As filed with the Securities and Exchange Commission on February 21, 1997
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. 24 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X}
Amendment No. 25
(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)
[X] on May 1, 1997 pursuant to paragraph (a)(i)
[ ] 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 was filed by
Registrant with the Commission on June 27, 1996.
=============================================================================
<PAGE>
This Registration Statement contains two prospectuses and two Statements 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
<TABLE>
<CAPTION>
Item Number Prospectus Caption
- ---------------------------------------------------- --------------------------------------------
<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 Objectives and
Policies; Investment Restrictions
14. Management of the Fund Services of the Adviser; Trustees and Officers;
Other Information
15. Control Persons and Principal Holders of
Securities Not Applicable
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 How to Buy Shares; Exchange Privileges;
of Securities Being Offered Redemption of Shares; Net Asset Value
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter The Distributor
22. Calculations of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
The following pages from Post-Effective Amendment No. 17 to the Registration
Statement on Form N-1A filed with the Securities and Exchange Commission on
August 27, 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>
PROSPECTUS
Phoenix Strategic
Equity
Series Fund
Prospectus
----------------------
May 1, 1997
----------------------
Micro Cap Fund
PHOENIX
[LOGOTYPE] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
May 1, 1997
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. 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 May 1, 1997, which has been filed with the
Securities and Exchange Commission (the "Commission") and is available upon
request at no charge by calling (800) 243-4361 or by writing to Phoenix
Equity Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200. The Statement of Additional Information is
incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity, and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board, or any other agency, and
involve investment risk, including possible loss of principal.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------------------------------------------------------
CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS/EXCHANGES: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY) (800) 243-1926
<PAGE>
TABLE OF CONTENTS
Page
---------
INTRODUCTION 3
FUND EXPENSES 4
PERFORMANCE INFORMATION 6
INVESTMENT OBJECTIVES AND POLICIES 6
INVESTMENT TECHNIQUES AND RELATED RISKS 7
INVESTMENT RESTRICTIONS 12
PORTFOLIO TURNOVER 12
MANAGEMENT OF THE FUND 13
DISTRIBUTION PLANS 13
HOW TO BUY SHARES 15
INVESTOR ACCOUNTS AND SERVICES AVAILABLE 19
NET ASSET VALUE 21
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
a diversified, open-end management investment company established 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 and management fee.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Fund's shares. See "Distribution Plans"
and the Statement of Additional Information. Equity Planning also acts as
financial agent of the Fund and as such receives a fee. See "The Financial
Agent." Equity Planning also serves as the Fund's transfer agent. See "The
Custodian and Transfer Agent."
The Fund has adopted 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").
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 a 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."
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.
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 State
Street Bank and Trust Company. 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 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 reflect a full year
of operations ending April 30, 1998.
<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 percentage 5% during the first year, decreasing 1%
of original purchase price or annually to 2% during the fourth and fifth
redemption proceeds, as years; thereafter decreasing to 0% after
applicable) None the fifth year
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees 1.25% 1.25%
Rule 12b-1 Fees
(after waiver) (a) 0.25% 1.00%
Other Expenses 0.48% 0.48%
Total Fund Operating Expenses 1.98% 2.73%
</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 April 30, 1998.
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) $67 $107
Micro Cap Series (Class B Shares) $78 $115
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) $67 $107
Micro Cap Series (Class B Shares) $28 $ 85
</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,
Lehman Brothers Corporate Index and Lehman Brothers 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. Any income derived from investments will be incidental. The Series'
investment objective is a fundamental policy and may not be changed without
the approval of the holders of a majority of the outstanding shares
6
<PAGE>
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 stocks of all types 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
securities of foreign issuers.
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 does not intend to concentrate investments in any specific
industry. The Adviser may invest also 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 net 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 May 1, 1997 based on initial
capitalization of $5 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.
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
7
<PAGE>
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 of
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, any asset, including equity securities and non- investment grade
debt so long as the asset is liquid, unencumbered and marked to market daily,
with a value sufficient to meet its obligations under the call, or (3) if the
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
total 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 the issuer of the
underlying security, rather than an option writer, and they generally have
longer expiration dates than call options.
Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They
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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 assets committed with
respect to the Series' existing futures and related options positions and the
premiums paid for related options would exceed 5% of the Series' total
assets. At the time of purchase of a futures contract or a call option on a
futures contract, any asset, including equity securities and non-investment
grade debt so long as the asset is liquid, unencumbered and marked to market
daily equal to the market value of the futures contract minus the 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 potentially unlimited. Also, there may be
circumstances when the purchase of an option 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,
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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 value of its total 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.
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 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
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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 assets 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, differences and inefficiencies in transaction settlement
systems, 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. Exchange rates are determined by forces of supply
and demand in the foreign exchange markets, and these forces are in turn
affected by a range of economic, political, financial, governmental and other
factors. Exchange rate fluctuations can affect the Fund's net asset value and
dividends either positively or negatively depending upon whether foreign
currencies are appreciating or depreciating in value relative to the U.S.
dollar. Exchange rates fluctuate over both the short and long term.
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 25% of the total assets (including any
borrowings) of the Series. However, the amount of the borrowings will be
dependent upon the availability and cost of credit from time
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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 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.
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. 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
Series which may not be changed without the approval of the Series'
shareholders. The Series has adopted fundamental policies with regard to the
issuance of senior securities, short sales, the borrowing of money, the
underwriting of securities of other issuers, concentration of investments in
particular industries, the purchase and sale of real estate, commodities and
futures contracts, and the making of loans.
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 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.
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MANAGEMENT OF THE FUND
The Fund is a mutual fund 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 Equity Series Fund (other than Equity Opportunities
Fund), Phoenix Series Fund, Phoenix Multi-Portfolio Fund (other than the Real
Estate Securities Portfolio), Phoenix Strategic Allocation Fund, Inc., The
Phoenix Edge Series Fund (other than the Real Estate Securities Series and
the Aberdeen New Asia Series) and Phoenix Duff & Phelps Institutional Mutual
Funds (other than Enhanced Reserves Portfolio) 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, 1996, PIC had
approximately $18.2 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 annual rate of 1.25% of the
aggregate net asset values of the Series.
The total advisory fee of 1.25% 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.
The Portfolio Manager
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 and Chief Investment Strategist of PIC and National Securities
& Research Corporation. He is Senior Vice President of The Phoenix Edge
Series Fund, Phoenix Multi-Portfolio Fund, Phoenix Income and Growth Fund,
Phoenix Series Fund, Phoenix Strategic Allocation 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. As
compensation, Equity Planning is entitled to a fee, payable monthly and based
upon (a) the average of the aggregate daily net asset values of the Series,
at the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million to $500 million .03%
Greater than $500 million .015%
(b) a minimum fee of $50,000; and (c) an annual fee of $12,000 together with
an additional $12,000 for any additional class of shares created in the
future.
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 certain 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 Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Fund.
DISTRIBUTION PLANS
The offices of Equity Planning, the national distributor of the Fund's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of
the Fund and a director and officer of Equity Planning. David R. Pepin, a
director and officer of Equity Planning, is an officer of the Fund. Michael
E. Haylon, a director of Equity Planning, is an officer of the Fund. G.
Jeffrey Bohne, Nancy G. Curtiss, William E. Keen III, William R. Moyer,
William J. Newman, Leonard J. Saltiel and Thomas N. Steenburg are officers of
the Fund and officers of Equity Planning.
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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 agent,
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 April
30, 1998 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 fee, 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.
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
bulking of purchases or sales, or transmission of such purchases or sales by
computerized tape or other electronic equipment; or other batch processing.
For the fiscal year ended April 30, 1996, the Fund paid $571,764 under the
Class A Plan and $98,689 under the Class B Plan. The fees were used to
compensate unaffiliated broker- dealers for servicing shareholder's accounts,
compensating sales personnel and reimbursing the Distributor for commission
expenses and expenses related to preparation of the marketing material.
On a quarterly basis, the 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
14
<PAGE>
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 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. All shares will be held in book entry form.
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. 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 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 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
15
<PAGE>
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 of $50,000
or more as shown below.
<TABLE>
<CAPTION>
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*
- ------------------------ ----------------- ----------------- ---------------------
<S> <C> <C> <C>
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**
</TABLE>
- --------------------
*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:
<TABLE>
<CAPTION>
Purchase Amount Payment to Broker/Dealer
--------------- ------------------------
<S> <C>
$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%
</TABLE>
If part or all of such investment, including investments by qualified
employee benefit plans, is subsequently redeemed within one year of the
investment date, the broker-dealer will refund to the Distributor such
amounts paid with respect to the investment.
How to Obtain Reduced Sales Charges On Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares to:
(1) any Phoenix Fund trustee, director or officer; (2) any director or
officer, or any full-time employee or sales representative (who has acted as
such for at least 90 days) of the Adviser or 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
16
<PAGE>
accounts held by such entity equal or exceed $1,000,000; (15) any person who
is investing redemption proceeds from investment companies other than the
Phoenix Funds if, in connection with the purchases or redemption of the
redeemed shares, the investor paid a prior sales charge provided such
investor supplies verification that the redemption occurred within 90 days of
the Phoenix Fund purchase and that a sales charge was paid; or (16) any
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.
In addition, Class A shares purchased by the following investors are not
subject to any Class A sales charge: (1) investment advisors and financial
planners who charge an advisory, consulting or other fee for their services
and buy shares for their own accounts or the accounts of their clients, and
(2) retirement plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi
trusts" that buy shares for their own accounts, in each case if those
purchases are made through a broker or agent or other financial intermediary
that has made special arrangements with the Distributor for those purchases;
(3) clients of such investment advisors or financial planners who buy shares
for their own accounts may also purchase shares without sales charge but only
if their accounts are linked to a master account of their investment advisor
or financial planner on the books and records of the broker, agent or
financial intermediary with which the Distributor has made such special
arrangements (each of these investors may be charged a fee by the broker,
agent or financial intermediary for purchasing shares).
Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are not subject to any sales charges. The Fund
receives the entire net asset value of its Class A Shares sold to investors.
The Distributor's commission is the sales charge shown above less any
applicable discount or commission "re-allowed" to selected dealers and
agents. The Distributor will re-allow discounts to selected dealers and
agents in the amounts indicated in the table above. In this regard, the
Distributor may elect to re-allow the entire sales charge to selected
dealers and agents for all sales with respect to which orders are placed with
the Distributor. A selected dealer who receives re-allowance in excess of 90%
of such a sales charge may be deemed to be an "underwriter" under the
Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Fund or shares of any other Phoenix Fund
(including Class B Shares and excluding Money Market 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 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
17
<PAGE>
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 salescharge 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. 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
18
<PAGE>
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 from 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) are converted to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also be
converted to Class A Shares.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel or a ruling from the
Internal Revenue Service ("IRS") to the effect: (i) that the conversion of
shares does not constitute a taxable event under federal income tax law; and
(ii) the assessment of higher distribution fees and transfer agency costs
with respect to Class B Shares does not result in dividends or distributions
constituting "preferential dividends" under the Code. 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 conversion of Class B Shares
would occur, and shares might continue to be subject to the higher
distribution fee for an indefinite period which may extend beyond the period
ending eight (8) years after the end of the month in which affected Class B
Shares were purchased. If the Fund were unable to obtain such assurances with
respect to the assessment of distribution fees and transfer agent costs
relative to the Class B Shares it might make additional distributions if
doing so would assist in complying with the Fund's general practice of
distributing sufficient income to reduce or eliminate U.S. federal taxes.
INVESTOR 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 in book entry form by the Transfer Agent which will forward a
statement each time there is a change in the number of shares in the 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 to be 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
19
<PAGE>
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. See
"Redemption of Small Accounts."
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 on all shares redeemed. Accordingly, the purchase of Class B
Shares will generally not be suitable for an investor who anticipates
withdrawing sums in excess of the above limits shortly after purchase.
Tax-Sheltered Retirement Plans
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Write or call
Equity Planning at (800) 243-4361 for further information about the plans.
Exchange Privileges
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 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
20
<PAGE>
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.
Because excessive trading can hurt Fund performance and harm shareholders,
the Fund reserves the right to temporarily or permanently terminate exchange
privileges or reject any specific order for any dealer, shareholder or person
whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain dealers and investment
advisors permitting them to exchange their clients' shares by telephone.
These privileges are limited under those agreements and the Distributor has
the right to reject or suspend those privileges. 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 held in book
entry form may be exchanged by calling (800) 243-1574 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, 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.
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 each 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. The net asset value per share of a
Series is determined by adding the values of all securities and other assets
of the Series, subtracting liabilities, and dividing by the total number of
outstanding shares of the Series. 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.
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<PAGE>
The Series' investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by
the Trustees or their delegates. Foreign and domestic debt securities (other
than short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Short term
investments having a remaining maturity of less than sixty-one days are
valued at amortized cost, which the Trustees have determined approximates
market. For further information about security valuations, see the Statement
of Additional Information.
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 be in proper
form to redeem shares, the signature of the shareholder(s) 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).
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, each Series maintains a
continuous offer to repurchase its shares, and shareholders may normally sell
their shares through securities dealers, brokers, or agents, who may charge
customary commissions or fees 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 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 held in book entry form 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 orders received and accepted by the Transfer Agent on
any day when the Transfer Agent is open for business will be entered at the
next calculated net asset value. However, telephone redemption orders
received and accepted by the Transfer Agent after the close of trading hours
on the Exchange will be executed on the following business day. 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
22
<PAGE>
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 Transfer
Agent within 180 days of the redemption, accompanied by payment for the
shares (not in excess of the redemption value). Class B shareholders who have
had the contingent deferred sales charge waived through participation in the
Systematic Withdrawal Program are not eligible to use the reinstatement
privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any
shareholder whose account has a value, due to redemptions, of less than $200.
Before the Fund redeems these shares, the shareholder will be given notice
that the value of the shares in the account is less than the minimum amount
and will be allowed 30 days to make an additional investment in an amount
which will increase the value of the account to at least $200.
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 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.
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<PAGE>
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 four 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 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.
24
<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>
<S> <C>
Account Type Give Social Security Number or Tax Identification Number of:
- ------------ ------------------------------------------------------------
Individual Individual
Joint (or Joint Tenant) Owner who will be paying tax
Uniform Gifts to Minors Minor
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business (also provide owner's name)
Trust, Estate, Pension Plan Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
Trust
Corporation, Partnership, Corporation, Partnership, Other Organization
Other Organization
Broker/Nominee Broker/Nominee
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the
application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
o A corporation
o Financial institution
o Section 501(a) exempt organization (IRA, Corporate
Retirement Plan, 403(b), Keogh)
o United States or any agency or instrumentality thereof
o A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof
o International organization or any agency or instrumentality thereof
o Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
o Real estate investment trust
o Common trust fund operated by a bank under section 584(a)
o An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
o Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to
reasonable cause and not willful neglect. If you fail to report
interest, dividend or patronage dividend income on your federal
income tax return, you will be treated as negligent and subject to an
IRS 5% penalty tax on any resulting underpayment of tax unless there
is clear and convincing evidence to the contrary. If you falsify
information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to a
backup withholding, you may be subject to an IRS $500 penalty and
certain criminal penalties including fines and imprisonment.
-----------------
This Prospectus sets forth concisely the information about the Phoenix
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 May 1, 1997. The Statement contains more detailed information about the
Fund and is incorporated into this Prospectus by reference. You may obtain a
free copy of the Statement by writing the Fund c/o Phoenix Equity Planning
Corporation, 100 Bright Meadow, P.O. Box 2200, Enfield, Connecticut
06083-2200 or by calling (800) 243-4361.
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Phoenix Strategic Equity Series Fund | Bulk Rate Mail |
P.O. Box 2200 | U.S. Postage |
Enfield, CT 06083-2200 | PAID |
| Springfield, MA |
| Permit No. 444 |
[LOGOTYPE] PHOENIX
DUFF & PHELPS
PDP 690 (5/97)
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street
Greenfield, MA 01301
Statement of Additional Information
May 1, 1997
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 May 1, 1997 (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 (6) 1
INVESTMENT RESTRICTIONS (12) 1
PERFORMANCE INFORMATION (6) 8
PORTFOLIO TRANSACTIONS AND BROKERAGE 9
SERVICES OF THE ADVISER (13) 10
NET ASSET VALUE (21) 10
HOW TO BUY SHARES (15) 11
ALTERNATIVE PURCHASE ARRANGEMENTS (15) 11
EXCHANGE PRIVILEGES (20) 12
REDEMPTION OF SHARES (22) 13
DIVIDENDS, DISTRIBUTIONS AND TAXES (23) 13
TAX SHELTERED RETIREMENT PLANS (20) 14
THE DISTRIBUTOR (13) 14
PLANS OF DISTRIBUTION (13) 15
TRUSTEES AND OFFICERS 16
OTHER INFORMATION 23
Numbers appearing in parentheses correspond to
related disclosures in the Fund's Prospectus.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders/Exchanges: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PDP690B (5/97)
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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 presently comprises 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 only to the
Phoenix Micro Cap Fund.
INVESTMENT OBJECTIVES AND POLICIES
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 which may be changed only upon approval by the holders of a majority
of the outstanding shares of the Series' shareholders. The Fund may not:
(1) issue senior securities, as such term is defined in the Investment
Company Act of 1940, as amended, except as otherwise permitted under these
fundamental investment restrictions;
(2) make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions; provided, however, the deposit or payment of an initial or
maintenance margin in connection with financial futures contracts or related
options transactions is not considered the purchase of a security on margin;
(3) borrow money in excess of 25% of the value of its total assets, or
pledge its assets to an extent greater than 25% of the value of its total
assets. Any such borrowings shall be from banks and shall be undertaken only
as a temporary measure or for extraordinary or emergency purposes. Deposits
in escrow in connection with the writing of covered call options or in
connection with the purchase or sale of financial futures contracts and
related options shall not be deemed to be a pledge or other encumbrance;
(4) engage in the business of underwriting the securities of others;
(5) concentrate its investment in the securities of issuers all of which
conduct their principal business activities in the same industry provided
that this restriction shall not apply to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities;
(6) make any investment in real estate, real estate mortgage loans and/or
commodities, except that the Fund may (a) purchase or sell readily
marketable securities which are secured by interests in real estate, or
issued by companies which deal in real estate including real estate
investment and mortgage investment trusts, and (b) engage in financial
futures contracts and related options transactions, provided that the sum of
the initial margin deposits on the Fund's futures and related options
positions and the premiums paid for related options do not exceed 5% of the
value of the Fund's total assets; and
(7) make loans, except that the Fund may (a) invest up to 15% of its total
assets in repurchase agreements of a type regarded as "liquid" which are
fully collateralized as to principal and interest which are entered into
only with commercial banks, brokers and dealers considered by the Fund to be
creditworthy and (b) loan its portfolio securities in amounts up to
one-third of the value of its total assets.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the values or costs of the Fund's
assets will not be considered violate of the restriction.
Investment Techniques
The Fund may utilize the following practices or techniques in pursuing its
investment objectives.
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
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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.
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 any asset, including equity securities
and non-investment grade debt so long as the asset is liquid, unencumbered
and marked to market daily, equal in value to the difference. In addition,
when the Series writes a call on an index which is
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"in-the-money" at the time the call is written, the Series will segregate
with its custodian bank any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, 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.
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
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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 any asset, including
equity securities and non-investment grade debt so long as the asset is
liquid, unencumbered and marked to market daily. This amount is known as
initial margin and is in the nature of a performance bond or good faith
deposit on the contract. The current initial margin deposit required per
contract is approximately 5% of the contract amount. Brokers may establish
deposit requirements higher than this minimum. Subsequent payments, called
variation margin, will be made to and from the account on a daily basis as
the price of the futures contract fluctuates. This process is known as
marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts.
Upon exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on
the futures contract.
Although financial futures contracts by their terms call for actual delivery
or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking of delivery. Closing
out is accomplished by effecting an offsetting transaction. A futures
contract sale is closed out by effecting a futures contract purchase for the
same aggregate amount of securities and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller immediately would be
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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 Series'
total assets. At the time of purchase of a futures contract or a call option
on a futures contract, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, equal to the market value of the futures contract
minus the 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 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.
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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 25% of the total
assets (including any borrowings) of the Series. 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 assets
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 value
of the Series' total assets. Loans of portfolio securities will always be
fully collateralized by any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, 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
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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 any asset, including
equity securities and non-investment grade debt so long as the asset is
liquid, unencumbered and marked to market daily, 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 any asset, including equity securities and non-investment grade debt
so long as the asset is liquid, unencumbered and marked to market daily,
equal to the 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) assets, including equity
securities and non-investment grade debt so long as the asset is liquid,
unencumbered and marked to market daily 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 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.
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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. Performance information
in advertisements and sales literature may be expressed as yield of a class
or Series and as total return of any Class or Series.
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, 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,
Lehman Brothers Corporate Index and Lehman Brothers 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 changing market and economic conditions. From time to
time the Fund may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital
gains components; or cite separately as a return figure the equity or bond
portion of the Fund's portfolio; or compare the Fund's equity or bond return
figures 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.
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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 cumulative 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.
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.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to
lower commission costs on a per-share and per-dollar basis. According to the
bunching procedures, the Adviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is consistent with its
duty
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<PAGE>
to seek best execution (which shall include the duty to seek best price) for
the Fund. No advisory account of the Adivser is to be favored over any other
account and each account that participates in an aggregated order is expected
to participate at the average share price for all transactions of the Adviser
in that security on a given business day, with all transaction costs shared
pro rata based on the Fund's participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
Adviser's accounts in accordance with the allocation order, and if the order
is partially filled, it shall be allocated pro rata based on the allocation
order. Notwithstanding the foregoing, the order may be allocated on a basis
different from that specified in the allocation order if all accounts of the
Adviser whose orders are allocated receive fair and equitable treatment and
the reason for such different allocation is explained in writing and is
approved in writing by the Adviser's compliance officer as soon as
practicable after the opening of the markets on the trading day following the
day on which the order is executed. If an aggregated order is partially
filled and allocated on a basis different from that specified in the
allocation order, no account that is benefited by such different allocation
may intentionally and knowingly effect any purchase or sale for a reasonable
period following the execution of the aggregated order that would result in
it receiving or selling more shares than the amount of shares it would have
received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall
appear appropriate.
During the fiscal years of other Series of the Fund ended April 30, 1994,
1995 and 1996 brokerage commissions paid by the Fund totalled $510,377,
$1,545,026 and $1,208,440, respectively. Of the total amounts paid in the
fiscal years ended April 30, 1994, 1995 and 1996, $5,630, $0 and $0,
respectively or 0.00%, 0.00% and 0.00% respectively of Fund assets were paid
to the former principal distributor 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 Series, PIC serves as investment adviser to Phoenix Strategic Equity
Series Fund (other than Equity Opportunities Fund), The Phoenix Edge Series
Fund (other than the Real Estate Securities Series and the Aberdeen New Asia
Series), Phoenix Series Fund, Phoenix Multi-Portfolio Fund (other than the
Real Estate Securities Portfolio), Phoenix Strategic Allocation Fund, Inc.,
and Phoenix Duff & Phelps Institutional Mutual Funds (other than Enhanced
Reserves Portfolio).
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); insurance expense; association membership dues;
brokerage fees; and taxes.
The 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 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 each 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. The Exchange will be closed on the
following observed national holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Since the Fund does not price securities on weekends or United
States national holidays, the net asset value of a Series' foreign assets may
be significantly affected on days when the investor has no access to the
Fund. The net asset value per share of a Series is determined by adding the
values of all securities and other assets of the Series, subtracting
liabilities, and dividing by the total number of outstanding shares of the
Series. Assets and liabilities are determined in accordance with generally
accepted accounting principles and applicable rules and regulations of the
Securities and Exchange Commission.
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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.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world,
the calculation of net asset value may not take place for any Series which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of such 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
ask quotations of such currencies against United States dollars as last
quoted by any recognized dealer. If an event were to occur after the value of
an investment was so established but before the net asset value per share was
determined, which was likely to materially change the net asset value, then
the instrument would be valued using fair value considerations by the
Trustees or their delegates. If at any time a Series has investments where
market quotations are not readily available, such investments are valued at
the fair value thereof as determined in good faith by the Trustees although
the actual calculations may be made by persons acting pursuant to the
direction of the Trustees.
HOW TO BUY SHARES
The 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 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.
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 services fee at an
annual rate of up to .30% of the Fund's aggregate average daily net assets
attributable to the Class A Shares. However, for the Series' fiscal year
ending November 30, 1997, 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 for additional information.
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.
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Class A Shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends, to the extent any
dividends are paid, per share. However, because initial sales charges are
deducted at the time of purchase, such investors would not have all their
funds invested initially and, therefore, would initially own fewer shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class A Shares because the accumulated continuing distribution
charges on Class B Shares may exceed the initial sales charge on Class A
Shares during the life of the investment. 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 fees such as higher distribution services fee and any
incremental transfer agency costs relating to Class B Shares will be borne
exclusively by that class. See "Dividends, Distributions and Taxes."
The Trustees of the Fund have determined that currently no conflict of
interest exists between the Class A and Class B Shares. On an ongoing basis,
the Trustees of the Fund, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict arises.
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.
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.
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.
12
<PAGE>
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.
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 Series' current 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 Series'
current Prospectus for more information.
Telephone Redemptions
Shareholders may redeem up to $50,000 worth of their shares by telephone.
See the Series' 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 Series' 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.
13
<PAGE>
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 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 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
distributor 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 1994, 1995
and 1996 of other series of the Fund, purchasers of the Fund shares paid
aggregate sales charges of $38,910, $30,721 and $1,825,565, respectively, of
which the principal Distributor for the Fund received net commissions of
$5,120, $9,792 and $206,540, respectively, for its services, the balance
being
14
<PAGE>
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.
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 Distributor has entered into sales agreements receive
sales charges in accordance with the commission table set forth in the
Prospectus. The Distributor may from time to time pay, from its own resources
or pursuant to the Plan of Distribution described below, a bonus or other
incentive to dealers (other than the Distributor) which employ a registered
representative who sells a minimum dollar amount of the shares of the Fund
during a specific period of time. Such bonus or other incentive may take the
form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and
members of their families to places within or without the United States or
other bonuses such as gift certificates or the cash equivalent of such
bonuses. The Distributor may, from time to time, reallow the entire portion
of the sales charge which it normally retains to individual selling dealers.
However, such additional reallowance generally will be made only when the
selling dealer commits to substantial marketing support such as internal
wholesaling through dedicated personnel, internal communications and mass
mailings.
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 Distributor for expenses incurred in connection
with activities intended to promote the sale of shares of each class of
shares of the Fund.
Pursuant to the Class A Plan, the Fund may reimburse the Distributor for
actual expenses of the Distributor up to .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.
For the fiscal year ended April 30, 1996, the Fund paid Rule 12b-1 Fees in
the amount of $670,453, of which the principal distributor received $337,972
and unaffiliated broker-dealers received $332,481. Of this amount: (1)
$585,802 represented compensation to dealers; (2) $67,164 represented
compensation to sales and shareholder services personnel and (3) $17,487 was
utilized for compensation for promotion and marketing material.
15
<PAGE>
On a quarterly basis, the Fund's Trustees review a report on expenditures
under the Plans and the purposes for which expenditures were made. The
Trustees conduct an additional, more extensive review annually in determining
whether the Plans will be continued. By its terms, continuation of the Plans
from year to year is contingent on annual approval by a majority of the
Fund's Trustees and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements
(the "Plan Trustees"). The Plans provide that they may not be amended to
increase materially the costs which the Fund may bear pursuant to the Plans
without approval of the shareholders of the Fund and that other material
amendments to the Plans must be approved by a majority of the Plan Trustees
by vote cast in person at a meeting called for the purpose of considering
such amendments. The Plans further provides that while it is in effect, the
selection and nomination of Trustees who are not "interested persons" shall
be committed to the discretion of the Trustees who are not "interested
persons". The Plans may be terminated at any time by vote of a majority of
the Plan Trustees or a majority of the outstanding shares of the 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.
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.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
<S> <C> <C>
C. Duane Blinn (69) Trustee Partner in the law firm of Day, Berry & Howard. Director/
Day, Berry & Howard Trustee, Phoenix Funds (1980-present). Trustee, Phoenix
CityPlace Duff & Phelps Institutional Mutual Funds and
Hartford, CT 06103 Phoenix-Aberdeen Series Fund (1996-present).
Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Robert Chesek (62) Trustee Trustee/Director, Phoenix Funds (1981-present) and
49 Old Post Road Chairman (1989-1994). Trustee, Phoenix Duff & Phelps
Wethersfield, CT 06109 Institutional Mutual Funds and Phoenix-Aberdeen Series
Fund (1996- present). Director/Trustee, the National
Affiliated Investment Companies (until 1993). Vice
President, Common Stock, Phoenix Home Life Mutual Insurance
Company (1980-1994).
16
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
E. Virgil Conway (67) Trustee Chairman, Metropolitan Transportation Authority (1992-
9 Rittenhouse Road present). Trustee/Director, Consolidated Edison Company
Bronxville, NY 10708 of New York, Inc. (1970-present), Pace University (1978-
present), Atlantic Mutual Insurance Company
(1974-present), HRE Properties (1989-present), Greater
New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock 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
(1987-present). Chairman, Audit Committee of the City of
New York (1981-1996). Director/ Trustee, the National
Affiliated Investment Companies (until 1993).
Director/Trustee, Phoenix Funds (1993-present). Trustee,
Phoenix Duff & Phelps Institutional Mutual Funds and
Phoenix-Aberdeen Series Fund (1996-present). Director,
Duff & Phelps Utilities Tax-Free Income Inc. and Duff &
Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director, Accuhealth (1994-present),
Trism, Inc. (1994- present), Realty Foundation of New York
(1972-present), Chairman, New York Housing Partnership
Development Corp. (1981-present), and Blackrock Fannie
Mae Mortgage Securities Fund (Advisory Director)
(1989-1996) and Advisory Director, Fund Directions
(1993-present). Chairman, Financial Accounting Standards
Advisory Council (1992-1995).
Harry Dalzell-Payne (67) Trustee Director/Trustee, Phoenix Funds (1983-present). Director,
330 East 39th Street Duff & Phelps Utilities Tax-Free Income Inc.
Apartment 29G (1995-present), Duff & Phelps Utility and Corporate Bond
New York, NY 10016 Trust Inc. (1995-present). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds and Phoenix- Aberdeen Series
Fund (1996-present). Director, Farragut Mortgage Co., Inc.
(1991-1994). Director/Trustee, the National Affiliated
Investment Companies (1983-1993). Formerly a Major General
of the British Army.
*Francis E. Jeffries (66) Trustee Director and Chairman of the Board, Phoenix Duff & Phelps
6585 Nicholas Blvd. Corporation (1995-present). Director/Trustee, Phoenix
Apt. 1601 Funds (1995-present). Trustee, Phoenix Duff & Phelps
Naples, FL 33963 Institutional Mutual Funds and Phoenix-Aberdeen Series
Fund (1996- present). Director, Duff & Phelps Utilities
Income Fund (1987-present), Duff & Phelps 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.
17
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
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 Product Company Institutional Mutual Funds and Phoenix-Aberdeen Series
64 Ross Road Fund (1996- present). Director, Equifax Corp.
Savannah, GA 30750 (1991-present) and Keystone International Fund, Inc.
(1989-present). Trustee, Keystone Liquid Trust, Keystone
Tax Exempt Trust, Keystone Tax Free Fund, Master Reserves
Tax Free Trust, and Master Reserves Trust.
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 (1992-1994).
*Philip R. McLoughlin (50) 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,
(1988-present) Phoenix Home Life Mutual Insurance Company.
Director/Trustee and President, Phoenix Funds
(1989-present). Trustee, Phoenix Duff & Phelps
Institutional Mutual Funds and Phoenix-Aberdeen Series
Fund (1996-present), Duff & Phelps Utilities Tax-Free
Income Inc. (1995-present) and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present). Director,
(1983-present) and Chairman (1995-present) Phoenix
Investment Counsel, Inc. Director (1984-present) and
President (1990-present), Phoenix Equity Planning
Corporation. Director, Phoenix Realty Group, Inc.
(1994-present), Phoenix Realty Advisors, Inc.
(1987-present), Phoenix Realty Investors, Inc.
(1994-present), Phoenix Realty Securities, Inc.
(1994-present), PXRE Corporation (Delaware)
(1985-present), and World Trust Fund (1991-present).
Director and Executive Vice President, Phoenix Life and
Annuity Company (1996-present), Director and Executive
Vice President, PHL Variable Insurance Company
(1995-present), and Director, Phoenix Charter Oak Trust
Company (1996-present). Director/Trustee, the National
Affiliated Investment Companies (until 1993). Director
(1994-present), Chairman (1996-present) and Chief
Executive Officer (1995-1996), National Securities &
Research Corporation and Director and President, Phoenix
Securities Group, Inc. (1993-1996). Director
(1992-present) and President (1992-1994), W.S. Griffith
& Co., Inc. (1992-1995) and Director (1992-present) and
President (1992-1994), Townsend Financial Advisers, Inc.
Director and Vice President, PM Holdings, Inc.
(1985-present).
18
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
Everett L. Morris (68) Trustee Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee,
Colts Neck, NJ 07722 Duff & Phelps Mutual Funds (1994-present). Trustee, Phoenix
Duff & Phelps Institutional Mutual Funds and
Phoenix-Aberdeen Series Fund (1996-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).
*James M. Oates (50) Trustee Managing Director, Wydown Group (1994-present). Chairman,
Managing Director IBEX Capital Markets LLC (1997-present). Director, Phoenix
The Wydown Group Duff & Phelps Corporation (1995-present).
IBEX Capital Markets LLC Director/Trustee, Phoenix Funds (1987-present). Trustee,
60 State Street Phoenix Duff & Phelps Institutional Mutual Funds and
Suite 950 Phoenix-Aberdeen Series Fund (1996-present). Director,
Boston, MA 02109 Govett Worldwide Opportunity Funds, Inc. (1991-present),
Blue Cross and Blue Shield of New Hampshire (1994-present),
Investors Financial Service Corporation (1995-present),
Investors Bank & Trust Corporation (1995-present) and
Plymouth Rubber Co. (1995- present). Director, Stifel
Financial (1996-present). Member, Chief Executives
Organization (1996-present). Director/ Trustee, the
National Affiliated Investment Companies (until 1993).
Director and President (1984-1994) and Chief Executive
Officer (1986-1994), Neworld Bank.
*Calvin J. Pedersen (54) Trustee Director and President, Phoenix Duff & Phelps Corporation
Phoenix Duff & Phelps (1995-present). Director/Trustee, Phoenix Funds (1995-
Corporation present). Trustee, Phoenix Duff & Phelps Institutional
55 East Monroe Street Mutual Funds and Phoenix-Aberdeen Series Fund
Suite 3600 (1996-present). President and Chief Executive Officer,
Chicago, IL 60603 Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present), Duff & Phelps Utilities Income Fund (since
inception), and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-present). Director (1986- 1995), President
(1993-1995) and Executive Vice President (1992-1993), Duff
& Phelps Corporation.
Philip R. Reynolds (69) Trustee Director/Trustee, Phoenix Funds (1984-present). Trustee,
43 Montclair Drive Phoenix Duff & Phelps Institutional Mutual Funds and
West Hartford, CT 06107 Phoenix-Aberdeen Series Fund (1996-present). Director,
Vestaur Securities, Inc. (1972-present). Trustee and
Treasurer, J. Walton Bissell Foundation, Inc.
(1988-present). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Herbert Roth, Jr. (68) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix Duff & Phelps Institutional Mutual Funds and
P.O. Box 909 Phoenix-Aberdeen Series Fund (1996-present). Director,
Sherborn, MA 01770 Boston Edison Company (1978-present), Phoenix Home Life
Mutual Insurance Company (1972-present), Landauer, Inc.
(medical services) (1970-present), Tech Ops./Sevcon, Inc.
(electronic controllers) (1987-present), Key Energy Group
(oil rig service) (1988-1994), and Mark IV Industries
(diversified manufacturer) (1985-present).
Director/Trustee, the National Affiliated Investment
Companies (until 1993).
19
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
Richard E. Segerson (50) Trustee Director/Trustee, Phoenix Funds, (1993-present). Trustee,
102 Valley Road Phoenix Duff & Phelps Institutional Mutual Funds and
New Canaan, CT 06840 Phoenix-Aberdeen Series Fund (1996-present). Managing
Director, Mullin Associates (1993-present). Vice President
and General Manager, Coats & Clark, Inc. (previously Tootal
American, Inc.) (1991-1993). Director/Trustee, the
National Affiliated Investment Companies (1984-1993).
Lowell P. Weicker, Jr. (65) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
Dresing Lierman Weicker Phoenix Duff & Phelps Institutional Mutual Funds and
6931 Arlington Road Phoenix-Aberdeen Series Fund (1996-present). Chairman,
Suite 501 Dresing, Lierman, Weicker (1995-present). Director, UST
Bethesda, MD 20814 Inc. (1995-present) and HPSC Inc. (1995-present). Director,
Duty Free International (1997-present). Governor of the
State of Connecticut (1991-1995).
Michael E. Haylon (39) Executive Vice Executive Vice President--Investments. Phoenix Duff &
President Phelps Corporation (1995-present). Executive Vice
President, Phoenix Funds (1993-present) and
Phoenix-Aberdeen Series Fund (1996-present). Vice
President, Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director (1994- present), President
(1995-present), Executive Vice President (1994-1995), Vice
President (1991-1994), Phoenix Investment Counsel, Inc.
Director (1994-present), President (1996- present),
Executive Vice President (1994-1996), Vice President
(1993-1994), National Securities & Research Corporation.
Director, Phoenix Equity Planning Corporation
(1995-present). Senior Vice President, Securities
Investments, Phoenix Home Life Mutual Insurance Company
(1993-1995). Various other positions with Phoenix Home
Life Mutual Insurance Company (1990-1993).
David R. Pepin (54) Executive Executive Vice President, Phoenix Funds and Phoenix-
Vice Aberdeen Series Fund (1996-present). Director
President (1997-present) and Executive Vice President
(1996-present), Phoenix Duff & Phelps Corporation. Managing
Director, Phoenix-Aberdeen International Advisers, LLC
(1996-present). Director and Executive Vice President,
Phoenix Equity Planning Corp. (1996-present). Director,
Phoenix Investment Counsel, Inc. and National Securities
& Research Corporation (1996- present). Various positions
with Phoenix Home Life Mutual Insurance Company
(1994-1995). Vice President and General Manager, Finance
and Health, Digital Equipment Corporation (1980-1994).
20
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
William J. Newman (57) Senior Vice Executive Vice President (1995-present) and Chief
President Investment Strategist (1996-present), Phoenix Investment
Counsel, Inc. Executive Vice President and Chief Investment
Strategist (1996-present), Senior Vice President
(1995-1996), National Securities & Research Corporation.
Senior Vice President, Phoenix Equity Planning Corporation
(1995-1996), Phoenix Strategic Equity Series Fund
(1996-present), The Phoenix Edge Series Fund
(1995-present), Phoenix Multi-Portfolio Fund
(1995-present), Phoenix Income and Growth Fund
(1996-present), Phoenix Series Fund (1996-present),
Phoenix Total Return Fund, Inc. (1996-present), Phoenix
Worldwide Opportunities Fund (1996-present), Phoenix Duff
& Phelps Institutional Mutual Funds (1996-present) and
Phoenix- Aberdeen Series 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).
Michael K. Arends (43) Vice Managing Director, Equities (1996-present), Vice President
President (1994-1996), National Securities and Research Corporation,
and Phoenix Investment Counsel, Inc. Vice President,
Phoenix Series Fund and Phoenix Strategic Equity Series
Fund (1994- present). Portfolio Manager, Phoenix Home Life
Mutual Insurance Company (1994-1995). Various other
positions with Kemper Financial Services (1983-1994).
William E. Keen, III Vice President Assistant Vice President, Phoenix Equity Planning
Corporation (1996-present). Vice President, Phoenix Funds,
Phoenix Duff & Phelps Institutional Mutual Funds and
Phoenix-Aberdeen Series Fund (1996-present). Assistant
Vice President, USAffinity Funds, USAffinity Investments
LP (1994-1995). Manager, Fund Administration, SEI
Corporation (1991-1994).
William R. Moyer (52) 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), Chief Financial Officer
Enfield, CT 06083-2200 (1996-present), and Treasurer (1994-1996), Phoenix Equity
Planning Corporation. Senior Vice President
(1990-present), Chief Financial Officer (1996-present)
and Treasurer (1994-present), Phoenix Investment Counsel,
Inc. Senior Vice President, Finance (1993-present), Chief
Financial Officer (1996-present), and Treasurer
(1994-present), National Securities & Research
Corporation. Vice President, Phoenix Funds (1990-present),
Phoenix-Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Senior Vice President, Finance, PHL Mutual
Funds Holdings, Inc. (1993-present). Senior Vice President
and Chief Financial Officer, W. S. Griffith & Co., Inc.
(1992-1995) and Townsend Financial Advisers, Inc.
(1993-1995). Vice President, the National Affiliated
Investment Companies (until 1993). Vice President,
Investment Products Finance, Phoenix Home Life Mutual
Insurance Company (1990-1995).
21
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
-------------------------------- -------------------------------------------------------------------------
Leonard J. Saltiel (45) Vice President Managing Director (1996-present), Senior Vice President
(1994-1996), Phoenix Equity Planning Corporation. Vice
President, Phoenix Funds (1994-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present) and
Phoenix-Aberdeen Series Fund (1996-present). Vice
President, 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).
Nancy G. Curtiss (44) Treasurer Vice President, Fund Accounting (1994-present) and
Treasurer (1996-present), Phoenix Equity Planning
Corporation. Treasurer, Phoenix Investment Counsel, Inc.
and National Securities & Research Corporation
(1996-present). Treasurer, Phoenix Funds (1994-present)
Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund (1996-
present). Second Vice President and Treasurer, Fund
Accounting, Phoenix Home Life Mutual Insurance Company
(1994-1995). Various positions with Phoenix Home Life
Insurance Company (1987-1994).
G. Jeffrey Bohne (49) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer
Greenfield, MA 01301 Agent Operations, Phoenix Equity Planning Corporation
(1993-present). Secretary, Phoenix Funds (1993-present).
Clerk, Phoenix Total Return Fund, Inc. (1994-present).
Secretary, Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund (1996-
present). Vice President, Home Life of New York Insurance
Company (1984-1992).
</TABLE>
-----------------
*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,
1996, the Trustees received aggregate remuneration of $31,275. For services
on the Boards of Directors/Trustees of the Phoenix Funds, each Trustee who is
not a full-time employee of the Adviser or any of its affiliates currently
receives a retainer at the annual rate of $40,000 and a fee of $2,500 per
joint meeting of the Boards. Each Trustee who serves on the Audit Committee
receives a retainer at the annual rate of $2,000 and a fee of $2,000 per
joint Audit Committee meeting attended. Each Trustee who serves on the
Nominating Committee receives a retainer at the annual rate of $1,000 and a
fee of $1,000 per joint Nominating Committee meeting attended. Each Trustee
who serves on the Executive Committee and who is not an interested person of
the Fund receives a retainer at the annual rate of $1,000 and $1,000 per
joint Executive Committee meeting attended. 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. Any
other interested person not compensated by the Adviser receives no fees from
the Fund.
22
<PAGE>
<TABLE>
<CAPTION>
As of April 30, 1996, the Trustees received the following compensation: Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (11 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ -------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $2,850 None None $50,250
Robert Chesek $2,745 for any for any $45,750
E. Virgil Conway $3,360 Trustee Trustee $67,750
Harry Dalzell-Payne $2,790 $47,250
Francis E. Jeffries $ 0 $ 0
Leroy Keith, Jr. $2,730 $45,250
Philip R. McLoughlin $ 0 $ 0
Everett L. Morris $ 990 $40,750
James M. Oates $3,210 $54,250
Calvin Pedersen $ 0 $ 0
Philip R. Reynolds $2,790 $47,250
Herbert Roth, Jr. $3,540 $59,250
Richard E. Segerson $3,210 $54,250
Lowell P. Weicker, Jr. $3,060 $49,250
</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
Independent Accountants
Price Waterhouse LLP has been selected as the independent accountants for
the Fund. Price Waterhouse LLP audits the Fund's annual financial statements
and expresses an opinion thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), serves as custodian of
the Fund's assets (the "Custodian"). Equity Planning acts as Transfer Agent
for the Fund (the "Transfer Agent").
Report to Shareholders
The fiscal year of the Series ends on April 30. 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.
23
<PAGE>
April 30, 1996
Phoenix Strategic
Equity Series Fund
Annual Report
ANNUAL
REPORT
Phoenix
Phoenix Equity Opportunities Fund
Phoenix Strategic Theme Fund
Phoenix Small Cap Fund
[Phoenix
Duff & Phelps logo]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PHOENIX EQUITY OPPORTUNITIES SERIES
MARKET AND PORTFOLIO REVIEW
Phoenix Equity Opportunities Fund posted strong results over the last fiscal
year. For the twelve months ended April 30, 1996, Class A shares returned
32.86% and Class B shares returned 31.92%. These results outdistanced its
benchmark, the Standard & Poor's 500 Composite Stock Index, which returned
30.28% during the same period. All of these figures assume reinvestment of
any distributions but exclude the effect of sales charges.
During this reporting period, the Fund's focus on high-growth companies
with strong thematic appeal proved to be a winning strategy in this market
environment. Our 21st Century Medicine theme, which focuses on leading
companies offering compelling solutions to health care needs, contributed
positively to the Fund's overall performance. Our portfolio holdings related
to Energy Technology, a theme which identifies companies within the oil
services sector that provide productivity-enhancing solutions to exploration
and production companies, also provided outstanding results. In the volatile
technology sector, we focused on a number of strong performing themes, most
notably, The Hybrid Network. This theme concentrates on computer networking
and telecommunications equipment companies, which provide the hardware,
software and services needed to help merge voice, data and video
communications onto one network.
In the coming months, we anticipate a volatile market in which stock
selection will be paramount. Our equity holdings will remain focused on those
areas where growth is most prevalent and will place particular emphasis on
companies that can thrive in any economic environment. We believe our
thematic investment style will continue to identify attractive investment
opportunities and we will be using market weakness to add selectively to
existing positions.
[Description of Line Chart]
Phoenix Equity Opportunities
Fund -- Class A S&P 500 Stock Index*
4/30/86 $ 9,522 $10,000
4/30/87 10,562 12,624
4/30/88 10,380 11,798
4/30/89 12,510 14,476
4/30/90 13,396 15,986
4/30/91 15,024 18,805
4/30/92 16,571 21,431
4/30/93 19,306 23,411
4/30/94 20,269 24,663
4/30/95 22,126 28,972
4/30/96 29,397 37,744
Average Annual Total Returns for the Period Ending 4/30/96
<TABLE>
<CAPTION>
From Inception
7/19/94 to
1 Year 5 Year 10 Year 4/30/96
- ------------------------------ --------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Class A with 4.75% sales
charge 26.53% 13.25% 11.39% --
- ------------------------------ ------- ------- -------- ------------
Class A at net asset value 32.86% 14.37% 11.93% --
- ------------------------------ ------- ------- -------- ------------
Class B with CDSC 26.92% -- -- 20.29%
- ------------------------------ ------- ------- -------- ------------
Class B at net asset value 31.92% -- -- 22.21%
- ------------------------------ ------- ------- -------- ------------
S&P 500 Stock Index 30.28% 14.95% 14.20% 25.70%
- ------------------------------ ------- ------- -------- ------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 4/30/86 for
Class A shares. The total return for Class A shares reflects the maximum
sales charge of 4.75% on the initial investment and assumes reinvestment of
dividends and capital gains. Class B share performance will be greater or
less than that shown based on differences in inception date, fees and sales
charges. The total return (since inception 7/19/94) for Class B shares
reflects the 5% contingent deferred sales charge (CDSC), which is applicable
on all shares redeemed during the 1st year after purchase and 4% for all
shares redeemed during the 2nd year after purchase (scaled down to 3%--3rd
year; 2%--4th and 5th year and 0% thereafter). Returns indicate past
performance, which is not predictive of future performance. Investment return
and net asset value will fluctuate, so that your shares, when redeemed, may
be worth more or less than the original cost.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of common
stock total return performance. The S&P 500's performance does not reflect
sales charges.
1
<PAGE>
Phoenix Equity Opportunities Series
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1996
SHARES VALUE
-------- ---------------
COMMON STOCKS--88.3%
Airlines--1.7%
Continental Airlines, Inc. Class B (b) 65,000 $ 3,688,750
-------------
Banks--3.3%
TCF Financial Corp. 200,000 7,075,000
-------------
Chemical--1.0%
Dow Chemical Co. 25,000 2,221,875
-------------
Computer Software & Services--16.6%
Arbor Software Corp. (b) 30,000 2,310,000
BMC Software, Inc. (b) 80,000 4,870,000
Computer Associates International, Inc. 65,000 4,769,375
Electronics For Imaging (b) 100,000 6,100,000
HBO & Co. 20,000 2,375,000
Microsoft Corp. (b) 30,000 3,401,250
Netscape Communications Corp. (b) 40,000 2,440,000
Prism Solutions, Inc. (b) 50,000 1,631,250
Security Dynamics Technologies,
Inc. (b) 30,000 2,535,000
UUNET Technologies, Inc. (b) 25,000 1,434,375
Xylan Corp. (b) 60,000 3,843,750
-------------
35,710,000
-------------
Cosmetics & Soaps--2.1%
Avon Products, Inc. 50,000 4,443,750
-------------
Electronics--2.1%
Intel Corp. 65,000 4,403,750
-------------
Entertainment, Leisure & Gaming--5.4%
Bally Entertainment Corp. (b) 75,000 1,565,625
Circus Circus Enterprises, Inc. (b) 130,000 4,777,500
Mirage Resorts, Inc. (b) 100,000 5,237,500
-------------
11,580,625
-------------
Healthcare--Diversified--1.9%
Genome Therapeutics Corp. (b) 70,000 691,250
Nexstar Pharmaceuticals, Inc. (b) 135,000 3,307,500
-------------
3,998,750
-------------
Healthcare--Drugs--3.6%
Biochem Pharmaceutical, Inc. (b) 75,000 3,412,500
Centocor, Inc. (b) 110,000 4,400,000
-------------
7,812,500
-------------
Hospital Management & Services--3.9%
Healthsouth Corp. (b) 100,000 3,712,500
PhyCor, Inc. (b) 95,000 4,678,750
-------------
8,391,250
-------------
Insurance--1.5%
Ace Ltd. 75,000 3,300,000
-------------
SHARES VALUE
------ -------------
Lodging & Restaurants--2.9%
Hilton Hotels Corp. 50,000 $ 5,275,000
Rainforest Cafe, Inc. (b) 25,000 925,000
-------------
6,200,000
-------------
Machinery--0.9%
Deere & Co. 50,000 1,943,750
-------------
Medical Products & Supplies--6.2%
Caremark International, Inc. 160,000 4,420,000
Myriad Genetics, Inc. (b) 45,000 1,482,187
Omnicare, Inc. 35,000 2,100,000
Orthologic Corp. (b) 25,000 871,875
Henry Schein, Inc. (b) 112,000 4,004,000
Ventritex, Inc. (b) 25,000 392,188
-------------
13,270,250
-------------
Metals & Mining--2.6%
Echo Bay Mines Ltd. 85,000 1,115,625
Hemlo Gold Mines, Inc. 100,000 1,300,000
Newmont Mining Corp. 55,000 3,183,125
-------------
5,598,750
-------------
Natural Gas--4.0%
Enron Oil & Gas Co. 120,000 3,180,000
Louisiana Land & Exploration Co. 100,000 5,412,500
-------------
8,592,500
-------------
Office & Business Equipment--1.7%
IDX Systems, Inc. (b) 100,000 3,675,000
-------------
Oil--2.7%
Noble Affiliates, Inc. 45,000 1,580,625
Union Pacific Resources Group 155,000 4,262,500
-------------
5,843,125
-------------
Oil Service & Equipment--4.8%
Global Marine, Inc. (b) 200,000 2,275,000
Noble Drilling Corp. (b) 200,000 3,000,000
Tidewater, Inc. 120,000 5,100,000
-------------
10,375,000
-------------
Pollution Control--2.4%
Raychem Corp. 65,000 5,061,875
-------------
Professional Services--2.6%
HFS, Inc. (b) 110,000 5,651,250
-------------
Publishing, Broadcasting, Printing & Cable--1.8%
American Radio Systems Corp. (b) 55,000 1,856,250
Clear Channel Communications, Inc. (b) 30,000 2,032,500
-------------
3,888,750
-------------
2 See Notes to Financial Statements
<PAGE>
Phoenix Equity Opportunities Series
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ---------------
Retail--1.9%
Cost Plus, Inc. (b) 50,000 $ 1,187,500
TJX Companies, Inc. 100,000 2,950,000
-------------
4,137,500
-------------
Telecommunications Equipment--10.7%
Cascade Communications Corp. (b) 20,000 2,005,000
Cisco Systems, Inc. (b) 100,000 5,187,500
MFS Communications Co., Inc. (b) 100,946 3,501,565
Newbridge Networks Corp. (b) 80,000 5,150,000
P-COM, Inc. (b) 75,000 1,856,250
Premiere Technologies, Inc. (b) 15,000 566,250
Westell Technologies, Inc. (b) 65,000 4,671,875
-------------
22,938,440
-------------
TOTAL COMMON STOCKS
(Identified cost $153,519,572) 189,802,440
-------------
FOREIGN COMMON STOCKS--6.4%
Building & Materials--0.5%
Ton Yi Industrial Corp. (Taiwan) (b) 712,000 1,025,280
-------------
Computer Software & Services--1.4%
Business Objects SA-SP ADR
(France) (b) 18,000 1,557,000
CBT Group PLC ADR (Ireland) (b) 20,000 1,480,000
-------------
3,037,000
-------------
Metals & Mining--0.5%
Pohang Iron & Steel Company Ltd.
ADR (South Korea) 40,000 1,100,000
-------------
Textile & Apparel--2.5%
Fila Holding SPA ADR (Italy) 80,000 5,460,000
-------------
Truckers & Marine--1.0%
Evergreen Marine Corp. (Taiwan) (b) 534,000 993,240
Yang Ming Marine Transport (Taiwan) 723,000 1,033,890
-------------
2,027,130
-------------
SHARES VALUE
------ -------------
Utility-Electric--0.5%
Korea Electric Power Corp. ADR
(South Korea) 40,000 $ 1,110,000
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $11,621,461) 13,759,410
-------------
CONVERTIBLE PREFERRED STOCKS--1.1%
Telecommunications Equipment--1.1%
MFS Communications Cv. Pfd. 8% 40,000 2,360,000
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $1,900,125) 2,360,000
-------------
TOTAL LONG-TERM INVESTMENTS--95.8%
(Identified cost $167,041,158) 205,921,850
-------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
---------- --------
SHORT-TERM OBLIGATIONS--3.6%
Commercial Paper--3.6%
Anheuser-Busch Cos., Inc.
5.35%, 5-1-96 A-1+ $ 4,085 4,085,000
Campbell Soup Co. 5.28%,
5-24-96 A-1+ 1,000 996,626
Gannett Co. 5.27%,
5-17-96 A-1 2,695 2,688,688
-----------
7,770,314
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $7,770,314) 7,770,314
-----------
TOTAL INVESTMENTS--99.4%
(Identified cost $174,811,472) 213,692,164(a)
Cash and receivables, less liabilities--0.6% 1,255,503
-----------
NET ASSETS--100.0% $214,947,667
===========
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $40,027,743 and gross
depreciation of $1,171,709 for income tax purposes. At April 30, 1996,
the aggregate cost of securities for federal income tax purposes was
$174,836,130.
(b) Non-income producing.
ADR-American Depository Receipt
See Notes to Financial Statements 3
<PAGE>
Phoenix Equity Opportunities Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
Assets
Investment securities at value
(Identified cost $174,811,472) $213,692,164
Foreign currency at value (Identified cost $20,962) 20,935
Cash 3,186
Receivables
Investment securities sold 2,038,755
Fund shares sold 48,290
Dividends and interest 45,975
-----------
Total assets 215,849,305
-----------
Liabilities
Payables
Investment securities purchased 434,600
Fund shares repurchased 197,643
Investment advisory fee 117,950
Distribution fee 42,905
Transfer agent fee 32,376
Financial agent fee 5,055
Trustees' fee 4,789
Accrued expenses 66,320
-----------
Total liabilities 901,638
-----------
Net Assets $214,947,667
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $165,249,438
Accumulated net realized gain 10,817,564
Net unrealized appreciation 38,880,665
-----------
Net Assets $214,947,667
===========
Class A
Shares of beneficial interest outstanding, $.0001 par
value, unlimited authorization (Net Assets
$213,600,150) 24,245,033
Net asset value per share $8.81
Offering price per share
$8.81/(1-4.75%) $9.25
Class B
Shares of beneficial interest outstanding, $.0001 par
value, unlimited authorization (Net Assets
$1,347,517) 154,274
Net asset value and offering price per share $8.73
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
Investment Income
Dividends $ 925,602
Interest 502,725
-----------
Total investment income 1,428,327
-----------
Expenses
Investment advisory fee 1,394,239
Distribution fee--Class A 495,613
Distribution fee--Class B 9,319
Financial agent fee 59,753
Transfer agent 305,174
Printing 63,162
Professional 50,345
Registration 48,226
Custodian 35,529
Trustees 21,093
Miscellaneous 16,831
-----------
Total expenses 2,499,284
-----------
Net investment loss (1,070,957)
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 34,656,690
Net realized loss on foreign currency transactions (3,958)
Net realized loss on options (6,745,863)
Net change in unrealized appreciation (depreciation)
on investments 29,337,807
-----------
Net gain on investments 57,244,676
-----------
Net increase in net assets resulting from operations $56,173,719
===========
See Notes to Financial Statements
4
<PAGE>
Phoenix Equity Opportunities Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, April 30,
1996 1995
----------- -------------
<S> <C> <C>
From Operations
Net investment income (loss) $ (1,070,957) $ 1,073,425
Net realized gain 27,906,869 5,576,553
Net change in unrealized appreciation (depreciation) 29,337,807 8,679,660
--------- -----------
Increase in net assets resulting from operations 56,173,719 15,329,638
--------- -----------
From Distributions to Shareholders
Net investment income--Class A -- (1,177,310)
Net realized gains--Class A (20,539,261) (11,595,466)
Net realized gains--Class B (108,254) (15,203)
--------- -----------
Decrease in net assets from distributions to shareholders (20,647,515) (12,787,979)
--------- -----------
From Share Transactions
Class A
Proceeds from sales of shares (3,092,252 and 6,338,878 shares, respectively) 24,946,255 46,125,947
Net asset value of shares issued from reinvestment of distributions (1,944,177
and 1,311,412 shares, respectively) 14,853,511 8,942,271
Cost of shares repurchased (5,081,608 and 8,806,706 shares, respectively) (41,255,024) (63,971,908)
--------- -----------
Total (1,455,258) (8,903,690)
--------- -----------
Class B
Proceeds from sales of shares (129,377 and 115,217 shares, respectively) 1,068,242 831,977
Net asset value of shares issued from reinvestment of distributions (13,074 and
2,209, respectively) 99,234 15,023
Cost of shares repurchased (59,229 and 46,374 shares, respectively) (481,915) (330,625)
--------- -----------
Total 685,561 516,375
--------- -----------
Decrease in net assets from share transactions (769,697) (8,387,315)
--------- -----------
Net increase (decrease) in net assets 34,756,507 (5,845,656)
Net Assets
Beginning of period 180,191,160 186,036,816
--------- -----------
End of period (including undistributed net investment income of $0 and $0,
respectively) $214,947,667 $180,191,160
========= ===========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Phoenix Equity Opportunities Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------
Year Ended April 30,
1996 1995 1994 1993 1992
------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $7.40 $7.31 $9.64 $8.59 $8.36
Income from investment operations
Net investment income (loss) (0.04)(4) 0.04 0.05 0.06 0.11
Net realized and unrealized gain 2.34 0.58 0.57 1.34 0.71
----------- -------- -------- -------- ----------
Total from investment operations 2.30 0.62 0.62 1.40 0.82
----------- -------- -------- -------- ----------
Less distributions
Dividends from net investment
income -- (0.05) (0.05) (0.06) (0.12)
Distributions from net realized
gains (0.89) (0.48) (2.90) (0.29) (0.47)
----------- -------- -------- -------- ----------
Total distributions (0.89) (0.53) (2.95) (0.35) (0.59)
----------- -------- -------- -------- ----------
Change in net asset value 1.41 0.09 (2.33) 1.05 0.23
----------- -------- -------- -------- ----------
Net asset value, end of period $8.81 $7.40 $7.31 $9.64 $8.59
=========== ======== ======== ======== ==========
Total return (1) 32.86% 9.16% 4.99% 16.50% 10.30%
Ratios/supplemental data:
Net assets, end of period
(thousands) $213,600 $179,666 $186,037 $215,570 $204,792
Ratio of average net assets of:
Expenses 1.25 % 1.32% 1.26% 1.35% 1.36%
Net investment income (loss) (0.53)% 0.60% 0.57% 0.67% 1.29%
Portfolio turnover 302 % 358% 167% 31% 73%
Average commission rate paid $0.0600 N/A N/A N/A N/A
</TABLE>
Class B
----------------------------
From
Year Inception
Ended 7/19/94 to
4/30/96 4/30/95
------------- ------------
Net asset value, beginning of
period $7.39 $7.28
Income from investment operations
Net investment income (loss) (0.10)(4) 0.00
Net realized and unrealized gain 2.33 0.59
----------- ----------
Total from investment operations 2.23 0.59
----------- ----------
Less distributions
Dividends from net investment
income -- --
Distributions from net realized
gains (0.89) (0.48)
----------- ----------
Total distributions (0.89) (0.48)
----------- ----------
Change in net asset value 1.34 0.11
----------- ----------
Net asset value, end of period $8.73 $7.39
=========== ==========
Total return (1) 31.92% 8.69%(3)
Ratios/supplemental data:
Net assets, end of period
(thousands) $1,348 $525
Ratio of average net assets of:
Expenses 2.06 % 2.15 %(2)
Net investment income (loss) (0.06)%(2)
(1.18)% (2)
Portfolio turnover 302 % 358 %
Average commission rate paid $0.0600 N/A
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using the average number of shares outstanding during the
period.
See Notes to Financial Statements
6
<PAGE>
PHOENIX STRATEGIC THEME SERIES
MARKET AND PORTFOLIO REVIEW
Phoenix Strategic Theme Fund posted outstanding results over this latest
reporting period. Since the Fund's October 16, 1995 inception through April
30, 1996, Class A shares returned 23.89% and Class B shares returned 23.41%.
These results significantly outpaced its benchmark, the Standard & Poor's 500
Composite Stock Index, which returned 13.56% during the same period. All of
these figures assume reinvestment of any distributions but exclude the effect
of sales charges.
During this reporting cycle, the Fund's holdings were focused on a number
of compelling investment themes which produced strong results. Our 21st
Century Medicine theme, which identifies companies that offer innovative
solutions to pressing health care problems, performed solidly during the
period. With the growing trend by corporate America to increase productivity
and concentrate on core businesses, our Move to Outsourcing theme also
contributed positively to the Fund's performance. Lastly, in the technology
area, portfolio holdings related to our Hybrid Network and Internet
Connection themes produced strong returns, despite the significant volatility
within this sector.
Over the last few months, we lowered the average market capitalization of
the portfolio to capture the better relative growth prospects found in the
small- and mid-cap areas of the market. In our view, valuations for many
smaller companies had become more compelling and we anticipated that investor
demand would increase for these securities. This strategy has proved to be
rewarding as small caps have shown dramatic strength relative to their
large-cap counterparts. If the small-cap market continues to rise at this
brisk pace, we may consider taking some profits in this area in the near
future.
Looking ahead, we expect further volatility in the equity markets and
continued rotation in market leadership. Our outlook has become modestly more
cautious as interest rates have risen and we anticipate this may provide more
competition for stocks over the balance of the year. Nonetheless, we believe
many promising growth opportunities still exist and will focus on those
companies and themes that should work well in any market environment.
[Description of Pie Chart]
Short-term
Obligations and
Cash
8.8%
America's
Educational
Crisis
1.6%
The Age of
Assisted
Living
3.3%
Quest for
Clean Water
3.7%
Environmental
Crisis
Recycled
4.4%
Retail
Revival
4.9%
Special
Situations
5.2%
Need for
Security
5.4%
Software
Solutions
5.8%
Digital
Sky Way
5.9%
Move to
Outsourcing
6.1%
Internet
Connection
7.2%
Healthcare
Productivity
7.7%
Energy
Technology
8.6%
Hybrid
Network
9.6%
21st Century
Medicine
11.8%
7
<PAGE>
Phoenix Strategic Theme Series
- --------------------------------------------------------------------------------
Mountain ST
- ----- Phoenix Strategic
Theme Series -- Class A
10/16/95 $ 9,525
4/30/96 11,798
==== Phoenix Strategic
Theme Series -- Class B
10/16/95 10,000
4/30/96 11,841
+++++ S&P 500 Stock Index*
10/16/95 $10,000
4.30/96 11,356
==== $11,841 (Class B)
- ----- $11,799 (Class A)
+++++ $11,356
Total Return for Period Ending 4/30/96
From Inception
10/16/95 to
4/30/96
- ------------------------------ --------------
Class A with 4.75% sales
charge 17.99%
- ------------------------------ ------------
Class A at net asset value 23.89%
- ------------------------------ ------------
Class B with CDSC 18.41%
- ------------------------------ ------------
Class B at net asset value 23.41%
- ------------------------------ ------------
S&P 500 Stock Index* 13.56%
- ------------------------------ ------------
This chart assumes an initial gross investment of $10,000 made on 10/16/95
(inception of the Fund) for Class A and Class B shares. The total return for
Class A shares reflects the maximum sales charge of 4.75% on the initial
investment and assumes reinvestment of dividends and capital gains. The total
return for Class B shares reflects the 5% contingent deferred sales charge
(CDSC), which is applicable on all shares redeemed during the 1st year after
purchase and 4% for all shares redeemed during the 2nd year after purchase
(scaled down to 3%--3rd year; 2%--4th and 5th year and 0% thereafter).
Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate, so that
your shares, when redeemed, may be worth more or less than the original cost.
* The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
return performance. The S&P 500's performance does not reflect sales
charges.
8
<PAGE>
Phoenix Strategic Theme Series
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1996
SHARES VALUE
-------- ---------------
COMMON STOCKS--91.2%
Commercial--Leasing Companies--0.4%
Mitcham Industries, Inc. (b) 25,000 $ 184,375
-------------
Commercial Services--Miscellaneous--6.3%
Accustaff, Inc. (b) 22,000 654,500
APAC Teleservices (b) 6,000 465,000
Corestaff, Inc. (b) 16,500 639,375
Manpower, Inc. 17,000 629,000
Olsten Corp. 15,000 455,625
-------------
2,843,500
-------------
Commercial Services--Schools--1.6%
Apollo Group, Inc. Class A (b) 6,000 264,000
National Education Corp. (b) 30,000 446,250
-------------
710,250
-------------
Commercial Services--Security/Safety--5.4%
ADT Ltd. (b) 40,000 680,000
Corrections Corporation of America (b) 15,000 956,250
Wackenhut Corrections Corporation (b) 15,000 802,500
-------------
2,438,750
-------------
Computer--Integrated Systems--2.1%
Medic Computer Systems, Inc. (b) 10,000 935,000
-------------
Computer--Local Networks--4.2%
FORE Systems, Inc. (b) 5,000 395,000
Shiva Corp. (b) 8,000 478,000
Xylan Corp. (b) 16,200 1,037,813
-------------
1,910,813
-------------
Computer--Peripheral Equipment--0.9%
U.S. Robotics Corporation (b) 2,500 391,250
-------------
Computer--Services--5.0%
America Online, Inc. (b) 10,000 640,000
HBO & Co. 5,000 593,750
Shared Medical Systems Corp. 15,000 1,027,500
-------------
2,261,250
-------------
Computer--Software--10.7%
Baan Company N.V. (b) 11,000 660,000
Clarify, Inc. (b) 22,000 877,250
Documentum, Inc. (b) 15,000 690,000
Gensym Corporation (b) 20,000 412,500
Hummingbird Comm. Ltd. (b) 15,000 626,250
Intuit, Inc. (b) 10,000 520,000
Netscape Communications Corp. (b) 7,000 427,000
Raptor Systems, Inc. (b) 20,000 660,000
-------------
4,873,000
-------------
Electric--Laser System/Component--2.4%
Coherent, Inc. (b) 20,000 1,072,500
-------------
SHARES VALUE
------ -------------
Electric--Military Systems--2.0%
General Motors Corp. Class H 15,000 $ 916,875
-------------
Electric--Scientific Instrument--2.5%
Dionex Corp. (b) 18,000 659,250
Input/Output, Inc. (b) 14,000 486,500
-------------
1,145,750
-------------
Electric--Semiconductor Manufacturing--1.3%
Flextronics International, Ltd. (b) 15,000 581,250
-------------
Financial Services--Miscellaneous--2.0%
Medaphis Corp. (b) 20,000 922,500
-------------
Leisure--Services--1.3%
Penske Motorsports, Inc. (b) 20,000 605,000
-------------
Media--Cable TV--1.5%
EchoStar Communications
Corporation (b) 20,000 670,000
-------------
Media--Radio/TV--0.7%
United Video Satellite Group, Inc. (b) 15,000 341,250
-------------
Medical--Biomed/Genetics--0.8%
Gilead Sciences, Inc. (b) 12,000 366,000
-------------
Medical/Dental--Supplies--1.9%
Target Therapeutics, Inc. (b) 16,000 868,000
-------------
Medical--Ethical Drugs--3.6%
Alza Corp. Class A (b) 17,000 484,500
Dura Pharmaceuticals, Inc. (b) 10,000 535,000
Fuisz Technologies, Ltd. (b) 25,000 637,500
-------------
1,657,000
-------------
Medical Instruments--2.7%
Lumisys, Inc. (b) 20,000 590,000
U.S. Surgical Corp. 17,000 629,000
-------------
1,219,000
-------------
Medical--Output/Home Care--6.0%
American HomePatient, Inc. (b) 13,000 549,250
Apria Healthcare Group, Inc. (b) 12,000 408,000
Caremark International, Inc. 30,000 828,750
Housecall Medical Resources, Inc. (b) 23,000 500,250
Pediatric Services of America (b) 18,000 454,500
-------------
2,740,750
-------------
Oil & Gas--Drilling--5.0%
Diamond Offshore Drilling (b) 20,000 995,000
ENSCO International, Inc. (b) 20,000 600,000
Sonat Offshore Drilling 12,000 658,500
-------------
2,253,500
-------------
See Notes to Financial Statements
9
<PAGE>
Phoenix Strategic Theme Series
- --------------------------------------------------------------------------------
SHARES VALUE
-------- ---------------
Oil & Gas--Field Services--2.2%
Halliburton Co. 8,000 $ 459,000
Schlumberger Ltd. 6,000 529,500
-------------
988,500
-------------
Pollution Control--Equipment--3.0%
Culligan Water Technologies, Inc. (b) 19,300 651,375
GTS Duratek, Inc. (b) 20,000 346,250
Ionics, Inc. (b) 8,000 384,000
-------------
1,381,625
-------------
Pollution Control--Services--3.7%
Sanfil, Inc. (b) 15,000 650,625
Superior Services, Inc. (b) 17,000 238,000
U.S.A. Waste Services, Inc. (b) 15,000 390,000
United Waste Systems, Inc. (b) 7,000 385,000
-------------
1,663,625
-------------
Retail--Apparel/Shoe--1.4%
Ross Stores, Inc. 18,000 621,000
-------------
Retail--Miscellaneous/Diversified--1.0%
Petsmart, Inc. (b) 10,000 443,750
-------------
Retail--Restaurants--0.6%
Planet Hollywood International, Inc. (b) 10,000 253,750
-------------
Retail--Supermarkets--0.9%
Whole Foods Market, Inc. (b) 20,000 407,500
-------------
Retail/Wholesale--Building Products--1.1%
Eagle Hardware & Garden, Inc. (b) 50,000 506,250
-------------
SHARES VALUE
------ -------------
Telecommunications--Equipment--5.4%
Cascade Communications Corp. (b) 8,000 $ 802,000
Lucent Technologies, Inc. (b) 6,500 228,312
Newbridge Networks Corp. (b) 16,000 1,030,000
Tellabs, Inc. (b) 7,000 386,750
-------------
2,447,062
-------------
Telecommunications--Services--1.6%
Panamsat Corporation 22,000 731,500
-------------
TOTAL COMMON STOCKS
(Identified cost $34,718,320) 41,352,125
-------------
TOTAL LONG-TERM INVESTMENTS--91.2%
(Identified cost $34,718,320) 41,352,125
-------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
---------- --------
SHORT-TERM OBLIGATIONS--3.8%
Commercial Paper--3.8%
Anheuser-Busch Cos., Inc.
5.32%, 5-1-96 A-1+ $1,140 1,140,000
Preferred Receivables Funding
Corp. 5.25%, 5-2-96 A-1 260 259,962
Schering Corp. 5.30%,
5-2-96 A-1+ 300 299,956
-----------
1,699,918
----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,699,918) 1,699,918
-----------
TOTAL INVESTMENTS--95.0%
(Identified cost $36,418,238) 43,052,043(a)
Cash and receivables, less liabilities--5.0% 2,261,107
-----------
NET ASSETS--100.0% $45,313,150
===========
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $6,888,107 and gross
depreciation of $254,302 for income tax purposes. At April 30, 1996, the
aggregate cost of securities for federal income tax purposes was
$36,418,238.
(b) Non-income producing.
See Notes to Financial Statements
10
<PAGE>
Phoenix Strategic Theme Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
Assets
Investment securities at value
(Identified cost $36,418,238) $43,052,043
Cash 448,477
Receivables
Investment securities sold 643,750
Fund shares sold 1,883,796
Receivable from adviser 13,766
Dividends and interest 2,000
Prepaid expenses 20,349
------------
Total assets 46,064,181
------------
Liabilities
Payables
Investment securities purchased 666,563
Fund shares repurchased 6,759
Distribution fee 13,992
Transfer agent fee 4,786
Trustees' fee 3,192
Financial agent fee 945
Accrued expenses 54,794
------------
Total liabilities 751,031
------------
Net Assets $45,313,150
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $39,055,482
Accumulated net realized loss (376,137)
Net unrealized appreciation 6,633,805
------------
Net Assets $45,313,150
============
Class A
Shares of beneficial interest outstanding, $.0001
par value, unlimited authorization (Net Assets
$33,393,147) 2,699,375
Net asset value per share $12.37
Offering price per share
$12.37/(1-4.75%) $12.99
Class B
Shares of beneficial interest outstanding, $.0001
par value, unlimited authorization (Net Assets
$11,920,003) 966,629
Net asset value and offering price per share $12.33
STATEMENT OF OPERATIONS
FROM INCEPTION OCTOBER 16, 1995 TO
APRIL 30, 1996
Investment Income
Dividends $ 30,199
Interest 136,861
------------
Total investment income 167,060
------------
Expenses
Investment advisory fee 98,507
Distribution fee--Class A 26,550
Distribution fee--Class B 25,143
Financial agent fee 3,940
Registration 43,311
Transfer agent 31,979
Printing 20,898
Professional 17,465
Custodian 12,195
Trustees 9,012
Miscellaneous 2,742
------------
Total expenses 291,742
Less expenses borne by investment adviser (89,005)
------------
Net expenses 202,737
------------
Net investment loss (35,677)
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (376,137)
Net change in unrealized appreciation
(depreciation) on investments 6,633,805
------------
Net gain on investments 6,257,668
------------
Net increase in net assets resulting from
operations $6,221,991
============
See Notes to Financial Statements
11
<PAGE>
Phoenix Strategic Theme Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
From
Inception
10/16/95 to
4/30/96
------------
From Operations
Net investment loss $ (35,677)
Net realized loss (376,137)
Net change in unrealized appreciation (depreciation) 6,633,805
----------
Increase in net assets resulting from operations 6,221,991
----------
From Distributions to Shareholders
Tax return of capital--Class A (25,935)
Tax return of capital--Class B (1,782)
----------
Decrease in net assets from distributions to shareholders (27,717)
----------
From Share Transactions
Class A
Proceeds from sales of shares (2,760,919 shares) 29,305,894
Net asset value of shares issued from reinvestment of
distributions (2,423 shares) 25,417
Cost of shares repurchased (63,967 shares) (743,134)
----------
Total 28,588,177
----------
Class B
Proceeds from sales of shares (992,960 shares) 10,820,691
Net asset value of shares issued from reinvestment of
distributions (161 shares) 1,682
Cost of shares repurchased (26,492 shares) (291,674)
----------
Total 10,530,699
----------
Increase in net assets from share transactions 39,118,876
----------
Net increase in net assets 45,313,150
Net Assets
Beginning of period 0
----------
End of period (including undistributed net investment
income of $0) $45,313,150
==========
See Notes to Financial Statements
12
<PAGE>
Phoenix Strategic Theme Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class A Class B
----------------- ------------------
From Inception From Inception
10/16/95 to 10/16/95 to
4/30/96 4/30/96
----------------- ------------------
Net asset value, beginning of period $10.00 $10.00
Income from investment operations
Net investment income (loss) (0.00)(1)(5) (0.06)(1)(5)
Net realized and unrealized gain 2.39 2.40
--------------- -----------------
Total from investment operations 2.39 2.34
--------------- -----------------
Less distributions
Dividends from net investment income -- --
Distributions from net realized
gains -- --
Tax return of capital (0.02) (0.01)
--------------- -----------------
Total distributions (0.02) (0.01)
--------------- -----------------
Change in net asset value 2.37 2.33
--------------- -----------------
Net asset value, end of period $12.37 $12.33
=============== =================
Total return (2) 23.89% (4) 23.41% (4)
Ratios/supplemental data:
Net assets, end of period (thousands) $33,393 $11,920
Ratio of average net assets of:
Expenses 1.40% (3) 2.16% (3)
Net investment income (loss) (0.09)%(3) (1.06)%(3)
Portfolio turnover 175% (4) 175% (4)
Average commission rate paid $0.0663 $0.0663
(1) Includes reimbursement of operating expenses by investment adviser of
$0.04 and $0.04, respectively.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized
(4) Not annualized
(5) Computed using average shares outstanding.
See Notes to Financial Statements
13
<PAGE>
PHOENIX SMALL CAP SERIES
MARKET AND PORTFOLIO REVIEW
Aided by the recent rally in small-cap stocks, Phoenix Small Cap Fund
produced stellar returns during this latest reporting period. Since the
Fund's inception on October 16, 1995 through April 30, 1996, Class A shares
returned 67.48% and Class B shares returned 66.80%. These results
significantly outperformed its benchmark, the Russell 2000 Small Cap Index,
which returned 16.20% during the same period. All of these figures assume
reinvestment of any distributions but exclude the effect of sales charges.
During this reporting cycle, we incorporated a number of Phoenix
investment themes into the portfolio with outstanding results. Within the
health care and energy sectors, our 21st Century Medicine and Energy
Technology themes produced strong returns for the Fund. Our technology
holdings, especially those related to our Hybrid Network and Internet
Connection themes also contributed positively to performance. Some of our
biggest individual gainers for the period included Parexel International,
Seacor Holdings, Lernout & Hauspie, MRV Communications, Systemsoft and
Learning Tree.
Our outlook for the small-cap market remains positive. We believe that the
performance of small-cap stocks have lagged relative to large company stocks
and still offer good growth potential. As this bull market matures, we expect
that small stocks should continue to lead the way.
Looking ahead, our stock selection will remain focused on companies that
can capitalize on timely investment themes. A few of our themes that we
believe have strong growth potential in this environment include America's
Educational Crisis, Software Solutions and 21st Century Medicine. Although
our initial efforts have met with very good success, we must stress that
small stock investing is a long-term endeavor and that investors should be
prepared to accept the short-term volatility that is inevitable in this
segment of the market.
[Description of Pie Chart]
Short-term
Obligations and
Cash 8.0%
America's
Educational
Crisis
4.0%
Genomic
Revolution
3.0%
Quest for
Clean Water
3.2%
The Age
of Lasers 4.2%
Special
Situations
7.3%
Need for
Security
3.8%
Software
Solutions
13.7%
Digital
Sky Way 6.7%
Move to
Outsourcing 5.4%
Internet
Connection 5.0%
Healthcare
Productivity
9.9%
Energy
Technology
9.5%
Hybrid
Network
13.8%
21st Century
Medicine
2.5%
14
<PAGE>
Phoenix Small Cap Series
- --------------------------------------------------------------------------------
[Description of Mountain Chart]
Phoenix Small
Cap Series -- Class A
9,525
15,950
Phoenix Small
Cap Series -- Class B
10,000
16,180
Russell 2000 Benchmark
10,000
11,620
$16,180 (Class B)
$15,950 (Class A)
$11,620
Total Return for Period Ending 4/30/96
From Inception
10/16/95 to
4/30/96
- ----------------------------------- --------------
Class A with 4.75% sales charge 59.50%
- ----------------------------------- ------------
Class A at net asset value 67.48%
- ----------------------------------- ------------
Class B with CDSC 61.80%
- ----------------------------------- ------------
Class B at net asset value 66.80%
- ----------------------------------- ------------
Russell 2000 Benchmark* 16.20%
- ----------------------------------- ------------
This chart assumes an initial gross investment of $10,000 made on 10/16/95
(inception of the Fund) for Class A and Class B shares. The total return for
Class A shares reflects the maximum sales charge of 4.75% on the initial
investment and assumes reinvestment of dividends and capital gains. The total
return for Class B shares reflects the 5% contingent deferred sales charge
(CDSC), which is applicable on all shares redeemed during the 1st year after
purchase and 4% for all shares redeemed during the 2nd year after purchase
(scaled down to 3%--3rd year; 2%--4th and 5th year and 0% thereafter).
Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate, so that
your shares, when redeemed, may be worth more or less than the original cost.
* The Russell 2000 Benchmark is a commonly used, unmanaged indicator of stock
market performance for small cap companies. The index does not reflect
sales charges.
15
<PAGE>
Phoenix Small Cap Series
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1996
SHARES VALUE
------ ------------
COMMON STOCKS--90.5%
Agricultural Operations--0.9%
Delta & Pine Land Co. 30,000 $ 1,338,750
----------
Commercial Services--Miscellaneous--6.1%
Clintrials Research, Inc. (b) 65,000 2,730,000
Corestaff, Inc. (b) 37,500 1,453,125
Employee Solutions, Inc. (b) 60,000 2,325,000
Robert Half International, Inc. (b) 40,000 2,300,000
----------
8,808,125
----------
Commercial Services--Schools--5.5%
Apollo Group, Inc. Class A (b) 15,000 660,000
ITT Educational Services, Inc. (b) 45,000 1,395,000
Learning Tree International (b) 50,000 1,250,000
National Education Corp. (b) 125,000 1,859,375
Nobel Education Dynamics (b) 30,000 532,500
Youth Services International, Inc. (b) 61,000 2,150,250
----------
7,847,125
----------
Commercial Services--Security/Safety--2.3%
Checkpoint Systems, Inc. (b) 60,000 1,792,500
Childrens Comprehensive Services,
Inc. (b) 33,500 477,375
Wackenhut Corrections Corporation (b) 20,000 1,070,000
----------
3,339,875
----------
Computer--Graphics--0.7%
Trident Microsystems, Inc. (b) 60,000 1,050,000
----------
Computer--Integrated Systems--2.3%
Medic Computer Systems, Inc. (b) 36,000 3,366,000
----------
Computer--Local Networks--1.2%
Shiva Corp. (b) 30,000 1,792,500
----------
Computer--Services--1.1%
Technology Solutions Co. (b) 60,000 1,620,000
----------
Computer--Software--22.8%
Accent Software International Ltd. (b) 50,000 2,200,000
Astea International, Inc. (b) 65,000 1,917,500
Citrix Systems, Inc. (b) 30,000 2,340,000
Cybercash, Inc. (b) 50,000 1,725,000
Epic Design Technology, Inc. (b) 58,000 1,986,500
HNC Software, Inc. (b) 55,000 2,048,750
HPR, Inc. (b) 30,000 1,290,000
Hummingbird Comm. Ltd. (b) 30,000 1,252,500
McAfee Associates, Inc. (b) 32,000 1,960,000
Mecon, Inc. (b) 78,000 2,184,000
Natural Microsystems Corp. (b) 45,000 1,698,750
Prism Solutions, Inc (b) 76,000 2,479,500
Red Brick Systems, Inc. (b) 35,000 2,073,750
Remedy Corp. (b) 27,000 2,119,500
Systemsoft Corporation (b) 100,000 2,787,500
SHARES VALUE
---- ----------
Computer--Software--continued
Transportation System Architects, Inc.
(b) 29,500 $ 1,578,250
Vantive Corporation (b) 30,000 1,087,500
----------
32,729,000
----------
Electric--Laser System/Component--2.6%
Coherent, Inc. (b) 70,000 3,753,750
----------
Electric--Military Systems--0.9%
Stanford Telecommunications, Inc. (b) 30,000 1,260,000
----------
Electric--Scientific Instrument--0.8%
Dionex Corp. (b) 30,000 1,098,750
----------
Electric--Semiconductor Manufacturer--5.6%
ESS Technology, Inc. (b) 123,000 2,782,875
Triquint Semiconductor, Inc. (b) 115,000 2,386,250
Vitesse Semiconductor Corp. (b) 95,000 2,838,125
----------
8,007,250
----------
Leisure Services--1.1%
Penske Motorsports, Inc. (b) 50,000 1,512,500
----------
Machinery--Farm--0.8%
Lindsay Manufacturing Co. 30,000 1,125,000
----------
Media--Cable TV--1.1%
EchoStar Communications Corp. (b) 46,000 1,541,000
----------
Media--Radio/TV--1.1%
United Video Satellite Group, Inc. (b) 72,000 1,638,000
----------
Medical--Biomed/Genetics--5.0%
Human Genome Sciences, Inc. (b) 55,000 2,186,250
Incyte Pharmaceuticals, Inc. (b) 58,000 1,863,250
Pharmaceutical Product Development, Inc.
(b) 26,000 1,098,500
Vical, Inc. (b) 139,000 2,093,688
----------
7,241,688
----------
Medical--Instruments--0.4%
Iridex Corporation (b) 35,000 525,000
----------
Medical--Output/Home Care--0.4%
Renal Care Group, Inc. (b) 16,800 579,600
----------
Medical--Products--3.2%
Capstone Pharmacy Services (b) 75,000 745,313
MediSense, Inc. (b) 8,000 360,000
Parexel International Corp. (b) 60,000 2,955,000
Quintiles Transnational Corp. (b) 8,000 586,000
----------
4,646,313
----------
Oil & Gas--Drilling--3.1%
Arethusa (Off-Shore), Ltd. (b) 27,000 1,215,000
Atwood Oceanics, Inc. (b) 38,000 1,619,750
Falcon Drilling Company, Inc. (b) 60,000 1,612,500
----------
4,447,250
----------
See Notes to Financial Statements
16
<PAGE>
Phoenix Small Cap Series
- -------------------------------------------------------------------------
SHARES VALUE
-------- ---------------
Oil & Gas--Field Services--2.4%
Dawson Production Services, Inc. (b) 71,500 $ 1,018,875
Pride Petroleum Services, Inc. (b) 90,000 1,473,750
Stolt Comex Seaway S.A. (b) 75,000 1,012,500
-------------
3,505,125
-------------
Oil & Gas--Machinery/Equipment--1.3%
Energy Ventures, Inc. (b) 61,900 1,857,000
-------------
Oil & Gas--U.S. Exploration & Production--1.7%
Chesapeake Energy Corp. (b) 19,200 1,358,400
Stone Energy Corp. (b) 60,000 1,080,000
-------------
2,438,400
-------------
Pollution Control--Equipment--1.3%
Culligan Water Technologies, Inc. (b) 30,600 1,032,750
U.S. Filter Corp. (b) 25,000 768,750
-------------
1,801,500
-------------
Retail--Apparel/Shoe--1.2%
Buckle, Inc. (b) 60,000 1,755,000
-------------
Telecommunications--Equipment--9.0%
Aspect Telecommunications Corp. (b) 23,000 1,322,500
Galileo Electro-Optics Corp. (b) 70,000 1,767,500
Global Telecommunications Ltd. (b) 43,000 2,246,750
MRV Communications, Inc. (b) 62,500 2,593,750
Pairgain Technologies, Inc. (b) 10,000 955,000
Teltrend, Inc. (b) 25,000 1,234,375
Westell Technologies, Inc. (b) 38,000 2,731,250
-------------
12,851,125
-------------
Telecommunications--Services--2.1%
Orion Network Systems, Inc. (b) 75,000 1,040,625
Panamsat Corp. (b) 60,000 1,995,000
-------------
3,035,625
-------------
Transportation--Equipment Manufacturing--1.5%
Avondale Industries, Inc. (b) 110,000 2,103,750
-------------
Transportation--Ship--1.0%
Seacor Holdings, Inc. (b) 35,000 1,443,750
-------------
TOTAL COMMON STOCKS
(Identified cost $104,466,743) 130,058,751
-------------
FOREIGN COMMON STOCKS--1.5%
Computer Software & Services--1.1%
Business Objects SA-SP ADR
(France) (b) 14,900 1,288,850
Planning Sciences International ADR
(United Kingdom) (b) 10,500 252,000
-------------
1,540,850
-------------
Pollution Control--0.4%
Memtec Ltd. ADR (Australia) 20,000 $ 547,500
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,702,755) 2,088,350
-------------
TOTAL LONG-TERM INVESTMENTS--92.0%
(Identified cost $106,169,498) 132,147,101
-------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
---------- --------
SHORT-TERM OBLIGATIONS--7.7%
Commercial Paper--7.0%
Anheuser-Busch Cos., Inc.
5.32%, 5-1-96 A-1+ $4,100 4,100,000
Shell Oil Co. 5.27%,
5-1-96 A-1+ 675 675,000
H.J. Heinz Co. 5.32%,
5-2-96 A-1+ 1,000 999,853
Schering Corp. 5.30%, 5-2-96 A-1+ 330 329,951
Gannett Co. 5.28%, 5-3-96 A-1+ 1,465 1,464,570
Bellsouth Telecommuni-
cations, Inc. 5.25%,
5-6-96 A-1+ 260 259,810
Emerson Electric Co. 5.26%,
5-6-96 A-1+ 1,195 1,194,127
Campbell Soup Co. 5.30%,
5-14-96 A-1+ 1,000 998,086
-----------
10,021,397
-----------
Federal Agency Securities--0.7%
Federal Farm Credit Bank 5.17%, 5-17-96 1,000 997,702
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $11,019,099) 11,019,099
-----------
TOTAL INVESTMENTS--99.7%
(Identified cost $117,188,597) 143,166,200(a)
Cash and receivables, less liabilities--0.3% 373,468
-----------
NET ASSETS--100.0% $143,539,668
===========
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $26,388,362 and gross
depreciation of $623,878 for income tax purposes. At April 30, 1996, the
aggregate cost of securities for federal income tax purposes was
$117,401,716.
(b) Non-income producing.
ADR-American Depository Receipt
See Notes to Financial Statements
17
<PAGE>
Phoenix Small Cap Series
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
Assets
Investment securities at value
(Identified cost $117,188,597) $143,166,200
Cash 3,606
Receivables
Fund shares sold 9,443,165
Investment securities sold 3,032,464
Prepaid expenses 20,519
-----------
Total assets 155,665,954
-----------
Liabilities
Payables
Investment securities purchased 11,939,568
Fund shares repurchased 23,047
Distribution fee 40,897
Transfer agent fee 13,976
Investment advisory fee 13,286
Trustees' fee 3,178
Financial agent fee 2,584
Accrued expenses 89,750
-----------
Total liabilities 12,126,286
-----------
Net Assets $143,539,668
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $117,269,725
Accumulated net realized gain 292,340
Net unrealized appreciation 25,977,603
-----------
Net Assets $143,539,668
===========
Class A
Shares of beneficial interest outstanding, $.0001
par value, unlimited authorization (Net Assets
$98,371,502) 5,877,279
Net asset value per share $16.74
Offering price per share
$16.74/(1-4.75%) $17.57
Class B
Shares of beneficial interest outstanding, $.0001
par value, unlimited authorization (Net Assets
$45,168,166) 2,707,543
Net asset value and offering price per share $16.68
STATEMENT OF OPERATIONS
FROM INCEPTION OCTOBER 16, 1995 TO
APRIL 30, 1996
Investment Income
Dividends $ 11,903
Interest 231,990
-----------
Total investment income 243,893
-----------
Expenses
Investment advisory fee 196,972
Distribution fee--Class A 49,601
Distribution fee--Class B 64,227
Financial agent fee 7,879
Registration 72,668
Transfer agent 55,491
Printing 27,232
Professional 18,359
Custodian 15,293
Trustees 8,998
Miscellaneous 4,218
-----------
Total expenses 520,938
Less expenses borne by investment adviser (78,823)
-----------
Net expenses 442,115
-----------
Net investment loss (198,222)
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 478,693
Net change in unrealized appreciation
(depreciation) on investments 25,977,603
-----------
Net gain on investments 26,456,296
-----------
Net increase in net assets resulting from
operations $26,258,074
===========
See Notes to Financial Statements
18
<PAGE>
Phoenix Small Cap Series
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
10/16/95 to
4/30/96
--------------
<S> <C>
From Operations
Net investment loss $ (198,222)
Net realized gain 478,693
Net change in unrealized appreciation (depreciation) 25,977,603
------------
Increase in net assets resulting from operations 26,258,074
------------
From Distributions to Shareholders
In excess of net investment income--Class A (12,168)
------------
Decrease in net assets from distributions to shareholders (12,168)
------------
From Share Transactions
Class A
Proceeds from sales of shares (6,072,940 shares) 81,698,360
Net asset value of shares issued from reinvestment of distributions (928
shares) 11,748
Cost of shares repurchased (196,589 shares) (2,715,491)
------------
Total 78,994,617
------------
Class B
Proceeds from sales of shares (2,768,695 shares) 39,161,690
Net asset value of shares issued from reinvestment of distributions (0 shares) --
Cost of shares repurchased (61,152 shares) (862,545)
------------
Total 38,299,145
------------
Increase in net assets from share transactions 117,293,762
------------
Net increase in net assets 143,539,668
Net Assets
Beginning of period 0
------------
End of period (including undistributed net investment income of $0) $143,539,668
============
</TABLE>
See Notes to Financial Statements
19
<PAGE>
Phoenix Small Cap Series
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class A Class B
--------------- ----------------
From Inception From Inception
10/16/95 to 10/16/95 to
4/30/96 4/30/96
--------------- ----------------
Net asset value, beginning of period $10.00 $10.00
Income from investment operations
Net investment income (loss) (0.04)(1)(5) (0.09)(1)(5)
Net realized and unrealized gain 6.79 6.77
------------- ---------------
Total from investment operations 6.75 6.68
------------- ---------------
Less distributions
Dividends from net investment
income -- --
In excess of net investment income (0.01) --
------------- ---------------
Total distributions (0.01) --
------------- ---------------
Change in net asset value 6.74 6.68
------------- ---------------
Net asset value, end of period $16.74 $16.68
============= ===============
Total return (2) 67.48% (4) 66.80% (4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $98,372 $45,168
Ratio of average net assets of:
Expenses 1.50% (3) 2.26% (3)
Net investment income (loss) (0.53)%(3) (1.44)%(3)
Portfolio turnover 103% (4) 103% (4)
Average commission rate paid $0.0657 $0.0657
(1) Includes reimbursement of operating expenses by investment advisor of
$0.02 and $0.02, respectively.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized
(4) Not annualized
(5) Computed using average shares outstanding.
See Notes to Financial Statements
20
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Strategic Equity Series Fund (the "Fund") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as a diversified open-end management investment company.
Each Series has distinct investment objectives. The Equity Opportunities Series
seeks to achieve long-term growth of capital from investment in a diversified
group of stocks or securities convertible into stocks. The Strategic Theme
Series seeks long-term appreciation of capital through investing in securities
of companies that the adviser believes are particularly well positioned to
benefit from cultural, demographic, regulatory, social or technological changes
worldwide. The Small Cap Series seeks long-term growth of capital by investing
in a diversified portfolio of securities, primarily common stock, of relatively
small companies which the adviser believes have long-term investment potential.
Each Series offers both Class A and Class B shares. Class A shares are sold
with a front-end sales charge of up to 4.75%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Both classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. Income and
expenses of each Series are borne pro rata by the holders of both classes of
shares, except that each class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
A. Security valuation:
Equity securities traded on an exchange or quoted on the over-the-counter
market are valued at the last sale price, or if there had been no sale that
day, at the last bid price, except for the Equity Opportunities Series which
uses the mean if there had been no sale. Short-term investments having a
remaining maturity of less than 61 days are valued at amortized cost which
approximates market. All other securities and assets are valued at their fair
value as determined in good faith by or under the direction of the Trustees.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign securities,
as soon as the Series is notified. Interest income is recorded on the accrual
basis. Realized gains and losses are determined on the identified cost basis.
C. Income taxes:
Each of the Series is treated as a separate taxable entity. It is the policy
of each Series in the Fund to comply with the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders. In
addition, each Series intends to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Code. Therefore, no
provision for federal income taxes or excise taxes has been made.
D. Distributions to shareholders:
Distributions are recorded by each Series on the ex-dividend date. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, expiring
capital loss carryforwards, foreign currency gain/loss, partnerships, and
losses deferred due to wash sales and excise tax regulations. Permanent book
and tax basis differences relating to shareholder distributions will result
in reclassifications to paid in capital.
E. Foreign currency translation:
Foreign securities, other assets and liabilities are valued using the foreign
currency exchange rate effective at the end of the reporting period. Cost of
investments is translated at the currency exchange rate effective at the trade
date. The gain or loss resulting from a change in currency exchange rates
between the trade and settlement dates of a portfolio transaction, is treated as
a gain or loss on foreign currency. Likewise, the gain or loss resulting from a
change in currency exchange rates, between the date income is accrued and paid,
is treated as a gain or loss on foreign currency. The Fund does not separate
that portion of the results of operations arising from changes in exchange rates
and that portion arising from changes in the market prices of securities.
21
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 (Continued)
F. Expenses:
Expenses incurred by the Fund with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation
method can be more fairly made.
G. Options:
Each Series may purchase put or call options on securities and securities
indices and foreign currencies for the purpose of hedging against changes in
the market value of the underlying securities or foreign currencies. The
Series pays a premium which is included in the Series' Schedule of
Investments and subsequently marked to market to reflect the current value of
the option. The risk associated with purchasing put and call options is
limited to the premium paid.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Advisers, Phoenix
Investment Counsel, Inc. ("PIC") and National Securities and Research
Corporation ("NSR"), indirect majority-owned subsidiaries of Phoenix Home
Life Mutual Insurance Company ("PHL"), are entitled to a fee based upon the
following annual rates as a percentage of the average daily net assets of
each Series:
1st $1-2 $2+
Series Adviser $1 Billion Billion Billion
- -------------------------- ------ ----------- ------ --------
Equity Opportunities
Series NSR 0.70% 0.65% 0.60%
Strategic Theme Series PIC 0.75% 0.70% 0.65%
Small Cap Series PIC 0.75% 0.70% 0.65%
The Adviser has agreed to assume expenses and reduce the advisory fee for
the benefit of the Strategic Theme and Small Cap Series to the extent that
other operating expenses (excluding investment advisory fees, distribution
fees, interest, taxes, brokerage fees and commissions and extraordinary
expenses) exceed 0.40% and 0.50%, respectively, of the average daily net
assets of each Series.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of $201,865 for Class A shares and
deferred sales charges of $4,675 for Class B shares for the period ended
April 30, 1996. In addition, each Series pays PEPCO a distribution fee at an
annual rate of 0.25% for Class A shares and 1.00% for Class B shares of the
average daily net assets of each Series. The Distribution Plan for Class A
shares provides for fees to be paid up to a maximum on an annual basis of
0.30%; the Distributor has voluntarily agreed to limit the fee to 0.25%. The
Distributor has advised the Fund that of the total amount expensed for the
period ended April 30, 1996, $337,972 was earned by the Distributor and
$332,481 was earned by unaffiliated participants.
As Financial Agent of the Fund, PEPCO receives a fee at an annual rate of
0.03% of the average daily net assets of the Fund for bookkeeping,
administration and pricing services. PEPCO serves as the Fund's Transfer
Agent with State Street Bank and Trust Company as sub-transfer agent. For the
period ended April 30, 1996, transfer agent fees were $392,644 of which PEPCO
retained $130,428 which is net of the fees paid to State Street.
At April 30, 1996, PHL and its affiliates held shares of the Fund as
follows:
Aggregate
Shares Net Asset Value
------ ----------------
Equity Opportunities Series--Class A 111 $ 978
--Class B 16,746 146,190
Strategic Theme Series--Class A 991,510 12,264,979
--Class B 10,009 123,406
Small Cap Series--Class A 490,232 8,206,487
--Class B 10,000 166,800
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities (excluding short-term secuities,
options written, futures, and forward currency contracts) for the
period ended April 30, 1996, aggregated the following:
Purchases Sales
----------- -------------
Equity Opportunities Series $580,972,506 $617,713,174
Strategic Theme Series 73,951,729 38,857,591
Small Cap Series 158,188,621 52,498,198
There were no purchases or sales of long-term U.S. Government securities.
4. CAPITAL LOSS CARRYOVERS
Under current tax law, capital losses realized after October 31, 1995 may be
deferred and treated as occurring on the first day of the following fiscal
year. For the year ended April 30, 1996, the Strategic Theme Series elected
to defer $375,980 in losses occurring between November 1, 1995 and April 30,
1996. In addition, the Equity Opportunities Series was able to utilize losses
deferred in the prior year against current year capital gains in the amount
of $327,805.
22
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1996 (Continued)
5. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Series of the Fund have
recorded several reclassifications in the capital accounts. These
reclassifications have no impact on the net asset value of the Series and are
designed generally to present undistributed income and realized gains on a
tax basis which is considered to be more informative to the shareholder. As
of April 30, 1996, the Series recorded the following reclassifications to
increase (decrease) the accounts listed below:
Accumulated Capital paid
Undistributed net realized in on shares
net investment gains of beneficial
income (losses) interest
-------------- ------------- ---------------
Equity Opportunities
Series $1,070,957 $(1,070,957) $ --
Strategic Theme Series 35,677 -- (35,677)
Small Cap Series 210,390 (186,353) (24,037)
6. SUBSEQUENT EVENT
As of June 14, 1996, the Small Cap Series will be closed for sales to new
investors. The close is the result of management's strategy to keep the fund
at an optimum size for small-cap investing.
TAX INFORMATION NOTICE (Unaudited)
For federal income tax purposes, 12.1% and 2.2% of the ordinary income
dividends paid by the Equity Opportunities Series and the Small Cap Series,
respectively, qualify for the dividends received deduction of corporate
shareholders.
For the fiscal year ended April 30, 1996, the Equity Opportunities Series
distributed $72,857 of long-term capital gain dividends.
This report is authorized for use by other than shareholders only when
accompanied or preceded by the delivery of a current prospectus showing the
sales charge and other material information.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [Price Waterhouse logo]
To the Trustees and Shareholders of
Phoenix Strategic Equity Series Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of the Phoenix Equity Opportunities Series, the Phoenix Strategic
Theme Series and the Phoenix Small Cap Series (constituting separate series
of the Phoenix Strategic Equity Series Fund, hereafter referred to as the
"Fund") at April 30, 1996, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at April 30, 1996 by correspondence
with the custodian and brokers, and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
June 14, 1996
24
<PAGE>
Phoenix Strategic Equity Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Martin J. Gavin, Executive Vice President
Michael E. Haylon, Executive Vice President
William J. Newman, Senior Vice President
Michael K. Arends, Vice President
James M. Dolan, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser--Phoenix Equity
Opportunities Fund
National Securities & Research Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Investment Adviser--Phoenix Strategic Theme
Fund and Phoenix Small Cap Fund
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
Principal Underwriter
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Legal Counsel
Dechert, Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
25
<PAGE>
Phoenix Strategic Equity Series Fund
P.O. Box 2200
Enfield, CT 06083-2200
Bulk Rate Mail
U.S. Postage
PAID
Springfield, MA
Permit No. 444
[Phoenix
Duff & Phelps logo]
PDP 744 (6/96) [Dalbar Honor's Commitment to Investors logo]
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A: Financial Highlights
Included in Part B: Financial Statements and Notes thereto, and Report
of Independent Accountants are included in the
Annual Report to Shareholders for the year ended
April 30, 1996, incorporated by reference.
(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
and herein incorporated by reference.
1.3 Amendment to Declaration of Trust of the Registrant, changing name of the Trust and
establishing additional Series of the Trust, filed via Edgar with Post-Effective Amendment
No. 13 on October 16, 1995 and herein incorporated by reference.
1.4 Amendment to Declaration of Trust of the Registrant, changing the name of the Series
of the Trust filed via Edgar with Post-Effective Amendment No. 14 on April 15, 1996
and herein incorporated by reference.
1.5 Amendment to Declaration of Trust establishing an additional Series of the Trust filed
via Edgar with Post-Effective Amendment No. 15 on May 24, 1996 and herein incorporated
by reference.
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
via Edgar with Post-Effective Amendment No. 13 on October 16, 1995 and herein incorporated
by reference.
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 and herein incorporated by
reference.
7. None.
8.1 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 and herein
incorporated by reference.
8.2 Amendment to Custodian Contract between Registrant and Equity Planning dated October
17, 1996 filed via Edgar herewith.*
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 and herein
incorporated by reference.
9.2 Form of Sales Agreement, filed with Post-Effective Amendment No. 9 on July 19, 1994
and herein incorporated by reference.
9.3 Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation
dated December 11, 1996, filed herewith.*
10. Opinion as to legality of the shares, previously filed, and herein incorporated by
reference.
11. Consent of Independent Accountant, previously filed, and herein incorporated by reference.
12. Not applicable.
13. None.
14. None.
C-1
<PAGE>
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 and herein incorporated by reference.
16. Schedule for computation of yield and effective yield quotations filed previously and
herein incorporated by reference.
17. Financial Data Schedule filed via Edgar with Post-Effective Amendment No. 17 filed
on August 27, 1996, and herein incorporated by reference.
18.1 Rule 18f-3 Dual Distribution Plan effective November 15, 1995 filed via Edgar with
Post-Effective Amendment No. 14 on April 15, 1996 and herein incorporated by reference.
18.2 Amended and Restated Rule 18f-3 Dual Distribution Plan effective May 1, 1996 filed
via Edgar with Post-Effective Amendment No. 17 filed on August 27, 1996, and herein
incorporated by reference.
18.3 Amended and Restated Rule 18f-3 Dual Distribution Plan effective May 1, 1996 filed
via Edgar herewith.*
19. Powers of Attorney filed via Edgar with Post-Effective Amendment No. 14 on April 16,
1996 and herein incorporated by reference.
</TABLE>
*Filed Herewith.
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 December 31, 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) 11,430
------
Shares of Beneficial Interest--Class B (Equity Opportunities) 275
------
Shares of Beneficial Interest--Class A (Theme) 4,819
------
Shares of Beneficial Interest--Class B (Theme) 3,276
------
Shares of Beneficial Interest--Class A (Small Cap) 17,625
------
Shares of Beneficial Interest--Class B (Small Cap) 9,057
------
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 and 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.
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Position with
Investment Advisors Other Business, Profession, Vocation or Employment
- ------------------------------------ -----------------------------------------------------------
<S> <C>
Michael E. Haylon Executive Vice President--Investments, Phoenix Duff & Phelps
Director and President Corporation. Director, Phoenix Equity Planning Corporation.
Executive Vice President, Phoenix Funds and Phoenix-Aberdeen
Series Fund. 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, Phoenix
Director and Chairman Duff & Phelps Corporation. Director and Executive Vice President,
Investments, Phoenix Home Life Mutual Insurance Company.
Director and President, Phoenix Equity Planning Corporation.
Director/Trustee and President, Phoenix Funds. Trustee and
President, Phoenix Duff & Phelps Institutional Mutual Funds
and Phoenix-Aberdeen Series Fund. Director and Executive Vice
President, Phoenix Life and Annuity Company and PHL Variable
Insurance Company. Director, Phoenix Realty Group, Inc., Phoenix
Realty Advisors, Inc., Phoenix Realty Investors, Inc., Phoenix
Realty Securities, Inc., and Phoenix Founders, Inc., and World
Trust Fund. Trustee, Duff & Phelps Utilities Tax-Free Income
Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc.
Director and Vice President, PM Holdings, Inc. Director, W.S.
Griffith & Co., Inc., Phoenix Charter Oak Trust Company and
Worldwide Phoenix Offshore, Inc.
David R. Pepin Executive Vice President and Director, Phoenix Duff & Phelps
Director Corporation. Managing Director, Phoenix- Aberdeen
International Advisors, LLC. Director and Executive Vice
President, Mutual Fund Sales and Operations, Phoenix Equity
Planning Corporation. Executive Vice President, Phoenix Funds,
Phoenix Duff & Phelps Institutional Mutual Funds and Phoenix-
Aberdeen Series Fund. Vice President, Phoenix Home Life Mutual
Insurance Company.
William J. Newman Senior Vice President, The Phoenix Edge Series Fund, Phoenix
Executive Vice President and Chief Income and Growth Fund, Phoenix Multi- Portfolio Fund, Phoenix
Investment Strategist Series Fund, Phoenix Strategic Allocation Fund, Inc., Phoenix
Strategic Equity Series Fund, Phoenix Worldwide Opportunities
Fund, Phoenix-Aberdeen Series Fund, Phoenix Duff & Phelps
Institutional Mutual Funds. Vice President, Common Stock and
Chief Investment Strategist, Phoenix Home Life Mutual Insurance
Company.
William R. Moyer Senior Vice President and Chief Financial Officer, Phoenix Duff
Senior Vice President, & Phelps Corporation. Senior Vice President and Chief Financial
Chief Financial Officer, Phoenix Equity Planning Corporation. Vice President,
Officer and Treasurer Phoenix Funds, Phoenix Duff & Phelps Institutional Mutual Funds,
and Phoenix-Aberdeen Series Fund. Senior Vice President, Chief
Financial Officer and Treasurer, W.S. Griffith and Co., Inc.
Vice President, Investment Products Finance, Phoenix Home Life
Mutual Insurance Company.
C-3
<PAGE>
Name and Position with
Investment Advisors Other Business, Profession, Vocation or Employment
- ------------------------------------ -----------------------------------------------------------
Rosemary T. Strekel Vice President, Phoenix Home Life Mutual Insurance Company.
Senior Vice President and Managing
Director, Private Placements
Eugene A. Charon Vice President and Controller, Phoenix Equity Planning
Vice President and Controller Corporation.
Thomas N. Steenburg Vice President, Counsel and Secretary, Phoenix Duff & Phelps
Vice President, Counsel Corporation and Phoenix Equity Planning Corporation.
and Secretary
David L. Albrycht Vice President, Phoenix Multi-Portfolio Fund, Phoenix
Managing Director, Fixed Income Multi-Sector Fixed Income Fund and Phoenix Multi- Sector Short
Term Bond Fund. Portfolio Manager, Phoenix Home Life Mutual
Insurance Company.
Michael K. Arends Vice President, Phoenix Series Fund and Phoenix Strategic Equity
Managing Director, Equities Series Fund. Portfolio Manager, Phoenix Home Life Mutual
Insurance Company.
Curtiss O. Barrows Vice President, Phoenix Series Fund, Phoenix Multi- Portfolio
Managing Director, Fixed Income Fund, The Phoenix Edge Series Fund. Portfolio Manager, Public
Bonds, Phoenix Home Life Mutual Insurance Company.
Sandra L. Becker Managing Director, Venture Capital and Private Placements,
Managing Director, Phoenix Home Life Mutual Insurance Company.
Private Placements
David Byerly
Managing Director, Fixed Income
Mary E. Canning Vice President, Phoenix Series Fund, The Phoenix Edge Series
Managing Director and Investment Fund and Phoenix Strategic Allocation Fund, Inc. Associate
Strategist, Equities Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company.
Paul M. Chute Managing Director, Investment Department, Phoenix Home Life
Managing Director, Mutual Insurance Company.
Private Placements
Nelson Correa Managing Director, Private Placements, Phoenix Home Life Mutual
Managing Director, Insurance Company.
Private Placements
Jeanne H. Dorey Vice President, The Phoenix Edge Series Fund, Phoenix
Managing Director, Equities Multi-Portfolio Fund and Phoenix Worldwide Opportunities Fund.
Portfolio Manager, International, Phoenix Home Life Mutual
Insurance Company.
Van Harissis Vice President, Phoenix Series Fund and The Phoenix Edge Series
Managing Director, Equities Fund. Senior Portfolio Manager, Howe & Rusling, Inc.
Richard C. Harland Portfolio Manager, Phoenix Home Life Mutual Insurance Company.
Managing Director, Equities Senior Institutional Portfolio Manager, Managing Director, J
& W Seligman & Co.
C-4
<PAGE>
Name and Position with
Investment Advisors Other Business, Profession, Vocation or Employment
- ------------------------------------ -----------------------------------------------------------
Christopher J. Kelleher Vice President, Phoenix Series Fund, The Phoenix Edge Series
Managing Director, Fixed Income Fund, Phoenix Duff & Phelps Institutional Mutual Funds. Portfolio
Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Company.
Thomas S. Melvin, Jr. Vice President, Phoenix Multi-Portfolio Fund and Phoenix Duff
Managing Director, Equities & Phelps Institutional Mutual Funds. Portfolio Manager, Common
Stock, Phoenix Home Life Mutual Insurance Company.
C. Edwin Riley, Jr. Vice President, Phoenix Series Fund, The Phoenix Edge Series
Managing Director, Equities Fund, Phoenix Strategic Allocation Fund, Inc. Director of Equity
Management, NationsBanc.
Amy L. Robinson Vice President, The Phoenix Edge Series Fund and Phoenix Series
Managing Director, Equity Trading Fund. Managing Director, Securities Administration, Phoenix
Home Life Mutual Insurance Company.
James D. Wehr Vice President, The Phoenix Edge Series Fund, Phoenix Series
Managing Director, Fixed Income Fund, Phoenix Multi-Portfolio Fund, Phoenix California
Tax-Exempt Bonds, Inc. and Phoenix Duff & Phelps Institutional
Mutual Funds. Managing Director, Public Fixed Income, Phoenix
Home Life Mutual Insurance Company.
Matthew Considine Vice President, Phoenix Multi-Portfolio Fund
Director, Equity Research
Timothy M. Heaney Vice President, Phoenix Multi-Portfolio Fund and Phoenix
Director, Fixed Income Research California Tax Exempt Bonds, Inc.
Peter S. Lannigan Vice President, Phoenix Multi-Portfolio Fund
Director, Fixed Income Research
Dorothy J. Skaret Vice President, Phoenix Series Fund, The Phoenix Edge Series
Director, Money Market Trading Fund, Phoenix Duff & Phelps Institutional Mutual Funds,
Phoenix-Aberdeen Series Fund, Phoenix Realty Securities, Inc.
Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Company.
George I. Askew
Portfolio Manager, Equities
John M. Hamlin Vice President, Phoenix Income and Growth Fund and Phoenix Series
Portfolio Manager, Equities Fund. Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company.
David Lui Vice President, Phoenix Worldwide Opportunities Fund, Phoenix
Portfolio Manager, Equities Multi-Portfolio Fund, The Phoenix Edge Series Fund. Associate
Portfolio Manager, International Portfolios, Phoenix Home Life
Mutual Insurance Company. Vice President, Asian Equities,
Alliance Capital Management.
</TABLE>
C-5
<PAGE>
The respective principal addresses of the companies or other entities named
above are as follows:
<TABLE>
<S> <C>
Alliance Capital Management 1345 Avenue of the Americas
New York, NY 10105
Duff & Phelps Utilities Tax-Free Income Inc. 55 East Monroe Street
Chicago, IL 60603
Duff & Phelps Utility and Corporate Bond Trust Inc. 55 East Monroe Street
Chicago, IL 60603
Howe & Rusling, Inc. 120 East Avenue
Rochester, NY 14604
J&W Seligman & Co. 100 Park Avenue
New York, NY 10017
NationsBanc One NationsBanc Plaza
Charlotte, NC 28255
Phoenix-Aberdeen International Advisers LLC One American Row
Hartford, CT 06102-5056
PHL Variable Insurance Company One American Row
Hartford, CT 06102-5056
Phoenix-Aberdeen Series Fund 101 Munson Street
Greenfield, MA 01301
Phoenix Charter Oak Trust Company One American Row
Hartford, CT 06102-5056
Phoenix Duff & Phelps Corporation 56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Phoenix Duff & Phelps Institutional Mutual Funds 101 Munson Street
Greenfield, MA 01301
Phoenix Equity Planning Corporation 100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Phoenix Founders, Inc. 38 Prospect Street
Hartford, CT 06115-0479
Phoenix Home Life Mutual Insurance Company One American Row
Hartford, CT 06102-5056
Phoenix Investment Counsel, Inc. 56 Prospect Street
Hartford, CT 06115-0480
Phoenix Life and Annuity Company One American Row
Hartford, CT 06102-5056
Phoenix Realty Advisors, Inc. 38 Prospect Street
Hartford, CT 06115-0479
</TABLE>
C-6
<PAGE>
Item 29. Principal Distributor
(a) See "Distribution Plans" and "How to Buy Shares" in the Prospectus and
"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:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Distributor with Registrant
----------------------------------- ------------------------------- ------------------------
<S> <C> <C>
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
David R. Pepin Director and None
56 Prospect Street Executive Vice President,
P.O. Box 150480 Mutual Fund Sales
Hartford, CT 06115-0480 and Operations
Leonard J. Saltiel Managing Director, Vice President
100 Bright Meadow Blvd. Operations and Service
P.O. Box 2200
Enfield, CT 06083-2200
Paul A. Atkins Senior Vice President and None
56 Prospect Street Sales Manager
P.O. Box 150480
Hartford, CT 06115-0480
Maris Lambergs Senior Vice President, None
100 Bright Meadow Blvd. Insurance and
P.O. Box 2200 Independent Division
Enfield, CT 06083-2200
William R. Moyer Senior Vice President, Vice President
100 Bright Meadow Blvd. and Chief Financial Officer
P.O. Box 2200
Enfield, CT 06083-2200
John F. Sharry Managing Director, None
100 Bright Meadow Blvd. Mutual Fund Distribution
P.O. Box 1900
Enfield, CT 06083-1900
G. Jeffrey Bohne Vice President, Secretary
100 Bright Meadow Blvd. Mutual Fund
P.O. Box 2200 Customer Service
Enfield, CT 06083-2200
Eugene A. Charon Vice President and None
100 Bright Meadow Blvd. Controller
P.O. Box 2200
Enfield, CT 06083-2200
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
William E. Keen III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 1900
Enfield, CT 06083-1900
C-7
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Distributor with Registrant
----------------------------------- ------------------------------- ------------------------
Elizabeth R. Sadowinski Vice President, None
100 Bright Meadow Blvd. Administration
P.O. Box 2200
Enfield, CT 06083-2200
Thomas N. Steenburg Vice President, Assistant Secretary
56 Prospect Street Counsel and Secretary
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
(c) Equity Planning received the following commissions or other compensation
from the Registrant during the fiscal year ending April 30, 1996:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Name of Principal Discounts and Redemption and Brokerage Other
Distributor Commissions Repurchase Commissions Compensation
----------------- ---------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Equity Planning $201,865 $4,675 $0 $71,572
</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 distributor,
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 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) Registrant hereby undertakes to file a post-effective amendment using
financial statements for Micro Cap Series, which need to be certified,
within four to six-months after the effective date of this
post-effective amendment to the Registration Statement.
C-8
<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 21st day of February, 1997.
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 21st day of February, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
---------------------------
C. Duane Blinn* Trustee
---------------------------
Robert Chesek* Trustee
---------------------------
E. Virgil Conway* Trustee
Treasurer (principal
--------------------------- financial and
Nancy G. Curtiss* accounting officer)
---------------------------
Harry Dalzell-Payne* Trustee
---------------------------
Francis E. Jeffries* Trustee
---------------------------
Leroy Keith, Jr.* Trustee
Trustee and President
/s/ Philip R. McLoughlin (principal executive
-------------------------- officer)
Philip R. McLoughlin
S-1
<PAGE>
Signature Title
--------- -----
---------------------------
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.* Trustee
</TABLE>
By /s/ Philip R. McLoughlin
------------------------------
*Philip R. McLoughlin pursuant to
powers of attorney filed
previously.
S-2
Exhibit 8.2
-----------
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and Phoenix Strategic Equity Series Fund (f/k/a Phoenix Equity
Opportunities Fund and f/k/a National Stock Fund) (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated October 14, 1993 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and conditions
under which the Custodian maintains the Fund's securities and other non-cash
property in the custody of certain foreign sub-custodians in conformity with
the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions:
1. Notwithstanding any provisions to the contrary set forth in the Custodian
Contract, the Custodian may hold securities and other non-cash property for
all of its customers, including the Fund, with a foreign sub-custodian in a
single account that is identified as belonging to the Custodian for the
benefit of its customers, provided, however, that (i) the records of the
Custodian with respect to securities and other non-cash property of the Fund
which are maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held
by the foreign sub-custodian be held separately from any assets of the
foreign sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representatives this 17th day of October, 1996.
PHOENIX STRATEGIC EQUITY SERIES FUND
By:/s/ Michael E. Haylon
----------------------------------
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY
By:/s/ Donald E. Lynn
----------------------------------
Title: Executive Vice President
Exhibit 9.3
FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 11th day of December, 1996 by
and between Phoenix Equity Planning Corporation, a Connecticut corporation
having a place of business located at 100 Bright Meadow Boulevard, Enfield,
Connecticut (the "Financial Agent") and each of the undersigned mutual funds
(hereinafter collectively and singularly referred to as the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the daily
net asset value of shares of the Trust in accordance with instructions received
from time to time from the Board of Trustees of the Trust; which instructions
shall be certified to Financial Agent by the Trust's Secretary. Financial Agent
shall report such net asset value so determined to the Trust and shall perform
such other services as may be requested from time to time by the Trust as are
reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and in
the places required by Rule 31a-2 under the Investment Company Act of 1940, as
amended, those books and records maintained by Financial Agent. Such books and
records are the property of the Trust and shall be surrendered promptly to the
Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of the
Trust, Financial Agent shall receive, within eight days after the end of each
month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted by it
in the exercise of due care in discharging its duties specifically described
hereunder and shall be answerable and accountable only for its own acts and
omissions and not for those of any agent employed by it nor for those of any
bank, trust company, broker, depository, correspondent or other person.
Financial Agent shall be protected in acting upon any instruction, notice,
request, consent, certificate, resolution, or other instrument or paper believed
by Financial Agent to be genuine, and to have been properly executed, and shall,
unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by Financial
Agent hereunder a certificate signed by the Secretary of the Trust. Financial
Agent shall be entitled, with respect to questions of law relating to its duties
hereunder, to advice of counsel (which may be counsel for the Trust) and, with
respect to anything done or omitted by it in good faith hereunder in conformity
with the advice of or based upon an opinion of counsel, to be held harmless by
the Trust from all claims of loss or damage. Nothing herein shall protect
Financial Agent against any liability to the Trust or to its respective
shareholders to which Financial Agent would otherwise be subject by reason of
its willful misfeasance, bad faith, gross
<PAGE>
negligence or reckless disregard of its duties hereunder. Except as provided in
this paragraph, Financial Agent shall not be entitled to any indemnification by
the Trust.
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. This Agreement shall be construed and the rights and obligations of the
parties hereunder enforced in accordance with the laws of the Commonwealth of
Massachusetts.
<PAGE>
9. This Agreement shall become effective on January 1, 1997.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first written above.
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX SERIES FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
By: /s/ Philip R. McLoughlin
----------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ David R. Pepin
----------------------------
David R. Pepin
Executive Vice President
<PAGE>
SCHEDULE A
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
Annual Financial Agent Fees shall be based on the following formula:
(1) An incremental schedule applies as follows:
<TABLE>
<S> <C>
Up to $100 million: 5 basis points on average daily net assets
$100 million to $300 million: 4 basis points on average daily net assets
$300 million thru $500 million: 3 basis points on average daily net assets
Greater than $500 million: 1.5 basis points on average daily net assets
</TABLE>
A minimum fee will apply as follows:
Money Market $35,000
Equity $50,000
Balanced $60,000
Fixed Income $70,000
International $70,000
REIT $70,000
(2) An additional charge of $12,000 applies for each additional class of
shares above one, over and above the minimum asset-based fee previously noted.
The following tables indicates the classification and effective date for
each of the applicable fund/series/portfolio:
Classification Series Name
-------------- -----------
Money Market Phoenix Money Market Fund Series
Equity Phoenix Aggressive Growth Fund Series
Phoenix Convertible Fund Series
Phoenix Endowment Equity Portfolio
Phoenix Equity Opportunities Fund
Phoenix Growth Fund Series
Phoenix Micro Cap Fund
Phoenix Mid Cap Portfolio
Phoenix Small Cap Fund
Phoenix Strategic Theme Fund
<PAGE>
Classification Series Name
-------------- -----------
Balanced Phoenix Balanced Fund Series
Phoenix Income and Growth Fund
Phoenix Strategic Allocation Fund, Inc.
Fixed Income Phoenix California Tax Exempt Bonds, Inc.
Phoenix Diversified Income Portfolio
Phoenix Emerging Markets Bond Portfolio
Phoenix High Yield Fund Series
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Tax-Exempt Bond Portfolio
Phoenix U.S. Government Securities Fund Series
International Phoenix International Portfolio
Phoenix Worldwide Opportunities Fund
REIT Phoenix Real Estate Securities Portfolio
Exhibit 18.3
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PHOENIX FUNDS
(the "Funds")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
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Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended
("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Funds shall offer
multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this
Plan.
2. The Multi-Class Structure
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The portfolios of the Funds listed on Schedule A hereto shall offer two
classes of shares, Class A and Class B ("Multi-Class Portfolios"). Shares of the
Multi-Class Portfolios shall represent an equal pro rata interest in the
respective Multi-Class Portfolio and, generally, shall have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class shall have a different designation; (b) each class shall bear any Class
Expenses, as defined by Section 2(b), below; (c) each class shall have exclusive
voting rights on any matter submitted to shareholders that relates solely to its
distribution arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. In addition, Class A and Class B
shares shall have the features described in Sections a, b, c and d, below.
a. Distribution Plans
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The Funds have adopted Distribution Plans pursuant to Rule 12b-1 with
respect to each Multi-Class Portfolio, containing substantially the following
terms:
i. Class A shares of each Multi-Class Portfolio shall reimburse
Phoenix Equity Planning Corporation (the "Distributor") for costs and
expenses incurred in connection with distribution and marketing of shares
thereof, as provided in the Class A Distribution Plan and any supplements
thereto, subject to an annual limit of 0.25%, or in some cases 0.30%, of
the average daily net assets of a Multi-Class Portfolio's Class A shares.
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ii. Class B shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution
and marketing of shares thereof, as provided in the Class B Distribution
Plan and any supplements thereto, subject to an annual limit of 1.00% of
the average daily net assets of a Multi-Class Portfolio's Class B shares.
b. Allocation of Income and Expenses
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i. General.
The gross income, realized and unrealized capital gains and losses and
expenses (other than Class Expenses, as defined below) of each Multi-Class
Portfolio shall be allocated to each class on the basis of its net asset
value relative to the net asset value of the Multi-Class Portfolio.
Expenses to be so allocated include expenses of the Funds that are not
attributable to a particular Multi-Class Portfolio or class of a
Multi-Class Portfolio but are allocated to a Multi- Class Portfolio ("Fund
Expenses") and expenses of a particular Multi-Class Portfolio that are not
attributable to a particular class of that Multi-Class Portfolio
("Portfolio Expenses"). Fund Expenses include, but are not limited to,
trustees' fees, insurance costs and certain legal fees. Portfolio Expenses
include, but are not limited to, certain state registration fees, custodial
fees, advisory fees and other expenses relating to the management of the
Multi-Class Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses") shall
be limited to: (1) transfer agency fees; (2) stationery, printing, postage,
and delivery expenses relating to preparing and distributing shareholder
reports, prospectuses, and proxy statements; (3) state Blue Sky
registration fees; (4) SEC registration fees; (5) expenses of
administrative personnel and services to the extent related to another
category of class-specific expenses; (6) trustees' fees and expenses; (7)
accounting expenses, auditors' fees, litigation expenses, and legal fees
and expenses; and (8) expenses incurred in connection with shareholder
meetings. Expenses described in subsection (a) (i) and (ii) above of this
paragraph must be allocated to the class for which they are incurred. All
other expenses described in this paragraph will be allocated as Class
Expenses, if a Fund's President and Treasurer have determined, subject to
Board approval or ratification, which of such categories of expenses will
be treated as Class Expenses, consistent with applicable legal principles
under the 1940 Act and the Internal Revenue Code of 1986, as amended
("Code"). The difference between the Class Expenses allocated to each share
of a class during a year and the Class Expenses allocated to each share of
any other class during such year shall at all times be less than .50% of
the average daily net asset value of the class of shares with the smallest
average net asset value. The afore-described description of Class Expenses
and any amendment thereto shall be subject to the continuing availability
of an opinion of counsel or a ruling from the Internal Revenue Service to
the effect that any such allocation of expenses or the assessment of higher
distribution fees and transfer agency costs on any class of shares does not
result in any dividends or distributions constituting "preferential
dividends" under the Code.
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In the event that a particular expense is no longer reasonably
allocable by class or to a particular class, it shall be treated as a Fund
Expense or Portfolio Expense as applicable, and in the event a Fund Expense
or Portfolio Expense becomes allocable as a Class Expense, it shall be so
allocated, subject to compliance with Rule 18f-3 and Board approval or
ratification.
The initial determination of expenses that will be allocated as Class
Expenses and any subsequent changes thereto as set forth in this Plan shall
be reviewed by the Board of Trustees and approved by such Board and by a
majority of the Trustees who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Trustees").
iii. Waivers or Reimbursements of Expenses
Investment Advisor may waive or reimburse its management fee in whole
or in part provided that the fee is waived or reimbursed to all shares of
the Fund in proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a Class
Expense may waive or reimburse that fee in whole or in part only if the
revised fee more accurately reflects the relative cost of providing to each
Multi-Class Portfolio the service for which the Class Expense is charged.
Distributor may waive or reimburse a Rule 12b-1 Plan fee payment in
whole or in part.
c. Exchange Privileges
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Shareholders of a Multi-Class Portfolio may exchange shares of a particular
class for shares of the same class in another Multi-Class Portfolio, at the
relative net asset values of the respective shares to be exchanged and with no
sales charge, provided the shares to be acquired in the exchange are, as may be
necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount. Each
Multi-Class Portfolio reserves the right to temporarily or permanently terminate
exchange privileges, impose conditions upon the exercision of exchange
privileges, or reject any specific order for any dealer, shareholder or person
whose transactions seem to follow a timing pattern, including those who request
more than one exchange out of a Multi-Class Portfolio within any thirty (30) day
period. Each Multi-Class Portfolio reserves the right to terminate or modify
these exchange privileges at any time upon giving prominent notice to
shareholders at least 60 days in advance.
d. Conversion Feature
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Class B Shares of a Multi-Class Portfolio will automatically convert to
Class A Shares of that portfolio, without sales charge, at the relative net
asset values of each such classes, not later
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than eight years from the acquisition of the Class B Shares. The conversion of
Class B Shares to Class A Shares is subject to the continuing availability of an
opinion of counsel or a ruling from the Internal Revenue Service to the effect
that the conversion of shares does not constitute a taxable event under federal
income tax law.
3. Board Review
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a. Approval of Amended and Restated Plan
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The Board of Trustees, including a majority of the Independent Trustees, at
a meeting held on November 20, 1996, approved the Amended and Restated Plan
based on a determination that the Plan, including the expense allocation, is in
the best interests of each class and Multi-Class Portfolio individually and of
the Funds. Their determination was based on their review of information
furnished to them which they deemed reasonably necessary and sufficient to
evaluate the Plan.
b. Approval of Amendments
----------------------
The Plan may not be amended materially unless the Board of Trustees,
including a majority of the Independent Trustees, have found that the proposed
amendment, including any proposed related expense allocation, is in the best
interests of each class and Multi-Class Portfolio individually and of the Funds.
Such funding shall be based on information required by the Board and furnished
to them that the Board deems reasonably necessary to evaluate the proposed
amendment.
c. Periodic Review
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The Board shall review reports of expense allocations and such other
information as they request at such times, or pursuant to such schedule, as they
may determine consistent with applicable legal requirements.
4. Contracts
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Any agreement related to the Multi-Class System shall require the parties
thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
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The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of the
first day of each Fund's current fiscal year.
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6. Amendments
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The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3(b) of this
Plan.
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SCHEDULE A
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PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND:
DIVERSIFIED INCOME PORTFOLIO
EMERGING MARKETS BOND PORTFOLIO
INTERNATIONAL PORTFOLIO
MID CAP PORTFOLIO
REAL ESTATE SECURITIES PORTFOLIO
TAX-EXEMPT BOND PORTFOLIO
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX SERIES FUND:
AGGRESSIVE GROWTH FUND SERIES
BALANCED FUND SERIES
CONVERTIBLE FUND SERIES
GROWTH FUND SERIES
HIGH YIELD FUND SERIES
MONEY MARKET FUND SERIES
U.S. GOVERNMENT SECURITIES FUND SERIES
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND
MICRO CAP FUND
SMALL CAP FUND
STRATEGIC THEME FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX WORLDWIDE OPPORTUNITIES FUND
