As filed with the Securities and Exchange Commission on May 24, 1996
Registration Nos. 33-6931
811-4727
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 15 [x]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 [x]
(Check appropriate box or boxes)
Phoenix Strategic Equity Series Fund
(Exact Name of Registrant as Specified in Charter)
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
Philip R. McLoughlin
Vice Chairman and Chief Executive Officer
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0479
(name and address of Agent for Service)
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on pursuant to paragraph (a)(i)
[x] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
A Rule 24f-2 Notice for the fiscal year ended on April 30, 1996 will be filed
by Registrant with the Commission on or before June 29, 1996.
<PAGE>
This Registration Statement contains two prospectuses and two Statement of
Additional Information.
These are identified as Version A and B of each.
PHOENIX STRATEGIC EQUITY SERIES FUND
[VERSION B]
Cross Reference Sheet Pursuant to Rule 495
Under the Securities Act of 1993
PART A
Information Required in Prospectus
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Item Number Prospectus Caption
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Introduction; Fund Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Introduction; Investment Objective
and Policies; Additional Information
5. Management of the Fund Management of the Fund
6. Capital Stock and Other Securities Dividends, Distributions and Taxes; Net Asset Value; How
to Buy Shares; Additional Information
7. Purchase of Securities Being Offered How to Buy Shares; Alternative Sales Arrangements;
Distribution Plans; Net Asset Value; Investor Accounts
and Services Available
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceeding Not Applicable
</TABLE>
PART B
Information Required in Statement of Additional Information
<TABLE>
<CAPTION>
Item Number Statement of Additional Information Caption
- ----------------------------------------------- ---------------------------------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Cover Page; General Information
13. Investment Objectives and Policies Cover Page; Investment Objective; Investment Policies;
Investment Restrictions
14. Management of the Fund Services of the Adviser; Trustees and Officers; Other
Information
15. Control Persons and Principal Holders Not Applicable
of Securities
16. Investment Advisory and Other Services Services of the Adviser
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities Net Asset Value; How to Buy Shares
19. Purchase, Redemption and Pricing of How to Buy Shares; Exchange Privileges; Redemption of
Securities Being Offered Shares; Net Asset Value
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter The National Distributor
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
The following pages from Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A filed with the Securities and Exchange
Commission on April 16, 1996 are incorporated herein by reference thereto:
Part A
Cross Reference pages to items required by Rule 495(a)
Prospectus pages 1 through 28.
Part B
Statement of Additional Information pages 1 through 24
April 30, 1996 Annual Report
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
_____________, 1996
Phoenix Strategic Equity Series Fund (the "Fund") is an open-end
management investment company whose shares are offered in four series, one of
which is offered by this Prospectus. Each series represents an investment in
a separate diversified fund with its own investment objectives and policies
designed to meet its specific investment goals. There can be no assurance
that any Series will achieve its objective.
Phoenix Micro Cap Fund (the "Micro Cap Series" or "Series") seeks as its
investment objective long-term growth of capital consistent with reasonable
risk. It is intended that this Series will invest primarily in a diversified
portfolio of securities, primarily common stock, of micro-cap companies.
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 any
implication that information herein is correct at any time subsequent to its
date. Investors should read and retain this Prospectus for future reference.
Additional information about the Series is contained in the Statement of
Additional Information, dated _______, 1996, which has been filed with the
Securities and Exchange Commission (the "Commission") and is available upon
request at no charge by calling (800) 243-4361 or by writing to Phoenix
Equity Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200. The Statement of Additional Information is
incorporated herein by reference.
Shares of the 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/EXCHANGES: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY) (800) 243-1926
<PAGE>
TABLE OF CONTENTS
Page
-------
INTRODUCTION 3
FUND EXPENSES 4
PERFORMANCE INFORMATION 6
INVESTMENT OBJECTIVE AND POLICIES 6
INVESTMENT TECHNIQUES AND RELATED RISKS 8
INVESTMENT RESTRICTIONS 12
PORTFOLIO TURNOVER 12
MANAGEMENT OF THE FUND 13
DISTRIBUTION PLANS 14
HOW TO BUY SHARES 15
INVESTOR ACCOUNTS AND SERVICES AVAILABLE 19
NET ASSET VALUE 22
HOW TO REDEEM SHARES 22
DIVIDENDS, DISTRIBUTIONS AND TAXES 23
ADDITIONAL INFORMATION 24
2
<PAGE>
INTRODUCTION
This Prospectus describes certain of the shares offered by and the
operations of Phoenix Strategic Equity Series Fund (the "Fund"). The Fund is
an open-end management investment company established in 1986 as a
Massachusetts business trust. Shares of the Fund are divided into four
series. This Prospectus offers shares of the Phoenix Micro Cap Fund, one of
the series currently offered by the Fund (the "Series"). Shares of the other
Series of the Fund are described in a separate prospectus. Each Series has a
different investment objective, and is designed to meet different investment
needs.
The Investment Advisers
The investment adviser for the Micro Cap Series is Phoenix Investment
Counsel, Inc. ("PIC" or the "Adviser"). The Adviser is a subsidiary of
Phoenix Duff & Phelps Corporation and prior to November 1, 1995, was an
indirect subsidiary of Phoenix Home Life Mutual Insurance Company. See
"Management of the Fund" for a description of the Investment Advisory
Agreement, management fee and the Adviser's undertaking to reimburse the Fund
for certain expenses.
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 quarterly fee based on the
average of the aggregate daily net asset values of the Fund at an annual rate
of $300 per $1 million. Equity Planning also serves as the Fund's transfer
agent.
The Fund has adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") for all classes
of all Series. 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 of a Series for
distribution expenditures incurred in connection with the sale and promotion
of Class A Shares of a Series and for furnishing shareholder services.
Although the Class A Plan provides for a 0.30% distribution fee, the
Distributor has voluntarily agreed to limit the Rule 12b-1 fee charged to
Class A Shares of a Series to 0.25% for the fiscal year 1997. Pursuant to the
distribution plan adopted for Class B Shares of a Series, 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 of a Series for distribution
expenditures incurred in connection with the sale and promotion of Class B
Shares of a Series and for furnishing shareholder services. See "Distribution
Plans."
Purchase of Shares
The Fund offers two classes of shares of each Series which may be purchased
at a price equal to their net asset value per share, plus a sales charge
which, at the election of the purchaser, may be imposed (i) at the time of
the purchase ("Class A Shares") or (ii) on a contingent deferred basis
("Class B Shares"). Completed application 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 Series and have the same rights, except that Class B Shares
bear the cost of the higher distribution fees which cause the Class B Shares
to have a higher expense ratio and to 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 Price
Class A Shares of a Series may be redeemed at any time at the net asset
value per share next computed after receipt of a redemption request by Equity
Planning, the 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."
3
<PAGE>
Risk Factors
There can be no assurances that the Series will achieve its investment
objectives. As a result of the Series' substantial investment in the stock
market, and particularly, the smallest capitalized companies traded, the net
asset values of Fund shares will fluctuate significantly in response to changes
in market and economic conditions, as well as the financial condition and
prospects of such issuers.
Micro-cap companies typically are subject to a greater degree of change in
earnings and business prospects than any larger, more established companies. In
addition, securities of domestic and foreign micro-cap companies are traded in
lower volume than those issued by larger companies and less information about
their prospects for continued success is typically available. Accordingly, the
Micro Cap Series may be subject to greater investment risk than that assumed by
mutual funds investing in a broader range of equities. See "Investment
Objectives and Policies."
FUND EXPENSES
The following table illustrates all fees and expenses a shareholder is
expected to incur. The expenses and fees for the Series have been pro-rated
to reflect a full year of operations ending July 31, 1997.
<TABLE>
<CAPTION>
Micro Cap Series
------------------------------------------------
Class A Class B
Shares Shares
(Pro-Forma)
<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 None 5% during the first year,
percentage of original decreasing 1% annually to 2%
purchase price or during the fourth and fifth
redemption proceeds, years; thereafter decreasing to
as applicable) 0% after the fifth year
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees 0. % 0. %
Rule 12b-1 Fees
(after waiver) (a) 0.25% 1.00%
Other Expenses (After
Expense Reimbursement) 0. % (b) 0. % (b)
Total Fund Operating Expenses % %
</TABLE>
(a) "Rule 12b-1 Fees" represent an asset based sales charge that, for a long
term shareholder, may be higher than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD"). While the Class A Plan provides for a 0.30% distribution
fee, the Distributor has voluntarily agreed to limit the fee to 0.25% for the
Series' fiscal year ending July 31, 1997. Rule 12b-1 fees would have been .30%
absent Distributor's waiver.
(b) The Adviser has agreed to reimburse the Series' operating expenses, other
than Management Fees and Rule 12b-1 Fees related to Class A and Class B Shares,
for the amount, if any, by which such operating expenses for the Series' fiscal
year ended July 31, 1997 exceed % of the average net assets. Other Expenses,
absent reimbursement, are estimated to equal approximately % and % of average
net assets of Class A Shares and Class B Shares, respectively. The total
operating expenses for Class A and Class B Shares of this Series are estimated
to be % and %, respectively absent reimbursement.
4
<PAGE>
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
Example* 1 year 3 years
- ----------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
An investor would pay the following expenses on a hypothetical $1,000
investment assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
Micro Cap Series (Class A Shares) $ $
Micro Cap Series (Class B Shares) $ $
An investor would pay the following expenses on the same $1,000
investment assuming no redemption at the end of each period:
Micro Cap Series (Class A Shares) $ $
Micro Cap Series (Class B Shares) $ $
</TABLE>
*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 expenses. Actual expenses may be greater or less than those shown. See
"Management of the Fund", "Distribution Plans" and "How to Buy Shares."
5
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Both
yield and total return figures are computed separately for Class A and Class
B Shares of the Series 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 Series will be computed by dividing the Series' net
investment income over a 30-day period by an average value of invested assets
(using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount will be compounded for
six months and then annualized for a twelve-month period to derive the
Series' yield.
Standardized quotations of average annual total return for Class A and Class
B Shares of the Series will be expressed in terms of the average annual
compound rate of return of a hypothetical investment in either Class A or
Class B Shares of the Series over a period of 1, 5 and 10 years (or up to the
life of the class of shares of the Series). 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 may also quote
supplementally a rate of total return over different periods of time by means
of aggregate, average, and year-by-year or other types of total return
figures. In addition, the Fund may from time to time publish materials citing
historical volatility for shares of the Series.
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 the Series' performance results to
other investment or savings vehicles (such as certificates of deposit) and
may refer to results published in various publications such as Changing
Times, Forbes, Fortune, Money, Barrons, Business Week and Investor's Daily,
Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment
Adviser, The Wall Street Journal, The New York Times, Consumer Reports,
Registered Representative, Financial Planning, Financial Services Weekly,
Financial World, U.S. News and World Report, Standard & 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 Series against certain widely acknowledged outside
standards or indices for stock and bond market performance, such as the
Standard & Poor's 500 Stock Index (the "S&P 500"), Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer's Price Index,
Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index. The S&P 500
is a commonly quoted market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 common stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common
stocks of a few companies listed on the American Stock Exchange or traded
over the counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
Advertisements, sale literature and other communications may contain
information about the Series or Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Series
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 a portfolio; or compare the Series' equity or bond return figure to
well-known indices of market performance, including, but not limited to: the
S&P 500 Index, Dow Jones Industrial Average, First Boston High Yield Index
and Salomon Brothers Corporate and Government Bond Indices.
Performance information for the Series reflects only the performance of a
hypothetical investment in Class A or Class B Shares of the Series during the
particular time period in which the calculations are based. Performance
information should be considered in light of the Series' investment
objectives and policies, characteristics and quality of its 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 Series, see
the Statement of Additional Information.
The Fund's Annual Report, available upon request and without charge, will
contain a discussion of the performance of the Series and a comparison of
that performance to a securities market index.
INVESTMENT OBJECTIVES
AND POLICIES
The investment objective of the Micro Cap Series is long-term growth of
capital consistent with reasonable risks. Any income derived from investments
will be incidental. The Series' investment objective is a fundamental policy and
may not be
6
<PAGE>
changed without the approval of the holders of a majority of the outstanding
shares of the Series. There can be no assurance that the Series will achieve
its investment objective.
Under normal circumstances, at least 65% of the Series' total assets will be
invested in equity securities of micro-cap companies. The Series defines
micro-cap companies as companies whose individual market capitalizations at the
time of acquisition would place them in the smallest 10% of market
capitalization of companies as measured by the Wilshire 5000 Index or a
comparable index or indices selected by the Adviser. The weighted average market
capitalization of the Series' holdings is expected to be less than the market
capitalization of the largest companies in the bottom 5% of the market
capitalization of equity issuers as measured by the Wilshire 5000 Index.
Currently, these companies have market capitalization of about $270 million or
less. Up to 25% of the Series' total assets may be invested in micro-cap issuers
domiciled outside of the United States.
Micro-cap companies in which the Series is likely to invest are selected on
the basis of the Adviser's assessment of their long-term potential to grow
rapidly through a variety of factors including the expansion of existing product
lines, introduction of new products, geographic expansion, market share gains,
improved operating efficiency, unexploited themes, or acquisitions. The Adviser
seeks those small and emerging companies which can show significant and
sustained increases in earnings over an extended period of time. Based on the
Adviser's strict sell discipline, however, stocks of companies which fail to
meet the Adviser's expectations will be sold. A strong financial structure and
fundamental prospects will be sought, but given the limited operating history of
smaller companies, and the tendency for less information regarding such
companies to be publicly available in certain situations, some of the above
factors will not be available or remain to be proven. Full development of these
companies frequently takes time and, for this reason, the Series should be
considered as a long-term investment and not as a vehicle for seeking short-term
profits.
The Series may invest in stocks of all types and, subject to investment
restrictions limiting concentration, is not restricted as to any specific
industry in its investments. The Adviser may invest in securities that are
privately placed or issued by newly established emerging entities and not
readily marketable when they present attractive investment opportunities.
Investment in these securities may provide greater rewards but will involve
greater risk. The Series may not invest more than 15% of its assets in illiquid
securities (securities that may not be sold within seven days at approximately
the price used in determining the net asset value of the Series' shares).
During adverse economic or market conditions, when the Adviser deems a
temporary defensive position is prudent any part of the Series' assets may be
held in cash or money market instruments including U.S. Government obligations
maturing within one year from the date of purchase. When the Series' assets are
held in cash or cash equivalents, it is not investing in securities intended to
meet the Series' investment objective.
Risk Considerations
Micro-capitalization companies are often companies with limited operating
history as a public company or companies within industries which have
recently emerged due to cultural, economic, regulatory or technological
developments. Many micro-capitalization companies are not well-known to the
investing public and are followed by relatively few securities analysts,
resulting in less publicly available information concerning these companies
as compared to larger capitalization companies. Given the limited operating
history and rapidly changing fundamental prospects, investment returns from
micro-capitalization companies are highly volatile. Micro-capitalization
companies may at times find their ability to raise capital impaired by their
size or lack of operating history.
Stocks of micro-capitalization companies and investments in private
placement securities are subject to varying patterns of trading volume
creating points when the securities may be illiquid. Securities of
micro-capitalization companies traded in the OTC market may have fewer market
makers, wider spreads between their quoted bid and asked prices and lower
trading volumes, resulting greater price volatility and less liquidity than
larger capitalization companies traded on the New York or American Stock
Exchange.
Other factors influencing the performance and volatility of the stocks of
micro-capitalization companies include industry developments within larger
markets, major economic trends and developments and general market movements
in both the equity and fixed income markets.
Investment in equity securities of foreign micro-capitalization companies
may involve special risks, particularly from political and economic
developments abroad and differences between foreign and U.S. regulatory
systems. Foreign micro-capitalization companies may be less liquid and their
prices more volatile than comparable domestic securities issuers.
The Series commenced operations on _______ 1996 based on initial
capitalization of $___ million. The ability of the Series to raise additional
capital for investment purposes may directly effect the spectrum of portfolio
holdings and performance.
Additional discussion regarding risks involved in investing in the Series
are described in the Investment Techniques and Related Risks" section below.
7
<PAGE>
INVESTMENT TECHNIQUES
AND RELATED RISKS
Investing in Convertible Securities
The Series may invest in convertible securities. A convertible security is a
bond, debenture, note, preferred stock or other security that may be
converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive
interest generally paid or accrued on debt or the dividend paid on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Convertible securities have several unique investment
characteristics such as (1) higher yields than common stocks, but lower
yields than comparable nonconvertible securities, (2) a lesser degree of
fluctuation in value than the underlying stock since they have fixed income
characteristics, and (3) the potential for capital appreciation if the market
price of the underlying common stock increases. Up to 5% of each of the
Series' assets may be invested in convertible securities that are rated below
investment grade (commonly referred to as "junk" securities). Such securities
present greater credit and market risks than investment grade securities. A
convertible security might be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Series is called for
redemption, the Series 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.
Writing Covered Options
The Series may, from time to time, write covered call option contracts as a
means of increasing the yield on the Series' portfolio and also as a means or
providing limited protection against decreases in the market value of the
Series' portfolio. Options are technically forms of "derivatives" in that
their value is dependent upon fluctuations in the value of other securities.
Such contracts will be written on securities in which the Series has
authority to invest and on securities indices listed on an organized national
securities exchange. The aggregate value of the securities underlying such
call options will be limited to not more than 25% of the net assets of the
Series.
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 call option is "covered" if,
throughout the life of the option, (1) the Series owns the optioned
securities, (2) the Series maintains in a segregated account with its
Custodian, cash or cash equivalents or U.S. Government securities with a
value sufficient to meet its obligations under the call, or (3) if the Series
owns an offsetting call option. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
writer forgoes the opportunity to profit from any increase in the market
price of the underlying security above the exercise price except insofar as
the premium represents such a profit. The Series will write only call option
contracts when it is believed that the total return to the Series can be
increased through such premiums consistent with the Series' investment
objective.
The Series may also write covered call options on securities indices.
Through the writing of call index options the Series 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 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 Series. 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 Series may purchase options to close out a position (i.e., enter into
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 Series' portfolio, the Series will 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 Series may wish to purchase a call option to hedge its
portfolio against an 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 Series may be invested in the purchase of put and call options,
including index options.
Purchasing Call and Put Options, Warrants and Stock Rights
The Series may invest up to an aggregate of 5% of its total assets in
exchange-traded or over-the-counter call and put options on securities and
securities indices and foreign currencies. Purchases of such options may be
made for the purpose of hedging against changes in the market value of the
underlying securities or foreign currencies or if in the opinion of the
Adviser, a hedging transaction is consistent with the Series' investment
objectives. The Series may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the
sale (in the case of a put) of the underlying security or foreign currency.
Any such sale would result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the call or put which is sold. Purchasing a call or
put option involves the risk that the Series may lose the premium it paid
plus transaction costs.
Warrants and stock rights are almost identical to call options in their
nature, use and effect except that they are issued by
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the issuer of the underlying security, rather than an option writer, and they
generally have longer expiration dates than call options. The Series using
this investment technique may invest up to 5% of its net assets in warrants
and stock rights, but no more than 2% of its net assets in warrants and stock
rights not listed on the New York Stock Exchange or the American Stock
Exchange.
Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They are transacted directly with dealers and
not with a clearing corporation, and there is a risk of non-performance by
the dealer. However, the premium is paid in advance by the dealer. OTC
options are available for a greater variety of securities, and in a wider
range of expiration dates and exercise prices, than exchange-traded options.
Since there is no exchange, pricing is normally done by reference to
information from a market maker, which information is carefully monitored or
caused to be monitored by the Adviser and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options,
there can be no assurance that a continuous liquid secondary market will
exist for any particular option at any specific time. Consequently, the
Series may be able to realize the value of an OTC option it has purchased
only by exercising its OTC option or entering into a closing sale transaction
with the dealer that issued it. Similarly, when the Series writes an OTC
option, it generally can close out that option prior to its expiration only
by entering into a closing purchase transaction with the dealer to which the
Series originally wrote the option. If a covered call option writer cannot
effect a closing transaction, it cannot sell the underlying security or
foreign currency until the option expires or the option is exercised.
Therefore, the writer of a covered OTC call option may not be able to sell an
underlying security even though it might otherwise be advantageous to do so.
Likewise, the writer of a secured OTC put option may be unable to sell the
securities pledged to secure the put for other investment purposes while it
is obligated as a put writer. Similarly, a purchaser of an OTC put or call
option might also find it difficult to terminate its position on a timely
basis in the absence of a secondary market.
Financial Futures and Related Options. The Series may enter into financial
futures contracts and related options as a hedge against anticipated changes
in the market value of the Series' portfolio securities or securities which
it intends to purchase or in the exchange rate of foreign currencies. Hedging
is the initiation of an offsetting position in the futures market which is
intended to minimize the risk associated with a position's underlying
securities in the cash market. Investment techniques related to financial
futures and options are summarized below and are described more fully in the
Statement of Additional Information.
Financial futures contracts consist of interest rate futures contracts,
foreign currency futures contracts and securities index futures contracts. An
interest rate futures contract obligates the seller of the contract to
deliver, and the purchaser to take delivery of, the interest rate securities
called for in the contract at a specified future time and a specified price.
A foreign currency futures contract obligates the seller of the contract to
deliver, and the purchaser to take delivery of, the foreign currency called
for in the contract at a specified future time and at a specified price. See
"Foreign Currency Transactions". A securities index assigns relative values
to the securities included in the index, and the index fluctuates with
changes in the market values of the securities so included. A securities
index futures contract is a bilateral agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the index value at the close of
the last trading day of the contract and the price at which the futures
contract is originally struck. An option on a financial futures contract
gives the purchaser the right to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the period of the option.
The Series may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange-
or board-traded put and call options on financial futures contracts and may
enter into financial futures contracts on foreign currencies.
The Series will engage in transactions in financial futures contracts and
related options only for hedging purposes and not for speculation. In
addition, the Series will not purchase or sell any financial futures contract
or related option if, immediately thereafter, the sum of the cash or U.S.
Treasury bills committed with respect to the Series' existing futures and
related options positions and the premiums paid for related options would
exceed 5% of the market value of the Series' total assets. At the time of
purchase of a futures contract or a call option on a futures contract, an
amount of cash, U.S. Government securities or other appropriate high-grade
debt obligations equal to the market value of the futures contract minus the
Series' initial margin deposit with respect thereto, will be deposited in a
segregated account with the Fund's custodian bank to fully collateralize the
position and thereby ensure that it is not leveraged. The extent to which the
Series may enter into financial futures contracts and related options may
also be limited by requirements of the Internal Revenue Code for
qualification as a regulated investment company.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the Adviser
could be incorrect in its expectation as to the direction or extent of
various interest rate movements or foreign currency exchange rates, in which
case the return might have been greater had hedging not taken place. There is
also the risk that a liquid secondary market may not exist, and the loss from
investing in futures contracts is potentially unlimited because the Series
may be unable to close its position. The risk in purchasing an option on a
financial futures contract is a loss of the premium paid. Also, there may be
circumstances when the purchase of an option
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on a financial futures contract could result in a loss while the purchase or
sale of the contract would not have resulted in a loss.
Repurchase Agreements
The Series may invest in repurchase agreements, either for temporary
defensive purposes necessitated by adverse market conditions or to generate
income from its excess cash balances, provided that no more than 10% of the
total assets may be invested in the aggregate in repurchase agreements having
maturities of more than seven days. A repurchase agreement is an agreement
under which the Series acquires a money market instrument (generally a
security issued by the U.S. Government or an agency thereof, a banker's
acceptance or a certificate of deposit) from a commercial bank, a broker or a
dealer, subject to resale to the seller at an agreed upon price and date
(normally the next business day). The resale price reflects an agreed upon
interest rate effective for the period the instrument is held by the Series
and is unrelated to the interest rate on the underlying instrument. A
repurchase agreement acquired by the Series will always be fully
collateralized by the underlying instrument, which will be marked to market
every business day. The underlying instrument will be held for the Series'
account by the Fund's custodian bank until repurchased.
The use of repurchase agreements involves certain risks such as default by
or the insolvency of the other party to the repurchase agreement. Repurchase
agreements will be entered into only with commercial banks, brokers and
dealers considered by the Adviser to be creditworthy.
Lending Portfolio Securities
In order to increase the return on its investment, the Series may each lend
its portfolio securities to broker-dealers and other financial institutions
in amounts up to 33% of the market or other fair value of its net assets.
Loans of portfolio securities will always be fully collateralized and will be
made only to borrowers considered by the Adviser to be credit-worthy. Lending
portfolio securities involves risk of delay in the recovery of the loaned
securities and in some cases the loss of rights in the collateral should the
borrower fail financially. See the Statement of Additional Information.
Foreign Currency Transactions
The value of the assets of the Series, as measured in United States dollars,
may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and may incur costs in
connection with conversions between various currencies. The Series may
conduct foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
through forward contracts to purchase or sell foreign currencies. A forward
foreign currency exchange contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded directly between
currency traders (usually large commercial banks) and their customers. At the
time of the purchase of a forward foreign currency exchange contract, an
amount of cash, U.S. Government securities or other appropriate high-grade
debt obligations equal to the market value of the contract, minus the Series'
initial margin deposit with respect thereto, will be deposited in a
segregated account with the Series' custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged.
When the Series enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the
United States dollar cost or proceeds, as the case may be. By entering into a
forward contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in the underlying security transaction,
it is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the United States dollar and such foreign currency. However, this tends to
limit potential gains which might result from a positive change in such
currency relationships. Utilizing this investment technique may also hedge
the foreign currency exchange rate risk by engaging in currency financial
futures and options transactions.
When the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the United States dollar, it
may enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Series' portfolio securities
denominated in such foreign currency. The forecasting of short-term currency
market movement is extremely difficult and whether such a short-term hedging
strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary
to purchase additional currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Series is obligated to deliver when a decision is made
to sell the security and make delivery of the foreign currency in settlement
of a forward contract. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the
Series is obligated to deliver.
If the Series retains the portfolio security and engages in an offsetting
transaction, the Series will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. If the
Series engages in an offsetting transaction, it may subsequently enter into a
new forward contract to sell the foreign currency. Should forward prices
decline during the period between the Series entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Series
would realize gains to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Series would suffer a loss to the extent the
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<PAGE>
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain which might result should the value of such
currency increase. The Series will have to convert its holdings of foreign
currencies into United States dollars from time to time. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies.
Investing in Foreign Securities
The Series may invest up to 25% of its total asset value in the securities
of foreign issuers. The Series may invest in a broad range of foreign
securities including equity, debt and convertible securities and foreign
government securities. While the Series 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 Series 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. 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 Series will not be registered with the Securities and Exchange Commission
("SEC") and the issuers thereof will not be subject to the SEC's reporting
requirements. Accordingly, there may be less publicly available information
about the securities and about the foreign company or government issuing them
than is available about a domestic company or government entity. Moreover,
individual foreign economies may differ favorably or unfavorably from the
United States economy in such respects as growth of Gross National Product,
rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payment positions.
In investing in securities denominated in foreign currencies, the Series
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 Series' 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 Series 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
Series and which may not be recoverable by the Series or its investors.
The Series 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 Series may invest may be primarily listed on foreign stock
exchanges which may trade on other days (such as Saturdays). As a result, the
net asset value of the Series' portfolio may be affected by such trading on
days when a shareholder has no access to the Series.
Investment income received by the Series from sources within foreign
countries may be subject to foreign income taxes withheld at the source. If
the Series should have more than 50% of the value of its assets invested in
securities of foreign corporations at the close of its taxable year, the
Series may elect to pass through to its shareholders their proportionate
shares of foreign income taxes paid. Investors are urged to consult their tax
attorney with respect to specific questions regarding foreign, federal, state
or local taxes.
Leverage
The Series may from time to time increase its ownership of securities holdings
above the amounts otherwise possible by borrowing from banks at fixed amounts of
interest and investing the borrowed funds. The Fund will borrow only from banks,
and only if immediately after such borrowing the value of the assets of the
Series (including the amount borrowed) less its liabilities (not including any
borrowings) is at least three times the amount of funds borrowed for investment
purposes. The effect of this provision is to permit the Fund to borrow up to
33-1/3% of the net assets of the Series, not including the proceeds of any such
borrowings. However, the amount of the borrowings will be dependent upon the
availability and cost of credit from time to time. If, due to market
fluctuations or other reasons, the value of the Series' assets computed as
provided above become less than three times the amount of the
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borrowings for investment purposes, the Fund, within three business days, is
required to reduce bank debt to the extent necessary to meet the required
300% asset coverage.
Interest on money borrowed will be an expense of the Series with respect
to which the borrowing has been made. As such expense would not otherwise be
incurred, the net investment income of the Series is not expected to be as
high as it otherwise would be during periods when borrowings for investment
purposes are substantial.
Bank borrowings for investment purposes must be obtained on an unsecured
basis. Any such borrowing must also be made subject to an agreement by the
lender that any recourse is limited to the assets of the Series with respect
to which the borrowing has been made.
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of the Series' shares to rise
faster than would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the monies borrowed) to the Series, the net
asset value of the Series will decrease faster than would otherwise be the
case.
Private Placements and Rule 144A Securities
The Series may purchase securities which have been privately issued or are
issued by newly established emerging entities 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 Series 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 Series may have to bear certain costs of registration in order to
sell such shares 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 Series determine the secondary market is liquid, Rule 144A
securities will be considered illiquid. Trustees of these Series 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 Series;
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 Series' illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities. The Series may invest up to 15% of its net assets in illiquid
securities.
Short Sales
The Series may from time to time make short sales involving securities held in
the Series' portfolio or which the Series has the right to acquire without the
payment of further consideration. The Series may also make short sales of other
securities, but in such cases it will maintain in a segregated account,
monitored on a daily basis, cash or U.S. Government securities at such a level
that (1) the segregated amount plus the amount of any collateral deposited with
a broker in connection with the transaction at least equals the current market
value of the securities sold short, and (2) the segregated amount plus the
amount deposited with the broker at least equals the value of the securities at
the time they were sold short. Short sales expose the Series to the risk that it
will be required to replace the borrowed securities to cover its short position
at a time when the securities may have appreciated in value, thus resulting in a
loss to the Series.
INVESTMENT RESTRICTIONS
The investment restrictions to which the Series is subject, together with
the investment objective of the Series, are fundamental policies of the Fund
which may not be changed without the approval of the Series' shareholders.
Among the more significant restrictions, the Series may not (i) invest more
than 5% of its total assets in securities issued or guaranteed by any one
issuer (except for U.S. Government obligations; any foreign government, its
agencies and instrumentalities) or (ii) purchase more than 10% of the
outstanding voting securities or more than 10% of the securities of any class
of any one issuer.
A detailed description of the Series' investment restrictions is contained
in the Statement of Additional Information.
PORTFOLIO TURNOVER
The Series pays brokerage commissions for purchases and sales of portfolio
securities. A high rate of portfolio turnover involves a correspondingly
greater amount of brokerage commissions and other costs which must be borne
directly by the Series and thus indirectly by its shareholders. It may also
result in the realization of larger amounts of short-term capital gains,
which are taxable to shareholders as ordinary income. As the securities of
micro-cap companies traded in the over-the-counter market tend to have fewer
market makers, wider spreads between quoted bid and asked prices is to be
expected; resulting in additional expense to the Series.
The rate of portfolio turnover is not a limiting factor when the Adviser
deems changes appropriate. Although the portfolio turnover rate of the Series
cannot be accurately predicted, it is anticipated that the annual turnover
rate will likely not exceed 150%-200%. Although securities for the Series are
not purchased for the short-term, the Adviser's strict sell discipline may
result in rates of portfolio turnover equivalent to those
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identified by the SEC as appropriate for capital appreciation funds with
substantial short-term trading. The Adviser's approach dictates that
underperforming securities and securities not consistent with prevailing
themes will be sold. Portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of portfolio securities during the fiscal year
by the monthly average of the value of the Series' securities (excluding
short-term securities). The turnover rate may vary greatly from year to year
and may be affected by cash requirements for redemptions of shares of the
Series and by compliance with provisions of the Internal Revenue Code,
relieving investment companies which distribute substantially all of their
net income from federal income taxation on the amounts distributed. For more
information regarding the consequences relating to a high portfolio turnover
rate, see "Portfolio Transactions and Brokerage" and "Dividends,
Distributions and Taxes" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund is a mutual fund technically known as an open-end management
company. The Trustees of the Trust are responsible for the overall
supervision of the Fund and perform the various duties imposed on Trustees by
the 1940 Act and Massachusetts business trust law.
The Adviser
The investment adviser to the Series is Phoenix Investment Counsel, Inc.
("PIC" or the "Adviser"), which is located at 56 Prospect Street, Hartford,
Connecticut 06115-0480. All of the outstanding stock of PIC is owned by Phoenix
Equity Planning Corporation ("Equity Planning" or "Distributor"), a subsidiary
of Phoenix Duff & Phelps Corporation of Chicago, Illinois. Prior to November 1,
1995, PIC and Equity Planning were indirect, wholly-owned subsidiaries of
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") of Hartford,
Connecticut. Phoenix Home Life is a majority shareholder of Phoenix Duff &
Phelps Corporation. Phoenix Home Life is in the business of writing ordinary and
group life and health insurance and annuities. Its principal offices are located
at One American Row, Hartford, Connecticut 06115-2520. In addition to the
Series, PIC also serves as investment adviser to Phoenix Strategic Theme Series,
Phoenix Small Cap Series, Phoenix Series Fund, Phoenix Multi-Portfolio Fund
(other than the Real Estate Securities Portfolio), Phoenix Total Return Fund,
Inc. and The Phoenix Edge Series Fund (other than the Real Estate Securities
Series) and as sub-adviser to investment portfolios of JNL Series Trust, Chubb
America Fund, Inc., SunAmerica Series Trust and American Skandia Trust. PIC was
originally organized in 1932 as John Chase, Inc. As of December 31, 1995, PIC
had approximately $18.48 billion in assets under management.
For managing, or directing the management of the investments of the
Series, PIC is entitled to a fee, payable monthly, at the following annual
rates based upon the aggregate net asset values of the Series:
1st $1-2 $2+
Series Billion Billion Billion
- ----------- -------- -------- ----------
Micro Cap % % %
The total advisory fee of % of the aggregate net assets of the Series is
greater than that for most mutual funds; however, the Board of Trustees of
the Fund believe that it is similar to fees charged by other mutual funds
whose investment objectives are similar to those of the Series.
PIC has agreed to reimburse the Series' operating expenses, other than
management fees and Rule 12-b fees related to Class A and Class B Shares for the
amount, if any, by which such operating expenses for the fiscal year ended July
31, 1997 exceed % of the average net assets of the Series.
Micro Cap Series
Mr. William J. Newman serves as Portfolio Manager of the Series and as such is
primarily responsible for the day to day management of the Series. Mr. Newman
joined Phoenix Home Life in April 1995 as Chief Investment Strategist and
Managing Director for Phoenix Investments. Mr. Newman is also Executive Vice
President of PIC and Senior Vice President of National Securities & Research
Corporation, Phoenix Equity Planning Corporation, The Phoenix Edge Series Fund,
Phoenix Multi-Portfolio Fund, Phoenix Income and Growth Fund, Phoenix Series
Fund, Phoenix Total Return Fund, Inc., Phoenix Worldwide Opportunities Fund and
Phoenix Duff & Phelps Institutional Mutual Funds. Mr. Newman was Chief
Investment Strategist for Kidder Peabody in New York from May, 1993 to December,
1994. He was Managing Director at Bankers Trust from March, 1991 to May, 1993.
The Financial Agent
Equity Planning also acts as financial agent of the Fund and, as such,
performs administrative, bookkeeping and pricing functions for the Fund.
Equity Planning receives a quarterly fee based on the average of the
aggregate daily net asset values of the Fund at the annual rate of $300 per
$1 million.
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 for which such agents are paid a fee by
Equity Planning.
Brokerage Commissions
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio
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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. Martin J. Gavin, 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, James M. Dolan, Nancy G. Curtiss, William R. Moyer, William J.
Newman and Leonard J. Saltiel 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
brokers are not permitted under the Glass-Steagall Act, the Trustees will
consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with banks or bank-affiliated securities
brokers would result in a loss to their customers or a change in the net
asset value per share of a Series of the 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 each Series 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. A
12b-1 fee paid by one series may be used to finance distribution of the shares
of another series based on the number of shareholder accounts within the Fund.
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 Series' fiscal year ended July 31, 1997 to 0.25% annually of the average
daily net assets of the Series' 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 Series' 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 and provision of shareholder services; (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 Prospectuses and Statements of Additional
Information for distribution to potential investors; (vii) such other similar
services that the Trustees 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 Series, 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 to
shareholders and/or maintaining 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. The Distributor may realize a profit from these arrangements.
In order to receive payments under the Plans, participants must meet such
qualifications as are to be established in the sole discretion of the
Distributor, such as services to the 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
14
<PAGE>
bulking of purchases or sales, or transmission of such purchases or sales by
computerized tape or other electronic equipment; or other batch processing.
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 Trustees and by a
majority of the Directors 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
affected Series 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 National Association of Securities Dealers ("NASD") regards certain
distribution fees as asset-based sales charges subject to NASD sales load
limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend either or both Plans.
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 of the Series represents an interest in the same
portfolio of investments of the Series, has the same rights, and is identical
to the other in all respects, except that Class B Shares bear the expenses of
the deferred sales arrangement and any expenses (including the higher
distribution services fee and any incremental transfer agency costs)
resulting from such sales arrangement. Each class has exclusive voting rights
with respect to provisions of the Rule 12b-1 distribution plan pursuant to
which its distribution services fee is paid and each class has different
exchange privileges. Only the Class B Shares are subject to a conversion
feature. The net income attributable to Class B Shares and the dividends paid
on Class B Shares will be reduced by the amount of the higher distribution
services fee and incremental expenses associated with such distribution
services fee; likewise, the net asset value of the Class B Shares will be
reduced by such amount to the extent the Series 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. Share certificates representing any number of
full shares will be issued only on request, and subject to certain
conditions. A fee may be incurred by the shareholder for a lost or stolen
share certificate. Sales personnel of broker-dealers distributing the Fund's
shares may receive differing compensation for selling Class A and 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 (except
Phoenix Multi-Sector Short Term Bond Fund Class A Shares held less than 6
months and Phoenix Money Market Fund Series Class A Shares), 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 is not taken and 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. 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
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<PAGE>
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
participant 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 service 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. 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.
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 the Distributor 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 on $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 sales 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 Underwriter 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
16
<PAGE>
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 to any full-time employee or sales representative (who has acted as such for
at least 90 days) of the Adviser or employees of Equity Planning; (3) registered
representatives and employees of securities dealers with whom Equity Planning
has sales agreements; (4) any qualified retirement plan exclusively for persons
described above; (5) any officer, director or employee of a corporate affiliate
of the Adviser or Equity Planning; (6) any spouse, child, parent, grandparent,
brother or sister of any person named in (1), (2), (3) or (5) above; (7)
employee benefit plans for employees of the Adviser, Equity Planning and/or
their corporate affiliates; (8) any employee or agent who retires from Phoenix
Home Life or Equity Planning; (9) any account held in the name of a qualified
employee benefit plan, endowment fund or foundation if, on the date of 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; (16) any
accounts established by financial institutions, broker-dealers or registered
investment advisers that charge an account management fee or transaction fee,
provided such entity has entered into an agreement with the Distributor for such
program; or (17) any deferred compensation plan established for the benefit of
any Phoenix Fund trustee or director; provided that sales made to persons listed
in (1) through (15) above are made upon the written assurance that the purchase
is made for investment purposes and that the shares so acquired will not be
resold except to the Fund.
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are not subject to any sales charges. The 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 Fund 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 Fund Series 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
17
<PAGE>
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 of Intent and the sales charge on the dollar amount of actual
purchases, the difference will be realized through the redemption of an
appropriate number of the escrowed shares and any remaining escrowed shares
will be deposited to his account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the 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
then current value (at the public offering price as described in the then
current prospectus relating to such shares) of shares of all Phoenix Funds
owned) in excess of the threshold amounts described in the Section entitled
"Initial Sales Charge Alternative--Class A Shares." To use this option, the
investor must supply sufficient 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 Purchase 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. 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 5 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.
18
<PAGE>
Second, 115 Class B Shares purchased in 1990 (including 15 shares issued as a
result of dividend reinvestment and distributions) would be redeemed next
without charge. Finally, 85 Class B Shares purchased in 1993 would be
redeemed resulting in a deferred sales charge of $27 [75 shares (85 shares
minus 10 shares resulting from dividend reinvestment) X $12 (lesser of
original price or current market value) X 3% (applicable rate in the third
year after purchase)].
The contingent deferred sales charge is waived on redemptions of shares
(a) if redemption is made within one year of death (i) of the sole
shareholder on an individual account, (ii) of a joint tenant where the
surviving joint tenant is the deceased's spouse, or (iii) of the beneficiary
of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act
(UTMA) or other custodial account; (b) if redemption is made within one year
of disability, as defined in Section 72(m)(7) of the Code; (c) in connection
with mandatory distributions upon reaching age 70-1/2 under any retirement
plan qualified under Sections 401, 408 or 403(b) of the Code or any
redemption resulting from the tax-free return of an excess contribution to an
IRA; (d) in connection with redemptions by 401(k) plans using an approved
participant tracking system for: participant hardships, death, disability or
normal retirement, and loans which are subsequently repaid; (e) in connection
with the exercise of certain exchange privileges among Class B Shares of the
Fund and Class B Shares of other Phoenix Funds; (f) in connection with any
direct rollover transfer of shares from an established Phoenix Fund qualified
plan into a Phoenix Fund IRA by participants terminating from the 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.
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) 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
availability of an opinion of counsel or a ruling of the Internal Revenue
Service ("IRS") to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B Shares
does not result in any dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that the conversion of shares does not
constitute a taxable event under federal income tax law. The Fund has not
sought opinions of counsel as to these matters but has or shall apply to the
IRS for such a ruling. While a ruling similar to the one sought by the Fund
as to preferential dividends has been issued previously by the IRS with
respect to Phoenix Multi-Sector Fixed Income Fund, Inc., complete assurance
cannot be given when or whether the Fund will receive a favorable ruling.
While an adverse determination by the IRS is not expected, the Fund may be
required to reassess the alternative purchase arrangement structure if the
IRS does not rule favorably. In addition, were the IRS not to rule favorably,
the Fund 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. The conversion of Class B Shares
to Class A Shares may be suspended if such an opinion or ruling is not
available. In that event, no further conversions of Class B Shares would
occur, and shares might continue to be subject to the higher distribution fee
for an indefinite period which may extend beyond the period ending six years
after the end of the month in which affected Class B Shares were purchased.
INVESTOR ACCOUNTS AND
SERVICES AVAILABLE
An account will be opened for the investor after the investor makes an
initial investment. Shares purchased will be held in the shareholder's
account by the Transfer Agent which will forward a statement each time there
is a change in the number of shares in the account. At any time, a
shareholder may request that a certificate be issued, subject to certain
conditions, representing any number of full shares held in his or her
account.
The Fund mails periodic reports to its shareholders. In order to reduce the
volume of mail, 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.
Shareholder inquiries should be directed to the Fund at (800) 243-1574.
Bank Draft Investing Program (Investo-Matic Plan)
By completing the Investo-Matic Section of the New Account Application, a
shareholder may authorize the bank named in the form to draw $25 or more from
his/her personal checking account on or about the 15th day of the month, to
be
19
<PAGE>
used to purchase additional shares for his account. The amount the
shareholder designates will be made available, in form payable to the order
of Equity Planning, to the Transfer Agent by the bank on the date the bank
draws on his/her account and will be used to purchase shares at the
applicable offering price. The shareholder or his or her registered
representative may, by telephone or written notice, cancel or change the
dollar amount being invested pursuant to the Investo-Matic Plan unless the
shareholder has notified the Fund or Transfer Agent that his or her
registered representative shall not have this authority.
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 the option of the shareholder, in cash. By exercising the distribution
option, a shareholder may elect to: (1) receive both dividends and capital
gain distributions in additional shares; (2) receive dividends in cash and
capital gain distributions in additional shares; or (3) receive both
dividends and capital gain distributions in cash. If a shareholder elects to
receive dividends and/or distributions in cash and the check cannot be
delivered or remains uncashed by the shareholder due to an invalid address,
then the dividend and/or distribution will be reinvested after the Transfer
Agent has been informed that the proceeds are undeliverable. Additional
shares will be purchased for the shareholder's account at the then current
net asset value. Shareholders who maintain an account balance of at least
$5,000, or $2,000 for tax qualified retirement benefit plans (calculated on
the basis of the net asset value of the shares held in a single account), may
direct that any dividends and distributions paid with respect to shares in
that account be automatically reinvested in a single account of one of the
other Phoenix Funds at net asset value. Shareholders should obtain a current
prospectus and consider the objectives and policies of each such Fund
carefully before directing dividends and distributions to the other Fund.
Reinvestment election forms and prospectuses are available from Equity
Planning. Distributions may also be mailed to a second payee and/or address.
Dividends and capital gain distributions received in shares are taxable to
the shareholder and credited to the shareholder's account in full and
fractional shares and are computed at the closing net asset value on the next
business day after the record date. A distribution option may be changed at
any time by notifying Customer Service by telephone at 800-243-1574 or
sending a letter signed by the registered owner(s) of the account. 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 the shareholder's account are repurchased or redeemed or transferred
between the record date and the payment date of a dividend or distribution,
he/she will receive cash for the dividend or distribution regardless of the
distribution option selected.
Systematic Withdrawal Program
The Systematic Withdrawal Program allows shareholders to periodically redeem
a portion of their account on a predetermined monthly or quarterly,
semiannual or annual basis. A sufficient number of full and fractional shares
shall therefore be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the
month at the closing net asset value on the date of redemption. The
Systematic Withdrawal Program also provides for redemptions to be tendered on
or about the 10th, 15th or 25th of the month with proceeds to be directed
through Automated Clearing House (ACH) to the shareholder's bank account. In
addition to the limitations stated below, withdrawals may not be less than
$25 and minimum account balance requirements shall continue to apply.
Class A shareholders participating in the Systematic Withdrawal Program
must own shares of the Fund worth $5,000 or more, as determined by the
then-current net asset value per share.
To participate in the Systematic Withdrawal Program, Class B shareholders
must initially own shares of the Fund worth $5,000 or more and elect to have
all dividends reinvested in additional Class B Shares of the Fund. 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.
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.
Class B shareholders redeeming more shares than the percentage permitted
by the withdrawal program shall be subject to any applicable contingent
deferred sales charge. Accordingly, the purchase of Class B Shares will
generally not be suitable for an investor who anticipates withdrawing sums in
excess of the above limits 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, 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.
Exchange Privileges
Shareholders may exchange Class A or Class B Shares held in book-entry form
for shares of the same class of other Phoenix Funds (except Phoenix
Multi-Sector Short Term Bond Fund Class A Shares held less than 6 months and
Class A Shares
20
<PAGE>
of Phoenix Money Market Series), provided the following conditions are met:
(1) the shares that will be acquired in the exchange (the "Acquired Shares")
are available for sale in the shareholder's state of residence; (2) the
Acquired Shares are the same class as the shares to be surrendered (the
"Exchanged Shares"); (3) the Acquired Shares will be registered to the same
shareholder account as the Exchanged Shares; (4) the account value of the
Fund whose shares are to be acquired must equal or exceed the minimum initial
investment amount required by that Fund after the exchange is implemented;
and (5) if a shareholder has elected not to utilize the Telephone Exchange
Privilege (see below), a properly executed exchange request must be received
by the Phoenix Funds, c/o State Street Bank and Trust Company.
Subject to the above requirements for an exchange, a shareholder or
his/her registered representative may, by telephone or written notice, elect
to have Class A or Class B Shares of the Fund exchanged for the same class of
shares of another Phoenix Fund automatically on a monthly, quarterly,
semi-annual or annual basis or may cancel the privilege ("Systematic
Exchange").
Shareholders who maintain an account balance in the Fund of at least
$5,000, or $2,000 for tax qualified retirement benefit plans (calculated on
the basis of the net asset value of the shares held in a single account), may
direct that shares of the Fund be automatically exchanged at predetermined
intervals for shares of the same class of another Phoenix Fund. If the
shareholder is participating in the Self Security program offered by Phoenix
Home Life, it is not necessary to maintain the above account balances in
order to use the Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of
a month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Series' net asset value per share next
computed following receipt of a properly executed exchange request, without
sales charge. On Class B share exchanges, the contingent deferred sales
charge schedule of the original shares purchased continues to apply.
The exchange of shares from one fund or Series to another is treated as a
sale of the Exchanged Shares and a purchase of the Acquired Shares for
Federal income tax purposes. The shareholder may, therefore, realize a
taxable gain or loss. See "Dividends, Distributions and Taxes" for
information concerning the Federal income tax treatment of a disposition of
shares.
It is the policy of the Adviser to discourage frequent trading by
shareholders among the Series and other Phoenix Funds in response to market
fluctuations. The Fund reserves the right to refuse exchange purchases by any
person or broker/dealer if, in the Fund's or Adviser's opinion, the exchange
would adversely affect the Series' ability to invest according to its
investment objectives and policies, or otherwise adversely affect the Fund
and its shareholders. The Fund reserves the right to terminate or modify its
exchange privileges at any time upon giving prominent notice to shareholders
at least 60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the prospectus of the fund
into which the exchange is to be made before any exchange requests are made.
Telephone Exchanges
Telephone Exchange privileges are only available in states where the shares
to be acquired may be legally sold. Unless a shareholder elects in writing
not to participate in the Telephone Exchange Privilege, shares for which
certificates have not been issued may be exchanged by calling (800) 367-5877
provided that the exchange is made between accounts with identical
registrations. Under the Telephone Exchange Privilege, telephone exchange
orders may also be entered on behalf of the shareholder by his or her legal
representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both accounts, the Transfer Agent will require
address verification and will record telephone instructions on tape. All
exchanges will be confirmed in writing with the shareholder. To the extent
that procedures reasonably designed to prevent unauthorized telephone
exchanges are not followed, the Fund and/or the Transfer Agent may be liable
for following telephone instructions for exchange transactions that prove to
be fraudulent. Broker/dealers other than Equity Planning have agreed to bear
the risk of any loss resulting from any unauthorized telephone exchange
instruction from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instructions entered
by an unauthorized third party that the Fund and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Exchange Privilege may be
modified or terminated at any time on 60 days' notice to shareholders. In
addition, during times of drastic economic or market changes, the Telephone
Exchange Privilege may be difficult to exercise or may be suspended
temporarily. In such event an exchange may be effected by following the
procedure outlined for tendering shares represented by certificate(s).
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates,
in order to exchange shares the shareholder must submit a written request to
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301. If the shares are being exchanged between accounts
that are not registered identically, the signature on such request must be
guaranteed by an eligible guarantor institution as defined by the Fund's
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.
21
<PAGE>
Purchase and withdrawal plans and reinvestment and exchange privileges are
described more fully in the Statement of Additional Information. For further
information, call Equity Planning at (800) 243-1574.
NET ASSET VALUE
The net asset value per share of the Series 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.
Net asset value per share of the Series is determined by dividing the value
of the Series' net assets--the value of its assets less its liabilities--by
the total number of its outstanding shares. 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 Series, and the
resulting amount of each is divided by the number of shares of that class
outstanding to produce the net asset value per share.
In determining the value of the Series' assets, the securities for which
market quotations are readily available are valued at market value. Debt
securities (other than short-term obligations) including those for which
market quotations are not readily available are normally valued on the basis
of valuations provided by a pricing service approved by the Trustees when
such prices are believed to reflect the fair value of such securities.
Securities listed or traded on a national securities exchange are valued at
the last sale price or, if there has been no recent sale, at the last bid
price. Securities which are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on
their respective exchanges. 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 market for such security by the Trustees or their delegates.
Securities traded in the over-the-counter market are valued at the last bid
price. Short-term obligations maturing in less than sixty days are valued at
amortized cost, which the Board has determined approximates market. 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 Series which invests in foreign securities contemporaneously with the
determination of the prices of the majority of the portfolio securities of
the Series. 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 offered 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 Series
has other investments, 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 REDEEM SHARES
Shareholders have the right to have the Fund buy back shares at the net
asset value next determined after receipt of a redemption request 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 (see "Net
Asset Value"). In the case of Class B Share redemptions, investors will be
subject to the applicable deferred sales charge, if any, for such shares (see
"Deferred Sales Charge Alternative--Class B Shares", above). To redeem, any
outstanding share certificates in proper form for transfer must be received
by Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301. To be in proper form to redeem shares, the signature
of the shareholder(s) on the certificate or stock power must be signed
exactly as registered, including any fiduciary title, on a written
instruction letter, certificate, or accompanying stock power, such signatures
being guaranteed by an eligible guarantor institution as determined in
accordance with the standards and procedures established by the Transfer
Agent (please contact the Fund at (800) 243-1574 with any questions regarding
eligible guarantors).
If no certificate has been issued, the Transfer Agent requires a written
request with signature guarantee. The Transfer Agent may waive the signature
guarantee requirement in the case of shares registered in the names of
individuals singly, jointly, or as custodian under the Uniform Gifts to
Minors Act, if the proceeds do not exceed $50,000, and the proceeds are
payable to the registered owner(s) at the address of record. Such requests
must be signed by each person in whose name the account is registered. In
addition, a shareholder may sell shares back to the Fund through securities
dealers who may charge customary commissions for their services. The
redemption price in such case will be the price as of the close of the
general trading session of the New York Stock Exchange on that day, provided
the order is received by the dealer prior thereto, and is transmitted to the
Distributor prior to the close of its business. No charge is made by the Fund
on redemptions, but shares tendered through investment dealers may be subject
to a service charge by such dealers. Payment for shares redeemed is made
within seven days; provided, however, that redemption proceeds will not be
disbursed until each check used for purchase of shares has been cleared for
payment by the investor's bank, which may take up to 15 days after receipt of
the check.
Additional documentation may be required for redemptions by corporations,
partnership or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRAs 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
22
<PAGE>
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.
Telephone Redemptions
Unless a shareholder elects in writing not to participate in the Telephone
Redemption privilege, shares for which certificates have not been issued may
be redeemed by telephoning (800) 367-5877 and telephone redemptions will also
be accepted on behalf of the shareholder from his or her registered
representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, the telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
shareholder. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the 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 redemption exchange
instruction from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instructions entered
by an unauthorized third party that the 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 and a shareholder should
submit a written redemption request, as described above.
If the amount of the redemption is over $500, the proceeds will be wired
to the shareholder's designated U.S. commercial bank account. If the amount
of the redemption is less than $500, the proceeds will be sent by check to
the address of record on the shareholder's account.
Telephone redemption requests must be received by the Transfer Agent by
the close of trading on the New York Stock Exchange on any day when the
Transfer Agent is open for business. Requests made after that time or on a
day when the Transfer Agent is not open for business cannot be accepted by
the Transfer Agent. The proceeds of a telephone redemption will normally be
sent on the first business day following receipt of the redemption request.
However, with respect to the telephone redemption of shares purchased by
check, such requests will only be effected after the Fund has assured itself
that good payment has been collected for the purchase of shares, which may
take up to 15 days. This expedited redemption privilege is not available to
HR-10, IRA and 403(b)(7) Plans.
Reinvestment Privilege
Shareholders have a privilege of using redemption proceeds to purchase Class
A Shares of any Phoenix Fund with no sales charge (at the 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 for reinvestment must be received by the
Underwriter 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 Series is treated as a separate entity for Federal income tax purposes.
The Series intends to elect to be treated as a regulated investment company
("RIC") and qualify annually as such under Subchapter M of the Internal
Revenue Code (the "Code"). In addition, the Series intends to distribute
annually to shareholders all or substantially all of its net investment
income and net realized capital gains, after utilization of any capital loss
carryover. As a result, the Series will not be subject to Federal income tax
on the net investment income and net capital gains that it distributes. The
discussion below is based upon the assumption that the Series will qualify as
a RIC.
The Series intends to make distributions from net investment income
semi-annually, and intends to distribute net realized capital gains, if any,
on an annual basis.
The Series 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 Series
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
Series, generally are subject
23
<PAGE>
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 Series.
Long-term capital gains, if any, distributed to shareholders and which are
designated by the Series as capital gain distributions, are taxable to
shareholders as long-term capital gain distributions regardless of the length
of time shares of the Series 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 in which they are received. However, dividends and distributions
declared by the Series 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
Series 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. A capital loss realized
on a disposition of the Series shares held six months or less will be treated
as a long-term capital loss to the extent of capital gain dividends received
with respect to such shares. In addition, if shares of the Series 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.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Series and their shareholders. In addition to the
Federal income tax consequences described above, which are applicable to any
investment in the Series, there may be state or local tax considerations, and
estate tax considerations, applicable to the circumstances of a particular
investor. Also, legislation may be enacted in the future that could affect
the tax consequences described above. Investors are urged to consult their
attorneys or tax advisers regarding specific questions as to Federal,
foreign, state or local taxes. 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 Series will send to its 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.
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 Stock Series of National Securities Funds. National
Securities Funds, as such, had been in existence since 1940. The Fund
continued the business of the Stock Series under the name "National Stock
Fund." The Trustees subsequently voted to change the name of the Fund to
"Phoenix Equity Opportunities Fund" to reflect the purchase of the Adviser by
Phoenix Home Life and the affiliation with other Phoenix Funds. On May 24,
1995, the Trustees again changed the name of the Fund to "Phoenix Strategic
Equity Series Fund."
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 are three series of the Fund, each of 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, 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
24
<PAGE>
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 resort 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.
25
<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
Strategic Equity Series Fund (the "Fund") which you should know before
investing. Please read it carefully and retain it for future reference.
Phoenix Strategic Equity Series Fund has filed with the Securities and
Exchange Commission a Statement of Additional Information about the Fund,
dated ____________, 1996. 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 or by calling (800) 243-4361.
Financial information relating to the Fund is contained in the Annual Report
to Shareholders for the year ended April 30, 1996 and is incorporated into
the Statement of Additional Information by reference.
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PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street, Greenfield, MA 01301
Statement of Additional Information
__________, 1996
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of the
Phoenix Micro Cap Fund of the Phoenix Strategic Equity Series Fund (the "Fund"),
dated ________, 1996 (the "Prospectus"), and should be read in conjunction with
it. Such 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) 1
INVESTMENT OBJECTIVES AND POLICIES (8) 1
INVESTMENT RESTRICTIONS (15) 1
PERFORMANCE INFORMATION (8) 8
PORTFOLIO TRANSACTIONS AND BROKERAGE 9
SERVICES OF THE ADVISER (15) 10
NET ASSET VALUE (25) 11
HOW TO BUY SHARES (18) 11
ALTERNATIVE PURCHASE ARRANGEMENTS (19) 11
EXCHANGE PRIVILEGES (24) 12
REDEMPTION OF SHARES (25) 13
DIVIDENDS, DISTRIBUTIONS AND TAXES (27) 13
TAX SHELTERED RETIREMENT PLANS (27) 14
THE NATIONAL DISTRIBUTOR (17) 15
PLANS OF DISTRIBUTION (17) 15
TRUSTEES AND OFFICERS 17
ADVISORY BOARD 23
OTHER INFORMATION 24
Numbers appearing in parentheses correspond
to related disclosures in the Fund's Prospectus.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders/Exchanges: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PDP (8/96)
<PAGE>
THE FUND
Phoenix Strategic Equity Series Fund (the "Fund") is a diversified open-end
management investment company which 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 Stock Series of National
Securities Funds. The Fund continued the business of the Stock Series. The
Trustees voted to change the name of the Fund to "Phoenix Equity Opportunities
Fund" to reflect the purchase of the Stock Series' adviser, National Securities
Research Corporation, by Phoenix Home Life Mutual Insurance Company and the
affiliation with other Phoenix Funds. On May 24, 1995, the Trustees voted to
change the name of the Fund to "Phoenix Strategic Equity Series Fund".
The Fund is presently comprised of four series: the Phoenix Equity
Opportunities Fund, Phoenix Strategic Theme Fund, Phoenix Small Cap Fund and
Phoenix Micro Cap Fund. This Statement of Additional Information pertains to
the Phoenix Micro Cap Fund.
INVESTMENT OBJECTIVES
The investment objective of the Series is deemed to be a fundamental policy
which may not be changed without the approval of the holders of a majority of
the outstanding shares of the Series. Investment restrictions described in
this Statement of Additional Information are fundamental policies of the
Series and may not be changed without the approval of the Series'
shareholders. Notwithstanding the foregoing, certain investment restrictions
affect more than one series of the Fund and therefore modifications may
require the consent of other shareholders. There is no assurance that the
Series will meet its investment objective.
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions constitute fundamental policies of the
Series (unless otherwise indicated) which may be changed only upon approval
by the holders of a majority of the outstanding shares of the Series'
shareholders. The Series may not:
1. Borrow money, except that the Series may borrow money for investment
purposes, provided that any such borrowing for investment purposes with
respect to the Series is (a) authorized by the Trustees prior to any
public distribution of the shares of the Series or is authorized by the
shareholders of the Series thereafter, (b) is limited to 33-1/3% of the
value of the total assets (taken at market value) of the Series, and (c)
is subject to an agreement by the lender that any recourse is limited to
the assets of the Series with respect to which the borrowing has been
made;
2. Underwrite the securities of others;
3. Deal in real estate (including real estate limited partnerships)
except that the Series may purchase marketable securities of companies
that deal in real estate or interests therein including real estate
investment trusts;
4. Deal in commodities or commodities contracts;
5. Make loans to other persons except that the Series may lend portfolio
securities (up to 33% 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");
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, provided that the Series may from time to time
make short sales involving securities held in the Series' portfolio or
which the Series has the right to acquire without the payment of further
consideration. The Series may also make short sales of other securities,
but in such cases will maintain in a segregated account, monitored on a
daily basis, cash or U.S. Government securities at such a level that (1)
the segregated amount plus the amount of any collateral deposited with a
broker in connection with the transaction at least equals the current
market value of the securities sold short, and (2) the segregated amount
plus the amount deposited with the broker at least equals the value of the
securities at the time they were sold short;
10. Issue senior securities;
11. Invest more than 25% of its total assets of the Series 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 Series
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. [Intentionally omitted]
15. 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
16. 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 by the Trustees. The Series may not:
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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 rules adopted by the Securities and Exchange Commission
for which the Trustees determine pursuant to the secondary market are liquid),
(b) repurchase agreements maturing in more than seven days, and (c) securities
that are not readily marketable.
2. Purchase or retain any security of an issuer if the Fund officers,
Trustees or Adviser, who individually own beneficially more than 1/2 of 1% of
such issuer, together own more than 5% of such issuer's securities.
3. Invest in interests in oil, gas or other mineral exploration
development programs or leases.
4. Invest more than 5% of the Series' total assets in warrants and stock
rights, valued at the lower of cost or market, or more than 2% of its assets
in warrants and stock rights that are not listed on the New York Stock
Exchange or American Stock Exchange.
Investment Techniques
The following supplements the "Investment Techniques and Related Rules
Section of the Prospectus.
Repurchase Agreements. Repurchase Agreements are agreements by which the
Series purchases a security and obtains a simultaneous commitment from the
seller (a member bank of the Federal Reserve System or, to the extent
permitted by the Investment Company Act of 1940, a recognized securities
dealer) that the seller will repurchase the security at an agreed upon price
and date. The resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the purchased
security.
A repurchase transaction is usually accomplished either by crediting the
amount of securities purchased to the account of the custodian of the Series
maintained in a central depository of book-entry system or by physical
delivery of the securities to the Series' custodian in return for delivery of
the purchase price to the seller. Repurchase transactions are intended to be
short-term transactions with the seller repurchasing the securities, usually
within seven days.
Even though repurchase transactions usually do not impose market risks on
the purchasing Series, if the seller of the repurchase agreement defaults and
does not repurchase the underlying securities, the Series might incur a loss
if the value of the underlying securities declines, and disposition costs may
be incurred in connection with liquidating the underlying securities. In
addition, if bankruptcy proceedings are commenced regarding the seller,
realization upon the underlying securities may be delayed or limited, and a
loss may be incurred if the underlying securities decline in value.
Securities and Index Options. The Series may write covered call options
and purchase call and put options. Options and the related risks are
summarized below.
Writing and Purchasing Options. Call options written by the Series
normally will have expiration dates between three and nine months from the
date written. During the option period the Series may be assigned an
exercise notice by the broker-dealer through which the call option was
sold, requiring the Series to deliver the underlying security (or cash in
the case of securities index calls) against payment of the exercise price.
This obligation is terminated upon the expiration of the option period or
at such earlier time as the Series effects a closing purchase transaction.
A closing purchase transaction cannot be effected with respect to an
option once the Series has received an exercise notice.
The exercise price of a call option written by the Series may be below,
equal to or above the current market value of the underlying security or
securities index at the time the option is written.
A multiplier for an index option performs a function similar to the unit
of trading for an option on an individual security. It determines the
total dollar value per contract of each point between the exercise price
of the option and the current level of the underlying index. A multiplier
of 100 means that a one-point difference will yield $100. Options on
different indices may have different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices,
Computer/Business Equipment Index, Major Market Index, Amex Market Value
Index, Computer Technology Index, Oil and Gas Index, NYSE Options Index,
Gaming/Hotel Index, Telephone Index, Transportation Index, Technology
Index, and Gold/Silver Index. The Series may write call options and
purchase call and put options on any other indices traded on a recognized
exchange.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option written by the Series to prevent an
underlying security from being called, or to enable the Series to write
another call option with either a different exercise price or expiration
date or both. The Series may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium
received on the call option is more or less than the cost of effecting the
closing purchase transaction. If a call option written by the Series
expires unexercised, the Series will realize a gain in the amount of the
premium on the option less the commission paid.
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The option activities of the Series may increase its portfolio turnover
rate and the amount of brokerage commissions paid. The Series will pay a
commission each time it purchases or sells a security in connection with
the exercise of an option. These commissions may be higher than those
which would apply to purchases and sales of securities directly.
Limitations on Options. The Series may write call options only if they
are covered and if they remain covered so long as the Series is obligated
as a writer. If the Series writes a call option on an individual security,
the Series will own the underlying security at all times during the option
period. The Series will write call options on indices only to hedge in an
economically appropriate way portfolio securities which are not otherwise
hedged with options or financial futures contracts. Call options on
securities indices written by the Series will be "covered" by identifying
the specific portfolio securities being hedged.
To secure the obligation to deliver the underlying security, the writer
of a covered call option on an individual security is required to deposit
the underlying security or other assets in escrow with the broker in
accordance with clearing corporation and exchange rules. In the case of an
index call option written by the Series, the Series will be required to
deposit qualified securities. A "qualified security" is a security against
which the Series has not written a call option and which has not been
hedged by the Series by the sale of a financial futures contract. If at
the close of business on any day the market value of the qualified
securities falls below 100% of the current index value times the
multiplier times the number of contracts, the Series will deposit an
amount of cash or liquid assets equal in value to the difference. In
addition, when the Series writes a call on an index which is
"in-the-money" at the time the call is written, the Series will segregate
with its custodian bank cash or liquid assets equal in value to the amount
by which the call is "in-the-money" times the multiplier times the number
of contracts. Any amount segregated may be applied to the Series'
obligation to segregate additional amounts in the event that the market
value of the qualified securities falls below 100% of the current index
value times the multiplier times the number of contracts.
The Series may invest up to 5% of its total assets in exchange-traded or
over-the-counter call and put options. The Series may sell a call option
or a put option which it has previously purchased prior to the purchase
(in the case of a call) or the sale (in the case of a put) of the
underlying security. Any such sale of a call option or a put option would
result in a net gain or loss, depending on whether the amount received on
the sale is more or less than the premium and other transaction costs
paid.
In connection with the Series qualifying as a regulated investment
company under the Internal Revenue Code, other restrictions on the Series'
ability to enter into option transactions may apply from time to time. See
"Taxes."
Risks Relating to Options. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase, but has retained the
risk of loss should the price of the underlying security decline. The
writer has no control over the time when it may be required to fulfill its
obligation as a writer of the option.
The risk of purchasing a call option or a put option is that the Series
may lose the premium it paid plus transaction costs. If the Series does
not exercise the option and is unable to close out the position prior to
expiration of the option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Series
will write and purchase options only when the Adviser believes that a
liquid secondary market will exist for options of the same series, there
can be no assurance that a liquid secondary market will exist for a
particular option at a particular time and that the Series, if it so
desires, can close out its position by effecting a closing transaction. If
the writer of a covered call option is unable to effect a closing purchase
transaction, it cannot sell the underlying security until the option
expires or the option is exercised. Accordingly, a covered call writer may
not be able to sell the underlying security at a time when it might
otherwise be advantageous to do so.
Possible reasons for the absence of a liquid secondary market on an
exchange include: (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.
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 the Series will realize a gain or
loss on the purchase or sale of an option on an index depends upon
movements in the level of prices in the market generally or in an industry
or market segment rather than upon movements in the price of an individual
security. Accordingly, successful use by the Series of options on indices
will be subject to the Adviser's ability to predict correctly movements in
the direction of the market generally or in the direction of a particular
industry. This requires different skills and techniques than predicting
changes in the prices of individual securities.
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Index prices may be distorted if trading of certain securities included
in the index is interrupted. Trading in index options also may be
interrupted in certain circumstances, such as if trading were halted in a
substantial number of securities included in the index. If this occurred,
the Series would not be able to close out options which it had written or
purchased and, if restrictions on exercise were imposed, might be unable
to exercise an option it purchased, which would result in substantial
losses to the Series. However, it is the Fund's policy to write or
purchase options only on indices which include a sufficient number of
securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance
and, unlike call writing on portfolio securities, cannot provide in
advance for its potential settlement obligation by holding the underlying
securities. Consequently, the Series will write call options on indices
only subject to the limitations described above.
Price movements in securities in the Series' portfolio will not correlate
perfectly with movements in the level of the index and, therefore, the
Series bears the risk that the price of the securities held by the Series
may not increase as much as the level of the index. In this event, the
Series would bear a loss on the call which would not be completely offset
by movements in the prices of the Series' portfolio securities. It is also
possible that the index may rise when the value of the Series' portfolio
securities does not. If this occurred, the Series would experience a loss
on the call which would not be offset by an increase in the value of its
portfolio and might also experience a loss in the market value of
portfolio securities.
Unless the Series has other liquid assets which are sufficient to satisfy
the exercise of a call on an index, the Series will be required to
liquidate portfolio securities in order to satisfy the exercise. Because
an exercise must be settled within hours after receiving the notice of
exercise, if the Series fails to anticipate an exercise, to the extent
permissible, it may have to borrow from a bank pending settlement of the
sale of securities in its portfolio and pay interest on such borrowing.
When the Series has written a call on an index, there is also a risk that
the market may decline between the time the Series has the call exercised
against it, at a price which is fixed as of the closing level of the index
on the date of exercise, and the time the Series is able to sell
securities in its portfolio. As with options on portfolio securities, the
Series will not learn that a call has been exercised until the day
following the exercise date but, unlike a call on a portfolio security
where the Series would be able to deliver the underlying security in
settlement, the Series may have to sell part of its portfolio securities
in order to make settlement in cash, and the price of such securities
might decline before they could be sold.
If the Series exercises a put option on an index which it has purchased
before final determination of the closing index value for that day, it
runs the risk that the level of the underlying index may change before
closing. If this change causes the exercised option to fall
"out-of-the-money" the Series will be required to pay the difference
between the closing index value and the exercise price of the option
(multiplied by the applicable multiplier) to the assigned writer. Although
the Series may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather
than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the
cutoff times for index options may be earlier than those fixed for other
types of options and may occur before definitive closing index values are
announced.
Financial Futures Contracts and Related Options. The Series may use
financial futures contracts and related options to hedge against changes in
the market value of its portfolio securities or securities which it intends
to purchase. Hedging is accomplished when an investor takes a position in the
futures market opposite to his cash market position. There are two types of
hedges--long (or buying) and short (or selling) hedges. Historically, prices
in the futures market have tended to move in concert with cash market prices,
and prices in the futures market have maintained a fairly predictable
relationship to prices in the cash market. Thus, a decline in the market
value of securities in the Series' portfolio may be protected against to a
considerable extent by gains realized on futures contracts sales. Similarly,
it is possible to protect against an increase in the market price of
securities which the Series may wish to purchase in the future by purchasing
futures contracts.
The Series may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade. Financial futures
contracts consist of interest rate futures contracts and securities index
futures contracts. A public market presently exists in interest rate futures
contracts covering long-term U.S. Treasury bonds, U.S. Treasury notes,
three-month U.S. Treasury bills and GNMA certificates. Securities index
futures contracts are currently traded with respect to the Standard & Poor's
500 Composite Stock Price Index and such other broad-based stock market
indices as the New York Stock Exchange Composite Stock Index and the Value
Line Composite Stock Price Index. A clearing corporation associated with the
exchange or board of trade on which a financial futures contract trades
assumes responsibility for the completion of transactions and also guarantees
that open futures contracts will be performed.
In contrast to the situation when the Series purchases or sell a security,
no security is delivered or received by the Series upon the purchase or sale
of a financial futures contract. Initially, the Series will be required to
deposit in a segregated account with its custodian bank an amount of cash,
U.S. Treasury bills or liquid high grade debt obligations. This amount is
known as initial margin and is in the nature of a performance bond or good
faith deposit on the contract. The current initial margin deposit required
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per contract is approximately 5% of the contract amount. Brokers may
establish deposit requirements higher than this minimum. Subsequent payments,
called variation margin, will be made to and from the account on a daily
basis as the price of the futures contract fluctuates. This process is known
as marking to market.
The writer of an option on a futures contract is required to deposit
margin pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
margin account. This amount will be equal to the amount by which the market
price of the futures contract at the time of exercise exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction. A futures
contract sale is closed out by effecting a futures contract purchase for the
same aggregate amount of securities and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller immediately would be
paid the difference and would realize a gain. If the offsetting purchase
price exceeds the sale price, the seller immediately would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed
out by effecting a futures contract sale for the same securities and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss.
The Series will pay commissions on financial futures contracts and related
options transactions. These commissions may be higher than those which would
apply to purchases and sales of securities directly.
Limitations on Futures Contracts and Related Options. The Series may not
engage in transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of its portfolio securities or securities which it intends to
purchase. The Series may not purchase or sell financial futures contracts or
related options if, immediately thereafter, the sum of the amount of initial
margin deposits on the Series' existing futures and related options positions
and the premiums paid for related options would exceed 5% of the market value
of the Series' total assets after taking into account unrealized profits and
losses on any such contracts. At the time of purchase of a futures contract
or a call option on a futures contract, an amount of cash, U.S. Government
securities or other appropriate high-grade debt obligations equal to the
market value of the futures contract minus the Series' initial margin deposit
with respect thereto will be deposited in a segregated account with the
Fund's custodian bank to collateralize fully the position and thereby ensure
that it is not leveraged.
The extent to which the Series may enter into financial futures contracts
and related options also may be limited by the requirements of the Internal
Revenue Code for qualifications as a regulated investment company. See
"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. The Series
will enter into an option or futures position only if there appears to be a
liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular option or futures contract at
any specific time. Thus, it may not be possible to close out a futures or
related option position. In the case of a futures position, in the event of
adverse price movements the Series would continue to be required to make
daily margin payments. In this situation, if the Series has insufficient cash
to meet daily margin requirements it may have to sell portfolio securities at
a time when it may be disadvantageous to do so. In addition, the Series may
be required to take or make delivery of the securities underlying the futures
contracts it holds. The inability to close out futures positions also could
have an adverse impact on the Series' ability to hedge its portfolio
effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in market prices, it can also preclude a hedger's opportunity to
benefit from a favorable market movement. In addition, investing in futures
contracts and options on futures contracts will cause the Series to incur
additional brokerage commissions and may cause an increase in the Series'
portfolio turnover rate.
The successful use of futures contracts and related options also depends on
the ability of the Adviser to forecast correctly the direction and extent of
market movements within a given time frame. To the extent market prices remain
stable during the period a futures contract or option is held by the Series or
such prices move in a direction opposite to that anticipated, the Series may
realize a potential unlimited loss on the hedging transaction which is not
offset by an increase in the value of its portfolio securities. As a result, the
Series' return for the period may be less than if is had not engaged in the
hedging transaction.
Utilization of futures contracts by the Series involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities which are being hedged. If the price
of the futures contract moves more or less than the price of the securities
being hedged, the Series will experience a gain or loss which will not be
completely offset by movements in the price of the securities. It is possible
that, where the Series has sold futures contracts to hedge its portfolio
against decline in the market, the market may advance and the value of
securities held in the Series' portfolio may decline. If this occurred, the
Series would lose money on the futures contract and would also experience a
decline in value in its portfolio securities. Where futures are purchased to
hedge against a possible increase in the prices of securities before the
Series is able
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to invest its cash (or cash equivalents) in securities (or options) in an
orderly fashion, it is possible that the market may decline; if the Series
then determines not to invest in securities (or options) at that time because
of concern as to possible further market decline or for other reasons, the
Series will realize a loss on the futures that would not be offset by a
reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market also elect to close out their contracts through
off-setting transactions rather than to meet margin deposit requirements. In
such case, distortions in the normal relationship between the cash and
futures markets could result. Price distortions could also result if
investors in futures contracts opt to make or take delivery of the underlying
securities rather than to engage in closing transactions due to the resultant
reduction in the liquidity of the futures market. In addition, due to the
fact that, from the point of view of speculators, the deposit requirements in
the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could
cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities and movements in the prices of
futures contracts, a correct forecast of market trends may still not result
in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for the
Series because the maximum amount at risk is the premium paid for the options
plus transaction costs. However, there may be circumstances when the purchase
of an option on a futures contract would result in a loss to the Series while
the purchase or sale of the futures contract would not have resulted in a
loss, such as when there is no movement in the price of the underlying
securities.
Leverage. The Series may from time to time increase its ownership of
securities holdings above the amounts otherwise possible by borrowing from
banks at fixed amounts of interest and investing the borrowed funds. The
Series will borrow only from banks, and only if immediately after such
borrowing the value of the assets of the Series (including the amount
borrowed) less its liabilities (not including any borrowings) is at least
three times the amount of funds borrowed for investment purposes. The effect
of this provision is to permit the Fund to borrow up to 33-1/3% of the net
assets of the Series, not including the proceeds of any such borrowings.
However, the amount of the borrowings will be dependent upon the availability
and cost of credit from time to time. If, due to market fluctuations or other
reasons, the value of the Series' assets computed as provided above becomes
at any time less than three times the amount of the borrowings for investment
purposes, the Series, within three business days, is required to reduce bank
debt to the extent necessary to meet the required 300% asset coverage.
Interest on money borrowed will be an expense of the Series with respect
to which the borrowing has been made. Because such expense would not
otherwise be incurred, the net investment income of the Series is not
expected to be as high as it otherwise would be during periods when
borrowings for investment purposes are substantial.
Bank borrowings for investment purposes must be obtained on an unsecured
basis. Any such borrowing must also be made subject to an agreement by the
lender that any recourse is limited to the assets of the Series with respect
to which the borrowing has been made.
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of the Series' shares to rise
faster than would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the monies borrowed) to the Series, the net
asset value of the Series will decrease faster than would otherwise be the
case.
Foreign Securities. The Series may purchase foreign securities, including
those issued by foreign branches of U.S. banks. In any event, such
investments in foreign securities will be limited to 25% of the total net
asset value of the Series. 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 Fund 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 Fund'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.
Lower Rated Convertible Securities. Convertible securities which are not
rated in the four highest categories, in which the Series may invest, are
predominantly speculative with respect to the issuer's capacity to repay
principal and interest and may include issues on which the issuer defaults.
Lending Portfolio Securities. In order to increase its return on
investments, the Series may make loans of its portfolio securities, as long
as the market value of the loaned securities does not exceed 33% of the
market or other fair value of the Series'
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net assets. Loans of portfolio securities will always be fully collateralized
by cash, U.S. Government Securities or other high quality debt securities at
no less than 100% of the market value of the loaned securities (as marked to
market daily) and made only to borrowers considered by the Adviser to be
creditworthy. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities and possibly the loss of the collateral if
the borrower fails financially.
Foreign Currency Transactions
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days ("Term")
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded directly between
currency traders (usually large commercial banks) and their customers.
The Series does not intend to enter into such forward contracts if it
would have more than 15% of the value of its total assets committed to
such contracts on a regular or continuous basis. The Series will not enter
into such forward contracts or maintain a net exposure in such contracts
where it would be obligated to deliver an amount of foreign currency in
excess of the value of its portfolio securities and other assets
denominated in that currency. The Adviser believes that it is important to
have the flexibility to enter into such forward contracts when it
determines that to do so is in the best interests of the Series. The
Fund's custodian bank will segregate cash or liquid high quality debt
securities in an amount not less than the value of the Series' total
assets committed to forward foreign currency exchange contracts entered
into for the purchase of a foreign currency. If the value of the
securities segregated declines, additional cash or securities will be
added so that the segregated amount is not less than the amount of the
Series' commitments with respect to such contracts. Generally, the Series
does not enter into forward contracts with a term longer than one year.
Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at
the exercise price at a specified date or during the option period. A call
option gives its owner the right, but not the obligation, to buy the
currency, while a put option gives its owner the right, but not the
obligation, to sell the currency. The option seller (writer) is obligated
to fulfill the terms of the option sold if it is exercised. However,
either seller or buyer may close its position during the option period for
such options any time prior to expiration.
A call rises in value if the underlying currency appreciates. Conversely,
a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Series against an
adverse movement in the value of a foreign currency, it does not limit the
gain which might result from a favorable movement in the value of such
currency. For example, if the Series were holding securities denominated
in an appreciating foreign currency and had purchased a foreign currency
put to hedge against a decline in the value of the currency, it would not
have to exercise its put. Similarly, if the Series had entered into a
contract to purchase a security denominated in a foreign currency and had
purchased a foreign currency call to hedge against a rise in the value of
the currency but instead the currency had depreciated in value between the
date of purchase and the settlement date, the Series would not have to
exercise its call but could acquire in the spot market the amount of
foreign currency needed for settlement.
Foreign Currency Futures Transactions. The Series may use foreign
currency futures contracts and options on such futures contracts. Through
the purchase or sale of such contracts, the Series may be able to achieve
many of the same objectives attainable through the use of foreign currency
forward contracts, but more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and are traded on boards of
trade and commodities exchanges. It is anticipated that such contracts may
provide greater liquidity and lower cost than forward foreign currency
exchange contracts.
Regulatory Restrictions. To the extent required to comply with Securities
and Exchange Commission Release No. IC-10666, when purchasing a futures
contract or writing a put option, the Series will maintain in a segregated
account cash or liquid high-grade debt securities equal to the value of
such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid "commodity pool operator"
status, the Series will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for
futures contracts (including foreign currency and all other futures
contracts) held by the Series plus premiums paid by it for open options on
futures would exceed 5% of the Series' total assets. The Series will not
engage in transactions in financial futures contracts or options thereon
for speculation, but only to attempt to hedge against changes in market
conditions affecting the values of securities which the Series holds or
intends to purchase. When futures contracts or options thereon are
purchased to protect against a price increase on securities intended to be
purchased later, it is anticipated that at least 75% of such intended
purchases will be completed. When other futures contracts or options
thereon are purchased, the underlying value of such contracts will at all
times not exceed the sum of: (1) accrued profit on such contracts held by
the broker; (2) cash or high quality money market instruments set aside in
an identifiable manner; and (3) cash proceeds from investments due in 30
days.
Investing in Micro-Cap Issuers. Under normal market conditions, the Series
expects to invest at least 65% of its total assets in equity securities of
micro capitalization companies. Market capitalizations of such issuers are
determined at the time of purchase. While the issuers in which the Series
will primarily invest may offer greater opportunities for capital
appreciation than larger
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capitalization issuers, investments in smaller companies may involve greater
risks and thus may be considered speculative. For example, micro
capitalization companies may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group. Full
development of these companies takes time and, for this reason, the Series
should be considered as a long-term investment and not as a vehicle for
seeking short-term profits, nor should an investment in the Series be
considered a complete investment program. In addition, many micro
capitalization company stocks trade less frequently and in smaller volume,
and may be subject to more abrupt or erratic price movements than stocks of
large companies. The securities of small companies may also be more sensitive
to market changes than the securities of large companies. These factors may
result in above-average fluctuations in the net asset value of the Series'
shares. The Series is not an appropriate investment for individual investors
requiring safety of principal or a predictable return of income from their
investment.
Derivative Investments. In order to hedge various portfolio positions,
including to hedge against price movements in markets in which the Fund
anticipates increasing its exposure, the Fund may invest in certain
instruments which may be characterized as derivative investments. These
investments include various types of interest rate transactions, options and
futures. Such investments also may consist of indexed securities. Other of
such investments have no express quantitative limitations, although they may
be made solely for hedging purposes, not for speculation, and may in some
cases be limited as to the type of counter-party permitted. Interest rate
transactions involve the risk of an imperfect correlation between the index
used in the hedging transactions and that pertaining to the securities which
are the subject of such transactions. Similarly, utilization of options and
futures transactions involves the risk of imperfect correlation in movements
in the price of options and futures and movements in the price of the
securities or interest rates which are the subject of the hedge. Investments
in indexed securities, including inverse securities, subject the Fund to the
risks associated with changes in the particular indices, which may include
reduced or eliminated interest payments and losses of invested principal.
Industry Classifications. For the purposes of establishing industry
classifications for the Series, the Adviser utilizes the William O'Neil &
Co., Inc. Industry Group Index. The William O'Neil & Co., Inc. Industry Group
Index is presently comprised of 197 industry classifications. Classifications
are determined based on the following broad sectors: Basic Material, Energy,
Capital Equipment, Technology, Consumer Cyclical, Retail, Consumer Staple,
Health Care, Transportation, Financial, and Utilities. Sectors are then
divided into industry groups based upon income sources and other economically
relevant criteria as determined by O'Neil & Co., Inc.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to shareholders or prospective investors.
Standardized quotations of average annual total return for Class A or
Class B Shares of a Series 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 of a Series over periods of 1, 5 and 10 years or up to the
life of the class of shares of a Series, calculated for each class separately
pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical
initial payment of $1,000, T = the average annual total return, n = the
number of years, and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). All total return figures
reflect the deduction of a proportional share of each class's expenses (on an
annual basis), deduction of the maximum initial sales load in the case of
Class A Shares and the maximum contingent deferred sales charge applicable to
a complete redemption of the investment in the case of Class B Shares, and
assume that all dividends and distributions on Class A and Class B Shares are
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 Stock Index (the "S&P 500"), Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer's Price Index,
Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index. The S&P 500
is a commonly quoted market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 common stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common
stocks of a few companies listed on the American Stock Exchange or traded
over the counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
Advertisements, sales literature and other communications may contain
information about the Fund and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund
to respond quickly to
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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 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 Index, Dow Jones Industrial Average, First Boston High Yield
Index and Salomon Brothers Corporate and Government Bond Indices.
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 Series' 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.
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.
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 execution of orders
and to negotiate brokerage commissions which 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 differ 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.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry
groups, and individual issues. Research services will vary from firm to firm,
with broadest coverage generally from the large full-line firms. Smaller
firms in general tend to provide information and interpretations on a smaller
scale, frequently with a regional emphasis. In addition, several firms
monitor federal, state, local and foreign political developments; many of the
brokers also provide access to outside consultants. The outside research
assistance is particularly useful to the Adviser's staff since the brokers as
a group tend to monitor a broader universe of securities and other matters
than the Adviser's staff can follow. In addition, it provides the Adviser
with a diverse perspective on financial markets. Research and investment
information is provided by these and other brokers at no cost to the Adviser
and is available for the benefit of other accounts advised by the Adviser and
its affiliates and not all of this information will be used in connection
with the 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 Fund and its
shareholders.
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A high rate of portfolio turnover involves a correspondingly higher amount
of brokerage commissions and other costs which must be borne directly by the
Fund and indirectly by shareholders.
During the fiscal years of other Series of the Fund ended April 30, 1993,
1994 and 1995, brokerage commissions paid by the Fund totalled $257,471,
$510,377 and $1,545,026, respectively. Of the total amounts paid in the fiscal
years ended April 30, 1993, 1994 and 1995, $98,822, $5,630 and $0, respectively
or 0.05%, 0.00% and 0.00%, respectively of Fund assets were paid to the former
principal underwriter in accordance and consistent with internal procedures
governing such affiliated transactions in accordance with regulatory
requirements.
SERVICES OF THE ADVISER
The offices of Phoenix Investment Counsel, Inc. ("PIC" or "Adviser") are
located at 56 Prospect Street, Hartford, Connecticut 06115. In addition to the
Theme Series and the Small Cap Series, PIC serves as investment adviser to
Phoenix Edge Series Fund (other than the Real Estate Series), Phoenix Series
Fund, Phoenix Multi-Portfolio Fund (other than the Real Estate Securities
Portfolio), and Phoenix Total Return Fund Inc.
PIC is an indirect wholly-owned 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, where the company manages
combined assets of approximately $13 billion through advisory accounts and
mutual funds.
The Adviser provides certain services and facilities required to carry on
the day-to-day operations of the Fund (for which they receive a management
fee) other than the costs of printing and mailing proxy materials, reports
and notices to shareholders; legal, auditing and accounting services;
regulatory filing fees and expenses of printing the 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 at printer's over-run cost); insurance expense;
association membership dues; brokerage fees; and taxes.
Each series will pay expenses incurred in its own operation and will also
pay a portion of the Fund's administration expenses allocated on the basis of
the asset values of the respective series.
The Adviser has agreed that if, in any fiscal year, the aggregate expenses
of the Fund, exclusive of taxes, 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
average net assets; 2.0% of the next $70,000,000 and 1.5% of any amount of
the average net assets in excess of $100,000,000.
The Management Agreement shall continue in effect for successive annual
periods, provided that such continuance is specifically approved annually by a
majority of the Trustees who are not interested persons of the parties thereto
(as defined in the 1940 Act) and by either (a) the Trustees of the Fund or (b)
vote of a majority of the outstanding securities of the Fund (as defined in the
1940 Act). The Management Agreement may be terminated without penalty at any
time by the Trustees or by a vote of a majority of the outstanding voting
securities of the Fund upon 60 days written notice addressed to the Adviser at
its principal place of business; and by the Adviser upon 60 days written notice
addressed to the Fund at its principal place of business. The Management
Agreement will terminate automatically 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 Series is computed at the close of the
general trading session of the New York Stock Exchange by dividing the value of
the Series securities, plus any cash and other assets (including dividends and
interest accrued but not collected) less all liabilities (including accrued
expenses), by the number of shares of the Series outstanding on each day that
the New York Stock Exchange (the "Exchange"), is open. See "Net Asset Value" in
the Prospectus.
HOW TO BUY SHARES
The Prospectus includes information as to the offering price of shares of
the Series, the sales charge, if any, included in the offering price, and the
minimum initial and subsequent investments which may be made in a Series.
Shares may be purchased from investment dealers having sales agreements
with the Distributor at the public offering price (the net asset value next
computed following receipt of a purchase application in proper form by State
Street Bank and Trust
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Company, plus the applicable sales charge). The minimum initial investment is
$500 ($25 if using the bank draft investing program designated
"Investo-Matic") and the minimum subsequent investment amount is $25. In the
case of employee payroll deduction plans, organized group plans and other
benefit programs or arrangements offered by certain dealers, the minimum
initial investment may be fixed from time to time at such lesser amounts as
the Adviser in its sole discretion may determine, and may in all cases, be
waived from time to time by the Adviser, in its sole discretion. See the
Fund's current Prospectus.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Series is authorized to offer two classes of shares. Shares may be
purchased from investment dealers at a price equal to their net asset value
per share, plus a sales charge which, at the election of the purchaser, may
be imposed either (i) at the time of the purchase (the "initial sales charge
alternative") or (ii) on a contingent deferred basis (the "deferred sales
charge alternative").
Class A Shares
An investor who 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 attributable to the Class A Shares. However, for the Series'
fiscal year ending July 31, 1996, 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. 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. See "Conversion
Feature," on page 12.
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 Series, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the
Series, 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.
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. 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 Series, 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."
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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.
Conversion Feature
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period
ending eight years after the end of the month in which the shares were
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.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service to the effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B Shares does not
result in the Fund's dividends or distributions constituting "preferential
dividends" under the Internal Revenue Code of 1986, as amended (the "Code"), and
(ii) that the conversion of shares does not constitute a taxable event under
federal income tax law. The Fund has not sought opinions of counsel as to these
matters or from the Internal Revenue Service (the "IRS"). While rulings as to
preferential dividends have been issued previously by the IRS to other Phoenix
Funds, complete assurance cannot of course be given that the Fund eventually
will request or receive such ruling. While an adverse determination by the IRS
currently is not expected, the Fund may be required to reassess (and reverse the
right to do so) its dual share structure were the IRS not to rule favorably
since that could impact on the Fund's ability to qualify as a regulated
investment company. In addition, were the IRS not to rule favorably, the Fund
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. 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 services fee for an indefinite
period which may extend beyond the period ending eight years after the end of
the month in which the shares were issued.
EXCHANGE PRIVILEGES
Subject to limitations, shareholders may exchange Class A or Class B
Shares held in book-entry form for shares of the same class of other Phoenix
Funds, provided the following conditions are met: (1) the shares that will be
acquired in the exchange (the "Acquired Shares") are available for sale in
the shareholder's state of residence; (2) the Acquired Shares are the same
class as the shares to be surrendered (the "Exchanged Shares"); (3) the
Acquired Shares will be registered to the same shareholder account as the
Exchanged Shares; (4) the account value of the Fund whose shares are to be
acquired must equal or exceed the minimum initial investment amount required
by that Fund after the exchange is implemented; and (5) if a shareholder has
elected not to utilize the Telephone Exchange Privilege (see below), a
properly executed exchange request must be received by Equity Planning. Other
restrictions affecting exchanges are described in the Prospectus of the
applicable Phoenix Fund(s).
Subject to the above requirements for an exchange, a shareholder or
his/her registered representative may, by telephone or written notice, elect
to have Class A or Class B Shares of the Fund exchanged for the same class of
shares of another Phoenix Fund automatically on a monthly, quarterly,
semi-annual or annual basis or may cancel the privilege ("Systematic
Exchange").
Shareholders who maintain an account balance in the Fund of at least $5,000,
or $2,000 for tax qualified retirement benefit plans (calculation on the basis
of the net asset value of the shares held in a single account), may direct that
shares of the Fund be automatically exchanged at predetermined intervals for
shares of the same class of another Phoenix Fund. If the shareholder is
participating in the Self Security program offered by Phoenix Home Life Mutual
Insurance Company, it is not necessary to maintain the above account balances in
order to use the Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of
a month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Fund's net asset value per share next
computed following receipt of a properly executed exchange request, without
sales charge. On Class B Share exchanges, the contingent deferred sales
charge schedule of the original shares purchased continues to apply.
12
<PAGE>
The exchange of shares from one fund to another is treated as sale of the
Exchanged Shares and a purchase of the Acquired Shares for Federal income tax
purposes. The shareholder may, therefore, realize a taxable gain or loss. See
"Dividends, Distributions and Taxes" of the Prospectus for information
concerning the Federal income tax treatment of a disposition of shares. It is
the policy of the Adviser to discourage and prevent frequent trading by
shareholders among the Fund and other Phoenix Funds in response to market
fluctuations. The Fund reserves the right to terminate or modify its exchange
privileges at any time upon giving prominent notice to shareholders at least
60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the prospectus of the fund
into which the exchange is to be made before any exchange requests are made.
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 or more. See the Prospectus for further
information.
Redemptions by Class B shareholders will be subject to the applicable
deferred sales charge, if any.
Each shareholder account in the Fund 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 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 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 reinvestment of their investment at
net asset value. See the Fund's current Prospectus for more information and
conditions attached to this privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Series is treated as a separate entity for federal income tax
purposes. The Series intends to elect to be treated as a regulated investment
company ("RIC") and qualify annually as such under certain provisions of the
Internal Revenue Code (the "Code"). Under such provisions, the Series 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 Series must, among other things, derive in
each taxable year at least 90% of its gross income from dividends, interest
and gains from the sale or other disposition of securities and 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 held for less
than three months. If in any taxable year the Series does not qualify as a
regulated investment company, all of its taxable income will be taxed to the
Fund at corporate rates.
The Code imposes a 4% nondeductible excise tax on a regulated investment
company, such as the Series, if it does not distribute to its shareholders
during the calendar year an amount equal to 98% of the Fund's net ordinary
income, with certain adjustments, for such calendar year, plus 98% of the
Series' net capital gains for the 12-month period ending on October 31 of
such calendar year. In addition, an amount equal to any undistributed
investment company taxable income or capital gain net income from the
previous calendar year must also be distributed to avoid the excise tax. The
excise tax is imposed on the amount by which the regulated investment company
does not meet the foregoing distribution requirements. If the Series has
taxable income that would be subject to the excise tax, the Series 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 Series
to shareholders of record in October, November and December of any year will
be deemed to have been received by, and will be taxable to shareholders as of
December 31 of such year, provided that the dividend is actually paid by the
Series before February 1, of the following year.
The Fund's policy is to distribute to its shareholders all or
substantially all investment company taxable income as defined in the Code
and any net realized capital gains for each year and consistent therewith to
meet the distribution requirements of Part I of subchapter M of the Code. The
Series intends to meet the other requirements of Part I of subchapter M,
including the
13
<PAGE>
requirements with respect to diversification of assets and sources of income,
so that the Series will pay no taxes on net investment income and net
realized capital gains distributed to shareholders. One of these requirements
as stated above is that less than 30% of the Series' gross income must be
derived from gains from the sale or other disposition of securities and
certain assets (including certain options) held for less than three months.
Accordingly, the Series may be restricted in certain activities, including:
(i) writing of options on securities which have been held less than three
months, (ii) writing of options which expire in less than three months, and
(iii) effecting closing purchase transactions with respect to options which
have been written less than three months prior to such transactions.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Series 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
Series are disposed of within 90 days after the date on which they were
acquired and new shares of a regulated investment company are acquired
without a sales charge or at a reduced sales charge. In that case, the gain
or loss realized on the disposition will be determined by excluding from the
tax basis of the shares disposed of all or a portion of the sales charge
incurred in acquiring those shares. This exclusion applies to the extent that
the otherwise applicable sales charge with respect to the newly acquired
shares is reduced as a result of the shareholder having incurred a sales
charge initially. The portion of the sales charge affected by this rule will
be treated as a sales charge paid for the new shares.
Distributions by the Series reduce the net asset value of the Series'
shares. Should a distribution reduce the net asset value of a share below a
shareholder's cost for the shares, such a distribution nevertheless generally
would be taxable to the shareholder as ordinary income or long-term capital
gain, even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution by a Series.
The price of shares purchased at that time may include the amount of the
forthcoming distribution, but the distribution generally would be taxable to
them.
Transactions in options on stock indices are subject to the Code rules of
section 1256. Pursuant to these rules, such options, whether sold by the
Series during a taxable year or held by the Series at the close of its
taxable year, will be treated as if sold for their market value, with 40% of
any resulting gain or loss treated as short-term and 60% long-term.
A high portfolio turnover rate may result in the realization of larger
amounts of short-term gains, which are taxable to shareholders as ordinary
income.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS Regulations, the Funds may be required to withhold 31% of
all reportable payments including any taxable dividends, capital gains
distributions or share redemption proceeds, for an account which does not
have a taxpayer identification number or social security number and certain
required certifications. The 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 Series will furnish its shareholders, within 31 days after the end of
the calendar year, with information which is required by the Internal Revenue
Service for preparing income tax returns.
Investors are urged to consult their attorney or tax adviser regarding
specific questions as to Federal, foreign, state or local taxes.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund and other Phoenix Funds may be offered in connection
with employer-sponsored 401(k) plans. PIC and its affiliates may provide
administrative services to these plans and to their participants, in addition
to the services that PIC and its affiliates provide to the Phoenix Funds, and
may 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 NATIONAL DISTRIBUTOR
Pursuant to an Underwriting Agreement with the Fund, Phoenix Equity Planning
Corporation (the "Distributor"), an indirect wholly-owned subsidiary of Phoenix
Duff & Phelps Corporation and parent of the Adviser, serves as underwriter for
the Fund. The address of the Distributor is 100 Bright Meadow Blvd., P.O. Box
2200, 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 1993, 1994 and 1995 of other Series of the Fund,
purchasers of the Fund shares paid aggregate sales charges of $64,813, $38,910
and $30,721, respectively, of which the principal Distributor for the Fund
received net commissions of $6,900, $5,120 and $9,792, respectively, for its
services, the balance being paid to dealers. The fees were used to compensate
sales and services person for sell 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.
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<PAGE>
The Underwriting Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the 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
Underwriting Agreement will terminate automatically in the event of its
assignment.
Dealers with whom the Underwriter 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.
PLANS OF DISTRIBUTION
The Fund has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of each series of the Fund (the "Class A
Plan", the "Class B Plan", and collectively the "Plans"). The Plans permit
the Fund to reimburse the Underwriter 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 Underwriter for
actual expenses of the Underwriter up to .30% 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 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 underwriting 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 Prospectuses and Statements 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, 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 specified 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.
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
15
<PAGE>
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 Fund.
The National Association of Securities Dealers (the "NASD"), recently
approved certain amendments to the NASD's mutual fund maximum sales charge
rule. The amendments would, under certain circumstances, regard distribution
fees to be asset-based sales charges subject to NASD sales load limits. An
amendment to the NASD's maximum sales charge rule may require the Trustees to
amend the Plan.
16
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and Officers of the Fund and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the
address of each executive officer and Trustee is 56 Prospect Street,
Hartford, Connecticut, 06115-0480. On November 15, 1995, the Trustees voted
to increase the number of Trustees to fourteen and to appoint Francis E.
Jeffries, Everett L. Morris and Calvin J. Pedersen to fill the vacancies
caused by the increase. The elected and appointed Trustees and executive
officers are listed below:
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
<S> <C> <C>
C. Duane Blinn (68) Trustee Partner in the law firm of Day, Berry & Howard.
Day, Berry & Howard Director/Trustee, Phoenix Funds (1980-present). Trustee,
CityPlace Phoenix Duff & Phelps Institutional Mutual Funds
Hartford, CT 06103 (1996-present). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Robert Chesek (61) Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Director/Trustee, the National Affiliated
Wethersfield, CT 06109 Investment Companies (until 1993). Vice President, Common
Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994). Trustee, Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present).
E. Virgil Conway (66) Trustee Trustee/Director, Consolidated Edison Company of New York,
9 Rittenhouse Road Inc. (1970-present), Pace University (1978-present),
Bronxville, NY 10708 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 Fund for Fannie Mae Mortgage
Securities (Advisory Director) (1989-present), Blackrock
Fund for Freddie Mac Mortgage Securities (Advisory
Director) (1990-present), Centennial Insurance Company
(1974-present), Josiah Macy, Jr., Foundation
(1975-present), and The Harlem Youth Development
Foundation. Chairman (1987-present), Metropolitan
Transportation Authority (1992-present). Chairman, Audit
Committee of the City of New York (1981-present).
Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director/Trustee, Phoenix Funds
(1993-present). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Accuhealth
(1994-present), Trism, Inc. (1994-present), Director,
Realty Foundation of New York (1972-present) and Chairman,
New York Housing Partnership Development Corp.
(1981-present). Advisory Director, Fund Directions
(1993-present). Former Director, New York Chamber of
Commerce and Industry (1974-1990).
Harry Dalzell-Payne (66) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix Duff & Phelps Institutional Mutual Funds
Apartment 29G (1996-present). Director, Farragut Mortgage Co., Inc.
New York, NY 10022 (1991-1994). Director/Trustee, the National Affiliated
Investment Companies (1983-1993). Consultant, The Levett
Group Holding, Inc. (1989-1990). Independent real estate
market consultant (1982-1990). Formerly a Major General of
the British Army.
17
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
*Francis E. Jeffries (65) Trustee Director and Chairman of the Board, Phoenix Duff & Phelps
Phoenix Duff & Phelps Corporation (1995-present). Director/Trustee, Phoenix Funds
Corporation (1995-present). Trustee, Phoenix Duff & Phelps
55 East Monroe Street Institutional Mutual Funds (1996-present), Director, Duff &
Suite 3600 Phelps Utilities Income Fund (1987-present), Duff & Phelps
Chicago, IL 60603 Utilities Tax-Free Income, Inc. (1991-present), Duff &
Phelps Utility and Corporate Bond Trust, Inc.
(1993-present) and The Empire District Electric Company
(1984-present). Director (1989-1995), Chairman of the Board
(1993-1995), President (1989-1993), and Chief Executive
Officer (1989-1995), Duff & Phelps Corporation.
Leroy Keith, Jr. (57) Trustee Chairman and Chief Executive Officer, Carson Products
Chairman and Chief Executive Company (1995-present). Director/Trustee, Phoenix Funds
Officer (1980-present). Trustee, Phoenix Duff & Phelps
Carson Products Company Institutional Mutual Funds (1996-present). Director,
64 Ross Road Equifax Corp. (1991-present), and Keystone International
Savannah, GA 31405 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.
Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993).
President, Morehouse College (1987-1994). Chairman and
Chief Executive Officer, Keith Ventures (1992-1995).
18
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
*Philip R. McLoughlin (49) Trustee and Director, Vice Chairman and Chief Executive Officer,
One American Row President Phoenix Duff & Phelps Corporation (1995-present). Director
Hartford, CT 06102 (1994-present) and Executive Vice President, Investments
(1987-present), Phoenix Home Life Mutual Insurance Company.
Director/Trustee and President, Phoenix Funds
(1989-present). President and Trustee, Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present). Director
(1983-present) and Chairman (1995-present), Phoenix
Investment Counsel, Inc. Director (1984-present) and
President (1990-present), Phoenix Equity Planning
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), Phoenix Founders, Inc. (1981-present), PXRE
Corporation (Delaware) (1985-present), World Trust Fund
(1991-present). Director/Trustee, the National Affiliated
Investment Companies (until 1993). Director (1994-present),
Chairman (1993-1995), President and Chief Executive
Officer, (1995-present), National Securities & Research
Corporation (1993-present), and Director and President,
Phoenix Securities Group, Inc. (1993-1995). Director
(1992-present) and President (1992-1994), W.S. Griffith &
Co., Inc. and Director (1992-1995) and President
(1992-1994) Townsend Financial Advisers, Inc. Director and
Vice President, PM Holdings, Inc. (1985-present).
Everett L. Morris (67) Trustee Vice President, W.H. Reaves and Company
164 Laird Road (1993-present). Director/Trustee, Phoenix Funds
Colts Neck, N.J. 07722 (1995-present). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present), and Trustee,
Duff & Phelps Mutual Funds (1994-present), Director, Duff &
Phelps Utilities Tax-Free Income, Inc. (1991-present), Duff
& Phelps Utility and Corporate Bond Trust, Inc.
(1993-present), and Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings Incorporated
(1989-1993). Senior Executive Vice President and Chief
Financial Officer, Public Service Electric and Gas Company
(1986-1992). Director, First Fidelity Bank, N.A., N.J.
(1984-1991).
19
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
James M. Oates (49) Trustee Director, Phoenix Duff & Phelps Corporation (1995-present).
Managing Director Director/Trustee, Phoenix Funds (1987-present). Trustee,
The Wydown Group Phoenix Duff & Phelps Institutional Mutual funds
50 Congress Street (1996-present). Director, Govett Worldwide Opportunity
Suite 1000 Funds, Inc. (1991-present), Blue Cross and Blue Shield of
Boston, MA 02109 New Hampshire (1994-present), Investors Financial Services
Corporaton (1995-present), and Investors Bank & Trust
Corporation (1995-present). Director/Trustee, the National
Affiliated Investment Companies (until 1993). Director and
President (1984-1994) and Chief Executive Officer
(1986-1994), Neworld Bank. Director, Savings Bank Life
Insurance Company (1988-1994). Stifel Financial Corporation
(1986-1995).
*Calvin J. Pedersen (54) Trustee Director and President, Phoenix Duff & Phelps Corporation
Phoenix Duff & Phelps (1995-present). Director/Trustee, Phoenix Funds
Corporation (1995-present). Trustee, Phoenix Duff & Phelps
55 East Monroe Street Institutional Mutual Funds (1996-present). President and
Suite 3600 Chief Executive Officer, Duff & Phelps Utilities Tax-Free
Chicago, IL 60603 Income, Inc. (1995-present), Duff & Phelps Utilities Income
Fund (1995-present), and Duff & Phelps Utility and
Corporate Bond Trust, Inc. (1995-present). Trustee,
Chairman and Chief Executive Officer, Phoenix Duff & Phelps
Mutual Funds (since inception). Director (1986-1995),
President (1993-1995) and Executive Vice President
(1992-1993), Duff & Phelps Corporation.
Philip R. Reynolds (68) Trustee Director/Trustee, Phoenix Funds (1984-present). Trustee,
43 Montclair Drive Phoenix Duff & Phelps Institutional Mutual Funds
West Hartford, CT 06107 (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. (67) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix Duff & Phelps Institutional Mutual Funds
P.O. Box 909 (1996-present). Director, Boston Edison Company
Sherborn, MA 01770 (1978-present), Phoenix Home Life Mutual Insurance Company
(1972-present), Landauer, Inc. (medical services)
(1970-present), Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), Key Energy Group (oil rig
service) (1988-1993), and Mark IV Industries (diversified
manufacturer) (1985-present). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Richard E. Segerson (50) Trustee Director/Trustee, Phoenix Funds, (1993-present). Trustee,
102 Valley Road Phoenix Duff & Phelps Institutional Mutual Funds
New Canaan, CT 06840 (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).
20
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
Lowell P. Weicker, Jr. (64) Trustee Trustee/Director, the Phoenix Funds (1995-present).
Dresing Lierman Weicker Trustee, Phoenix Duff & Phelps Institutional Mutual Funds
6931 Arlington Road (1996-present). Chairman, Dresing, Lierman, Weicker
Suite 501 (1995-present). Director, UST Inc. (1995-present) and HPSC,
Bethesda, MD 20814 Inc. (1995-present). Governor of the State of Connecticut
(1991-1995). President and Chief Executive Officer,
Research! America (1989-1990).
Martin J. Gavin (46) Executive Vice Executive Vice President--Finance and Operations, Phoenix
President Duff & Phelps Corporation (1995-present). Senior Vice
President, Investment Products, Phoenix Home Life Mutual
Insurance Company (1989-1995). Director and Executive Vice
President, Phoenix Equity Planning Corporation
(1990-present). Director (1994-present) and Executive Vice
President (1991-present), Phoenix Investment Counsel, Inc.
Director and Executive Vice President, Phoenix Securities
Group, Inc. (1993-1995) and National Securities & Research
Corporation (1993-present). Director (1993-present) and
Executive Vice President (1993-1994), W.S. Griffith & Co.,
Inc., Director (1993-1995) and Executive Vice President
(1993-1994), Townsend Financial Advisers, Inc. Executive
Vice President, Phoenix Funds (1995-present). Director and
Vice President, PM Holdings, Inc. (1994-1995). Executive
Vice President, National Affiliated Investment Companies
(until 1993).
Michael E. Haylon (38) Executive Vice Executive Vice President--Investments, Phoenix Duff &
President Phelps Corporation (1995-present). Executive Vice
President, Phoenix Funds (1993-present). Director
(1994-present) and President (1995-present), Executive Vice
President (1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director and Executive Vice
President (1994-present), Vice President (1993-1994),
National Securities & Research Corporation. Director,
Phoenix Equity Planning Corporation (1995-present). Vice
President, Phoenix Duff & Phelps Institutional Mutual
Funds. 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).
21
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
William J. Newman (56) Senior Vice Executive Vice President, Phoenix Investment Counsel, Inc.
President (1995-present). Senior Vice President, National Securities
& Research Corporation (1995-present), Phoenix Equity
Planning Corporation (1995-present), 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
Total Return Fund, Inc. (1996-present) and Phoenix
Worldwide Opportunities Fund (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), Managing Director,
Equities, McKay Shield (1988-1990).
Michael K. Arends (42) Vice President Vice President, Phoenix Investment Counsel, Inc.
(1994-present). Vice President, Phoenix Series Fund, and
National Securities & Research Corporation (1994-present).
Portfolio Manager, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various other positions with Kemper
Financial Services (1983-1994).
James M. Dolan (46) Vice President Vice President and Compliance Officer (1994-present), and
100 Bright Meadow Blvd. Assistant Secretary (1981-present), Phoenix Equity Planning
P.O. Box 2200 Corporation. Vice President, Phoenix Funds (1989-present)
Enfield, CT 06083-2200 and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Vice President (1991-present), Assistant
Clerk and Assistant Secretary (1982-present), Phoenix
Investment Counsel, Inc., Vice President and Chief
Compliance Officer (1994-present), Phoenix Realty Advisors,
Inc. and Chief Compliance Officer (1995-present), Phoenix
Realty Securities, Inc. Assistant Vice President
(1993-1994), Vice President and Compliance Officer,
Assistant Secretary, National Securities & Research
Corporation (1994-present). Vice President, the National
Affiliated Investment Companies (until 1993). Various other
positions with Phoenix Equity Planning Corporation
(1978-1994).
22
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- -------------- -----------------------------------------------------------
William R. Moyer (51) Vice President Senior Vice President and Chief Financial Officer, Phoenix
100 Bright Meadow Blvd. Duff & Phelps Corporation (1995-present). Senior Vice
P.O. Box 2200 President, Finance (1990-present), and Treasurer
Enfield, CT 06083-2200 (1994-present). Phoenix Equity Planning Corporation and
Phoenix Investment Counsel, Inc. Vice President, Phoenix
Funds (1990-present). Vice President, the National
Affiliated Investment Companies (until 1993); Senior Vice
President, Finance, Phoenix Securities Group, Inc.
(1993-1995). Senior Vice President, Finance (1993-present),
and Treasurer (1994-present) National Securities & Research
Corporation. Senior Vice President and Chief Financial
Officer (1993-1995) and Treasurer (1994-1995), W.S.
Griffith & Co., Inc. and Townsend Financial Advisers, Inc.
Vice President, Investment Products Finance, Phoenix Home
Life Mutual Insurance Company (1990-1995).
Leonard J. Saltiel (42) Vice President Senior Vice President, Phoenix Equity Planning Corporation
(1994-present). Vice President, Phoenix Funds
(1994-present), National Securities & Research Corporation
(1994-present), and Phoenix Duff & Phelps Institutional
Mutual Funds (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 (48) Secretary Vice President, Transfer Agent Operations, Phoenix Equity
101 Munson Street Planning Corporation (1993-present). Secretary, the Phoenix
Greenfield, MA 01301 Funds (1993-present). Clerk, Phoenix Total Return Fund,
Inc. (1994-present), Phoenix Investment Counsel, Inc.
(1995-present) Phoenix Duff & Phelps Institutional Mutual
Funds (1996-present). Vice President and General Manager,
Phoenix Home Life Mutual Insurance Co. (1993-1995), Vice
President, Home Life of New York Insurance Company
(1984-1992).
Nancy G. Curtiss (43) Treasurer Treasurer, Phoenix Funds (1994-present) and Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present). Vice
President, Fund Accounting, Phoenix Equity Planning
Corporation (1994-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.
For services rendered to the Fund for the fiscal period ended April 30, 1995,
the Trustees received aggregate remuneration of $25,987. 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 $36,000 and a fee of $2,000 per joint meeting of
the Boards. Each Trustee who serves on the Audit Committee receives a retainer
at the annual rate of $2,000 and 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.
23
<PAGE>
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 interested
Trustees of the Fund are compensated for their services by the Adviser and
receive no compensation from the Fund.
As of April 30, 1996, the Trustees and Advisory Board received the
following compensation:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement Benefits Estimated From Fund and
Compensation Accrued as Part Annual Benefits Fund Complex
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- -------------------------- ------------ ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
C. Duane Blinn $ $
Robert Chesek $ $
E. Virgil Conway $ $
Harry Dalzell-Payne $ $
Francis E. Jeffries $ $
Leroy Keith, Jr. $ None None $
Philip R. McLoughlin $ for any for any $
Everett L. Morris $ Trustee/Advisory Trustee/Advisory $
James M. Oates $ Board member Board member $
Calvin Pedersen $ $
Philip R. Reynolds $ $
Herbert Roth, Jr. $ $
Richard E. Segerson $ $
Lowell P. Weicker, Jr. $ $
</TABLE>
On April 30, 1996, the Trustees and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
OTHER INFORMATION
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), serves as custodian of
the Fund's assets (the "Custodian"). The Custodian, and any sub-custodians,
physically hold all securities and cash of the Fund.
Equity Planning acts as Transfer Agent for the Fund (the "Transfer
Agent"). In connection with its furnishing shareholder services as Transfer
Agent, Equity Planning receives a fee equivalent to $14.95 for each
designated shareholder account. Transfer Agent fees are also utilized to
offset costs and fees paid to subtransfer agents employed by the Transfer
Agent. State Street serves as a subtransfer agent pursuant to a Subtransfer
Agency Agreement effective as of June 1, 1994.
Report to Shareholders
The fiscal year of the Series ends on July 31st. The Fund will send
financial statements to the Series' shareholders at least semi-annually. An
annual report, containing financial statements, audited by independent
accountants, will be sent to shareholders each year, and is available without
charge upon request.
Financial Statements
The Financial Statements for the Series are incorporated herein by
reference. The financial information relating to the Fund is available by
calling Equity Planning at (800) 243-4361, or by writing to Equity Planning
at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200. A copy of the Annual Report must precede or accompany this
Statement of Additional Information.
24
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A: [Intentionally omitted]
Included in Part B: [Intentionally omitted]
(b) Exhibits:
<TABLE>
<S> <C>
1.1 Declaration of Trust of the Registrant, previously filed, and herein incorporated by
reference.
1.2 Amendment to Declaration of Trust of the Registrant creating additional classes and dual
distribution system, filed with Post-Effective Amendment No. 9 on July 19, 1994.
1.3 Amendment to Declaration of Trust of the Registrant, changing name of the Trust and
establishing additional Series of the Trust, filed with Post-Effective Amendment No. 13
on October 16, 1995.
1.4 Amendment to Declaration of Trust of the Registrant, changing the name of the Series of
the Trust filed with Post Effective Amendment No. 14 on April 15, 1996.
1.5 Amendment to Declaration of Trust establishing an additional Series of the Trust.*
2.1 By-laws of the Registrant, previously filed, and herein incorporated by reference.
3. Not Applicable.
4.1 Reference is hereby made to Article VI of Registrant's Declaration of Trust referenced in
Exhibit 1 above.
5.1 Management Agreement between Registrant and National Securities & Research Corporation
dated January 1, 1994, previously filed, and herein incorporated by reference.
5.2 Management Agreement between Registrant and Phoenix Investment Counsel, Inc. filed with
Post-Effective Amendment No. 13 on October 16, 1995.
6.1 Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation
("Equity Planning") dated May 14, 1993, previously filed, and herein incorporated by
reference.
6.2 Form of Underwriting Agreement for Class B Shares between Registrant and Equity Planning
filed with Post-Effective Amendment No. 8 on May 4, 1994.
7. None.
8. Custodian Contract between Registrant and State Street Bank and Trust Company dated
October 14, 1993, filed with Post-Effective Amendment No. 8 on May 4, 1994.
9.1 Transfer Agency and Service Agreement between Registrant and Equity Planning dated June
1, 1994, filed with Post-Effective Amendment No. 9 on July 19, 1994.
9.2 Form of Sales Agreement, filed with Post-Effective Amendment No. 9 on July 19, 1994.
10. Opinion as to legality of the shares filed with Post-Effective Amendment No. 13 on
October 16, 1995.
11. Consent of Independent Accountant. [To be filed by Amendment]
12. Not applicable.
13. None.
14. None.
15.1 Distribution Plan dated May 14, 1993, previously filed, and herein incorporated by
reference.
15.2 Form of Distribution Plan for Class B Shares filed with Post-Effective Amendment No. 8 on
May 4, 1994.
16. Schedule for computation of yield and effective yield quotations filed previously.
17. Financial Data Schedule filed with Post Effective Amendment No. 14 on April 15, 1996.
18. Rule 18f-3 Dual Distribution Plan effective November 15, 1995 filed with Post Effective
Amendment No. 14 on April 15, 1996.
19. Powers of Attorney as filed with Post Effective Amendment No. 14 on April 16, 1996.
</TABLE>
*Filed Herewith.
C-1
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant
No person is controlled by, or under common control, with the Registrant.
Item 26. Number of Holders of Securities
As of April 30, 1996, the number of record holders of each class of
securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record-holders
-------------------------------------------------------------- -----------------
<S> <C>
Shares of Beneficial Interest--Class A (Equity Opportunities) 11,856
Shares of Beneficial Interest--Class B (Equity Opportunities) 213
Shares of Beneficial Interest--Class A (Theme) 1,476
Shares of Beneficial Interest--Class B (Theme) 913
Shares of Beneficial Interest--Class A (Small Cap Growth) 6,301
Shares of Beneficial Interest--Class B (Small Cap Growth) 3,082
Shares of Beneficial Interest--Class A (MicroCap) 0
Shares of Beneficial Interest--Class B (MicroCap) 0
</TABLE>
Item 27. Indemnification
Registrant's indemnification provision is set forth in Post-Effective
Amendment No. 7 filed with the Securities and Exchange Commission on June 30,
1993, and is incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Fund" in the Prospectus and "Services of the Advisers"
and in the Statement of Additional Information which is included in this
Post-Effective Amendment.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of National Securities & Research Corporation is, or at any time during the past
two years has been engaged for his or her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name and Position with
National Securities &
Research Corporation Other Business, Profession, Vocation or Employment
<S> <C>
- ------------------------------- ----------------------------------------------------------
Martin J. Gavin Executive Vice President--Finance and Operations, Phoenix
Director and Executive Duff & Phelps Corporation. Executive Vice President and
Vice President Director, Phoenix Investment Counsel, Inc., and Phoenix
Equity Planning Corporation. Director, W.S. Griffith &
Co., Inc., Director and Vice President, PM Holdings, Inc.
Executive Vice President, Phoenix Funds. Senior Vice
President, Investment Products, Phoenix Home Life Mutual
Insurance Company.
Michael E. Haylon Executive Vice President--Investments, Phoenix Duff &
Director and Executive Phelps Corporation. Executive Vice President, Phoenix
Vice President Funds. Director and President, Phoenix Investment Counsel,
Inc. Director, Phoenix Equity Planning Corporation. Vice
President, Phoenix Duff & Phelps Institutional Mutual
Funds. Senior Vice President, Securities Investments,
Phoenix Home Life Mutual Insurance Company.
Philip R. McLoughlin Director, Vice Chairman and Chief Executive Officer,
Director, Chairman and Chief Phoenix Duff & Phelps Corporation. Director and Executive
Executive Officer Vice President, Investments, Phoenix Home Life Mutual
Insurance Company. Director and President, Phoenix Equity
Planning Corporation. Director and Chairman, Phoenix
Investment Counsel, Inc., Trustee and President, Phoenix
Duff & Phelps Institutional Mutual Funds. Director,
Phoenix Realty Group, Inc., Phoenix Realty Advisors, Inc.,
Phoenix Realty Investors, Inc., Phoenix Realty Securities,
Inc., Phoenix Founders, Inc., and World Trust Fund;
Director and Vice President, PM Holdings, Inc.
Director/Trustee/President of the Phoenix Funds;
Director, W.S. Griffith & Co., Inc.
C-2
<PAGE>
William R. Moyer Senior Vice President and Chief Financial Officer, Phoenix
Senior Vice President, Duff & Phelps Corporation. Senior Vice President, Finance,
Finance, and Treasurer and Treasurer, Phoenix Equity Planning Corporation and
Phoenix Investment Counsel, Inc. Vice President, the
Phoenix Funds and Phoenix Duff & Phelps Institutional
Mutual Funds. Senior Vice President, Chief Financial
Officer, and Treasurer, W.S. Griffith & Co., Inc. Vice
President, Investment Products Finance, Phoenix Home Life
Mutual Life Insurance Company.
William J. Newman Executive Vice President, Phoenix Investment Counsel, Inc.
Senior Vice President Senior Vice President, Phoenix Equity Planning
Corporation, Phoenix Strategic Equity Series
Fund, The Phoenix Edge Series Fund, Phoenix
Multi-Portfolio Fund, Phoenix Income and
Growth Fund, Phoenix Series Fund, Phoenix
Total Return Fund, Inc., Phoenix Worldwide
Opportunities Fund and Phoenix Duff & Phelps
Institutional Mutual Funds. Chief Investment
Strategist, Kidder, Peabody Co., Inc. Vice
President, Common Stock and Chief Investment
Strategist, Phoenix Home Life Mutual
Insurance Company.
Michael K. Arends Vice President, Phoenix Series Fund, Phoenix Strategic
Vice President Equity Series Fund, National Securities & Research
Corporation and Phoenix Investment Counsel, Inc. Various
other positions with Kemper Financial Services. Portfolio
Manager, Phoenix Home Life Mutual Insurance Company.
Curtiss O. Barrows Vice President, Phoenix Series Fund, Phoenix Multi-
Vice President Portfolio Fund, The Phoenix Edge Series Fund, and Phoenix
Investment Counsel, Inc. Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company.
James M. Dolan Vice President and Compliance Officer; Assistant
Vice President and Secretary, Phoenix Equity Planning Corporation. Vice
Compliance Officer; President, Phoenix Funds and Phoenix Duff & Phelps
Assistant Secretary Institutional Mutual Funds. Vice President, Assistant
Clerk and Assistant Secretary, Phoenix Investment Counsel,
Inc. Vice President and Chief Compliance Officer, Phoenix
Realty Advisors, Inc. and Chief Compliance Officer,
Phoenix Realty Securities, Inc. Assistant Vice President
Compliance, Phoenix Home Life Mutual Insurance Company.
Jeanne H. Dorey Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Multi-Portfolio Fund, Phoenix Investment Counsel, Inc. and
Phoenix Worldwide Opportunities Fund. Portfolio Manager,
International, Phoenix Home Life Mutual Insurance Company.
Christopher J. Kelleher Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Investment Counsel, Inc., and Phoenix
Duff & Phelps Institutional Mutual Funds. Portfolio
Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Company.
C-3
<PAGE>
Thomas S. Melvin, Jr. Vice President, Phoenix Investment Counsel, Inc., Phoenix
Vice President Multi-Portfolio Fund, and Phoenix Duff & Phelps
Institutional Mutual Funds. Portfolio Manager, Common
Stock, Phoenix Home Life Mutual Insurance Company.
Amy L. Robinson Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Series Fund, and Phoenix Investment Counsel, Inc. Managing
Director, Securities Administration, Phoenix Home Life
Mutual Insurance Company.
Leonard J. Saltiel Senior Vice President, Phoenix Equity Planning
Vice President Corporation. Vice President, Phoenix Funds and Phoenix
Duff & Phelps Institutional Mutual Funds. Vice President,
Investment Operations, Phoenix Home Life Mutual Insurance
Company.
Elizabeth R. Sadowinski Vice President, Mutual Fund Customer Service, Phoenix Home
Vice President Life Mutual Insurance Company. Vice President, Field and
Investor Services, Phoenix Equity Planning Corporation.
Dorothy J. Skaret Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Investment Counsel, Inc., Phoenix
Realty Securities, Inc. and Phoenix Duff & Phelps
Institutional Mutual Funds. Director, Public Fixed Income,
Phoenix Home Life Mutual Life Insurance Company.
James D. Wehr Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Multi-Portfolio Fund, Phoenix
Investment Counsel, Inc., Phoenix California Tax-Exempt
Bonds, Inc. and Phoenix Duff & Phelps Institutional Mutual
Funds. Managing Director, Public Fixed Income, Phoenix
Home Life Mutual Insurance Company.
Eugene A. Charon Controller, Phoenix Equity Planning Corporation and
Controller Phoenix Investment Counsel, Inc.
Thomas N. Steenburg Senior Vice President and Counsel, Phoenix Duff & Phelps
Secretary Corporation. Counsel, Phoenix Home Life Mutual Insurance
Company. Phoenix Investment Counsel, Inc. and Phoenix
Equity Planning Corporation. Assistant Secretary, The
Phoenix Funds.
</TABLE>
C-4
<PAGE>
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or
officer of Phoenix Investment Counsel, Inc. is, or at any time during the
past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name and Position with
Phoenix Investment Counsel, Inc. Business and other connections
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Martin J. Gavin Executive Vice President--Finance and Operations, Phoenix
Director and Duff & Phelps Corporation. Director and Executive Vice
Executive Vice President President, Phoenix Equity Planning Corporation, and
National Securities & Research Corporation. Director,
W.S. Griffith & Co., Inc. Director and Vice President, PM
Holdings, Inc. Executive Vice President, the Phoenix
Funds. Senior Vice President, Investment Products,
Phoenix Home Life Mutual Insurance Company.
Michael E. Haylon Executive Vice President--Investments, Phoenix Duff &
Director and Phelps Corporation. Executive Vice President, Phoenix
President Funds. Director, Phoenix Equity Planning Corporation.
Vice President, Phoenix Duff & Phelps Institutional
Mutual Funds. Director and Executive Vice President,
National Securities & Research Corporation. Senior Vice
President, Securities Investments, Phoenix Home Life
Mutual Insurance Company.
Philip R. McLoughlin Director, Vice Chairman and Chief Executive Officer,
Director and Chairman Phoenix Duff & Phelps Corporation. Executive Vice
President, Investments, and Director Phoenix Home Life
Mutual Insurance Company. Director/Trustee/President of
the Phoenix Funds. Director and President, Phoenix Equity
Planning Corporation. Director, President, and Chief
Executive Officer, National Securities & Research
Corporation. Trustee and President, Phoenix Duff & Phelps
Institutional Mutual Funds. Director, W.S. Griffith &
Co., Inc., Phoenix Founders, Inc., Phoenix Realty Group,
Inc., Phoenix Realty Advisors, Inc., Phoenix Realty
Investors, Inc. and Phoenix Realty Securities Inc., and
World Trust Fund. Director and Vice President, PM
Holdings, Inc.
William J. Newman Senior Vice President, National Securities & Research
Executive Vice President Corporation, Phoenix Equity Planning Corporation, Phoenix
Strategic Equity Series Fund, The Phoenix Edge Series
Fund, Phoenix Multi-Portfolio Fund, Phoenix Income and
Growth Fund, Phoenix Series Fund, Phoenix Total Return
Fund, Inc., Phoenix Worldwide Opportunities Fund and
Phoenix Duff & Phelps Institutional Mutual Funds. Chief
Investment Strategist, Kidder, Peabody Co., Inc. Vice
President, Common Stock and Chief Investment Strategist,
Phoenix Home Life Mutual Insurance Company.
Paul A. Atkins Vice President, Institutional Investment Sales, Phoenix
Senior Vice President Home Life Mutual Insurance Company.
C-5
<PAGE>
Name and Position with
Phoenix Investment Counsel, Inc. Business and other connections
- ----------------------------------- ---------------------------------------------------------
William R. Moyer Senior Vice President and Chief Financial Officer,
Senior Vice President, Phoenix Duff & Phelps Corporation. Senior Vice President,
Finance, and Treasurer Finance, and Treasurer, Phoenix Equity Planning
Corporation, and National Securities & Research
Corporation. Senior Vice President, Chief Financial
Officer and Treasurer, W.S. Griffith & Co., Inc. Vice
President, the Phoenix Funds. Vice President, Investment
Products Finance, Phoenix Home Life Mutual Insurance
Company.
David L. Albrycht Vice President, Phoenix Multi-Sector Short Term Bond
Vice President Fund, Phoenix Multi-Portfolio Fund and Phoenix
Multi-Sector Fixed Income Fund, Inc. Portfolio Manager,
Phoenix Home Life Mutual Insurance Company.
Michael K. Arends Vice President, Phoenix Series Fund, Phoenix Strategic
Vice President Equity Series Fund and National Securities & Research
Corporation. Portfolio Manager, Kemper Investment
Portfolio Growth Fund (until 1994). Portfolio Manager,
Phoenix Home Life Mutual Insurance Company.
Curtiss O. Barrows Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Multi-Portfolio Fund, and National
Securities & Research Corporation. Portfolio Manager,
Public Bonds, Phoenix Home LifeMutual Insurance Company.
Sandra L. Becker Managing Director, Private Placements, Phoenix Home Life
Vice President Mutual Insurance Company.
Kathleen A. Bloomquist Director and Vice President, Worldwide Phoenix Limited.
Vice President Vice President, Institutional Client Relations/Service,
Phoenix Home Life Mutual Insurance Company.
James C. Bly Regional Group Pension Manager, Phoenix Home Life Mutual
Vice President Insurance Company.
Mary E. Canning Vice President, Phoenix Series Fund and The Phoenix Edge
Vice President Series Fund. Associate Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance Company.
Paul M. Chute Managing Director, Private Placements, Phoenix Home Life
Vice President Mutual Insurance Company.
Nelson Correa Managing Director, Private Placements, Phoenix Home Life
Vice President Mutual Insurance Company.
James M. Dolan Vice President and Compliance Officer, Phoenix Equity
Vice President, Assistant Clerk Planning Corporation. Vice President, the Phoenix Funds,
and Assistant Secretary and Phoenix Duff & Phelps Institutional Mutual Funds,
Vice President and Compliance Officer, Assistant
Secretary, National Securities & Research Corporation.
Vice President and Chief Compliance Officer, Phoenix
Realty Advisors, Inc. and Chief Compliance Officer,
Phoenix Realty Securities, Inc.
C-6
<PAGE>
Name and Position with
Phoenix Investment Counsel, Inc. Business and other connections
- ----------------------------------- ---------------------------------------------------------
Jeanne H. Dorey Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Multi-Portfolio Fund, Phoenix Worldwide Opportunities
Fund and National Securities & Research Corporation.
Portfolio Manager, International, Phoenix Home Life
Mutual Insurance Company.
John M. Hamlin Vice President, Phoenix Income and Growth Fund and
Vice President Phoenix Series Fund. Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance Company.
Richard C. Harland Portfolio Manager, Phoenix Home Life Mutual Insurance
Vice President Company. Senior Institutional Portfolio Manager, Managing
Director, J&W Seligman & Co.
Christopher J. Kelleher Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Duff & Phelps Institutional Mutual
Funds, and National Securities & Research Corporation.
Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company.
Peter S. Lannigan Vice President, Phoenix Multi-Portfolio Fund. Associate
Vice President Director, Bond Rating Group, Standard & Poor's Corp.
(until 1993). Director, Public Fixed Income, Phoenix Home
Life Mutual Insurance Company.
Thomas S. Melvin, Jr. Vice President, Phoenix Multi-Portfolio Fund, and
Vice President National Securities & Research Corporation. Portfolio
Manager, Common Stock, Phoenix Home Life Mutual Insurance
Company.
C. Edwin Riley, Jr. Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Total Return Fund, Inc., and Phoenix Series Fund.
Portfolio Manager, Phoenix Home Life Mutual Insurance
Company. Director of Equity Management, NationsBanc.
Amy L. Robinson Vice President, The Phoenix Edge Series Fund, Phoenix
Vice President Series Fund and National Securities & Research
Corporation. Managing Director, Securities
Administration, Phoenix Home Life Mutual Insurance
Company.
David M. Schans, C.L.U. Vice President, Phoenix Duff & Phelps Institutional
Vice President Mutual Funds. Regional Group Pension Manager, Phoenix
Home Life Mutual Insurance Company.
Holly B. Simeon Regional Vice President, Phoenix Home Life Mutual
Vice President Insurance Company.
Dorothy J. Skaret Vice President, Phoenix Series Fund, The Phoenix Edge
Vice President Series Fund, Phoenix Duff & Phelps Institutional Mutual
Funds, National Securities & Research Corporation and
Phoenix Realty Securities, Inc. Director, Public Fixed
Income, Phoenix Home Life Mutual Insurance Company.
Rosemary T. Strekl Vice President, Private Placements, Phoenix Home Life
Vice President Mutual Insurance Company.
C-7
<PAGE>
Name and Position with
Phoenix Investment Counsel, Inc. Business and other connections
- ----------------------------------- ---------------------------------------------------------
James D. Wehr Vice President, Phoenix Multi-Portfolio Fund, Phoenix
Vice President Series Fund, The Phoenix Edge Series Fund, Phoenix
California Tax Exempt Bonds, Inc., and National
Securities & Research Corporation. Managing Director,
Public Fixed Income, Phoenix Home Life Mutual Insurance
Company.
G. Jeffrey Bohne Vice President, Transfer Agent Operations, Phoenix Equity
Clerk Planning Corporation. Secretary, the Phoenix Funds and
Phoenix Duff & Phelps Institutional Mutual Funds. Clerk,
Phoenix Total Return Fund, Inc. Vice President and
General Manager, Phoenix Home Life Mutual Insurance
Company.
Thomas N. Steenburg Secretary, Vice President and Counsel, Phoenix Duff &
Secretary Phelps Corporation. Secretary, National Securities &
Research Corporation, and Phoenix Equity Planning
Corporation.
</TABLE>
C-8
<PAGE>
The respective principal addresses of the companies or other entities
named above are as follows:
J&W Seligman & Co. }100 Park Avenue
}New York, NY 10017
Kemper Financial Services }120 South LaSalle Street
}Chicago, IL 60603
Kidder, Peabody Co. Inc. }10 Hanover Square
}New York, NY 10005
National Securities & Research }One American Row
Corporation }Hartford, CT 06115
NationsBanc }101 South Tryon Street
}Charlotte, NC 28255
Phoenix Duff & Phelps Corporation }56 Prospect Street
}Hartford, CT 06115
Phoenix Duff & Phelps Institutional }101 Munson Street
Mutual Funds }Greenfield, MA 01301
Phoenix Equity Planning Corporation }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
Phoenix Home Life Mutual Insurance }One American Row
Company }Hartford, CT 06115
Phoenix Investment Counsel, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Advisors, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Group, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Investors, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Securities, Inc. }One American Row
}Hartford, CT 06115
PM Holdings, Inc. }One American Row
}Hartford, CT 06115
The Phoenix Funds }101 Munson Street
}Greenfield, MA 01301
W. S. Griffith & Co., Inc. }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
World Trust Fund }KREDIETRUST
}Societe Anonyme
}11, rue Aldringen
}L-2690 Luxembourg
}R.C. Luxembourg B 10.750
Worldwide Phoenix Limited }41 Cedar House
}Hamilton HM 12, Bermuda
Item 29. Principal Underwriter
(a) See "Distribution Plans" and "How to Buy Shares" in the Prospectus and
"National Distributor" and "Plans of Distribution" in the Statement of
Additional Information, both of which are included in this Post-Effective
Amendment to the Registration Statement.
(b) Directors and executive officers of Phoenix Equity Planning Corporation
are as follows:
C-9
<PAGE>
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Underwriter with Registrant
- -------------------------- ------------------------------ ---------------------------
<S> <C> <C>
Martin J. Gavin Director and Executive Vice Executive Vice President
56 Prospect Street President
P.O. Box 150480
Hartford, CT 06115-0480
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
One American Row
Hartford, CT 06115
Leonard J. Saltiel Senior Vice President Vice President
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
William R. Moyer Senior Vice President, Vice President
100 Bright Meadow Blvd. Finance, and Treasurer
P.O. Box 2200
Enfield, CT 06083-2200
William J. Newman Senior Vice President Senior Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
G. Jeffrey Bohne Vice President, Secretary
101 Munson Street Transfer Agent Operations
Greenfield, MA 01301
Nancy G. Curtiss Vice President, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Maris Lambergs Vice President/National Sales None
100 Bright Meadow Blvd. Manager
P.O. Box 2200
Enfield, CT 06083-2200
James M. Dolan Vice President and Compliance Vice President
100 Bright Meadow Blvd. Officer;
P.O. Box 2200 Assistant Secretary
Enfield, CT 06083-2200
Elizabeth R. Sadowinski Vice President, Field and Assistant Secretary
100 Bright Meadow Blvd. Investor Services
Enfield, CT 06083-2200
Eugene A. Charon Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Thomas N. Steenburg Secretary Assistant Secretary
One American Row
Hartford, CT 06115
</TABLE>
C-10
<PAGE>
(c) Equity Planning received the following commissions or other compensation
from the Registrant during the fiscal year ending April 30, 1996;
<TABLE>
<CAPTION>
Name of Net Underwriting Compensation on
Principal Discounts and Redemption and Brokerage Other
Underwriter Commissions Repurchase Commissions Compensation
- ----------- ---------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Equity Planning
</TABLE>
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder include herein described
Series' investment adviser, Phoenix Investment Counsel, Inc.; Registrant's
financial agent, transfer agent and principal underwriter, Phoenix Equity
Planning Corporation; Registrant's dividend disbursing agent and custodian,
State Street Bank and Trust Company. The address of the Secretary of the Trust
is 101 Munson Street, Greenfield, Massachusetts 01301; the address of Phoenix
Investment Counsel, Inc. is 56 Prospect Street, Hartford, Connecticut 06115; the
address of Phoenix Equity Planning Corporation is 100 Bright Meadow Boulevard,
P.O. Box 2200, Enfield, Connecticut 06083-2200; the address of the dividend
disbursing agent is P.O. Box 8301, Boston, Massachusetts 02266-8301, Attention:
Phoenix Funds, and the address of the custodian is P.O. Box 351, Boston,
Massachusetts 02101.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hartford, and State of Connecticut on the 24th
day of May, 1996.
PHOENIX STRATEGIC EQUITY SERIES FUND
ATTEST: /s/ Thomas N. Steenberg By: /s/ Philip R. McLoughlin
------------------------------- -------------------------------
Thomas N. Steenberg Philip R. McLoughlin
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities indicated, on this 24th day of May, 1996.
<TABLE>
<CAPTION>
Signature Title
- ----------------------------------- ------------------------
<S> <C>
- ----------------------------------- Trustee
C. Duane Blinn*
- ----------------------------------- Trustee
Robert Chesek*
- ----------------------------------- Trustee
E. Virgil Conway*
- ----------------------------------- Treasurer (principal
Nancy G. Curtiss* financial and
accounting officer)
- ----------------------------------- Trustee
Harry Dalzell-Payne*
- ----------------------------------- Trustee
Francis E. Jeffries*
- ----------------------------------- Trustee
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin Trustee and President
---------------------------------
Philip R. McLoughlin
S-1(c)
<PAGE>
Signature Title
- ----------------------------------- ------------------------
- ----------------------------------- Trustee
Everett L. Morris*
- ----------------------------------- Trustee
James M. Oates*
- ----------------------------------- Trustee
Calvin J. Pedersen*
- ----------------------------------- Trustee
Philip R. Reynolds*
- ----------------------------------- Trustee
Herbert Roth, Jr.*
- ----------------------------------- Trustee
Richard E. Segerson*
- ----------------------------------- Trustee
Lowell P. Weicker, Jr.*
By /s/ Philip R. McLoughlin
--------------------------------
</TABLE>
*Philip R. McLoughlin pursuant to powers of attorney filed previously under
this Registration Statement.
S-2(c)
