.93) -- --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (2.81) (2.22) (1.29) (0.42) (0.09)
--------- --------- --------- --------- ---------
Change in net asset value (1.14) 0.50 0.53 1.78 (0.04)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 16.90 $ 18.04 $ 17.54 $ 17.01 $ 15.23
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return(1) 11.23%(3) 17.13% 11.24% 14.68% (0.34)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $33,653 $30,216 $26,209 $16,971 $4,629
RATIO TO AVERAGE NET ASSETS
OF:
Operating expenses 1.75%(2) 1.73% 1.76% 1.78% 1.65%(2)
Net investment income 1.65%(2) 1.90% 1.96% 2.46% 2.36%(2)
Portfolio turnover 82%(3) 206% 191% 197% 159%
Average commission rate
paid(4) $0.0487 $0.0541 $0.0546 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4)For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
See Notes to Financial Statements 11
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
INVESTOR PROFILE
Phoenix Convertible Fund is designed for an investor seeking to supplement
current income while maintaining the potential for growth.
INVESTMENT ADVISER'S REPORT
For the six-month period ended April 30, 1998, Phoenix Convertible Fund Class
A and B shares posted solid returns of 6.74% and 6.42%, respectively, compared
with a 9.12% return for the CS First Boston Convertible Securities Index*. All
performance figures assume reinvestment of dividends and exclude the effect of
sales charges.
During this latest reporting cycle, speculative-grade convertibles
outperformed investment-grade issues. The portfolio's underperformance versus
the benchmark resulted primarily from our energy holdings and from our
relatively conservative investment posture in a rapidly rising market. Consumer
cyclical and staples stocks registered strong gains over the last six months and
our heavy exposure to these sectors benefited performance. Top contributors
included U.S. West, Media Group, Time Warner, Cablevision Systems and Office
Depot.
OUTLOOK
Looking ahead, we expect economic growth to moderate later in the year as the
impact of the Asian crisis begins to take hold in the United States. Although
our forecast calls for a slowdown in the U.S. economy, we do not foresee a
recession on the immediate horizon. As it relates to the stock market, we
believe that corporate profit growth will continue to slow, creating a
challenging earnings environment for investors and further fueling the
volatility and rotation in the market. As always, we remain committed to the
Fund's overall objective of providing low-risk equity exposure. The portfolio's
asset allocation as of April 30, 1998 was 80% convertible securities, 4% common
stock and 16% cash equivalents.
* The CS First Boston Convertible Index includes issues rated "B-" or better
by Standard & Poor's, with a minimum issue size of $50 million. The Index is not
available for direct investment.
12
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ----------- ------------------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS--53.9%
COMMUNICATIONS EQUIPMENT--0.7%
BBN Corp. Cv. 6%, 4/1/12......... B $ 1,500 $ 1,455,000
------------------
COMPUTER (SOFTWARE & SERVICES)--1.2% System Software Association Cv.
7%, 9/15/02.................... NR 2,750 2,378,750
------------------
DIVERSIFIED MISCELLANEOUS--2.1%
Berkshire Hathaway Cv. 1%,
12/2/01........................ AA 2,325 4,286,719
------------------
ELECTRICAL EQUIPMENT--2.8%
Itron, Inc. Cv. 6.75%,
3/31/04........................ NR 1,850 1,720,500
Thermo Electron Corp. Cv. 144A
4.25%, 1/1/03 (c).............. A- 3,500 4,020,625
------------------
5,741,125
------------------
ELECTRONICS (SEMICONDUCTORS)--1.0%
Xilinx, Inc. Cv. 5.25%,
11/1/02........................ B 1,850 1,981,813
------------------
HEALTH CARE (DIVERSIFIED)--1.5%
Chiron Corp. Cv. 144A 1.90%,
11/17/00 (c)................... BBB+ 3,250 3,022,500
------------------
HEALTH CARE (LONG TERM CARE)--0.5%
Atria Communities, Inc. Cv. 144A
5%, 10/15/02 (c)............... B- 1,000 996,250
------------------
HOUSEHOLD FURN. & APPLIANCES--1.2%
Sunbeam Corp. Cv. 0%, 3/25/18.... NR 7,800 2,437,500
------------------
LEISURE TIME PRODUCTS--5.8%
Imax Corp. Cv. 5.75%, 4/1/03..... B 4,250 5,838,437
Time Warner, Inc. Cv. 0%,
6/22/13........................ BBB- 10,135 6,119,006
------------------
11,957,443
------------------
METALS MINING--5.3%
Coeur d'Alene Cv. 144A 7.25%,
10/31/05 (c)................... NR 7,500 6,993,750
Coeur d'Alene Euro Cv. 6%,
6/10/02........................ CCC+ 1,000 765,000
Stillwater Mining Co. Cv. 7%,
5/1/03......................... NR 2,800 3,125,500
------------------
10,884,250
------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ----------- ------------------
OIL & GAS (DRILLING & EQUIPMENT)--9.1%
Baker Hughes, Inc. Cv. 0%,
5/5/08......................... A- $ 2,100 $ 1,722,000
Diamond Offshore Drilling, Inc.
Cv. 3.75%, 2/15/07............. BBB+ 1,500 2,002,500
Halter Marine Group, Inc. Cv.
4.50%, 9/15/04................. B+ 3,550 3,092,937
Halter Marine Group, Inc. Cv.
144A 4.50%, 9/15/04 (c)........ NR 2,175 1,894,969
Key Energy Group Cv. 144A 5%,
9/15/04 (c).................... NR 2,000 1,660,000
Nabors Industries, Inc. Cv. 5%,
5/15/06........................ BBB- 4,605 6,901,744
Offshore Logistic Cv. 144A 6%,
12/15/03 (c)................... B+ 1,000 1,197,500
------------------
18,471,650
------------------
PUBLISHING--1.2%
Hollinger, Inc. Cv. 0%,
10/5/13........................ BB- 6,000 2,407,500
------------------
PUBLISHING (NEWSPAPERS)--0.7%
Times Mirror Co. Cv. 144A 0%,
4/15/17 (c).................... A 3,500 1,513,750
------------------
RETAIL (DRUG STORES)--2.8%
Rite Aid Corp. Cv. 144A 5.25%,
9/15/02 (c).................... BBB 5,175 5,808,938
------------------
RETAIL (GENERAL MERCHANDISE)--4.9%
Home Depot, Inc. Cv. 3.25%,
10/1/01........................ A+ 1,250 1,945,313
Office Depot, Inc. Cv. 0%,
11/1/08........................ BB- 2,500 1,959,375
Pep Boys Cv. 0%, 9/20/11......... BBB 7,775 4,169,344
Saks Holdings, Inc. Cv. 5.50%,
9/15/06........................ B 1,250 1,084,375
Sports Authority, Inc. (The) Cv.
144A 5.25%, 9/15/01 (c)........ B 1,000 913,750
------------------
10,072,157
------------------
SERVICES (ADVERTISING/MARKETING)--3.4%
Interpublic Group (The) Cv. 144A
1.80%, 9/16/04 (c)............. NR 2,500 2,381,250
Omnicom Group, Inc. Cv. 144A
2.25%, 1/6/13 (c).............. NR 4,000 4,580,000
------------------
6,961,250
------------------
See Notes to Financial Statements 13
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ----------- ------------------
SERVICES (COMMERCIAL & CONSUMER)--0.5%
Metamor Worldwide, Inc. Cv.
2.94%, 8/15/04................. NR $ 1,000 $ 1,036,250
------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.0%
Premiere Technology Cv. 144A
5.75%, 7/1/04 (c).............. NR 1,500 1,732,500
U.S. Cellular Corp. Cv. 0%,
6/15/15........................ BBB- 6,000 2,287,500
------------------
4,020,000
------------------
WASTE MANAGEMENT--7.2%
Chemical Waste Management, Inc.
Cv. 0%, 8/16/10................ BBB+ 14,150 6,919,350
U.S.A. Waste Services, Inc. Cv.
4%, 2/1/02..................... BBB- 2,650 3,259,500
WMX Technologies, Inc. Cv. 2%,
1/24/05........................ BBB+ 4,710 4,521,600
------------------
14,700,450
------------------
TOTAL CONVERTIBLE BONDS
(Identified cost $106,453,167).............................. 110,133,295
------------------
FOREIGN CONVERTIBLE BONDS--5.0%
SINGAPORE--1.1% APP Finance VII Mauritius Cv.
144A 3.50%, 4/30/03 (c)........ NR 2,300 2,294,250
------------------
SWITZERLAND--3.9%
Roche Holdings, Inc. Cv. 144A 0%,
5/6/12 (c)..................... NR 7,800 3,597,750
Sandoz Capital BVI Ltd. Cv. 2%,
10/6/02........................ Aaa(b) 1,500 2,343,750
Sandoz Capital BVI Ltd. Cv. 144A
2%, 10/6/02 (c)................ Aaa(b) 1,330 2,078,125
------------------
8,019,625
------------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $9,566,443)................................ 10,313,875
------------------
SHARES
-----------
CONVERTIBLE PREFERRED STOCKS--21.3%
AIRLINES--1.5%
Trans World Air Cv. Pfd. 8%.................. 82,900 3,025,850
------------------
BROADCASTING (TELEVISION, RADIO & CABLE)--0.5%
Cablevision Systems Corp. Cv. Pfd. 8.50%..... 21,000 1,008,000
------------------
COMMUNICATIONS EQUIPMENT--0.9%
Merrill Lynch & Co. Series Cox (STRYPES) Cv.
Pfd. 6%.................................... 26,100 975,487
TCI Pacific Communications Cv. Pfd. 5%....... 4,800 876,000
------------------
1,851,487
------------------
SHARES VALUE
----------- ------------------
COMPUTERS (SOFTWARE & SERVICES)--0.4%
Microsoft Corp. Series A Cv. Pfd. $2.196..... 8,500 $ 791,562
------------------
HEALTH CARE (DIVERSIFIED)--0.6%
McKesson Corp. Cv. Pfd. 144A $2.50 (c)....... 11,600 1,122,300
------------------
HOUSEHOLD FURN. & APPLIANCES--3.6%
Newell Financial Trust I Cv. Pfd. 5.25%,
Series 144A (c)............................ 129,900 7,355,588
------------------
INSURANCE (MULTI-LINE)--3.0%
American General Delaware Series A Cv. Pfd.
6%......................................... 24,600 2,091,000
St. Paul Capital LLC MIPS Cv. Pfd. 6%........ 56,000 4,088,000
------------------
6,179,000
------------------
METALS MINING--1.5%
Timet Capital Trust I Cv. Pfd. 144A 6.625%
(c)........................................ 20,000 960,000
USX Corp. Cv. Pfd. 6.75%..................... 97,800 2,004,900
------------------
2,964,900
------------------
NATURAL GAS--2.7%
El Paso Energy Capital Cv. Pfd. 4.75%........ 104,000 5,466,500
------------------
OIL & GAS (DRILLING & EQUIPMENT)--1.6%
EVI, Inc. Cv. Pfd. 144A, 5% (c).............. 69,500 3,266,500
------------------
OIL & GAS (EXPLORATION & PRODUCTION)--1.5%
Belco Oil & Gas Cv. Pfd. 6.50%............... 40,000 1,035,000
Lomak Petroleum Cv. Pfd. 144A 5.75% (c)...... 50,000 2,106,250
------------------
3,141,250
------------------
PAPER & FOREST PRODUCTS--1.0%
International Paper Co. Cv. Pfd. 5.25%....... 38,600 2,084,400
------------------
RAILROADS--1.0%
Union Pacific Capital Trust Cv. Pfd. 144A
6.25% (c).................................. 40,000 2,085,000
------------------
TELEPHONE--0.5%
US West, Inc. Series D Cv. Pfd. 4.50%........ 12,700 968,375
------------------
TEXTILES (APPAREL)--1.0%
Designer Finance Cv. Pfd. 6%................. 46,700 2,101,500
------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $39,721,128)............................... 43,412,212
------------------
COMMON STOCKS--4.2%
AEROSPACE/DEFENSE--0.5%
Boeing Co.................................... 20,400 1,021,275
------------------
ALUMINUM--0.5%
Kaiser Aluminum Corp......................... 36,800 384,100
Reynolds Metals Co........................... 9,200 607,200
------------------
991,300
------------------
14 See Notes to Financial Statements
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
SHARES VALUE
METALS MINING--0.3% -------- ------------------
Stillwater Mining Co......................... 22,900 $ 605,418
------------------
OIL & GAS (DRILLING & EQUIPMENT)--1.9%
Friede Goldman International, Inc............ 30,400 1,223,613
Marine Drilling Companies, Inc............... 31,900 775,569
Noble Drilling Corp.......................... 30,393 982,074
Varco International, Inc..................... 29,000 891,750
------------------
3,873,006
------------------
RETAIL (GENERAL MERCHANDISE)--0.5%
Consolidated Stores Corp..................... 25,700 1,028,000
------------------
TELECOMMUNICATIONS (LONG DISTANCE)--0.5%
AT&T Corp.................................... 16,300 979,019
------------------
TOTAL COMMON STOCKS
(Identified cost $6,993,758)....................................... 8,498,018
------------------
TOTAL LONG-TERM INVESTMENTS--84.4%
(Identified cost $162,734,496)..................................... 172,357,400
------------------
STANDARD PAR
& POOR'S VALUE
RATING (000)
----------- -----------
SHORT-TERM OBLIGATIONS--16.3%
COMMERCIAL PAPER--15.5%
Enterprise Funding Corp. 5.54%,
5/1/98......................... A-1 $2,000 2,000,000
Marsh & McLennan Companies 5.52%,
5/1/98......................... A-1+ 4,460 4,460,000
SBC Communications, Inc. 5.52%,
5/4/98......................... A-1+ 2,500 2,498,850
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
----------- ----------- ------------------
COMMERCIAL PAPER--CONTINUED
Kimberly-Clark Corp. 5.51%,
5/7/98......................... A-1+ $3,945 $ 3,941,377
AlliedSignal, Inc. 5.52%
5/8/1998....................... A-1 2,165 2,162,676
Procter & Gamble Co. 5.53%,
5/8/98......................... A-1+ 3,500 3,496,236
AlliedSignal, Inc. 5.53%,
5/11/98........................ A-1 3,590 3,584,485
Anheuser-Busch Cos., Inc. 5.50%,
5/11/98........................ A-1+ 850 848,702
Associates Corp. of North America
5.50%, 5/13/98................. A-1+ 3,750 3,750,000
Dupont (E.I.) de Nemours & Co.
5.50%, 5/27/98................. A-1+ 3,355 3,341,673
Corporate Receivables Corp.
5.50%, 6/12/98................. A-1+ 1,525 1,508,536
------------------
31,592,535
------------------
FEDERAL AGENCY SECURITIES--0.8%
FHLMC 5.43%, 5/22/98.......................... 1,670 1,664,710
------------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $33,263,925)............................... 33,257,245
------------------
TOTAL INVESTMENTS--100.7%
(Identified cost $195,998,421).............................. 205,614,645(a)
Cash and receivables, less liabilities--(0.7%).............. (1,455,142)
------------------
NET ASSETS--100.0%............................................ $204,159,503
------------------
------------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $14,412,435 and gross
depreciation of $4,796,211 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$195,998,421.
(b) As rated by Moody's.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally qualified institutional buyers. At April 30,1998,
these securities amounted to a value of $61,581,545 or 30.2% of net assets.
See Notes to Financial Statements 15
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $195,998,421) $ 205,614,645
Short-term investments held as collateral for loaned
securities 2,493,800
Cash 2,299,831
Receivables
Investment securities sold 1,128,489
Dividends and interest 876,474
Fund shares sold 62,557
--------------
Total assets 212,475,796
--------------
LIABILITIES
Payables
Collateral on securities loaned 2,493,800
Investment securities purchased 5,372,974
Fund shares repurchased 192,274
Investment advisory fee 109,892
Distribution fee 47,575
Transfer agent fee 35,742
Trustees' fee 9,301
Financial agent fee 7,582
Accrued expenses 47,153
--------------
Total liabilities 8,316,293
--------------
NET ASSETS $ 204,159,503
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 181,862,456
Undistributed net investment income 662,970
Accumulated net realized gain 12,017,853
Net unrealized appreciation 9,616,224
--------------
NET ASSETS $ 204,159,503
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $195,551,146) 10,372,087
Net asset value per share $18.85
Offering price per share
$18.85/(1-4.75%) $19.79
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $8,608,357) 458,660
Net asset value and offering price per share $18.77
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Interest $ 3,441,584
Dividends 1,032,127
Security lending 8,539
-------------
Total investment income 4,482,250
-------------
EXPENSES
Investment advisory fee 664,404
Distribution fee--Class A 245,175
Distribution fee--Class B 41,458
Financial agent fee 50,810
Transfer agent 116,929
Professional 16,105
Registration 11,489
Custodian 10,954
Trustees 10,674
Printing 7,956
Miscellaneous 10,086
-------------
Total expenses 1,186,040
-------------
NET INVESTMENT INCOME 3,296,210
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 11,980,932
Net change in unrealized appreciation (depreciation)
on investments (2,063,945)
-------------
NET GAIN ON INVESTMENTS 9,916,987
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 13,213,197
-------------
-------------
16 See Notes to Financial Statements
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 3,296,210 $ 6,453,569
Net realized gain 11,980,932 26,030,582
Net change in unrealized appreciation (depreciation) (2,063,945) 1,273,001
-------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 13,213,197 33,757,152
-------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (2,955,442) (6,482,244)
Net investment income--Class B (99,832) (177,737)
Net realized gains--Class A (24,998,912) (13,252,457)
Net realized gains--Class B (1,017,432) (398,476)
-------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (29,071,618) (20,310,914)
-------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (458,449 and 701,929 shares, respectively) 9,024,073 13,664,448
Net asset value of shares issued from reinvestment of distributions
(1,344,937 and 854,224 shares, respectively) 23,720,050 16,093,284
Cost of shares repurchased (1,239,660 and 2,904,061 shares, respectively) (23,083,139) (56,421,242)
-------------- -----------------
Total 9,660,984 (26,663,510)
-------------- -----------------
CLASS B
Proceeds from sales of shares (52,708 and 131,986 shares, respectively) 976,268 2,562,597
Net asset value of shares issued from reinvestment of distributions
(55,240 and 21,826 shares, respectively) 969,980 410,540
Cost of shares repurchased (43,892 and 68,900 shares, respectively) (822,321) (1,343,541)
-------------- -----------------
Total 1,123,927 1,629,596
-------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 10,784,911 (25,033,914)
-------------- -----------------
NET DECREASE IN NET ASSETS (5,073,510) (11,587,676)
NET ASSETS
Beginning of period 209,233,013 220,820,689
-------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$662,970 AND $422,034, RESPECTIVELY) $204,159,503 $ 209,233,013
-------------- -----------------
-------------- -----------------
</TABLE>
See Notes to Financial Statements 17
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.51 $ 19.26 $ 18.23 $ 17.56 $ 19.34 $ 18.86
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.32 0.61(4) 0.70(4) 0.87 0.78 0.68
Net realized and unrealized gain (loss) 0.85 2.54 1.68 1.04 (1.06) 1.53
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.17 3.15 2.38 1.91 (0.28) 2.21
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.29) (0.64) (0.77) (1.05) (0.69) (0.73)
Dividends from net realized gains (2.54) (1.26) (0.58) (0.19) (0.81) (1.00)
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (2.83) (1.90) (1.35) (1.24) (1.50) (1.73)
--------- --------- --------- --------- --------- ---------
Change in net asset value (1.66) 1.25 1.03 0.67 (1.78) 0.48
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 18.85 $ 20.51 $ 19.26 $ 18.23 $ 17.56 $ 19.34
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return(1) 6.74%(3) 17.40% 13.55% 11.45% (1.48)% 12.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $195,551 $ 201,170 $ 214,874 $ 219,384 $ 226,294 $ 252,072
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.13%(2) 1.12% 1.17% 1.18% 1.14% 1.15%
Net investment income 3.26%(2) 3.11% 3.75% 4.78% 4.27% 3.70%
Portfolio turnover 75%(3) 152% 141% 79% 91% 94%
Average commission rate paid(5) $0.0585 $0.0661 $0.0619 N/A N/A N/A
<CAPTION>
CLASS B
-----------------------------------------------------------------
SIX FROM
MONTHS INCEPTION
ENDED 7/15/94
4/30/98 YEAR ENDED OCTOBER 31, TO
(UNAUDITED) 1997 1996 1995 10/31/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.43 $ 19.20 $ 18.17 $ 17.55 $ 17.59
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26 0.46(4) 0.55(4) 0.70(4) 0.15
Net realized and unrealized gain (loss) 0.85 2.52 1.68 1.07 (0.06)
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.11 2.98 2.23 1.77 0.09
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.23) (0.49) (0.62) (0.96) (0.13)
Dividends from net realized gains (2.54) (1.26) (0.58) (0.19) --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (2.77) (1.75) (1.20) (1.15) (0.13)
--------- --------- --------- --------- ---------
Change in net asset value (1.66) 1.23 1.03 0.62 (0.04)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 18.77 $ 20.43 $ 19.20 $ 18.17 $ 17.55
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return(1) 6.42%(3) 16.49% 12.72% 10.59% 0.49%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $8,608 $8,063 $5,947 $3,715 $856
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.88%(2) 1.87% 1.92% 1.95% 1.83%(2)
Net investment income 2.50%(2) 2.33% 2.95% 3.92% 3.29%(2)
Portfolio turnover 75%(3) 152% 141% 79% 91%
Average commission rate paid(5) $0.0585 $0.0661 $0.0619 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5)For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
18 See Notes to Financial Statements
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
INVESTOR PROFILE
Phoenix Growth Fund is designed for investors seeking long-term capital
appreciation.
INVESTMENT ADVISER'S REPORT
Aided by a strong U.S. equity market, the Phoenix Growth Fund posted
double-digit gains over this latest fiscal reporting period. For the six-month
reporting cycle ended April 30, 1998, Class A shares returned 17.05% and Class B
shares earned 16.65%. During the same period, the Standard & Poor's 500
Composite Index* returned 22.47%, and the average return for 951 growth funds
was 17.35%, according to Lipper Analytical Services, Inc. All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
Positive contributors to performance during this latest reporting cycle
included the Fund's overweighted position in the "red-hot" health-care sector as
well as strong stock selection in capital goods, consumer staples, and financial
services. Individual holdings that produced stellar gains included such names as
Pfizer, HBO & Company, Gillette, BMC Software and Tyco International. On the
other side of the equation, negative contributors over the last six months
included the portfolio's exposure to the poorly performing energy group and
weakness in some of our technology and consumer cyclical holdings.
OUTLOOK
Looking ahead, we expect economic growth to moderate later in the year as the
impact of the Asian crisis begins to take hold in the United States. Although we
expect a slowdown in the U.S. economy, we do not foresee a recession on the
immediate horizon. As it relates to the stock market, we believe that corporate
profit growth will continue to slow, creating a challenging earnings environment
for investors and further fueling volatility and rotation in the market.
Specific to the Phoenix Growth Fund, we are maintaining our overweighted
positions in health-care and technology and are pleased with the recent strong
performance we received from these two sectors. Because of the current
speculative merger and acquisition environment in the financial services arena,
we believe that some in the group have become overbought, and we have elected to
selectively take profits in this sector. Lastly, given the attractive
risk/reward opportunities in the energy group, it is our intention to add to
these stocks as crude oil prices begin to show further signs of stabilization.
* The S&P 500 Index is an unmanaged, commonly used measure of stock market
performance. The Index is not available for direct investment.
19
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
------------- ----------------
<S> <C> <C>
COMMON STOCKS--90.8%
AEROSPACE/DEFENSE--1.8%
Boeing Co....................................................... 1,018,000 $ 50,963,625
----------------
BANKS (MAJOR - REGIONAL)--4.4%
Banc One Corp................................................... 458,920 26,990,232
BankBoston Corp................................................. 189,400 20,443,362
Mellon Bank Corp................................................ 182,600 13,147,200
NationsBank Corp................................................ 375,900 28,474,425
U.S. Bancorp.................................................... 276,700 35,140,900
----------------
124,196,119
----------------
BANKS (MONEY CENTER)--2.4%
BankAmerica Corp................................................ 304,300 25,865,500
Citicorp........................................................ 132,700 19,971,350
NDB Bancorp, Inc................................................ 223,100 20,720,412
----------------
66,557,262
----------------
BROADCASTING (TELEVISION, RADIO, & CABLE)--2.7%
CBS Corporation................................................. 1,305,700 46,515,562
Chancellor Media Corp. (b)...................................... 639,900 30,355,256
----------------
76,870,818
----------------
CHEMICALS--1.4%
Monsanto Co..................................................... 765,600 40,481,100
----------------
CHEMICALS (SPECIALTY)--0.7%
Solutia, Inc.................................................... 684,200 19,414,175
----------------
COMMUNICATIONS EQUIPMENT--0.6%
Ciena Corp. (b)................................................. 301,400 16,803,050
----------------
COMPUTERS (HARDWARE)--5.0%
International Business Machines Corp............................ 1,204,400 139,559,850
----------------
COMPUTERS (NETWORKING)--0.9%
Cisco Systems, Inc. (b)......................................... 341,400 25,007,550
----------------
COMPUTERS (PERIPHERALS)--0.8%
EMC Corp. (b)................................................... 480,500 22,163,062
----------------
COMPUTERS (SOFTWARE & SERVICES)--7.6%
America Online, Inc. (b)........................................ 103,800 8,304,000
BMC Software, Inc. (b).......................................... 625,900 58,560,769
Comdisco, Inc................................................... 327,900 14,509,575
Computer Associates International............................... 776,100 45,450,356
Compuware Corp. (b)............................................. 1,166,900 57,032,237
Edwards (J.D.) & Co. (b)........................................ 460,500 16,405,312
Sterling Commerce............................................... 319,700 13,607,231
----------------
213,869,480
----------------
SHARES VALUE
------------- ----------------
CONSUMER FINANCE--1.2%
American Express Co............................................. 135,600 $ 13,831,200
Household International, Inc.................................... 158,300 20,806,556
----------------
34,637,756
----------------
DISTRIBUTORS (FOOD & HEALTH)--1.2%
Cardinal Health, Inc............................................ 347,500 33,446,875
----------------
ELECTRICAL EQUIPMENT--1.6%
General Electric Co............................................. 516,900 44,001,112
----------------
ELECTRONICS (INSTRUMENTATION)--0.6%
Linear Technology Corp.......................................... 196,100 15,786,050
----------------
ELECTRONICS (SEMICONDUCTORS)--1.0%
Intel Corp. (b)................................................. 345,600 27,928,800
----------------
ENTERTAINMENT--1.5%
Liberty Media Group (b)......................................... 1,240,600 41,172,413
----------------
FINANCIAL (DIVERSIFIED)--1.7%
American General Corp........................................... 92,600 6,169,475
FHLMC........................................................... 902,500 41,797,031
----------------
47,966,506
----------------
HEALTH CARE (DIVERSIFIED)--4.4%
Bristol-Myers Squibb Co......................................... 603,000 63,842,625
Warner-Lambert Co............................................... 316,600 59,896,763
----------------
123,739,388
----------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS)--4.3%
Pfizer, Inc..................................................... 523,000 59,523,937
Schering Plough Corp............................................ 347,900 27,875,488
Watson Pharmaceuticals, Inc. (b)................................ 789,700 33,957,100
----------------
121,356,525
----------------
HEALTH CARE (HOSPITAL MANAGEMENT)--2.6%
HBO & Co........................................................ 887,700 53,095,556
Tenet Healthcare Corp........................................... 532,700 19,942,956
----------------
73,038,512
----------------
HEALTH CARE (LONG TERM CARE)--1.5%
Healthsouth Corp. (b)........................................... 1,380,700 41,679,881
----------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.3%
Guidant Corp.................................................... 421,100 28,161,063
Medtronic, Inc.................................................. 681,700 35,874,463
----------------
64,035,526
----------------
HOUSEHOLD FURN. & APPLIANCES--0.1%
Sunbeam Corp., Inc.............................................. 130,900 3,288,863
----------------
20 See Notes to Financial Statements
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
SHARES VALUE
------------- ----------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.3%
Colgate-Palmolive Co............................................ 405,400 $ 36,359,313
----------------
INSURANCE (LIFE/HEALTH)--0.8%
UNUM Corp....................................................... 397,000 21,338,750
----------------
INSURANCE (MULTI-LINE)--2.7%
American International Group, Inc............................... 221,000 29,075,313
Reliastar Financial Corp........................................ 292,100 13,327,063
Travelers Group, Inc............................................ 551,300 33,732,669
----------------
76,135,045
----------------
INSURANCE (PROPERTY - CASUALTY)--1.3%
Allstate Corp................................................... 370,200 35,631,750
----------------
MACHINERY (DIVERSIFIED)--1.5%
Deere & Co...................................................... 489,900 28,628,531
Thermo Electron Corp............................................ 338,100 13,460,606
----------------
42,089,137
----------------
MANUFACTURING (DIVERSIFIED)--1.5%
Tyco International Ltd.......................................... 750,700 40,913,150
----------------
OIL & GAS (DRILLING & EQUIPMENT)--4.5%
Cooper Cameron Corp. (b)........................................ 222,800 14,802,275
Diamond Offshore Drilling, Inc.................................. 474,000 23,996,250
Halliburton Co.................................................. 534,900 29,419,500
Schlumberger Ltd................................................ 431,100 35,727,413
Transocean Offshore, Inc........................................ 422,400 23,601,600
----------------
127,547,038
----------------
OIL & GAS (REFINING & MARKETING)--1.6%
Tosco Corp...................................................... 1,249,800 44,524,125
----------------
PAPER & FOREST PRODUCTS--0.8%
International Paper Co.......................................... 428,600 22,367,563
----------------
PERSONAL CARE--1.9%
Gillette Co..................................................... 462,700 53,412,931
----------------
RETAIL (BUILDING SUPPLIES)--1.4%
Home Depot, Inc................................................. 578,700 40,291,988
----------------
RETAIL (DRUG STORES)--3.7%
CVS Corp........................................................ 674,700 49,759,125
Rite Aid Corp................................................... 1,679,100 53,941,088
----------------
103,700,213
----------------
RETAIL (FOOD CHAINS)--2.3%
Safeway, Inc.................................................... 1,728,500 66,115,125
----------------
SHARES VALUE
------------- ----------------
RETAIL (GENERAL MERCHANDISE)--4.0%
Borders Group, Inc. (b)......................................... 610,000 $ 19,596,250
Consolidated Stores Corp. (b)................................... 1,038,400 41,536,000
Fred Meyer, Inc. (b)............................................ 492,680 22,109,015
Staples, Inc. (b) .............................................. 1,119,000 27,625,313
----------------
110,866,578
----------------
RETAIL (SPECIALTY-APPAREL)--0.6%
TJX Co., Inc.................................................... 365,200 16,160,100
----------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--2.9%
Airtouch Communications, Inc. (b)............................... 1,524,200 80,973,125
----------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.9%
AT&T Corp....................................................... 1,367,300 82,123,456
MCI Communications Corp......................................... 521,400 26,232,938
----------------
108,356,394
----------------
WASTE MANAGEMENT--1.8%
U.S.A. Waste Services Inc. (b).................................. 1,044,800 51,260,500
----------------
TOTAL COMMON STOCKS
(Identified cost $2,063,290,360)............................................................ 2,546,007,123
----------------
FOREIGN COMMON STOCKS--4.9%
BIOTECHNOLOGY--0.6%
Elan PLC Sponsored ADR (Ireland) (b)............................ 265,900 16,519,037
----------------
HOUSEHOLD FURN. & APPLIANCES--2.7%
Philips Electronics NV ADR NY Registered (Netherlands).......... 849,500 76,455,000
----------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--0.5%
Telefonaktiebolaget LM Ericsson ADR (Sweden).................... 257,300 13,234,869
----------------
TELEPHONE--1.1%
Telecom Brasil ADR (Brazil)..................................... 268,400 32,694,475
----------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $97,335,197)............................................................... 138,903,381
----------------
TOTAL LONG-TERM INVESTMENTS--95.7%
(Identified cost $2,160,625,557)............................................................ 2,684,910,504
----------------
See Notes to Financial Statements 21
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ------------- ----------------
SHORT-TERM OBLIGATIONS--3.2%
COMMERCIAL PAPER--3.1%
Deutsche Bank Financial 5.50%, 5/1/98..................... A-1+ $ 5,415 $ 5,415,000
AlliedSignal, Inc. 5.50%, 5/4/98.......................... A-1 1,827 1,826,163
SBC Communications Inc. 5.50%, 5/4/98..................... A-1+ 11,150 11,144,890
AlliedSignal, Inc. 5.51%, 5/5/98.......................... A-1 10,991 10,981,052
Anheuser-Busch Cos., Inc. 5.45%, 5/6/98................... A-1 7,885 7,879,031
Cargill, Inc. 5.48%, 5/7/98............................... A-1+ 10,000 9,990,867
Procter & Gamble Co. 5.53%, 5/8/98........................ A-1+ 6,010 6,003,537
Private Export Funding Corp. 5.50%, 5/15/98............... A-1+ 7,000 6,985,028
General Electric Capital Corp. 5.51%, 5/18/98............. A-1+ 15,000 15,000,000
Greenwich Funding Corp. 5.52%, 5/22/98.................... A-1+ 2,872 2,862,752
General Re Corp. 5.5%, 6/4/98............................. A-1+ 5,000 4,974,028
Corporate Asset Funding Co., Inc. 5.50%, 6/11/98.......... A-1+ 1,650 1,650,000
CXC, Inc. 5.52%, 6/12/98.................................. A-1+ 3,700 3,676,172
----------------
88,388,520
----------------
PAR
VALUE
(000) VALUE
------------- ----------------
FEDERAL AGENCY SECURITIES--0.1%
FFCB 6.02%, 1/22/99....................................... $ 1,500 $ 1,504,026
----------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $89,883,183)................................................................... 89,892,546
----------------
TOTAL INVESTMENTS--98.9%
(Identified cost $2,250,508,740)................................................................ 2,774,803,050(a)
Cash and receivables, less liabilities--1.1%.................................................... 29,605,160
----------------
NET ASSETS--100.0%................................................................................ $2,804,408,210
----------------
----------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $536,161,491 and gross
depreciation of $11,867,181 for federal income tax purposes. At April 30,
1998, the aggregate cost of securities for federal income tax purposes was
$2,250,508,740.
(b) Non-income producing.
22 See Notes to Financial Statements
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $2,250,508,740) $ 2,774,803,050
Short-term investments held as collateral for loaned
securities 18,382,410
Cash 929
Receivables
Investment securities sold 37,627,030
Dividends and interest 2,211,946
Fund shares sold 465,965
----------------
Total assets 2,833,491,330
----------------
LIABILITIES
Payables
Collateral on securities loaned 18,382,410
Investment securities purchased 4,430,347
Fund shares repurchased 3,302,390
Investment advisory fee 1,498,211
Distribution fee 621,460
Transfer agent fee 468,274
Financial agent fee 44,811
Trustees' fees 9,301
Accrued expenses 325,916
----------------
Total liabilities 29,083,120
----------------
NET ASSETS $ 2,804,408,210
----------------
----------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 2,012,033,625
Undistributed net investment loss (1,093,928)
Accumulated net realized gain 269,174,203
Net unrealized appreciation 524,294,310
----------------
NET ASSETS $ 2,804,408,210
----------------
----------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,724,718,194) 104,546,666
Net asset value per share $26.06
Offering price per share
$26.06/(1-4.75%) $27.36
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $79,690,016) 3,114,359
Net asset value and offering price per share $25.59
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Dividends $ 11,011,413
Interest 2,044,135
Security lending 102,257
--------------
Total investment income 13,157,805
--------------
EXPENSES
Investment advisory fee 8,548,066
Distribution fee--Class A 3,162,529
Distribution fee--Class B 356,961
Financial agent fee 258,084
Transfer agent 1,674,032
Printing 90,098
Custodian 65,603
Professional 27,575
Registration 21,983
Trustees 10,674
Miscellaneous 36,128
--------------
Total expenses 14,251,733
--------------
NET INVESTMENT LOSS (1,093,928)
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on securities 269,652,886
Net change in unrealized appreciation on investments 152,247,025
--------------
NET GAIN ON INVESTMENTS 421,899,911
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 420,805,983
--------------
--------------
See Notes to Financial Statements 23
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,093,928) $ 12,828,128
Net realized gain 269,652,886 499,286,602
Net change in unrealized appreciation (depreciation) 152,247,025 37,069,225
---------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 420,805,983 549,183,955
---------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A -- (17,472,939)
Net investment income--Class B -- (64,123)
Net realized gains--Class A (484,983,916) (395,993,712)
Net realized gains--Class B (13,740,399) (8,267,051)
---------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (498,724,315) (421,797,825)
---------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (9,084,861 and 10,576,129 shares, respectively) 222,514,713 270,447,275
Net asset value of shares issued from reinvestment of distributions
(20,476,785 and 16,237,740 shares, respectively) 450,490,561 381,717,419
Cost of shares repurchased (15,508,431 and 23,676,500 shares, respectively) (391,022,230) (604,530,141)
---------------- -----------------
Total 281,983,044 47,634,553
---------------- -----------------
CLASS B
Proceeds from sales of shares (401,311 and 938,817 shares, respectively) 9,716,175 23,549,010
Net asset value of shares issued from reinvestment of distributions
(580,369 and 325,555 shares, respectively) 12,570,786 7,574,359
Cost of shares repurchased (340,191 and 493,546 shares, respectively) (8,254,450) (12,629,905)
---------------- -----------------
Total 14,032,511 18,493,464
---------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 296,015,555 66,128,017
---------------- -----------------
NET INCREASE IN NET ASSETS 218,097,223 193,514,147
NET ASSETS
Beginning of period 2,586,310,987 2,392,796,840
---------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF
($1,093,928) AND $0, RESPECTIVELY) $ 2,804,408,210 $ 2,586,310,987
---------------- -----------------
---------------- -----------------
</TABLE>
24 See Notes to Financial Statements
<PAGE>
PHOENIX GROWTH FUND SERIES
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 27.83 $ 26.87 $ 24.92 $ 21.24 $ 21.53 $ 20.76
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.01)(4) 0.14(4) 0.20(4) 0.26 0.26 0.32
Net realized and unrealized gain (loss) 3.74 5.62 3.63 4.53 0.17 1.15
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 3.73 5.76 3.83 4.79 0.43 1.47
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income -- (0.21) (0.25) (0.30) (0.24) (0.32)
Dividends from net realized gains (5.50) (4.59) (1.63) (0.81) (0.48) (0.38)
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (5.50) (4.80) (1.88) (1.11) (0.72) (0.70)
--------- --------- --------- --------- --------- ---------
Change in net asset value (1.77) 0.96 1.95 3.68 (0.29) 0.77
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 26.06 $ 27.83 $ 26.87 $ 24.92 $ 21.24 $ 21.53
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return(1) 17.05%(3) 24.81% 16.34% 23.91% 2.06% 7.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $2,724,718 $2,518,289 $2,347,471 $2,300,251 $2,140,458 $2,563,442
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.08%(2) 1.10% 1.17% 1.20% 1.19% 1.18%
Net investment income (loss) (0.07%)(2) 0.53% 0.80% 0.92% 1.22% 1.55%
Portfolio turnover 68%(3) 196% 116% 109% 118% 176%
Average commission rate paid(6) $0.0500 $0.0518 $0.0534 N/A N/A N/A
<CAPTION>
CLASS B
-----------------------------------------------------------------
SIX FROM
MONTHS INCEPTION
ENDED 7/15/94
4/30/98 YEAR ENDED OCTOBER 31, TO
(UNAUDITED) 1997 1996 1995 10/31/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 27.51 $ 26.63 $ 24.74 $ 21.19 $ 20.48
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.10)(4) (0.06)(4) --(4) --(4) 0.01
Net realized and unrealized gain (loss) 3.68 5.57 3.61 4.60 0.70
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 3.58 5.51 3.61 4.60 0.71
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income -- (0.04) (0.09) (0.24) --
Dividends from net realized gains (5.50) (4.59) (1.63) (0.81) --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (5.50) (4.63) (1.72) (1.05) --
--------- --------- --------- --------- ---------
Change in net asset value (1.92) 0.88 1.89 3.55 0.71
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 25.59 $ 27.51 $ 26.63 $ 24.74 $ 21.19
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return(1) 16.65%(3) 23.89% 15.48% 23.02% 3.47%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $79,690 $68,022 $45,326 $20,111 $2,966
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.83%(2) 1.85% 1.93% 1.97% 1.87%(2)
Net investment income (loss) (0.81%)(2) (0.25%) 0.01% 0.01% 0.32%(2)
Portfolio turnover 68%(3) 196% 116% 109% 118%
Average commission rate paid(6) $0.0500 $0.0518 $0.0534 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5)Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the time of share purchases and redemptions.
(6)For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
See Notes to Financial Statements 25
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
- ------------------------------------------------------------
INVESTOR PROFILE
Phoenix Aggressive Growth Fund is designed for long-term investors who are
willing to assume above-average risk in return for above-average capital growth
potential.
INVESTMENT ADVISER'S REPORT
For the six months ended April 30, 1998, Phoenix Aggressive Growth Fund Class
A shares returned 16.53% and Class B shares earned 16.20% compared with 9.95%
for the Russell 2000 Growth Index.* All performance figures assume reinvestment
of dividends and exclude the effect of sales charges. Small company investing
involves added risks, including greater price volatility, less liquidity, and
increased competitive threat.
In the final two months of 1997, there was a "flight to quality" as the market
reacted to events in Southeast Asia. The Fund's performance was held back during
this time by its small- to mid-cap focus as well as its overweighted position in
oil service stocks.
In January, a management change was made to a team approach led by Roger
Engemann. The team uses a top-down approach to identify attractive sectors of
the market and a bottom-up approach to stock selection.
During 1998, the Fund's oil service holdings were liquidated, and the proceeds
used to increase the portfolio's weighting in the health-care sector,
communication services, and consumer cyclicals. We also reduced our weightings
in financial services, energy, and basic materials. As a result, our cash
position is currently higher than average as we continue to opportunistically
look for attractive values.
OUTLOOK
We expect the market to continue to be volatile due to uncertainties over the
impact the Asian "crisis" will have, particularly on technology stocks. Our
emphasis will be on sectors of the economy and individual firms that have
minimal exposure to Asia and the aftereffects.
Stock selection will center on companies with a domestic focus, a high degree
of earnings predictability, and fast-growing earnings and revenue streams.
Industries with these characteristics include retailers, telecommunication
equipment and service, and information technology service. Health-care is also
an attractive sector, particularly pharmaceuticals and medical technology
companies.
* The Russell 2000 Growth Index is an unmanaged, commonly used measure of
performance of small-capitalization stocks with above- average growth
orientation. The Index is not available for direct investment.
26
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
---------- ---------------
<S> <C> <C>
COMMON STOCKS--95.6%
AEROSPACE/DEFENSE--0.9%
Boeing Co.............................................. 50,000 $ 2,503,125
---------------
AIRLINES--0.4%
Southwest Airlines Co.................................. 45,000 1,234,687
---------------
BANKS (MAJOR REGIONAL)--2.0%
Firstar Corp........................................... 35,000 1,305,937
Huntington Bancshares, Inc............................. 40,000 1,422,500
NationsBank Corp....................................... 40,000 3,030,000
---------------
5,758,437
---------------
BANKS (MONEY CENTER)--2.3%
Chase Manhattan Corp................................... 25,000 3,464,062
Morgan (J.P.) & Co., Inc............................... 25,000 3,281,250
---------------
6,745,312
---------------
BEVERAGES (NON-ALCOHOLIC)--2.1%
PepsiCo, Inc........................................... 150,000 5,953,125
---------------
BIOTECHNOLOGY--1.5%
Centocor, Inc. (b)..................................... 100,000 4,218,750
---------------
BROADCASTING (TELEVISION, RADIO, & CABLE)--4.9%
Clear Channels Communications, Inc. (b)................ 60,000 5,655,000
Univision Communications, Inc. Class A (b)............. 160,000 6,130,000
USA Networks, Inc. (b)................................. 100,000 2,456,250
---------------
14,241,250
---------------
COMMUNICATIONS EQUIPMENT--6.9%
Ascend Communications, Inc. (b)........................ 70,000 3,049,375
Ciena Corp. (b)........................................ 55,000 3,066,250
MRV Communications, Inc. (b)........................... 100,000 2,687,500
Nextel Communications, Inc. Class A (b)................ 100,000 2,868,750
Pairgain Technologies, Inc. (b)........................ 250,000 4,609,375
Tellabs, Inc. (b)...................................... 55,000 3,898,125
---------------
20,179,375
---------------
COMPUTERS (PERIPHERALS)--0.5%
Seagate Technology, Inc. (b)........................... 55,000 1,467,812
---------------
COMPUTERS (SOFTWARE & SERVICES)--11.0%
America Online, Inc. (b)............................... 40,000 3,200,000
Aspect Development, Inc. (b)........................... 30,000 1,899,375
Cambridge Technology Partners, Inc. (b)................ 60,000 3,135,000
Computer Associates International, Inc................. 50,000 2,928,125
Edwards (J.D.) & Co. (b)............................... 75,000 2,681,250
HNC Software, Inc. (b)................................. 80,000 3,120,000
Manugistics Group, Inc. (b)............................ 35,000 2,100,000
Mastech Corp. (b)...................................... 225,000 5,962,500
Network Associates, Inc. (b)........................... 50,000 3,425,000
PeopleSoft, Inc. (b)................................... 75,000 3,487,500
---------------
31,938,750
---------------
SHARES VALUE
---------- ---------------
CONSUMER FINANCE--1.5%
American Express Co.................................... 25,000 $ 2,550,000
Providian Financial Corp............................... 30,000 1,805,625
---------------
4,355,625
---------------
ELECTRONICS (INSTRUMENTATION)--1.1%
Vitesse Semiconductor Corp. (b)........................ 55,000 3,172,812
---------------
ELECTRONICS (SEMICONDUCTORS)--5.6%
Etec Systems, Inc. (b)................................. 30,000 1,702,500
Intel Corp............................................. 45,000 3,636,562
Micron Technology, Inc. (b)............................ 75,000 2,329,687
Texas Instruments, Inc................................. 65,000 4,164,062
Uniphase Corp (b)...................................... 40,000 2,170,000
Xilinx, Inc. (b)....................................... 50,000 2,287,500
---------------
16,290,311
---------------
ENTERTAINMENT--0.9%
Royal Caribbean Cruises Ltd............................ 40,000 2,735,000
---------------
FINANCIAL (DIVERSIFIED)--3.9%
Countrywide Credit Industries, Inc..................... 65,000 3,144,375
FHLMC.................................................. 115,000 5,325,938
FNMA................................................... 50,000 2,993,750
---------------
11,464,063
---------------
HEALTH CARE (DIVERSIFIED)--2.9%
American Home Products Corp............................ 30,000 2,793,750
Johnson & Johnson...................................... 40,000 2,855,000
Warner-Lambert Co...................................... 15,000 2,837,813
---------------
8,486,563
---------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--5.5%
Lilly (Eli) & Co....................................... 80,000 5,565,000
Merck & Company, Inc................................... 40,000 4,820,000
Pfizer, Inc............................................ 50,000 5,690,625
---------------
16,075,625
---------------
HEALTH CARE (HOSPITAL MANAGEMENT)--3.6%
HBO & Co............................................... 175,000 10,467,188
---------------
HEALTH CARE (LONG TERM CARE)--0.2%
Balanced Care Corp. (b)................................ 75,000 618,750
---------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.9%
Guidant Corp........................................... 65,000 4,346,875
Medtronic, Inc......................................... 75,000 3,946,875
---------------
8,293,750
---------------
HOUSEHOLD FURN. & APPLIANCES--1.0%
Pier 1 Imports, Inc.................................... 115,000 3,033,125
---------------
INVESTMENT BANKING/BROKERAGE--0.6%
Merrill Lynch & Co., Inc............................... 20,000 1,755,000
---------------
See Notes to Financial Statements 27
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
- ------------------------------------------------------
SHARES VALUE
---------- ---------------
MANUFACTURING (DIVERSIFIED)--2.3%
AlliedSignal, Inc...................................... 75,000 $ 3,285,938
United Technologies Corp............................... 35,000 3,445,313
---------------
6,731,251
---------------
OIL & GAS (DRILLING & EQUIPMENT)--1.0%
Transocean Offshore, Inc............................... 50,000 2,793,750
---------------
RAILROADS--1.2%
Kansas City Southern Industries, Inc................... 80,000 3,615,000
---------------
RESTAURANTS--0.7%
CKE Restaurants, Inc................................... 55,000 1,904,375
---------------
RETAIL (BUILDING SUPPLIES)--1.2%
Lowe's Companies, Inc.................................. 50,000 3,496,875
---------------
RETAIL (DRUG STORES)--1.0%
Walgreen Co............................................ 80,000 2,760,000
---------------
RETAIL (GENERAL MERCHANDISE)--5.1%
Bed, Bath & Beyond, Inc. (b)........................... 65,000 3,201,250
Consolidated Stores Corp. (b).......................... 120,000 4,800,000
Kmart Corp. (b)........................................ 300,000 5,231,250
Sears Roebuck & Co..................................... 25,000 1,482,813
---------------
14,715,313
---------------
SERVICES (ADVERTISING/MARKETING)--0.6%
Ziff-Davis, Inc. (b)................................... 101,400 1,825,200
---------------
SERVICES (COMMERCIAL & CONSUMER)--5.4%
Cendant Corp. (b)...................................... 625,000 15,625,000
---------------
SERVICES (COMPUTER SYSTEMS)--0.9%
Brightstar Information Technology Group, Inc. (b)...... 175,000 2,734,375
---------------
SERVICES (DATA PROCESSING)--2.1%
First Data Corp........................................ 180,000 6,097,500
---------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.8%
Airtouch Communications, Inc. (b)...................... 100,000 5,312,500
---------------
TELECOMMUNICATIONS (EQUIPMENT)--2.6%
Lucent Technologies, Inc............................... 100,000 7,612,500
---------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.4%
Intermedia Communications, Inc. (b).................... 45,000 3,284,297
Pacific Gateway Exchange, Inc. (b)..................... 40,000 2,280,000
Star Telecommunication, Inc. (b)....................... 164,000 4,438,250
---------------
10,002,547
---------------
SHARES VALUE
---------- ---------------
TELEPHONE--3.2%
ICG Communications, Inc. (b)........................... 150,000 $ 5,250,000
Qwest Communications International, Inc. (b)........... 80,000 3,085,000
US LEC Corp. (b)....................................... 35,000 848,750
---------------
9,183,750
---------------
TOBACCO--0.9%
Philip Morris Companies, Inc........................... 73,000 2,723,813
---------------
TOTAL COMMON STOCKS
(Identified cost $227,187,172).......................................... 278,122,184
---------------
FOREIGN COMMON STOCKS--0.4%
COMPUTER (SOFTWARE & SERVICES)--0.4%
CBT Group PLC (b) (Ireland)............................ 25,000 1,271,875
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,382,644)............................................ 1,271,875
---------------
TOTAL LONG-TERM INVESTMENTS --96.0%
(Identified cost $228,569,816........................................... 279,394,059
---------------
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------------- ----------
SHORT-TERM OBLIGATIONS--4.9%
COMMERCIAL PAPER--4.8%
Marsh & McLennan Cos., Inc. 5.52%,
5/1/98................................... A-1+ $ 6,390 6,390,000
AlliedSignal, Inc. 5.50%, 5/4/98........... A-1 1,855 1,854,150
Goldman Sachs & Co. 5.50% 5/5/98........... A-1+ 655 654,596
Procter & Gamble Co. 5.53%, 5/8/98......... A-1+ 4,985 4,979,640
---------------
13,878,386
---------------
FEDERAL AGENCY SECURITIES--0.1%
FHLMC 5.43%, 5/7/98........................................ 430 429,610
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $14,307,996).............................................. 14,307,996
---------------
TOTAL INVESTMENTS --100.9%
(Identified cost $242,877,812)............................................. 293,702,055(a)
Cash and receivables, less liabilities--(0.9%)............................. (2,711,458)
---------------
NET ASSETS--100.0%........................................................... $290,990,597
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $54,218,530 and gross
depreciation of $3,394,287 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$242,993,148.
(b) Non-income producing.
28 See Notes to Financial Statements
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $242,877,812) $ 293,702,055
Short-term investments held as collateral for loaned
securities 9,420,640
Cash 4,162
Receivables
Investment securities sold 1,026,434
Fund shares sold 207,763
Dividend and interest 96,687
--------------
Total assets 304,457,741
--------------
LIABILITIES
Payables
Collateral on securities loaned 9,420,640
Investment securities purchased 3,148,993
Fund shares repurchased 538,210
Investment advisory fee 169,036
Distribution fee 70,172
Financial agent fee 11,467
Transfer agent fee 2,129
Trustees' fee 1,760
Accrued expenses 104,737
--------------
Total liabilities 13,467,144
--------------
NET ASSETS $ 290,990,597
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 234,450,650
Undistributed net investment loss (157,270)
Accumulated net realized gain 5,872,974
Net unrealized appreciation 50,824,243
--------------
NET ASSETS $ 290,990,597
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $274,831,065) 17,254,688
Net asset value per share $15.93
Offering price per share
$15.93/(1-4.75%) $16.72
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $16,159,532) 1,052,831
Net asset value and offering price per share $15.35
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Interest $ 953,605
Dividends 460,125
Securitiy lending 63,550
-------------
Total investment income 1,477,280
-------------
EXPENSES
Investment advisory fee 938,425
Distribution fee--Class A 317,288
Distribution fee--Class B 71,456
Financial Agent Fee 64,534
Transfer agent 118,666
Custodian 67,161
Professional 20,639
Registration 13,565
Printing 11,978
Trustees 9,674
Miscellaneous 1,164
-------------
Total expenses 1,634,550
-------------
NET INVESTMENT LOSS (157,270)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 6,209,733
Net change in unrealized appreciation on investments 35,830,424
-------------
NET GAIN ON INVESTMENTS 42,040,157
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 41,882,887
-------------
-------------
See Notes to Financial Statements 29
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss $ (157,270) $ (1,405,570)
Net realized gain 6,209,733 54,155,507
Net change in unrealized appreciation (depreciation) 35,830,424 (8,722,108)
-------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 41,882,887 44,027,829
-------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains--Class A (49,279,463) (33,833,409)
Net realized gains--Class B (2,802,392) (1,733,847)
-------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (52,081,855) (35,567,256)
-------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sale of shares (1,335,815 and 4,764,191 shares, respectively) 20,017,189 76,429,442
Net asset value of shares issued from reinvestment of distributions
(3,394,334 and 2,152,050 shares, repectively) 45,790,717 31,462,960
Cost of shares repurchased (1,779,307 and 6,476,002 shares, respectively) (27,421,916) (103,491,166)
-------------- -----------------
Total 38,385,990 4,401,236
-------------- -----------------
CLASS B
Proceeds from sale of shares (310,246 and 787,300 shares, respectively) 4,504,106 12,236,599
Net asset value of shares issued from reinvestment of distributions
(193,821 and 104,654 shares, respectively) 2,527,426 1,500,729
Cost of shares repurchased (263,607 and 711,043 shares, respectively) (3,841,482) (10,939,843)
-------------- -----------------
Total 3,190,050 2,797,485
-------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 41,576,040 7,198,721
-------------- -----------------
NET INCREASE IN NET ASSETS 31,377,072 15,659,294
NET ASSETS
Beginning of period 259,613,525 243,954,231
-------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT LOSS OF
($157,270) AND $0, RESPECTIVELY) $290,990,597 $ 259,613,525
-------------- -----------------
-------------- -----------------
</TABLE>
30 See Notes to Financial Statements
<PAGE>
PHOENIX AGGRESSIVE GROWTH FUND SERIES
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.20 $ 16.84 $ 16.51 $ 13.33 $ 14.56 $ 13.56
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.01)(4) (0.08)(4) (0.13)(4) 0.06(4) 0.27 0.22
Net realized and unrealized gain (loss) 2.22 2.95 2.64 4.21 (0.21) 1.62
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 2.21 2.87 2.51 4.27 0.06 1.84
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- (0.02) (0.19) (0.22) (0.23)
Dividends from net realized gains (3.48) (2.51) (2.16) (0.90) (1.07) (0.61)
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (3.48) (2.51) (2.18) (1.09) (1.29) (0.84)
--------- --------- --------- --------- --------- ---------
Change in net asset value (1.27) 0.36 0.33 3.18 (1.25) 1.00
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 15.93 $ 17.20 $ 16.84 $ 16.51 $ 13.33 $ 14.56
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return(1) 16.53%(3) 19.67% 17.43% 35.14% 0.37% 14.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $274,831 $246,002 $233,488 $180,288 $140,137 $143,035
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.18%(2) 1.20% 1.20% 1.29% 1.26% 1.17%
Net investment income (loss) (0.08)%(2) (0.53)% (0.81)% 0.43% 1.97% 1.58%
Portfolio turnover 472%(3) 518% 401% 331% 306% 192%
Average commission rate paid(6) $0.0549 $0.0586 $0.0655 N/A N/A N/A
<CAPTION>
CLASS B
-----------------------------------------------------------------
SIX FROM
MONTHS INCEPTION
ENDED 7/21/94
4/30/98 YEAR ENDED OCTOBER 31, TO
(UNAUDITED) 1997 1996 1995 10/31/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.76 $ 16.57 $ 16.38 $ 13.31 $ 13.09
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.06)(4) (0.20)(4) (0.25)(4) (0.12)(4) 0.02
Net realized and unrealized gain (loss) 2.13 2.90 2.60 4.26 0.20
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 2.07 2.70 2.35 4.14 0.22
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- (0.17) --
Dividends from net realized gains (3.48) (2.51) (2.16) (0.90) --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (3.48) (2.51) (2.16) (1.07) --
--------- --------- --------- --------- ---------
Change in net asset value (1.41) 0.19 0.19 3.07 0.22
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 15.35 $ 16.76 $ 16.57 $ 16.38 $ 13.31
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return(1) 16.20%(3) 18.70% 16.52% 34.15% 1.68%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $16,160 $13,611 $10,466 $2,393 $330
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.93%(2) 1.96% 1.95% 2.04% 1.81%(2)
Net investment income (loss) (0.83)%(2) (1.28)% (1.57)% (0.83)% 1.45%(2)
Portfolio turnover 472%(3) 518% 401% 331% 306%
Average commission rate paid(6) $0.0549 $0.0586 $0.0655 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5)Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
(6)For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect mark-ups,
mark-downs, or spreads on shares traded on a principal basis.
See Notes to Financial Statements 31
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ----------------------------------------------------------------
INVESTOR PROFILE
Phoenix High Yield Fund is designed for aggressive investors seeking high
current income as well as the potential for long-term capital appreciation.
INVESTMENT ADVISER'S REPORT
The Phoenix High Yield Fund continued to provide investors with above-average
returns versus the high yield universe. For the six months ended April 30, 1998,
Class A shares returned 7.56% and Class B shares earned 7.25% compared with a
return of 5.47% for the CS First Boston High Yield Index.* All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges. High yielding fixed-income securities generally are subject to greater
market fluctuations and risk of loss of income and principal than are
investments in lower yielding fixed-income securities. Foreign investing
involves special risks, such as currency fluctuation, less public disclosure,
and economic and political risks.
The Fund's positive performance in late 1997 and early 1998 was driven by its
overweighted position in telecommunications, energy, and media/entertainment. We
have maintained close to 35% exposure to the international sector, with an
emphasis on higher quality companies in non-emerging countries, particularly
companies domiciled in Europe. We avoided much of the turmoil in the emerging
markets due to a lack of exposure in the Asian countries.
The domestic high yield market remains relatively attractive compared with
other fixed-income alternatives, given continued support from a strong economy
and demand for higher yields by investors. In addition, the high yield investor
base continues to expand with increased interest from institutional and European
investors. However, yields offered by the domestic high yield market are near
historic lows and part of our current strategy is to position the credit quality
of the portfolio above that of the general high yield market.
OUTLOOK
Our competitive advantage continues to be a global approach to the high yield
market. We currently find more compelling values in the international sector of
the market and, therefore, are maintaining the maximum exposure of 35%.
Importantly, the international portion of the portfolio remains well diversified
by country. The 65% allocation to the domestic high yield sector is diversified
by industry, with overweighted positions in telecommunications, energy, and
media/entertainment.
* The CS First Boston High Yield Index is an unmanaged, commonly used measure
of performance of the high yield sector of the bond market. The Index is not
available for direct investment.
32
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
--------- --------- ------------
ASSET-BACKED SECURITIES--0.5% DLJ Mortgage Acceptance Corp.
94-MF4, B2 8.50%, 4/18/01...... BB(d) $ 3,000 $2,992,500
------------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $2,849,491).................................. 2,992,500
------------
CORPORATE BONDS--61.5%
BROADCASTING (TELEVISION, RADIO, & CABLE)--8.8%
Fox Kids Worldwide 144A 0%,
11/1/07 (b)(f)................. B 39,000 24,911,250
Fox/Liberty Networks LLC 0%,
8/15/07 (f).................... B 13,000 8,905,000
Fox/Liberty Networks LLC 8.875%,
8/15/07........................ B 5,000 5,125,000
Lin Holdings Corp. 144A 0% 3/1/08
(b)(f)......................... B 10,000 6,287,500
Poland Communications, Inc.
Series B 9.875%, 11/1/03....... B 12,200 12,108,500
------------
57,337,250
------------
COMPUTER SOFTWARE & SERVICES--0.8%
PSINET, Inc. 144A 10%, 2/15/05
(b)............................ B 3,400 3,502,000
Verio, Inc. 144A 13.50%, 6/15/04
(b)(e)......................... NR 1,000 1,460,000
------------
4,962,000
------------
CONTAINERS (METAL & GLASS)--1.7%
Portola Packaging, Inc. Sr. Note
10.75%, 10/1/05................ B 10,000 10,762,500
------------
COSMETICS/PERSONAL CARE--1.7%
Revlon Worldwide Corp. Series B
0%, 3/15/01.................... B 14,000 10,780,000
------------
DIVERSIFIED MISCELLANEOUS--0.2%
IBJ Preferred Cap Co. 144A 8.79%,
12/29/49 (b)(f)................ A 1,645 1,559,414
------------
DRUGS--MAJOR PHARMACEUTICALS--1.5%
Fountain View, Inc. 144A 11.25%,
4/15/08 (b).................... Caa 5,000 5,112,500
Schein Pharmaceutical, Inc. 144A,
8.727%, 12/15/04 (b)(e)(f)..... B 4,800 4,800,000
------------
9,912,500
------------
ELECTRONICS (INSTRUMENTATION)--1.9%
Anacomp, Inc. Series B 10.875%,
4/1/04......................... B 7,000 7,455,000
Samsung Electron America 144A
9.75%, 5/1/03 (b).............. Ba 5,000 5,012,500
------------
12,467,500
------------
ENGINEERING & CONSTRUCTION--0.4%
Octel Developments Sr. Notes 144A
10%, 5/1/06 (b)................ B 2,500 2,500,000
------------
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
--------- --------- ------------
GAMING, LOTTERY, PARIMUTUEL COS.--2.2% Trump Atlantic City Assoc.
11.25%, 5/1/06................. B $14,000 $14,000,000
------------
HEALTH CARE--DIVERSIFIED--1.1%
Global Health Sciences 144A 11%,
5/1/08 (b)..................... Caa 6,900 7,003,500
------------
INDUSTRIAL--2.4%
Stellex Industries, Inc. 144A
9.50%, 11/1/07 (b)............. NR 2,000 2,047,500
Wam!net, Inc. 144A 13.25%, 3/1/05
(b)(f)......................... NR 21,000 13,282,500
------------
15,330,000
------------
LEASING/RENTAL--0.6%
Williams Scotsman, Inc. 9.875%,
6/1/07......................... B 3,700 3,922,000
------------
MACHINERY (DIVERSIFIED)--0.3%
Newcor, Inc. 144A 9.875%, 3/1/08
(b)............................ B 2,000 2,047,500
------------
MANUFACTURING (DIVERSIFIED)--0.6%
Polymer Group, Inc. 144A 8.75%,
3/1/08 (b)..................... B 4,000 4,070,000
------------
MANUFACTURING (SPECIALIZED)--0.6%
Phillips Van-Heusen 144A 9.50%,
5/1/08 (b)..................... B 4,000 4,005,000
------------
METALS MINING--1.3%
NSM Steel Ltd. 144A 12.25%,
2/1/08 (b)..................... Caa 8,750 8,487,500
------------
OFFICE EQUIPMENT & SUPPLIES--0.5%
United Stationers, Inc. Sr. Sub.
Notes 144A 8.375%, 4/15/08
(b)............................ B 3,000 3,022,500
------------
OIL & GAS (EXPLORATION & PRODUCTION)--10.0%
Nuevo Energy Co. 9.50%,
4/15/06........................ B 13,500 14,310,000
Bellwether Exploration Co.
10.875%, 4/1/07................ B 8,000 8,400,000
Benton Oil & Gas Co. 11.625%,
5/1/03......................... B 9,800 10,584,000
Benton Oil & Gas Co. 9.375%,
11/1/07........................ B 2,750 2,756,875
Ocean Energy, Inc. 9.75%,
10/1/06........................ B 5,000 5,500,000
Forcenergy, Inc. 8.50%,
2/15/07........................ B 7,000 7,087,500
Lomak Petroleum, Inc. 8.75%,
1/15/07........................ B 2,000 2,045,000
Ocean Energy, Inc. Series B
8.875%, 7/15/07................ B 7,000 7,367,500
Snyder Oil Corp. 8.75%,
6/15/07........................ B 6,750 6,918,750
------------
64,969,625
------------
See Notes to Financial Statements 33
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ------------------------------------------------------
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
PUBLISHING--1.6% --------- --------- ------------
Hollinger International
Publishing, Inc. 9.25%,
3/15/07........................ B $ 3,400 $3,561,500
Outdoor Communications, Inc.
9.25%, 8/15/07................. B 6,500 6,800,625
------------
10,362,125
------------
TELECOMMUNICATIONS (LONG DISTANCE)--6.7%
Hermes Europe Railtel B.V. 144A
11.50%, 8/15/07 (b)............ B 6,500 7,393,750
NTL, Inc. Series B 0%, 2/1/06
(f)............................ B 7,000 5,608,750
NTL, Inc. Series B 10%,
2/15/07........................ B 8,000 8,640,000
RCN Corp 144A 0%, 2/15/08
(b)(f)......................... B 20,525 12,879,437
RSL Communications PLC 144A 0%,
3/1/08 (b)(f).................. B 14,750 9,145,000
------------
43,666,937
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--5.9%
Bell Technology Group 144A 13%,
5/1/05 (b)(g).................. NR 4,400 4,444,000
Comcast Cellular Series B 9.50%,
5/1/07......................... Ba 10,500 10,972,500
Orion Network Systems, Inc. 0%,
1/15/07 (f).................... B 8,000 6,160,000
Sprint Spectrum L.P. 0%, 8/15/06
(f)............................ B 19,950 16,558,500
------------
38,135,000
------------
TELEPHONE--7.6% InterAmericas Communication Corp.
Unit 144A 14%, 7/15/07
(b)(g)......................... NR 12,000 12,600,000
Intermedia Communication Series B
0%, 7/15/07 (f)................ B 12,850 9,428,688
Pathnet, Inc. 144A 12.25%,
4/15/08 (b)(g)................. NR 5,825 5,970,625
RNC Corp. 144A 0%, 10/15/07
(b)(f)......................... B 17,250 11,471,250
Teligent, Inc. 11.50%, 12/1/07... NR 5,000 5,212,500
Teligent, Inc. 144A 0%, 3/1/08
(b)(f)......................... NR 8,000 4,570,000
------------
49,253,063
------------
TRUCKERS & MARINE--2.2%
Global Ocean Carriers 144A
10.25%, 7/15/07 (b)............ B 4,000 3,690,000
Hvide Marine, Inc. 144A 8.375%,
2/15/08 (b).................... B 5,500 5,376,250
Sea Containers 144A 7.875%,
2/15/08 (b).................... Ba 5,000 4,943,750
------------
14,010,000
------------
WASTE MANAGEMENT--0.9%
Allied Waste Industries 0%,
6/1/07 (f)..................... B 7,500 5,503,125
------------
TOTAL CORPORATE BONDS
(Identified cost $385,650,614)................................ 398,069,039
------------
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
--------- --------- ------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--2.4%
First Chicago/Lennar Trust 144A
8.11%, 2/28/11 (b)(f).......... B(d) $ 9,825 $8,636,789
Salomon Brothers Mortgage
Securities VII 95-C, 1 144A
6.80%, 9/30/08(b).............. B 7,861 6,623,266
------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $13,526,530)................................. 15,260,055
------------
FOREIGN GOVERNMENT SECURITIES--4.6%
ARGENTINA--0.4%
Imasac SA 144A 11%, 5/2/05 (b)... B 2,500 2,506,250
------------
DOMINICAN REPUBLIC--0.3%
Dominican Republic 6.875%,
8/30/24 (f).................... B+(d) 2,500 1,987,500
------------
INDONESIA--1.1%
Asia Pulp & Paper Co. 12%,
12/29/49 (f)................... Caa 7,900 6,873,000
------------
RUSSIA--2.8%
Russia Principal Loans, PIK
interest capitalization,
6.719%, 12/15/20 (f)........... NR 28,350 17,949,093
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $31,573,168)................................. 29,315,843
------------
FOREIGN CORPORATE BONDS--24.5%
BAHAMAS--1.0%
Sun International Hotels 9%,
3/15/07........................ Ba 6,000 6,270,000
------------
BERMUDA--1.1%
AES China Generating Co. Yankee
10.125%, 12/15/06.............. Ba 8,220 7,767,900
------------
BRAZIL--2.8%
Arisco Prod Alimenticios 144A
10.75%, 5/22/05 (b)............ NR 3,750 3,656,250
Globo Communicacoes Participacoes
144A 10.625%, 12/15/08 (b)..... B 2,380 2,418,675
Localiza Rent a Car 144A 10.25%,
10/1/05 (b).................... B 8,000 7,120,000
RBS Participacoes SA 144A 11%,
4/1/07 (b)..................... BB-(d) 5,000 5,025,000
------------
18,219,925
------------
CANADA--2.3%
Hurricane Hydrocarbons 144A
11.75%, 11/1/04 (b)............ B- 8,000 8,060,000
International Utility Sr. Sub.
PIK Notes 144A 10.75%, 2/1/08
(b)............................ Caa 2,250 2,340,000
Metronet Communications 12%,
8/15/07........................ NR 4,000 4,600,000
------------
15,000,000
------------
CHINA--0.2%
Greater Beijing 144A 9.50%,
6/15/07 (b)(e)................. Ba 1,650 1,311,750
------------
CYPRUS--1.6%
American Reefer 144A 10.25%,
3/1/08 (b)..................... B 10,000 10,075,000
------------
34 See Notes to Financial Statements
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ------------------------------------------------------
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
GERMANY--1.8% --------- --------- ------------
Kabelmedia Holding 0%, 8/1/06
(f)............................ B $15,000 $11,700,000
------------
GREECE--2.2%
Antenna TV SA Sr. Notes 9%,
8/1/07......................... BB(d) 4,250 4,335,000
Fage Dairy Industries SA 9%,
2/1/07......................... B 10,000 9,700,000
------------
14,035,000
------------
HONG KONG--0.2%
Road King Infrastructure 144A
9.50%, 7/15/07 (b)............. BB(d) 2,000 1,580,000
------------
MEXICO--4.4%
Copamex Industries SA Series B
11.375%, 4/30/04 .............. NR 8,000 8,730,000
Ispat Mexicana SA Euro 10.375%,
3/15/01........................ NR 12,000 12,360,000
Pemex Onc. 9.50%, 9/15/27........ BB(d) 2,000 2,002,500
Petroleos Mexicanos 144A 9.25%,
3/30/18 (b).................... BB(d) 5,500 5,410,625
------------
28,503,125
------------
NETHERLANDS--1.1%
Netia Holdings 144A 0%, 11/1/07
(b)(f)......................... B 9,750 6,946,875
------------
PANAMA--1.5%
Republic of Panama 8.875%,
9/30/27........................ Ba 10,000 9,795,000
------------
POLAND--0.9%
Poland Telecom Finance 144A 14%,
12/1/07 (b)(e)................. NR 5,000 5,625,000
------------
UNITED KINGDOM--3.4%
Bridas Corp. 12.50%, 11/15/99.... Ba 6,500 6,922,500
Esprit Telecom Group PLC 11.50%,
12/15/07....................... Caa 10,000 11,000,000
Telwest Communications PLC 0%,
10/1/07 (f).................... B 5,000 4,050,000
------------
21,972,500
------------
TOTAL FOREIGN CORPORATE BONDS
(Identified cost $155,795,045)................................ 158,802,075
------------
FOREIGN CONVERTIBLE BONDS--1.4%
RUSSIA--1.4%
Lukinteer Finance Lukoil 144A,
1%, 11/3/03 (b)................ NR 10,500 8,977,500
------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $9,777,270).................................. 8,977,500
------------
SHARES VALUE
--------- ------------
PREFERRED STOCKS--2.6%
BROADCASTING (TELEVISION, RADIO, & CABLE)--1.8%
American Radio Systems Series B Pfd. PIK
11.375%....................................... 100,017 $ 11,827,021
------------
PAPER & FOREST PRODUCTS--0.6%
SD Warren Co. Series B Pfd. PIK 14%............. 115,000 4,042,377
------------
UTILITY-ELECTRIC POWER--0.2%
International Utility Structures 144A Pfd. PIK
(b)........................................... 1,000 1,062,500
------------
TOTAL PREFERRED STOCKS
(Identified cost $13,523,141)................................ 16,931,898
------------
CONVERTIBLE PREFERRED STOCKS--0.2%
BROADCASTING (TELEVISION, RADIO, & CABLE)--0.2%
Granite Broadcasting Corp. CV. Pfd. $1.938...... 30,000 1,792,500
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $2,025,000)................................. 1,792,500
------------
COMMON STOCKS--0.0%
PUBLISHING--0.0%
Sullivan Holdings, Inc. Class C (c)............. 76 0
------------
TOTAL COMMON STOCKS
(Identified cost $357,880)................................... 0
------------
WARRANTS--0.0%
Orion Network Systems, Inc. Warrants (c)........ 8,000 80,000
Metronet Communications 144A Warrants (b)(c).... 4,000 192,500
------------
TOTAL WARRANTS
(Identified cost $106,429)................................... 272,500
------------
TOTAL LONG-TERM INVESTMENTS--97.7%
(Identified cost $615,184,568)............................... 632,413,910
------------
TOTAL INVESTMENTS--97.7%
(Identified cost $615,184,568)............................... 632,413,910(a)
Cash and receivables, less liabilities--2.3%................. 14,796,909
------------
NET ASSETS--100.0%............................................. $647,210,819
------------
------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $26,218,966 and gross
depreciation of $9,082,426 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$615,277,370.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1998, these securities amounted to a value of $269,163,206 or 41.6% of net
assets.
(c) Non-income producing.
(d) As rated by Standard & Poor's, Duff and Phelps or Fitch. (e) Rights
incorporated as a unit. (f) Variable or step coupon security; interest rate
shown reflects the rate
currently in effect.
(g) Warrants incorporated as a unit.
See Notes to Financial Statements 35
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $615,184,568) $ 632,413,910
Receivables
Investment securities sold 11,240,342
Dividends and interest 11,407,648
Fund shares sold 834,028
--------------
Total assets 655,895,928
--------------
LIABILITIES
Payables
Custodian 4,150,149
Investment securities purchased 2,500,000
Fund shares repurchased 1,335,322
Investment advisory fee 352,596
Distribution fee 180,245
Transfer agent fee 58,654
Financial agent fee 19,562
Trustees' fee 9,476
Accrued expenses 79,105
--------------
Total liabilities 8,685,109
--------------
NET ASSETS $ 647,210,819
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 701,971,215
Undistributed net investment income 1,822,125
Accumulated net realized loss (73,811,863)
Net unrealized appreciation 17,229,342
--------------
NET ASSETS $ 647,210,819
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $573,701,218) 61,283,155
Net asset value per share $9.36
Offering price per share
$9.36/(1-4.75%) $9.83
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $72,487,436) 7,763,816
Net asset value and offering price per share $9.34
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,022,165) 109,238
Net asset value and offering price per share $9.36
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Interest $ 30,069,459
Dividends 964,974
-------------
Total investment income 31,034,433
-------------
EXPENSES
Investment advisory fee 2,044,672
Distribution fee--Class A 707,365
Distribution fee--Class B 315,383
Distribution fee--Class C 801
Financial agent fee 112,201
Transfer agent 323,889
Registration 50,078
Professional 21,334
Printing 18,299
Custodian 14,116
Trustees 10,850
Miscellaneous 6,187
-------------
Total expenses 3,625,175
-------------
NET INVESTMENT INCOME 27,409,258
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 7,475,424
Net change in unrealized appreciation on investments 11,011,109
-------------
NET GAIN ON INVESTMENTS 18,486,533
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 45,895,791
-------------
-------------
36 See Notes to Financial Statements
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ----------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 27,409,258 $ 49,787,651
Net realized gain 7,475,424 43,737,254
Net change in unrealized appreciation (depreciation) 11,011,109 (14,877,655)
-------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 45,895,791 78,647,250
-------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (24,885,385) (47,205,499)
Net investment income--Class B (2,613,743) (3,142,933)
Net investment income--Class C (8,700) --
-------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (27,507,828) (50,348,432)
-------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (9,887,985 and 19,095,734 shares, respectively) 91,479,086 171,457,073
Net asset value of shares issued from reinvestment of distributions
(1,467,366 and 2,704,031 shares, respectively) 13,563,680 24,329,132
Cost of shares repurchased (8,715,645 and 21,233,985 shares, respectively) (80,899,210) (191,152,369)
-------------- -----------------
Total 24,143,556 4,633,836
-------------- -----------------
CLASS B
Proceeds from sales of shares (2,796,356 and 4,404,860 shares, respectively) 25,851,201 39,804,503
Net asset value of shares issued from reinvestment of distributions
(114,149 and 142,554 shares, respectively) 1,053,743 1,286,205
Cost of shares repurchased (900,728 and 1,757,872 shares, respectively) (8,341,129) (15,793,311)
-------------- -----------------
Total 18,563,815 25,297,397
-------------- -----------------
CLASS C
Proceeds from sales of shares (110,396 and 0 shares, respectively) 1,036,529 --
Net asset value of shares issued from reinvestment of distributions
(524 and 0 shares, respectively) 4,913 --
Cost of shares repurchased (1,682 and 0 shares, respectively) (15,744) --
-------------- -----------------
Total 1,025,698 --
-------------- -----------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 43,733,069 29,931,233
-------------- -----------------
NET INCREASE IN NET ASSETS 62,121,032 58,230,051
NET ASSETS
Beginning of period 585,089,787 526,859,736
-------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,822,125 AND $1,920,695, RESPECTIVELY) $647,210,819 $ 585,089,787
-------------- -----------------
-------------- -----------------
</TABLE>
See Notes to Financial Statements 37
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.09 $ 8.63 $ 8.17 $ 8.11 $ 9.11 $ 8.14
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.40 0.80 0.78 0.80 0.76 0.74
Net realized and unrealized gain (loss) 0.27 0.46 0.46 0.04 (0.97) 0.97
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.67 1.26 1.24 0.84 (0.21) 1.71
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.40) (0.80) (0.78) (0.78) (0.76) (0.74)
Tax return of capital -- -- -- -- (0.03) --
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.40) (0.80) (0.78) (0.78) (0.79) (0.74)
--------- --------- --------- --------- --------- ---------
Change in net asset value 0.27 0.46 0.46 0.06 (1.00) 0.97
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.36 $ 9.09 $ 8.63 $ 8.17 $ 8.11 $ 9.11
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return(1) 7.56%(3) 15.03% 15.95% 11.19% (2.57)% 21.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $573,701 $532,906 $501,265 $507,855 $531,773 $182,333
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.06%(2) 1.11% 1.17% 1.21% 1.19% 1.04%
Net investment income 8.73%(2) 8.76% 9.21% 10.01% 9.01% 8.46%
Portfolio turnover 62%(3) 167% 162% 147% 222% 157%
<CAPTION>
CLASS B
-----------------------------------------------------------------------
SIX MONTHS FROM
ENDED INCEPTION
4/30/98 YEAR ENDED OCTOBER 31, 2/16/94 TO
(UNAUDITED) 1997 1996 1995 10/31/94
------------ --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.07 $ 8.63 $ 8.19 $ 8.13 $ 9.38
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.38 0.73 0.71 0.72 0.54
Net realized and unrealized gain (loss) 0.27 0.46 0.45 0.07 (1.25)
------------ --------- --------- --------- ------------
TOTAL FROM INVESTMENT OPERATIONS 0.65 1.19 1.16 0.79 (0.71)
------------ --------- --------- --------- ------------
LESS DISTRIBUTIONS
Dividends from net investment income (0.38) (0.75) (0.72) (0.73) (0.52)
Tax return of capital -- -- -- -- (0.02)
------------ --------- --------- --------- ------------
TOTAL DISTRIBUTIONS (0.38) (0.75) (0.72) (0.73) (0.54)
------------ --------- --------- --------- ------------
Change in net asset value 0.27 0.44 0.44 0.06 (1.25)
------------ --------- --------- --------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.34 $ 9.07 $ 8.63 $ 8.19 $ 8.13
------------ --------- --------- --------- ------------
------------ --------- --------- --------- ------------
Total return(1) 7.25%(3) 14.18% 14.88% 10.44% (7.67)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $72,487 $52,184 $25,595 $12,331 $6,056
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.81%(2) 1.86% 1.92% 1.97% 1.80%(2)
Net investment income 8.09%(2) 8.00% 8.47% 9.18% 9.12%(2)
Portfolio turnover 62%(3) 167% 162% 147% 222%
</TABLE>
(1) Maximum sales load is not reflected in total return calculation.
(2) Annualized.
(3) Not annualized.
38 See Notes to Financial Statements
<PAGE>
PHOENIX HIGH YIELD FUND SERIES
- ------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------
FROM
INCEPTION
2/27/98 TO
4/30/98
(UNAUDITED)
-------------
<S> <C>
Net asset value, beginning of period $ 9.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.11
Net realized and unrealized gain (loss) 0.07
------
TOTAL FROM INVESTMENT OPERATIONS 0.18
------
LESS DISTRIBUTIONS
Dividends from net investment income (0.13)
Tax return of capital --
------
TOTAL DISTRIBUTIONS (0.13)
------
Change in net asset value 0.05
------
NET ASSET VALUE, END OF PERIOD $ 9.36
------
------
Total return(1) 1.89%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 1,022
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.81%(2)
Net investment income 8.52%(2)
Portfolio turnover 62%(3)
</TABLE>
(1) Maximum sales load is not reflected in total return calculation.
(2) Annualized.
(3) Not annualized.
See Notes to Financial Statements 39
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
- ------------------------------------------------------------------------
INVESTOR PROFILE
Phoenix U.S. Government Securities Fund is designed for conservative investors
seeking current income and conservation of capital. The U.S. Government
Securities Fund invests in securities guaranteed by the U.S. Government as to
the timely payment of interest and principal, however, shares in the Fund are
not insured nor guaranteed.
INVESTMENT ADVISER'S REPORT
For the six months ended April 30, 1998, Phoenix U.S. Government Securities
Fund Class A shares returned 3.43% and Class B shares returned 3.09% compared
with 3.56% for the Lehman Brothers Government Bond Index.* All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
As spreads between Treasuries and mortgage-backed securities began to widen,
we shifted our emphasis away from U.S. Treasuries and gradually increased our
weighting in mortgage-backed issues from about 10% of the Fund in December to
approximately 40% at the end of the reporting period. In addition, we
selectively added commercial mortgage-backed credits when we found attractive
values.
OUTLOOK
The bond market is likely to continue to be quite volatile as the market
continues to question whether the strong economy and low unemployment will
ultimately lead to higher inflation. In addition, the market seems to have mixed
views on whether the effects of the Asian turmoil will result in slower domestic
growth, which could help keep inflation in check.
The Fund's duration will be maintained in line with its benchmark index to
minimize interest rate surprises. It is currently 5.3 years. We will continue to
conservatively manage the Fund, emphasizing those sectors that we believe offer
the best risk/reward tradeoff.
* The Lehman Brothers Government Bond Index is an unmanaged, commonly used
performance measure of government securities. The Index is not available for
direct investment.
40
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ----------- -----------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--15.2%
U.S. TREASURY BONDS--2.8%
U.S. Treasury Bonds 6.125%, 11/15/27................. AAA $ 4,950 $ 5,069,641
-----------
U.S. TREASURY NOTES--12.4%
U.S. Treasury Notes 5.625%, 10/31/99................. AAA 7,470 7,475,826
U.S. Treasury Notes 5.625%, 12/31/99................. AAA 5,700 5,706,212
U.S. Treasury Notes 5.375%, 2/15/01.................. AAA 9,000 8,947,529
-----------
22,129,567
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $27,169,041)...................................................... 27,199,208
-----------
AGENCY MORTGAGE-BACKED SECURITIES--24.8%
FNMA 10%, 5/25/04.................................... AAA 2,453 2,591,563
FNMA 6.75%, '99-'21.................................. AAA 2,000 2,037,182
GNMA 8%, '99-'06..................................... AAA 134 139,006
GNMA 8.50%, '99-'22.................................. AAA 301 314,378
GNSF 6.50%, '99-'28.................................. AAA 39,730 39,369,879
-----------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(Identified cost $44,521,165)...................................................... 44,452,008
-----------
MUNICIPAL BONDS--16.7%
Atlanta Downtown Development Authority Lease Revenue
Taxable 6.875%, 2/1/21 (e)......................... AAA 5,100 5,310,375
Chicago Public Building Taxable 6.25%, 1/1/99 (c).... AAA 2,000 2,005,640
Chicago Public Building Taxable 6.65%, 1/1/01 (c).... AAA 1,000 1,017,500
Chicago Public Building Taxable 7%, 1/1/06 (c)....... AAA 2,000 2,107,500
Chicago Public Building Taxable 7%, 1/1/07 (c)....... AAA 1,050 1,109,063
Harristown Development Corporation PA Special
Obligation Taxable 6.15%, 2/1/16................... AAA 5,000 4,831,250
Long Beach CA Pension Obligation Taxable 7.09%,
9/1/09............................................. Aaa(f) 1,940 2,039,425
Massachusetts Port Authority Revenue Taxable 6.35%,
7/1/06............................................. AA- 1,000 1,007,500
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ----------- -----------
MUNICIPAL BONDS--CONTINUED
Massachusetts Port Authority Revenue Taxable 6.45%,
7/1/09............................................. AA- $ 1,575 $ 1,586,812
Pittsburgh PA Pension Taxable Series A 6.25%,
3/1/11............................................. AAA 2,665 2,615,031
San Francisco City & County Redevelopment Agency
Revenue Taxable 9.75%, 6/1/13...................... AAA 4,800 6,396,000
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $29,016,324)...................................................... 30,026,096
-----------
ASSET-BACKED SECURITIES--6.8%
ContiMortgage Home Equity Loan Trust 98-1B 7.86%,
4/15/29............................................ BBB- 1,470 1,484,011
Saxon Asset Securities Trust 1997-3 MF1 6.935%,
2/25/27............................................ Aa(f) 5,333 5,301,335
Delta Funding Home Equity Loan Trust 97-2 A4 7.03%,
8/25/24............................................ AAA 4,250 4,284,531
IMC Home Equity Loan 98-1 M2 Trust 7.38%, 6/20/29.... A 1,130 1,142,713
-----------
TOTAL ASSET-BACKED SECURITIES
(Identified cost $12,274,237)...................................................... 12,212,590
-----------
CORPORATE BONDS--2.4%
GAMING, LOTTERY, PARIMUTUEL COS.--2.4%
Mashantucket Pequot Revenue 144A 6.91%, 9/01/12
(b)(c)............................................. AAA 4,200 4,347,000
-----------
TOTAL CORPORATE BONDS
(Identified cost $4,200,000)....................................................... 4,347,000
-----------
NON-AGENCY MORTGAGE BACKED SECURITIES--21.2%
Imperial CMB Trust 1998-2 M1 6.95%, 4/25/28.......... AAA(f) 1,634 1,629,480
PNC Mortgage Securities Corp. 96-3, A5 8%,
12/25/26........................................... Aaa(f) 4,565 4,791,705
Residential Funding Securities l 1996-S3 A5 7.25%,
1/25/26............................................ AAA 5,390 5,431,753
Residential Funding Mortgage Securities l 1996-S4 A13
7.25%, 2/25/26..................................... AAA 4,894 4,933,954
Merrill Lynch Mortgage 1996-C2, C Investors, Inc.
6.96%, 11/21/28.................................... A 9,000 9,163,125
See Notes to Financial Statements 41
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
- ------------------------------------------------------
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ----------- -----------
CS First Boston Corp. 97-SPCE, D 144A 7.332%,
04/20/08 (b)(c).................................... BBB(f) $ 4,928 $ 4,961,880
MCFI 1996-MC2 C., 7.224% 9/20/06..................... A(f) 7,000 7,194,687
-----------
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(Identified cost $38,151,385)...................................................... 38,106,584
-----------
SHARES
-----------
PREFERRED STOCKS--9.7%
REITS--9.7%
Home Ownership Funding 2, Step-down Pfd. 144A 13.338%(b)(d).......
18,000 17,418,402
-----------
TOTAL PREFERRED STOCKS
(Identified cost $17,212,105)...................................................... 17,418,402
-----------
TOTAL LONG-TERM INVESTMENTS--96.8%
(Identified cost $172,544,257)..................................................... 173,761,888
-----------
PAR
VALUE
(000) VALUE
----------- -----------
SHORT-TERM OBLIGATIONS--1.0%
FEDERAL AGENCY SECURITIES--1.0%
FHLM 5.45%, 5/1/98.............................................. $ 1,865 $ 1,865,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,865,000)...................................................... 1,865,000
-----------
TOTAL INVESTMENTS--97.8%
(Identified cost $174,409,257).................................................... 175,626,888(a)
Cash and receivables, less liabilities--2.2%...................................... 3,860,072
-----------
NET ASSETS--100.0%.................................................................. $179,486,960
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $1,709,877 and gross
depreciation of $492,246 for income tax purposes. At April 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$174,409,257.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1998
these securities amounted to a value of $26,727,282 or 14.9% of net assets.
(c) These bonds are fully defeased by U.S. Government Treasury Obligations. (d)
Dividend payments backed by FHLMC ("Freddie Mac") Participation
Certificates.
(e) The revenue from this security is backed by the U.S. Government.
(f) As rated by Moody's, Fitch or Duff & Phelps.
42 See Notes to Financial Statements
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
- ----------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $174,409,257) $ 175,626,888
Cash 6,762
Receivables
Investment securities sold 2,742,292
Interest and dividends 1,552,509
Fund shares sold 78,435
--------------
Total assets 180,006,886
--------------
LIABILITIES
Payables
Fund shares repurchased 299,352
Investment advisory fee 67,121
Transfer agent fee 47,824
Distribution fee 41,141
Trustees' fee 9,300
Financial agent fee 7,775
Accrued expenses 47,413
--------------
Total liabilities 519,926
--------------
NET ASSETS $ 179,486,960
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 186,754,538
Undistributed net investment loss (188,480)
Accumulated net realized loss (8,296,729)
Net unrealized appreciation 1,217,631
--------------
NET ASSETS $ 179,486,960
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $173,309,797) 17,901,531
Net asset value per share $9.68
Offering price per share
$9.68/(1-4.75%) $10.16
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $6,177,163) 641,810
Net asset value and offering price per share $9.62
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Interest $ 5,390,192
Dividends 514,220
Security lending 2,619
-----------
Total investment income 5,907,031
-----------
EXPENSES
Investment advisory fee 414,701
Distribution fee - Class A 223,025
Distribution fee - Class B 29,460
Financial agent fee 47,772
Transfer agent 151,779
Professional 16,187
Registration 11,580
Trustees 10,673
Custodian 9,008
Printing 7,812
Miscellaneous 3,688
-----------
Total expenses 925,685
-----------
NET INVESTMENT INCOME 4,981,346
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on
securities 2,821,677 Net change in unrealized appreciation (depreciation) on
investments (1,420,335)
-----------
NET GAIN ON INVESTMENTS 1,401,342
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 6,382,688
-----------
-----------
See Notes to Financial Statements 43
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
- ----------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 4,981,346 $ 11,039,672
Net realized gain 2,821,677 517,260
Net change in unrealized appreciation (depreciation) (1,420,335) 2,715,533
-------------- -----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 6,382,688 14,272,465
-------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (5,695,866) (10,634,100)
Net investment income--Class B (168,665) (259,835)
-------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (5,864,531) (10,893,935)
-------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (727,907 and 2,629,037 shares, respectively) 7,073,707 24,689,395
Net asset value of shares issued from reinvestment of distributions
(344,650 and 639,861 shares, respectively) 3,345,404 6,046,315
Cost of shares repurchased (2,045,445 and 6,412,210 shares, respectively) (19,872,415) (60,334,761)
-------------- -----------------
Total (9,453,304) (29,599,051)
-------------- -----------------
CLASS B
Proceeds from sales of shares (174,686 and 165,395 shares, respectively) 1,691,214 1,565,869
Net asset value of shares issued from reinvestment of distributions
(10,578 and 11,893 shares, respectively) 102,094 153,651
Cost of shares repurchased (97,583 and 143,485 shares, respectively) (942,768) (1,354,825)
-------------- -----------------
Total 850,540 364,695
-------------- -----------------
DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (8,602,764) (29,234,356)
-------------- -----------------
NET DECREASE IN NET ASSETS (8,084,607) (25,855,826)
NET ASSETS
Beginning of period 187,571,567 213,427,393
-------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF ($188,480) AND
$694,705, RESPECTIVELY) $179,486,960 $ 187,571,567
-------------- -----------------
-------------- -----------------
</TABLE>
44 See Notes to Financial Statements
<PAGE>
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
(UNAUDITED) 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.66 $ 9.47 $ 9.60 $ 8.88 $ 9.87 $ 9.91
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26 0.55 0.52 0.55 0.64 0.62(1)
Net realized and unrealized gain (loss) 0.07 0.17 (0.15) 0.72 (1.02) 0.34
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.33 0.72 0.37 1.27 (0.38) 0.96
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.31) (0.53) (0.50) (0.55) (0.45) (0.62)
Dividends from net realized gains -- -- -- -- (0.02) (0.38)
Tax return of capital -- -- -- -- (0.14) --
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.31) (0.53) (0.50) (0.55) (0.61) (1.00)
--------- --------- --------- --------- --------- ---------
Change in net asset value 0.02 0.19 (0.13) 0.72 (0.99) (0.04)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.68 $ 9.66 $ 9.47 $ 9.60 $ 8.88 $ 9.87
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return(2) 3.43%(4) 7.85% 4.05% 14.81% (3.98)% 10.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $173,310 $182,250 $208,552 $235,879 $262,157 $57,072
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 0.98%(3) 0.98% 1.03% 0.99% 0.98% 0.75%
Net investment income 5.43%(3) 5.63% 5.55% 6.01% 5.92% 6.19%
Portfolio turnover 159%(4) 377% 379% 178% 101% 264%
<CAPTION>
CLASS B
-----------------------------------------------------------------
SIX FROM
MONTHS INCEPTION
ENDED 2/24/94
4/30/98 YEAR ENDED OCTOBER 31, TO
(UNAUDITED) 1997 1996 1995 10/31/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.60 $ 9.45 $ 9.58 $ 8.86 $ 9.61
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.47 0.44 0.48 0.39
Net realized and unrealized gain (loss) 0.06 0.17 (0.14) 0.72 (0.75)
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.29 0.64 0.30 1.20 (0.36)
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.27) (0.49) (0.43) (0.48) (0.30)
Dividends from net realized gains -- -- -- -- --
Tax return of capital -- -- -- -- (0.09)
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.27) (0.49) (0.43) (0.48) (0.39)
--------- --------- --------- --------- ---------
Change in net asset value 0.02 0.15 (0.13) 0.72 (0.75)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.62 $ 9.60 $ 9.45 $ 9.58 $ 8.86
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return(2) 3.09%(4) 6.94% 3.39% 13.82% (3.83)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $6,177 $5,321 $4,875 $3,655 $1,238
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.73%(3) 1.71% 1.78% 1.73% 2.00%(3)
Net investment income 4.70%(3) 4.91% 4.79% 5.23% 4.49%(3)
Portfolio turnover 159%(4) 377% 379% 178% 101%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.03.
(2) Maximum sales load is not reflected in the total return calculation.
(3) Annualized
(4) Not annualized
See Notes to Financial Statements 45
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
- ------------------------------------------------------
INVESTOR PROFILE
Phoenix Money Market Fund is designed for conservative investors seeking high
current income with minimal risk of capital.
INVESTMENT ADVISER'S REPORT
Phoenix Money Market Fund continued to perform well during this six-month
reporting period. As of April 30, 1998, current yield was 4.92% for Class A
shares and 4.16% for Class B shares compared with an average money market yield
of 4.91% as reported in IBC's Money Market Fund Insight.* Current yield is a
seven-day annualized yield computed by dividing the average net income earned
per share during the seven days preceding the date of calculation by the average
daily net asset value per share for the same period, multiplied by 365. The Fund
is neither insured nor guaranteed by the U.S. government, and there can be no
assurance the Fund will maintain a stable net asset value of $1.00 per share.
Ongoing concerns about the turmoil in Southeast Asia and unstable markets
globally have persisted over the reporting period. As a result, short-term money
markets continued to experience high volatility. Moderate to strong domestic
growth in the fourth quarter of 1997 and the first quarter of 1998 has led to
ongoing confusion over the impact that the foreign markets will have on domestic
markets. The Federal Reserve has moved from a neutral policy position to a bias
toward tightening rates.
During this time, we continued to maintain a market neutral strategy given the
ongoing volatility in the markets, while looking for trading opportunities in
variable-rate and corporate securities. We continue to emphasize high-quality
commercial paper and variable-rate securities to enhance yield. The Fund's
average credit quality remained A1/P1. The Fund's credit quality is based solely
on the creditworthiness of the investments in the portfolios and does not apply
to the stability or safety of the Fund.
OUTLOOK
Volatility in the short-term markets is likely to continue as the market
questions whether the strong economy and low unemployment will ultimately lead
to higher inflation. In addition, the market seems to have mixed views on
whether the effects of the Asian turmoil will result in slower domestic growth,
alleviating the need for any move by the Federal Reserve to tighten rates.
* The Donoghue Money Fund Average is an average of all major first-tier
government money market funds as reported in IBC's Money Market Fund Insight.
46
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
- ------------------------------------------------------
INVESTMENTS AT APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
VALUE INTEREST MATURITY
(000) DESCRIPTION RATE DATE VALUE
- --------- ----------------------------------- --------- --------- -----------
<S> <C> <C> <C> <C>
FEDERAL AGENCY SECURITIES--5.5%
$ 7,500 SLMA................................. 6.00% 6/30/98 $ 7,500,000
850 FNMA................................. 9.40 8/10/98 857,891
250 FFCB................................. 5.70 9/2/98 249,989
500 FFCB................................. 5.60 10/1/98 499,852
-----------
9,107,732
TOTAL FEDERAL AGENCY SECURITIES.........................................
-----------
RESET
DATE
---------
FEDERAL AGENCY SECURITIES--VARIABLE--32.2% (B)
4,500 FFCB (final maturity 4/1/99)......... 5.44 5/1/98 4,500,000
10,500 FFCB (final maturity 7/24/00)........ 5.79 5/1/98 10,502,645
702 SBA (final maturity 1/25/21)......... 6.00 5/1/98 701,415
3,000 FNMA (final maturity 4/9/99)......... 5.54 5/5/98 2,998,590
3,000 FNMA (final maturity 11/9/98)........ 5.57 5/5/98 2,999,542
5,000 SLMA (final maturity 11/9/98)........ 5.28 5/5/98 5,000,000
2,000 SLMA (final maturity 2/22/99)........ 5.27 5/5/98 2,000,000
3,000 SLMA (final maturity 3/7/01)......... 5.33 5/5/98 3,000,000
3,500 SLMA (final maturity 11/10/98)....... 5.26 5/5/98 3,499,022
3,000 FNMA (final maturity 12/14/98)....... 5.32 6/14/98 2,998,975
2,500 FNMA (final maturity 6/19/98)........ 5.60 6/19/98 2,500,239
3,000 FHLMC (final maturity 6/22/98)....... 5.44 6/22/98 2,999,789
3,000 SBA (final maturity 4/25/22)......... 6.00 7/1/98 3,000,000
967 SBA (final maturity 5/25/21)......... 6.00 7/1/98 966,125
2,982 SBA (final maturity 10/25/22)........ 6.00 7/1/98 2,978,663
3,000 SBA (final maturity 2/25/23)......... 6.00 7/1/98 3,000,000
-----------
53,645,005
TOTAL FEDERAL AGENCY SECURITIES-- VARIABLE..............................
-----------
STANDARD
& POOR'S MATURITY
RATING DATE
--------- ---------
COMMERCIAL PAPER--55.6%
448 Receivables Capital
Corp..................... A-1+ 5.59 5/1/98 448,000
5,000 Goldman, Sachs & Co...... A-1+ 5.55 5/5/98 4,996,917
4,500 Private Export Funding
Corp..................... A-1+ 5.56 5/6/98 4,496,525
6,000 Preferred Receivables
Funding Corp............. A-1 5.55 5/7/98 5,994,451
3,000 AlliedSignal Inc......... A-1 5.50 5/8/98 2,996,780
2,210 Ciesco L.P............... A-1+ 5.57 5/8/98 2,207,606
1,092 BellSouth
Telecommunications,
Inc...................... A-1+ 5.57 5/11/98 1,090,310
550 Potomac Electric Power
Co....................... A-1 5.52 5/11/98 549,157
FACE STANDARD
VALUE & POOR'S INTEREST MATURITY
(000) DESCRIPTION RATING RATE DATE VALUE
- --------- ------------------------- --------- --------- --------- -----------
COMMERCIAL PAPER--CONTINUED
$ 150 General Electric Capital
Corp..................... A-1+ 5.58% 5/12/98 $ 149,744
900 Enterprise Funding
Corp..................... A-1+ 5.55 5/14/98 898,196
3,190 BellSouth Capital Funding
Corp..................... A-1+ 5.50 5/15/98 3,183,177
2,730 Goldman, Sachs & Co...... A-1+ 5.50 5/15/98 2,724,150
3,080 Greenwich Funding
Corp..................... A-1+ 5.53 5/18/98 3,071,957
1,450 Deutsche Bank Financial
Corp..................... A-1+ 5.52 5/22/98 1,445,331
2,105 General Re. Corp......... A-1+ 5.50 5/22/98 2,098,222
730 Enterprise Funding
Corp..................... A-1+ 5.53 5/26/98 727,196
2,500 Merrill Lynch & Co.,
Inc...................... A-1+ 5.52 5/26/98 2,490,417
5,000 General Electric Capital
Corp..................... A-1+ 5.51 5/28/98 5,000,000
2,885 Cargill, Inc............. A-1+ 5.49 6/1/98 2,871,361
3,000 Enterprise Funding
Corp..................... A-1+ 5.52 6/8/98 2,982,520
1,500 Corporate Asset Funding
Co., Inc................. A-1+ 5.50 6/11/98 1,491,979
3,000 Corporate Asset Funding
Co., Inc................. A-1+ 5.50 6/11/98 2,981,208
1,300 General Re. Corp......... A-1+ 5.53 6/11/98 1,291,813
3,738 Receivables Capital
Corp..................... A-1+ 5.52 6/11/98 3,714,500
1,670 Corporate Receivables
Corp..................... A-1+ 5.50 6/12/98 1,659,284
3,500 CXC, Inc................. A-1+ 5.52 6/12/98 3,477,460
3,500 Corporate Receivables
Corp..................... A-1+ 5.54 6/15/98 3,475,763
1,500 CXC, Inc................. A-1+ 5.45 6/15/98 1,489,781
1,305 Enterprise Funding
Corp..................... A-1+ 5.40 6/19/98 1,295,408
2,500 Greenwich Funding
Corp..................... A-1+ 5.54 6/19/98 2,481,148
1,500 CXC, Inc................. A-1+ 5.54 6/25/98 1,487,304
1,099 Enterprise Funding
Corp..................... A-1+ 5.44 7/15/98 1,086,600
2,500 Private Export Funding
Corp..................... A-1+ 5.48 7/17/98 2,470,697
See Notes to Financial Statements 47
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
- ------------------------------------------------------
FACE STANDARD
VALUE & POOR'S INTEREST MATURITY
(000) DESCRIPTION RATING RATE DATE VALUE
- --------- ------------------------- --------- --------- --------- -----------
COMMERCIAL PAPER--CONTINUED
$ 1,410 Enterprise Funding
Corp..................... A-1+ 5.50% 7/29/98 $ 1,390,827
2,160 Private Export Funding
Corp..................... A-1+ 5.36 8/3/98 2,129,770
2,050 Preferred Receivables
Funding Corp............. A-1 5.42 8/10/98 2,018,828
2,500 CXC, Inc................. A-1+ 5.47 9/16/98 2,447,579
3,000 Beta Finance, Inc........ A-1+ 5.44 9/24/98 2,933,813
3,000 Beta Finance, Inc........ A-1+ 5.48 9/30/98 2,930,840
-----------
92,676,619
TOTAL COMMERCIAL PAPER..................................................
-----------
MEDIUM-TERMS NOTES--9.1%
3,500 Associates Corporation of
North America............ AA- 5.51 7/20/98 3,497,298
3,100 Associates Corporation of
North America............ AA- 6.375 8/15/98 3,103,915
3,000 Associates Corporation of
North America............ AA- 6.50 9/9/98 3,006,576
FACE STANDARD
VALUE & POOR'S INTEREST MATURITY
(000) DESCRIPTION RATING RATE DATE VALUE
- --------- ------------------------- --------- --------- --------- -----------
MEDIUM-TERMS NOTES--CONTINUED
$ 2,500 Pitney Bowes Credit
Medium Term Note......... A-1+ 6.305% 9/23/98 $ 2,504,944
575 General Electric Capital
Corp..................... A-1+ 8.10 1/26/99 584,121
2,500 Beta Finance Inc......... A-1+ 5.73 3/16/99 2,499,981
-----------
15,196,835
TOTAL MEDIUM TERM NOTES.................................................
-----------
CERTIFICATES OF DEPOSIT--1.8%
3,000 Deutsche Bank Financial,
Inc...................... A-1+ 5.75 3/5/99 2,998,789
-----------
2,998,789
TOTAL CERTIFICATES OF DEPOSIT...........................................
-----------
173,624,980(a)
TOTAL INVESTMENTS--104.2%
(Identified cost $173,624,980)........................................
(7,043,846)
Cash and receivables, less liabilities--4.2%..........................
-----------
$166,581,134
NET ASSETS--100.0%......................................................
-----------
-----------
</TABLE>
(a)Federal Income Tax Information: At April 30, 1998, the aggregate cost of
securities was the same for book and tax purposes.
(b)Variable rate demand notes. The interest rates shown reflect the rates
currently in effect.
48 See Notes to Financial Statements
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
ASSETS
Investment securities at value
(Identified cost $173,624,980) $ 173,624,980
Cash 104,851
Receivables
Interest 976,272
Fund shares sold 712,613
--------------
Total Assets 175,418,716
--------------
LIABILITIES
Payables
Fund shares repurchased 8,456,614
Dividend distributions 151,988
Transfer agent fee 86,817
Investment advisory fee 58,533
Trustees' fee 9,123
Financial agent fee 7,662
Distribution fee 7,557
Accrued expenses 59,288
--------------
Total liabilities 8,837,582
--------------
NET ASSETS $ 166,581,134
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of benefical interest $ 166,581,134
--------------
NET ASSETS $ 166,581,134
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $154,222,543) 154,222,543
Net asset value and offering price per share $1.00
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $12,358,591) 12,358,591
Net asset value and offering price per share $1.00
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
INVESTMENT INCOME
Interest $ 5,181,230
-----------
Total investment income 5,181,230
-----------
EXPENSES
Investment advisory fee 365,139
Distribution fee--Class B 44,944
Financial agent fee 47,423
Transfer agent 197,890
Registration 19,173
Professional 14,879
Custodian 13,443
Printing 11,448
Trustees 10,497
Miscellaneous 866
-----------
Total expenses 725,702
-----------
NET INVESTMENT INCOME $ 4,455,528
-----------
-----------
See Notes to Financial Statements 49
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
-------------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 4,455,528 $ 9,307,014
-------------- -----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (4,205,545) (8,890,389)
Net investment income--Class B (249,983) (416,625)
-------------- -----------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (4,455,528) (9,307,014)
-------------- -----------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (460,482,893 and 732,054,689 shares, respectively) 460,482,893 732,054,689
Net asset value of shares issued from reinvestment of distributions
(3,781,171 and 8,138,566 shares, respectively) 3,781,171 8,138,566
Cost of shares repurchased (498,736,224 and 744,357,959 shares, respectively) (498,736,224) (744,357,959)
-------------- -----------------
Total (34,472,160) (4,164,704)
-------------- -----------------
CLASS B
Proceeds from sales of shares (14,919,342 and 35,539,707 shares, respectively) 14,919,342 35,539,707
Net asset value of shares issued from reinvestment of distributions
(202,594 and 329,335 shares, respectively) 202,594 329,335
Cost of shares repurchased (17,776,721 and 31,078,203 shares, respectively) (17,776,721) (31,078,203)
-------------- -----------------
Total (2,654,785) 4,790,839
-------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (37,126,945) 626,135
-------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS (37,126,945) 626,135
NET ASSETS
Beginning of period 203,708,079 203,081,944
-------------- -----------------
END OF PERIOD $166,581,134 $ 203,708,079
-------------- -----------------
-------------- -----------------
</TABLE>
50 See Notes to Financial Statements
<PAGE>
PHOENIX MONEY MARKET FUND SERIES
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS
ENDED
4/30/98 YEAR ENDED OCTOBER 31,
UNAUDITED 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.024 0.048 0.047 0.053 0.032 0.025(1)
--------- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.024 0.048 0.047 0.053 0.032 0.025
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.024) (0.048) (0.047) (0.053) (0.032) (0.025)
--------- --------- --------- --------- --------- ---------
Change in net asset value -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total return 2.47%(3) 4.76% 4.67% 5.32% 3.20% 2.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $154,223 $188,695 $192,859 $193,534 $196,566 $170,334
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 0.75%(2) 0.79% 0.84% 0.71% 0.85% 0.85%
Net investment income 4.93%(2) 4.76% 4.68% 5.31% 3.19% 2.53%
<CAPTION>
CLASS B
-----------------------------------------------------------------
SIX FROM
MONTHS INCEPTION
ENDED 7/15/94
4/30/98 YEAR ENDED OCTOBER 31, TO
UNAUDITED 1997 1996 1995 10/31/94
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.020 0.040 0.039 0.046 0.007
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.020 0.040 0.039 0.046 0.007
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.020) (0.040) (0.039) (0.046) (0.007)
--------- --------- --------- --------- ---------
Change in net asset value -- -- -- -- --
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total return 2.09%(3) 4.02% 3.93% 4.63% 0.70%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 12,359 $ 15,013 $ 10,223 $ 8,506 $ 2,086
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.50%(2) 1.55% 1.59% 1.44% 1.60%(2)
Net investment income 4.17%(2) 4.02% 3.92% 4.62% 3.46%(2)
</TABLE>
(1)Includes reimbursement of operating expenses by investment adviser of
$0.0001.
(2) Annualized
(3) Not annualized
See Notes to Financial Statements 51
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Series Fund (the "Trust") is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. Each Series has distinct
investment objectives. The Balanced Fund Series seeks to provide reasonable
income, long-term capital growth and conservation of capital. The Convertible
Fund Series seeks as its investment objectives income and the potential for
capital appreciation; these objectives are to be considered as relatively equal.
The Growth Fund Series seeks long-term appreciation of capital. The Aggressive
Growth Fund Series seeks appreciation of capital through the use of aggressive
investment techniques. The High Yield Fund Series seeks to provide high current
income. The U.S. Government Securities Fund Series seeks a high level of current
income by investing in U.S. Government guaranteed or backed securities. The
Money Market Fund Series seeks to provide as high a level of current income
consistent with capital preservation and liquidity.
Each Series offers both Class A and Class B shares and, additionally, High
Yield Fund Series offers Class C shares. Class A shares are sold with a
front-end sales charge of up to 4.75%. Class B shares are sold with a contingent
deferred sales charge which declines from 5% to zero depending on the period of
time the shares are held. Class C shares are sold with a 1% contingent deferred
sales charge if redeemed within one year of purchase. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. Income and
expenses of each Series are borne pro rata by the holders of all classes of
shares, except that each class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. SECURITY VALUATION:
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Debt securities are valued on the basis of
broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at their fair value as
determined in good faith by or under the direction of the Trustees.
The Money Market Fund Series uses the amortized cost method of security
valuation which, in the opinion of the Trustees, represents the fair value of
the particular security. The Trustees monitor the deviations between the
classes' net asset value per share as determined by using available market
quotations and its amortized cost per share. If the deviation exceeds 1/2 of 1%,
the Board of Trustees will consider what action, if any, should be initiated to
provide a fair valuation. This valuation procedure allows each class of the
Series to maintain a constant net asset value of $1 per share.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign securities,
as soon as the Series is notified. Interest income is recorded on the accrual
basis. The Trust does not amortize premiums except for the Money Market Fund
Series, but does amortize discounts using the effective interest method.
Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each of the Series is treated as a separate taxable entity. It is the policy
of each Series in the Trust to comply with the requirements of the Internal
Revenue Code (the Code), applicable to regulated investment companies, and to
distribute all of its taxable income to its shareholders. In addition, each
Series intends to distribute an amount sufficient to avoid imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision for federal
income taxes or excise taxes has been made.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Series on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, expiring
capital loss carryforwards, foreign currency gain/loss, partnerships, and losses
deferred due to wash sales and excise tax regulations. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications to paid in capital.
E. FOREIGN CURRENCY TRANSLATION:
Foreign securities, other assets and liabilities are valued using the foreign
currency exchange rate effective at the end of the reporting period. Cost of
investments is translated at the currency exchange rate effective at the trade
date. The gain or loss resulting from a change in currency exchange rates
between the trade and settlement dates of a portfolio transaction is treated as
a gain or loss on foreign currency. Likewise, the gain or loss resulting from a
change in currency exchange rates, between the
52
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED) (CONTINUED)
date income is accrued and paid, is treated as a gain or loss on foreign
currency. The Trust does not separate that portion of the results of operations
arising from changes in exchange rates and that portion arising from changes in
the market prices of securities.
F. FORWARD CURRENCY CONTRACTS:
Each of the Series, except U.S. Government Securities Fund Series and Money
Market Fund Series, may enter into forward currency contracts in conjunction
with the planned purchase or sale of foreign denominated securities in order to
hedge the U.S. dollar cost or proceeds. Forward currency contracts involve, to
varying degrees, elements of market risk in excess of the amount recognized in
the statement of assets and liabilities. Risks arise from the possible movements
in foreign exchange rates or if the counterparty does not perform under the
contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in market
value is recorded by each Series as an unrealized gain (or loss). When the
contract is closed, the Series records a realized gain (or loss) equal to the
change in the value of the contract when it was opened and the value at the time
it was closed.
G. SECURITY LENDING:
The Trust loans securities to qualified brokers through an agreement with
State Street Bank & Trust (the Custodian). Under the terms of the agreement, the
Trust receives collateral with a market value not less than 100% of the market
value of loaned securities. Collateral is adjusted daily in connection with
changes in the market value of securities on loan. Collateral consists of cash,
securities issued or guaranteed by the U.S. Government or its agencies and the
sovereign debt of foreign countries. Interest earned on the collateral and
premiums paid by the borrower are recorded as income by the Trust net of fees
charged by the Custodian for its services in connection with this securities
lending program. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities or in the foreclosure on collateral. At April
30, 1998, the Trust had the following amounts of security loans;
VALUE OF
VALUE OF SECURITIES
COLLATERAL ON LOAN
------------ ------------
Balanced Fund Series............... $ 10,481,900 $ 10,527,055
Convertible Fund Series............ 2,493,800 2,349,844
Growth Fund Series................. 18,382,410 18,492,109
Aggressive Growth Fund Series...... 9,420,640 9,198,168
U.S. Government Securities Fund
Series........................... 15,583,250 15,080,999
Money Market Fund Series........... 1,020,000 999,350
H. EXPENSES:
Expenses incurred by the Trust with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation method
can be more fairly made.
I. OPTIONS:
The Trust, except for U.S. Government and Money Market Series, may write
covered options or purchase options contracts for the purpose of hedging against
changes in the market value of the underlying securities or foreign currencies.
The Series will realize a gain or loss upon the expiration or closing of the
option transaction. Gains and losses on written options are reported separately
in the Statement of Operations. When a written option is exercised, the proceeds
on sales or amounts paid are adjusted by the amount of premium received. Options
written are reported as a liability in the Statement of Assets and Liabilities
and subsequently marked-to-market to reflect the current value of the option.
The risk associated with written options is that the change in value of options
contracts may not correspond to the change in value of the hedged instruments.
In addition, losses may arise from changes in the value of the underlying
instruments, or if a liquid secondary market does not exist for the contracts.
Each Series, except for U.S. Government and Money Market Series, any purchase
options which are included in the Series' Schedule of Investments and
subsequently marked-to-market to reflect the current value of the option. When a
purchased option is exercised, the cost of the security is adjusted by the
amount of premium paid. The risk associated with purchased options is limited to
the premium paid.
J. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS:
Each Series may engage in when-issued or delayed delivery transactions. The
Series record when-issued securities on the trade date and maintain collateral
for the securities purchased.
53
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED) (CONTINUED)
Securities purchased on a when-issued or delayed delivery basis begin earning
interest on the settlement date.
NOTE 2. INVESTMENT ADVISORY FEE AND
RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Adviser, Phoenix Investment
Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home Life Mutual
Insurance Company ("PHL"), is entitled to a fee based upon the following annual
rates as a percentage of the average daily net assets of each separate Series:
1ST $1 $1-2
SERIES BILLION BILLION $2+ BILLION
- ---------------------------------- ----------- ----------- -----------
Growth Fund Series................ 0.70% 0.65% 0.60%
Aggressive Growth Fund Series..... 0.70% 0.65% 0.60%
Convertible Fund Series........... 0.65% 0.60% 0.55%
High Yield Fund Series............ 0.65% 0.60% 0.55%
Balanced Fund Series.............. 0.55% 0.50% 0.45%
U.S. Government Securities Fund
Series.......................... 0.45% 0.40% 0.35%
Money Market Fund Series.......... 0.40% 0.35% 0.30%
The Adviser has agreed to assume expenses and reduce the advisory fee for the
benefit of the Money Market Fund Series to the extent that total expenses
(excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) exceed 0.85% for Class A shares and 1.60% for Class B shares of the
average of the aggregate daily net asset value.
Phoenix Equity Planning Corporation (PEPCO), an indirect majority-owned
subsidiary of PHL, which serves as the national distributor of the Trust's
shares, has advised the Trust that it retained selling commissions of $274,420
for Class A shares and deferred sales charges of $318,977 for Class B shares and
$0 for Class C shares, for the six months ended April 30, 1998. In addition,
each Series except the Money Market Fund Series pays PEPCO a distribution fee at
an annual rate of 0.25% for Class A shares, 1.00% for Class B shares and 1.00%
for Class C shares of the High Yield Fund Series applied to the average daily
net assets of each Series; the distribution fee for the Money Market Fund Series
is 0% and 0.75% for Class A and Class B, respectively. The distributor has
advised the Trust that of the total amount expensed for the six months ended
April 30, 1998, $1,676,861 was earned by the Distributor, $5,381,202 was earned
by unaffiliated participants, and $716,007 was paid to W.S. Griffith, an
indirect subsidiary of PHL.
As Financial Agent of the Trust, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.05% of average daily
net assets up to $100 million, 0.04% of average daily net assets of $100 million
to $300 million, 0.03% of average daily net assets of $300 million through $500
million, and 0.015% of average daily net assets greater than $500 million; a
minimum fee may apply. PEPCO serves as the Trust's Transfer Agent with State
Street Bank and Trust Company as sub-transfer agent. For the six months ended
April 30, 1998, transfer agent fees were $3,620,204 of which PEPCO retained
$1,570,783 which is net of fees paid to State Street.
At April 30, 1998, PHL and affiliates held Phoenix Series Fund shares which
aggregated the following:
AGGREGATE
NET ASSET
SHARES VALUE
--------- -----------
Aggressive Growth Fund Series Class
B.................................... 14,429 $ 221,625
High Yield Fund Series Class A......... 414 3,876
High Yield Fund Series C............... 10,741 100,537
U.S. Government Securities Fund Series
Class A.............................. 309 2,993
Money Market Fund Series Class A....... 434,569 434,569
NOTE 3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the six months ended April 30, 1998
(excluding U.S. Government and agency securities and short-term securities)
aggregated the following:
PURCHASES SALES
------------- -------------
Balanced Fund Series............ $1,134,399,927 $ 972,644,429
Convertible Fund Series......... 141,145,829 155,786,710
Growth Fund Series.............. 2,031,015,770 1,752,209,706
Aggressive Growth Fund Series... 1,173,868,928 1,158,223,197
High Yield Fund Series.......... 394,130,020 342,287,577
U.S. Government Securities Fund
Series........................ 52,930,303 22,595,164
Purchases and sales of U.S. Government and agency securities during the six
months ended April 30, 1998, aggregated the following:
PURCHASES SALES
------------- -------------
Balanced Fund Series............ $ 201,496,809 $ 385,930,552
High Yield Fund Series.......... 22,927,502 43,315,547
U.S. Government Securities Fund
Series........................ 227,697,755 260,286,321
NOTE 4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts.
54
<PAGE>
PHOENIX SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED) (CONTINUED)
NOTE 5. CAPITAL LOSS CARRYOVERS
The following Series have capital loss carryforwards which may be used to
offset future capital gains.
U.S. GOVERNMENT
HIGH YIELD SECURITIES
EXPIRATION DATE FUND SERIES FUND SERIES
- ---------------------------- ----------- ----------------
1998........................ $66,472,552 $ 1,816,304
2002........................ 14,103,053 8,684,579
2003........................ 46,929,335 --
2004........................ -- 2,433,827
----------- ----------------
Total..................... $127,504,940 $ 12,934,710
----------- ----------------
----------- ----------------
Included in the High Yield Fund Series amount expiring in 1998, $46,426,813
was acquired in connection with the merger of the National Bond Fund.
NOTE 6. SUBSEQUENT EVENT DISCLOSURE
On May 27, 1998, the Board of Trustees of Phoenix Series Fund unanimously
approved an Agreement and Plan of Reorganization relating to the proposed
combination of the Phoenix Convertible Fund Series and Phoenix Income and Growth
Fund.
Pursuant to the Agreement, the Convertible Fund will transfer all or
substantially all of its assets to the Income and Growth Fund in exchange for
shares of the Income and Growth Fund and the assumption by the Income and Growth
Fund of certain identified liabilities of the Convertible Fund. Following the
exchange, the Convertible Fund will distribute the shares of the Income and
Growth Fund to its shareholders pro rata, in liquidation of the Convertible
Fund. The effectiveness of these transactions is subject to the satisfaction of
a number of conditions, including approval by shareholders of the Convertible
Fund.
This report is not authorized for distribution to prospective investors in the
Phoenix Series Fund unless preceded or accompanied by an effective Prospectus
which includes information concerning the sales charge, Fund's record and other
pertinent information.
55
<PAGE>
WHAT IS THE PHOENIX SERIES FUND?
Phoenix Series Fund is your investment for a lifetime! Consisting of seven
individual portfolios, each with a separate investment objective, the Series
Fund is a mutual fund designed to provide you with convenience and flexibility
in making your investment decisions. As your personal financial needs change,
you can easily redirect your investment to a more suitable portfolio within the
Series Fund.
WHO MANAGES MY FUND?
Phoenix Investment Counsel, Inc. provides skilled and professional management
services, including investment selection and portfolio supervision.
WHY ARE THERE SEVEN FUNDS?
We have designed seven separate funds, each with different investment
objectives, in order to meet a variety of investment goals.
PHOENIX BALANCED FUND SERIES seeks as its investment objectives reasonable
income, long-term capital growth and conservation of capital.
PHOENIX CONVERTIBLE FUND SERIES seeks as its investment objectives income and
the potential for capital appreciation; these objectives are to be considered
relatively equal.
PHOENIX GROWTH FUND SERIES seeks as its investment objective long-term
appreciation of capital. Since income is not an objective, any income generated
by the investment of this Series' assets will be incidental to its objective.
PHOENIX HIGH YIELD FUND SERIES seeks as its investment objective high current
income. Capital growth is a secondary objective which will also be considered
when consistent with the primary objective of high current income.
PHOENIX MONEY MARKET FUND SERIES seeks as its investment objective as high a
level of current income as is consistent with the preservation of capital and
the maintenance of liquidity.
PHOENIX AGGRESSIVE GROWTH FUND SERIES seeks as its investment objective
appreciation of capital through the use of aggressive investment techniques.
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES seeks as its investment
objective a high level of current income consistent with safety of principal.
WHAT IF MY FINANCIAL NEEDS CHANGE?
Just call us. At your request, the value of shares in any account can be
exchanged toward the purchase of shares of any other fund within the Series Fund
by using the Exchange Privilege.
HOW DOES THE EXCHANGE PRIVILEGE WORK?
Our Exchange Privilege offers the flexibility needed to assure the most
suitable portfolio throughout your lifetime. At any time you may redirect some
or all of your present holdings into another fund in the Series Fund which
better serves your needs. Just call us with the details. We'll process the
exchange free of charge. The toll-free number to call with your exchange request
is 800-367-5877. The exchange privilege may be modified or terminated, as noted
in the prospectus.
HOW DO I MAKE ADDITIONAL INVESTMENTS?
Send your check directly to State Street Bank and Trust Company, P.O. Box
8301, Boston, MA 02266-8301. Please include either the bottom section of your
confirmation statement or a simple letter of instruction.
CAN I MAKE AUTOMATIC MONTHLY INVESTMENTS?
You may authorize automatic monthly investments for as little as $25 to be
made directly from your personal checking account. An application is available
from the Series Fund.
CAN I ESTABLISH AN INDIVIDUAL RETIREMENT ACCOUNT (IRA) WITH PHOENIX SERIES FUND?
Yes! The Phoenix Series Fund is an appropriate investment vehicle for
qualified retirement plans including IRAs, Keoghs, Pension and Profit Sharing
Plans.
HOW DO I ESTABLISH AND IRA?
Just call us at 800-243-4361.
HOW MUCH CAN I INVEST INTO AN IRA?
Individuals may invest up to $2,000 or 100% or earned income, whichever is
less. If you have an unemployed spouse, the maximum contribution could increase
to $2,250.
WHAT ARE THE TAX ADVANTAGES OF ESTABLISHING AN IRA?
Individuals who meet the deductibility requirements may deduct their yearly
IRA contributions from their taxable income, and thus, pay less tax.
Additionally, the account's earnings still accumulate tax-free until you
withdraw your money at retirement.
WHO CAN ANSWER MY QUESTIONS?
Most questions can be answered by our Customer Service Department. We are
equipped with computer terminals which allow quick and easy access to
information on your account. In most cases, your questions can be answered by
calling us toll-free at 800-243-1574.
56
<PAGE>
PHOENIX SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
TRUSTEES
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
OFFICERS
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
J. Roger Engemann, Senior Vice President
James E. Mair, Senior Vice President
William J. Newman, Senior Vice President
John S. Tilson, Senior Vice President
James D. Wehr, Senior Vice President
David L. Albrycht, Vice President
Steven L. Colton, Vice President
John M. Hamlin, Vice President
John D. Kattar, Vice President
William E. Keen, III, Vice President
Christopher J. Kelleher, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Christopher J. Saner, Vice President
Julie L. Sapia, Vice President
Andrew Szabo, Vice President
Pierre G. Trinque, Vice President
Nancy C. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
INVESTMENT ADVISER
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
PRINCIPAL UNDERWRITER
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
<PAGE>
---------------
PHOENIX FUNDS BULK RATE MAIL
P.O. Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
---------------
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
================= ================= ================= ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================= ================= ================= ==================================
PAR VALUE
(000) U.S. GOVERNMENT AND AGENCY SECURITIES - 10.8%
<S> <C> <C> <C>
$ 51,250 $ - $ 51,250 U.S. Treasury Notes 5.375%, 1/31/00
17,000 - 17,000 U.S. Treasury Notes 5.50%, 3/31/00
5,680 - 5,680 U.S. Treasury Notes 5.50%, 1/31/03
5,850 - 5,850 U.S. Treasury Notes 6.125%, 8/15/07
27,135 - 27,135 GNMA 6.50%, '23 - '24
4,000 - 4,000 FNMA 98-M4, C 6.527%, 5/25/30
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
MUNICIPAL BONDS - 6.8%
1,700 - 1,700 California State Department Water System Series S 5%, 12/1/29
4,415 - 4,415 Dallas-Fort Worth Airport 6.40%, 11/1/06
1,200 - 1,200 Dallas-Fort Worth Taxable 6.40%, 11/1/07
2,050 - 2,050 Florida Department of Transportation 5%, 7/1/27
5,600 - 5,600 Fresno County Pension Obligation Taxable 6.21%, 8/15/06
2,560 - 2,560 Houston Water & Sewer Ref - Jr Series D 5%, 12/1/25
3,410 - 3,410 Illinois Educ. Facilities Authority Revenue - Loyola Series A
7.84%, 7/1/24
4,500 - 4,500 Kern County Pension Obligation Taxable 7.26%, 8/15/14
3,000 - 3,000 Long Beach Pension Obligation Taxable 6.87%, 9/1/06
2,560 - 2,560 Los Angeles County Public Works 5.125%, 12/1/29
1,575 - 1,575 Massachusetts State Port Authority Revenue 6.05%, 7/1/02
2,050 - 2,050 Massachusetts State Water Authority 5%, 8/1/24
7,460 - 7,460 New York State Taxable 6.40%, 3/1/08
4,520 - 4,520 Orange County Pension Series A Taxable 7.62%, 9/1/08
4,250 - 4,250 Pittsburg Pension Taxable 6.50%, 3/1/17
3,400 - 3,400 Sacramento County Pension 95-A Taxable 6.625%, 8/15/06
1,335 - 1,335 San Bernardino County Pension Obligation Revenue 6.87%, 8/1/08
3,625 - 3,625 San Bernardino County Pension Obligation Revenue 6.94%, 8/1/09
3,000 - 3,000 Texas Taxable Veterans Series B 6.05%, 12/1/02
1,700 - 1,700 Sonoma County Pension Obligation 6.625%, 6/1/13
2,200 - 2,200 Ventura County Pension Obligation Taxable 6.54%, 11/1/05
2,560 - 2,560 Washington State Series E Taxable 5%, 7/1/22
TOTAL MUNICIPAL BONDS
ASSET BACKED SECURITIES - 3.5%
5,000 - 5,000 AESOP Funding II LLC 144A 97-1, A2 6.40%, 10/20/03
1,500 - 1,500 Associates Manufactured Housing 1997-2 A6 7.075%, 3/15/28
3,500 - 3,500 Capita Equipment Receivables Trust 97-1B, 6.45%, 8/15/02
5,000 - 5,000 Chase Credit Card Master Trust 1997-2A 6.30%, 4/15/03
2,000 - 2,000 Discover Card Master Trust I 98-4, A 5.75%, 10/16/03
1,822 - 1,822 Fleetwood Credit Corp. 96-B, A 6.90%, 3/15/12
3,325 - 3,325 Green Tree Financial Corp. 96-2, M1 7.60%, 4/15/27
1,515 - 1,515 Green Tree Financial Corp. 96-4, A6 7.40%, 6/15/27
4,600 - 4,600 Newcourt Receivables Asset Trust 1997-1 A3 6.11%, 5/21/01
2,500 - 2,500 Premier Auto Trust 98-1, A-4 5.70%, 10/6/02
5,000 - 5,000 Wings Commercial Loan Master Trust I 98-A2 144A 5.918%, 3/20/08
TOTAL ASSET BACKED SECURITIES
<CAPTION>
VALUE
========================== ====================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
========================== ====================== =================
<C> <C> <C>
$ 51,080,357 $ - $ 51,080,357
16,977,728 - 16,977,728
5,642,682 - 5,642,682
6,005,552 - 6,005,552
27,041,574 - 27,041,574
4,028,750 - 4,028,750
----------------------- ----------------------- ----------------------
110,776,643 - 110,776,643
----------------------- ----------------------- ----------------------
1,612,875 - 1,612,875
4,426,038 - 4,426,038
1,200,000 - 1,200,000
1,957,750 - 1,957,750
5,551,000 - 5,551,000
2,435,200 - 2,435,200
3,661,487 - 3,661,487
4,770,000 - 4,770,000
3,116,250 - 3,116,250
2,464,000 - 2,464,000
1,567,125 - 1,567,125
1,947,500 - 1,947,500
7,460,000 - 7,460,000
4,926,800 - 4,926,800
4,127,813 - 4,127,813
3,489,250 - 3,489,250
1,378,388 - 1,378,388
3,760,937 - 3,760,937
2,973,750 - 2,973,750
1,706,375 - 1,706,375
2,241,250 - 2,241,250
2,416,000 - 2,416,000
----------------------- ----------------------- ----------------------
69,189,788 - 69,189,788
----------------------- ----------------------- ----------------------
5,060,938 - 5,060,938
1,521,562 - 1,521,562
3,541,562 - 3,541,562
5,028,320 - 5,028,320
1,987,578 - 1,987,578
1,839,303 - 1,839,303
3,456,961 - 3,456,961
1,573,470 - 1,573,470
4,610,063 - 4,610,063
2,485,156 - 2,485,156
5,004,688 - 5,004,688
----------------------- ----------------------- ----------------------
36,109,601 36,109,601
----------------------- ----------------------- ----------------------
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
===================================================== ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
===================================================== ==================================
CORPORATE BONDS - 6.6%
<S> <C> <C> <C>>
$ 4,925 $ - $ 4,925 Boston Scientific 6.625%, 3/15/05
5,000 - 5,000 Buckeye Cellulose Corp. 8.50%, 12/15/05
5,000 - 5,000 Century Telephone Enterprises 6.30%, 1/15/08
1,650 - 1,650 Cummins Engine 6.45%, 3/1/05
5,000 - 5,000 Ford Motor Credit 6%, 1/14/03
4,000 - 4,000 Fred Meyer 7.45%, 3/1/08
4,880 - 4,880 IBJ Preferred Capital Co. LLC 144A 8.79%, 12/29/49
5,100 - 5,100 McKesson Corp. 144A 6.40%, 3/1/08
3,000 - 3,000 Meditrust Corp. Notes 7.375%, 7/15/00
5,000 - 5,000 Merrill Lynch & Co. 6%, 2/12/03
5,000 - 5,000 Panamsat Corp. 144A 6.125%, 1/15/05
4,880 - 4,880 SB Treasury Co. 144A 9.125%, 12/29/49
5,000 - 5,000 Tenet Healthcare Corp. Sr. Note 9.625%, 9/1/02
3,000 - 3,000 Turner Broadcasting 8.375%, 7/1/13
5,000 - 5,000 Westpoint Stevens 8.75%, 12/15/01
TOTAL CORPORATE BONDS
NON-AGENCY MORTGAGE BACKED SECURITIES - 10.4%
4,039 - 4,039 CS First Boston Corp. 97-SPCE, D 144A 7.332%, 4/20/08
11,000 - 11,000 CS First Boston Mortgage Securities Corp. 97-C2 B 6.72%, 11/17/07
4,400 - 4,400 DLJ Mortgage Acceptance Corp.96-CF1, A1B 144A 7.58%, 2/12/06
5,000 - 5,000 DLJ Mortgage Acceptance Corp.97-CF2, B2 144A 7.14%, 11/15/08
2,500 - 2,500 First Union Lehman Brothers 97-C1, B 7.43%, 4/18/07
11,415 - 11,415 G.E. Capital Mortgage Services, Inc. 94-9, M 6.50%, 2/25/24
8,820 - 8,820 G.E. Capital Mortgage Services, Inc. 1996-4 A5 7%, 3/25/26
490 - 490 G.E. Capital Mortgage Services, Inc. 96-8, M 7.25%, 5/25/26
5,000 - 5,000 G.E. Capital Mortgage Services, Inc. 97-1, A14 7.50%, 3/25/27
7,000 - 7,000 GMAC Commercial Mortgage Securities, Inc. 97-B, C-2 6.703%, 12/15/07
4,340 - 4,340 Lehman Large Loan 97-L11, B 6.95%, 3/12/07
1,500 - 1,500 Nationslink Funding Corp. 96-1, B 7.69%, 12/20/05
5,750 - 5,750 New Century Home Equity Loan Trust 6.78%, 8/25/25
8,350 - 8,350 Prudential Home Mortgage Securities 94-15, M 6.80%, 5/25/24
2,525 - 2,525 Prudential Home Mortgage Securities 144A 96-A B1 7.9584%, 5/28/26
1,925 - 1,925 Residential Asset Securitization Trust 96-A8, A1 8%, 12/25/26
2,800 - 2,800 Residential Funding Mortgage Securities I 96-S1, A11 7.10%, 1/25/26
3,915 - 3,915 Residential Funding Mortgage Securities I 96-S4, M1 7.25%, 2/25/26
4,420 - 4,420 Securitized Asset Sales 93-J 2B 6.807%, 11/28/23
5,198 - 5,198 Structured Asset Securities Corp. 95-C4, B 7%, 6/25/26
5,650 - 5,650 Triangle Funding Ltd. 97-3A, 1B 144A 5.846%, 10/15/05
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
FOREIGN CORPORATE BONDS - 0.4%
580 - 580 Compania Sud Amer Vapore 144A 7.375%, 12/8/03
2,400 - 2,400 Petropower I Funding Trust 144A 7.36%, 2/15/14
1,450 - 1,450 Telefonica de Argentina 144A 9.125%, 5/7/08
TOTAL FOREIGN CORPORATE BONDS
<CAPTION>
VALUE
========================== ====================== ===================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
========================== ====================== ===================
<C> <C> <C>
$ 4,937,313 $ - $ 4,937,313
5,112,500 - 5,112,500
4,925,000 - 4,925,000
1,637,625 - 1,637,625
4,962,500 - 4,962,500
4,000,000 - 4,000,000
4,626,103 - 4,626,103
5,023,500 - 5,023,500
3,052,500 - 3,052,500
4,962,500 - 4,962,500
4,881,250 - 4,881,250
5,032,500 - 5,032,500
5,631,250 - 5,631,250
3,382,500 - 3,382,500
5,418,750 - 5,418,750
----------------------------------------------------------------------
67,585,791 - 67,585,791
----------------------------------------------------------------------
4,066,768 - 4,066,768
11,144,375 - 11,144,375
4,677,750 - 4,677,750
5,010,938 - 5,010,938
2,625,781 - 2,625,781
11,182,838 - 11,182,838
8,837,446 - 8,837,446
500,736 - 500,736
5,062,500 - 5,062,500
7,063,437 - 7,063,437
4,462,062 - 4,462,062
1,586,250 - 1,586,250
5,764,375 - 5,764,375
8,300,802 - 8,300,802
2,365,609 - 2,365,609
1,937,064 - 1,937,064
2,821,000 - 2,821,000
3,948,387 - 3,948,387
4,429,569 - 4,429,569
5,239,937 - 5,239,937
5,639,406 - 5,639,406
----------------------------------------------------------------------
106,667,030 106,667,030
----------------------------------------------------------------------
571,300 - 571,300
2,380,920 - 2,380,920
1,457,250 - 1,457,250
----------------------------------------------------------------------
4,409,470 - 4,409,470
----------------------------------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
============== ================= ===================== ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
============== ================= ===================== ==================================
FOREIGN GOVERNMENT SECURITIES - 8.6%
<S> <C> <C> <C>
$ 6,105 $ - $ 6,105 Bulgaria FLIRB-A Bearer Euro 2.25%, 7/28/12
3,698 - 3,698 Croatia Series B 6.50%, 7/31/06
4,300 - 4,300 Croatia Series A 6.50%, 7/31/10
2,114 - 2,114 Ecuador Bearer PDI Euro, PIK interest capitalization 6.625%, 2/27/15
3,811 - 3,811 Ecuador Registered PDI Euro, PIK interest capitalization 6.625%, 2/27/15
5,745 - 5,745 Peru PDI 4%, 3/7/17
5,500 - 5,500 Poland Bearer PDI 4%, 10/27/14
6,100 - 6,100 Poland Registered PDI 4%, 10/27/14
3,750 - 3,750 Republic of Argentina 9.75%, 9/19/27
8,156 - 8,156 Republic of Argentina Bearer FRB 6.625%, 3/31/05
9,075 - 9,075 Republic of Brazil NMB-L 6.688%, 4/15/09
8,000 - 8,000 Republic of Colombia 7.625%, 2/15/07
2,300 - 2,300 Republic of Korea 8.875%, 4/15/08
11,275 - 11,275 Republic of Panama 8.875%, 9/30/27
4,155 - 4,155 Republic of Venezuela 9.25%, 9/15/27
5,545 - 5,545 Russia IAN Series US 144A 6.719%, 12/15/15
9,160 - 9,160 United Mexican States Global Bond 11.50%, 5/15/26
TOTAL FOREIGN GOVERNMENT SECURITIES
CONVERTIBLE BONDS - 10.7%
- 1,000 1,000 Atria Communities, Inc. Cv. 144A 5%, 10/15/02
- 1,500 1,500 BBN Corp. Cv. 6%, 4/1/12
- 2,100 2,100 Baker Hughes, Inc. Cv. 0%, 5/5/08
- 2,325 2,325 Berkshire Hathaway Cv. 1%, 12/2/01
- 14,150 14,150 Chemical Waste Management, Inc. Cv. 0%, 8/16/10
- 3,250 3,250 Chiron Corp. Cv. 144A 1.90%, 11/17/00
- 7,500 7,500 Coeur d'Alene Cv. 144A 7.25%, 10/31/05
- 1,000 1,000 Coeur d'Alene Euro Cv. 6%, 6/10/02
- 1,500 1,500 Diamond Offshore Drilling, Inc. Cv. 3.75%, 2/15/07
- 3,550 3,550 Halter Marine Group, Inc. Cv. 4.50%, 9/15/04
- 2,175 2,175 Halter Marine Group, Inc. Cv. 144A 4.50%, 9/15/04
- 6,000 6,000 Hollinger, Inc. Cv. 0%, 10/5/13
- 1,250 1,250 Home Depot, Inc. Cv. 3.25%, 10/1/01
- 4,250 4,250 Imax Corp. Cv. 5.75%, 4/1/03
- 2,500 2,500 Interpublic Group Cv. 144A 1.80%, 9/16/04
- 1,850 1,850 Itron, Inc. Cv. 6.75%, 3/31/04
- 2,000 2,000 Key Energy Group Cv. 144A 5%, 9/15/04
- 1,000 1,000 Metamor Worldwide, Inc. Cv. 2.94%, 8/15/04
- 4,605 4,605 Nabors Industries, Inc. Cv. 5%, 5/15/06
- 2,500 2,500 Office Depot, Inc. Cv. 0%, 11/1/08
- 1,000 1,000 Offshore Logistic Cv. 144A 6%, 12/15/03
- 4,000 4,000 Omnicom Group, Inc. Cv. 144A 2.25%, 1/6/13
- 7,775 7,775 Pep Boys Cv. 0%, 9/20/11
- 1,500 1,500 Premiere Technology Cv. 144A 5.75%, 7/1/04
- 5,175 5,175 Rite Aid Corp. Cv. 144A 5.25%, 9/15/02
- 1,250 1,250 Saks Holdings, Inc. Cv. 5.50%, 9/15/06
- 1,000 1,000 Sports Authority, Inc. (The) Cv. 144A 5.25%, 9/15/01
- 2,800 2,800 Stillwater Mining Co. Cv. 7%, 5/1/03
<CAPTION>
VALUE
================= ====================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================= ====================== =================
$ 4,105,612 $ - $ 4,105,612
3,395,035 - 3,395,035
3,818,937 - 3,818,937
1,352,346 - 1,352,346
2,437,782 - 2,437,782
3,924,553 - 3,924,553
5,032,500 - 5,032,500
5,581,500 - 5,581,500
3,620,625 - 3,620,625
7,493,095 - 7,493,095
7,651,359 - 7,651,359
7,495,520 - 7,495,520
2,267,800 - 2,267,800
11,043,863 - 11,043,863
3,670,943 - 3,670,943
3,995,866 - 3,995,866
11,049,250 - 11,049,250
------------------- ----------------------- --------------------------
87,936,586 87,936,586
------------------- ----------------------- --------------------------
- 996,250 996,250
- 1,455,000 1,455,000
- 1,722,000 1,722,000
- 4,286,719 4,286,719
- 6,919,350 6,919,350
- 3,022,500 3,022,500
- 6,993,750 6,993,750
- 765,000 765,000
- 2,002,500 2,002,500
- 3,092,937 3,092,937
- 1,894,969 1,894,969
- 2,407,500 2,407,500
- 1,945,313 1,945,313
- 5,838,437 5,838,437
- 2,381,250 2,381,250
- 1,720,500 1,720,500
- 1,660,000 1,660,000
- 1,036,250 1,036,250
- 6,901,744 6,901,744
- 1,959,375 1,959,375
- 1,197,500 1,197,500
- 4,580,000 4,580,000
- 4,169,344 4,169,344
- 1,732,500 1,732,500
- 5,808,938 5,808,938
- 1,084,375 1,084,375
- 913,750 913,750
- 3,125,500 3,125,500
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
===================================================== ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
===================================================== ==================================
CONVERTIBLE BONDS - continued
<S> <C> <C> <C>
$ $ 7,800 7,800 Sunbeam Corp. Cv. 0%, 3/25/18
- 2,750 2,750 System Software Association 7%, 9/15/02
- 3,500 3,500 Thermo Electron Corp. Cv. 144A 4.25%, 1/1/03
- 10,135 10,135 Time1Warner, Inc. Cv. 0%, 6/22/13
- 3,500 3,500 Times0Mirror Co. Cv. 144A 0%, 4/15/17
- 2,650 2,650 U.S.A. Waste Services, Inc. Cv. 4%, 2/1/02
- 6,000 6,000 U.S.0Cellular Corp. Cv. 0%, 6/15/15
- 4,710 4,710 WMX,Technologies, Inc. Subordinate Notes Cv. 2%, 1/24/05
- 1,850 1,850 Xilinx, Inc. Cv. 5.25%, 11/1/02
TOTAL CONVERTIBLE BONDS
FOREIGN CONVERTIBLE BONDS - 1.0%
- 2,300 2,300 APP Finance VII Mauritius Cv. 144A 3.50%, 4/30/03
- 7,800 7,800 Roche Holdings, Inc. Cv. 144A 0%, 5/6/12
- 1,500 1,500 Sandoz Capital BVI Ltd. Cv. 2%, 10/6/02
- 1,330 1,330 Sandoz Capital BVI Ltd. Cv. 144A 2%, 10/6/02
TOTAL FOREIGN CONVERTIBLE BONDS
SHARES CONVERTIBLE PREFERRED STOCKS - 4.2%
- 24,600 24,600 American General Delaware Series A Cv. Pfd. 6%
- 40,000 40,000 Belco Oil & Gas Cv. Pfd. 6.50%
- 21,000 21,000 Cablevision Systems Corp. Cv. Pfd. 8.50%
- 46,700 46,700 Designer Finance Cv. Pfd. 6%
- 104,000 104,000 El Paso Energy Capital Cv. Pfd. 4.75%
- 69,500 69,500 Evi, Inc. Cv. Pfd. 144A 5.%,
- 38,600 38,600 International Paper Co. Cv. Pfd. 5.25%
- 50,000 50,000 Lomak Petroleum Cv. Pfd.144A 5.75%
- 11,600 11,600 McKesson Corp. Cv. Pfd. 144A $2.50
- 26,100 26,100 Merrill Lynch & Co. Series Cox (STRYPES) Cv. Pfd. 6%
- 8,500 8,500 Microsoft Corp. Series A Cv. Pfd. $2.196
- 129,900 129,900 Newell Financial Trust I Cv. Pfd. 5.25% Series 144A
- 56,000 56,000 St. Paul Capital LLC (MIPS) Cv. Pfd. 6%
- 4,800 4,800 TCI Pacific Communications Cv. Pfd. 5%
<CAPTION>
VALUE
================ ====================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================ ====================== =================
<C> <C> <C>
$ - 2,437,500 2,437,500
2,378,750 2,378,750
4,020,625 4,020,625
6,119,006 6,119,006
1,513,750 1,513,750
3,259,500 3,259,500
2,287,500 2,287,500
4,521,600 4,521,600
1,981,813 1,981,813
----------------------- ----------------------- -----------------------
- 110,133,295 110,133,295
----------------------- ----------------------- -----------------------
- 2,294,250 2,294,250
- 3,597,750 3,597,750
- 2,343,750 2,343,750
- 2,078,125 2,078,125
----------------------- ----------------------- -----------------------
- 10,313,875 10,313,875
----------------------- ----------------------- -----------------------
- 2,091,000 2,091,000
- 1,035,000 1,035,000
- 1,008,000 1,008,000
- 2,101,500 2,101,500
- 5,466,500 5,466,500
- 3,266,500 3,266,500
- 2,084,400 2,084,400
- 2,106,250 2,106,250
- 1,122,300 1,122,300
- 975,487 975,487
- 791,562 791,562
- 7,355,588 7,355,588
- 4,088,000 4,088,000
- 876,000 876,000
</TABLE>
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
================= ================= ================= ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================= ================= ================= ==================================
SHARES CONVERTIBLE PREFERRED STOCKS - continued
<S> <C> <C> <C>
- 20,000 20,000 Timet Capital Trust I Cv. Pfd. 144A 6.625%
- 82,900 82,900 Trans World Air Cv. Pfd. 8%
- 40,000 40,000 Union Pacific Capital Trust Cv. Pfd. 144A 6.25%
- 12,700 12,700 US West, Inc. Series D Cv. Pfd. 4.50%
- 97,800 97,800 USX Corp. Cv. Pfd. 6.75%
TOTAL CONVERTIBLE PREFERRED STOCKS
COMMON STOCKS - 31.1%
26,500 - 26,500 AMR Corp. (a)
11,500 - 11,500 Adolph Coors Co. Cl B
25,700 - 25,700 Albertson's Inc.
44,700 - 44,700 Allstate Corp.
7,100 - 7,100 American Express Co.
32,400 - 32,400 Ameritech Corp.
173,600 16,300 189,900 AT&T Corp.
15,400 - 15,400 Autodesk, Inc.
109,400 - 109,400 Banc One Corp.
68,900 - 68,900 BankAmerica Corp.
31,900 - 31,900 Bankers Trust Corp.
53,000 - 53,000 Baxter International, Inc.
48,400 - 48,400 BellSouth Corp.
99,800 - 99,800 BJ Services Co. (a)
- 20,400 20,400 Boeing Co.
2,100 - 2,100 Bowater, Inc.
10,600 - 10,600 Bristol-Myers Squibb Co.
3,600 - 3,600 CVS Corp.
1,900 - 1,900 Camco International, Inc.
65,300 - 65,300 Caterpillar, Inc.
36,500 - 36,500 Chase Manhattan Corp.
47,500 - 47,500 Chrysler Corp.
23,700 - 23,700 Citicorp
16,900 - 16,900 CMS Energy Corp.
10,400 - 10,400 Colgate Palmolive Co.
45,400 - 45,400 Columbia Energy Group
46,800 - 46,800 Compaq Computer Corp.
25,000 - 25,000 CompUSA, Inc. (a)
46,400 - 46,400 Computer Associates International, Inc.
21,100 - 21,100 Conseco, Inc.
81,300 - 81,300 Consolidated Edison, Inc.
- 25,700 25,700 Consolidated Stores Corp.
13,000 - 13,000 Dayton Hudson Corp.
77,600 - 77,600 Deere & Co.
10,000 - 10,000 Dell Computer Corp.(a)
33,000 - 33,000 Deluxe Corp.
9,400 - 9,400 Dexter Corp.
37,600 - 37,600 Dominion Resources, Inc.
107,000 - 107,000 Dow Chemical Co.
2,200 - 2,200 Dresser Industries, Inc.
60,000 - 60,000 Du Pont (E.I.) de Nemours & Co.
50,000 - 50,000 Eastern Enterprises
<CAPTION>
VALUE
===================== ====================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
===================== ====================== =================
<C> <C> <C>
$ - $ 960,000 $ 960,000
- 3,025,850 3,025,850
- 2,085,000 2,085,000
- 968,375 968,375
- 2,004,900 2,004,900
----------------------- -----------------------------------------
- 43,412,212 43,412,212
----------------------- -----------------------------------------
4,037,937 - 4,037,937
411,125 - 411,125
1,285,000 - 1,285,000
4,302,375 - 4,302,375
724,200 - 724,200
1,379,025 - 1,379,025
10,426,850 979,019 11,405,869
723,800 - 723,800
6,434,087 - 6,434,087
5,856,500 - 5,856,500
4,119,087 - 4,119,087
2,938,188 - 2,938,188
3,106,675 - 3,106,675
3,742,500 - 3,742,500
- 1,021,275 1,021,275
117,469 - 117,469
1,122,275 - 1,122,275
265,500 - 265,500
128,963 - 128,963
3,718,019 - 3,718,019
5,057,531 - 5,057,531
1,908,906 - 1,908,906
3,566,850 - 3,566,850
738,319 - 738,319
932,750 - 932,750
3,688,750 - 3,688,750
1,313,325 - 1,313,325
464,063 - 464,063
2,717,300 - 2,717,300
1,047,088 - 1,047,088
3,678,825 - 3,678,825
- 1,028,000 1,028,000
1,135,063 - 1,135,063
4,534,750 - 4,534,750
807,500 - 807,500
1,105,500 - 1,105,500
388,337 - 388,337
1,487,550 - 1,487,550
10,345,562 - 10,345,562
116,325 - 116,325
4,368,750 - 4,368,750
2,118,750 - 2,118,750
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
================= ================= ================= ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================= ================= ================= ==================================
SHARES COMMON STOCKS - continued
<S> <C> <C> <C>
24,300 - 24,300 Eaton Corp.
5,400 - 5,400 Electronic Data Systems Corp.
43,600 - 43,600 EMC Corp.
84,900 - 84,900 Enova Corp.
51,100 - 51,100 Equitable Companies, Inc.
128,700 - 128,700 Equitable Resources, Inc.
7,100 - 7,100 Estee Lauder Companies Class A
35,600 - 35,600 FPL Group, Inc.
25,000 - 25,000 Federated Department Stores, Inc. (a)
15,100 - 15,100 Federal National Mortgage Association
32,500 - 32,500 Fingerhut Companies, Inc.
8,200 - 8,200 Fleetwood Enterprises
181,600 - 181,600 Ford Motor Corp.
- 30,400 30,400 Friede Goldman International, Inc.
138,800 - 138,800 General Dynamics Corp.
9,200 - 9,200 General Electric Co.
20,400 - 20,400 General Motors Corp.
15,600 - 15,600 Greenpoint Financial Corp.
4,400 - 4,400 Gulfstream Aerospace Corp. (a)
34,500 - 34,500 H & R Block, Inc.
10,400 - 10,400 Halliburton Co.
35,600 - 35,600 Hartford Financial Services Group, Inc.
48,500 - 48,500 Hewlett Packard Co.
12,400 - 12,400 Home Depot, Inc.
10,000 - 10,000 Hormel Foods Corp.
27,400 - 27,400 Imperial Bancorp (a)
31,600 - 31,600 Ingersoll-Rand Co.
13,700 - 13,700 Intel Corp.
66,900 - 66,900 International Business Machines Corp.
15,900 - 15,900 Interpublic Group of Companies, Inc.
134,900 - 134,900 IRT Property Co.
69,400 - 69,400 Jostens, Inc.
51,800 - 51,800 KN Energy, Inc.
- 36,800 36,800 Kaiser Aluminum Corp.
68,200 - 68,200 Lilly (Eli) & Co.
25,000 - 25,000 Liz Claiborne, Inc.
62,000 - 62,000 Lucent Technologies, Inc.
22,900 - 22,900 Lyondell Petrochemical Co.
10,300 - 10,300 MDU Resources Group, Inc.
67,200 - 67,200 McKesson Corp.
- 31,900 31,900 Marine Drilling Companies, Inc.
36,300 - 36,300 Mattel, Inc.
115,709 - 115,709 Meditrust Companies
50,000 - 50,000 Merck & Co., Inc.
25,700 - 25,700 Merrill Lynch & Co., Inc.
123,500 - 123,500 Microsoft Corp. (a)
16,900 - 16,900 Minnesota Power & Light Co.
143,200 - 143,200 Morgan Stanley Dean Witter & Co.
41,900 - 41,900 National Service Industries
66,900 - 66,900 NationsBank Corp.
58,300 - 58,300 New Jersey Resources Corp.
- 30,393 30,393 Noble Drilling Corp.
<CAPTION>
VALUE
====================== ==================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
===================== ==================== =================
<C> <C> <C>
2,244,713 - 2,244,713
232,200 - 232,200
2,011,050 - 2,011,050
2,271,075 - 2,271,075
3,136,263 - 3,136,263
4,182,750 - 4,182,750
471,706 - 471,706
2,209,425 - 2,209,425
1,229,688 - 1,229,688
904,112 - 904,112
962,813 - 962,813
378,737 - 378,737
8,319,550 - 8,319,550
- 1,223,613 1,223,613
5,864,300 - 5,864,300
783,150 - 783,150
1,374,450 - 1,374,450
619,125 - 619,125
184,525 - 184,525
1,552,500 - 1,552,500
572,000 - 572,000
3,942,700 - 3,942,700
3,652,656 - 3,652,656
863,350 - 863,350
340,000 - 340,000
803,162 - 803,162
1,455,575 - 1,455,575
1,107,131 - 1,107,131
7,752,037 - 7,752,037
1,015,613 - 1,015,613
1,568,213 - 1,568,213
1,643,912 - 1,643,912
3,040,013 - 3,040,013
- 384,100 384,100
4,744,162 - 4,744,162
1,229,688 - 1,229,688
4,719,750 - 4,719,750
752,837 - 752,837
357,281 - 357,281
4,750,200 - 4,750,200
- 775,569 775,569
1,390,744 - 1,390,744
3,478,510 - 3,478,510
6,025,000 - 6,025,000
2,255,175 - 2,255,175
11,130,437 - 11,130,437
688,675 - 688,675
11,294,900 - 11,294,900
2,267,838 - 2,267,838
5,067,675 - 5,067,675
2,200,825 - 2,200,825
- 982,074 982,074
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
================= ================= ================= ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================= ================= ================= ==================================
SHARES COMMON STOCKS - continued
<S> <C> <C> <C>
121,200 - 121,200 Omnicom Group, Inc.
10,000 - 10,000 PSS World Medical, Inc. (a)
17,400 - 17,400 Penney (J.C.) Co., Inc.
32,000 - 32,000 PepsiCo, Inc.
103,100 - 103,100 Pfizer, Inc.
121,300 - 121,300 Philip Morris Companies, Inc.
47,200 - 47,200 Quaker Oats Co.
28,700 - 28,700 Raytheon Co. Class B
- 9,200 9,200 Reynolds Metals Co.
51,500 - 51,500 Richfood Holdings Inc.
2,200 - 2,200 Rite Aid Corp.
15,000 - 15,000 Ross Stores, Inc.
96,800 - 96,800 Rowan Companies, Inc. (a)
11,500 - 11,500 St. Paul Co., Inc.
9,200 - 9,200 Schering Plough Corp.
23,000 - 23,000 Schlumberger Ltd.
6,900 - 6,900 Smithfield Foods, Inc. (a)
- 22,900 22,900 Stillwater Mining Co.
15,200 - 15,200 Sun Microsystems, Inc. (a)
9,300 - 9,300 Sundstrand Corp.
5,000 - 5,000 TJX Co., Inc.
7,200 - 7,200 Tandy Corp.
5,700 - 5,700 Teleflex, Inc.
6,700 - 6,700 Tellabs, Inc. (a)
4,000 - 4,000 Thiokol Corp.
103,800 - 103,800 Travelers Group, Inc.
12,500 - 12,500 Tredegar Industries
2,800 - 2,800 UnionBanCal Corp.
95,900 - 95,900 United Technologies Corp.
62,100 - 62,100 Universal Corp.
3,300 - 3,300 VF Corp.
3,900 - 3,900 Valassis Communications, Inc. (a)
- 29,000 29,000 Varco International, Inc.
54,500 - 54,500 Viad Corp.
30,500 - 30,500 Vulcan Materials Co.
82,000 - 82,000 Wal-Mart Stores, Inc,
21,500 - 21,500 Warner-Lambert Co.
39,700 - 39,700 Washington Gas Light Co.
11,900 - 11,900 Wellpoint Health Network (a)
TOTAL COMMON STOCKS
FOREIGN COMMON STOCKS - 2.0%
9,900 - 9,900 Akzo Nobel N.V. ADR (Netherlands)
180,400 - 180,400 BCE, Inc. (Canada)
22,700 - 22,700 Canadian National Railway Co. (Canada)
8,500 - 8,500 Canadian Pacific Ltd. (Canada)
40,700 - 40,700 Elf Aquitane Sponsored ADR (France)
14,000 - 14,000 Mid Ocean Ltd. (Bermuda)
55,200 - 55,200 Nordic American Tanker Shipping, Ltd. (Bermuda)
3,400 - 3,400 PartnerRe Ltd. (Bermuda)
42,300 - 42,300 Royal Philips Electronics NV (Netherlands)
10,000 - 10,000 Telecom Corp. (New Zealand)
1,000 - 1,000 Telefonaktiebolaget LM Ericsson (Sweden)
17,300 - 17,300 Unilever PLC (United Kingdom)
TOTAL FOREIGN COMMON STOCKS
TOTAL LONG-TERM INVESTMENTS - 96.1%
<CAPTION>
VALUE
========================= ===================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
========================= ===================== =================
<C> <C> <C>
$ 5,741,850 $ - $ 5,741,850
224,375 - 224,375
1,236,488 - 1,236,488
1,270,000 - 1,270,000
11,734,069 - 11,734,069
4,526,006 - 4,526,006
2,454,400 - 2,454,400
1,626,931 - 1,626,931
- 607,200 607,200
1,413,031 - 1,413,031
70,675 - 70,675
694,688 - 694,688
2,849,550 - 2,849,550
974,625 - 974,625
737,150 - 737,150
1,906,125 - 1,906,125
209,587 - 209,587
- 605,418 605,418
626,050 - 626,050
642,281 - 642,281
221,250 - 221,250
358,200 - 358,200
242,250 - 242,250
474,862 - 474,862
215,500 - 215,500
6,351,263 - 6,351,263
978,906 - 978,906
288,400 - 288,400
9,440,156 - 9,440,156
2,324,869 - 2,324,869
171,600 - 171,600
153,075 - 153,075
- 891,750 891,750
1,406,781 - 1,406,781
3,509,406 - 3,509,406
4,146,125 - 4,146,125
4,067,531 - 4,067,531
1,079,344 - 1,079,344
858,288 - 858,288
----------------------- ----------------------- ----------------------
310,629,247 8,498,018 319,127,265
----------------------- ----------------------- ----------------------
1,019,700 - 1,019,700
7,678,275 - 7,678,275
1,476,919 - 1,476,919
250,219 - 250,219
2,642,956 - 2,642,956
1,055,250 - 1,055,250
848,700 - 848,700
170,212 - 170,212
3,807,000 - 3,807,000
383,125 - 383,125
51,438 - 51,438
1,291,012 - 1,291,012
----------------------- ----------------------- ----------------------
20,674,806 - 20,674,806
----------------------- ----------------------- ----------------------
813,978,962 172,357,400 986,336,362
----------------------- ----------------------- ----------------------
See Notes to Pro Forma Financial Statements.
<PAGE>
</TABLE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Schedule of Investments
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
DESCRIPTION
================= ================= ================= ==================================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
================= ================= ================= ==================================
PAR VALUE SHORT-TERM OBLIGATIONS - 4.0%
<S> <C> <C> <C>
(000) Commercial Paper - 3.6%
$ - $ 2,000 $ 2,000 Enterprise Funding Corp. 5.54%, 5/1/98
- 4,460 4,460 Marsh & McLennan Companies 5.52%, 5/1/98
- 2,500 2,500 SBC Communications, Inc. 5.52%, 5/4/98
- 3,945 3,945 Kimberly-Clark Corp. 5.51%, 5/7/98
4,865 2,165 7,030 AlliedSignal, Inc. 5.52%, 5/8/98
- 3,500 3,500 Procter & Gamble Co. 5.53%, 5/8/98
- 3,590 3,590 AlliedSignal, Inc. 5.53%, 5/11/98
- 850 850 Anheuser-Busch Cos., Inc. 5.50%, 5/11/98
- 3,750 3,750 Associates Corp. of North America 5.50%, 5/13/98
- 3,355 3,355 Du Pont (E.I.) de Nemours & Co. 5.50%, 5/27/98
- 1,525 1,525 Corporate Receivables Corp. 5.50%, 6/12/98
Federal Agency Securities - 0.4%
2,585 - 2,585 FHLMC 5.43%, 5/7/98
- 1,670 1,670 FHLMC 5.43%, 5/22/98
TOTAL SHORT-TERM OBLIGATIONS
TOTAL INVESTMENTS - 100.1%
(Identified cost $756,519,381, $195,998,421 and $952,517,802)
Cash and receivables, less liabilities - (0.1%)
NET ASSETS - 100.0%
(a) non income producing
<CAPTION>
VALUE
========================== ====================== =================
Income & Convertible Pro Forma
Growth Fund Combining
Fund Series Portfolios
========================= ====================== =================
<C> <C> <C>
- 2,000,000 $ 2,000,000
- 4,460,000 4,460,000
- 2,498,850 2,498,850
- 3,941,377 3,941,377
4,859,778 2,162,676 7,022,454
- 3,496,236 3,496,236
- 3,584,485 3,584,485
- 848,702 848,702
- 3,750,000 3,750,000
- 3,341,673 3,341,673
- 1,508,536 1,508,536
- - -
2,582,661 - 2,582,661
- 1,664,710 1,664,710
----------------------- ----------------------- ----------------------
7,442,439 33,257,245 40,699,684
----------------------- ----------------------- ----------------------
821,421,401 205,614,645 1,027,036,046
446,578 (1,455,142) (1,008,564)
----------------------- ----------------------- ----------------------
$ 821,867,979 $ 204,159,503 $ 1,026,027,482
======================= ======================= ======================
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Combining Statement Of Assets And Liabilities
April 30,1998 (unaudited)
<TABLE>
<CAPTION>
Income &
Growth Convertible Pro Forma
Fund Fund Adjustments Combined
------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investment securities at value
(Identified cost $756,519,381, $195,998,421
and $952,517,802) $ 821,421,401 $ 205,614,645 $ 1,027,036,046
Short-term investments held as collateral
for loaned securities - 2,493,800 2,493,800
Cash 162,419 2,299,831 2,462,250
Receivables
Investment securities sold 4,036,802 1,128,489 5,165,291
Fund shares sold 274,562 62,557 337,119
Dividends and interest 6,026,333 876,474 6,902,807
------------ ------------ ---------- -------------
Total assets 831,921,517 212,475,796 1,044,397,313
------------ ------------ ---------- -------------
LIABILITIES
Payables
Collateral on securities loaned - 2,493,800 2,493,800
Investment securities purchased 7,094,876 5,372,974 12,467,850
Fund shares repurchased 1,810,917 192,274 2,003,191
Investment advisory fee 476,820 109,892 586,712
Distribution fee 395,655 47,575 443,230
Transfer agent fee 154,341 35,742 190,083
Financial agent fee 20,656 7,582 28,238
Trustees' fee 9,122 9,301 18,423
Accrued expenses 91,151 47,153 138,304
------------ ------------ ---------- -------------
Total liabilities 10,053,538 8,316,293 18,369,831
------------ ------------ ---------- -------------
NET ASSETS $ 821,867,979 $ 204,159,503 $ 1,026,027,482
============ ============ ========== =============
CLASS A
Shares of beneficial interest outstanding 45,084,238 10,372,087 8,799,594 (a) 64,255,919
Net assets $ 459,991,986 $ 195,551,146 $ 655,543,132
Net asset value per share $ 10.20 $ 18.85 $ 10.20
Offering price per share - 4.75% $ 10.71 $ 19.79 $ 10.71
CLASS B
Shares of beneficial interest outstanding 35,407,595 458,660 383,645 (a) 36,249,900
Net assets $ 361,875,993 $ 8,608,357 $ 370,484,350
Net asset value and offering price per share $ 10.22 $ 18.77 $ 10.22
(a) Adjustment reflects additional shares
issued in conversion.
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund / Phoenix Convertible Fund Series
Pro Forma Statement Of Operations
Twelve Months Ended April 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Income &
Growth Convertible Pro Forma
Fund Fund Adjustments Combined
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 28,905,450 $ 6,502,301 $ 35,407,751
Dividends 10,855,681 2,127,185 12,982,866
Security lending income - 34,108 34,108
----------- ---------- ------- -----------
Total investment income 39,761,131 8,663,594 48,424,725
----------- ---------- ------- -----------
EXPENSES
Investment advisory fee 5,877,607 1,348,277 80,000 (a) 7,305,884
Distribution fee - Class A 1,161,545 498,568 - 1,660,113
Distribution fee - Class B 3,750,399 79,998 - 3,830,397
Financial agent fee 252,949 103,984 (73,000)(b) 283,933
Transfer agent 1,009,936 223,929 (12,000)(c) 1,221,865
Registration 22,066 16,493 (15,600)(c) 22,959
Printing 76,480 19,309 (15,000)(c) 80,789
Professional 21,405 20,691 (20,000)(c) 22,096
Custodian 64,627 19,035 (15,000)(c) 68,662
Trustees 20,582 20,502 (19,000)(c) 22,084
Miscellaneous 36,306 12,677 (5,000)(c) 43,983
----------- ---------- ------- -----------
Total expenses 12,293,902 2,363,463 (94,600) 14,562,765
----------- ---------- ------- -----------
NET INVESTMENT INCOME 27,467,229 6,300,131 94,600 33,861,960
----------- ---------- ------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 131,617,279 31,460,696 163,077,975
Net realized gain (loss) on foreign
currency transactions (1,242) 506 (736)
Net change in unrealized appreciation
(depreciation) on investments 4,573,207 255,546 4,828,753
----------- ---------- ------- -----------
Net gain on investments 136,189,244 31,716,748 167,905,992
----------- ---------- ------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 163,656,473 $ 38,016,879 94,600 $ 201,767,952
=========== ========== ======= ===========
</TABLE>
Adjustments:
(a) Reflects adjustment to the acquiring fund due to adviser fee schedule.
(b) Financial agent fees were adjusted to reflect the application of the fee
schedule in effect at 4/30/98.
(c) Adjustment reflects expected savings when the two funds become one.
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Income & Growth Fund/Phoenix Convertible Fund Series
Notes to Pro Forma Combining Financial Statements
April 30, 1998 (Unaudited)
1. Basis of Combination
The Pro Forma Statement of Assets and Liabilities, including the Pro Forma
Schedule of Investments, and the related Pro Forma Statement of Operations ("Pro
Forma Statements") reflect the accounts of Phoenix Income & Growth Fund ("Income
& Growth") and Phoenix Convertible Fund Series ("Convertible") as if the
reorganization occurred as of and for the year ended April 30, 1998. These
statements have been derived from the books and records utilized in calculating
daily net asset value of each fund at April 30, 1998 and for the year then
ended.
The Pro Forma Statements give effect to the proposed transfer of the assets and
stated liabilities of the Convertible Fund Series in exchange for shares of the
respective class of the Income & Growth Fund. Phoenix Investment Counsel, Inc.
("PIC" or the "Adviser") will bear all costs and expenses of the reorganization.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of the funds incorporated by reference in the Statement of
Additional Information.
2. Shares of Beneficial Interest
The Pro Forma net asset value per share assumes the issuance of additional
shares of the Income & Growth Fund which would have been issued at April 30,
1998 in connection with the proposed reorganization. The amount of additional
shares assumed to be issued was calculated based on the net assets of
Convertible Class A as of April 30, 1998 of $195,551,146 and the net asset value
per share of Income & Growth Class A of $10.20; and net assets of Convertible
Class B of $8,608,357 and the net asset value per share of Income & Growth Class
B of $10.22. The Pro Forma Statement of Assets & Liabilities reflects the
combined Pro Forma shares outstanding as calculated above.
3. Pro Forma Operations
Pro Forma operating expenses include the actual expenses of each Fund and the
combined Fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity. The investment advisory, distribution and financial
agent fees have been calculated for the combined Fund based on the fee schedule
in effect for the Income & Growth Fund at the combined level of average net
assets for the year ended April 30, 1998.
4. Portfolio Valuation
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Debt securities are valued on the basis of
broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at fair value as determined
in good faith by or under the direction of the Trustees.
<PAGE>
PHOENIX INCOME AND GROWTH FUND
PART C
OTHER INFORMATION
Item 15. Indemnification
The response to this item is incorporated by reference to Part A of the
Prospectus/Proxy Statement in this Registration Statement under the caption
"Comparative Information on Shareholder Rights--Liability of Trustees."
Item 16: Exhibits
<TABLE>
<S> <C>
(1)(a) Declaration of Trust of the Registrant, as amended, previously
filed, and herein incorporated by reference.
(1)(b) Amendment to Declaration of Trust of the Registrant, filed with
Post-Effective Amendment No. 10 on August 25, 1994 and herein
incorporated by reference.
(2) By-laws of the Registrant, previously filed, and incorporated
herein by reference.
(3) Not Applicable.
(4) Agreement and Plan of Reorganization (included as Exhibit A to the
Prospectus/Proxy Statement contained in Part A of this Registration
Statement).
(5) Reference is hereby made to Article VI of Registrant's Declaration
of Trust referenced in Exhibit 1 above.
(6)(a) Management Agreement between Registrant and National Securities &
Research Corporation, dated May 14, 1993, previously filed, and
herein incorporated by reference.
(6)(b) Amendment to Management Agreement between Registrant and National
Securities & Research Corporation, dated January 1, 1994, filed
with Post-Effective Amendment No. 10 on August 25, 1994 and
herein incorporated by reference.
(7)(a) Underwriting Agreement for Class A Shares between Registrant and
Phoenix Equity Planning Corporation ("Equity Planning") dated May
14, 1993, previously filed, and herein incorporated by reference.
(7)(b) Underwriting Agreement for Class B Shares between Registrant and
Equity Planning, dated May 14, 1993, previously filed, and
incorporated herein by reference.
(8) Not Applicable.
(9) Custodian Contract between Registrant and State Street Bank and
Trust Company dated May 1, 1997,
filed with Post-Effective Amendment No. 13 on August 26, 1997.
(10)(a) Distribution Plan for Class A Shares, dated May 14, 1993,
previously filed, and herein incorporated by reference.
(10)(b) Distribution Plan for Class B Shares, dated May 14, 1993,
previously filed, and herein incorporated by reference.
(11) Opinion and consent of Goodwin, Procter & Hoar LLP with respect
to legality of the shares being issued (to be filed by Pre-Effective
Amendment).
(12) Opinion and Consent of Goodwin, Procter & Hoar LLP with respect
to tax matters relating to acquisition of Phoenix Mid Cap
Portfolio (to be filed by Pre-Effective Amendment).
(13)(a) Transfer Agency and Service Agreement between Registrant and
Equity Planning dated June 1, 1994, filed with Post-Effective
Amendment No. 10 on August 25, 1994, filed via EDGAR with Post-
Effective Amendment No. 13 on August 26, 1997 and herein
incorporated by reference.
(13)(b) Form of Sales Agreement, filed with Post-Effective Amendment No. 10
on August 25, 1994, filed via EDGAR with Post-Effective Amendment
No. 13 on August 26, 1998 and herein incorporated by reference.
(13)(c) Financial Agent Agreement between Registrant and Phoenix Equity
Planning Corporation dated December 11, 1996, filed via EDGAR with
Post-Effective Amendment No. 14 on August 26, 1997 and herein
incorporated by reference.
C-1
<PAGE>
(13)(d) First Amendment to Financial Agent Agreement between Registrant
and Phoenix Equity Planning Corporation dated January 1, 1997
filed via EDGAR with Post-Effective Amendment No. 14 on August 26,
1997 and herein incorporated by reference.
(13)(e) Second Amendment to Financial Agent Agreement between Registrant
and Phoenix Equity Planning Corporation filed via EDGAR with
Post-Effective Amendment No. 14 on August 26, 1997 and herein
incorporated by reference.
(14)* Consent of Independent Accountants.
(15) Not Applicable.
(16) Powers of Attorney filed via EDGAR with Post-Effective Amendment
No. 12 on August 27, 1996 and herein incorporated by reference.
(17)* Form of Proxy Card for Phoenix Convertible Series Fund.
</TABLE>
- --------------
*Filed herewith.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this Registration Statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of the Registrant in the City
of Hartford and State of Connecticut on the ___ day of July, 1998.
PHOENIX INCOME AND GROWTH FUND
By: /s/ Philip R. McLoughlin
---------------------------------
Philip R. McLoughlin
President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities indicated:
<TABLE>
<S> <C>
/s/ Philip R. McLoughlin Trustee and President (principal executive officer)
- ---------------------------------- Treasurer (principal financial and accounting
Philip R. McLoughlin officer)
/s/ Nancy G. Curtiss
- ---------------------------------
Nancy G. Curtiss
* Trustee
- ---------------------------------
Robert Chesek
* Trustee
- ---------------------------------
E. Virgil Conway
* Trustee
- ---------------------------------
Harry Dalzell-Payne
* Trustee
- ---------------------------------
Francis E. Jeffries
* Trustee
- ---------------------------------
Larry Keith, Jr.
* Trustee
- ---------------------------------
Everett L. Morris
* Trustee
- ---------------------------------
James M. Oates
* Trustee
- ---------------------------------
Calvin J. Pedersen
C-3
<PAGE>
* Trustee
- ---------------------------------
Herbert Roth, Jr.
* Trustee
- ---------------------------------
Richard E. Segerson
* Trustee
- ---------------------------------
Lowell P. Weicker, Jr.
*By: /s/Philip R. McLoughlin
----------------------------------
Philip R. McLoughlin
Attorney-in-Fact under Powers of
Attorney dated February 21, 1996
filed herein.
</TABLE>
C-4
<PAGE>
Index To Exhibits
(14) Consent of Independent Accountants
(17) Form of Proxy Card for Phoenix Convertible Fund Series
C-5
Exhibit 14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined Proxy
Statement/Prospectus and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our report dated December 12, 1997, relating to the financial statements and
financial highlights of the Phoenix Convertible Fund Series, a series of the
Phoenix Series Fund, appearing in the October 31, 1997 Annual Report to
Shareholders, and of our report dated June 15, 1998, relating to the financial
statements and financial highlights of the Phoenix Income and Growth Fund
appearing in the April 30, 1998 Annual Report to Shareholders, which financial
statements and financial highlights are also incorporated by reference into the
Registration Statement. We also consent to the reference to us under the heading
"Management and Other Service Providers" in such Combined Proxy
Statement/Prospectus. We further consent to the reference to us under the
heading "Financial Highlights" in the Prospectuses of the Phoenix Convertible
Fund Series dated February 28, 1998 and of the Phoenix Income and Growth Fund
dated August 28, 1997, and under the heading "Other Information - Independent
Accountants" in the Statements of Additional Information of the Phoenix
Convertible Fund Series dated February 28, 1998 and of the Phoenix Income and
Growth Fund dated August 28, 1997 which are incorporated by reference into the
Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 15, 1998
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
