As filed with the Securities and Exchange Commission on August 29, 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 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 26 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 27 [X]
(Check appropriate box or boxes)
-------------
Phoenix Strategic Equity Series Fund
(Exact Name of Registrant as Specified in Charter)
-------------
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
-------------
Thomas N. Steenburg
Vice President, Counsel and Secretary
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)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on ________ 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
Form 24F-2 for the fiscal year ended on April 30, 1997 was filed by Registrant
with the Commission on June 27, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 A]
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 Objectives
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; Distribution Plans; Net Asset
Value; Investor Account Services
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; Investment
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 Advisers
17. Brokerage Allocation .................................... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities ........................ Net Asset Value; How to Buy Shares
19. Purchase, Redemption and Pricing of Securities How to Buy Shares; Investor Account Services;
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>
The following pages from Post-Effective Amendment No. 24 to the Registration
Statement on Form N-1A filed with the Securities and Exchange Commission on
February 21, 1997 are incorporated herein by reference thereto:
Part A
Version B Cross Reference pages to items required by Rule 495(a)
Version B Prospectus pages 1 through 24.
Part B
Version B Statement of Additional Information pages 1 through 23
April 30, 1996 Annual Report
<PAGE>
[cover]
PHOENIX
FUNDS
PROSPECTUS
OCTOBER 28, 1997
Phoenix Strategic Equity Series Fund
[triangle] EQUITY
OPPORTUNITIES
FUND
[triangle] STRATEGIC THEME
FUND
[triangle] SMALL CAP FUND
[logo] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
October 28, 1997
Phoenix Strategic Equity Series Fund (the "Fund") is an open-end
management investment company whose shares are offered in four series, three of
which are offered in 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 Equity Opportunities Fund ("Equity Opportunities Series") seeks as
its investment objective long-term growth of capital from investment in a
diversified group of stocks or securities convertible into stocks. This Series
intends to invest in stock of all types and is not restricted as to any
specific industry. Any income derived from investments will be incidental.
Phoenix Strategic Theme Fund ("Theme Series") seeks as its investment
objective long-term appreciation of capital. This Series seeks to identify
securities benefiting from long-term trends present in the United States and
abroad. The Series intends to invest primarily in common stocks believed by the
Adviser to have substantial potential for capital growth. Since many trends may
be early in their development and no history of industry growth patterns is
available, securities owned may present a high degree of risk.
Phoenix Small Cap Fund ("Small Cap Series") seeks as its investment
objective 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. Companies are selected by
the Adviser on the basis of their long-term potential for expanding their
revenue, profit and earnings per share base through a variety of methods
including the growth of existing products, introduction of new products,
improved operating efficiencies, market share gains, penetration of new markets
or acquisitions. Current income is not a factor in the selection of securities.
The Series is intended to provide an opportunity for investors who are not
ordinarily in a position to perform the specialized type of research or
analysis involved in investing in small and emerging growth 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 Fund is contained in the Statement of Additional
Information, dated October 28, 1997, which has been filed with the Securities
and Exchange Commission (the "Commission") and is available upon request at no
charge by calling (800) 243-4361 or by writing to Phoenix Equity Planning
Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200. The Statement of Additional Information is incorporated herein by
reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity, and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board, or any other agency, and involve
investment risk, including possible loss of principal.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY) (800) 243-1926
<PAGE>
TABLE OF CONTENTS
Page
-----
INTRODUCTION ................................. 3
FUND EXPENSES ................................. 4
FINANCIAL HIGHLIGHTS ........................ 6
PERFORMANCE INFORMATION ..................... 8
INVESTMENT OBJECTIVES AND POLICIES ............ 8
Equity Opportunities Series ............... 9
Small Cap Series ........................... 9
Theme Series .............................. 10
INVESTMENT TECHNIQUES AND RELATED RISKS ...... 10
INVESTMENT RESTRICTIONS ..................... 15
MANAGEMENT OF THE FUND ........................ 15
DISTRIBUTION PLANS ........................... 16
HOW TO BUY SHARES ........................... 18
INVESTOR ACCOUNT SERVICES ..................... 21
NET ASSET VALUE .............................. 23
HOW TO REDEEM SHARES ........................ 23
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 24
ADDITIONAL INFORMATION ........................ 25
2
<PAGE>
INTRODUCTION
This Prospectus describes 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, three of which are
described in this Prospectus. This Prospectus offers shares of the Equity
Opportunities Series, Theme Series and Small Cap Series currently offered by
the Fund (the "Series"). Each Series has a different investment objective, and
is designed to meet different investment needs.
The Investment Advisers
The investment adviser for the Theme Series and Small Cap Series is
Phoenix Investment Counsel, Inc. ("PIC" or the "Adviser"). National Securities
& Research Corporation ("National") (PIC and National are sometimes
collectively referred to as the "Adviser") is the investment adviser of the
Equity Opportunities Series. Each Adviser is a subsidiary of Phoenix Duff &
Phelps Corporation and indirect subsidiaries of Phoenix Home Life Mutual
Insurance Company. See "Management of the Fund" for a description of the
Investment Advisory Agreements and management fees.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or Distributor"),
serves as national distributor of the Fund's shares. See "Distribution Plans"
and the Statement of Additional Information. Equity Planning also acts as
financial agent of the Fund and as such receives a fee. 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 1998 fiscal year. Pursuant to the distribution plan adopted for
Class B Shares, the Fund shall reimburse the Distributor up to a maximum annual
rate of 1.00% of the Fund's average daily Class B Share net assets 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. Pursuant to the distribution plan adopted for Class C Shares and
Class M Shares, the Theme Series shall reimburse the Distributor up to a
maximum annual rate of 1.00% and 0.50%, respectively, of the average daily net
assets of the Theme Series for distribution expenses incurred in connection
with the sale and promotion of each class of shares and for furnishing
shareholder services. See "Distribution Plans."
Purchase of Shares
The Fund offers two classes of shares of each Series and two additional
classes of shares of the Theme 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 (the "Class A
Shares" and "Class M Shares") or (ii) on a contingent deferred basis (the
"Class B Shares" and "Class C Shares"). Completed applications for the purchase
of shares should be mailed to the Phoenix Funds, c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
Class A and M Shares are offered to the public at the next determined net
asset value after receipt of the order by State Street Bank and Trust Company
("State Street Bank") plus a sales charge. The maximum initial sales charge is
4.75% and 3.50%, respectively, of the offering price on single purchases of
less than $50,000. The sales charges are reduced on a graduated scale on single
purchases of $50,000 or more.
Class B and C Shares are offered to the public at the next determined net
asset value after receipt of an order by State Street Bank with no sales
charge. Class B Shares are subject to a sales charge if they are redeemed
within five years of purchase. Class C Shares redeemed within one year of
purchase are subject to a 1% sales charge.
Shares of each Class represent an identical interest in the investment
portfolio of a Series and have the same rights. For more information on fees
and charges applicable for each Series and Class, refer to "Fund Expenses" and
"Alternative Purchase Arrangements."
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investment program designated "Investo-Matic") and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment amounts
are available under certain circumstances. See "How to Buy Shares."
Redemption of Shares
Class A and M Shares of a Series may be redeemed at any time at the net
asset value per share next computed after receipt of a redemption request by
Equity Planning, the Fund's transfer agent. Class B and C shareholders
redeeming shares within certain time periods 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 any Series will achieve its investment
objectives. As a result of each Series' substantial investment in the stock
market, the net asset values of Fund shares will fluctuate in response to
changes in market and economic conditions, as well as the financial condition
and prospects of issuers in which each Series invests.
The Theme Series utilizes an approach to equity investing which attempts
to identify and exploit investment opportunities ahead of other investors.
Investments based upon this type of strategic theme identification may not
positively correlate with movements in the stock market as a whole. Pursuing
investments in similar or related industries may also increase overall risk.
Small capitalization companies typically are subject to a greater degree
of change in earnings and business prospects than are larger, more established
companies. In addition, securities of small capitalization companies are traded
in lower volume than those issued by larger companies and are more volatile
than those of larger companies. Accordingly, the Small 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 will
incur. The expenses and fees set forth in the table are based on the fiscal
year ended April 30, 1997.
<TABLE>
<CAPTION>
Equity Opportunities Series
---------------------------------------
Class A Class B
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% None
Maximum Sales Load Imposed on Reinvested
Dividends None None
Deferred Sales Load (as a percentage of original None 5% during the first year,
purchase price or redemption proceeds, decreasing 1% annually to 2%
as applicable) during the fourth and fifth
years; decreasing to 0% after
the fifth year
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees
Advisory Fees 0.70% 0.70%
12b-1 Fees (after waiver) (a) 0.25% 1.00%
Other Expenses 0.28% 0.28%
------ -----
Total Fund Operating Expenses 1.23% 1.98%
====== =====
<CAPTION>
Small Cap Series
-----------------------------------------
Class A Class B
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% None
Maximum Sales Load Imposed on Reinvested
Dividends None None
Deferred Sales Load (as a percentage of original None 5% during the first year,
purchase price or redemption proceeds, decreasing 1% annually to 2%
as applicable) during the fourth and fifth
years; decreasing to 0% after
the fifth year
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees
Advisory Fees 0.75% 0.75%
12b-1 Fees (after waiver) (a) 0.25% 1.00%
Other Expenses 0.37% 0.37%
------ ----
Total Fund Operating Expenses 1.37% 2.12%
====== ====
</TABLE>
- -----------
(a) "12b-1 Fees" represent an asset based sales charge that, for a long
term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
While the Class A Share Distribution Plan continues to provide for a 0.30%
distribution fee, the Distributor has voluntarily agreed to limit the fee to
0.25% for the 1998 fiscal year. 12b-1 fees would have been .30% absent
Distributor's waiver. 12b-1 Fees stated for Class B Shares include a Service
Fee. See "Distribution Plans."
4
<PAGE>
<TABLE>
<CAPTION>
Theme
Series
---------
Class A
Shares
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75%
Maximum Sales Load Imposed on Reinvested
Dividends None
Deferred Sales Load (as a percentage of original None
purchase price or redemption proceeds,
as applicable)
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees
Advisory Fees 0.75%
12b-1 Fees (after waiver) (a) 0.25%
Other Expenses 0.40%
------
Total Fund Operating Expenses 1.40%
======
<CAPTION>
Theme Series
---------------------------------------------------------------------------
Class B Class C Class M
Shares Shares (b) Shares (b)
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None 3.50%
Maximum Sales Load Imposed on Reinvested
Dividends None None None
Deferred Sales Load (as a percentage of original 5% during the first year, 1% during the first year None
purchase price or redemption proceeds, decreasing 1% annually to 2%
as applicable) during the fourth and fifth years;
decreasing to 0% after the fifth
year
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees
Advisory Fees 0.75% 0.75% 0.75%
12b-1 Fees (after waiver) (a) 1.00% 1.00% 0.50%
Other Expenses 0.40% 0.40% 0.40%
----- ----- ----
Total Fund Operating Expenses 2.15% 2.15% 1.65%
===== ===== ====
</TABLE>
- -----------
(a) "12b-1 Fees" represent an asset based sales charge that, for a long
term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
While the Class A Share Distribution Plan continues to provide for a 0.30%
distribution fee, the Distributor has voluntarily agreed to limit the fee to
0.25% for the 1998 fiscal year. 12b-1 fees would have been .30% absent
Distributor's waiver. 12b-1 Fees stated for Class B and Class C Shares include
a Service Fee. See "Distribution Plans."
(b) Prior to October 28, 1997, Class C and M Shares were not offered.
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
Example* 1 year 3 years 5 years 10 years
- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a hypothetical $1,000
investment assuming (1) a 5% annual return and (2) redemption at
the end of each time period.
Equity Opportunities Series (Class A Shares) $59 $85 $112 $189
Equity Opportunities Series (Class B Shares) $60 $82 $107 $211
Small Cap Series (Class A Shares) $61 $89 $119 $204
Small Cap Series (Class B Shares) $62 $86 $114 $226
Theme Series (Class A Shares) $61 $90 $120 $207
Theme Series (Class B Shares) $62 $87 $115 $229
Theme Series (Class C Shares) $32 $67 $115 $248
Theme Series (Class M Shares) $51 $85 $122 $224
An investor would pay the following expenses on the same $1,000
investment assuming no redemption at the end of each period:
Equity Opportunities Series (Class A Shares) $59 $85 $112 $189
Equity Opportunities Series (Class B Shares) $20 $62 $107 $211
Small Cap Series (Class A Shares) $61 $89 $119 $204
Small Cap Series (Class B Shares) $22 $66 $114 $226
Theme Series (Class A Shares) $61 $90 $120 $207
Theme Series (Class B Shares) $22 $67 $115 $229
Theme Series (Class C Shares) $22 $67 $115 $248
Theme Series (Class M Shares) $51 $85 $122 $224
</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. Class B Share figures
assume conversion to Class A Shares after eight years. See "Management of the
Fund," "Distribution Plans" and "How to Buy Shares."
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for each
Series by class of shares for the Fund. The financial information has been
audited by Price Waterhouse LLP, independent accountants. Their opinion and the
Fund's Financial statements and notes thereto are incorporated by reference in
the Statement of Additional Information. The Statement of Additional
Information and the Fund's most recent Annual Report (containing the report of
Independent Accountants and additional information relating to Fund
performance) are available at no charge upon request by calling (800) 243-4361.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
Phoenix Equity Opportunities Fund
<TABLE>
<CAPTION>
Class A
-----------------------------------
Year Ended April 30,
1997 1996
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ...... $ 8.81 $ 7.40
Income from investment operations
Net investment income (loss) ............... (0.03)(4) (0.04)(4)
Net realized and unrealized gain (loss) ... (0.90) 2.34
-------- --------
Total from investment operations ......... (0.93) 2.30
-------- --------
Less distributions
Dividends from net investment income ...... -- --
Distributions from net realized gains ...... (0.94) (0.89)
In excess of accumulated net realized gains (0.05) --
-------- --------
Total distributions ..................... (0.99) (0.89)
-------- --------
Change in net asset value .................. (1.92) 1.41
-------- --------
Net asset value, end of period ............ $ 6.89 $ 8.81
======== ========
Total return(1) ........................... (12.19)% 32.86%
Ratios/supplemental data:
Net assets, end of period (thousands) ...... $163,396 $213,600
Ratio to average net assets of:
Expenses ................................. 1.23% 1.25%
Net investment income (loss) ............... (0.39)% (0.53)%
Portfolio turnover ........................ 412% 302%
Average commission rate paid(5) ............ $ 0.0543 $ 0.0600
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 7.31 $ 9.64 $ 8.59 $ 8.36 $ 7.61
Income from investment operations
Net investment income (loss) ............... 0.04 0.05 0.06 0.11 0.17
Net realized and unrealized gain (loss) ... 0.58 0.57 1.34 0.71 0.74
--------- --------- --------- --------- ---------
Total from investment operations ......... 0.62 0.62 1.40 0.82 0.91
--------- --------- --------- --------- ---------
Less distributions
Dividends from net investment income ...... (0.05) (0.05) (0.06) (0.12) (0.16)
Distributions from net realized gains ...... (0.48) (2.90) (0.29) (0.47) --
In excess of accumulated net realized gains -- -- -- -- --
--------- --------- --------- --------- ---------
Total distributions ..................... (0.53) (2.95) (0.35) (0.59) (0.16)
--------- --------- --------- --------- ---------
Change in net asset value .................. 0.09 (2.33) 1.05 0.23 0.75
--------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 7.40 $ 7.31 $ 9.64 $ 8.59 $ 8.36
========= ========= ========= ========= =========
Total return(1) ........................... 9.16% 4.99% 16.50% 10.30% 12.16%
Ratios/supplemental data:
Net assets, end of period (thousands) ...... $179,666 $186,037 $215,570 $204,792 $213,147
Ratio to average net assets of:
Expenses ................................. 1.32% 1.26% 1.35% 1.36% 1.41%
Net investment income (loss) ............... 0.60% 0.57% 0.67% 1.29% 2.19%
Portfolio turnover ........................ 358% 167% 31% 73% 95%
Average commission rate paid(5) ............ N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Class A
------------------------------------------
Year Ended April 30,
1990 1989 1988
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period ...... $ 8.31 $ 7.52 $ 9.72
Income from investment operations
Net investment income (loss) ............... 0.25 0.29 0.27
Net realized and unrealized gain (loss) ... 0.38 1.17 (0.24)
-------- --------- -----------
Total from investment operations ......... 0.63 1.46 0.03
-------- --------- -----------
Less distributions
Dividends from net investment income ...... (0.27) (0.30) (0.29)
Distributions from net realized gains ...... (1.06) (0.37) (1.94)
In excess of accumulated net realized gains -- -- --
-------- --------- -----------
Total distributions ..................... (1.33) (0.67) (2.23)
-------- --------- -----------
Change in net asset value .................. (0.70) 0.79 (2.20)
-------- --------- -----------
Net asset value, end of period ............ $ 7.61 $ 8.31 $ 7.52
======== ========= ===========
Total return(1) ........................... 7.08% 20.52% (1.72)%
Ratios/supplemental data:
Net assets, end of period (thousands) ...... $210,667 $ 230,066 $ 218,749
Ratio to average net assets of:
Expenses ................................. 1.09% 0.89% 0.74%
Net investment income (loss) ............... 2.88% 3.75% 3.35%
Portfolio turnover ........................ 49% 59% 91%
Average commission rate paid(5) ............ N/A N/A N/A
<CAPTION>
Class B
------------------------------------------------------
From
Inception
Year Ended April 30, 7/19/94 to
1997 1996 4/30/95
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net asset value, beginning of period ...... $ 8.73 $ 7.39 $ 7.28
Income from investment operations
Net investment income (loss) ............... (0.09)(4) (0.10)(4) 0.00
Net realized and unrealized gain (loss) ... (0.88) 2.33 0.59
------- ------- -----
Total from investment operations ......... (0.97) 2.23 0.59
------- ------- -----
Less distributions
Dividends from net investment income ...... -- -- --
Distributions from net realized gains ...... (0.94) (0.89) (0.48)
In excess of accumulated net realized gains (0.05) -- --
------- ------- -----
Total distributions ..................... (0.99) (0.89) (0.48)
------- ------- -----
Change in net asset value .................. (1.96) 1.34 0.11
------- ------- -----
Net asset value, end of period ............ $ 6.77 $ 8.73 $ 7.39
======= ======= =====
Total return(1) ........................... (12.79)% 31.92% 8.69%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ...... $ 1,666 $ 1,348 $ 525
Ratio to average net assets of:
Expenses ................................. 1.98% 2.06% 2.15%(2)
Net investment income (loss) ............... (1.15)% (1.18)% (0.06)%(2)
Portfolio turnover ........................ 412% 302% 358%
Average commission rate paid(5) ............ $0.0543 $0.0600 N/A
</TABLE>
- -----------
(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
(5) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
6
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
Phoenix Small Cap Fund
<TABLE>
<CAPTION>
Class A
-----------------------------------------
From Inception
Year Ended 10/16/95 to
4/30/97 4/30/96
----------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ............... $ 16.74 $ 10.00
Income from investment operations
Net investment income (loss) ..................... (0.05)(5) (0.04)(1)(5)
Net realized and unrealized gain (loss) ......... (2.53) 6.79
-------- -------
Total from investment operations ............... (2.58) 6.75
-------- -------
Less distributions
Dividends from net investment income ............ -- --
Dividends from net realized gains ............... (0.02) --
In excess of net investment income ............... -- (0.01)
In excess of accumulated net realized gains ...... (0.01) --
-------- -------
Total distributions .............................. (0.03) (0.01)
-------- -------
Change in net asset value ........................ (2.61) 6.74
-------- -------
Net asset value, end of period ..................... $ 14.13 $ 16.74
======== =======
Total return(2) .................................... (15.43)% 67.48%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............... $155,089 $98,372
Ratio to average net assets of:
Expenses .......................................... 1.37% 1.50% (3)
Net investment income (loss) ..................... (0.28)% (0.53)%(3)
Portfolio turnover ................................. 325% 103%(4)
Average commission rate paid(6) .................. $ 0.0540 $0.0657
<CAPTION>
Class B
-----------------------------------------
From Inception
Year Ended 10/16/95 to
4/30/97 4/30/96
----------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ............... $ 16.68 $ 10.00
Income from investment operations
Net investment income (loss) ..................... (0.17)(5) (0.09)(1)(5)
Net realized and unrealized gain (loss) ......... (2.50) 6.77
------- -------
Total from investment operations ............... (2.67) 6.68
------- -------
Less distributions
Dividends from net investment income ............ -- --
Dividends from net realized gains ............... (0.02) --
In excess of net investment income ............... -- --
In excess of accumulated net realized gains ...... (0.01) --
------- -------
Total distributions .............................. (0.03) --
------- -------
Change in net asset value ........................ (2.70) 6.68
------- -------
Net asset value, end of period ..................... $ 13.98 $ 16.68
======= =======
Total return(2) .................................... (16.03)% 66.80%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............... $97,647 $45,168
Ratio to average net assets of:
Expenses .......................................... 2.12% 2.26%(3)
Net investment income (loss) ..................... (1.03)% (1.44)%(3)
Portfolio turnover ................................. 325% 103%(4)
Average commission rate paid(6) .................. $0.0540 $0.0657
</TABLE>
- -----------
(1) Includes reimbursement of operating expenses by investment adviser 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.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
Phoenix Strategic Theme Fund
<TABLE>
<CAPTION>
Class A
------------------------------------
From Inception
Year Ended 10/16/95 to
4/30/97 4/30/96
------------ -----------------------
<S> <C> <C>
Net asset value, beginning of period ............... $ 12.37 $ 10.00
Income from investment operations(7)
Net investment income (loss) ..................... 0.06(5) (0.00)(1)(5)
Net realized and unrealized gain (loss) ......... (0.38) 2.39
--------- -------
Total from investment operations ............... (0.32) 2.39
--------- -------
Less distributions
Dividends from net investment income ............ (0.01) --
In excess of accumulated net realized gains ...... (0.01) --
Tax return of capital ........................... -- (0.02)
--------- -------
Total distributions .............................. (0.02) (0.02)
--------- -------
Change in net asset value ........................ (0.34) 2.37
--------- -------
Net asset value, end of period ..................... $ 12.03 $ 12.37
========= =======
Total return(2) .................................... (2.57)% 23.89%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............... $ 77,827 $33,393
Ratio to average net assets of:
Expenses .......................................... 1.40% 1.40%(3)
Net investment income (loss) ..................... 0.49% (0.09)%(3)
Portfolio turnover ................................. 532% 175%(4)
Average commission rate paid(6) .................. $ 0.0590 $0.0663
<CAPTION>
Class B
-----------------------------------------
From Inception
Year ended 10/16/95 to
4/30/97 4/30/96
----------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ............... $ 12.33 $ 10.00
Income from investment operations(7)
Net investment income (loss) ..................... (0.03)(5) (0.06)(1)(5)
Net realized and unrealized gain (loss) ......... (0.38) 2.40
------- -------
Total from investment operations ............... (0.41) 2.34
------- -------
Less distributions
Dividends from net investment income ............ -- --
In excess of accumulated net realized gains ...... (0.01) --
Tax return of capital ........................... -- (0.01)
------- -------
Total distributions .............................. (0.01) (0.01)
------- -------
Change in net asset value ........................ (0.42) 2.33
------- -------
Net asset value, end of period ..................... $ 11.91 $ 12.33
======= =======
Total return(2) .................................... (3.31)% 23.41%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............... $49,843 $11,920
Ratio to average net assets of:
Expenses .......................................... 2.15% 2.16%(3)
Net investment income (loss) ..................... (0.23)% (1.06)%(3)
Portfolio turnover ................................. 532% 175%(4)
Average commission rate paid(6) .................. $0.0590 $0.0663
</TABLE>
- -----------
(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.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(7) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from
anticipated results depending on the timing of share purchases and
redemptions.
7
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements, sales literature or reports to shareholders or prospective
investors. Both yield and total return figures are computed separately for each
Class of Shares of a 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 a 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 each Class of
Shares of a Series will be expressed in terms of the average annual compound
rate of return of a hypothetical investment in such Class of Shares of a Series
over a period of 1, 5 and 10 years (or up to the life 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 and M Shares and the maximum
contingent deferred sales charge applicable to a complete redemption of the
investment in the case of Class B and C Shares, and assume that all dividends
and distributions on each Class of Shares are reinvested when paid. 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 any Series. Performance data quoted
for Class B, C and M Shares covering periods prior to the inception of such
Classes of Shares will reflect historical performance of Class A Shares of a
Series as adjusted for the higher operating expenses applicable to such Class
of Shares.
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 a 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 a Series against certain widely acknowledged outside standards
or indices for stock and bond market performance, such as the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500"), Standard & Poor's 400 MidCap
Index (the "S&P 400"), Dow Jones Industrial Average, Russell 2000 Index,
Russell 2000 Growth Index, Europe Australia Far East Index (EAFE), Consumer
Price Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index.
The S&P 500 is a commonly quoted measure of stock market performance and
represents common stocks of companies of varying sizes segmented across 90
different industries which are listed on the New York Stock Exchange, the
American Stock Exchange and traded over the NASDAQ National Market System.
Advertisements, sale literature and other communications may contain
information about any Series or Adviser's current investment strategies and
management style. Current strategies and style may change to allow any 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 a Series' equity or bond return figure to
well-known indices of market performance, including, but not limited to: the
S&P 500, Dow Jones Industrial Average, CS First Boston High Yield Index and
Salomon Brothers Corporate and Government Bond Indices.
Performance information for a Series reflects only the performance of a
hypothetical investment in Class A, Class B, Class C or Class M Shares of that
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 each Series, see the Statement
of Additional Information.
The Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Series and a comparison of
that performance to a securities market index.
INVESTMENT OBJECTIVES
AND POLICIES
Each Series has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies among
the three Series can be expected to affect the investment return of each Series
and the degree of market and financial risk to which each Series is subject.
The investment objective of each Series is deemed to be a fundamental policy
which may not be changed without the approval of a vote of a majority of the
outstanding shares of that
8
<PAGE>
Series. Except as noted below, a Series' investment policies are not deemed to
be fundamental and, therefore, may be changed without shareholder approval.
Since certain risks are inherent in the ownership of any security, there can be
no assurance that a Series will achieve its investment objective.
Equity Opportunities Series
The investment objective of the Equity Opportunities Series is long-term
growth of capital from investment in a diversified group of stocks or
securities convertible into stocks. Any income derived from investments will be
incidental. The Series' investment objective is a fundamental policy which may
not be changed without the approval of the holders of a majority of the
outstanding shares of the Series.
At least 65% of the Series' total assets are, under normal circumstances,
invested in stocks. The Series may invest in stocks of all types and, subject
to investment restrictions, is not restricted as to any particular industry in
its investments. It is generally not the policy of the Series to purchase
securities for trading purposes, although there may be a limited number of
short-term transactions. The Series will not invest in cash or cash equivalents
in an amount equal to or exceeding 10% of total net assets, unless the Adviser
deems it necessary to exceed this limit for temporary defensive purposes in
response to adverse economic or market conditions. During adverse economic or
market conditions, 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 Adviser deems a temporary defensive
position to be prudent. However, when the Series' assets are in cash or cash
equivalents, it is not investing in securities selected to meet the Series'
investment objective.
Risk Considerations
Investments in common stocks for capital appreciation are subject to the
risks of changing economic and market conditions which may affect the
profitability and financial conditions of the companies in whose securities the
Series is invested and the Adviser's ability to anticipate those changes.
Since investments normally will consist primarily of securities considered
to have appreciation potential, the assets of the Series may be considered to
be subject to greater risks than would be involved if the Series invested in
securities which do not have such potential.
Additional discussion regarding risks involved in investing in the Series
are described in the "Investment Techniques and Related Risks" section below.
Small Cap Series
The investment objective of the Small Cap Series is long-term growth of capital
from investment in a diversified group of stocks or securities convertible into
stocks. Any income derived from investments will be incidental. Under normal
circumstances, at least 65% of the Series' total assets will be invested in
stocks of companies with a total market capitalization of $1 billion or less at
the time of acquisition. Up to 25% of the Series' total assets may be invested
in small capitalization foreign issuers.
Companies 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 strong fundamental prospects will be sought, but
given the limited operating history of smaller companies, in certain situations
some of the above factors will not be available or remain to be proven. Full
development of these companies frequently takes time and, for this reason, the
Series should be considered as a long-term investment and not as a vehicle for
seeking short-term profits.
The Series may invest in stocks of all types and, subject to investment
restrictions limiting concentration, is not restricted as to industry in its
investments. During adverse economic or market conditions, 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 Adviser deems a temporary defensive position to be prudent. However, 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
Smaller 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. Given the limited operating history and rapidly changing
fundamental prospects, investment returns from smaller capitalization companies
are highly volatile. Smaller companies may at times find their ability to raise
capital impaired by their size or lack of operating history. Product lines are
often less diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading volume
creating points in time when the securities are illiquid.
Other factors influencing the performance and volatility of small
capitalization stocks include industry developments within major markets, major
economic trends and developments and general market movements in both the
equity and fixed income markets.
Investment in equity securities of foreign small capitalization companies
may involve special risks, particularly from political and economic
developments abroad and differences between foreign and U.S. regulatory
systems. Foreign small capitalization companies may be less liquid and their
prices more volatile than comparable domestic securities issuers.
Additional discussion regarding risks involved in investing in the Series
are described in the "Investment Techniques and Related Risks" section below.
9
<PAGE>
Theme Series
The Theme Series seeks as its investment objective 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. Examples of
thematic investing would include having invested in oil and gas exploration
companies during the energy shortage years of the late 1970's, having invested
in companies which benefited from lower inflation trends during the early
1980's, or having invested in companies acquiring cellular franchises in the
late 1980's, and technology companies during the 1990's.
The Adviser will not concentrate its investments in specific industries in
amounts greater than 25% of the assets of the Series in any particular
"industry(ies)" or group(s) of "industries" without shareholder approval. In
determining when and whether to invest in particular industries, the Adviser
will establish strategic (major changes affecting markets for prolonged
periods) and tactical (focused, short-term) investment themes. Investment
themes shall generally reflect trends which appear likely to drive stocks with
similar technologies and products or which embody broad social, economic,
political and technological considerations; offer substantial appreciation
potential; present a visionary idea or creative solution; and exhibit some
independence from economic cycles. The Adviser may change investment themes
once it has determined that an investment theme has become saturated or fully
exploited. The Adviser may pursue one or more investment themes at any time.
The Adviser will seek to identify companies which, in addition to being
considered well positioned to benefit from investment themes identified, are
also believed to possess attributes such as, but not limited to, good financial
resources, satisfactory return on capital, enhanced industry position and
superior management skills.
The Theme Series may also invest in preferred stocks, investment grade
bonds (Moody's Investors Service, Inc. rating Baa or higher or Standard &
Poor's Ratings Group rating BBB or higher), convertible preferred stocks and
convertible debentures if in the judgment of the Adviser the investment would
further its investment objective. The Series may also engage in certain options
transactions and enter into financial futures contracts and related options for
hedging purposes. The Series may also invest up to 35% of its assets in the
securities of foreign issuers. See "Investment Techniques and Related Risks."
Each security held will be monitored to determine whether it is contributing to
the basic objective of long-term appreciation of capital.
For temporary defensive purposes (as when market conditions for growth
stocks are adverse), investments may be made in fixed income securities with or
without warrants or conversion features. In addition, for such temporary
defensive purposes, the Series may pursue a policy of retaining cash or
investing part or all of its assets in cash equivalents. 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
To the extent that the Series invests in a single investment theme, it may
be more susceptible to adverse economic, political or regulatory developments
than would be the case if it invested in a broader spectrum of themes. In
addition, the Series' investments in common stocks of companies with limited
operating history may result in higher volatility in returns. Further, the
successful effectuation of the thematic investment strategy used by the Adviser
is dependent upon the Adviser's ability to anticipate emerging market trends,
exploit such investment opportunities and to thereafter divest of such
securities upon saturation. No assurances can be given that the investment
strategies utilized will positively correlate with any or all such marketplace
trends or that other, possibly more profitable investment trends will not be
missed.
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
Each Series may invest in convertible securities. A convertible security
is a bond, debenture, note, preferred stock or other security that may be
converted into or exchanged for a prescribed amount of common stock of the same
or a different issuer within a particular period of time at a specified price
or formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique investment characteristics such as
(1) higher yields than common stocks, but lower yields than comparable
nonconvertible securities, (2) a lesser degree of fluctuation in value than the
underlying stock since they have fixed income characteristics, and (3) the
potential for capital appreciation if the market price of the underlying common
stock increases. Up to 5% of each of these 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
a 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
Each Series may, from time to time, write covered call option contracts as
a means of increasing the yield on the Series' portfolio and also as a means or
providing limited protection against decreases in the market value of the
Series' portfolio. Options are technically forms of "derivatives" in that their
value is dependent upon fluctuations in the value of other
10
<PAGE>
securities. Such contracts will be written on securities in which the Series
has authority to invest and on securities indices listed on an organized
national securities exchange. The aggregate value of the securities underlying
such call options will be limited to not more than 25% of the net assets of the
Series.
A call option on a security gives the purchaser of the option the right to
buy the underlying security from the writer at the exercise price at any time
prior to the expiration of the contract, regardless of the market price of the
security during the option period. A call option is "covered" if, throughout
the life of the option, (1) the Series owns the optioned securities, (2) the
Series maintains in a segregated account with its Custodian, cash or cash
equivalents or U.S. Government securities with a value sufficient to meet its
obligations under the call, or (3) if the Series owns an offsetting call
option. The premium paid to the writer is the consideration for undertaking the
obligations under the option contract. The writer forgoes the opportunity to
profit from any increase in the market price of the underlying security above
the exercise price except insofar as the premium represents such a profit. The
Series will write only call option contracts when it is believed that the total
return to the Series can be increased through such premiums consistent with the
Series' investment objective.
The Series may also write covered call options on securities indices.
Through the writing of call index options the Series can achieve many of the
same objectives as through the use of call options on individual securities.
Call options on securities indices are similar to call options on a security
except that, rather than the right to take delivery of a security at a
specified price, a call option on a securities index gives the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the securities index upon which the call option is based is greater than the
exercise price of the option. The writing of such index call options would be
subject to the present limitation of covered call option writing of not more
than 25% of the net assets of the Series. The writing of option contracts is a
highly specialized activity which involves investment techniques and risks
different from those ordinarily associated with investment companies, and the
restrictions listed above would tend to reduce such risks.
The Series may purchase options to close out a position (i.e., enter into
a "closing purchase transaction" (the purchase of a call option on the same
security with the same exercise price and expiration date as the call option
which it has previously written on any particular security)). When a security
is sold from the Series' portfolio, the Series will effect a closing purchase
transaction so as to close out any existing call option on that security,
realizing a profit or loss depending on whether the amount paid to purchase a
call option is less or more than the amount received from the sale thereof. In
addition, the Series may wish to purchase a call option to hedge its portfolio
against an anticipated increase in the price of securities it intends to
purchase or to purchase a put option to hedge its portfolio against an
anticipated decline in securities prices. No more than 5% of the assets of the
Series may be invested in the purchase of put and call options, including index
options.
Purchasing Call and Put Options, Warrants and Stock Rights
Each 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 such Series' investment
objectives. These 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 these 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. A Series using this investment
technique may invest up to 5% of its net assets in warrants and stock rights,
but no more than 2% of its net assets in warrants and stock rights not listed
on the New York Stock Exchange or the American Stock Exchange.
Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer. However, the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities, and in a wider range of
expiration dates and exercise prices, than exchange-traded options. Since there
is no exchange, pricing is normally done by reference to information from a
market maker, which information is carefully monitored or caused to be
monitored by the Adviser and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options, there
can be no assurance that a continuous liquid secondary market will exist for
any particular option at any specific time. Consequently, these 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 a 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 such 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
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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
Each 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.
A 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.
A Series will engage in transactions in financial futures contracts and
related options only for hedging purposes and not for speculation. In addition,
a Series will not purchase or sell any financial futures contract or related
option if, immediately thereafter, the sum of the cash or U.S. Treasury bills
committed with respect to such Series' existing futures and related options
positions and the premiums paid for related options would exceed 5% of the
market value of such 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 such Series' initial margin deposit with respect
thereto, will be deposited in a pledged account with the Fund's custodian bank
to fully collateralize the position and thereby ensure that it is not
leveraged. The extent to which a 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 such 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
Each Series may invest in repurchase agreements, either for temporary
defensive purposes necessitated by adverse market conditions or to generate
income from its excess cash balances, provided that no more than 10% of the
total assets may be invested in the aggregate in repurchase agreements having
maturities of more than seven days. A repurchase agreement is an agreement
under which a 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 such Series and is unrelated to the
interest rate on the underlying instrument. A repurchase agreement acquired by
such 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 such Series' account by the Funds' 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, each Series may each
lend its portfolio securities to broker-dealers and
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other financial institutions in amounts up to 33% of the market or other fair
value of its net assets. Loans of portfolio securities will always be fully
collateralized and will be made only to borrowers considered by the Adviser to
be credit-worthy. Lending portfolio securities involves risk of delay in the
recovery of the loaned securities and in some cases the loss of rights in the
collateral should the borrower fail financially. See the Statement of
Additional Information.
Foreign Currency Transactions
The value of the assets of a 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. A 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, 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
contract, minus the Series' initial margin deposit with respect thereto, will
be deposited in a pledged account with the Series' custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
When a 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 utilizing this investment technique 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. A Series using this investment technique will have
to convert its holdings of foreign currencies into United States dollars from
time to time. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Investing in Foreign Securities
Each Series may invest up to 25% of its total assets (provided however,
the Theme Series may invest up to 35% of its total assets) in the securities of
foreign issuers. Each Series may invest in a broad range of foreign securities
including equity, debt and convertible securities and foreign government
securities. Each Series may also invest in domestic securities denominated in
foreign currencies.
Investing in the securities of foreign companies involves special risks
and considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio transactions,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investment or exchange control regulations, political instability
which could affect U.S. investments in foreign countries, and potential
restrictions on the flow of international capital. Additionally, dividends
payable on foreign securities may be subject to foreign taxes withheld prior to
distribution.
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Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility, and changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar.
Many of the foreign securities held by each 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 a
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 Theme Series and Small Cap Series may from time to time increase their
ownership of securities holdings above the amounts otherwise possible by
borrowing from banks at fixed amounts of interest and investing the borrowed
funds. The Fund will borrow only from banks, and only if immediately after such
borrowing the value of the assets of the Series (including the amount borrowed)
less its liabilities (not including any borrowings) is at least three times the
amount of funds borrowed for investment purposes. The effect of this provision
is to permit the Fund to borrow up to 33-1/3% of the net assets of such Series,
not including the proceeds of any such borrowings. However, the amount of the
borrowings will be dependent upon the availability and cost of credit from time
to time. If, due to market fluctuations or other reasons, the value of such
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 those Series with respect
to which the borrowing has been made. Because such expense would not otherwise
be incurred, the net investment income of such 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 such 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 such 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 such Series, the net
asset value of the Series will decrease faster than would otherwise be the
case.
Private Placements and Rule 144A Securities
Each Series may purchase securities which have been privately issued and
are subject to legal restrictions on resale or which are issued to qualified
institutional investors under special rules adopted by the SEC. Such securities
may offer higher yields than comparable publicly traded securities. Such
securities ordinarily can be sold by these Series in secondary market
transactions to certain qualified investors pursuant to rules established by
the SEC, in privately negotiated
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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, these Series may have to bear certain costs of registration in order
to sell such shares publicly. Except in the case of securities sold to
qualifying institutional investors under special rules adopted by the SEC for
which the Trustees of these Series determine the secondary market is liquid,
Rule 144A securities will be considered illiquid. Trustees of these Series may
determine the secondary market is liquid based upon the following factors which
will be reviewed periodically as required pursuant to procedures adopted by
these Series: the number of dealers willing to purchase or sell the security;
the frequency of trades; dealer undertakings to make a market in the security,
and the nature of the security and its market. Investing in Rule 144A
Securities could have the effect of increasing the level of these Series'
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities. Each Series may invest up to
15% of its net assets in illiquid securities.
INVESTMENT RESTRICTIONS
The investment restrictions to which each Series is subject, together with
the investment objectives of the Series, are fundamental policies of the Fund
which may not be changed as to any Series without the approval of such Series'
shareholders. Among the more significant restrictions, each Series may not (i)
invest more than 5% of its total assets in securities issued or guaranteed by
any one issuer (except for U.S. Government obligations; any foreign government,
its agencies and instrumentalities) or (ii) purchase more than 10% of the
outstanding voting securities or more than 10% of the securities of any class
of any one issuer.
A detailed description of each Series' investment restrictions is
contained in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund is a mutual fund technically known as an open-end management
investment 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 Advisers
The investment adviser to the Theme Series and Small Cap Series is Phoenix
Investment Counsel, Inc. ("PIC"), 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. 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 Theme
and Small Cap Series, PIC also serves as investment adviser to Phoenix Series
Fund, Phoenix Multi-Portfolio Fund (other than the Real Estate Securities
Portfolio), Phoenix Duff & Phelps Institutional Mutual Funds (other than
Enhanced Reserves Portfolio and Real Estate Equity Securities Portfolio),
Phoenix Strategic Allocation Fund, Inc. and The Phoenix Edge Series Fund (other
than the Real Estate Securities Series and Aberdeen New Asia Series) and as
sub-adviser to investment portfolios of Chubb America Fund, Inc. and SunAmerica
Series Trust. PIC was originally organized in 1932 as John Chase, Inc. As of
April 30, 1997, PIC had approximately $17.96 billion in assets under
management.
For managing or directing the management of the investments of the Theme
and Small Cap Series, PIC is entitled to a fee, payable monthly, at the
following annual rates based upon the aggregate net asset values of the
following Series:
1st $1-2 $2+
Series Billion Billion Billion
- ----------- --------- --------- --------
Theme 0.75% 0.70% 0.65%
Small Cap 0.75% 0.70% 0.65%
The total advisory fee of 0.75% of the aggregate net assets of the Theme
and Small Cap 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
Theme and Small Cap Series. The ratio of the management fees to average net
assets for the fiscal period ended April 30, 1997 for the Theme Series and
Small Cap Series was 0.75%.
The investment adviser to the Equity Opportunities Series is National
Securities & Research Corporation ("National"), which is also located at 56
Prospect Street, Hartford, CT 06115-0480. National is a direct subsidiary of
Phoenix Duff & Phelps Corporation. National also acts as the investment adviser
or manager for Phoenix Multi-Sector Short Term Bond Fund, Phoenix California
Tax Exempt Bonds, Inc., Phoenix Income and Growth Fund, Phoenix Multi-Sector
Fixed Income Fund, Inc. and the Phoenix Worldwide Opportunities Fund. National
has acted as an investment adviser for over sixty years. As of April 30, 1997,
National had approximately $1.6 billion in assets under management.
As compensation for its services, National receives a fee, which is
accrued daily against the value of the Equity Opportunities Series' net assets
and is paid monthly by the Fund. The fee is computed at an annual rate of 0.70%
of the Series' average daily net assets of up to $1 billion, 0.65% of
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the Series' average daily net assets from $1 billion to $2 billion and 0.60% of
the Series' average daily net assets in excess of $2 billion. The ratio of the
management fees to average net assets for the fiscal year ended April 30, 1997
for the Equity Opportunities Series was 0.70%.
The Portfolio Managers
Equity Opportunities Series
Mr. Michael K. Arends serves as Portfolio Manager of the Equity
Opportunities Series and as such is primarily responsible for the day to day
management of the Series' investments. Mr. Arends has served in this capacity
since September 1994. Mr. Arends is a Managing Director, Equities, of PIC and
National and is also a Vice President of the Fund and Phoenix Series Fund.
During 1989 to 1994, Mr. Arends served as Co-Portfolio Manager for various
Kemper Funds, the Kemper Investment Portfolio-Growth Fund, Kemper Growth Fund
and Kemper Retirement Fund Series.
Theme Series and Small Cap Series
Mr. William J. Newman serves as Portfolio Manager of the Theme Series and
Small Cap Series and as such is primarily responsible for the day to day
management of each 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 of National. He is a 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, Phoenix-Aberdeen Series 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 each Series, at
the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
(b) a minimum fee of $50,000 for each Series; and (c) an annual fee of
$12,000 for each class of shares beyond one. For its services during the Fund's
fiscal year ended April 30, 1997, Equity Planning received $211,223 or .04% of
average net assets.
The Custodian and Transfer Agent
The custodian of the assets of the Fund is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts 02101 (the "Custodian").
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Fund (the "Transfer Agent") for
which it is paid $14.95 plus out of pocket expenses for each designated
shareholder account. The Transfer Agent engages sub-agents to perform certain
shareholder servicing functions 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. prohibit its members from seeking orders for the execution of
investment company portfolio transactions on the basis of their sales of
investment company shares, under such Rules, sales of investment company shares
may be considered in selecting brokers to effect portfolio transactions.
Accordingly, some portfolio transactions are, subject to such Rules and to
obtaining best prices and executions, effected through dealers (excluding
Equity Planning) who sell shares of the Fund.
DISTRIBUTION PLANS
The offices of Equity Planning, the national distributor of the Fund's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of the
Fund and a director and officer of Equity Planning. David R. Pepin, a Director
and officer of Equity Planning, is an officer of the Fund. Michael E. Haylon, a
director of Equity Planning, is an officer of the fund. G. Jeffrey Bohne, Nancy
G. Curtiss, William E. Keen, III, William R. Moyer, Leonard J. Saltiel and
Thomas N. Steenburg are officers of the Fund and officers of Equity Planning.
Equity Planning and the Fund have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Fund shares sold subject to an initial sales charge and those
sold subject to a contingent deferred sales charge. The Fund has granted Equity
Planning the exclusive right to purchase from the Fund and resell, as
principal, shares needed to fill unconditional orders for Fund shares. Equity
Planning may sell Fund shares through its registered representatives or through
securities dealers with whom it has sales agreements. Equity Planning may also
sell Fund shares pursuant to sales agreements entered into with banks or
bank-affiliated securities brokers who, acting as agent for their customers,
place orders for Fund shares with Equity Planning. Although the Glass-Steagall
Act prohibits banks and bank affiliates from engaging in the business of
underwriting, distributing or selling securities (including mutual fund
shares), banking regulators have not indicated that such institutions are
prohibited from purchasing mutual fund shares upon the order and for the
account of their customers. If, because of changes in law or regulations, or
because of new interpretations of existing law, it is determined that agency
transactions of banks or bank-affiliated securities 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
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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," the "Class C Plan," the "Class M 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.
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
fiscal year 1998 to 0.25% annually of the average daily net assets of the
Fund's Class A Shares. Under the Class B and Class C Plans, the Fund may
reimburse the Distributor monthly for actual expenses of the Distributor up to
1.00% annually of the average daily net assets of the Fund's Class B and C
Shares, respectively. Pursuant to the Class M Plan, the Fund may reimburse the
Distributor monthly for actual expenses of the Distributor up to 0.50% annually
of the average daily net assets of the Fund's Class M 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 and Class C Shares); (ii) compensation, sales incentives and
payments to sales, marketing and service personnel; (iii) payments to broker-
dealers and other financial institutions which have entered into agreements
with the Distributor for services rendered in connection with the sale and
distribution of shares of the Fund; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Fund; (v) the costs of preparing and distributing promotional materials; (vi)
the cost of printing the Fund's Prospectus and Statement of Additional
Information for distribution to potential investors; (vii) such other similar
services that the Trustees determine are reasonably calculated to result in the
sale of shares of the Fund, provided, however that a portion of such amount
paid to the Distributor, which portion shall be equal to or less than 0.25%
annually of the average daily net assets of the Fund, may be paid for
reimbursing the costs of providing services to shareholders, including
assistance in connection with inquiries related to shareholder accounts (the
"Service Fee"). From the Service Fee the Distributor expects to pay a quarterly
fee to qualifying broker/dealer firms, as compensation for providing personal
services to shareholders and/or maintaining shareholder accounts, with respect
to shares sold by such firms. This fee will not exceed on an annual basis 0.25%
of the average annual net asset value of such shares, and will be in addition
to sales charges on Fund shares which are reallowed to such firms. To the
extent that the entire amount of the Service fee is not paid to such firms, the
balance will serve as compensation for personal and account maintenance
services furnished by the Distributor. The Distributor also pays to dealers, as
additional compensation with respect to sales of Class C and M shares, 0.75%
and 0.25% of the average annual net asset value of each class, respectively.
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.
Under the Class A Plan, reimbursement or payment of expenses may not be
made unless such payment or reimbursement occurs prior to the earliest of (a)
the last day of the one-year period commencing on the last day of the calendar
quarter during which the specific service or activity was performed, or (b) the
last day of the one-year period commencing on the last day of the calendar
quarter during which payment for the service or activity was made by a third
party on behalf of the Fund. The Class B Plan, Class C Plan, and Class M Plan,
however, do not limit the reimbursement of distribution related expenses to
expenses incurred in specified time periods.
For the fiscal year ended April 30, 1997, the Fund paid the Distributor
$1,084,114 under the Class A Plan and $1,325,489 under the Class B Plan. The
fees were used to compensate broker-dealers for servicing shareholder's
accounts, including $87,100 paid to W.S. Griffith & Co., Inc., an affiliate,
compensating sales personnel and reimbursing the Distributor for commission
expenses and expenses related to preparation of the marketing material. On a
quarterly basis, the Fund's Trustees review a report on expenditures under each
Plan and the purposes for which expenditures were made. The Trustees conduct an
additional, more extensive review annually in determining whether each Plan
will be continued. By its terms, continuation of each Plan from year to year is
contingent on annual approval by a majority of the Fund's Trustees and by a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in the
operation of either Plan or any related agreements (the "Plan Trustees"). Each
Plan provides that it may not be amended to increase materially the costs which
the Fund may bear without approval of the applicable class of shareholders of
the affected Series of the Fund and that other material amendments must be
approved by a majority of the Plan Trustees by vote cast in person at a meeting
called for the purpose of considering such amendments. Each Plan further
provides that while it is in effect, the selection and nomination of Trustees
who are not "interested persons" shall be committed to the discretion of the
Trustees who are not "interested persons." Each Plan may be
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terminated at any time by vote of a majority of the Plan Trustees or a majority
of the applicable class of outstanding shares of the Fund.
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit each Series and all classes of shareholders. The Class A
Plan was approved by Class A shareholders of the Equity Opportunities Series at
a special meeting of shareholders held on April 30, 1993. The Class B Plan and
the Class C and Class M Plans were adopted by the Trustees (including a
majority of independent Trustees) on May 25, 1994 and May 28, 1997,
respectively.
The National Association of Securities Dealers, Inc. ("NASD") regards
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend either or both Plans.
HOW TO BUY SHARES
How do you invest?
You may open a fund account with an initial investment of $500. This
amount is reduced to $25 for investments made under the "Investo-Matic" plan
(see the Fund's Application), individual retirement accounts or under the
systematic exchange privilege described below. The initial investment
requirement is waived for investments made under pension, profit sharing or
employee benefit plans as well as in connection with reinvested dividends and
distributions.
You may make additional investments at any time with at least $25. The
subsequent investment minimum is waived for investments made under pension,
profit sharing or employee benefit plans as well as in connection with
reinvested dividends and distributions.
An application should be completed to open a new Phoenix Funds account. A
check for the amount you wish to invest, made payable to the "Phoenix Funds,"
(along with the completed application if opening a new account), must be sent
to: Phoenix Funds, c/o State Street Bank and Trust Company ("State Street
Bank"), P.O. Box 8301, Boston, MA 02266-8301. See the Statement of Additional
Information for more information regarding the reduction or elimination of the
minimum initial or subsequent investments. You may also write to the
Distributor at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-2200 or
call (800) 243-1574.
Shares are sold at the public offering price based on the net asset value
for the class of shares bought next determined after State Street Bank receives
your order. In most cases, in order to receive that day's public offering
price, State Street Bank must receive your order before the close of regular
trading on the New York Stock Exchange. See "Net Asset Value."
What are the classes and how do they differ?
The Fund presently offers investors four classes of shares which bear sales
and distribution charges in different amounts. Currently, only the Theme Series
offers Class C and M Shares.
Class A Shares. If you buy Class A Shares, you will pay a sales charge at
the time of purchase equal to 4.75% of the offering price (4.99% of the amount
invested). The sales charge may be reduced or waived under certain conditions.
Class A Shares are not subject to any charges by the Fund when they are sold.
Class A Shares have lower Rule 12b-1 fees and pay higher dividends than any
other class.
Class B Shares. If you buy Class B Shares, you will not pay a sales charge
at the time of purchase. If you sell your Class B Shares within the first 5
years after they are bought, you will pay a sales charge of up to 5% of your
shares' value. See "Deferred Sales Charge Alternative--Class B Shares." This
charge declines to zero over a period of 5 years and may be waived under
certain conditions. Class B shares have higher Rule 12b-1 fees and pay lower
dividends than Class A and M Shares. Class B Shares automatically convert to
Class A Shares eight years after purchase. The Distributor intends to limit
investments in Class B Shares to: (a) $250,000 for any person; (b) $1 million
for any unallocated employer sponsored plan; and (c) $250,000 for each
participant in any allocated qualified employer sponsored plan, including
401(k) plans, provided such plan uses an approved participant tracking system.
Class B Shares will not be sold to any qualified employee benefit plan,
endowment fund or foundation if, on the date of the initial investment, such
entity has assets of over $10 million or more than 200 participant employees.
Class B Shares will not be sold to anyone who is over 85 years old.
Class C Shares. If you buy Class C Shares, you will not pay a sales charge
at the time of purchase. If you sell your Class C Shares within the first year
after they are bought, you will pay a sales charge of 1% of your shares' value.
See "Deferred Sales Charge Alternative--Class C Shares." Class C Shares have
the same Rule 12b-1 fees and pay comparable dividends as Class B Shares. Class
C Shares do not convert to any other class of shares of the Fund. Class C
Shares are not currently offered for all Phoenix Funds.
Class M Shares. If you buy Class M Shares, you will pay a sales charge at
the time of purchase equal to 3.50% of the offering price (3.63% of the amount
invested). Class M Shares are not subject to any charges by the Fund when they
are sold. Class M Shares have lower Rule 12b-1 fees and pay higher dividends
than Class B and C Shares. Class M Shares do not convert to any other class of
shares of the Fund. Class M Shares are not currently offered for all Phoenix
Funds.
What arrangement is best for you?
The alternative purchase arrangement permits you to choose the method of
buying shares that is most beneficial to you given the amount of the purchase,
the length of time you expect to hold the shares, whether you wish to receive
distributions in cash or to reinvest them in additional shares, and other
circumstances. You should consider whether, during the anticipated term of your
investment, the accumulated continuing distribution and service fees and
contingent deferred sales charges of one class would be more than the initial
sales charge and accumulated distribution and service fees of another class of
shares bought at the same time. See "Distribution Plans" and "Fund Expenses."
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<PAGE>
Initial Sales Charge Alternative--Class A and M Shares
The public offering price of Class A and M Shares is the net asset value
plus a sales charge that varies depending on the size of any "person's" (see
"How To Obtain Reduced Initial Sales Charges--Class A and M Shares: Combination
Purchase Privilege") purchase. Shares issued based on the automatic
reinvestment of income dividends or capital gains distributions are not subject
to any sales charges. The sales charge is divided between your investment
dealer and the Distributor as shown on the following tables.
Class A Shares
Sales Charge as
a percentage of
-----------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- -------------------- ---------- ---------- ----------------
Under $50,000 4.75% 4.99% 4.25%
$50,000 but under
$100,000 4.50 4.71 4.00
$100,000 but under
$250,000 3.50 3.63 3.00
$250,000 but under
$500,000 3.00 3.09 2.75
$500,000 but under
$1,000,000 2.00 2.04 1.75
$1,000,000 or more None None None
Class M Shares (Theme Series Only)
Sales Charge as
a percentage of
-----------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- -------------------- ---------- ---------- ----------------
Under $50,000 3.50% 3.63% 3.00%
$50,000 but under
$100,000 2.50 2.56 2.00
$100,000 but under
$250,000 1.50 1.52 1.00
$250,000 but under
$500,000 1.00 1.01 1.00
$500,000 or more None None None
Deferred Sales Charge Alternative--
Class B and C Shares
Class B and C Shares are purchased without an initial sales charge;
however, shares sold within a specified time period are subject to a declining
contingent deferred sales charge (the "CDSC") at the rates set forth below. The
charge will be multiplied by the then current market value or the initial cost
of the Shares being redeemed, whichever is less. No sales charge will be
imposed on increases in net asset value. In addition, shares issued based on
the automatic reinvestment of income dividends or capital gains distributions
are not subject to any sales charges. To minimize the CDSC, shares not subject
to any charge will be redeemed first, followed by shares held the longest time.
The Distributor will add up all shares bought in any month and use the last day
of the preceding month in calculating the amount of shares owned and time
period held for Class B Shares. The trade date will be used for purposes of
aging Class C Share investments.
Deferred Sales charge you may pay to sell Class B Shares
Year 1 2 3 4 5 6+
- ------ ---- ---- ---- ---- ---- ---
CDSC 5% 4% 3% 2% 2% 0%
Deferred Sales charge you may pay to sell Class C Shares (Theme Series Only)
Year 1 2+
- ------ ---- ----
CDSC 1% 0%
Dealer Concessions
In addition to the dealer discount on purchases of Class A and M Shares,
the Distributor intends to pay investment dealers a sales commission of 4% of
the sale price of Class B Shares and a sales commission of 1% of the sale price
of Class C Shares sold by such dealers. Your broker, dealer or investment
adviser may also charge you additional commissions or fees for their services
in selling shares to you provided they notify the Distributor of their
intention to do so.
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of
the Funds and/or for providing other shareholder services. Depending on the
nature of the services, these fees may be paid either from the Funds through
distribution fees, service fees or transfer agent fees or in some cases, the
Distributor may pay certain fees from its own profits and resources. From its
own profits and resources, the Distributor does intend to: (a) sponsor sales
contests, training and educational meetings and provide additional compensation
to qualifying dealers in the form of trips, merchandise or expense
reimbursements; (b) from time to time pay special incentive and retention fees
to qualified wholesalers, registered financial institutions and third party
marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million
of Class A Share purchases by an account held in the name of a qualified
employee benefit plan with at least 100 eligible employees, 0.50% on the next
$3 million, plus 0.25% on the amount in excess of $6 million; and (d) excluding
purchases as described in (c) above, pay broker/dealers an amount equal to 1%
of the amount of Class A Shares sold above $1 million but under $3 million,
0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million.
If part or all of such investment, including investments by qualified employee
benefit plans, is subsequently redeemed within one year of the investment date,
the broker-dealer will refund to the Distributor such amounts paid with respect
to the investment. In addition, the Distributor may pay the entire applicable
sales charge on purchases of Class A Shares to selected dealers and agents. Any
dealer who receives more than 90% of a sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933.
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<PAGE>
How To Obtain Reduced Initial Sales Charges--Class A and M Shares
Investors choosing Class A or M Shares may be entitled to reduced sales
charges. The five ways in which sales charges may be avoided or reduced are
described below.
Qualified Purchasers. If you fall within any one of the following
categories, you will not have to pay a sales charge on your purchase of Class A
or M Shares: (1) any Phoenix Fund trustee, director or officer; (2) any
director or officer, or any full-time employee or sales representative (for at
least 90 days), of the Adviser or Distributor; (3) registered representatives
and employees of securities dealers with whom Distributor has sales agreements;
(4) any qualified retirement plan exclusively for persons described above; (5)
any officer, director or employee of a corporate affiliate of the Adviser or
Distributor; (6) any spouse, child, parent, grandparent, brother or sister of
any person named in (1), (2), (3) or (5) above; (7) employee benefit plans for
employees of the Adviser, Distributor and/or their corporate affiliates; (8)
any employee or agent who retires from Phoenix Home Life, Distributor and/ or
their corporate affiliates; (9) any account held in the name of a qualified
employee benefit plan, endowment fund or foundation if, on the date of the
initial investment, the plan, fund or foundation has assets of $10,000,000 or
more or at least 100 eligible employees; (10) any person with a direct rollover
transfer of shares from an established Phoenix Fund qualified plan; (11) any
Phoenix Home Life separate account which funds group annuity contracts offered
to qualified employee benefit plans; (12) any state, county, city, department,
authority or similar agency prohibited by law from paying a sales charge; (13)
any fully matriculated student in any U.S. service academy; (14) any
unallocated account held by a third party administrator, registered investment
adviser, trust company, or bank trust department which exercises discretionary
authority and holds the account in a fiduciary, agency, custodial or similar
capacity, if in the aggregate such accounts held by such entity equal or exceed
$1,000,000; (15) any person who is investing redemption proceeds from
investment companies other than the Phoenix Funds if, in connection with the
purchases or redemption of the redeemed shares, the investor paid a prior sales
charge provided such investor supplies verification that the redemption
occurred within 90 days of the Phoenix Fund purchase and that a sales charge
was paid; (16) any deferred compensation plan established for the benefit of
any Phoenix Fund trustee or director; provided that sales to persons listed in
(1) through (15) above are made upon the written assurance of the purchaser
that the purchase is made for investment purposes and that the shares so
acquired will not be resold except to the Fund; (17) purchasers of Class A or M
Shares bought through investment 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; (18) retirement plans and
deferred compensation plans and trusts used to fund those plans (including, for
example, plans qualified or created under sections 401(a), 403(b) or 457 of the
Internal Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker or agent or
other financial intermediary that has made special arrangements with the
Distributor for such purchases; or (19) clients of investment advisors or
financial planners who buy shares for their own accounts but only if their
accounts are linked to a master account of their investment advisor or
financial planner on the books and records of the broker, agent or financial
intermediary with which the Distributor has made such special arrangements
(each of the investors described in (17) through (19) may be charged a fee by
the broker, agent or financial intermediary for purchasing shares).
Combination Purchase Privilege. Your purchase of any class of shares of
this or any other Phoenix Fund (other than Phoenix Money Market Fund Series
Class A Shares), if made at the same time by the same "person," will be added
together to determine whether the combined sum entitles you to an immediate
reduction in sales charges. A "person" is defined in this and the following
sections as (a) any individual, their spouse and minor children purchasing
shares for his or their own account (including an IRA account) including his or
their own trust; (b) a trustee or other fiduciary purchasing for a single
trust, estate or single fiduciary account (even though more than one
beneficiary may exist); (c) multiple employer trusts or Section 403(b) plans
for the same employer; (d) multiple accounts (up to 200) under a qualified
employee benefit plan or administered by a third party administrator; or (e)
trust companies, bank trust departments, registered investment advisers, and
similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial or similar capacity,
provided all shares are held of record in the name, or nominee name, of the
entity placing the order.
Letter of Intent. If you sign a Letter of Intent, your purchase of any
class of shares of this or any other Phoenix Fund (other than Phoenix Money
Market Fund Series Class A Shares), if made by the same person within a
thirteen month period, will be added together to determine whether you are
entitled to an immediate reduction in sales charges. Sales charges are reduced
based on the overall amount you indicate that you will buy under the Letter of
Intent. The Letter of Intent is a mutually non-binding arrangement between you
and the Distributor. Since the Distributor doesn't know whether you will
ultimately fulfill the Letter of Intent, shares worth 5% of the amount of each
purchase will be set aside until you fulfill the Letter of Intent. When you buy
enough shares to fulfill the Letter of Intent, these shares will no longer be
restricted. If, on the other hand, you do not satisfy the Letter of Intent, or
otherwise wish to sell any restricted shares, you will be given the choice of
either buying enough shares to fulfill the Letter of Intent or paying the
difference between any sales charge you previously paid and the otherwise
applicable sales charge based on the intended aggregate purchases described in
the Letter of Intent. You will be given 20 days to make this decision. If you
do not exercise either election, the Distributor will automatically redeem the
number of your restricted shares needed to make up the deficiency in sales
charges received.
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<PAGE>
The Distributor will redeem restricted Class A or M Shares before Class C or B
Shares, respectively. Oldest shares will be redeemed before selling newer
shares. Any remaining shares will then be deposited to your account.
Right of Accumulation. Your purchase of any class of shares of this or any
other Phoenix Fund, if made over time by the same person may be added together
to determine whether the combined sum entitles you to a prospective reduction
in sales charges. You must provide certain account information to the
Distributor to exercise this right.
Associations. Certain groups or associations may be treated as a "person"
and qualify for reduced Class A Share sales charges. The group or association
must: (1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge;
(3) work through an investment dealer; or (4) not be a group whose sole reason
for existing is to consist of members who are credit card holders of a
particular company, policyholders of an insurance company, customers of a bank
or a broker-dealer or clients of an investment adviser.
How To Obtain Reduced Deferred Sales Charges--
Class B and C Shares
The CDSC is waived on the redemption (sale) of Class B and C Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section
72(m)(7); (c) as a mandatory distribution upon reaching age 701/2 under any
retirement plan qualified under Code Sections 401, 408 or 403(b) or resulting
from the tax-free return of an excess contribution to an IRA; (d) by 401(k)
plans using an approved participant tracking system for participant hardships,
death, disability or normal retirement, and loans which are subsequently
repaid; (e) based on the exercise of exchange privileges among Class B and C
Shares of this or any other Phoenix Fund; (f) based on any direct rollover
transfer of shares from an established Phoenix Fund qualified plan into a
Phoenix Fund IRA by participants terminating from the qualified plan; and (g)
based on the systematic withdrawal program (Class B Shares only). If, as
described in condition (a) above, an account is transferred to an account
registered in the name of a deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B or C Shares are not redeemed within one year of the death, they
will remain subject to the applicable CDSC.
Conversion Feature--Class B Shares
Class B Shares will automatically convert to Class A Shares of the same
Fund eight years after they are bought. Conversion will be on the basis of the
then prevailing net asset value of Class A and B Shares. There is no sales
load, fee or other charge for this feature. Class B Shares acquired through
dividend or distribution reinvestments will be converted into Class A Shares at
the same time that other Class B Shares are converted based on the proportion
that the reinvested shares bear to purchased Class B Shares. The conversion
feature is subject to the continuing availability of an opinion of counsel or a
ruling of the Internal Revenue Service that the assessment of the higher
distribution fees and associated costs with respect to Class B Shares does not
result in any dividends or distributions constituting "preferential dividends"
under the Code, and that the conversion of shares does not constitute a taxable
event under federal income tax law. If the conversion feature is suspended,
Class B Shares would continue to be subject to the higher distribution fee for
an indefinite period. Even if the Funds were unable to obtain such assurances,
it might continue to make distributions if doing so would assist in complying
with its general practice of distributing sufficient income to reduce or
eliminate federal taxes otherwise payable by the Funds.
INVESTOR ACCOUNT SERVICES
The Fund mails periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one
copy of most Fund reports will be mailed to households for multiple accounts
with the same surname at the same household address. Please contact Equity
Planning to request additional copies of shareholder reports toll free at (800)
243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to
the shareholder account services can be found in the Fund's Statement of
Additional Information ("SAI").
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, you may authorize the
bank named in the form to draw $25 or more from your personal checking or
savings account to be used to purchase additional shares for your account. The
amount you designate will be made available, in form payable to the order of
the Transfer Agent, by the bank on the date the bank draws on your account and
will be used to purchase shares at the applicable offering price.
Distribution Option. Each Series currently declares all income dividends
and all capital gain distributions, if any, payable in shares of the Series at
net asset value or, at your option, in cash. By exercising the distribution
option, you may elect to: (1) receive both dividends and capital gain
distributions in additional shares or (2) receive dividends in cash and capital
gain distributions in additional shares or (3) receive both dividends and
capital gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed that the proceeds are undeliverable.
Additional shares will be purchased in your account at the then current net
asset value. Dividends and capital gain distributions received in shares are
taxable to you and credited to your account in full and fractional shares
computed at the closing net asset value on the
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<PAGE>
next business day after the record date. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows
you to periodically redeem a portion of your account on a predetermined
monthly, quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to your bank account. In addition to the limitations
stated below, withdrawals may not be less than $25 and minimum account balance
requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Series worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. Participants
in the Program redeeming Class C Shares will be subject to any applicable
contingent deferred sales charge. The purchase of shares while participating in
the withdrawal program will ordinarily be disadvantageous to the Class A or M
Shares investor since a sales charge will be paid by the investor on the
purchase of Class A or M Shares at the same time as other shares are being
redeemed. For this reason, investors in Class A or M Shares may not participate
in an automatic investment program while participating in the Systematic
Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
Accordingly, the purchase of Class B Shares will generally not be suitable for
an investor who anticipates withdrawing sums in excess of the above limits
shortly after purchase.
Tax Sheltered Retirement Plans. Shares of the Fund are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE IRA, SIMPLE 401(k), Profit-Sharing and Money
Purchase Pension Plans which can be adopted by self-employed persons ("Keogh")
and by corporations and 403(b) Retirement Plans. Write or call Equity Planning
at (800) 243-4631 for further information about the plans.
Exchange Privileges
You may exchange shares of one Phoenix Fund for shares of another Phoenix
Fund without paying any fees or sales charges. On exchanges with share classes
that carry a contingent deferred sales charge, the CDSC schedule of the
original shares purchased continues to apply. Shares held in book-entry form
may be exchanged for shares of the same class of other Phoenix Funds, provided
the following conditions are met: (1) the shares that will be acquired in the
exchange (the "Acquired Shares") are available for sale; (2) the Acquired
Shares are the same class as the shares to be surrendered (the "Exchanged
Shares"); (3) the Acquired Shares will be registered to the same shareholder
account as the Exchanged Shares; (4) the account value of the Fund whose shares
are to be acquired must equal or exceed the minimum initial investment amount
required by that Phoenix Fund after the exchange is made; and (5) if you have
elected not to use the telephone exchange privilege (see below), a properly
executed exchange request must be received by the Distributor. Exchanges may be
made over the telephone or in writing and may be made at one time or
systematically over a period of time. Note, each Phoenix Fund has different
investment objectives and policies. You should read the prospectus of the
Phoenix Fund into which the exchange is to be made before making any exchanges.
This privilege may be modified or terminated at any time on 60 days' notice.
Market Timer Restrictions. Because excessive trading can hurt Fund
performance and harm shareholders, the Fund reserves the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These
privileges are limited under those agreements. The Distributor has the right to
reject or suspend these privileges upon reasonable notice.
Telephone Exchanges. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Fund and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk if the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by the registered shareowner(s).
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<PAGE>
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.
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 value. For further
information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
You have the right to have the Fund buy back shares at the net asset value
next determined after receipt of a redemption order, and any other required
documentation in proper form, by Phoenix Funds c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301. In the case of a Class B or C
Share redemption, you will be subject to the applicable deferred sales charge,
if any, for such shares (see "Deferred Sales Charge Alternative--Class B and C
Shares," above). Subject to certain restrictions, shares may be redeemed by
telephone or in writing. In addition, shares may be sold through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The Fund does not charge any redemption fees. Payment for
shares redeemed is made within seven days, provided that redemption proceeds
will not be disbursed until each check used for purchases of shares has been
cleared for payment by your bank, which may take up to 15 days after receipt of
the check.
The requirements to redeem shares are outlined in the table below.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRA's or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Funds at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
How can I sell my Shares?
[GRAPHIC
OF PHONE] By Phone [bullet] Sales up to $50,000
[bullet] Not available on most retirement accounts
(800) 243-1574 [bullet] Requests received after 4PM will be
executed on the following business day
[GRAPHIC
OF ENVELOPE] In Writing [bullet] Letter of instruction from the registered
owner including the fund and account
number and the number of shares or dollar
amount you wish to sell
[bullet] No signature guarantee is required if your
shares are registered individually, jointly,
or as custodian under the Uniform Gifts to
Minors Act or Uniform Transfers to Minors
Act, the proceeds of the redemption do not
exceed $50,000, and the proceeds are
payable to the registered owner(s) at the
address of record
Shares previously issued in certificate form cannot be redeemed until the
certificated shares have been deposited to your account.
Telephone Redemptions
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to you. If
there has been an address change within the past 60 days, a telephone
redemption will not be authorized. To the extent that procedures reasonably
designed to prevent unauthorized telephone redemptions are not followed, the
Fund and/or the Transfer Agent may be liable for following telephone
instructions for redemption transactions that prove to be fraudulent.
Broker/dealers other than Equity Planning have agreed to bear the risk of any
loss resulting from any unauthorized telephone redemption instruction from the
firm or its registered representatives. However, you would bear the risk of
loss resulting from instructions entered by an unauthorized third party that
the Fund and/or the Transfer Agent reasonably believe to be genuine. The
Telephone Redemption Privilege may be modified or terminated at any time on 60
days' notice to shareholders. In addition, during times of drastic economic or
market changes, the Telephone Redemption Privilege may be difficult to exercise
or may be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
23
<PAGE>
Written Redemptions
If you elect not to use the telephone redemption or telephone exchange
privileges, you must submit your request in writing. If the shares are being
exchanged between accounts that are not identically registered, the signature
on such request must be guaranteed by an eligible guarantor institution as
defined by the Transfer Agent in accordance with its signature guarantee
procedures. Currently, such procedures generally permit guarantees by banks,
broker dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Account Reinstatement Privilege
You have a one time privilege of using redemption proceeds from Class A,
B, C and M Shares to purchase Class A Shares of any Phoenix Fund with no sales
charge (at net asset value next determined after the request for reinvestment
is made). For Federal income tax purposes, a redemption and reinvestment will
be treated as a sale and purchase of shares. Special rules may apply in
computing the amount of gain or loss in these situations. (See "Dividends,
Distributions and Taxes" for information on the Federal income tax treatment of
a disposition of shares.) A written request to reinstate your account must be
received by the Transfer Agent within 180 days of the redemption, accompanied
by payment for the shares (not in excess of the redemption value). Class B
shareholders who have had the contingent deferred sales charge waived through
participation in the Systematic Withdrawal Program are not eligible to use the
Reinstatement Privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Funds
reserve the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Funds redeem these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be
allowed 60 days to make an additional investment in an amount which will
increase the value of the account to at least $200.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
Each Series is treated as a separate entity for Federal income tax
purposes. Each 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"). The Trustees believe that each Series qualified as a
RIC for its most recent fiscal year. In addition, each 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, each 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 each Series
will qualify as a RIC.
Each 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.
Each 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 a 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 a Series.
Long-term capital gains, if any, distributed to shareholders and which are
designated by a 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 a 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 a
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. In addition, if shares of a
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 each 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. 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.
24
<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.
Each 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. This Prospectus offers three series of
the Fund. The Equity Opportunities Series and the Small Cap Series offer Class
A and Class B Shares. The Strategic Theme Series offers Class A, Class B, Class
C and Class M 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.
25
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
- --------------------------------------------------------------------------------------------------------
<S> <C>
Individual Individual
- --------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- --------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- --------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- --------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- --------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- --------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- --------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- --------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you will
be treated as negligent and subject to an IRS 5% penalty tax on any
resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix
Strategic Equity Series Fund (the "Fund") which you should know before
investing. Please read it carefully and retain it for future reference.
Phoenix Strategic Equity Series Fund has filed with the Securities and Exchange
Commission a Statement of Additional Information about the Fund, dated October
28, 1997. The Statement contains more detailed information about the Fund and
is incorporated into this Prospectus by reference. You may obtain a free copy
of the Statement by writing the Fund c/o Phoenix Equity Planning Corporation,
100 Bright Meadow, P.O. Box 2200, Enfield, Connecticut 06083-2200 or by calling
(800) 243-4361.
Financial information relating to the Fund is contained in the Annual Report to
Shareholders for the year ended April 30, 1997 and is incorporated into the
Statement of Additional Information by reference.
[RECYCLE LOGO] Printed on recycled paper using soybean ink
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
[back cover] [indicia]
BULK RATE MAIL
Phoenix Strategic Equity Series Fund U.S. POSTAGE
PO Box 2200 PAID
Enfield CT 06083-2200 SPRINGFIELD, MA
PERMIT NO. 444
[logo] PHOENIX
DUFF & PHELPS
PDP 690 (10/97)
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street
Greenfield, MA 01301
Statement of Additional Information
October 28, 1997
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Strategic Equity Series Fund (the "Fund"), dated October 28, 1997, and
should be read in conjunction with it. The Fund's Prospectus may be obtained by
calling Phoenix Equity Planning Corporation ("Equity Planning") at (800)
243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O.
Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
PAGE
THE FUND (1) ................................. 1
INVESTMENT OBJECTIVES AND POLICIES (8) ...... 1
INVESTMENT RESTRICTIONS (15) .................. 1
INVESTMENT TECHNIQUES (10) .................. 2
PERFORMANCE INFORMATION (8) .................. 8
PORTFOLIO TRANSACTIONS AND BROKERAGE ......... 9
SERVICES OF THE ADVISERS (15) ............... 10
NET ASSET VALUE (23) ........................ 11
HOW TO BUY SHARES (18) ........................ 12
ALTERNATIVE PURCHASE ARRANGEMENTS (18) ......... 12
INVESTOR ACCOUNT SERVICES (21) ............... 13
REDEMPTION OF SHARES (23) ..................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES (24) ...... 14
TAX SHELTERED RETIREMENT PLANS (22) ......... 15
THE DISTRIBUTOR (16) ........................ 15
PLANS OF DISTRIBUTION (16) .................. 16
TRUSTEES AND OFFICERS ........................ 17
OTHER INFORMATION ........................... 24
Numbers appearing in parentheses correspond to related disclosures
in the Fund's Prospectus.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PDP731 (10/97)
<PAGE>
THE FUND
Phoenix Strategic Equity Series Fund is a diversified open-end management
investment company which was organized under Massachusetts law in 1986 as a
business trust. The Fund's Prospectus describes the investment objectives of
the Phoenix Equity Opportunities Fund (the "Equity Opportunities Series"), the
Phoenix Strategic Theme Fund (the "Theme Series"), and the Phoenix Small Cap
Fund (the "Small Cap Series"). The Equity Opportunities Series, Theme Series
and Small Cap Series are sometimes collectively referred to as the "Series."
The following discussion supplements the description of these Series' and
investment policies and investment techniques in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
As discussed in the Prospectus, the investment objective of each 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 each Series.
Investment restrictions described in this Statement of Additional Information
are fundamental policies of each Series and may not be changed as to any Series
without the approval of such Series' shareholders. There is no assurance that
any Series will meet its investment objective.
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions constitute fundamental policies of
each Series (unless otherwise indicated) which may be changed only upon
approval by the holders of a majority of the outstanding shares of each Series'
shareholders. No Series may:
1. Borrow money, except that the Theme Series and Small Cap Series may borrow
money for investment purposes, provided that any such borrowing for investment
purposes with respect to such Series is (a) authorized by the Trustees prior
to any public distribution of the shares of such Series or is authorized by
the shareholders of such Series thereafter, (b) is limited to 33-1/3% of the
value of the total assets (taken at market value) of such Series, and (c) is
subject to an agreement by the lender that any recourse is limited to the
assets of that Series with respect to which the borrowing has been made;
2. Underwrite the securities of others;
3. Deal in real estate (including real estate limited partnerships) except
that any Series may purchase marketable securities of companies that deal in
real estate or interests therein including real estate investment trusts;
4. Deal in commodities or commodities contracts;
5. Make loans to other persons except that any Series may lend portfolio
securities (up to 33% of net assets at the time the loan is made) to brokers
or dealers or other financial institutions not affiliated with the Fund or the
Adviser, subject to conditions established by the Adviser (see "Lending of
Securities") and enter into repurchase transactions (in accordance with the
Fund's current Prospectus).
6. Participate in any joint trading accounts;
7. Pledge, mortgage or hypothecate any securities or other property;
8. Purchase on margin;
9. Engage in short sales;
10. Issue senior securities;
11. Invest more than 25% of its total assets of a Series in any one industry
or group of industries;
12. Purchase any securities (other than U.S. Government obligations) if, as a
result, more than 5% of the value of the total assets of such Series would be
invested in securities of a single issuer;
13. Purchase any security if, as a result, more than 10% of any class of
securities or more than 10% of the outstanding voting securities of any issuer
would be held;
14. Purchase any security for the Equity Opportunities Series unless (a) the
issuer or its predecessor has had a three year record of continuous operation
during which it published balance sheets and income statements, (b) at the end
of its last fiscal year, the issuer or its predecessor reported gross receipts
of $1,000,000 and (c) the issuer or its predecessor had an operating profit
for at least one fiscal year of the five years immediately preceding;
15. Purchase any security of an investment trust except for purchases in the
open market where no commission or profit to a sponsor or dealer results from
such purchases, other than a customary broker's commission; and
16. Make an investment for the purpose of exercising control or management.
1
<PAGE>
Other Policies
The following investment restrictions do not constitute fundamental
policies and may be changed without shareholder approval. No Series may:
1. Invest more than 15% of its net assets in illiquid securities,
including (a) securities with legal or contractual restrictions on resale
(except in the case of securities issued pursuant to Rule 144A sold to
qualifying institutional investors under special rules adopted by the
Securities and Exchange Commission for which the Trustees of the Fund determine
the secondary market is liquid), (b) repurchase agreements maturing in more
than seven days, and (c) securities that are not readily marketable.
2. Purchase or retain any security of an issuer if the Fund officers,
Trustees or Adviser, who individually own beneficially more than 1/2 of 1% of
such issuer, together own more than 5% of such issuer's securities.
3. Invest in interests in oil, gas or other mineral exploration
development programs or leases.
4. Invest more than 5% of a Series' net assets in warrants and stock
rights, valued at the lower of cost or market, or more than 2% of its net
assets in warrants and stock rights that are not listed on the New York Stock
Exchange or American Stock Exchange.
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 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
All 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 a Series normally
will have expiration dates between three and nine months from the date written.
During the option period a 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 a 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. A 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 a Series to prevent an
underlying security from being called, or to enable a Series to write another
call option with either a different exercise price or expiration date or both.
A Series may realize a net gain or loss from a closing purchase transaction
depending upon whether
2
<PAGE>
the amount of the premium received on the call option is more or less than the
cost of effecting the closing purchase transaction. If a call option written by
a Series expires unexercised, a Series will realize a gain in the amount of the
premium on the option less the commission paid.
The option activities of a Series may increase its portfolio turnover rate
and the amount of brokerage commissions paid. A 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. A Series may write call options only if they are
covered and if they remain covered so long as a Series is obligated as a
writer. If a Series writes a call option on an individual security, a Series
will own the underlying security at all times during the option period. A
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 a 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 a Series, a Series will be required to deposit qualified
securities. A "qualified security" is a security against which a Series has not
written a call option and which has not been hedged by a 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, a Series will deposit an
amount of cash or liquid assets equal in value to the difference. In addition,
when a Series writes a call on an index which is "in-the-money" at the time the
call is written, a Series will segregate with its custodian bank cash or liquid
assets equal in value to the amount by which the call is "in-the-money" times
the multiplier times the number of contracts. Any amount segregated may be
applied to a 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.
A Series may invest up to 5% of its total assets in exchange-traded or
over-the-counter call and put options. A 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 a Series qualifying as a regulated investment company
under the Internal Revenue Code, other restrictions on a Series' ability to
enter into option transactions may apply from time to time. See "Dividends,
Distributions and Taxes."
Risks Relating to Options. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that a Series may
lose the premium it paid plus transaction costs. If a 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 a 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 a 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. The Adviser believes that the position
limits established by the exchanges will not have any adverse impact upon a
Series or all of the Series, in the aggregate.
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Risks of Options on Indices. Because the value of an index option depends
upon movements in the level of the index rather than movements in the price of
a particular security, whether a 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 a 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, a 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 a 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, a Series will write call options on indices only subject to the
limitations described above.
Price movements in securities in a Series' portfolio will not correlate
perfectly with movements in the level of the index and, therefore, a Series
bears the risk that the price of the securities held by the Series may not
increase as much as the level of the index. In this event, the Series would
bear a loss on the call which would not be completely offset by movements in
the prices of a Series' portfolio securities. It is also possible that the
index may rise when the value of a 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 a Series has other liquid assets which are sufficient to satisfy
the exercise of a call on an index, a 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 a 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 a Series has written a call on an index, there is also a risk that
the market may decline between the time a 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 a Series is able to sell securities in its portfolio.
As with options on portfolio securities, a 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 a Series would be able to deliver the underlying
security in settlement, a 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 a 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" a 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 a 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
Each 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 a 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 a Series may wish to purchase in the
future by purchasing futures contracts.
These 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.
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In contrast to the situation when such Series purchases or sell a
security, no security is delivered or received by these Series upon the
purchase or sale of a financial futures contract. Initially, these Series will
be required to deposit in a segregated account with its custodian bank an
amount of cash, U.S. Treasury bills or liquid high grade debt obligations. This
amount is known as initial margin and is in the nature of a performance bond or
good faith deposit on the contract. The current initial margin deposit required
per contract is approximately 5% of the contract amount. Brokers may establish
deposit requirements higher than this minimum. Subsequent payments, called
variation margin, will be made to and from the account on a daily basis as the
price of the futures contract fluctuates. This process is known as marking to
market.
The writer of an option on a futures contract is required to deposit
margin pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
margin account. This amount will be equal to the amount by which the market
price of the futures contract at the time of exercise exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction. A futures
contract sale is closed out by effecting a futures contract purchase for the
same aggregate amount of securities and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller immediately would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller immediately would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same securities and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain, whereas if the purchase price exceeds the offsetting sale
price, the purchaser would realize a loss.
Such 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. A 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. A 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 that Series' existing futures and related options positions
and the premiums paid for related options would exceed 5% of the market value
of that Series' total assets after taking into account unrealized profits and
losses on any such contracts. At the time of purchase of a futures contract or
a call option on a futures contract, 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
a Series' initial margin deposit with respect thereto will be deposited in a
pledged account with the Fund's custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged.
The extent to which a 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
"Dividends, Distributions and Taxes."
Risks Relating to Futures Contracts and Related Options. Positions in
futures contracts and related options may be closed out only on an exchange
which provides a secondary market for such contracts or options. A 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 a Series would continue to be required to make daily margin payments.
In this situation, if a 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, a 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 a
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 a Series to incur
additional brokerage commissions and may cause an increase in a 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 a Series or
such prices move in a direction opposite to that anticipated, a Series may
realize a loss on the hedging transaction which is not offset by an increase in
the value of its portfolio securities. As a result, a Series' return for the
period may be less than if is had not engaged in the hedging transaction.
Utilization of futures contracts by a 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
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the price of the securities being hedged, a 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 a 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 a Series' portfolio may decline. If this
occurred, a 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 a 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 a 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, a Series will realize a loss on the futures that would not be offset
by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market also elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such case,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities rather than
to engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of market trends may still not result in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for a 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 a 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 Fund may from time to time increase the Theme Series' and Small Cap
Series' ownership of securities holdings above the amounts otherwise possible
by borrowing from banks at fixed amounts of interest and investing the borrowed
funds. These Series will borrow only from banks, and only if immediately after
such borrowing the value of the assets of these Series (including the amount
borrowed) less its liabilities (not including any borrowings) is at least three
times the amount of funds borrowed for investment purposes. The effect of this
provision is to permit the Fund to borrow up to 33-1/3% of the net assets of
these Series, not including the proceeds of any such borrowings. However, the
amount of the borrowings will be dependent upon the availability and cost of
credit from time to time. If, due to market fluctuations or other reasons, the
value of such Series' assets computed as provided above becomes at any time
less than three times the amount of the borrowings for investment purposes,
these 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 these Series with respect
to which the borrowing has been made. Because such expense would not otherwise
be incurred, the net investment income of such 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 these 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 these Series, the net
asset value of these Series will decrease faster than would otherwise be the
case.
Foreign Securities
Each of 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 each Series (provided,
however, the Theme Series may invest up to 35% of its total assets in the
securities of foreign issuers). 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
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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 a 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 Theme Series and Small
Cap Series may make loans of its portfolio securities, as long as the market
value of the loaned securities does not exceed 33% of the market or other fair
value of that Series' net assets. Loans of portfolio securities will always be
fully collateralized by cash, U.S. Government Securities or other high quality
debt securities at no less than 100% of the market value of the loaned
securities (as marked to market daily) and made only to borrowers considered by
the Adviser to be creditworthy. Lending portfolio securities involves a risk of
delay in the recovery of the loaned securities and possibly the loss of the
collateral if the borrower fails financially.
Foreign Currency Transactions
Each Series may engage in foreign currency transactions. The following is
a description of these 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.
No Series intends 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. No Series will enter into such forward contracts
or maintain a net exposure in such contracts where it would be obligated to
deliver an amount of foreign currency in excess of the value of its portfolio
securities and other assets denominated in that currency. The Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that to do so is in the best interests of a
Series. The Fund's custodian bank will be instructed to pledge 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. If the value of the securities pledged declines, additional cash or
securities will be added so that the pledged amount is not less than the amount
of the Series' commitments with respect to such contracts. Generally, no Series
will enter into a forward contract 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 a 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 a 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 a 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. Each Series may use foreign
currency futures contracts and options on such futures contracts. Through the
purchase or sale of such contracts, a 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, each Series will maintain in a pledged
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, a Series
will not enter into a futures contract or purchase an option thereon if
immediately thereafter the
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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. No Series
will engage in transactions in financial futures contracts or options thereon
for speculation, but only to attempt to hedge against changes in market
conditions affecting the values of securities which the Series holds or intends
to purchase. When futures contracts or options thereon are purchased to protect
against a price increase on securities intended to be purchased later, it is
anticipated that at least 75% of such intended purchases will be completed.
When other futures contracts or options thereon are purchased, the underlying
value of such contracts will at all times not exceed the sum of: (1) accrued
profit on such contracts held by the broker; (2) cash or high quality money
market instruments set aside in an identifiable manner; and (3) cash proceeds
from investments due in 30 days.
Investing in Small Cap Issuers
Under normal market conditions, the Small Cap Series expects to invest at
least 65% of its total assets in equity securities of small 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, small 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 small
company stocks trade less frequently and in smaller volume, and may be subject
to more abrupt or erratic price movements than stocks of large companies. The
securities of small companies may also be more sensitive to market changes than
the securities of large companies. These factors may result in above-average
fluctuations in the net asset value of the Series' shares. The Series is not an
appropriate investment for individual investors requiring safety of principal
or a predictable return of income from their investment.
Derivative Investments
In order to hedge various portfolio positions, including to hedge against
price movements in markets in which the Fund anticipates increasing its
exposure, the Fund may invest in certain instruments which may be characterized
as derivative investments. These investments include various types of interest
rate transactions, options and futures. Such investments also may consist of
indexed securities. Other of such investments have no express quantitative
limitations, although they may be made solely for hedging purposes, not for
speculation, and may in some cases be limited as to the type of counter-party
permitted. Interest rate transactions involve the risk of an imperfect
correlation between the index used in the hedging transactions and that
pertaining to the securities which are the subject of such transactions.
Similarly, utilization of options and futures transactions involves the risk of
imperfect correlation in movements in the price of options and futures and
movements in the price of the securities or interest rates which are the
subject of the hedge. Investments in indexed securities, including inverse
securities, subject the Fund to the risks associated with changes in the
particular indices, which may include reduced or eliminated interest payments
and losses of invested principal.
Industry Classifications
For the purposes of establishing industry classifications for the Theme
Series and Small Cap 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.
For the Equity Opportunities Series, industry classifications are
established by reference to the Directory of Companies Filing Annual Reports
published by the SEC.
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 each Class of
Shares of a Series will be expressed in terms of the average annual compounded
rate of return for a hypothetical investment in such Class of Shares of a
Series over periods of 1, 5 and 10 years or up to the life 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 and Class M Shares and the maximum contingent
deferred sales charge applicable to a complete redemption of the investment in
the case of Class B and Class C Shares, and assume that all dividends and
distributions are
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reinvested when paid. Performance data quoted for Class C and Class M Shares
covering periods prior to the inception of Class C and Class M Shares will
reflect historical performance of Class A Shares adjusted for the higher
operating expenses applicable to Class C and Class M Shares.
The Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Fund may compare its performance results to other investment
or savings vehicles (such as certificates of deposit) and may refer to results
published in various publications such as Changing Times, Forbes, Fortune,
Money, Barrons, Business Week and Investor's Daily, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street
Journal, The New York Times, Consumer Reports, Registered Representative,
Financial Planning, Financial Services Weekly, Financial World, U.S. News and
World Report, Standard & Poor's The Outlook, and Personal Investor. The Fund
may from time to time illustrate the benefits of tax deferral by comparing
taxable investments to investments made through tax-deferred retirement plans.
The total return may also be used to compare the performance of the Fund
against certain widely acknowledged outside standards or indices for stock and
bond market performance, such as the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500"), Standard & Poor's 400 MidCap Index ("S&P 400"),
Dow Jones Industrial Average, Russell 2000 Index, Russell 2000 Growth Index,
Europe Australia Far East Index (EAFE), Consumer Price Index, Lehman Brothers
Corporate Index and Lehman Brothers T-Bond Index.
Advertisements, sales literature and other communications may contain
information about the Fund and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund to
respond quickly to changing market and economic conditions. From time to time
the Fund may include specific portfolio holdings or industries 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
future to well-known indices of market performance, including, but not limited
to: the S&P 500, Dow Jones Industrial Average, CS First Boston High Yield Index
and Salomon Brothers Corporate and Government Bond Indices.
For Equity Opportunities Series for the 1, 5 and 10 year periods ended
April 30, 1997, the average annual total return of the Class A Shares was
- -16.37%, 8.21% and 8.82%, respectively. Class B average annual total return for
the 1 year period and since inception 7/19/94 to April 30, 1997 was -15.89% and
7.43%. The Theme Series' 1 year average annual return and since inception
October 16, 1995 for Class A shares was -7.22% and 9.47% and, for Class B
Shares was -7.17% and 9.70%, respectively. The Small Cap Series' 1 year average
annual return and from inception October 16, 1995 for Class A shares was
- -19.42% and 21.46% and for Class B Shares was -19.38% and 22.14%, respectively.
Performance information reflects only the performance of a hypothetical
investment in each class during the particular time period on which the
calculations are based. Performance information should be considered in light
of the 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, Class B, Class C or Class M 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 and Class M Shares's maximum sales charge of 4.75% and 3.50%, respectively,
and assumes reinvestment of all income dividends and capital gain distributions
during the period. Based on the foregoing for the Equity Opportunities Series,
the Class A Share's aggregate cumulative total return quotation for the period
commencing August 1, 1944 and ending April 30, 1997 was 20,020%.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, for each class 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 Advisers place 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 Advisers to seek the best prices and
execution of orders and to negotiate brokerage commissions which the Advisers'
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 Advisers, the rate is deemed by the
Advisers 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 Advisers
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after the transaction has been consummated. If the Advisers 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 Advisers believe 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 Advisers'
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 Advisers. The Advisers do 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 Advisers better prices and
execution are available elsewhere.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to
lower commission costs on a per-share and per-dollar basis. According to the
bunching procedures, the Adviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is inconsistent with its
duty to seek best execution (which shall include the duty to seek best price)
for the Fund. No advisory account of the Adviser is to be favored over any
other account and each account that participates in an aggregated order is
expected to participate at the average share price for all transactions of the
Adviser in that security on a given business day, with all transaction costs
shared pro rata based on the Fund's participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
Adviser's accounts in accordance with the allocation order, and if the order 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.
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.
During the fiscal years ended April 30, 1995, 1996 and 1997, brokerage
commissions paid by the Fund totalled $1,545,026, $1,208,440 and $2,686,635,
respectively. Commissions paid to the principal underwriter for the fiscal
years ended April 30, 1995, 1996 and 1997 totalled $0, $0 and $0, respectively.
Brokerage commissions of $1,598,061 paid during the fiscal year ended April 30,
1997 were paid on portfolio transactions aggregating $1,077,564,987 executed by
brokers who provided research and other statistical and factual information.
SERVICES OF THE ADVISERS
The offices of Phoenix Investment Counsel, Inc., (PIC) and National
Securities & Research Corporation ("National") are located at 56 Prospect
Street, Hartford, Connecticut 06115. In addition to the Equity Opportunities
Series, National serves as investment adviser to Phoenix Multi-Sector Short
Term Bond Fund, Phoenix California Tax Exempt Bonds, Inc., Phoenix Income and
Growth Fund, Phoenix Multi-Sector Fixed Income Fund, Inc., and Phoenix
Worldwide Opportunities Fund. In addition to the Theme Series
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and the Small Cap Series, PIC serves as investment adviser to The Phoenix Edge
Series Fund (other than the Real Estate Series and Aberdeen New Asia Series),
Phoenix Series Fund, Phoenix Multi-Portfolio Fund (other than the Real Estate
Securities Portfolio), and Phoenix Strategic Allocation Fund Inc.
PIC is an indirect wholly-owned subsidiary and National is a direct
subsidiary of Phoenix Duff & Phelps Corporation. Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life") owns a majority interest in Phoenix
Duff & Phelps Corporation. Phoenix Home Life is a mutual insurance company
engaged in the insurance and investment businesses. Phoenix Home Life's
principal place of business is located at One American Row, Hartford,
Connecticut.
The Advisers provide 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.
Each Series will pay expenses incurred in its own operation and will also
pay a portion of the Fund's administration expenses allocated on the basis of
the asset values of the respective Series.
As compensation for its services, National receives a fee from the Equity
Opportunities Series, which is accrued daily against the value of the Series
net assets and is paid by the Series on the last day of the month. The fee is
computed at an annual rate of .70% of the Series average daily net assets of up
to $1 billion, .65% of the Series' average daily net assets from $1 billion to
$2 billion, and .60% of the Series' average net assets in excess of $2 billion.
For the fiscal years 1995, 1996 and 1997 the net management fees paid by the
Series to the Adviser were $1,252,747, $1,394,239 and $1,408,901, respectively.
For managing the investments, or directing the management of the
investments of the Theme Series and the Small Cap Series, PIC is entitled to a
monthly fee at the annual rate of 0.75% of the average daily net asset values
of the Series up to $1 billion; 0.70% of such value between $1 billion and $2
billion; and 0.65% of such value in excess of $2 billion. For the fiscal years
1996 and 1997, the combined management fee paid by the Theme Series and Small
Cap Series was $295,479 and $2,736,920, respectively.
The Adviser has agreed that if, in any fiscal year, the aggregate expenses
of the Fund, exclusive of taxes, brokerage, interest and (with the prior
consent of any necessary state securities commissions) extraordinary expenses,
but including the management fee, exceed the most restrictive expense
limitations applicable to the Fund under state securities laws or published
regulations thereunder, the Adviser will refund to the Fund the excess over
such amount. Currently, the most restrictive of such limitations would require
the Adviser to reimburse the Fund to the extent that in any fiscal year such
aggregate expenses exceed 2.5% of the first $30,000,000 of average net assets;
2.0% of the next $70,000,000 and 1.5% of any amount of the average net assets
in excess of $100,000,000. In the event legislation were to be adopted in each
state so as to eliminate this restriction, the Fund would take such action
necessary to eliminate this expense limitation.
The Management Agreement with National was approved by the Trustees of the
Fund on March 16, 1993 and by the shareholders of the Fund on April 30, 1993.
The Management Agreement with PIC was approved by the Trustees of the Fund on
May 24, 1995. The Management Agreements 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 Agreements 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 Agreements will
terminate automatically in the event of their "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, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Since the Fund does not price securities on weekends or
United States national holidays, the net asset value of 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. 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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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 minimum initial investment is $500 and the minimum subsequent
investment is $25. However, both the minimum initial and subsequent investment
amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank
draft investing program administered by Distributor, or pursuant to the
Systematic Exchange privilege or for an individual retirement account (IRA). In
addition, there are no subsequent investment minimum amounts in connection with
the reinvestment of dividend or capital gain distributions. Completed
applications for the purchase of shares should be mailed to: Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares 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"). Orders received by dealers prior to the
close of trading on the New York Stock Exchange are confirmed at the offering
price effective at that time, provided the order is received by the Distributor
prior to its close of business.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Funds, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated continuing distribution services fee and contingent deferred
sales charges on Class B or C Shares would be less than the initial sales
charge and accumulated distribution services fee on Class A or M Shares
purchased at the same time. Note, only the Theme Series offers Class C and
Class M Shares.
Dividends paid by the Fund, if any, with respect to each Class of Shares
will be calculated in the same manner at the same time on the same day, except
that fees such as higher distribution services fee and any incremental transfer
agency costs relating to each Class of Shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
Class A Shares
Class A Shares incur a sales charge when they are purchased and enjoy the
benefit of not being subject to any sales charge when they are redeemed. Class
A Shares are subject to an ongoing distribution services fee at an annual rate
of up to 0.25% of the Fund's aggregate average daily net assets attributable to
the Class A Shares. In addition, certain purchases of Class A Shares qualify
for reduced initial sales charges. See the Fund's current Prospectus for
additional information.
Class B Shares
Class B Shares do not incur a sales charge when they are purchased, but
they are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions. See the Fund's current Prospectus for additional
information.
Class B Shares are subject to an ongoing distribution and services fee at
an aggregate annual rate of up to 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B Shares. Class B Shares enjoy the benefit
of permitting all of the investor's dollars to work from the time the
investment is made. The higher ongoing distribution 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.
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,
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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 Share dividends in the sub-account will also convert to
Class A Shares.
Class C Shares
Class C Shares are purchased without an initial sales charge but are
subject to a deferred sales charge if redeemed within one year of purchase. The
deferred sales charge may be waived in connection with certain qualifying
redemptions. Shares issued in conjunction with the automatic reinvestment of
income distributions and capital gain distributions are not subject to any
sales charges. Class C Shares are subject to an ongoing distribution and
services fee at an aggregate annual rate of up to 1.00% of the Fund's aggregate
average daily net assets attributable to Class C Shares. See the Fund's current
Prospectus for more information.
Class M Shares
Class M Shares incur a sales charge at the time of purchase but are not
subject to any sales charge when redeemed. Certain purchases of Class M Shares
may qualify for reduced initial sales charges as described in the Fund's
Prospectus. Class M Shares are subject to an ongoing distribution and services
fee at an aggregate annual rate of up to 0.50% of the Fund's aggregate average
daily net assets attributable to Class M Shares.
INVESTOR ACCOUNT SERVICES
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges
as described in the Fund's current Prospectus. Certain privileges may not be
available in connection with all classes. In most cases, changes to account
services may be accomplished over the phone. Inquiries regarding policies and
procedures relating to shareholder account services should be directed to
Shareholder Services at (800) 243-1574.
Exchanges. Under certain circumstances, shares of any Phoenix Fund may be
exchanged for shares of the same Class of another Phoenix Fund on the basis of
the relative net asset values per share at the time of the exchange. Exchanges
are subject to the minimum initial investment requirement of the designated
Fund, Series, or Portfolio, except if made in connection with the Systematic
Exchange privilege. Shareholders may exchange shares held in book-entry form
for an equivalent number (value) of the same class of shares of any other
Phoenix Fund, if currently offered. On exchanges with share classes that carry
a contingent deferred sales charge, the CDSC schedule of the original shares
purchased continues to apply. The exchange of shares is treated as a sale and
purchase for federal income tax purposes (see also "Dividends, Distributions
and Taxes").
Systematic Exchanges. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund automatically on a monthly,
quarterly, semi-annual or annual basis or may cancel this privilege at any
time. If you maintain an account balance of at least $5,000, or $2,000 for tax
qualified retirement benefit plans (calculated on the basis of the net asset
value of the shares held in a single account), you may direct that shares be
automatically exchanged at predetermined intervals for shares of the same class
of another Phoenix Fund. This requirement does not apply to Phoenix "Self
Security" program participants. Systematic exchanges will be executed upon the
close of business on the 10th day of each month or the next succeeding business
day. Systematic exchange forms are available from the Distributor. Exchanges
will be based upon each Fund's net asset value per share next computed after
the close of business on the 10th day of each month (or next succeeding
business day), without sales charge.
Dividend Reinvestment Across Accounts. If you maintain an account balance
of at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Phoenix Fund at net asset value. You should obtain a current
prospectus and consider the objectives and policies of each Fund carefully
before directing dividends and distributions to another Fund. Reinvestment
election forms and prospectuses are available from Equity Planning.
Distributions may also be mailed to a second payee and/or address. Requests for
directing distributions to an alternate payee must be made in writing with a
signature guarantee of the registered owner(s). To be effective with respect to
a particular dividend or distribution, notification of the new distribution
option must be received by the Transfer Agent at least three days prior to the
record date of such dividend or distribution. If all shares in your account are
repurchased or redeemed or transferred between the record date and the payment
date of a dividend or distribution, you will receive cash for the dividend or
distribution regardless of the distribution option selected.
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
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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 after receipt of the check.
See the Fund's current Prospectus for further information.
Redemptions by Class B and Class C 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 Fund's current
Prospectus for more information.
By Mail
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written
request to Equity Planning that the Fund redeem the shares. See the Fund's
current Prospectus for more information.
Telephone Redemptions
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Fund's current Prospectus for
additional information.
Reinvestment Privilege
Shareholders who may have overlooked features of their investment at the
time they redeemed have a privilege of reinvestment of their investment at net
asset value. See the Fund's current Prospectus for more information and
conditions attached to this privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Series is treated as a separate entity for federal income tax
purposes. Each 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, each 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, each 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. If in any taxable year
a 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 a 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 a
Series before February 1, of the following year.
The Fund's policy is to distribute to its shareholders all or
substantially all investment company taxable income as defined in the Code and
any net realized capital gains for each year and consistent therewith to meet
the distribution requirements of Part I of subchapter M of the Code. Each
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 each Series will pay no taxes on net investment
income and net realized capital gains distributed to shareholders.
Under certain circumstances, the sales charge incurred in acquiring shares
of a 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 a 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.
14
<PAGE>
Distributions by a 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 a Series
during a taxable year or held by a 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.
Each 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. National and PIC and their affiliates may
provide administrative services to these plans and to their participants, in
addition to the services that National and PIC and their 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 a Distribution Agreement with the Fund, Phoenix Equity
Planning Corporation (the "Distributor"), an indirect, less than wholly-owned
subsidiary of Phoenix Home Life and an affiliate of National, serves as
Distributor for the Fund. The address of the Distributor is 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 1995, 1996 and 1997, purchasers of
the Fund shares paid aggregate sales charges of $30,721, $1,825,565 and
$4,241,930, respectively, of which the principal Distributor for the Fund
received net commissions of $9,792, $206,540 and $736,095, respectively, for
its services, the balance being paid to dealers. The fees were used to
compensate sales and service persons for selling shares of the Fund and for
providing services to shareholders. In addition, the fees were used to
compensate the Distributor for sales and promotional activities.
The Distribution Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Fund, or by vote
of a majority of the Fund's Trustees who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Distribution Plan or in any related agreements. The Distribution Agreement
will terminate automatically in the event of its assignment.
Dealers with whom the Distributor has entered into sales agreements
receive sales charges in accordance with the commission table set forth in the
Prospectus. The Distributor may from time to time pay, from its own resources
or pursuant to the Plan of Distribution described below, a bonus or other
incentive to dealers (other than the Distributor) which employ a registered
representative who sells a minimum dollar amount of the shares of the Fund
during a specific period of time. Such bonus or other incentive may take the
form of payment for travel expenses, including lodging, incurred in connection
with trips taken by qualifying registered representatives and members of their
families to places within or without the United States or other bonuses such as
gift certificates or the cash equivalent of such bonuses. The Distributor may,
from time to time, reallow the entire portion of the sales charge which it
normally retains to individual selling dealers. However, such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
Equity Planning also acts as administrative agent of the Fund and as such
performs administrative, bookkeeping and pricing functions for the Fund. As
compensation for such services, effective as of January 1, 1997, Equity
Planning is entitled to a fee, payable monthly and based upon the average of
the aggregate daily net asset values of each Series, at the following
incremental annual rates:
15
<PAGE>
First $100 million .05% subject to a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum charge of $60,000 is applicable for each Series. In addition,
Equity Planning is paid $12,000 for each class of shares beyond one. Until
December 31, 1996, Equity Planning's fee for these services was based on an
annual rate of 0.03% of each Series' aggregate daily net asset value. For its
services during the Fund's fiscal year ended April 30, 1997, Equity Planning
received $211,223.
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," the "Class C Plan," the "Class M 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. For fiscal year
1997, the Distributor has voluntarily agreed to limit the Rule 12b-1 fee for
Class A Shares to 0.25%.
Pursuant to the Class A Plan, the Fund may reimburse the Distributor for
actual expenses of the Distributor up to 0.30% of the average daily net assets
of the Fund's Class A Shares. Under the Class B Plan and the Class C 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 and Class C Shares, respectively. Pursuant to the Class M Plan, the Fund
may reimburse the Distributor monthly for actual expenses of the Distributor up
to 0.50% annually of the average daily net assets of the Fund's Class M 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 Prospectus and
Statement of Additional Information for distribution to potential investors;
and (vii) such other similar services that the Trustees of the Fund determine
are reasonably calculated to result in the sale of shares of the Fund; provided
however, 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, 1997, the Fund paid Rule 12b-1 Fees in
the amount of $2,409,603, of which the principal underwriter received
$1,588,806, W.S. Griffith & Co., Inc., an affiliate, received $87,100 and
unaffiliated broker-dealers received $733,697. 12b-1 fees paid by the Fund
during last fiscal year were spent on: (1) advertising ($247,565); (2) printing
and mailing of prospectuses to other than current shareholders ($52,468); (3)
compensation to dealers ($5,948,830); (4) compensation to sales personnel
($524,000); (5) service costs ($133,223) and (6) other ($114,531).
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
16
<PAGE>
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 provide that
while they are in effect, the selection and nomination of Trustees who are not
"interested persons" shall be committed to the discretion of the Trustees who
are not "interested persons." The Plans may be terminated at any time by vote
of a majority of the Plan Trustees or a majority of the outstanding shares of
the relevant class of the Fund.
The National Association of Securities Dealers, Inc. (the "NASD") regards
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend the Plans.
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 Aberdeen Series Fund and Phoenix Duff & Phelps
Hartford, CT 06103 Institutional Mutual Funds (1996-present). Director/Trustee,
the National Affiliated Investment Companies (until 1993).
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-1994),
49 Old Post Road Phoenix Funds. Trustee, Phoenix-Aberdeen Series Fund and
Wethersfield, CT 06109 Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Vice President, Common Stock, Phoenix Home Life
Mutual Insurance Company (1980-1994). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
E. Virgil Conway (67) Trustee Chairman, Metropolitan Transportation Authority (1992-
9 Rittenhouse Road present). Trustee/Director, Consolidated Edison Company of
Bronxville, NY 10708 New York, Inc. (1970-present), Pace University (1978-
present), Atlantic Mutual Insurance Company (1974-present),
HRE Properties (1989-present), Greater New York Councils,
Boy Scouts of America (1985-present), Union Pacific Corp.
(1978-present), Blackrock Freddie Mac Mortgage Securities
Fund (Advisory Director) (1990-present), Centennial Insurance
Company (1974-present), Josiah Macy, Jr., Foundation (1975-
present), The Harlem Youth Development Foundation (1987-
present), Accuhealth (1994-present), Trism, Inc. (1994-
present), Realty Foundation of New York (1972-present), New
York Housing Partnership Development Corp. (Chairman)
(1981-present) and Fund Directions (Advisory Director)
(1993-present). Director/Trustee, Phoenix Funds (1993-
present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present).
Director, Duff & Phelps Utilities Tax-Free Income Inc. and
Duff & Phelps Utility and Corporate Bond Trust Inc. (1995-
present). Chairman, Audit Committee of the City of New York
(1981-1996). Advisory Director, Blackrock Fannie Mae
Mortgage Securities Fund (1989-1996). Chairman, Financial
Accounting Standards Advisory Council (1992-1995).
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ---------------------------- --------------- -----------------------------------------------------------------
<S> <C> <C>
Harry Dalzell-Payne (68) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York, NY 10022 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present). Director,
Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee, the
National Affiliated Investment Companies (1983-1993).
Formerly a Major General of the British Army.
*Francis E. Jeffries (66) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff &
Naples, FL 33963 Phelps Utilities Income Fund (1987-present), Duff & Phelps
Utilities Tax-Free Income Inc. (1991-present) and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1993-present).
Director, The Empire District Electric Company (1984-
present). Director (1989-1997), Chairman of the Board (1993-
1997), President (1989-1993), and Chief Executive Officer
(1989-1995), Phoenix Duff & Phelps Corporation.
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson Products
Chairman and Chief Company (1995-present). Director/Trustee, Phoenix Funds
Executive Officer (1980-present). Trustee, Phoenix-Aberdeen Series Fund and
Carson Products Company Phoenix Duff & Phelps Institutional Mutual Funds (1996-
64 Ross Road present). Director, Equifax Corp. (1991-present) and Keystone
Savannah, GA 30750 International Fund, Inc. (1989-present). Trustee, Keystone
Liquid Trust, Keystone Tax Exempt Trust, Keystone Tax Free
Fund, Master Reserves Tax Free Trust, and Master Reserves
Trust. President, Morehouse College (1987-1994). Chairman
and Chief Executive Officer, Keith Ventures (1992-1994).
Director/Trustee, the National Affiliated Investment Companies
(until 1993). Director, Blue Cross/Blue Shield (1989-1993)
and First Union Bank of Georgia (1989-1993).
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
*Philip R. McLoughlin (50) Trustee and Chairman (1997-present), Vice Chairman (1995-1997) and Chief
President Executive Officer (1995-present), Phoenix Duff & Phelps
Corporation. Director (1994-present) and Executive Vice
President, Investments (1988-present), Phoenix Home Life
Mutual Insurance Company. Director/Trustee and President,
Phoenix Funds (1989-present). Trustee and President, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Director, Duff & Phelps Utilities
Tax-Free Income Inc. (1995-present) and Duff & Phelps Utility
and Corporate Bond Trust Inc. (1995-present). Director (1983-
present) and Chairman (1995-present), Phoenix Investment
Counsel, Inc. Director (1984-present) and President (1990-
present), Phoenix Equity Planning Corporation. Director (1993-
present), Chairman (1993-present) and Chief Executive Officer
(1993-1995), National Securities & Research Corporation.
Director, Phoenix Realty Group, Inc. (1994-present), Phoenix
Realty Advisors, Inc. (1987-present), Phoenix Realty Investors,
Inc. (1994-present), Phoenix Realty Securities, Inc. (1994-
present), PXRE Corporation (Delaware) (1985-present), and
World Trust Fund (1991-present). Director and Executive Vice
President, Phoenix Life and Annuity Company (1996-present).
Director and Executive Vice President, PHL Variable Insurance
Company (1995-present). Director, Phoenix Charter Oak Trust
Company (1996-present). Director and Vice President, PM
Holdings, Inc. (1985-present). Director and President, Phoenix
Securities Group, Inc. (1993-1995). Director (1992-present) and
President (1992-1994), W.S. Griffith & Co., Inc. Director (1992-
present) and President (1992-1994), Townsend Financial
Advisers, Inc. Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Everett L. Morris (69) Trustee Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee, Duff
Colts Neck, N.J. 07722 & Phelps Mutual Funds (1994-present). Trustee, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. (1991-present) and Duff
& Phelps Utility and Corporate Bond Trust Inc. (1993-
present). Director, Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings, Incorporated (1989-
1993).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C>
*James M. Oates (51) Trustee Chairman, IBEX Capital Markets LLC (1997-present).
Managing Director Managing Director, Wydown Group (1994-present). Director,
The Wydown Group Phoenix Duff & Phelps Corporation (1995-present). Director/
IBEX Capital Markets LLC Trustee, Phoenix Fund (1987-present). Trustee, Phoenix-
60 State Street Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 950 Institutional Mutual Funds (1996-present). Director, Govett
Boston, MA 02109 Worldwide Opportunity Funds, Inc. (1991-present), Blue Cross
and Blue Shield of New Hampshire (1994-present), Investors
Financial Service Corporation (1995-present), Investors Bank
& Trust Corporation (1995-present), Plymouth Rubber Co.
(1995-present) and Stifel Financial (1996-present). Member,
Chief Executives Organization (1996-present). Director (1984-
1994), President (1984-1994) and Chief Executive Officer
(1986-1994), Neworld Bank. Director/Trustee, the National
Affiliated Investment Companies (until 1993).
*Calvin J. Pedersen (55) Trustee Director (1986-present), President (1993-present) and
Phoenix Duff & Phelps Executive Vice President (1992-1993), Phoenix Duff & Phelps
Corporation Corporation. Director/Trustee, Phoenix Funds (1995-present).
55 East Monroe Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Suite 3600 Phelps Institutional Mutual Funds (1996-present). President
Chicago, IL 60603 and Chief Executive Officer, Duff & Phelps Utilities Tax-Free
Income Inc. (1995-present), Duff & Phelps Utilities Income
Inc. (1994-present) and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present).
Philip R. Reynolds (70)** Trustee Director/Trustee, Phoenix Funds (1984-present). Trustee,
43 Montclair Drive Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
West Hartford, CT 06107 Institutional Mutual Funds (1996-present). Director, Vestaur
Securities, Inc. (1972-present). Trustee and Treasurer, J.
Walton Bissell Foundation, Inc. (1988-present). Director/
Trustee, the National Affiliated Investment Companies (until
1993).
Herbert Roth, Jr. (68) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-present), Phoenix Home Life Mutual
Insurance Company (1972-present), Landauer, Inc. (medical
services) (1970-present),Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), and Mark IV Industries
(diversified manufacturer) (1985-present). Director, Key
Energy Group (oil rig service) (1988-1994). Director/Trustee,
the National Affiliated Investment Companies (until 1993).
Richard E. Segerson (51) Trustee Managing Director, Mullin Associates (1993-present).
102 Valley Road Director/Trustee, Phoenix Funds (1993-present). Trustee,
New Canaan, CT 06840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Vice President and
General Manager, Coats & Clark, Inc. (previously Tootal
American, Inc.) (1991-1993). Director/Trustee, the National
Affiliated Investment Companies (1984-1993).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- ----------------------------------------------------------------
<S> <C> <C>
Lowell P. Weicker, Jr. (66) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), HPSC Inc. (1995-present), Duty Free
International, Inc. (1997-present) and Compuware (1996-
present). Visiting Professor, University of Virginia (1997-
present). Chairman, Dresing, Lierman, Weicker (1995-1996).
Governor of the State of Connecticut (1991-1995).
Michael E. Haylon (39) Executive Director and Executive Vice President--Investments, Phoenix
Vice Duff & Phelps Corporation (1995-present). Executive Vice
President President, Phoenix Funds (1993-present) and Phoenix-
Aberdeen Series Fund (1996-present). Executive Vice
President (1997-present), Vice President, Phoenix Duff &
Phelps Institutional Mutual Funds (1996-1997). 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 (1997-present)
President 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).
William J. Newman (58) Senior Vice Executive Vice President (1995-present) and Chief Investment
President 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), The
Phoenix Edge Series Fund (1995-present), Phoenix Multi-
Portfolio Fund (1995-present), Phoenix Income and Growth
Fund (1996-present), Phoenix Series Fund (1996-present),
Phoenix Strategic Allocation Fund, Inc. (1996-present),
Phoenix Worldwide Opportunities Fund (1996-present),
Phoenix-Aberdeen Series Fund (1996-present) and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present).
Vice President, Common Stock and Chief Investment
Strategist, Phoenix Home Life Mutual Insurance Company
(1995). Chief Investment Strategist, Kidder, Peabody Co., Inc.
(1993-1994). Managing Director, Equities, Bankers Trust
Company (1991-1993).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- ----------------------------------------------------------------
<S> <C> <C>
Michael K. Arends (43) Vice Managing Director, Equities (1996-present), Vice President
President (1994-1996), Phoenix Investment Counsel, Inc. and National
Securities & Research Corporation. Vice President, Phoenix
Strategic Equity Series Fund and Phoenix Series Fund (1994-
present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with
Kemper Financial Services (1983-1994).
William E. Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning
100 Bright Meadow Blvd. President Corporation (1996-present). Vice President, Phoenix Funds,
P.O. Box 2200 Phoenix Duff & Phelps Institutional Mutual Funds and
Enfield, CT 06083-2200 Phoenix-Aberdeen Series Fund (1996-present). Assistant Vice
President, USAffinity Funds, (1994-1995). Treasurer and
Secretary, USAffinity Funds (1994-1995). Manager, Fund
Administration, SEI Corporation (1991-1994).
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer, Phoenix
100 Bright Meadow Blvd. President 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. Senior Vice President and
Chief Operating Officer, Duff & Phelps Investment
Management Co. (1996-present). Vice President, Phoenix
Funds (1990-present), Phoenix-Duff & Phelps Institutional
Mutual Funds (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Senior Vice President and Chief
Financial Officer, W. S. Griffith & Co., Inc. (1992-1995) and
Townsend Financial Advisers, Inc. (1993-1995). Vice
President, the National Affiliated Investment Companies (until
1993). Vice President, Investment Products Finance, Phoenix
Home Life Mutual Insurance Company (1990-1995).
Leonard J. Saltiel (43) Vice Managing Director (1996-present), Senior Vice President
President (1994-1996), Phoenix Equity Planning Corporation. Vice
President, Phoenix Funds (1994-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present) and
Phoenix-Aberdeen Series Fund (1996-present). Vice
President, Investment Operations, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with Home
Life Insurance Company and Phoenix Home Life Mutual
Insurance Company (1987-1994).
G. Jeffrey Bohne (49) Secretary Vice President and General Manager, Phoenix Home Life
101 Munson Street Mutual Insurance Co. (1993-present). Vice President, Mutual
Greenfield, MA 01301 Funds Customer Service, Phoenix Equity Planning Corporation
(1993-present). Secretary, Phoenix Funds (1993-present).
Clerk, Phoenix Strategic Allocation Fund, Inc. (1994-present).
Secretary, Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund (1996-
present). Vice President, Home Life of New York Insurance
Company (1984-1992).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------- --------------- -----------------------------------------------------------------
<S> <C> <C>
Nancy G. Curtiss (44) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen
Series Fund (1996-present). Second Vice President and
Treasurer, Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with Phoenix
Home Life Mutual Insurance Company (1987-1994).
</TABLE>
- -----------
*Indicates that the Trustee is an "interested person" of the Trust within the
meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Blinn and
Reynolds will retire from the Board of Trustees effective January 1, 1998.
For services rendered to the Fund for the fiscal year ended April 30,
1997, the Trustees received aggregate remuneration of $54,225 For services on
the Boards of Directors/Trustees of the Phoenix Funds, each Trustee who is not
a full-time employee of the Adviser or any of its affiliates currently receives
a retainer at the annual rate of $40,000 and a fee of $2,500 per joint meeting
of the Boards. Each Trustee who serves on the Audit Committee receives a
retainer at the annual rate of $2,000 and a fee of $2,000 per joint Audit
Committee meeting attended. Each Trustee who serves on the Nominating Committee
receives a retainer at the annual rate of $1,000 and a fee of $1,000 per joint
Nominating Committee meeting attended. Each Trustee who serves on the Executive
Committee and who is not an interested person of the Fund receives a retainer
at the annual rate of $1,000 and $1,000 per joint Executive Committee meeting
attended. The function of the Executive Committee is to serve as a contract
review, compliance review and performance review delegate of the full Board of
Trustees. Costs are allocated equally to each of the Series and Funds within
the Fund complex. The foregoing fees do not include the reimbursement of
expenses incurred in connection with meeting attendance. Officers and employees
of the Advisers who are interested persons are compensated by the Adviser and
receive no compensation from the Fund.
For the Fund's last fiscal year, the Trustees and Advisory Board received
the following compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (12 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ----------------------- -------------- --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $ 5,130* $63,250
Robert Chesek $ 4,500 $56,250
E. Virgil Conway+ $ 5,310 $66,000
Harry Dalzell-Payne+ $ 4,500 $56,750
Francis E. Jeffries $ 1,125* $15,000
Leroy Keith, Jr. $ 4,500 None None $56,250
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $ 4,230* Trustee Trustee $54,000
James M. Oates+ $ 4,680 $58,500
Calvin J. Pedersen $ 0 $ 0
Philip R. Reynolds $ 4,500 $56,250
Herbert Roth, Jr.+ $ 5,580 $68,750
Richard E. Segerson $ 5,040 $62,750
Lowell Weicker, Jr. $ 5,130 $63,250
</TABLE>
*This compensation (and the earnings thereon) will be deferred pursuant to the
Directors' Deferred Compensation Plan. At June 30, 1997, the total amount of
deferred compensation (including interest and other accumulation earned on the
original amounts deferred) accrued for Messrs. Blinn, Jeffries, Morris and Roth
was $349,026.91, $28,561.41, $85,849.73 and $132,587.69, respectively. At
present, by agreement among the Fund, the Distributor and the electing
director, director fees that are deferred are paid by the Fund to the
Distributor. The liability for the deferred compensation obligation appears
only as a liability of the Distributor.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
On April 30, 1997, the Trustees and officers of the Fund beneficially owned less
than 1% of the outstanding shares of the Fund.
23
<PAGE>
OTHER INFORMATION
Independent Accountants
Price Waterhouse LLP serves as independent accountants for the Fund (the
"Accountants"). The Accountants audit the annual financial statements and
express their opinion on them.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), serves as custodian
of the Fund's assets (the "Custodian") and Equity Planning acts as Transfer
Agent for the Fund (the "Transfer Agent").
Reports to Shareholders
The fiscal year of the Fund ends on April 30th. The Fund will send
financial statements to its shareholders at least semi-annually. An annual
report, containing financial statements, audited by independent accountants,
will be sent to shareholders each year, and is available without charge upon
request.
Financial Statements
The Financial Statements for the fiscal year ended April 30, 1997
appearing in the Fund's 1997 Annual Report to Shareholders, are incorporated
herein by reference.
24
<PAGE>
Phoenix Small Cap Fund
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1997
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------------
<S> <C> <C>
COMMON STOCKS--77.6%
Building--Cement/Concrete/Aggregate--0.8%
Lafarge Corp. 28,400 $ 688,700
Southdown, Inc. 35,000 1,264,375
---------------
1,953,075
---------------
Building--Residential/Commercial--0.5%
Centex Corp. 35,000 1,260,000
---------------
Commercial Services--Miscellaneous--0.7%
Caribiner International, Inc. (b) 35,000 1,855,000
---------------
Commercial Services--Printing--0.9%
Consolidated Graphics, Inc. (b) 90,000 2,193,750
---------------
Commercial Services--Schools--2.2%
Computer Learning Centers, Inc. (b) 75,000 1,996,875
Learning Tree International, Inc. (b) 37,800 1,190,700
Strayer Education, Inc. 90,000 2,317,500
---------------
5,505,075
---------------
Computer--Memory Devices--1.2%
Hutchinson Technology, Inc. (b) 115,000 3,119,375
---------------
Computer--Peripheral Equipment--0.2%
NeoMagic Corp. (b) 45,000 525,938
---------------
Computer--Services--3.6%
Computer Horizons Corp. (b) 40,000 1,740,000
Data Dimensions, Inc. (b) 145,000 3,443,750
Technology Solutions Co. (b) 100,000 2,637,500
Yahoo!, Inc. (b) 40,000 1,365,000
---------------
9,186,250
---------------
Computer--Software--4.1%
Cognos, Inc. (b) 90,000 2,283,750
Compuware Corp. (b) 120,000 4,530,000
Manugistics Group, Inc. (b) 64,000 3,440,000
---------------
10,253,750
---------------
Cosmetics/Personal Care--0.4%
Weider Nutrition International, Inc. (b) 89,100 980,100
---------------
Electric--Laser Systems/Component--1.5%
Cymer, Inc. (b) 93,000 3,824,625
---------------
Electric--Semiconductor Equipment--4.8%
DuPont Photomasks, Inc. (b) 80,000 3,830,000
PRI Automation, Inc. (b) 70,000 3,587,500
Speedfam International, Inc. (b) 33,400 809,950
Teradyne, Inc. (b) 115,000 3,766,250
---------------
11,993,700
---------------
Electric--Semiconductor Manufacturing--3.9%
ANADIGICS, Inc. (b) 129,700 3,664,025
Hadco Corp. (b) 31,900 1,363,725
Jabil Circuit, Inc. (b) 30,000 1,451,250
Sanmina Corp. (b) 25,000 1,250,000
Triquint Semiconductor, Inc. (b) 72,700 2,162,825
---------------
9,891,825
---------------
Finance--Equity REITS--1.9%
Beacon Properties Corp. 78,000 2,408,250
Cali Realty Corp. 84,000 2,478,000
---------------
4,886,250
---------------
Finance--Investment Bankers--1.8%
Edwards (A.G.), Inc. 74,000 2,590,000
Morgan Keegan, Inc. (b) 42,400 768,500
Raymond James Financial, Inc. (b) 55,800 1,304,325
---------------
4,662,825
---------------
Finance--Investment Management--1.1%
T. Rowe Price Associates 60,000 2,775,000
---------------
Financial Services--Miscellaneous--1.0%
Capitol One Financial Corp. 70,000 2,528,750
---------------
Insurance--Life--5.1%
Equitable of Iowa Co. 50,000 2,443,750
Presidential Life Corp. 210,000 3,018,750
ReliaStar Financial Corp. 82,000 4,961,000
Western National Corp. 93,000 2,394,750
---------------
12,818,250
---------------
Insurance--Multi Line--1.1%
Horace Mann Educators Corp. 60,000 2,812,500
---------------
Insurance--Property/Casualty/Title--2.0%
American Bankers Insurance Group, Inc. 40,000 2,115,000
Mutual Risk Management Ltd. 80,000 2,940,000
---------------
5,055,000
---------------
Leisure--Toys/Games/Hobby--0.6%
Action Performance Cos., Inc. (b) 60,000 1,582,500
---------------
Machinery--Farm--1.3%
Lindsay Manufacturing Co. 112,500 3,206,250
---------------
Medical--Biomed/Genetics--2.1%
Agouron Pharmaceuticals, Inc. (b) 45,000 2,880,000
Guilford Pharmaceuticals, Inc. (b) 102,800 2,377,250
---------------
5,257,250
---------------
Medical--Ethical Drugs--0.3%
Theragenics Corp. (b) 43,700 742,900
---------------
Medical--Outpatient/Home Care--0.3%
National Surgery Centers, Inc. (b) 28,000 840,000
---------------
Oil & Gas--Drilling--6.0%
Atwood Oceanics, Inc. (b) 44,000 2,695,000
Cliffs Drilling Co. (b) 93,000 5,673,000
Marine Drilling Co., Inc. (b) 230,000 3,622,500
Precision Drilling Corp. (b) 89,900 3,124,025
---------------
15,114,525
---------------
Oil & Gas--Field Services--3.7%
Pride Petroleum Services, Inc. (b) 265,000 4,571,250
Trico Marine Services, Inc. (b) 100,000 3,550,000
Veritas DGC, Inc. (b) 65,000 1,251,250
---------------
9,372,500
---------------
See Notes to Financial Statements
3
<PAGE>
Phoenix Small Cap Fund
- --------------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
--------- ---------------
<S> <C> <C>
Oil & Gas--Machinery/Equipment--1.4%
Energy Ventures, Inc. (b) 16,000 $ 1,070,000
Gulf Island Fabrication, Inc. (b) 62,800 1,318,800
Varco International, Inc. (b) 48,800 1,122,400
---------------
3,511,200
---------------
Oil & Gas--U.S. Exploration & Production--4.4%
Forcenergy, Inc. (b) 120,000 3,720,000
Newfield Exploration Co. (b) 152,800 2,922,300
Stone Energy Corp. (b) 120,000 3,210,000
Tom Brown, Inc. (b) 70,000 1,277,500
---------------
11,129,800
---------------
Pollution Control--Equipment--1.2%
Culligan Water Technologies, Inc. (b) 75,000 3,065,625
---------------
Pollution Control--Services--3.3%
Newpark Resources, Inc. (b) 60,000 2,692,500
Philip Environmental, Inc. (b) 170,000 2,677,500
Tetra Tech, Inc. (b) 203,000 2,892,750
---------------
8,262,750
---------------
Retail--Apparel/Shoe--1.6%
Pacific Sunwear of California (b) 60,000 1,875,000
Ross Stores, Inc. 73,100 2,055,937
---------------
3,930,937
---------------
Retail--Discount & Variety--3.1%
Mac Frugals Bargains Close-Outs, Inc. (b) 100,000 2,925,000
Stein Mart, Inc. (b) 85,000 2,465,000
Tuesday Morning Corp. (b) 90,000 2,542,500
---------------
7,932,500
---------------
Retail--Mail Order & Direct--0.7%
dELiA*s, Inc. (b) 100,000 1,700,000
---------------
Shoes & Related Apparel--1.2%
Wolverine World Wide, Inc. 74,000 2,978,500
---------------
Steel--Specialty Alloys--0.5%
Special Metals Corp. (b) 95,000 1,341,875
---------------
Telecommunications--Equipment--2.1%
Digital Microwave Corp. (b) 45,000 1,158,750
MRV Communications, Inc. (b) 96,000 1,980,000
P-Com, Inc. (b) 26,500 758,562
Spectrian Corp. (b) 105,000 1,391,250
---------------
5,288,562
---------------
Transportation--Air Freight--0.3%
Eagle USA Airfreight, Inc. (b) 35,500 710,000
---------------
Transportation--Equipment Manufacturer--1.0%
Halter Marine Group, Inc. (b) 126,100 2,474,713
---------------
Transportation--Services--0.5%
Expeditors International of
Washington, Inc. (b) 55,000 1,375,000
---------------
Transportation--Truck--3.2%
JB Hunt Transport Services, Inc. 192,100 2,665,387
Swift Transportation Co., Inc. (b) 90,000 2,565,000
USFreightways Corp. 107,000 2,889,000
---------------
8,119,387
---------------
TOTAL COMMON STOCKS
(Identified cost $198,309,640) 196,017,812
---------------
FOREIGN COMMON STOCKS--1.7%
Electric--Semiconductor Equipment--1.7%
ASM Lithography Holding NV
(Netherlands) (b) 54,000 4,293,000
---------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $4,000,712) 4,293,000
---------------
TOTAL LONG-TERM INVESTMENTS--79.3%
(Identified cost $202,310,352) 200,310,812
---------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ --------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--20.6%
Commercial Paper--18.9%
Shell Oil Co. 5.58%, 5-1-97 A-1+ $3,600 3,600,000
Amoco Co. 5.52%, 5-2-97 A-1+ 2,895 2,894,556
Exxon Imperial U.S., Inc. 5.55%,
5-2-97 A-1+ 3,485 3,484,463
DuPont (E.I.) de Nemours & Co.
5.28%, 5-5-97 A-1+ 1,980 1,978,838
McKenna Triangle National Corp.
5.56%, 5-6-97 A-1+ 5,550 5,545,714
Minnesota Mining & Manufacturing
Co. 5.27%, 5-7-97 A-1+ 540 539,526
Pfizer, Inc. 5.50%, 5-7-97 A-1+ 2,105 2,103,070
Greenwich Funding Corp. 5.54%,
5-12-97 A-1+ 1,579 1,576,327
Heinz (H.J.) Co. 5.47%, 5-20-97 A-1 3,040 3,031,224
Warner-Lambert Co. 5.52%, 5-20-97 A-1+ 2,800 2,791,843
Pfizer, Inc. 5.47%, 5-29-97 A-1+ 4,500 4,480,855
Private Export Funding Corp.
5.35%, 5-29-97 A-1+ 3,300 3,284,437
Heinz (H.J.) Co. 5.50%, 5-30-97 A-1 3,625 3,608,939
Potomac Electric Power Co. 5.53%,
6-3-97 A-1 5,200 5,173,640
General Re Corp. 5.55%, 6-13-97 A-1+ 3,774 3,748,982
---------------
47,842,414
---------------
Federal Agency Securities--1.7%
Federal Home Loan Banks 5.34%, 5-23-97 1,215 1,211,035
Federal National Mortgage Assoc. 5.28%,
6-5-97 3,000 2,983,446
---------------
4,194,481
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $52,039,881) 52,036,895
---------------
TOTAL INVESTMENTS--99.9%
(Identified cost $254,350,233) 252,347,707(a)
Cash and receivables, less liabilities--0.1% 387,920
---------------
NET ASSETS--100.0% $252,735,627
===============
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $9,105,186 and gross
depreciation of $12,666,905 for income tax purposes. At April 30, 1997,
the aggregate cost of securities for federal income tax purposes was
$255,909,426.
(b) Non-income producing.
See Notes to Financial Statements
4
<PAGE>
Phoenix Small Cap Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
Assets
Investment securities at value
(Identified cost $254,350,233) $252,347,707
Cash 52,792
Receivables
Investment securities sold 27,471,925
Fund shares sold 784,341
Dividends and interest 48,825
---------------
Total assets 280,705,590
---------------
Liabilities
Payables
Investment securities purchased 27,119,880
Fund shares repurchased 382,295
Investment advisory fee 157,418
Distribution fee 113,326
Financial agent fee 10,204
Transfer agent fee 80,510
Trustees' fee 4,203
Accrued expenses 102,127
---------------
Total liabilities 27,969,963
---------------
Net Assets $252,735,627
===============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $280,182,727
Accumulated net realized loss (25,444,574)
Net unrealized depreciation (2,002,526)
---------------
Net Assets $252,735,627
===============
Class A
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $155,088,978) 10,972,539
Net asset value per share $14.13
Offering price per share
$14.13/(1-4.75%) $14.83
Class B
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $97,646,649) 6,984,075
Net asset value and offering price per share $13.98
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
Investment Income
Interest $ 2,649,688
Dividends 240,469
---------------
Total investment income 2,890,157
---------------
Expenses
Investment advisory fee 1,994,519
Distribution fee--Class A 423,679
Distribution fee--Class B 964,642
Financial agent fee 96,250
Transfer agent 621,523
Registration 122,073
Printing 51,720
Professional 31,818
Custodian 26,283
Trustees 18,260
Miscellaneous 11,204
---------------
Total expenses 4,361,971
---------------
Net investment loss (1,471,814)
---------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (25,221,777)
Net change in unrealized appreciation (depreciation)
on investments (27,980,129)
---------------
Net loss on investments (53,201,906)
---------------
Net decrease in net assets resulting from operations $(54,673,720)
===============
See Notes to Financial Statements
5
<PAGE>
Phoenix Small Cap Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended October 16, 1995 to
April 30, 1997 April 30, 1996
--------------- -------------------
<S> <C> <C>
From Operations
Net investment income (loss) $ (1,471,814) $ (198,222)
Net realized gain (loss) (25,221,777) 478,693
Net change in unrealized appreciation (depreciation) (27,980,129) 25,977,603
-------------- -------------
Increase (decrease) in net assets resulting from operations (54,673,720) 26,258,074
-------------- -------------
From Distributions to Shareholders
Net realized gains--Class A (183,926) --
Net realized gains--Class B (108,414) --
In excess of net investment income--Class A -- (12,168)
In excess of accumulated net realized gains--Class A (141,528) --
In excess of accumulated net realized gains--Class B (83,423) --
-------------- -------------
Decrease in net assets from distributions to shareholders (517,291) (12,168)
-------------- -------------
From Share Transactions
Class A
Proceeds from sales of shares (12,800,790 and
6,072,940 shares, respectively) 216,824,086 81,698,360
Net asset value of shares issued from reinvestment
of distributions (18,203 and 928 shares, respectively) 304,365 11,748
Cost of shares repurchased (7,723,733 and 196,589
shares, respectively) (126,330,628) (2,715,491)
-------------- -------------
Total 90,797,823 78,994,617
-------------- -------------
Class B
Proceeds from sales of shares (5,355,420 and 2,768,695
shares, respectively) 90,761,953 39,161,690
Net asset value of shares issued from reinvestment
of distributions (9,754 and 0 shares, respectively) 161,819 --
Cost of shares repurchased (1,088,642 and 61,152
shares, respectively) (17,334,625) (862,545)
-------------- -------------
Total 73,589,147 38,299,145
-------------- -------------
Increase in net assets from share transactions 164,386,970 117,293,762
-------------- -------------
Net increase in net assets 109,195,959 143,539,668
Net Assets
Beginning of period 143,539,668 0
-------------- -------------
End of period (including undistributed net
investment income of $0 and $0, respectively) $ 252,735,627 $143,539,668
============== =============
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix Small Cap Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A Class B
----------------------------- -----------------------------
From Inception From Inception
Year Ended 10/16/95 to Year Ended 10/16/95 to
4/30/97 4/30/96 4/30/97 4/30/96
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.74 $10.00 $16.68 $10.00
Income from investment operations
Net investment income (loss) (0.05)(5) (0.04)(1)(5) (0.17)(5) (0.09)(1)(5)
Net realized and unrealized gain (loss) (2.53) 6.79 (2.50) 6.77
---------- ---------- --------- --------
Total from investment operations (2.58) 6.75 (2.67) 6.68
---------- ---------- --------- --------
Less distributions
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.02) -- (0.02) --
In excess of net investment income -- (0.01) -- --
In excess of accumulated net realized gains (0.01) -- (0.01) --
---------- ---------- --------- --------
Total distributions (0.03) (0.01) (0.03) --
---------- ---------- --------- --------
Change in net asset value (2.61) 6.74 (2.70) 6.68
---------- ---------- --------- --------
Net asset value, end of period $14.13 $16.74 $13.98 $ 16.68
========== ========== ========= ========
Total return (2) (15.43)% 67.48%(4) (16.03)% 66.80%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $155,089 $98,372 $97,647 $45,168
Ratio to average net assets of:
Expenses 1.37% 1.50%(3) 2.12% 2.26%(3)
Net investment income (loss) (0.28)% (0.53)%(3) (1.03)% (1.44)%(3)
Portfolio turnover 325% 103%(4) 325% 103%(4)
Average commission rate paid (6) $0.0540 $0.0657 $0.0540 $0.0657
</TABLE>
(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.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
7
<PAGE>
Phoenix Strategic Theme Fund
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1997
SHARES VALUE
-------- -------------
COMMON STOCKS-- 73.9%
Banks--Foreign--1.0%
BanPonce Corp. 37,000 $1,262,625
-------------
Banks--Money Center--1.0%
Chase Manhattan Corp. 14,000 1,296,750
-------------
Banks--Southeast--1.0%
First American Corp. 19,000 1,244,500
-------------
Banks--Super Regional--1.0%
Fleet Financial Group, Inc. 21,000 1,281,000
-------------
Commercial Services--Schools--1.3%
Education Management Corp. (b) 50,000 1,100,000
ITT Educational Services, Inc. (b) 25,000 568,750
-------------
1,668,750
-------------
Computer--Local Networks--2.1%
Ascend Communications, Inc. (b) 59,000 2,699,250
-------------
Computer--Memory Devices--4.3%
Quantum Corp. (b) 45,000 1,875,938
Seagate Technology, Inc. (b) 38,000 1,743,250
Western Digital Corp. (b) 30,000 1,848,750
-------------
5,467,938
-------------
Computer--Services--1.5%
America Online, Inc. (b) 42,000 1,895,250
-------------
Computer--Software--1.2%
Compuware Corp. (b) 42,000 1,585,500
-------------
Cosmetics/Personal Care--0.4%
Weider Nutrition International, Inc. (b) 42,600 468,600
-------------
Diversified Operations--1.1%
Corning, Inc. 28,000 1,351,000
-------------
Electric--Semiconductor Equipment--4.5%
Applied Materials, Inc. (b) 54,000 2,963,250
Teradyne, Inc. (b) 85,000 2,783,750
-------------
5,747,000
-------------
Electric--Semiconductor Manufacturing--4.5%
Altera Corp. (b) 27,000 1,338,187
LSI Logic Corp. (b) 65,000 2,486,250
Xilinx, Inc. (b) 40,000 1,960,000
-------------
5,784,437
-------------
Electrical--Equipment--1.0%
General Electric Co. 12,000 1,330,500
-------------
Finance--Equity REITS--4.1%
Equity Residential Properties Trust 35,000 1,531,250
Essex Property Trust, Inc. 40,000 1,170,000
Patriot American Hospitality, Inc. 58,000 1,247,000
Starwood Lodging Trust 33,000 1,270,500
-------------
5,218,750
-------------
Finance--Investment Bankers--3.6%
Charles Schwab Corp. 55,000 2,014,375
Merrill Lynch & Co., Inc. 14,000 1,333,500
Morgan Stanley Group, Inc. 20,000 1,262,500
-------------
4,610,375
-------------
Financial Services--Miscellaneous--1.1%
SunAmerica, Inc. 31,000 1,426,000
-------------
Insurance--Diversified--2.2%
Travelers Group, Inc. 51,000 2,824,125
-------------
Insurance--Life--6.7%
Conseco, Inc. 65,000 2,689,375
Lincoln National Corp. 23,000 1,288,000
Providian Corp. 44,000 2,541,000
Torchmark Corp. 32,000 1,988,000
-------------
8,506,375
-------------
Insurance--Property/Casualty/Title--3.5%
Ace, Ltd. 30,000 1,800,000
Allstate Corp. 20,000 1,310,000
American International Group, Inc. 11,000 1,413,500
-------------
4,523,500
-------------
Medical--Drug/Diversified--1.1%
Johnson & Johnson 23,000 1,408,750
-------------
Medical--Ethical Drugs--2.1%
Pfizer, Inc. 14,000 1,344,000
Schering-Plough Corp. 16,000 1,280,000
-------------
2,624,000
-------------
Oil & Gas--Drilling--4.4%
Diamond Offshore Drilling (b) 50,000 3,218,750
ENSCO International, Inc. (b) 51,000 2,422,500
-------------
5,641,250
-------------
Oil & Gas--International Integrated--1.5%
Exxon Corp. 34,000 1,925,250
-------------
Oil & Gas--Machinery/Equipment--4.5%
Cooper Cameron Corp. (b) 28,000 1,995,000
Smith International, Inc. (b) 54,000 2,558,250
Varco International, Inc. (b) 50,000 1,150,000
-------------
5,703,250
-------------
Oil & Gas--Refining--0.9%
Trizec Hahn Corp. 50,000 1,093,750
-------------
Pollution Control--Equipment--0.9%
Ionics, Inc. (b) 25,000 1,150,000
-------------
Pollution Control--Services--2.8%
Newpark Resources, Inc. (b) 40,000 1,795,000
Philip Environmental, Inc. (b) 40,000 630,000
U.S.A. Waste Services, Inc. (b) 37,000 1,211,750
-------------
3,636,750
-------------
Real Estate Operations--0.8%
Fairfield Communities, Inc. (b) 40,000 1,040,000
-------------
Retail--Major Discount Chains--1.0%
Costco Co., Inc. (b) 44,000 1,270,500
-------------
Transportation--Airline--2.0%
UAL Corp. (b) 17,000 1,264,375
U.S. Air Group, Inc. (b) 40,000 1,295,000
-------------
2,559,375
-------------
See Notes to Financial Statements
10
<PAGE>
Phoenix Strategic Theme Fund
- --------------------------------------------------------------------------------
SHARES VALUE
-------- -------------
Transportation--Truck--4.5%
CNF Transportation, Inc. 78,000 $ 2,320,500
USFreightways Corp. 58,000 1,566,000
Yellow Corp. (b) 95,000 1,828,750
-------------
5,715,250
-------------
Utility--Water Supply--0.3%
Southwest Water Co. 25,800 341,850
-------------
TOTAL COMMON STOCKS
(Identified cost $91,969,841) 94,302,200
-------------
FOREIGN COMMON STOCKS--1.9%
Medical--Ethical Drugs--1.9%
Teva Pharmaceutical Industries, Ltd.
Sponsored ADR (Israel) (b) 47,000 2,385,250
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $2,494,912) 2,385,250
-------------
TOTAL LONG-TERM INVESTMENTS--75.8%
(Identified cost $94,464,753) 96,687,450
-------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ --------
SHORT-TERM OBLIGATIONS-- 29.8%
Commercial Paper--24.6%
Asset Securitization
Cooperative Corp. 5.65%,
5-1-97 A-1+ $4,746 4,746,000
Ciesco L.P. 5.55%, 5-1-97 A-1+ 3,000 3,000,000
Exxon Imperial U.S., Inc.
5.55%, 5-2-97 A-1+ 1,805 1,804,722
Preferred Receivables
Funding Corp. 5.33%,
5-2-97 A-1 520 519,923
International Lease Finance
Corp. 5.32%, 5-5-97 A-1 2,215 2,213,331
Merrill Lynch & Co., Inc.
5.57%, 5-7-97 A-1+ 2,195 2,192,962
Amoco Co. 5.40%, 5-9-97 A-1+ 3,500 3,495,800
General Electric Capital
Corp. 5.46%, 5-15-97 A-1+ 2,900 2,893,842
Heinz (H.J.) Co. 5.47%,
5-20-97 A-1 3,800 3,789,030
Greenwich Funding Corp.
5.54%, 5-21-97 A-1+ 2,520 2,512,244
Pfizer, Inc. 5.47%, 5-29-97 A-1+ 1,585 1,578,257
Private Export Funding
Corp. 5.35%, 5-29-97 A-1+ 2,730 2,717,125
---------------
31,463,236
---------------
Federal Agency Securities--5.2%
Federal Home Loan Banks 5.34%, 5-23-97 3,640 3,628,121
Federal National Mortgage Assoc. 5.28%,
6-5-97 3,000 2,983,446
---------------
6,611,567
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $38,077,832) 38,074,803
---------------
TOTAL INVESTMENTS--105.6%
(Identified cost $132,542,585) 134,762,253(a)
Cash and receivables, less liabilitites--(5.6%) (7,092,363)
---------------
NET ASSETS--100.0% $127,669,890
===============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $3,320,579 and gross
depreciation of $1,808,462 for income tax purposes. At April 30, 1997,
the aggregate cost of securities for federal income tax purposes was
$133,250,136.
(b) Non-income producing.
See Notes to Financial Statements
11
<PAGE>
Phoenix Strategic Theme Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
Assets
Investment securities at value
(Identified cost $132,542,585) $134,762,253
Cash 3,652
Receivables
Investment securities sold 13,910,103
Fund shares sold 356,640
Dividends and interest 20,880
---------------
Total assets 149,053,528
---------------
Liabilities
Payables
Investment securities purchased 20,930,845
Fund shares repurchased 202,155
Investment advisory fee 77,836
Distribution fee 56,048
Transfer agent fee 29,709
Financial agent fee 5,959
Trustees' fee 4,215
Accrued expenses 76,871
---------------
Total liabilities 21,383,638
---------------
Net Assets $127,669,890
===============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $126,312,012
Undistributed net investment income 199,760
Accumulated net realized loss (1,061,550)
Net unrealized appreciation 2,219,668
---------------
Net Assets $127,669,890
===============
Class A
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $77,827,000) 6,468,295
Net asset value per share $12.03
Offering price per share
$12.03/(1-4.75%) $12.63
Class B
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $49,842,890) 4,183,620
Net asset value and offering price per share $11.91
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
Investment Income
Interest $ 1,175,498
Dividends 704,060
--------------
Total investment income 1,879,558
--------------
Expenses
Investment advisory fee 742,401
Distribution fee--Class A 161,426
Distribution fee--Class B 344,165
Financial agent fee 41,154
Transfer agent 168,715
Registration 86,695
Printing 25,451
Professional 25,318
Custodian 22,000
Trustees 18,258
Miscellaneous 7,691
--------------
Total expenses 1,643,274
--------------
Net investment income 236,284
--------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (564,658)
Net realized gain on foreign currency transactions 165
Net change in unrealized appreciation (depreciation)
on investments (4,414,137)
--------------
Net loss on investments (4,978,630)
--------------
Net decrease in net assets resulting from operations $(4,742,346)
==============
See Notes to Financial Statements
12
<PAGE>
Phoenix Strategic Theme Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended October 16, 1995 to
April 30, 1997 April 30, 1996
--------------- -------------------
<S> <C> <C>
From Operations
Net investment income (loss) $ 236,284 $ (35,677)
Net realized gain (loss) (564,493) (376,137)
Net change in unrealized appreciation (depreciation) (4,414,137) 6,633,805
--------------- -----------------
Increase (decrease) in net assets resulting from operations (4,742,346) 6,221,991
--------------- -----------------
From Distributions to Shareholders
Net investment income--Class A (58,137) --
Net investment income--Class B -- --
In excess of accumulated net realized gains--Class A (75,556) --
In excess of accumulated net realized gains--Class B (45,199) --
Tax return of capital--Class A -- (25,935)
Tax return of capital--Class B -- (1,782)
--------------- -----------------
Decrease in net assets from distributions to shareholders (178,892) (27,717)
--------------- -----------------
From Share Transactions
Class A
Proceeds from sales of shares (5,618,602 and
2,760,919 shares, respectively) 70,489,900 29,305,894
Net asset value of shares issued from reinvestment
of distributions (9,860 and 2,423 shares,
respectively) 124,426 25,417
Cost of shares repurchased (1,859,542 and
63,967 shares, respectively) (23,252,060) (743,134)
--------------- -----------------
Total 47,362,266 28,588,177
--------------- -----------------
Class B
Proceeds from sales of shares (3,501,688 and
992,960 shares, respectively) 43,480,458 10,820,691
Net asset value of shares issued from reinvestment
of distributions (3,161 and 161 shares, respectively) 39,607 1,682
Cost of shares repurchased (287,858 and
26,492 shares, respectively) (3,604,353) (291,674)
--------------- -----------------
Total 39,915,712 10,530,699
--------------- -----------------
Increase in net assets from share transactions 87,277,978 39,118,876
--------------- -----------------
Net increase in net assets 82,356,740 45,313,150
Net Assets
Beginning of period 45,313,150 0
--------------- -----------------
End of period (including undistributed net
investment income of $199,760 and $0, respectively) $127,669,890 $45,313,150
=============== =================
</TABLE>
See Notes to Financial Statements
13
<PAGE>
Phoenix Strategic Theme Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A Class B
----------------------------- -----------------------------
From Inception From Inception
Year Ended 10/16/95 to Year Ended 10/16/95 to
4/30/97 4/30/96 4/30/97 4/30/96
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.37 $10.00 $12.33 $10.00
Income from investment operations (7)
Net investment income (loss) 0.06(5) (0.00)(1)(5) (0.03)(5) (0.06)(1)(5)
Net realized and unrealized gain (loss) (0.38) 2.39 (0.38) 2.40
------------ ---------------- ------------ ----------------
Total from investment operations (0.32) 2.39 (0.41) 2.34
------------ ---------------- ------------ ----------------
Less distributions
Dividends from net investment income (0.01) -- -- --
In excess of accumulated net realized gains (0.01) -- (0.01) --
Tax return of capital -- (0.02) -- (0.01)
------------ ---------------- ------------ ----------------
Total distributions (0.02) (0.02) (0.01) (0.01)
------------ ---------------- ------------ ----------------
Change in net asset value (0.34) 2.37 (0.42) 2.33
------------ ---------------- ------------ ----------------
Net asset value, end of period $12.03 $12.37 $11.91 $12.33
============ ================ ============ ================
Total return (2) (2.57)% 23.89% (4) (3.31)% 23.41% (4)
Ratios/supplemental data:
Net assets, end of period (thousands) $77,827 $33,393 $49,843 $11,920
Ratio to average net assets of:
Expenses 1.40% 1.40% (3) 2.15% 2.16% (3)
Net investment income (loss) 0.49% (0.09)% (3) (0.23)% (1.06)% (3)
Portfolio turnover 532% 175% (4) 532% 175% (4)
Average commission rate paid (6) $0.0590 $0.0663 $0.0590 $0.0663
</TABLE>
(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.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(7) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
See Notes to Financial Statements
14
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
INVESTMENTS AT APRIL 30, 1997
SHARES VALUE
--------- --------------
COMMON STOCKS--87.8%
Advertising--1.0%
Outdoor Systems, Inc. (b) 61,800 $ 1,714,950
--------------
Auto & Truck Parts--1.7%
Cummins Engine Co., Inc. 50,000 2,806,250
--------------
Banks--6.2%
BankAmerica Corp. 23,000 2,688,125
Chase Manhattan Corp. 70,000 6,483,750
Zions Bancorporation 7,800 986,700
--------------
10,158,575
--------------
Computer Software & Services--10.8%
America Online, Inc. (b) 60,000 2,707,500
Computer Associates International, Inc. 60,000 3,120,000
HBO & Co. 71,100 3,803,850
McAfee Associates, Inc. (b) 50,000 2,787,500
Microsoft Corp. (b) 20,000 2,430,000
Veritas Software Corp. (b) 60,000 2,017,500
Visio Corp. (b) 18,100 918,575
--------------
17,784,925
--------------
Cosmetics & Soaps--1.5%
Clorox Co. 20,000 2,547,500
--------------
Diversified Financial Services--3.3%
American Express Co. 50,000 3,293,750
Conseco, Inc. 50,000 2,068,750
--------------
5,362,500
--------------
Diversified Miscellaneous--0.7%
Central Garden & Pet Co. (b) 60,000 1,196,250
--------------
Electrical Equipment--0.5%
Westinghouse Electric Corp. 50,000 850,000
--------------
Electronics--8.4%
Datum, Inc. (b) 25,000 581,250
Dupont Photomasks, Inc. (b) 60,700 2,906,013
Level One Communications, Inc. (b) 26,100 835,200
Micron Technology, Inc. 100,000 3,525,000
SCI Systems, Inc. (b) 40,000 2,470,000
Texas Instruments, Inc. 40,000 3,570,000
--------------
13,887,463
--------------
Entertainment, Leisure & Gaming--3.8%
Time Warner, Inc. 75,000 3,375,000
Walt Disney Co. 35,000 2,870,000
--------------
6,245,000
--------------
Healthcare--Diversified--1.2%
Bristol-Myers Squibb Co. 30,000 1,965,000
--------------
Healthcare--Drugs--4.5%
Eli Lilly & Co. 40,000 3,515,000
Pfizer, Inc. 40,000 3,840,000
--------------
7,355,000
--------------
Hospital Management & Services--1.4%
Oxford Health Plans, Inc. (b) 35,000 2,305,625
--------------
Household Furnishings & Appliances--1.0%
Sunbeam Corp., Inc. 50,000 1,587,500
--------------
Insurance--5.7%
Allstate Corp. 55,000 3,602,500
Progressive Corp. 35,000 2,664,375
Unum Corp. 40,000 3,080,000
--------------
9,346,875
--------------
Medical Products & Supplies--1.9%
Johnson & Johnson 50,000 3,062,500
--------------
Oil Service & Equipment--9.9%
Diamond Offshore Drilling (b) 55,100 3,547,063
Global Marine, Inc. (b) 89,200 1,795,150
Noble Drilling Corp. (b) 120,000 2,085,000
Schlumberger Ltd. 40,000 4,430,000
Smith International, Inc. (b) 40,000 1,895,000
Transocean Offshore, Inc. 42,900 2,600,812
--------------
16,353,025
--------------
Pollution Control--2.0%
U.S.A. Waste Services, Inc. (b) 50,000 1,637,500
United Waste Systems, Inc. (b) 48,700 1,643,625
--------------
3,281,125
--------------
Professional Services--2.5%
HFS, Inc. (b) 70,000 4,147,500
--------------
Publishing, Broadcasting, Printing & Cable--5.0%
Clear Channel Communications,
Inc. (b) 80,000 3,880,000
Heftel Broadcasting Corp. Class A (b) 28,500 1,425,000
New York Times Co. 70,000 3,027,500
--------------
8,332,500
--------------
REITS--3.5%
General Growth Properties 53,500 1,705,312
Patriot American Hospitality, Inc. 192,200 4,132,300
--------------
5,837,612
--------------
Retail--1.8%
Home Depot, Inc. 50,000 2,900,000
--------------
Telecommunications Equipment--1.4%
Lucent Technologies, Inc. 40,000 2,365,000
--------------
Utility--Gas--1.7%
Sonat, Inc. 50,000 2,856,250
--------------
Utility--Telephone--6.4%
Bell Atlantic Corp. 80,000 5,420,000
NYNEX Corp. 100,000 5,175,000
--------------
10,595,000
--------------
TOTAL COMMON STOCKS
(Identified cost $140,327,941) 144,843,925
--------------
FOREIGN COMMON STOCKS--4.4%
Machinery--2.2%
ASM Lithography Holding NV
(Netherlands) (b) 45,000 3,577,500
--------------
See Notes to Financial Statements
17
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SHARES VALUE
-------- -------------
Utility--Telephone--2.2%
Telecomunicacoes Brasileiras SA--
Telebras Sponsored ADR (Brazil) 32,200 $ 3,694,950
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $6,246,485) 7,272,450
-------------
WARRANTS--3.4%
Electronics--3.4%
Intel Warrants (b) 50,000 5,643,750
-------------
TOTAL WARRANTS
(Identified cost $5,352,501) 5,643,750
-------------
TOTAL LONG-TERM INVESTMENTS--95.6%
(Identified cost $151,926,927) 157,760,125
-------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
----------- --------
SHORT-TERM OBLIGATIONS--19.9%
Commercial Paper--12.3%
Anheuser-Busch Cos., Inc.
5.55%, 5-1-97 A-1+ $1,590 1,590,000
Ciesco L.P. 5.55%, 5-1-97 A-1+ 6,985 6,985,000
Campbell Soup Co. 5.50%,
5-8-97 A-1+ 4,015 4,010,706
Cargill, Inc. 5.45%,
5-15-97 A-1+ 3,075 3,068,483
Corporate Asset Funding
Co., Inc. 5.53%, 5-16-97 A-1+ 3,965 3,955,864
General Electric Capital
Corp. 5.55%, 6-13-97 A-1+ 750 745,028
---------------
20,355,081
---------------
Federal Agency Securities--7.5%
Federal Home Loan Banks 5.28%, 5-1-97 5,830 5,830,000
Federal Home Loan Mortgage Corp.
5.34%, 5-5-97 6,500 6,496,143
---------------
12,326,143
---------------
U.S. Treasury Bills--0.1%
U.S. Treasury Bills 4.72%, 5-1-97 200 200,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $32,881,224) 32,881,224
---------------
TOTAL INVESTMENTS--115.5%
(Identified cost $184,808,151) 190,641,349(a)
Cash and receivables, less liabilities--(15.5%) (25,579,524)
---------------
NET ASSETS--100.0% $165,061,825
===============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $7,579,373 and gross
depreciation of $2,611,794 for income tax purposes. At April 30, 1997,
the aggregate cost of securities for federal income tax purposes was
$185,673,770.
(b) Non-income producing.
See Notes to Financial Statements
18
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
Assets
Investment securities at value
(Identified cost $184,808,151) $190,641,349
Cash 5,343
Receivables
Investment securities sold 8,208,018
Fund shares sold 7,263
Dividends and interest 69,442
---------------
Total assets 198,931,415
---------------
Liabilities
Payables
Investment securities purchased 33,332,486
Fund shares repurchased 260,565
Investment advisory fee 95,330
Transfer agent fee 53,991
Distribution fee 35,031
Financial agent fee 7,256
Trustees' fee 4,817
Accrued expenses 80,114
---------------
Total liabilities 33,869,590
---------------
Net Assets $165,061,825
===============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $160,971,770
Accumulated net realized loss (1,743,143)
Net unrealized appreciation 5,833,198
---------------
Net Assets $165,061,825
===============
Class A
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $163,395,627) 23,713,170
Net asset value per share $6.89
Offering price per share
$6.89/(1-4.75%) $7.23
Class B
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $1,666,198) 246,110
Net asset value and offering price per share $6.77
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
Investment Income
Dividend $ 868,274
Interest 630,929
Other income 191,096
---------------
Total investment income 1,690,299
---------------
Expenses
Investment advisory fee 1,408,901
Distribution fee--Class A 499,009
Distribution fee--Class B 16,682
Financial agent fee 73,819
Transfer agent 317,994
Professional 42,975
Printing 35,482
Registration 33,677
Trustees 22,158
Custodian 20,755
Miscellaneous 14,121
---------------
Total expenses 2,485,573
---------------
Net investment loss (795,274)
---------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 10,746,672
Net realized loss on foreign currency transactions (9,207)
Net change in unrealized appreciation (depreciation)
on investments (33,047,467)
---------------
Net loss on investments (22,310,002)
---------------
Net decrease in net assets resulting from operations $(23,105,276)
===============
See Notes to Financial Statements
19
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, 1997 April 30, 1996
--------------- ---------------
<S> <C> <C>
From Operations
Net investment income (loss) $ (795,274) $ (1,070,957)
Net realized gain 10,737,465 27,906,869
Net change in unrealized appreciation (depreciation) (33,047,467) 29,337,807
----------- -----------
Increase (decrease) in net assets resulting from
operations (23,105,276) 56,173,719
----------- -----------
From Distributions to Shareholders
Net realized gains--Class A (21,357,244) (20,539,261)
Net realized gains--Class B (197,785) (108,254)
In excess of accumulated net realized gains--Class A (1,175,456) --
In excess of accumulated net realized gains--Class B (10,885) --
----------- -----------
Decrease in net assets from distributions to
shareholders (22,741,370) (20,647,515)
----------- -----------
From Share Transactions
Class A
Proceeds from sales of shares (1,544,352 and
3,092,252 shares, respectively) 13,235,186 24,946,255
Net asset value of shares issued from reinvestment
of distributions (2,020,340 and 1,944,177 shares,
respectively) 16,243,531 14,853,511
Cost of shares repurchased (4,096,555 and 5,081,608
shares, respectively) (34,291,172) (41,255,024)
----------- -----------
Total (4,812,455) (1,455,258)
----------- -----------
Class B
Proceeds from sales of shares (115,267 and 129,377
shares, respectively) 965,240 1,068,242
Net asset value of shares issued from reinvestment
of distributions (24,702 and 13,074, respectively) 195,636 99,234
Cost of shares repurchased (48,133 and 59,229
shares, respectively) (387,617) (481,915)
----------- -----------
Total 773,259 685,561
----------- -----------
Decrease in net assets from share transactions (4,039,196) (769,697)
----------- -----------
Net increase (decrease) in net assets (49,885,842) 34,756,507
Net Assets
Beginning of period 214,947,667 180,191,160
----------- -----------
End of period (including undistributed net
investment income of $0 and $0, respectively) $165,061,825 $214,947,667
=========== ===========
</TABLE>
See Notes to Financial Statements
20
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Year Ended April 30,
1997 1996 1995 1994 1993
------------ ------------ ---------------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.81 $ 7.40 $ 7.31 $ 9.64 $ 8.59
Income from investment operations
Net investment income (loss) (0.03)(4) (0.04)(4) 0.04 0.05 0.06
Net realized and unrealized gain (loss) (0.90) 2.34 0.58 0.57 1.34
------- ------- ------- ------- -------
Total from investment operations (0.93) 2.30 0.62 0.62 1.40
------- ------- ------- ------- -------
Less distributions
Dividends from net investment income -- -- (0.05) (0.05) (0.06)
Dividends from net realized gains (0.94) (0.89) (0.48) (2.90) (0.29)
In excess of accumulated net realized gains (0.05) -- -- -- --
------- ------- ------- ------- -------
Total distributions (0.99) (0.89) (0.53) (2.95) (0.35)
------- ------- ------- ------- -------
Change in net asset value (1.92) 1.41 0.09 (2.33) 1.05
------- ------- ------- ------- -------
Net asset value, end of period $ 6.89 $ 8.81 $ 7.40 $ 7.31 $ 9.64
======= ======= ======= ======= =======
Total return (1) (12.19)% 32.86% 9.16% 4.99% 16.50%
Ratios/supplemental data:
Net assets, end of period (thousands) $163,396 $213,600 $179,666 $186,037 $215,570
Ratio to average net assets of:
Expenses 1.23% 1.25 % 1.32% 1.26% 1.35%
Net investment income (loss) (0.39)% (0.53)% 0.60% 0.57% 0.67%
Portfolio turnover 412 % 302 % 358% 167% 31%
Average commission rate paid (5) $ 0.0543 $ 0.0600 N/A N/A N/A
Class B
--------------------------------------
From
Year Ended April 30, Inception
7/19/94 to
1997 1996 4/30/95
------------ ------------ -------------
Net asset value, beginning of period $ 8.73 $ 7.39 $ 7.28
Income from investment operations
Net investment income (loss) (0.09)(4) (0.10)(4) 0.00
Net realized and unrealized gain (loss) (0.88) 2.33 0.59
------- ------- -------
Total from investment operations (0.97) 2.23 0.59
------- ------- -------
Less distributions
Dividends from net investment income -- -- --
Dividends from net realized gains (0.94) (0.89) (0.48)
In excess of accumulated net realized gains (0.05) -- --
------- ------- -------
Total distributions (0.99) (0.89) (0.48)
------- ------- -------
Change in net asset value (1.96) 1.34 0.11
------- ------- -------
Net asset value, end of period $ 6.77 $ 8.73 $ 7.39
======= ======= =======
Total return (1) (12.79)% 31.92% 8.69%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 1,666 $ 1,348 $ 525
Ratio to average net assets of:
Expenses 1.98% 2.06% 2.15%(2)
Net investment income (loss) (1.15)% (1.18)% (0.06)%(2)
Portfolio turnover 412% 302% 358%
Average commission rate paid (5) $0.0543 $0.0600 N/A
</TABLE>
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
(5) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
21
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
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 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. 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 Equity Opportunities Series seeks to achieve long-term growth of
capital from investment in a diversified group of stocks or securities
convertible into stocks.
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. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. Security valuation:
Equity securities are valued at the last sale price, or if there had been
no sale that day, at the last bid price. Short-term investments having a
remaining maturity of 60 days or less are valued at amortized cost which
approximates market. All other securities and assets are valued at their fair
value as determined in good faith by or under the direction of the Trustees.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign securities,
as soon as the 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 and 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.
22
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (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
- ---------------------------- --------- ------------ --------- ----------
Small Cap Series PIC 0.75% 0.70% 0.65%
Strategic Theme Series PIC 0.75% 0.70% 0.65%
Equity Opportunities Series NSR 0.70% 0.65% 0.60%
The Adviser has agreed to assume expenses and reduce the advisory fee for
the benefit of the Small Cap and Strategic Theme Series to the extent that other
operating expenses (excluding investment advisory fees, distribution fees,
interest, taxes, brokerage fees and commissions and extraordinary expenses)
exceed 0.50% and 0.40%, 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 $432,737 for Class A shares and
deferred sales charges of $303,358 for Class B shares for the year ended April
30, 1997. 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 year ended April
30, 1997, $1,588,806 was earned by the Distributor and $820,797 was earned by
unaffiliated participants.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the average
daily net assets of each Series through December 31, 1996, and starting on
January 1, 1997, at an annual rate of 0.05% of average daily net assets up to
$100 million, 0.04% of average daily net assets of $100 million to $300 million,
0.03% of average daily net assets of $300 million through $500 million, and
0.015% of average daily net assets greater than $500 million; a minimum fee may
apply. PEPCO serves as the Fund's Transfer Agent with State Street Bank and
Trust Company as sub-transfer agent. For the year ended April 30, 1997, transfer
agent fees were $1,108,232 of which PEPCO retained $373,701 which is net of the
fees paid to State Street.
At April 30, 1997, PHL and its affiliates held shares of the Fund as
follows:
Aggregate
Shares Net Asset Value
--------- ----------------
Strategic Theme Series
--Class A 993,317 $11,949,604
--Class B 10,019 119,326
Equity Opportunities Series
--Class A 124 857
--Class B 18,833 127,497
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities (excluding short-term securities,
options, futures, and forward currency contracts) for the year ended April 30,
1997, aggregated the following:
Purchases Sales
--------------- ---------------
Small Cap Series $797,714,133 $677,295,192
Strategic Theme Series 457,473,624 397,163,740
Equity Opportunities Series 772,203,040 799,519,094
There were no purchases or sales of long-term U.S. Government securities.
4. CAPITAL LOSS CARRYOVERS
At April 30, 1997, Small Cap Series had a capital loss carryover of
$20,746,935, expiring in 2005, which may be used to offset future capital gains.
Under current tax law, capital losses realized after October 31, 1996 may
be deferred and treated as occurring on the first day of the following fiscal
year. For the year ended April 30, 1997, the following losses were deferred:
Small Cap Series $377,891, Strategic Theme Series
23
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (Continued)
$127,981 and Equity Opportunities Series $877,524. In addition, prior year
losses deferred were utilized as follows: Strategic Theme Series $375,980 and
Equity Opportunities Series $3,958 (foreign currency only).
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, 1997, the Series recorded the following reclassifications to increase
(decrease) the accounts listed below:
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gain (loss) interest
---------------- -------------- ---------------
Small Cap Series $1,471,814 $ 2,154 $(1,473,968)
Strategic Theme Series 21,613 (165) (21,448)
Equity Opportunities
Series 795,274 (556,802) (238,472)
TAX INFORMATION NOTICE (Unaudited)
For federal income tax purposes, 2.17%, 38.70% and 4.54% of the ordinary
income dividends paid by the Small Cap Series, Strategic Theme Series and Equity
Opportunities Series, respectively, qualify for the dividends received deduction
of corporate shareholders.
For the fiscal year ended April 30, 1997, the Equity Opportunities Series
distributed $1,851,224 of long-term capital gain dividends.
This report is not authorized for distribution to prospective investors in
the Phoenix Strategic Equity Series Fund unless preceded or accompanied by an
effective prospectus which includes information concerning the sales charge,
the Fund's record and other pertinent information.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO] Price Waterhouse LLP [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
Phoenix Small Cap Fund, the Phoenix Strategic Theme Fund and the Phoenix Equity
Opportunities Fund (constituting separate series of the Phoenix Strategic Equity
Series Fund, hereinafter referred to as the "Fund") at April 30, 1997, 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, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
June 11, 1997
25
<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,
1997, incorporated by reference.
(b) Exhibits:
1.1* Declaration of Trust of the Registrant, previously filed, and filed
via Edgar with Post-Effective Amendment No. 26 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 filed via Edgar
with Post-Effective Amendment No. 25 on August 20, 1997.
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.
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.
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.
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, filed
via Edgar with Post-Effective Amendment No. 25 on August 20, 1997 and
herein incorporated by reference.
5.2 Investment Advisory between Registrant and Phoenix Investment
Counsel, Inc. dated October 16, 1995 filed via Edgar with
Post-Effective Amendment No. 13 on October 16, 1995.
5.3 First Amendment to Phoenix Strategic Equity Series Fund Management
Agreement between Registrant and National Securities Research
Corporation dated January 1, 1994 filed via Edgar with Post-Effective
Amendment No. 25 on August 20, 1997.
5.4 Second Amendment to Phoenix Strategic Equity Series Fund Management
Agreement between Registrant and National Securities and Research
Corporation dated October 16, 1995 filed via Edgar with Post-
Effective Amendment No. 25 on August 20, 1997.
6.1* Underwriting Agreement between Registrant and Phoenix Equity Planning
Corporation ("Equity Planning") dated May 14, 1993, previously filed,
and filed via Edgar with Post-Effective Amendment No. 26 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 filed via Edgar with Post-Effective Amendment No. 26 and
herein incorporated by reference.
7. None.
8.* Custodian Contract between Registrant and State Street Bank and Trust
Company dated May 1, 1997, filed via Edgar with Post-Effective
Amendment No. 26 on August 29, 1997.
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, filed via Edgar with Post-Effective Amendment No.
25 on August 20, 1997 and incorporated herein by reference.
9.2 Form of Sales Agreement, filed with Post-Effective Amendment No. 9 on
July 19, 1994 and filed via Edgar with Post-Effective Amendment No.
25 on August 20, 1997 and incorporated herein by reference.
9.3 Financial Agent Agreement between Registrant and Equity Planning
dated December 11, 1996 filed via Edgar with Post-Effective Amendment
No. 25 on August 20, 1997 and incorporated herein by reference.
C-1
<PAGE>
9.4 First Amendment to Financial Agent Agreement between Registrant and
Equity Planning dated February 26, 1997 filed via Edgar with
Post-Effective Amendment No. 25 on August 20, 1997 and incorporated
herein by reference.
9.5 Second Amendment of Financial Agent Agreement between Registrant and
Equity Planning dated July 22, 1997, filed via Edgar with
Post-Effective Amendment No. 25 on August 20, 1997 and incorporated
herein by reference.
10. Opinion as to legality of the shares filed via Edgar with
Post-Effective Amendment No. 13 on October 16, 1995.
11. Consent of Independent Accountant.
12. Not applicable.
13. None.
14. None.
15.* Form of Amended and Restated Distribution Plan filed via Edgar with
Post-Effective Amendment No. 26.
16. Schedule for computation of yield and effective yield quotations
filed previously.
17.* Financial Data Schedule filed herewith and reflected on Edgar as
Exhibit 27.
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
incorporated herein 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 on
August 27, 1996 and incorporated herein by reference.
18.3 Amended and Restated Rule 18f-3 Dual Distribution Plan effective May
1, 1996 filed via Edgar with Post-Effective Amendment No. 25 on
August 20, 1997 and incorporated herein by reference.
18.4 First Amendment to the Amended and Restated Plan pursuant to Rule
18f-3 dated May 28, 1997 filed via Edgar with Post-Effective
Amendment No. 25 on August 20, 1997 and incorporated herein by
reference.
19. Powers of Attorney filed via Edgar with Post-Effective Amendment No.
14 on April 16, 1996 and incorporated herein by reference.
- -----------
*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 May 30, 1997, the number of record holders of each class of
securities of the Registrant was as follows:
Number of
Title of Class Record-holders
- ----------------------------------------------------------------- --------------
Shares of Beneficial Interest--Class A (Equity Opportunities) 11,005
Shares of Beneficial Interest--Class B (Equity Opportunities) 282
Shares of Beneficial Interest--Class A (Theme) 5,795
Shares of Beneficial Interest--Class B (Theme) 4,289
Shares of Beneficial Interest--Class C (Theme) 0
Shares of Beneficial Interest--Class M (Theme) 0
Shares of Beneficial Interest--Class A (Small Cap) 19,995
Shares of Beneficial Interest--Class B (Small Cap) 11,226
Shares of Beneficial Interest--Class A (MicroCap) 0
Shares of Beneficial Interest--Class B (MicroCap) 0
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 "Trustees and Officers" in the Statement of Additional
Information, each of which is included in this Post-Effective Amendment to the
Registration Statement.
For information as to the business, profession, vocation or employment of
a substantial nature of director and officers of the Advisers reference is made
to the Advisers' current Form ADV (SEC File Nos. 801-8177 (NSR) and 801-5995
(PIC)) filed under the Investment Advisers Act of 1940 and incorporated herein
by reference.
C-2
<PAGE>
Item 29. Principal Underwriter
(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 Position and Offices Position and Offices
Principal 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
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
David R. Pepin Director and Executive Vice President
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
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Distributor with Registrant
- ------------------------- --------------------------- ----------------------
<S> <C> <C>
Elizabeth R. Sadowinski Vice President, None
56 Prospect Street Administration
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Assistant Secretary
56 Prospect Street Counsel and Secretary
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
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an
affiliated person of the Registrant or an affiliated person of such
affiliated person, directly or indirectly, from the Registrant during the
Registrant's last fiscal year.
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 advisers, Phoenix Investment Counsel, Inc. and National
Securities & Research Corporation; Registrant's financial agent, transfer agent
and principal underwriter, Phoenix Equity Planning Corporation; Registrant's
dividend disbursing agent and custodian, State Street Bank and Trust Company.
The address of the Secretary of the Trust is 101 Munson Street, Greenfield,
Massachusetts 01301; the address of Phoenix Investment Counsel, Inc. and
National Securities & Research Corporation is 56 Prospect Street, Hartford,
Connecticut 06115; the address of Phoenix Equity Planning Corporation is 100
Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200; the
address of the dividend disbursing agent is P.O. Box 8301, Boston,
Massachusetts 02266-8301, Attention: Phoenix Funds, and the address of the
custodian is P.O. Box 351, Boston, Massachusetts 02101.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders
upon request and without charge.
C-4
<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,
thereto duly authorized, in the City of Hartford, and State of Connecticut on
the 29th day of August, 1997.
PHOENIX STRATEGIC EQUITY SERIES FUND
ATTEST: /s/ Thomas N. Steenburg By: /s/ Philip R. McLoughlin
------------------------------- -----------------------------------
Thomas N. Steenburg 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 29th day of August, 1997.
Signature Title
- ------------------------------- ----------------------
Trustee
- ----------------------------
C. Duane Blinn*
Trustee
- ----------------------------
Robert Chesek*
Trustee
- ----------------------------
E. Virgil Conway*
Treasurer (principal
- ---------------------------- financial and
Nancy G. Curtiss* accounting officer)
Trustee
- ----------------------------
Harry Dalzell-Payne*
Trustee
- ----------------------------
Francis E. Jeffries*
Trustee
- ----------------------------
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin Trustee and President
- ---------------------------- (principal executive
Philip R. McLoughlin officer)
S-1(c)
<PAGE>
Signature Title
- ------------------------------- --------
Trustee
- ----------------------------
Everett L. Morris*
Trustee
- ----------------------------
James M. Oates*
Trustee
- ----------------------------
Calvin J. Pedersen*
Trustee
- ----------------------------
Philip R. Reynolds*
Trustee
- ----------------------------
Herbert Roth, Jr.*
Trustee
- ----------------------------
Richard E. Segerson*
Trustee
- ----------------------------
Lowell P. Weicker, Jr.*
By /s/ Philip R. McLoughlin
--------------------------
* Philip R. McLoughlin pursuant to powers of attorney previously filed.
S-2(c)
Exhibit 1.1
DECLARATION OF TRUST
OF
NATIONAL STOCK FUND
Dated: June 25, 1986
THE DECLARATION OF TRUST of National Stock Fund is made the 25th day of
June, 1986 by the parties signatory hereto, as trustees (such persons, so long
as they shall continue in office in accordance with the terms of this
Declaration of Trust, and all other persons who at the time in question have
been duly elected or appointed as trustees in accordance with the provisions of
this Declaration of Trust and are then in office, being hereinafter called the
"Trustees").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trustees desire to form a trust fund under the law of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust", which name
shall be deemed to include any series of the Trust, as the context requires)
shall be "National Stock Fund", and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall refer to the Trustees as
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Trustees, and not individually, and shall not refer to the officers, agents,
employees or Shareholders of the Trust. Each series of the Trust which shall be
established and designated by the Trustees pursuant to Section 6.9 shall conduct
its activities under such name as the Trustees shall determine and set forth in
the instrument establishing such Series. However, should the Trustees determine
that the use of the name of the Trust or any Series is not advisable, they may
select such other name for the Trust or the Series as they deem proper and the
Trust may hold its property and conduct its activities under such other name.
Any name change shall become effective upon the execution by a majority of the
then Trustees of an instrument setting forth the new name. Any such instrument
shall have the status of an amendment to this Declaration.
1.2. Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or more than 50% requirement of
the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them in
the 1940 Act, as amended from time to time.
"Declaration" shall mean this Declaration of Trust as amended from time to
time. References in this Declaration to "Declaration", "hereof", "herein", and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"Fundamental Policies" shall mean the investment objectives and
restrictions set forth in the Prospectus and designated as fundamental policies
therein.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus and Statement of
Additional Information constituting parts of the Registration Statement of the
Trust under the Securities Act of 1933 as such Prospectus and Statement of
Additional Information may be amended or supplemented and filed with the
Securities and Exchange Commission from time to time.
"Series" shall mean any series designated pursuant to Section 6.9 hereof.
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"Shareholders" shall mean as of any particular time all holders of record
of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of interest
into which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares.
"Trustees" shall mean the signatories to this Declaration of Trust, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly elected or appointed
and have qualified as trustees in accordance with the provisions hereof and are
then in office; and reference in this Declaration of Trust to a Trustee or
Trustees shall refer to such person or persons in their capacity as trustees
hereunder.
"Trust Property" shall mean as of any particular time any and all property,
real or personal, tangible or intangible, which at such time is owned or held by
or for the account of the Trust or the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be fixed from
time to time by written instrument signed by a majority of the Trustees then in
office, provided, however, that the number of Trustees shall in no event be less
than three or more than fifteen (except prior to the first public offering of
Shares of the Trust). Any vacancy created by an increase in Trustees may be
filled by the appointment of an individual having the qualifications described
in this Article made by a written instrument signed by a majority of the
Trustees then in office. Any such appointment shall not become effective,
however, until the individual named in the written instrument of appointment
shall have accepted in writing such appointment and agreed in writing to be
bound by the terms of this Declaration of Trust. No reduction in the number of
Trustees shall have the effect of removing any Trustee from office prior to the
expiration of his term. Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled as provided in Section 2.4 hereof, the
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Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration of Trust. A Trustee shall be an individual at least
21 years of age who is not under legal disability. Trustees need not own Shares.
2.2. Term and Election. Each Trustee named herein, or elected or appointed
in accordance herewith, shall (except in the even of resignations or removals or
vacancies pursuant to Section 2.3 or 2.4 hereof) hold office during the lifetime
of this Trust and until its termination as hereinafter provided unless such
Trustee resigns or is removed as provided in Section 2.3 below, provided,
however, that the Trustees shall have the power to set and alter the terms of
office of the Trustees, and they may at any time lengthen or lessen their own
terms or make their terms of unlimited duration.
2.3. Resignation and Removal. Any Trustee may resign his trust (without
need for prior or subsequent accounting) by an instrument in writing signed by
him and delivered or mailed to the Chairman, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument. Any of the Trustees may be
removed by the affirmative vote of the holders of two-thirds (2/3) of the Shares
or (provided the aggregate number of Trustees after such removal shall not be
less than the number required by Section 2.1 hereof) with cause by the action of
two-thirds of the remaining Trustees. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held in the
name of the resigning or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
2.4. Vacancies. The terms of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, bankruptcy,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. No such vacancy shall operate to annul this
Declaration of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of a vacancy, the holders of at
least a majority of the Shares entitled to vote, acting at any meeting of
Shareholders held in accordance with Section 10.1 hereof, or, to the extent
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permitted by the 1940 Act, a majority of the Trustees continuing in office
acting by written instrument or instruments, may fill such vacancy, and any
Trustee so elected by the Trustees shall hold office as provided in this
Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary, an
Assistant Secretary or any two Trustees. Regular meetings of the Trustees may be
held without call or notice at a time and place fixed by the By-Laws or by
resolution of the Trustees. Notice of any other meeting shall be mailed or
otherwise given not less than 24 hours before the meeting but may be waived in
writing by any Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such meeting except
where a Trustee attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. The Trustees may act with or without a meeting. A quorum for
all meetings of the Trustees shall be a majority of the Trustees. Unless
provided otherwise in this Declaration of Trust, any action of the Trustees may
be taken at a meeting by vote of a majority of the Trustees present (a quorum
being present) or without a meeting by written consents of a majority of the
Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust within the meaning of Section
1.2 hereof or otherwise interested in any action to be taken may be counted for
quorum purposes under this Section and shall be entitled to vote to the extent
permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
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communications system shall constitute presence in person at such meeting.
2.6. Officers. The Trustees shall annually elect a President, a Secretary
and a Treasurer and may elect a Chairman. The Trustees may elect or appoint or
authorize the Chairman, if any, or President to appoint such other officers or
agents with such powers as the Trustees may deem to be advisable. The Chairman
and President shall be and the Secretary and Treasurer may, but need not, be a
Trustee.
2.7. By-Laws. The Trustee may adopt and from time to time amend or repeal
the By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power, subject to the Fundamental
Policies, to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of securities including common and
preferred stocks, warrants, bonds, debentures, time notes and all other
evidences of indebtedness, negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, reverse repurchase agreements, convertible
securities, commodities, commodity futures contracts and
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related options, currencies, currency futures, forward contracts, options
and other securities, including without limitation, those issued,
guaranteed or sponsored by any state, territory or possession of the United
States and the District of Columbia and their political subdivisions,
agencies and instrumentalities, or by the United States Government or its
agencies or instrumentalities, or international instrumentalities, or by
any bank, savings institution, corporation or other business entity
organized under the laws of the United States and, to the extent provided
in the Prospectus and not prohibited by the Fundamental Policies, organized
under foreign laws; or in "when issued" contracts for any such securities,
or retain Trust assets in cash and from time to time change the investments
of the assets of the Trust; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such
investments of every kind and description, including, without limitation,
the right to consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or corporations to
exercise any of said rights, powers and privileges in respect of any of
said instruments; and the Trustees shall be deemed to have the foregoing
powers with respect to any additional securities in which the Trust may
invest should the investment policies set forth in the Prospectus or the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal title to all the Trust Property shall be vested in
the Trustees as joint tenants except that the Trustees shall have the power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each person who may hereafter become a Trustee upon his
due election and qualification. Upon the resignation, removal or death of a
Trustee, he shall automatically cease to have any right, title or interest in
any of the Trust Property, and the right, title
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and interest of such Trustee in the Trust Property shall vest automatically in
the remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
3.4. Issuance and Repurchase of Securities. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in, Shares, including shares
in fractional denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
Trust whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the Commonwealth of Massachusetts governing
business corporations.
3.5. Borrow Money. Subject to the Fundamental Policies, the Trustees shall
have power to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement of any
other person, firm, association or corporation.
3.6. Delegation; Committees. The Trustees shall have power, consistent with
their continuing exclusive authority over the management of the Trust and the
Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to the same extent
as such delegation is permitted to directors of a Massachusetts business
corporation and is permitted by the 1940 Act.
3.7. Collection and Payment. The Trustees shall have the power to collect
all property due to the Trust; and to pay all claims, including taxes, against
the Trust Property; to prosecute, defend, compromise or abandon any claims
relating to the Trust Property; to foreclose any security interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and pay any expenses
which in the opinion of the Trustees are
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necessary or incidental to carry out any of the purposes of this Declaration,
and to pay reasonable compensation from the funds of the Trust to themselves as
Trustees. The Trustees shall fix the compensation of all officers, employees and
Trustees. The Trustees may pay themselves such compensation for special
services, including legal, underwriting, syndicating and brokerage services, as
they in good faith may deem reasonable, and reimbursement for expenses
reasonably incurred by themselves on behalf of the Trust.
3.9. Miscellaneous Powers. The Trustees shall have the power to: (a) employ
or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by law, indemnify any Person
with whom the Trust has dealings, including the Trust's investment adviser,
distributor and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of others; (h)
determine and change the fiscal year of the Trust and the method in which its
accounts shall be kept; and (i) adopt a seal for the Trust, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust.
3.10. Further Powers. The Trustees shall have power to conduct the business
of the Trust and carry on its operations in any and all of its branches and
maintain offices both within and without the Commonwealth of Massachusetts, in
any and all states of the United States of America, in the District of Columbia,
and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies of instrumentalities of the United States of America and
of
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foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with Trust Property.
3.11. Principal Transactions. Except in transactions permitted by the 1940
Act or any rule or regulation thereunder, or any order of exemption issued by
the Securities and Exchange Commission, or effected to implement the provisions
of any agreement to which the Trust is a party, the Trustees shall not, on
behalf of the Trust, buy any securities (other than Shares) from or sell any
securities (other than Shares) to, or lend any assets of the Trust to, any
Trustee or officer of the Trust or any firm of which any such Trustee or officer
is a member acting as principal, or have any such dealings with any investment
adviser, distributor or transfer agent or with any Affiliated Person of such
Person; but the Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
3.12. Litigation. The Trustees shall have the power to engage in and to
prosecute, defend, compromise, abandon, or adjust, by arbitration, or otherwise,
any actions, suits, proceedings, disputes, claims and demands relating to the
Trust, and out of the assets of the Trust to pay or to satisfy any debts, claims
or expenses incurred in connection therewith, including those of litigation, and
such power shall include, without limitation, the power of the Trustees or any
appropriate committee thereof, in the exercise of their or its good faith
business judgment, to dismiss any action, suit, proceeding, dispute, claim, or
demand, derivative or otherwise, brought by any person, including a Shareholder
in its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
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ARTICLE IV
Management and Distribution Arrangements
4.1. Management Arrangements. Subject to a Majority Shareholder Vote of the
applicable Series the Trustees may in their discretion from time to time enter
into advisory, administration or management contracts whereby the other party
to such contract shall undertake to furnish the Trustees such advisory,
administrative and management services as the Trustees shall from time to time
consider desirable with respect to such Series and all upon such terms and
conditions as the Trustees may in their discretion determine. Notwithstanding
any provisions of this Declaration of Trust, the Trustees may authorize any
adviser, administrator or manager (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of portfolio securities of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
adviser, administrator or manager (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees.
4.2. Distribution Arrangements. The Trustees may in their discretion form
time to time enter into a contract, providing for the sale of the Shares of the
Trust or any Series to net the Trust not less than the par value per share,
whereby the Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In either
case, the contract shall be on such terms and conditions as the Trustees may in
their discretion determine not inconsistent with the provisions of this Article
IV or the By-Laws; and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust and may
provide that such other party may enter into selected dealer agreements with
registered securities dealers to further the purpose of the distribution or
repurchase of the Shares.
4.3. Parties to Contract. Any contract of the character described in
Sections 4.1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any corporation, firm, trust or association, although one or more of
the Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder or member of such other party to the contract, and no such contract
shall be invalidated or
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rendered voidable by reason of the existence of any such relationship, nor shall
any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was reasonable and fair
and not inconsistent with the provisions of this Article IV or the By-Laws. The
same person (including a firm, corporation, trust, or association) may be the
other party to contracts entered into pursuant to Sections 4.1 and 4.2 above or
Article VII, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 4.3.
4.4. Provisions and Amendments. Any contract entered into pursuant to
Sections 4.1 and 4.2 of this Article IV shall be consistent with and subject to
the requirements of Section 15 of the 1940 Act with respect to its continuance
in effect, its termination, and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract entered into
pursuant to Section 4.1 shall be effective unless assented to by a Majority
Shareholder Vote.
ARTICLE V
Limitations of Liability of Shareholders,
Trustees and Others
5.1. No Personal Liability of Shareholders, Trustees, etc. No Shareholder
shall be subject to any personal liability whatsoever to any Person in
connection with Trust Property or the acts, obligations or affairs of the Trust.
No Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from his bad faith, willful misfeasance, gross negligence
or reckless disregard of his duty so such Person, and all such Persons shall
look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust, is made a party to
any suit or proceeding to enforce any such liability, he shall not on account
thereof be held to any such liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder
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may become subject by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability. The rights
accruing to a Shareholder under this Section 5.1 shall not exclude any other
right to which such Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee or agent
of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including, without limitation, the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties.
5.3. Mandatory Indemnification. The Trust shall indemnify each of its
Trustees, officers, employees, and agents (including persons who serve at its
request as directors, officers or trustees of another organization in which it
has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties; provided, however, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either the matter
of willful misfeasance, gross negligence or reckless disregard of duty, or the
matter of good faith and reasonable belief as to the best interests of the
Trust, had been adjudicated, it would have been adjudicated in favor of such
person. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted herein or in
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Section 5.1 or to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
5.4. No Bond Required of Trustees. No Trustee shall, as such, be obligated
to give any bond or surety or other security for the performance of any of his
duties hereunder.
5.5. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other securities of the Trust or undertaking, and every
other act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors thereof only
in their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees or by any officers,
employees or agents of the Trust, in their capacity as such, shall contain an
appropriate recital to the effect that the Shareholders, Trustees, officers,
employees and agents of the Trust shall not personally be bound by or liable
thereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made therein to the Declaration of Trust, and may contain any further
recital which they may deem appropriate, but the omission of such recital shall
not operate to impose personal liability on any of the Trustees, Shareholders,
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
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5.6. Reliance on Experts, etc. Each Trustee and officer or employee of the
Trust shall, in the performance of his duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any investment adviser, distributor, selected
dealer, accountant, appraiser or other expert or consultant selected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or expert may also be a Trustee.
ARTICLE VI
Shares of Beneficial Interest
6.1. Beneficial Interest. The interest of the beneficiaries hereunder shall
be divided into transferable shares of beneficial interest, all of one class,
with par value $0.0001 per share. The number of such shares of beneficial
interest authorized hereunder is unlimited. The Trustees may divide or combine
the Shares into a greater or lesser number of shares without thereby changing
the proportionate interests in the Trust. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
split of Shares, shall be fully paid and nonassessable.
6.2. Rights of Shareholders. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights in this Declaration specifically set forth. The Shares shall not
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights (except for rights of appraisal specified in Section 11.4 and as the
Trustees may determine with respect to any series of Shares).
6.3. Trust Only. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary
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between the Trustees and each Shareholder from time to time. It is not the
intention of the Trustees to create a general partnership, limited partnership,
joint stock association, corporation, bailment or any form of legal relationship
other than a trust. Nothing in this Declaration of Trust shall be construed to
make the Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
6.4. Issuance of Shares. The Trustees, in their discretion, may from time
to time without a vote of the Shareholders issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount not less than par value and type of consideration,
including cash or property, at such time or times (including, without
limitation, each business day in accordance with the maintenance of a constant
net asset value per share as set forth in Section 9.3 hereof), and on such terms
as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust. Reductions
in the number of outstanding Shares may be made pursuant to the constant net
asset value share formula set forth in Section 9.3. Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000ths of a Share or multiples thereof.
6.5. Register of Shares. A register shall be kept at the Trust or a
transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any dividend or distribution, nor to have
notice given to him as herein provided, until he has given his address to a
transfer agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. It is not contemplated that certificates will
be issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of share certificates
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and promulgate appropriate rules and regulations as to their use.
6.6. Transfer Agent and Registrar. The Trustees shall have power to employ
a transfer agent or transfer agents, and a registrar or registrars. The transfer
agent or transfer agents may keep the said register and record therein the
original issues and transfers, if any, of the said Shares. Any such transfer
agent and registrar shall perform the duties usually performed by transfer
agents and registrars of certificates of stock in a corporation, except as
modified by the Trustees.
6.7. Transfer of Shares. Shares shall be transferable on the records of the
Trust only by the record holder thereof or by his agent thereto duly authorized
in writing, upon delivery to the Trustees or a transfer agent of the Trust of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or a transfer
agent of the Trust, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law, except as may otherwise be provided by
the laws of the Commonwealth of Massachusetts.
6.8. Treasury Shares. Shares held in the treasury shall, until reissued,
not confer any voting rights on the Trustees, nor shall such Shares be entitled
to any dividends or other distributions declared with respect to the Shares.
6.9. Series Designation. The Trustees, in their discretion, may authorize
the division of Shares into two or
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more Series, each series relating to a separate portfolio of investments. The
different Series shall be established and designated, and the variations in the
relative rights and preferences as between the different series shall be fixed
and determined, by the Trustees; provided, that all Shares shall be identical
except that there may be variations so fixed and determined between different
series as to investment objective, purchase price, right of redemption, special
and relative rights as to dividends and on liquidation conversion rights, and
conditions under which the several series shall have separate voting rights. All
references to Shares in this Declaration shall be deemed to be shares of any or
all series as the context may require.
If the Trustees shall divide the Shares of the Trust into two or more
Series, the following provisions shall be applicable:
(a) The number of authorized Shares and the number of Shares of each
Series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more Series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Series required by the Trust at their
discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with respect to
any one or more Series which represents the interests in the assets of the Trust
immediately prior to the establishment of two or more Series and the powers of
the Trustees to invest and reinvest assets applicable to any other Series shall
be as set forth in the instrument of the Trustees establishing such Series which
is hereinafter described.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors and
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except as may otherwise be required by applicable tax laws, and shall be so
recorded upon the books of account of the Trust. In the event that there are any
assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series, the
Trustees shall allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the shareholders of all series for all
purposes.
(d) assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(e) The power of the Trustees to pay dividends and make distributions
with respect to any one or more Series shall be governed by Section 9.2 of this
Trust. Dividends and distributions on Shares of a particular Series may be paid
with such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine, to the holders of Shares of
that Series, from such of the income and capital gains, accrued or realized,
from the assets belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series. All
dividends and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions.
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The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preference of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
6.10. Notices. Any and all notices to which any Shareholder hereunder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at this last
known address as recorded on the register of the Trust.
ARTICLE VII
Custodian
7.1. Appointment and Duties. The Trustees shall at all times employ a
custodian or custodians, meeting the qualifications for custodians contained in
the 1940 Act, as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the By-Laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust, or any Series, and
deliver the same upon written order;
(2) to receive and receipt for any moneys due to the Trust, or any
Series, and deposit the same in its own banking department of elsewhere as
the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of
the Trust, or any Series, and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income
of the Trust, or any Series;
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all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote of the Series,
the custodian shall deliver and pay over all property of the Trust held by it
with respect to the Series as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
7.2. Central Certificate System. Subject to such rules, regulations and
orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act and the rules and
regulations promulgated thereunder, pursuant to which system all securities of
any particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the Trust.
ARTICLE VIII
Redemption
8.1. Redemptions. All outstanding Shares of any Series may be redeemed at
the option of the holders thereof, upon and subject to the terms and conditions
provided in this Article VIII. The Trust shall, upon application of any
Shareholder or pursuant to authorization from any Shareholder, redeem or
repurchase from such Shareholder outstanding Shares with respect to the
applicable Series for an amount per share determined by the application of a
formula adopted with respect to the applicable Series for such purpose by
resolution of the Trustees (which formula shall be consistent with the 1940 Act,
and the rules and regulations promulgated thereunder); provided that (a) such
amount per share shall not exceed the cash equivalent of the proportionate
interest of each share in the
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assets of the Series of the Trust at the time of the purchase or redemption and
(b) if so authorized by the Trustees, the Trust may, at any time and from time
to time, charge fees for effecting such redemption, at such rates as the
Trustees may establish, as and to the extent permitted under the 1940 Act, and
the rules and regulations promulgated thereunder, and may, at any time and from
time to time, pursuant to such Act and such rules and regulations, suspend such
right of redemption. The procedures for effecting redemption shall be as set
forth in the Prospectus from time to time. Payment will be made in such manner
as described in the Prospectus.
8.2. Redemption of Shares; Disclosure of Holding. If the Trustees shall, at
any time and in good faith, be of the opinion that direct or indirect ownership
of Shares or other securities of the Trust has or may become concentrated in any
person to an extent which would disqualify the Trust as a regulated investment
company under the Internal Revenue Code, then the Trustees shall have the power
by lot or other means deemed equitable by them (i) to call for redemption a
number, or principal amount, of Shares or other securities of the Trust
sufficient, in the opinion of the Trustees, to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would in the opinion of
the Trustees result in such disqualification. The redemption shall be effected
at a redemption price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
8.3. Redemptions Pursuant to Constant Net Asset Value Formula. The Trust
may also reduce the number of outstanding Shares pursuant to the provisions of
Section 9.3.
8.4. Redemptions of Accounts of Less than $200. Due to the relatively high
cost of maintaining investment accounts of less than $200, the Trustees shall
have the power to redeem shares at a redemption price determined in accordance
with Section 8.1 if at any time the total investment in such account
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does not have a value of at least $200, or such lower amount as the Board of
Trustees may determine; provided, however, that the Trustees may not exercise
such power with respect to Shares if the Prospectus does not describe such
power. In the event the Trustees determine to exercise their power to redeem
Shares provided in this Section 8.4., shareholders shall be notified that the
value of their account is less than $200 and allowed 60 days to make an
additional investment before redemption is processed.
ARTICLE IX
Determination of Net Asset Value,
Net Income and Distributions
9.1. Net Asset Value. The net asset value of each outstanding Share of the
Trust shall be determined at such time or times on such days as the Trustees may
determine, in accordance with the 1940 Act. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth in the
Prospectus. The power and duty to make the daily calculations may be delegated
by the Trustees to the adviser, administrator, manager, custodian, transfer
agent or such other person as the Trustees may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from time to time
distribute ratably among the Shareholders of any Series such proportion of the
net profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees with respect to such Series as they may deem proper. Such distribution
may be made in cash or property (including without limitation any type of
obligations of the Trust or any assets thereof), and the Trustees may distribute
ratably among the Shareholders of any Series additional Shares of the applicable
Series issuable hereunder in such manner, at such times, and on such terms as
the Trustees may deem proper. Such distributions may be among the Shareholders
of record at the time of declaring a distribution or among the Shareholders of
record at such later date as the Trustees shall determine. The Trustees may
always retain from the net profits such amount as they may deem necessary to pay
the debts or expenses of the Trust or to meet obligations of the Trust, or as
they may deem desirable to use in the conduct of its affairs or to retain for
future requirements or extensions of the business. The Trustees may adopt and
offer to Shareholders of any Series such
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dividend reinvestment plan, cash dividend payout plans or related plans as the
Trustees shall deem appropriate for such Series.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
9.3. Constant Net Asset Value; Reduction of Outstanding Shares. The
Trustees shall have the power to determine the net income of any Series of the
Trust once on each day the net asset value of the Series is determined as
provided in Section 9.1 and at each such determination to declare such net
income as dividends with the result that the net asset value per share of the
Series shall remain at a constant dollar value. The determination of net income
and the resultant declaration of dividends shall be as set forth in the
Prospectus. In the event the Trustees determine net asset value of a Series as
described herein, fluctuations in value of shares of the Series will be
reflected in the number of outstanding Shares of the Series in each
shareholder's account. It is expected that the Series will have a positive net
income at the time of each determination. If for any reason the net income of
the Series is a negative amount, the Trust may offset such amount against
dividends accrued in the account of each shareholder of the Series. If and to
the extent such negative amount exceeds such accrued dividends, the Trustees
shall have authority to reduce the number of outstanding Shares of the Series.
Such reduction will be effected by having each Shareholder of the Series
proportionately contribute to the Series' capital the necessary Shares of the
Series that represent the amount of the excess upon such determination. Each
Shareholder of the Series will be deemed to have agreed to such contribution in
these circumstances by his investment in the Series. This procedure will permit
the net asset value per share of the Series to be maintained at a constant
dollar value per share.
The Trustees, by resolution, may discontinue or amend the practice of
maintaining the net asset value per share of any Series at a constant dollar
amount at any time and such modification shall be evidenced by appropriate
changes in the Prospectus.
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9.4. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per share
net asset value of the Trust's Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary or desirable
or to enable the Trust to comply with any provision of the 1940 Act, or any rule
or regulation thereunder, including any rule or regulation adopted pursuant to
Section 22 of the 1940 Act by the Commission or any securities association
registered under the Securities Exchange Act of 1934, or any order of exemption
issued by said Commission, all as in effect now or hereafter amended or
modified.
ARTICLE X
Shareholders
10.1. Meetings of Shareholders. Meetings of the Shareholders may be called
at any time by a majority of the Trustees and shall be called by any Trustee
upon written request of Shareholders of any Series holding in the aggregate not
less than 10% of the outstanding Shares of such Series having voting rights,
such request specifying the purpose or purposes for which such meeting is to be
called. Any such meeting shall be held within or without the Commonwealth of
Massachusetts on such day and at such time as the Trustees shall designate. The
holders of one-third of the outstanding Shares present in person or by proxy
shall constitute a quorum for the transaction of any business, except as may
otherwise be required by the 1940 Act or other applicable law or by this
Declaration or the By-Laws of the Trust. If a quorum is present at a meeting,
the affirmative vote of a majority of the Shares represented at the meeting
constitutes the action of the Shareholders, unless the 1940 Act, other
applicable law, this Declaration or the By-Laws of the Trust requires a greater
number of affirmative votes.
10.2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder at his registered address, mailed at least
10 days and not more than 60 days before the meeting. Only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice.
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10.3. Record Date for Meetings. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 60 days prior to the
date of any meeting of Shareholders or distribution or other action as a record
date for the determination of the Persons to be treated as Shareholders of
record for such purposes, except for dividend payments which shall be governed
by Section 9.2 hereof.
10.4. Proxies, etc. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resolution of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
10.5. Reports. The Trustees shall cause to be prepared at least annually a
report of operations containing a balance sheet and statement of income and
undistributed income of the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent public accountant on such
financial statements. Copies of such reports shall be mailed to all Shareholders
of record within the time required
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by the 1940 Act. The Trustees shall, in addition, furnish to the Shareholders at
least semi-annually interim reports containing an unaudited balance sheet of the
Trust as of the end of such period and an unaudited statement of income and
surplus for the period from the beginning of the current fiscal year to the end
of such period.
10.6. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
10.7. Shareholder Action by Written Consent. Any action which may be taken
by Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration) consent to the action in
writing and the written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
10.8. Voting. Each shareholder shall be entitled to vote on any matter
required to be submitted to shareholders by the provisions of this Declaration,
the 1940 Act, the laws of the Commonwealth of Massachusetts or otherwise. Any
matter requiring such a vote and affecting a particular Series, including
without limitation matters affecting the investment advisory arrangements or
investment policies or restrictions of a Series, shall not be deemed to have
been effectively acted upon unless approved by the required vote of the
Shareholders of such Series. Notwithstanding the foregoing, to the extent
permitted by the 1940 Act, only Shares of the respective Series are entitled to
vote on matters concerning only that Series and each Series shall not be
required to vote separately on the selection of independent public accountants,
the election of Trustees and any submission with respect to a contract with a
principal underwriter or distributor.
ARTICLE XI
Duration; Termination of Trust;
Amendment; Mergers; Etc.
11.1. Duration. Subject to possible termination in accordance with the
provisions of Section 11.2 hereof, the Trust created hereby shall continue
indefinitely.
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11.2. Termination of Trust.
(a) The Trust may be terminated by the affirmative vote of the holders
of not less than two-thirds of the Shares of each Series at any meeting of
Shareholders or by an instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not less than
two-thirds of such Shares. The termination of any Series of the Trust shall only
require an affirmative vote of the holders of not less than two-thirds of the
shares of that Series, as provided above. Upon any such termination,
(i) The Trust or such Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
such Series and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or such Series shall have
been wound up, including the power to fulfill or discharge the contracts of
the Trust, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property to one
or more persons at public or private sale for consideration which may
consist in whole or in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and do all other acts appropriate
to liquidate its business; provided that any sale, conveyance, assignment,
exchange, transfer or other disposition of all or substantially all the
Trust Property shall require approval of the principal terms of the
transaction and the nature and amount of the consideration by vote or
consent of the holders of a majority of the Shares entitled to vote.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of any Series, in cash or in kind
or partly each, among the Shareholders of the applicable Series according
to their respective rights.
(b) Upon termination of the Trust, and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of
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such termination. The Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease. Upon termination of any Series, the Trustees
shall thereupon be discharged from all further liabilities and duties with
respect to such Series and the rights and interests of all Shareholders of such
Series shall thereupon cease.
11.3. Amendment Procedure.
(a) This Declaration may be amended by the affirmative vote of the
holders of not less than a majority of the Shares or by an instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of the Shares. Shareholders of
each Series shall have the right to vote separately on amendments to this
Declaration to the extent provided by Section 10.8. The Trustees may also amend
this Declaration without the vote or consent of Shareholders if they deem it
necessary to conform this Declaration to the requirements of applicable federal
laws or regulations or the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be liable
for failing so to do.
(b) No amendment may be made, under Section 11.3 (a) above, which
would change any rights with respect to any Shares of the Trust by reducing the
amount payable thereon upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds of the Shares of each Series. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
(c) A certification in recordable form signed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares
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of the Trust shall have become effective, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the Trustees or
by an instrument signed by a majority of the Trustees.
11.4. Merger, Consolidation and Sale of Assets. The Trust, or any series
thereof, may merge or consolidate with any other corporation, association, trust
or other organization or may sell, lease or exchange all or substantially all of
its property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of not less than one-half
of the shares of each Series of the Trust (if approving the merger of the Trust)
or such Series (if approving the merger of a Series), or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than one-half of such shares, and any such merger, consolidation, sale,
lease or exchange shall be deemed for all purposes to have been accomplished
under and pursuant to the statutes of the Commonwealth of Massachusetts. In
respect of any such merger, consolidation, sale or exchange of assets, any
Shareholder shall be entitled to rights of appraisal of his Shares to the same
extent as a shareholder of a Massachusetts business corporation in respect of a
merger, consolidation, sale or exchange of assets of a Massachusetts business
corporation, and such rights shall be his exclusive remedy in respect of his
dissent from any such action.
11.5. Incorporation. With the approval of the holders of a majority of the
Shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization in exchange
for the Shares or securities thereof or otherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, association or organization in which the Trust holds
or is about to acquire shares or any other interest. The Trustees may also cause
a merger or consolidation between the Trust or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided
30
<PAGE>
under the law then in effect. Nothing contained herein shall be construed as
requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organizations or entities.
11.6. Derivative and Class Actions. The holders of the Shares shall have
the power to vote to the same extent as the Shareholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or its holders of shares
ARTICLE XII
Miscellaneous
12.1. Filing. This Declaration and any amendment hereto shall be filed in
the office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, containing the original Declaration and all
amendments theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
12.2. Resident Agent. The Trust shall maintain a resident agent in the
Commonwealth of Massachusetts, which agent shall initially be CT Corporation
System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees may designate
a successor resident agent, provided, however, that such appointment shall not
become effective until written notice thereof is delivered to the office of the
Secretary of the Commonwealth.
31
<PAGE>
12.3. Governing Law. This Declaration is executed by the Trustees and
delivered in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
12.4. Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
12.5. Reliance by Third Parties. Any certificate executed by an individual
who, according to the records of the Trust, or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder, certifying
to: (a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Shareholders, (d) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees and their successors.
12.6. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
32
<PAGE>
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ John Fitting, Jr.
-------------------------------
John Fitting, Jr.
/s/Rodd Baxter
-------------------------------
Rodd Baxter
/s/ Leonard I. Chubinsky
-------------------------------
Leonard I. Chubinsky
/s/ Jeremiah J. Bresnahan, Jr.
-------------------------------
Jeremiah J. Bresnahan, Jr.
33
<PAGE>
STATE OF NEW YORK )
: ss.: June 25, 1986
COUNTY OF NEW YORK )
Then personally appeared before me, John Fitting, Jr., who resides at 290
Park Avenue, New York, New York 10028, Rodd Baxter, who resides at 402 Westwood
Road, Woodmere, New York 11598, and Leonard I. Chubinsky, who resides at 199
Lakeshore Drive, Pleasantville, New York 10570, who acknowledged the foregoing
instrument to be their free act and deed and the free act and deed of the
Trustees of National Stock Fund.
/s/ Migdalia Santiago
----------------------------
Notary Public
My Commission Expires:
MIGDALIA SANTIAGO
Notary Public, State of New York
No. 31-4750902
Qualified in New York County
Commission Expires March 30, 1987
34
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. City of Boston,
June 26, 1986
Then personally appeared before me, Jeremiah J. Bresnahan, Jr., who resides
at 511 Ward Street, Newton Center, Massachusetts 02159, who acknowledged the
foregoing instrument to be his free act and deed and the free act and deed of a
Trustee of National Stock Fund.
/s/ Pauline Frances Martin
-------------------------------------
Notary Public
My Commission Expires:
10/31/86
- ------------------------
PAULINE FRANCES MARTIN, Notary Public
My Commission Expires October 31, 1986
PSESF.001
35
Exhibit 6.1
Class A Shares
NATIONAL STOCK FUND
UNDERWRITING AGREEMENT
AGREEMENT made and entered into this 14th day of May, 1993, by and between
NATIONAL STOCK FUND, a Massachusetts business trust (hereinafter called the
"Fund"), and PHOENIX EQUITY PLANNING CORPORATION, a Connecticut corporation
(hereinafter called the "Underwriter").
1. The Fund hereby appoints the Underwriter as its exclusive agent to
promote the sale and to arrange for the sale of shares of beneficial interest of
the Fund, including both unissued shares and treasury shares, through
broker-dealers or otherwise, in all parts of the United States and elsewhere
throughout the world. The Fund agrees to sell and deliver its shares, upon the
terms hereinafter set forth, as long as it has unissued and/or treasury shares
available for sale.
(a) The Fund hereby authorizes the Underwriter, subject to law and the
Declaration of Trust of the Fund, to accept, for the account of the Fund,
orders for the purchase of its shares, satisfactory to the Underwriter, as
of the time of receipt of such orders by the dealer, or as otherwise
described in the then-current Prospectus of the Fund.
(b) The public offering price of such shares shall be based on the net
asset value per share (as determined by the Fund) of the outstanding shares
of the Fund. Such net asset value shall be regularly determined on every
business day as of the time of closing of the New York Stock Exchange and
the public offering price based upon such net asset value shall become
effective as set forth from time to time in the current Prospectus; such
net asset value shall also be regularly determined, and the public offering
price based thereon shall become effective, as of such other times for the
regular determination of net asset value as may be required or permitted by
rules of the National Association of Securities Dealers, Inc. or of the
Securities and Exchange Commission. The Fund shall furnish the Underwriter,
with all possible promptness, a statement of each computation of net asset
value, and of the details entering into such computation.
The public offering price of such shares shall be equal to the net
asset value, as described above, plus a commission to be fixed from time to
time by the Fund and the Underwriter and as described in the current
Prospectus of the Fund. The Underwriter may fix quantity discounts and
other similar terms not inconsistent with the provisions of the Investment
Company Act of 1940, as amended (the "Act"). The Underwriter shall not
impose any commission, permit any quantity discounts or impose any other
similar terms in connection with the sale of shares of the Fund except as
disclosed in the then-current Prospectus of the Fund.
<PAGE>
(c) The Underwriter shall be entitled to deduct a commission on all
such shares sold equal to the difference between the public offering price
and the net asset value on which such price is based. If any such
commission is received by the Fund, it will pay such commission to the
Underwriter. Out of such commission, the Underwriter may allow to dealers
such concessions as the Underwriter may determine from time to time.
Notwithstanding anything in this Agreement otherwise provided, sales may be
made at net asset value as provided in the then-current Prospectus of the
Fund.
(d) As reimbursement for expenditures made in connection with
providing certain distribution-related services, the Underwriter may
receive from the Fund a distribution services fee under the terms and
conditions set forth in the Fund's Distribution Plan adopted under Rule
12b-1 under the Act (the "Plan"), as the Plan may be amended from time to
time and subject to any further limitations on such fees as the Trustees
may impose.
2. The Underwriter agrees to devote reasonable time and effort to enlist
investment dealers and otherwise promote the sale and distribution and act as
Underwriter for the sale and distribution of the shares of the Fund as such
arrangements may profitably be made; but so long as its does so, nothing herein
contained shall prevent the Underwriter from entering into similar arrangements
with other funds and to engage in other activities. The Fund reserves the right
to issue shares in connection with any merger or consolidation of the Fund with
any other investment company or any personal holding company or in connection
with offers of exchange exempted from Section 22(d) of the Act.
3. Upon receipt by the Fund at its principal place of business of a written
order from the Underwriter, together with delivery instructions, the Fund shall,
as promptly as practicable, cause certificates for the shares called for in such
order to be delivered or credited in such amounts and in such names as shall be
specified by the Underwriter, against payment therefor in such manner as may be
acceptable to the Fund.
4. All sales literature and advertisements used by the Underwriter in
connection with sales of the shares of the Fund shall be subject to the approval
of the Fund. The Fund authorizes the Underwriter in connection with the sale or
arranging for the sale of its shares to give only such information and to make
only such statements or representations as are contained in the Prospectus or in
sales literature or advertisements approved by the Fund or in such financial
statements and reports as are furnished to the Underwriter pursuant to paragraph
6 below. The Fund shall not be responsible in any way for any information,
statements or representations given or made by the Underwriter or its
representatives or agents other than such information, statements and
representations.
5. The Underwriter as agent of the Fund is authorized, subject to the
direction of the Fund, to accept shares for redemption at prices determined as
prescribed in the then-current Prospectus of the Fund. The Fund shall reimburse
-2-
<PAGE>
the Underwriter monthly for its out-of-pocket expenses reasonably incurred in
carrying out the foregoing authorization, but the Underwriter shall not be
entitled to any commissions or other compensation with respect to such
redemptions. The Underwriter shall report all such redemptions promptly to the
Fund.
6. The Fund shall keep the Underwriter fully informed with regard to its
affairs, shall furnish the Underwriter with a certified copy of all financial
statements, and a signed copy of each report, prepared by independent public
accountants and with such reasonable number of printed copies of each annual and
other periodic reports of the Fund as the Underwriter may request, and shall
cooperate fully in the efforts of the Underwriter to sell and arrange for the
sale of its shares and in the performance by the Underwriter of all of its
duties under this Agreement.
7. The Fund will pay or cause to be paid expenses (including counsel fees
and disbursements) of any registration of its shares of beneficial interest
under, but not limited to, Federal, State or other regulatory authority, fees
for filing periodic reports with regulatory bodies and of preparing, setting in
type and printing the Prospectus and any amendments thereto prepared for use in
connection with the offering of shares of the Fund, for fees and expenses
incident to the issuance of shares of capital stock such as the cost of stock
certificates, issuance taxes, fees of the transfer agent including the cost of
preparing and mailing notices to shareholders pertaining to transactions with
respect to such shareholders' accounts, dividend disbursing agent's costs
including the cost of preparing and mailing notices confirming shares acquired
by the shareholder pursuant to the reinvestment of dividends and distributions,
and the mailing to shareholders of prospectuses, notices and reports as may be
required from time to time by regulatory bodies or for such other purposes,
except for purposes of sales by the Underwriter as outlined in paragraph 8
below.
8. The Underwriter shall pay all of its own costs and expenses (other than
expenses and costs heretofore deemed payable by the Fund and other than expenses
which one or more dealers may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the shares issued or sold
hereunder including (a) expenses of printing copies of prospectuses to be used
in connection with the sale of shares of the Fund at printer's overrun costs;
(b) expenses of printing and distributing or disseminating any other literature,
advertising or selling aids in connection with the offering of shares for sale
(however, the expenses referred to in (a) and (b) do not include expenses
incurred in connection with the preparation, printing and distribution of any
prospectus or report or other communication to shareholders to the extent that
such expenses are necessarily incurred to effect compliance by the Fund with any
Federal or State law or other regulatory bodies); and (c) expenses of
advertising in connection with such offering.
9. The Fund agrees to register, from time to time as necessary, additional
shares with the Securities and Exchange Commission, State and other regulatory
bodies and to pay the relating filing fees therefor and to file such amendments,
reports and other documents as may be necessary in order that there may be no
untrue statement of a material fact in the Registration Statement or Prospectus
or no omission to state a material fact therein necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As used in this Agreement, the term "Registration
Statement" shall mean the Registration Statement most recently filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended, as such Registration Statement is amended from time to
time, and the term "Prospectus" shall mean the most recent form of prospectus
authorized by the Fund for use by the Underwriter and by dealers.
-3-
<PAGE>
10. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Act.
11. This Agreement has been approved by the Board of Trustees of the Fund,
including the Trustees who are not "interested persons" of the Fund, as defined
in the Act, and who have no direct or indirect financial interest in this
Agreement (the "Disinterested Trustees"), by vote cast in person at a meeting
called for the purpose of voting on this Agreement. This Agreement shall
continue in effect for two years from its effective date and thereafter for
successive annual periods, provided that such continuance is specifically
approved annually be a majority of the Trustees, acting on behalf of the Fund,
and by a majority of the Disinterested Trustees, cast in person at a meeting
called for such purpose.
12. This Agreement may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Disinterested Trustees or by vote of a
majority of the outstanding voting securities of the Fund, as that term is
defined in the Act, on not more than 60 days' written notice to the Underwriter.
13. The Declaration of Trust establishing the Fund, dated June 25, 1986, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "National Stock Fund" refers to the Trustees under the
Declaration collectively as trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of the Fund may be held to
any personal liability, nor may resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of said Fund but the Fund property only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
NATIONAL STOCK FUND
By: /s/ Geoffrey H. Wadsworth
-----------------------------
Geoffrey H. Wadsworth, Vice President
Attest:
By: /s/ Mairead M. Collins
-----------------------------
Mairead M. Collins
Assistant Secretary
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Martin J. Gavin
-----------------------------
Martin J. Gavin
Attest:
By: /s/ Patricia O. McLaughlin
---------------------------------
natl/stock.u Patricia O. McLaughlin
Assistant Secretary
-4-
Exhibit 6.2
PHOENIX EQUITY OPPORTUNITIES FUND
UNDERWRITING AGREEMENT
CLASS B SHARES
THIS AGREEMENT by and between PHOENIX EQUITY OPPORTUNITIES FUND, a
Massachusetts business trust (the "Fund"), and PHOENIX EQUITY PLANNING
CORPORATION, a Connecticut corporation (the "Underwriter").
1. The Fund hereby appoints the Underwriter as exclusive agent to promote
the sales and to arrange for the sale of Class B shares of the Fund, including
both unissued shares and treasury shares, through broker-dealers or otherwise,
in all parts of the United States and elsewhere throughout the world. The Fund
agrees to sell and deliver its shares, upon the terms hereinafter set forth, as
long as it has unissued and/or treasury shares available for sale.
(a) The Fund hereby authorizes the Underwriter, subject to law and the
Articles of Incorporation of the Fund, to accept, for the account of the Fund,
orders for the purchase of its Class B shares, satisfactory to the Underwriter,
as of the time of receipt of such orders by the dealer, or as otherwise
described in the Prospectus of the Fund.
(b) The public offering price of such Class B shares shall be based on the
net asset value per share (as determined by the Fund) of the outstanding Class B
shares of the Fund. Such net asset value shall be regularly determined on every
business day as of the time of closing of the general trading session of the New
York Stock Exchange and the public offering price based upon such net asset
value shall become effective as set forth from time to time in the current
Prospectus; such net asset value shall also be regularly determined, and the
public offering price based thereon shall become effective, as of such other
times for the regular determination of net asset value as may be required or
permitted by rules of the National Association of Securities Dealers, Inc. or
the Securities and Exchange Commission. The Fund shall furnish the Underwriter,
with all possible promptness, a statement of each computation of net asset
value, and of the details entering into such computation. The public offering
price of such Class B shares shall be equal to the net asset value, as described
above, plus a commission to be fixed from time to time by the Fund and the
Underwriter and as described in the current Prospectus of the Fund. The
Underwriter may fix quantity discounts and other similar terms not inconsistent
with the provisions of the Investment Company Act of 1940, as amended (the
"Act"). The Underwriter shall not impose any commission, permit any quantity
discounts or impose any other similar terms in connection with the sale of Class
B shares of the Fund except as disclosed in the Prospectus of the Fund.
(c) As compensation for providing services under this Agreement, the
Underwriter shall receive from the Fund all contingent deferred sales charges
applied on redemptions of Class B shares. Whether and to what extent a
contingent deferred sales charge will be imposed with respect to a redemption
shall be determined in accordance with, and in a manner set forth in, the Fund's
Prospectus.
<PAGE>
-2-
(d) As reimbursement for expenditures made in connection with providing
certain distribution-related services, the Underwriter may receive from the Fund
a distribution services fee under the terms and conditions set forth in the
Fund's Distribution Plan for Class B Shares adopted under Rule 12b-1 under the
Act (the "Plan"), as the Plan may be amended from time to time and subject to
any further limitations on such fees as the Trustees may impose.
2. The Underwriter agrees to devote reasonable time and effort to enlist
investment dealers and otherwise promote the sale and distribution and act as
Underwriter for the sale and -- distribution of the shares of the Fund as such
arrangements may profitably be made; but so long as it does so, nothing
contained herein shall prevent the Underwriter from entering into similar
arrangements with other funds and to engage in other activities. The Fund
reserves the right to issue shares in connection with any merger or
consolidation of the Fund with any other investment company or any personal
holding company or in connection with offers of exchange exempted from Section
22(d) of the Act.
3. Upon receipt by the Fund at its principal place of business of a written
order from the Underwriter, together with the delivery instructions, the Fund
shall, as promptly as practicable, cause certificates for the shares called for
in such order to be delivered or credited in such amounts and in such names as
shall be specified by the Underwriter, against payment therefor in such manner
as may be acceptable to the Fund.
4. All Sales literature and advertisements used by the Underwriter in
connection with sales of the shares of the Fund shall be subject to the approval
of the Fund. The Fund authorizes the Underwriter in connection with the sale or
arranging for the sale of its shares to give only such information and to make
only such statements or representations as are contained in the Prospectus or in
sales literature or advertisements approved by the Fund or in such financial
statements and reports as are furnished to the Underwriter pursuant to paragraph
6 below. The Fund shall not be responsible in any way for any information,
statements or representations given or made by the Underwriter or its
representatives or agents.
5. The Underwriter, as agent of the Fund, is authorized, subject to the
direction of the Fund, to accept shares for redemption at prices determined as
prescribed in the then-current Prospectus of the Fund. The Fund shall reimburse
the Underwriter monthly for its out-of-pocket expenses reasonably incurred in
carrying out the foregoing authorization, but the Underwriter shall not be
entitled to any commissions or other compensation with respect to such
redemptions. The Underwriter shall report all such redemptions promptly to the
Fund.
6. The Fund shall keep the Underwriter fully informed with regard to its
affairs, shall furnish the Underwriter with a certified copy of all financial
statements, and a signed copy of each report, prepared by independent public
accountants and with such reasonable number of printed copies of each annual and
other periodic reports of the Fund as the Underwriter may request, and shall
cooperate fully in the efforts of the Underwriter to sell and arrange for the
sale of its shares and in the performance by the Underwriter of all of its
duties under this Agreement.
<PAGE>
-3-
7. The Fund will pay or cause to be paid expenses (including counsel fees
and disbursements) of any registration of its shares under, but not limited to,
Federal, State or other regulatory authority, fees for filing periodic reports
with regulatory bodies and of preparing, setting in type and printing the
Prospectus and any amendments thereto prepared for use in connection with the
offering of shares of the Fund, for fees and expenses incident to the issuance
of shares of capital stock such as the cost of stock certificates, issuance
taxes, fees of the transfer agent including the cost of preparing and mailing
notices to shareholders pertaining to transactions with respect to such
shareholders' accounts, dividend disbursing agent's costs including the cost of
preparing and mailing notices confirming shares acquired by the shareholder
pursuant to the reinvestment of dividends and distributions, and mailing to
shareholders of prospectuses, notices and reports as may be required from time
to time by regulatory bodies or for such other purposes, except for purposes of
sales by the Underwriter as outlined in paragraph 8 below.
8. The Underwriter shall pay all of its own costs and expenses (other than
expenses and costs heretofore deemed payable by the Fund and other than expenses
which one or more dealers may bear pursuant to any agreement with the
Underwriter) incident to the sale and distribution of the Class B shares issued
or sold hereunder including (a) expenses of printing copies of the Prospectus to
be used in connection with the sale of Class B shares of the Fund at printer's
overrun cost; (b) expenses of printing and distributing or disseminating any
other literature, advertising or selling aids in connection with the offering of
Class B shares for sale (however, the expenses referred to in (a) and (b) do not
include expenses incurred in connection with the preparation, printing and
distribution of any prospectus or report or other communication to shareholders
to the extent that such expenses are necessarily incurred to effect compliance
by the Fund with any Federal or State law or other regulatory bodies); and (c)
expenses of advertising in connection with such offering.
9. The Fund agrees to register, from time to time as necessary, additional
shares with the Securities and Exchange Commission, State and other regulatory
bodies and to pay the related filing fees therefor and to file such amendments,
reports and other documents as may be necessary in order that there may be no
untrue statement of a material fact in the Registration Statement or Prospectus
or no omission to state a material fact therein necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As used in this Agreement, the term "Registration Statement"
shall mean the Registration Statement most recently filed by the Fund with the
Securities and Exchange Commission and effective under the Securities Act of
1933, as amended, as such Registration Statement is amended from time to time,
and the term "Prospectus" shall mean the most recent form of prospectus
authorized by the Fund for use by the Underwriter and by dealers.
10. This Agreement shall terminate automatically in the event of its
assignment. The term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Act.
11. This Agreement has been approved by the Trustees of the Fund, including
the Trustees who are not "interested persons" of the Fund, as defined in the
Act, and who have no direct or indirect financial interest in this Agreement
(the "Disinterested Trustees"), by vote cast in person
<PAGE>
-4-
at a meeting called for the purpose of voting on this Agreement. This Agreement
shall continue in effect for two years from its effective date, and thereafter
for successive annual periods, provided that such continuance is specifically
approved annually by a majority of the Trustees, acting on behalf of the Fund,
and by a majority of the Disinterested Trustees, cast in person at a meeting
called for such purpose.
12. This Agreement may be terminated at any time, without the payment of
any penalty, by vote of a majority of the Disinterested Trustees or by vote of a
majority of the outstanding voting securities of the Fund, as that term is
defined in the Act, on not more than 60 days' written notice to the Underwriter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized this 26th day of May, 1994.
PHOENIX EQUITY OPPORTUNITIES FUND
Attest: /s/ Richard Wirth By: /s/ Philip R. McLoughlin
----------------------------- -------------------------------
Richard Wirth Name: Philip R. McLoughlin
Asst Secretary Title: President
PHOENIX EQUITY PLANNING
CORPORATION
Attest: /s/ Patricia O. McLaughlin By: /s/ Martin J. Gavin
---------------------------- -------------------------------
` Name: Martin J. Gavin
Title: Executive Vice President
Exhibit 8.
Custodian Contract
<PAGE>
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX 1
and
STATE STREET BANK AND TRUST COMPANY
Phoenix2.cus
GlobalSeriesCorp
21N
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By
It.......................................................................................................1
2. Duties of the Custodian with Respect to Property
of each Fund Held by the Custodian in the United States..................................................2
2.1 Holding Securities..............................................................................2
2.2 Delivery of Securities..........................................................................2
2.3 Registration of Securities......................................................................4
2.4 Bank Accounts...................................................................................4
2.5 Availability of Federal Funds...................................................................5
2.6 Collection of Income............................................................................5
2.7 Payment of Fund Moneys..........................................................................5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased.................................................................6
2.9 Appointment of Agents...........................................................................7
2.10 Deposit of Fund Assets in U.S. Securities System................................................7
2.11 Fund Assets Held in the Custodian's Direct
Paper System....................................................................................8
2.12 Segregated Account..............................................................................9
2.13 Ownership Certificates for Tax Purposes.........................................................9
2.14 Proxies.........................................................................................9
2.15 Communications Relating to Fund Securities.....................................................10
3. Duties of the Custodian with Respect to Property of
each Fund Held Outside of the United States.............................................................10
3.1 Appointment of Foreign Sub-Custodians..........................................................10
3.2 Assets to be Held..............................................................................10
3.3 Foreign Securities Systems.....................................................................10
3.4 Holding Securities.............................................................................11
3.5 Agreements with Foreign Banking Institutions...................................................11
3.6 Access of Independent Accountants of each Fund.................................................11
3.7 Reports by Custodian...........................................................................11
3.8 Transactions in Foreign Custody Account........................................................12
3.9 Liability of Foreign Sub-Custodians............................................................12
3.10 Liability of Custodian.........................................................................12
3.11 Reimbursement for Advances.....................................................................13
3.12 Monitoring Responsibilities....................................................................13
3.13 Branches of U.S. Banks.........................................................................13
3.14 Tax Law........................................................................................13
<PAGE>
4. Payments for Sales or Repurchase or Redemptions
of Shares of each Fund..................................................................................14
5. Proper Instructions.....................................................................................14
6. Actions Permitted Without Express Authority.............................................................15
7. Evidence of Authority...................................................................................15
8. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income..........................................................................................15
9. Records.................................................................................................16
10. Opinion of Fund's Independent Accountants...............................................................16
11. Reports to Fund by Independent Public Accountants.......................................................16
12. Compensation of Custodian...............................................................................16
13. Responsibility of Custodian.............................................................................16
14. Effective Period, Termination and Amendment.............................................................18
15. Successor Custodian.....................................................................................18
16. Interpretive and Additional Provisions..................................................................19
17. Additional Funds........................................................................................19
18. Massachusetts Law to Apply..............................................................................20
19. Prior Contracts.........................................................................................20
20. Shareholder Communications..............................................................................20
21. Limitation of Liability................................................................................21
</TABLE>
<PAGE>
MASTER CUSTODIAN CONTRACT
-------------------------
This Contract between each fund or series of a fund listed on Appendix
1 which evidences its agreement to be bound hereby by executing a copy of this
Contract (each such fund, any and all separate series or portfolios thereof and
any additional portfolios or separate series thereof which become subject to
this Contract pursuant to Section 17 hereof, are individually hereafter referred
to as a "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, each of the Funds has previously entered into a Custodian
Contract with the Custodian;
WHEREAS, the Custodian and each of the Funds desire to replace such
existing Custodian Contracts with this Master Custodian Contract between the
Custodian and all of the Funds;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
Each Fund hereby employs the Custodian as the custodian of the assets
of such Fund, including securities which such Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of such Fund's governing documents (domestic securities and foreign securities
are sometimes collectively referred to herein as "Securities"). Each Fund agrees
to deliver to the Custodian all securities and cash of such Fund, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by such Fund from time to time, and the
cash consideration received by it for such new or treasury shares each class of
capital stock or beneficial interest, as applicable, of such Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Fund held or received by such Fund and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Fund from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of the Fund, and provided that
the Custodian shall have no more or less responsibility or liability to the Fund
on account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Fund shall approve in writing the
terms of any subcustodian agreement with a United States subcustodian. The
Custodian may employ as sub-custodian for each Fund's foreign securities the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. Duties of the Custodian with Respect to Property of each Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, to be held by it in
the United States including all domestic securities owned by such Fund,
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury
(each, a "U.S. Securities System") and (b) commercial paper of an
issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian (the "Direct Paper System")
pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Fund held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from such Fund, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of such Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by such
Fund;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of such Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of such Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
<PAGE>
7) Upon the sale of such securities for the account of such Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by such Fund, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and such
Fund, which may be in the form of cash or obligations issued
by the United States government, its agencies or
instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned by
such Fund prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by
such Fund requiring a pledge of assets by such Fund, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among such Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by such Fund;
13) For delivery in accordance with the provisions of any
agreement among such Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account
deposits in connection with transactions by such Fund;
<PAGE>
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for such Fund, for delivery to such
Transfer Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of such Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from such Fund, a
certified copy of a resolution of the Board or of the
Executive Committee of such Fund signed by an officer of such
Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of such Fund to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of each
Fund or in the name of any nominee of each Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to each Fund,
unless a Fund has authorized in writing the appointment of a nominee to
be used in common with other registered investment companies having the
same investment adviser as such Fund, or in the name or nominee name of
any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian under the terms of this Contract
shall be in "street name" or other good delivery form. If, however, a
Fund directs the Custodian to maintain securities in "street name", the
Custodian shall utilize commercially reasonable means to timely collect
income due such Fund on such securities and to timely notify each Fund
of relevant corporate actions including, without limitation, pendency
of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund ,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of such Fund, other than cash maintained by such Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for
each Fund may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Fund be approved by vote of a majority of the Board of such
Fund. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
<PAGE>
2.5 Availability of Federal Funds. Upon mutual agreement between a Fund and
the Custodian, the Custodian shall, upon the receipt of Proper
Instructions from such Fund, make federal funds available to such Fund
as of specified times agreed upon from time to time by such Fund and
the Custodian in the amount of checks received in payment for Shares of
such Fund which are deposited into such Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to Securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to such Fund's
custodian account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder.
Unless otherwise agreed to by the parties, income due each Fund on
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide each Fund
with such information or data as may be necessary to assist each Fund
in arranging for the timely delivery to the Custodian of the income to
which each Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from a
Fund, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
1) Upon the purchase of Securities, options, futures contracts or
options on futures contracts for the account of such Fund but
only (a) against the delivery of such securities or evidence
of title to such options, futures contracts or options on
futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940,
as amended, to act as a custodian and has been designated by
the Custodian as its agent for this purpose) registered in the
name of such Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between such Fund and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by such Fund of securities owned by the Custodian
<PAGE>
along with written evidence of the agreement by the Custodian
to repurchase such securities from such Fund or (e) for
transfer to a time deposit account of such Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from such Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
Securities owned by such Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by such Fund
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by such
Fund, including but not limited to the following payments for
the account of such Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of such Fund whether or not such expenses are to be
in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of such Fund
declared pursuant to the governing documents of such Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from such Fund, a certified
copy of a resolution of the Board or of the Executive
Committee of such Fund signed by an officer of such Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of Securities for the account of
such Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific Proper Instructions
from such Fund to so pay in advance, the Custodian shall be absolutely
liable to such Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times, subject
to the applicable Fund's prior approval, in its discretion appoint (and
may at any time remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct; provided,
however, that the
<PAGE>
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Exchange Act, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies, collectively referred to herein as "U.S.
Securities System" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, if any,
and subject to the following provisions:
1) The Custodian may keep securities of each Fund in a U.S.
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
U.S. Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
2) The records of the Custodian with respect to securities of
each Fund which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to
each Fund;
3) The Custodian shall pay for securities purchased for the
account of each Fund upon (i) receipt of advice from the U.S.
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of each Fund. The Custodian shall transfer securities
sold for the account of each Fund upon (i) receipt of advice
from the U.S. Securities System that payment for such
securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of each Fund. Copies
of all advices from the U.S. Securities System of transfers of
securities for the account of each Fund shall identify each
Fund, be maintained for each Fund by the Custodian and be
provided to each Fund at its request. Upon request, the
Custodian shall furnish each Fund confirmation of each
transfer to or from the account of each Fund in the form of a
written advice or notice and shall furnish to each Fund copies
of daily transaction sheets reflecting each day's transactions
in the U.S. Securities System for the account of each Fund.
4) The Custodian shall provide each Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) The Custodian shall have received from each Fund the initial
certificate required by Article 14 hereof;
<PAGE>
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to each Fund for the benefit of such
Fund for any loss or damage to such Fund resulting from use of
the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the U.S. Securities System; at
the election of the affected Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss
or damage if and to the extent that such Fund has not been
made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by each Fund in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from each Fund;
2) The Custodian may keep securities of each Fund in the Direct
Paper System only if such securities are represented in an
account of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of
each Fund which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to
each Fund;
4) The Custodian shall pay for securities purchased for the
account of each Fund upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of each Fund. The Custodian shall
transfer securities sold for the account of each Fund upon the
making of an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account of each
Fund;
5) The Custodian shall furnish each Fund confirmation of each
transfer to or from the account of each Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to each Fund
copies of daily transaction sheets reflecting each day's
transactions in the Direct Paper System for the account of
each Fund;
6) The Custodian shall provide each Fund with any report on its
system of internal accounting control as each Fund may
reasonably request from time to time.
<PAGE>
2.12 Pledged Account. The Custodian shall upon receipt of Proper
Instructions from a Fund establish and maintain a pledged account or
accounts for and on behalf of such Fund, into which account or accounts
may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any agreement among
such Fund , the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by such Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by such Fund or commodity
futures contracts or options thereon purchased or sold by such Fund,
(iii) for the purposes of compliance by such Fund with the procedures
required by Investment Company Act Release No. 10666, and subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions from such Fund , a certified copy of a resolution of the
Board or of the Executive Committee of such Fund signed by an officer
of such Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of each Fund held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of such Fund or a nominee of such Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the applicable Fund such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to each Fund all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by such Fund and the maturity of futures contracts purchased or
sold by such Fund) received by the Custodian from issuers of the
securities being held for such Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to each Fund all written
information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If a Fund desires to
<PAGE>
take action with respect to any tender offer, exchange offer or any
other similar transaction, such Fund shall notify the Custodian at
least three business days prior to the date on which the Custodian is
to take such action.
3. Duties of the Custodian with Respect to Property of each Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. Each Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for such Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of such Fund's Board,
the Custodian and such Fund may agree to amend Schedule A hereto from
time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. Upon receipt
of Proper Instructions, a Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining
custody of such Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or each Fund may determine
to be reasonably necessary to effect such Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
each Fund, the foreign securities of each Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and each Fund, assets of each Fund shall be
maintained in a clearing agency which acts as a securities depository
or in a book-entry system for the central handling of securities
located outside of the United States (each a "Foreign Securities
System") only through arrangements implemented by the foreign banking
institutions serving as sub-custodians pursuant to the terms hereof
(Foreign Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities Systems"). Where
possible, such arrangements shall include entry into agreements
containing the provisions set forth in Section 3.6 hereof.
3.4 Holding Securities. The Custodian may hold securities and other
non-cash property for all of its customers, including each 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 each Fund which are
maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to each 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.
<PAGE>
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Fund will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agents, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each Fund
will be freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to each Fund; (d)
officers of or auditors employed by, or other representatives of the
Custodian, including to the extent permitted under applicable law the
independent public accountants for each Fund, will be given access to
the books and records of the foreign banking institution relating to
its actions under its agreement with the Custodian; and (e) assets of
each Fund held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents. Agreements with foreign
banking institutions shall contain those provisions required by
subparagraph (c) of Section 17f-5 under the Investment Company Act of
1940.
3.6 Access of Independent Accountants of each Fund. Upon request of each
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of each Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to each Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of each Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of such Fund's securities and other assets
and advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking institution for
the Custodian on behalf of such Fund indicating, as to securities
acquired for such Fund, the identity of the entity having physical
possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.8, the provisions of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of each Fund held outside the United States by
foreign sub-custodians. (b) Notwithstanding any provision of this
Contract to the contrary, settlement and payment for securities
received for the account of each Fund and delivery of securities
maintained for the account of each Fund may be effected in accordance
with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same
<PAGE>
extent as set forth in Section 2.3 of this Contract, and each Fund
agrees to hold any such nominee harmless from any liability as a holder
of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of a
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that such Fund has not been
made whole for any such loss, damage, cost, expense, liability or
claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by Section 3.13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this Section 3.10, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to each Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If, pursuant to Proper Instructions, a Fund
requires the Custodian to advance cash or securities for any purpose
for the benefit of a Fund including the purchase or sale of foreign
exchange or of contracts for foreign exchange, or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Contract, except such as may arise from events or
circumstances for which the Custodian or a sub-custodian are liable
pursuant to Sections 3.9 and 3.10 above, or from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Fund
shall be security therefor and should such Fund fail to repay the
Custodian promptly, the Custodian shall upon prior written notice be
entitled to utilize available cash and to dispose of such Fund's assets
to the extent necessary to obtain reimbursement.
<PAGE>
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to
each Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian and such other information
needed to permit the Fund to comply with Section 17f-5 under the 1940
Act. Such information shall be similar in kind and scope to that
furnished to each Fund in connection with the initial approval of this
Contract. In addition, the Custodian will promptly inform each Fund in
the event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any material loss of
the assets of each Fund or in the case of any foreign sub-custodian not
the subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there appears
to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted U.S. accounting
principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of a
Fund's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this Contract. (b) Cash
held for each Fund in the United Kingdom shall be maintained in an
interest bearing account established for each Fund with the Custodian's
London branch, which account shall be subject to the direction of the
Custodian, State Street London Ltd. or both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on any Fund or the Custodian
as custodian of such Fund by the tax law of the United States of
America or any state or political subdivision thereof. It shall be the
responsibility of each Fund to notify the Custodian of the obligations
imposed on each Fund or the Custodian as custodian of each Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
each Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which each Fund has provided such
information.
4. Payments for Sales or Repurchases or Redemptions of Shares of each Fund
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of each Fund and deposit into the account of each Fund such
payments as are received for Shares of each Fund issued or sold from time to
time by each Fund. The Custodian will provide timely notification to each Fund
and the Transfer Agent of any receipt by it of payments for Shares of such Fund.
<PAGE>
From such funds as may be available for the purpose but subject to the
limitations of each Fund's governing documents and any applicable votes of the
Board of each Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of each Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of each Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by such
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between each Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of each Fund
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. Each Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of each Fund
accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for such
Fund's assets. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from
each Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the applicable Fund;
1) surrender securities in temporary form for securities in
definitive form;
2) endorse for collection, in the name of each Fund, checks,
drafts and other negotiable instruments; and
<PAGE>
3) in general, attend to all ministerial details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of each Fund
except as otherwise directed by the Board of each Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of each Fund. The Custodian may receive and accept a certified copy of a vote of
the Board of each Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the governing documents of each Fund as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of each Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if directed in writing to do so by each
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of each Fund as described in each Fund's currently effective
Prospectus and shall advise each Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of each
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of each Fund shall be made at the time or
times described from time to time in each Fund's currently effective Prospectus.
9. Records
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of each Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of each Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the applicable
Fund and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the request of any Fund, supply such Fund with a tabulation
of securities owned by such Fund and held by the Custodian and shall, when
requested to do so by a Fund and for such compensation as shall be agreed upon
between such Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
<PAGE>
The Custodian shall take all reasonable action, as each Fund may from
time to time request, to obtain from year to year favorable opinions from each
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of each Fund's Form N-1A, and Form N-SAR or
other annual reports to the Securities and Exchange Commission and with respect
to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide each Fund, at such times as each Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
each Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, determine in accordance with the fee
schedule attached hereto as Schedule B, as amended from time to time as agreed
by each Fund and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to any Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for a
Fund) on all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to any Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
<PAGE>
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts provided Custodian has maintained an adequate
disaster recovery plan; (ii) errors by a Fund or its investment advisor in their
instructions to the Custodian provided such instructions have been in accordance
with this Contract; (iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or intermediary, central
bank or other commercially prevalent payment or clearing system to deliver to
the Custodian's sub-custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any delay or failure of
any company, corporation, or other body in charge or registering or transferring
securities in the name of the Custodian, a Fund, the Custodian's sub-custodians,
nominees or agents or any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vi) delays or inability to perform
its duties due to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any provision of any present
or future law or regulation or order of the United States of America, or any
state thereof, or any other country, or political subdivision thereof or of any
court of competent jurisdiction.
Except as expressly provided in Section 3.9, the Custodian shall be
liable for the acts or omissions of a foreign banking institution appointed
pursuant to the provisions of Article 3 to the same extent as set forth in
Article 1 hereof with respect to sub-custodians located in the United States.
If a Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to a Fund being liable for the payment of money or incurring liability
of some other form, such Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If a Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlements)
or in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of such Fund shall be security
therefor and should such Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Fund's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
<PAGE>
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to each Fund act under Section
2.10 hereof in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of each Fund has approved the initial
use of a particular Securities System by each Fund, as required by Rule 17f-4
under the Investment Company Act of 1940, as amended and that the Custodian
shall not with respect to a Fund act under Section 2.11 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board has approved the initial use of the Direct Paper System by each
Fund; provided further, however, that a Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of its governing documents, and further provided, that a Fund may at
any time by action of its Board (i) substitute another bank or trust company for
the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, each Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination as provided
herein.
15. Successor Custodian
If a successor custodian for a Fund shall be appointed by the Board of
such Fund, the Custodian shall, upon termination, and upon receipt of a
certified copy of such vote, deliver to such successor custodian at the office
of the Custodian, duly endorsed and in the form for transfer, all securities of
such Fund then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of such Fund held in a Securities
System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of the
applicable Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the Custodian
on or before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the Investment Company Act of 1940, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of such Fund and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of such Fund and to transfer to an account
of such
<PAGE>
successor custodian all of the securities of such Fund held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of a Fund to procure the certified copy of the vote referred to above or
of the Board to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
each Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing documents of any Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
17. Additional Funds
In the event that any mutual funds in addition to the Funds are
hereafter established which desire to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such services, such fund shall
become a Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references to the "Fund"
are to each of the Funds listed on Appendix 1 individually, as if this Contract
were between each such individual Fund and the Custodian.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between each of the Funds and the Custodian relating to the
custody of such Fund's assets.
20. Shareholder Communications
<PAGE>
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs each Fund to indicate whether such Fund authorizes
the Custodian to provide such Fund's name, address, and share position to
requesting companies whose stock each Fund owns. If a Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If a Fund tells the Custodian "yes" or do not check either "yes" or "no" below,
the Custodian is required by the rule to treat such Fund as consenting to
disclosure of this information for all securities owned by such Fund or any
funds or accounts established by each Fund. For each Fund's protection, the Rule
prohibits the requesting company from using such Fund's name and address for any
purpose other than corporate communications. Please indicate below whether each
Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name, address,
and share positions of each Fund listed on Appendix 1.
NO [X] The Custodian is not authorized to release the name, address,
and share positions of each Fund listed on Appendix 1.
21. Limitation of Liability.
The execution of this Contract has been authorized by each Fund's
Board. This Contract is executed on behalf of each Fund or, in the case of a
Fund organized as a business trust, the trustees of such Fund as trustees and
not individually and the obligations of each Fund under this Contract are not
binding upon any of such Fund's trustees, officers or shareholders individually
but are binding only upon the assets and property of such Fund. A Certificate of
Trust in respect of each Fund organized as a business trust is on file with the
Secretary of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of May, 1997.
EACH OF THE FUNDS LISTED ON APPENDIX 1
By: /s/ Michael E. Haylon
----------------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
---------------------------------
Executive Vice President
<PAGE>
APPENDIX 1
Fund Names
(as of May 1, 1997)
Phoenix California Tax Exempt Bonds, Inc.
The Phoenix Edge Series Fund
Real Estate Securities Series
Phoenix Income and Growth Fund
Phoenix Multi-Portfolio Fund
Phoenix Diversified Income Portfolio
Phoenix Emerging Markets Bond Portfolio
Phoenix Endowment Equity Portfolio
Phoenix Real Estate Securities Portfolio
Phoenix Mid Cap Portfolio
Phoenix Tax-Exempt Bond Portfolio
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Series Fund
Phoenix Aggressive Growth Fund Series
Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Growth Fund Series
Phoenix High Yield Fund Series
Phoenix Money Market Series
Phoenix U.S. Government Securities Fund Series
Phoenix Strategic Allocation Fund, Inc.
Phoenix Strategic Equity Series Fund
Phoenix Equity Opportunities Fund
Phoenix Micro Cap Fund
Phoenix Small Cap Fund
Phoenix Strategic Theme Fund
Phoenix Duff & Phelps Institutional Mutual Funds
Enhanced Reserves Portfolio
Real Estate Equity Securities Portfolio
<PAGE>
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of each Fund for use as
sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
- ----------------------------
Fund's Authorized Officer
Date: ______________________
Exhibit 15
Form of Distribution Plan
<PAGE>
[NAME OF FUND]
(the "Fund")
CLASS ___ SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class ___ shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class ___ shareholders.
2. Rule 12b-1 Fees
---------------
[The Fund shall reimburse the Distributor, at the end of each month, up
to a maximum on an annual basis of ____% the average daily value of the net
assets of the Fund's Class ___ shares, subject to any applicable restrictions
imposed by rules of the National Association of Securities Dealers, Inc., for
distribution expenditures incurred by Distributor subsequent to the
effectiveness of this Plan, in connection with the sale and promotion of the
Class ___ shares of the Fund and the furnishing of services to Class ___
shareholders of the Fund. Such expenditures shall consist of: (i) commissions to
sales personnel for selling Class ___ shares of the Fund (including underwriting
commissions and finance charges related to the payment of commissions); (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 selling agreements with the Distributor for services
rendered in connection with the sale and distribution of Class ___ shares of the
Fund; (iv) payment of expenses incurred in sales and promotional activities,
including advertising expenditures related to the Class ___ shares of the Fund;
(v) the costs of preparing and distributing promotional materials; (vi) the cost
of printing the Fund's Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Fund determine are reasonably calculated to result in the
sale of Class ___ shares of the Fund.] The Fund shall [also] pay the
Distributor, at the end of each month, an amount on an annual basis equal to
0.25% of the average daily value of the net assets of the Fund's Class ___
shares, as compensation for providing personal service to shareholders,
including assistance in connection with inquiries relating to shareholder
accounts, and for maintaining shareholder accounts (the "Service Fee").
<PAGE>
[Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.]
Amounts paid or payable by the Fund under this Plan or any agreement
with any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class ___ shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its
adoption and may be continued thereafter if specifically approved at least
annually by a vote of at least a majority of the Trustees of the Fund as well as
a majority of the Disinterested Trustees. This Plan may be amended at any time,
provided that (a) the Plan may not be amended to increase materially the amount
of the distribution expenses provided in Paragraph 2 hereof (including the
Service Fee) without the approval of at least a majority of the outstanding
voting securities (as defined in the Act) of the Class ___ shares of the Fund
and (b) all material amendments to this Plan must be approved by a majority vote
of the Trustees of the Fund and of the Disinterested Trustees cast in person at
a meeting called for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
------------------------------------
While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a)
such agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class ___ shares of the Fund on not more than 60 days' written notice to the
other party to the agreement and (b) such agreement shall terminate
automatically in the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class ___ shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
[10. Non-Recourse
------------
The Fund's Declaration of Trust dated ____________, a copy of which,
together with the amendments thereto ("Declaration"), is on file in the office
of the Secretary of the Commonwealth of Massachusetts, 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 may be held to any personal liability, nor may any resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund but the Fund property only shall be
liable.]
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