As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-87215
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-14
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
Phoenix Strategic Equity Series Fund
(Exact Name of Registrant as Specified in Declaration of Trust)
--------------
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)
--------------
Pamela S. Sinofsky
Assistant Vice President and Assistant Counsel
Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115-0479
(Name and Address of Agent for Service)
Copies of Communications to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
--------------
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
--------------
Registrant is relying on Section 24(f) of the Investment Company Act of
1940, as amended, which permits registration of an indefinite number of shares
of beneficial interest, $0.0001 par value per share of the Registrant.
Accordingly, no filing fee is due in connection with this Registration
Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 9(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Part A:
Information Required in Prospectus/Proxy Statement
<TABLE>
<CAPTION>
Caption or Location in
Form N-14 Item No. and Caption Prospectus/Proxy Statement
- ---------------------------------------------- ----------------------------------------------
<S> <C>
1. Beginning of Registration Statement and Cover Page; Cross Reference Sheet
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
3. Fee Table, Synopsis Information and Risk Synopsis; Principal Risk Factors; Comparison
Factors of Investment Objectives and Policies
4. Information about the Transaction Synopsis; The Proposed Reorganization;
Comparative Information on Shareholder
Rights; Exhibit A (Agreement and Plan of
Reorganization)
5. Information about the Registrant Cover Page; Synopsis; Principal Risk Factors;
Comparison of Investment Objectives and
Policies; The Proposed Reorganization;
Comparative Information on Distribution
Arrangements; Comparative Information on
Shareholder Services; Comparative
Information on Shareholder Rights;
Management and Other Service Providers;
Additional Information About The Funds;
Current Prospectus of Registrant
6. Information about the Company Being Synopsis; Comparison of Investment
Acquired Objectives and Policies; The Proposed
Reorganization; Comparative Information on
Distribution Arrangements; Comparative
Information on Shareholder Services;
Comparative Information on Shareholder
Rights; Additional Information About The
Funds; Prospectus of the Phoenix-Seneca Mid
Cap Fund dated March 30, 1999
7. Voting Information Synopsis; The Proposed Reorganization;
Comparative Information on Shareholder
Rights; Voting Information
8. Interest of Certain Persons and Experts The Proposed Reorganization
9. Additional Information Required for Not Appliable
Reoffering By Persons Deemed to be
Underwriters
</TABLE>
<PAGE>
Part B:
Information Required in Statement of Additional Information
<TABLE>
<CAPTION>
Caption or Location in
Form N-14 Item No. and Caption Prospectus/Proxy Statement
- ------------------------------------------------- -----------------------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information about the Registrant Cover Page; Statement of Additional
Information of Registrant dated August 27,
1999
13. Additional Information about the Company Cover Page; Statement of Additional
Being Acquired Information of Phoenix Multi-Portfolio Fund
dated March 30, 1999
14. Financial Statements Annual Report of the Registrant for the year
ended April 30, 1999; Annual Report of
Phoenix Multi-Portfolio Fund for the year
ended November 30, 1998; Semi-Annual
Report of Phoenix Multi-Portfolio Fund for the
six-month period ended May 31, 1999; and
Pro Forma Financial Statements
Part C:
Other Information
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
</TABLE>
<PAGE>
PHOENIX-SENECA MID CAP FUND
a series of
Phoenix Multi-Portfolio Fund
101 Munson Street
Greenfield, Massachusetts 01301
----------------
December [ ], 1999
Dear Shareholder:
The Phoenix-Seneca Mid Cap Fund, a series of Phoenix Multi-Portfolio Fund
(the "Trust"), will hold a special meeting of shareholders at 10:00 a.m., local
time, on February 25, 2000 at the offices of the Trust. At the meeting, the
shareholders of the Mid Cap Fund will vote on an agreement and plan of
reorganization under which the Mid Cap Fund will be combined with the
Phoenix-Seneca Strategic Theme Fund, a series of Phoenix Strategic Equity
Series Fund. If the agreement and plan of reorganization is implemented, you
will become a shareholder of the Strategic Theme Fund and will receive shares
of the corresponding class of the Strategic Theme Fund with an aggregate value
equal to the aggregate value of your investment in the Mid Cap Fund. No sales
charge will be imposed in connection with the reorganization. Phoenix
Investment Partners, Ltd. will pay all costs of the reorganization. The
reorganization will be conditioned upon receipt of an opinion of counsel
indicating that the reorganization will qualify as a tax-free reorganization
for federal income tax purposes.
The proposed reorganization would be a means of combining two series with
substantially identical investment objectives and would permit the Mid Cap
Fund's shareholders to pursue an identical objective in a combined fund that
employs a more flexible investment strategy. The recent performance of the
Strategic Theme Fund compares favorably with that of the Mid Cap Fund and the
total expense ratio of the combined funds following the reorganization is
projected to be slightly lower than the current total expense ratio of the Mid
Cap Fund.
The Board of Trustees has carefully considered and has unanimously
approved the proposed reorganization, as described in the accompanying
materials, and believes that the reorganization is in the best interests of the
Mid Cap Fund and its shareholders. The Board of Trustees therefore recommends
that you vote in favor of the reorganization agreement.
We strongly urge you to review, complete and return your proxy as soon as
possible. Your vote is important no
matter how many shares you own. Voting your shares early will help to avoid
costly follow-up mail and telephone solicitation. After reviewing the enclosed
materials, please exercise your right to vote today by completing, dating and
signing each proxy card you receive and mailing the proxy in the
self-addressed, postage-paid envelope that we have enclosed for your
convenience. It is very important that you vote and that your voting
instructions be received no later than February 21, 2000.
Please note that you may receive more than one proxy package if you hold
shares of the Mid Cap Fund in more than one account. You should return separate
proxy cards for each account. If you have any questions, please call
800-243-1574 (Option 0), between 8:00 a.m. and 6:00 p.m. Eastern time, Monday
through Friday.
Sincerely,
Philip R. McLoughlin
President
Phoenix Multi-Portfolio Fund
<PAGE>
<PAGE>
PHOENIX-SENECA MID CAP FUND
a series of
Phoenix Multi-Portfolio Fund
101 Munson Street
Greenfield, Massachusetts 01301
----------------
Notice of Special Meeting of Shareholders
to be Held February 25, 2000
TO THE SHAREHOLDERS:
The Phoenix-Seneca Mid Cap Fund, a series of Phoenix Multi-Portfolio Fund,
a Massachusetts business trust, will hold a special meeting of shareholders at
the offices of the Trust on February 25, 2000 at 10:00 a.m., local time, for
the following purposes:
1. To consider and act upon a proposal to approve the Agreement and Plan
of Reorganization, dated August 27, 1999, and the transactions it contemplates,
including (a) the transfer of all or substantially all of the assets of the Mid
Cap Fund to Phoenix-Seneca Strategic Theme Fund in exchange solely for shares
of the corresponding class of the Strategic Theme Fund and the assumption by
the Strategic Theme Fund of all known liabilities of the Mid Cap Fund and (b)
the distribution of the shares of the Strategic Theme Fund so received to
shareholders of the Mid Cap Fund in complete liquidation of the Mid Cap Fund.
2. To consider and act upon any other business as may properly come before
the meeting and any adjournments thereof.
You are entitled to vote at the meeting and any adjournment(s) if you
owned shares of the Mid Cap Fund at the close of business on December 29, 1999.
If you attend the meeting, you may vote your shares in person. If you do not
expect to attend the meeting, please complete, date, sign, and return the
enclosed proxy card in the enclosed self-addressed, postage-paid return
envelope.
Please indicate your voting instructions on the enclosed proxy card, then
please date and sign the card and return it in the envelope provided. If you
sign, date, and return the proxy card but give no voting instructions, your
shares will be voted "FOR" the proposal noticed above. In order to avoid the
additional expense and delay of further solicitation, we ask your cooperation
in mailing in your proxy card promptly. Unless proxy cards submitted by
corporations and partnerships are signed by the appropriate persons as
indicated in the voting instructions on the proxy card, such proxy cards cannot
be voted.
By Order of the Board of Trustees of Phoenix
Multi-Portfolio Fund,
G. Jeffrey Bohne, Secretary
Greenfield, Massachusetts
December [ ], 1999
<PAGE>
<PAGE>
PHOENIX-SENECA STRATEGIC THEME FUND
a series of
Phoenix Strategic Equity Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
1 (800) 243-1574
PHOENIX-SENECA MID CAP FUND
a series of
Phoenix Multi-Portfolio Fund
101 Munson Street
Greenfield, Massachusetts 01301
1 (800) 243-1574
PROSPECTUS/PROXY STATEMENT
Dated December [ ], 1999
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Trustees of Phoenix Multi-Portfolio
Fund, a Massachusetts business trust (the "Trust"), for use at the special
meeting of shareholders of the Phoenix-Seneca Mid Cap Fund to be held at 10:00
a.m., local time, on February 25, 2000 at the offices of Phoenix
Multi-Portfolio Fund, 101 Munson Street, Greenfield, Massachusetts 01301, and
at any adjournment(s).
The purpose of the meeting is to consider an agreement and plan of
reorganization (the "reorganization agreement") that would effect the
reorganization of the Mid Cap Fund into the Phoenix-Seneca Strategic Theme
Fund, a series of the Phoenix Strategic Equity Series Fund (the "Acquiring
Trust"), as described below. Under the reorganization agreement, which has been
approved by the Board of Trustees of the Trust, all or substantially all of the
assets of the Mid Cap Fund would be transferred to the Strategic Theme Fund in
exchange solely for Class A and Class B shares of beneficial interest in the
Strategic Theme Fund and the assumption by the Strategic Theme Fund of all
known liabilities of the Mid Cap Fund. These shares of the Strategic Theme Fund
would then be distributed pro rata to the shareholders of the corresponding
classes of the Mid Cap Fund, and then the Mid Cap Fund would be liquidated. As
a result of the proposed transactions, each shareholder of the Mid Cap Fund
would receive a number of full and fractional shares of the corresponding class
of the Strategic Theme Fund with an aggregate net asset value equal to the
aggregate net asset value of the shareholder's Mid Cap Fund shares on the
effective date of the reorganization.
The Strategic Theme Fund and the Mid Cap Fund are both portfolio series of
open-end management investment companies. The Strategic Theme Fund has an
investment objective of long-term capital growth. The Mid Cap Fund has an
investment objective of long-term capital appreciation. Both funds employ
Phoenix Investment Counsel, Inc. as adviser. Seneca Capital Management LLC is
the subadviser for both funds. As used in this Prospectus/Proxy Statement the
term "adviser" refers to Phoenix Investment Counsel, as the context requires.
This Prospectus/Proxy Statement, which you should retain for future
reference, sets forth concisely the information that you should know about the
Mid Cap Fund, the Strategic Theme Fund, and the transactions contemplated by
the reorganization agreement, before you vote on the proposed reorganization.
As used in this Prospectus/Proxy Statement, the term "funds" refers to the Mid
Cap Fund and the Strategic Theme Fund, collectively, and the term "trusts"
refers to the Trust and the Acquiring Trust, collectively. A copy of the
prospectus for the Strategic Theme Fund, dated August 27, 1999, is included
with this Prospectus/Proxy Statement and is incorporated by reference in this
Prospectus/Proxy Statement.
<PAGE>
A Prospectus and a Statement of Additional Information for the Mid Cap
Fund, each dated March 30, 1999, have been filed with the Securities and
Exchange Commission ("SEC") and are incorporated by reference in this
Prospectus/ Proxy Statement. A Statement of Additional Information for the
Strategic Theme Fund, dated August 27, 1999, has also been filed with the SEC
and is incorporated by reference in this Prospectus/Proxy Statement. Copies of
the above-referenced documents are available upon written or oral request and
without charge by contacting Phoenix Equity Planning Corporation at 100 Bright
Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by
telephoning Phoenix Equity Planning Corporation toll-free at 1-800-243-4361.
A Statement of Additional Information, dated December , 1999 relating to
the proposed transactions described in this Prospectus/Proxy Statement has been
filed with the SEC and is incorporated by reference in this Prospectus/Proxy
Statement. Copies of this Statement of Additional Information may be obtained
without charge by contacting Phoenix Equity Planning Corporation, at 100 Bright
Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by
telephoning Phoenix Equity Planning Corporation toll free at 1-800-243-4361.
The Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains the Statement of Additional Information
dated December , 1999, and other material incorporated by reference, together
with other information regarding the Strategic Theme Fund and the Mid Cap Fund.
This Prospectus/Proxy Statement constitutes the proxy statement of the Mid
Cap Fund for the meeting and the prospectus for shares of the Strategic Theme
Fund that have been registered with the SEC and are being issued in connection
with the reorganization. This Prospectus/Proxy Statement is expected to first
be sent to shareholders on or about January 7, 2000.
----------------
THE SECURITIES OF THE STRATEGIC THEME FUND HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
The date of this Prospectus/Proxy Statement is December [ ], 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SYNOPSIS ..................................................... 1
PRINCIPAL RISK FACTORS ....................................... 7
THE PROPOSED REORGANIZATION .................................. 8
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES ............. 12
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS ......... 19
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES .............. 21
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS ................ 21
FISCAL YEAR .................................................. 23
MANAGEMENT AND OTHER SERVICE PROVIDERS ....................... 23
VOTING INFORMATION ........................................... 24
ADDITIONAL INFORMATION ABOUT THE FUNDS ....................... 26
MISCELLANEOUS ................................................ 27
OTHER BUSINESS ............................................... 32
</TABLE>
<PAGE>
[This page intentionally left blank]
<PAGE>
SYNOPSIS
Background
The proposed reorganization is the outcome of deliberations by the Boards
of Trustees of the two trusts. Phoenix Investment Counsel Inc., the adviser to
each of the funds, recommended that the Trustees of each trust consider the
benefits that the shareholders would realize if the Mid Cap Fund were to be
combined with the Strategic Theme Fund. In response to this recommendation, the
independent trustees of each trust requested that management outline a specific
reorganization proposal for their consideration and provide an analysis of the
specific benefits that shareholders would realize from the proposal.
Independent trustees are trustees who are not "interested persons" of their
respective trusts (as defined in Section 2(a)(19) of the Investment Company Act
of 1940 (the "1940 Act")). After considering the specific reorganization
proposal, the trustees of each trust, including the independent trustees, at
meetings held on August 25, 1999, unanimously approved the reorganization
agreement.
Summary of the Proposed Reorganization
The reorganization will be effected in accordance with the terms of the
reorganization agreement, a copy of which is attached to this Prospectus/Proxy
Statement as Appendix A. The reorganization agreement provides for:
o the acquisition of all or substantially all of the assets of the Mid Cap
Fund by the Strategic Theme Fund in exchange solely for Class A and Class
B shares of the Strategic Theme Fund;
o the assumption by the Strategic Theme Fund of all known liabilities of
the Mid Cap Fund;
o the pro rata distribution of the corresponding class of Strategic Theme
Fund shares to the Mid Cap Fund shareholders; and
o the liquidation of the Mid Cap Fund and cancellation of the outstanding
Mid Cap Fund shares.
The reorganization is anticipated to occur on or about March 10, 2000. If
the reorganization agreement is implemented, each Mid Cap Fund shareholder will
receive a number of full and fractional shares of the corresponding class of
Strategic Theme Fund shares with an aggregate net asset value equal in value to
the aggregate net asset value of his or her Mid Cap Fund shares, as of the
closing date of the reorganization.
The implementation of the reorganization agreement is subject to a number
of conditions set forth in the reorganization agreement. See "The Proposed
Reorganization." Among the significant conditions (which may not be waived)
are:
o the receipt by each trust of an opinion of counsel as to the federal
income tax consequences of the reorganization; and
o the approval of the reorganization agreement by the shareholders of the
Mid Cap Fund.
The reorganization agreement provides that Phoenix Investment Partners,
Ltd. will bear all costs and expenses of the reorganization, including the
costs of the meeting, the costs and expenses incurred in the preparation and
mailing of the notice, this Prospectus/Proxy Statement and the proxy, and the
solicitation of proxies.
Investment Objectives and Policies
The investment objectives of the Mid Cap Fund and the Strategic Theme Fund
are substantially identical. The principal investment strategies are generally
similar but differ in certain important respects. The Strategic Theme Fund has
an investment objective of long-term capital growth. The Mid Cap Fund has an
investment objective of long-term capital appreciation.
1
<PAGE>
See "Principal Risk Factors" and "Comparison of Investment Objectives and
Policies" below, for further information on the similarities and differences
between the investment objectives, policies and risks of the Strategic Theme
Fund and the Mid Cap Fund. You can also find additional information in the
Strategic Theme Fund's Prospectus.
Distribution and Purchase Arrangements
The Mid Cap Fund offers two classes of shares: Class A and Class B.
Shares of the Mid Cap Fund are offered to the public at a price equal to
the net asset value per share, plus a sales charge which, at the election of
the purchaser, may be imposed as follows:
o Class A shares--at the time of purchase; and
o Class B--on a contingent deferred basis.
The Strategic Theme Fund offers Class A and Class B shares having
substantially identical rights and privileges to those of the Mid Cap Fund. The
Strategic Theme Fund also offers Class C shares. As a result of the
reorganization, expenses incurred by Phoenix Equity Planning Corporation in
selling the Class A and Class B shares of the Mid Cap Fund that have not been
reimbursed by Rule 12b-1 fees or contingent deferred sales charges will become
subject to reimbursement by the Strategic Theme Fund.
See "Comparative Information on Distribution Arrangements" below for
further information on the distribution arrangements of the Mid Cap Fund and
the Strategic Theme Fund. You can also find additional information on
distribution arrangements in the Strategic Theme Fund's Prospectus.
Dividends and Distributions
The dividend and distribution policies of the funds are substantially
identical.
o The Mid Cap Fund and the Strategic Theme Fund both distribute net
investment income semi-annually and distribute net realized capital gains,
if any, at least annually.
All dividends and distributions of the Mid Cap Fund and the Strategic
Theme Fund are paid in additional shares of the respective series, unless
shareholders elect to receive cash. You can also find additional information on
dividends and distributions in the Strategic Theme Fund's Prospectus.
Exchanges
The Mid Cap Fund and the Strategic Theme Fund currently offer shareholders
identical exchange privileges. Shareholders of the Mid Cap Fund and the
Strategic Theme Fund may exchange their shares for shares of a corresponding
class of shares of other affiliated Phoenix funds, except for the mutual funds
of the Phoenix-Zweig Trust and Phoenix Euclid Funds.
On exchanges with share classes that carry a contingent deferred sales
charge, the contingent deferred sales charge schedule of the original shares
purchased continues to apply. You can also find additional information on
exchanges in the Strategic Theme Fund's Prospectus.
Redemption Procedures
Shareholders of both the Mid Cap Fund and the Strategic Theme Fund may
redeem their shares at a redemption price equal to the net asset value of the
shares (minus any applicable contingent deferred sales charge) as next
determined following the receipt of a redemption order in proper form. Payments
of redemption proceeds for redeemed Mid Cap
2
<PAGE>
Fund and Strategic Theme Fund shares ordinarily are made within seven days
after receipt of a redemption request in proper form. See "Comparative
Information on Shareholder Services" for more information. You can also find
additional information on redemption procedures in the Strategic Theme Fund's
Prospectus.
Federal Tax Consequences of Proposed Reorganization
At the closing of the reorganization, the Trust and the Acquiring Trust
will receive an opinion of counsel that subject to customary assumptions and
representations:
o shareholders of the Mid Cap Fund will recognize no gain or loss for
federal income tax purposes on their receipt of shares of the Strategic
Theme Fund;
o the aggregate tax basis of the Strategic Theme Fund shares, including any
fractional shares, received by each shareholder of the Mid Cap Fund
pursuant to the reorganization will be the same as the aggregate tax basis
of the Mid Cap Fund shares held by such shareholder immediately prior to
the reorganization; and
o the holding period of the Strategic Theme Fund shares, including
fractional shares, to be received by each shareholder of the Mid Cap Fund
will include the period during which the Mid Cap Fund shares exchanged
therefor were held by such shareholder (provided that the Mid Cap Fund
shares were held as a capital asset on the date of the reorganization).
See "The Proposed Reorganization--Federal Income Tax Consequences" for
more information.
Risk Factors
An investment in the Strategic Theme Fund is subject to specific risks
arising from the types of securities in which the Strategic Theme Fund invests
and general risks arising from investing in any mutual fund. Investors can lose
money by investing in the Strategic Theme Fund. There is no assurance that the
Strategic Theme Fund will meet its investment objective. Because the Strategic
Theme Fund and the Mid Cap Fund have substantially identical investment
objectives and generally similar investment policies, the risks associated with
an investment in each fund are generally similar. See "Principal Risk Factors"
for the principal risks associated with an investment in the Strategic Theme
Fund.
Management and Other Service Providers
Investment and trading decisions for the funds are made by a team of
managers and analysts headed by Gail P. Seneca. The team leaders, which include
Ms. Seneca, Richard D. Little and Ronald K. Jacks, are primarily responsible
for the day-to-day decisions related to the funds.
3
<PAGE>
Comparative Fee Tables
The tables below are designed to assist an investor in understanding the
various direct and indirect costs and expenses associated with an investment in
the relevant class of shares of each fund. Each table also includes pro forma
information for the combined Strategic Theme Fund resulting from the
reorganization assuming the reorganization took place on October 31, 1999, and
after adjusting such information to reflect current fees. The expense
information for the Strategic Theme Fund and the Mid Cap Fund is based upon
expenses for the twelve months ended October 31, 1999.
As indicated in the table below, immediately upon effectiveness of the
reorganization, the "Total Annual Fund Operating Expenses" for the combined
Strategic Theme Fund are expected to be lower than the "Total Annual Fund
Operating Expenses" for the Mid Cap Fund.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------
Mid Cap Strategic Theme Pro Forma Combined
Fund Fund Strategic Theme Fund
------------- --------------- ----------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees 0.75% 0.75% 0.75%
Distribution and Service (12b-1 Fees) (a) 0.25% 0.25% 0.25%
Other Expenses 0.42% 0.33% 0.33%
---- ---- ----
Total Annual Fund Operating Expenses 1.42% 1.33% 1.33%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
-----------------------------------------------------------
Mid Cap Strategic Theme Pro Forma Combined
Fund Fund Strategic Theme Fund
------------- --------------- ----------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees 0.75% 0.75% 0.75%
Distribution and Service (12b-1 Fees) (a) 1.00% 1.00% 1.00%
Other Expenses 0.42% 0.33% 0.33%
---- ---- ----
Total Annual Fund Operating Expenses 2.17% 2.08% 2.08%
==== ==== ====
</TABLE>
The following table shows shareholder transaction expenses currently
applicable to the purchase of Class A and Class B shares of both funds.
4
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------
Mid Cap Fund Strategic Theme Fund
----------------- ---------------------
<S> <C> <C>
Shareholders Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.75% 4.75%
Maximum Deferred Sales Charge (Load) (as a percentage of
the lesser of the value redeemed or the amount invested) None None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
--------------------------------------
Mid Cap Fund Strategic Theme Fund
-------------- ---------------------
<S> <C> <C>
Shareholders Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None
Maximum Deferred Sales Charge (Load) (as a percentage of
the lesser of the value redeemed or the amount invested) 5%(b) 5%(b)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
(a) Distribution and Service 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.
(b) The Maximum Deferred Sales Charge is imposed on Class B shares redeemed
during the first year; thereafter, it decreases 1% annually to 2% during
the fourth and fifth years and to 0% after the fifth year.
Example
These examples illustrate the impact of the above fees and expenses on an
account with an initial investment of $10,000, based on the expenses shown
above. They assume a 5% annual return, the reinvestment of all dividends and
distributions and "annual fund operating expenses" remaining the same each
year. These examples are hypothetical; actual fund expenses and returns vary
from year to year, and may be higher or lower than those shown. In the case of
Class B shares, it is assumed that your shares are converted to Class A shares
after eight years.
Fees and expenses if you redeemed your shares at the end of each time
period:
<TABLE>
<CAPTION>
Class A Shares
- --------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Strategic Theme Fund $604 $876 $1,169 $2,000
Mid Cap Fund $613 $903 $1,214 $2,096
Pro Forma Combined Strategic Theme Fund $604 $876 $1,169 $2,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Class B Shares
- --------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Strategic Theme Fund $611 $852 $1,119 $2,219
Mid Cap Fund $620 $879 $1,164 $2,313
Pro Forma Combined Strategic Theme Fund $611 $852 $1,119 $2,219
</TABLE>
Fees and expenses if you did not redeem your shares at the end of each
time period:
<TABLE>
<CAPTION>
Class A Shares
- --------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Strategic Theme Fund $604 $876 $1,169 $2,000
Mid Cap Fund $613 $903 $1,214 $2,096
Pro Forma Combined Strategic Theme Fund $604 $876 $1,169 $2,000
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
- --------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Strategic Theme Fund $211 $652 $1,119 $2,219
Mid Cap Fund $220 $679 $1,164 $2,313
Pro Forma Combined Strategic Theme Fund $211 $652 $1,119 $2,219
</TABLE>
The purpose of the tables 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 RETURNS
OR EXPENSES. ACTUAL RETURNS OR EXPENSES MAY BE GREATER OR LESS THAN SHOWN.
6
<PAGE>
PRINCIPAL RISK FACTORS
The Mid Cap Fund and the Strategic Theme Fund have substantially identical
investment objectives. The principal investment strategies are generally
similar but differ in certain important respects. As a result, the risks
associated with an investment in the two funds are generally similar. The
following highlights the principal similarities and differences between the
principal risk factors associated with an investment in the Mid Cap Fund as
contrasted with those associated with the Strategic Theme Fund and is qualified
in its entirety by the more extensive discussion of risk factors in the
Prospectuses and Statements of Additional Information for the Strategic Theme
Fund and the Mid Cap Fund, respectively.
An investment in the Strategic Theme Fund is subject to specific risks
arising from the types of securities in which the Strategic Theme Fund invests
and general risks arising from investing in any mutual fund. Investors can lose
money by investing in the Strategic Theme Fund. There is no assurance that the
Strategic Theme Fund will meet its investment objective.
General
The Strategic Theme Fund and the Mid Cap Fund both invest in common stocks
for capital appreciation. Conditions affecting the overall economy, specific
industries or companies in which the funds invest can be worse than expected.
As a result, the value of shares may decrease.
Foreign Investing
Both funds are permitted to make investments in foreign securities.
Foreign markets and currencies may not perform as well as U.S. markets.
Political and economic uncertainty in foreign countries, as well as less public
information about foreign investments, may negatively impact the portfolios.
Dividends and other income payable on foreign securities may be subject to
foreign taxes. Some investments may be made in currencies other than U.S.
dollars that will fluctuate in value as a result of changes in the currency
exchange rate.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being written using
two rather than four digits to define the applicable year. There is the
possibility that some or all of an entity's computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. If an entity whose securities are held by the funds does
not "fix" its Year 2000 issue, it is possible that its operations and financial
results would be hurt. Also, the cost of modifying computer programs to become
Year 2000 compliant may hurt the financial performance and market price of
entities whose securities are held by the funds.
Theme Investing
The Strategic Theme Fund invests in companies that Seneca Capital
Management LLC believes are well positioned to benefit from cultural,
demographic, regulatory, social, or technological, changes worldwide. Theme
investing is dependent upon Seneca's ability to anticipate emerging market
trends, exploit such investment opportunities and to thereafter sell securities
once the theme is saturated. There is no assurance that the themes selected
will increase as the market increases.
If a limited number of themes are selected for fund investment, adverse
economic, political or regulatory developments may have a greater adverse
effect on the Strategic Theme Fund than if the Strategic Theme Fund invested in
a larger number of themes. Themes not selected for investment may prove more
profitable than themes selected for investment by Seneca.
Small and Mid-Capitalization Companies
The Strategic Theme Fund and the Mid Cap Fund may invest in companies with
small capitalizations. Given the limited operating history and rapidly changing
fundamental prospects, investment returns from smaller capitalization
7
<PAGE>
companies can be highly volatile. Small capitalization companies may be
affected to a greater extent to changes in economic conditions, and conditions
in particular industries are subject to varying patterns of trading volume and
may, at times, be more difficult to sell.
The Strategic Theme Fund and the Mid Cap Fund invest in common stocks of
mid-capitalization companies. Mid-capitalization investing presents certain
risks. These issuers may be affected to a greater extent than larger, well
established companies by changes in general economic conditions and conditions
in particular industries, and they may not have the same operating history and
"track record" as larger companies. Future performance of mid-cap companies
may, therefore, be more difficult to predict.
THE PROPOSED REORGANIZATION
Agreement and Plan of Reorganization
The terms and conditions under which the proposed reorganization may be
consummated are set forth in the reorganization agreement. Significant
provisions of the reorganization agreement are summarized below. This summary,
however, is qualified in its entirety by reference to the reorganization
agreement, a form of which is attached to this Prospectus/Proxy Statement as
Appendix A.
The Agreement and Plan of Reorganization contemplates:
o the acquisition by the Strategic Theme Fund, on the closing date of the
reorganization, of all or substantially all of the assets of the Mid Cap
Fund in exchange solely for Class A and Class B shares of the Strategic
Theme Fund
o the assumption by the Strategic Theme Fund of all known liabilities of
the Mid Cap Fund;
o the pro rata distribution of the corresponding class of Strategic Theme
Fund shares to the Mid Cap Fund Shareholders; and
o the Liquidation of the Mid Cap Fund and the cancellation of outstanding
Mid Cap Fund Shares.
The assets of the Mid Cap Fund to be acquired by the Strategic Theme Fund
include all property, including, without limitation, all cash, securities, and
dividends or interest receivables which are owned by the Mid Cap Fund and any
deferred or prepaid expenses shown as an asset on the books of the Mid Cap Fund
on the closing date of the reorganization. The Strategic Theme Fund will assume
all known liabilities, accrued expenses, costs, charges, and reserves of the
Mid Cap Fund reflected on an unaudited statement of assets and liabilities as
of the closing date. The closing of the reorganization will occur on the first
Friday following satisfaction (or waiver) of the conditions to closing set
forth in the reorganization agreement (currently anticipated to occur on or
about March 10, 2000), or such later date as the parties may agree.
The value of the Mid Cap Fund's assets to be acquired and the Mid Cap
Fund's liabilities to be assumed by the Strategic Theme Fund and the net asset
value of each class of shares of the Strategic Theme Fund will be determined as
of immediately after the close of regular trading on the New York Stock
Exchange on the closing date, using the valuation procedures set forth in the
Strategic Theme Fund's then current Prospectus and Statement of Additional
Information. The number of Class A and Class B shares of the Strategic Theme
Fund to be issued to the Mid Cap Fund will be determined by dividing (a) the
value of the aggregate net assets attributable to each class of shares of the
Mid Cap Fund by (b) the net asset value per share of the corresponding class of
the Strategic Theme Fund.
On the closing date, the Mid Cap Fund will liquidate and distribute pro
rata to its shareholders of record the Strategic Theme Fund shares received by
the Mid Cap Fund in exchange for their respective shares in the Mid Cap Fund.
This liquidation and distribution will be accomplished by opening an account on
the books of the Strategic Theme Fund in
8
<PAGE>
the name of each shareholder of record in the Mid Cap Fund and by crediting to
each account the shares due pursuant to the reorganization. Every Mid Cap Fund
shareholder will own shares of the corresponding class of the Strategic Theme
Fund immediately after the reorganization, the value of which will be equal to
the value of the shareholder's Mid Cap Fund shares immediately prior to the
reorganization.
At or prior to the closing date, the Mid Cap Fund will declare a dividend
or dividends which, together with all previous such dividends, will have the
effect of distributing to the Mid Cap Fund shareholders all of the Mid Cap
Fund's investment company taxable income for all taxable years ending at or
prior to the closing date (computed without regard to any deduction for
dividends paid) and all of its net capital gains realized (after reduction for
any capital loss carry-forward) in all taxable years ending at or prior to the
closing date.
The consummation of the reorganization is subject to a number of
conditions set forth in the reorganization agreement. Certain of these
conditions may be waived by the Board of Trustees of either trust, or by an
authorized officer of each trust, as appropriate.
Among the significant conditions which may not be waived are: (a) the
receipt by the Trust and the Acquiring Trust of an opinion of counsel as to
certain federal income tax consequences of the reorganization and (b) the
approval of the reorganization agreement by the shareholders of the Mid Cap
Fund. The reorganization agreement may be terminated and the reorganization
abandoned at any time, before or after approval by the shareholders of the Mid
Cap Fund, prior to the closing date, by either party by resolution of the Board
of Trustees of either party. In addition, the reorganization agreement may be
amended by mutual agreement, except that no amendment may be made to the
reorganization agreement subsequent to the meeting that would change the
provisions for determining the number of Strategic Theme Fund shares to be
issued to shareholders of the Mid Cap Fund without their further approval.
Reasons for the Reorganization
The proposed reorganization is the outcome of deliberations by the Boards
of Trustees of the trusts. Phoenix Investment Counsel Inc., the adviser to each
of the funds, recommended that the trustees of each trust consider the benefits
that the shareholders of the funds would realize if the Mid Cap Fund were to be
combined with the Strategic Theme Fund. In response to this recommendation, the
independent trustees of each trust requested that management authorize a
specific reorganization proposal for their consideration and provide an
analysis of the specific benefits to be realized by shareholders for the
proposal.
In the course of their review, the trustees of the Trust noted that the
reorganization would be a means of combining two series with substantially
identical investment objectives and would permit the shareholders of the Mid
Cap Fund to pursue their investment goals in a combined fund that employs what
the adviser views as a more flexible investment strategy. In reaching this
conclusion, the Board considered a number of additional factors, including the
following:
o the total expense ratio of the combined Strategic Theme Fund following
the reorganization is projected to be slightly lower than the current
total expense ratio of the Mid Cap Fund;
o the average annual return of Class A shares of the Strategic Theme Fund
of 44.91% and 24.36% for the one and three year periods ended April 30,
1999 compared favorably with the average annual return of 4.92% and 9.33%
for the Class A shares of the Mid Cap Fund for the same periods;
o the reorganization provides for continuity of distribution and
shareholder servicing arrangements;
o the reorganization will not result in the recognition of any gain or loss
for federal income tax purposes either to the Mid Cap Fund or the
Strategic Theme Fund or to the shareholders of either of the funds; and
9
<PAGE>
o the reorganization could result in economies of scale through the
spreading of fixed costs over a larger asset base.
After considering these and other factors, the Board of Trustees of the
Trust, including the independent trustees, unanimously concluded at a meeting
held on August 25, 1999 that the reorganization would be in the best interests
of the Mid Cap Fund and its shareholders and that the interests of existing Mid
Cap Fund shareholders will not be diluted as a result of the transactions
contemplated by the reorganization. The Board of Trustees of the Trust then
unanimously voted to approve the reorganization agreement and authorize the
officers of the Trust to submit the reorganization agreement to shareholders
for consideration.
At a meeting held on August 25, 1999, the Board of Trustees of the
Acquiring Trust, including the independent trustees, also unanimously concluded
that the reorganization would be in the best interests of the Strategic Theme
Fund and the shareholders and that the interests of existing Strategic Theme
Fund shareholders will not be diluted as a result of the reorganization. The
Board of Trustees of the Acquiring Trust also noted that the expenses incurred
by Phoenix Equity Planning in selling the Class B shares of the Mid Cap Fund
that have not been reimbursed by Rule 12b-1 fees or contingent deferred sales
charges will become subject to reimbursement by the Strategic Theme Fund. The
Board of Trustees of the Acquiring Trust also unanimously voted to approve the
reorganization agreement.
Federal Income Tax Consequences
Special counsel to the funds, Goodwin, Procter & Hoar LLP, is to opine
that, subject to customary assumptions and representations, on the basis of the
existing provisions of the Internal Revenue Code (the "Code"), the Treasury
Regulations promulgated thereunder and current administrative and judicial
interpretations thereof, for federal income tax purposes:
o the transfer of all or substantially all of the assets of the Mid Cap Fund
solely in exchange for Strategic Theme Fund shares and the assumption by the
Strategic Theme Fund of all known liabilities of the Mid Cap Fund, and the
distribution of such shares to the shareholders of the Mid Cap Fund, will
constitute a "reorganization" within the meaning of Section 368(a) of the
Code; the Strategic Theme Fund and the Mid Cap Fund will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Code;
o no gain or loss will be recognized by the Strategic Theme Fund on the
transfer of the assets of the Mid Cap Fund to the Strategic Theme Fund in
exchange for Strategic Theme Fund shares and the assumption by the Strategic
Theme Fund of all known liabilities of the Mid Cap Fund or upon the
distribution of Strategic Theme Fund shares to the Mid Cap Fund shareholders
in exchange for their shares of the Mid Cap Fund;
o the tax basis of the Mid Cap Fund's assets acquired by the Strategic Theme
Fund will be the same to the Strategic Theme Fund as the tax basis of such
assets to the Mid Cap Fund immediately prior to the reorganization, and the
holding period of the assets of the Mid Cap Fund in the hands of the
Strategic Theme Fund will include the period during which those assets were
held by the Mid Cap Fund;
o no gain or loss will be recognized by the Strategic Theme Fund upon the
receipt of the assets of the Mid Cap Fund solely in exchange for the
Strategic Theme Fund shares and the assumption by the Strategic Theme Fund
of all known liabilities of the Mid Cap Fund;
o no gain or loss will be recognized by shareholders of the Mid Cap Fund upon
the receipt of Strategic Theme Fund shares by such shareholders, provided
such shareholders receive solely Strategic Theme Fund shares (including
fractional shares) in exchange for their Mid Cap Fund shares; and
o the aggregate tax basis of the Strategic Theme Fund shares, including any
fractional shares, received by each shareholder of the Mid Cap Fund pursuant
to the reorganization will be the same as the aggregate tax basis of the Mid
Cap Fund shares held by such shareholder immediately prior to the
reorganization, and the holding period of the
10
<PAGE>
Strategic Theme Fund shares, including fractional shares, to be received
by each shareholder of the Mid Cap Fund will include the period during
which the Mid Cap Fund shares exchanged therefor were held by such
shareholder (provided that the Mid Cap Fund shares were held as a capital
asset on the date of the reorganization).
The receipt of such an opinion is a condition to the consummation of the
reorganization. The Trust has not obtained an Internal Revenue Service ("IRS")
private letter ruling regarding the federal income tax consequences of the
reorganization, and the IRS is not bound by advice of counsel. If the transfer
of the assets of the Mid Cap Fund in exchange for Strategic Theme Fund shares
and the assumption by the Strategic Theme Fund of all known liabilities of the
Mid Cap Fund do not constitute a tax-free reorganization, each Mid Cap Fund
shareholder generally will recognize gain or loss equal to the difference
between the value of Strategic Theme Fund shares such shareholder acquires and
the tax basis of such shareholder's Mid Cap Fund shares. Shareholders of the
funds should consult their tax advisers regarding the effect, if any, of the
proposed reorganization in light of their individual circumstances. Since the
foregoing discussion relates only to the federal income tax consequences of the
reorganization, shareholders of the funds should also consult tax advisers as to
state and local tax consequences, if any, of the reorganization.
Capitalization
The following table sets forth the capitalization of the Strategic Theme
Fund and the Mid Cap Fund, and on a pro forma basis for the combined Strategic
Theme Fund as of October 31, 1999, giving effect to the proposed acquisition of
net assets of the Mid Cap Fund at net asset value. The pro forma data reflects
an exchange ratio of approximately 0.944198645 and 0.922470925 for Class A and
Class B shares, respectively, of the Strategic Theme Fund issued for each Class
A and Class B share, respectively, of the Mid Cap Fund.
<TABLE>
<CAPTION>
Mid-Cap Pro Forma
Strategic Theme Fund Fund Strategic Theme Fund
---------------------- ----------------- ---------------------
<S> <C> <C> <C>
Net assets
Class A $122,198,546 $292,275,239 $414,473,785
Class B 92,047,015 17,067,003 109,114,018
Class C 1,464,381 N/A 1,464,381
Net asset value per share
Class A $ 18.42 $ 20.30 $ 18.42
Class B 17.82 19.25 17.82
Class C 17.82 N/A 17.82
Shares outstanding
Class A 6,634,775 14,396,029 22,502,062
Class B 5,165,204 886,568 6,122,948
Class C 82,170 N/A 82,170
</TABLE>
The table set forth above should not be relied on to determine the number of
Strategic Theme Fund shares to be received in the reorganization. The actual
number of shares to be received will depend upon the net asset value and number
of shares outstanding of the Mid Cap Fund and the Strategic Theme Fund at the
time of the reorganization.
11
<PAGE>
Historical Performance Information
The following table sets forth the average annual total return of the
Class A and Class B shares of the Strategic Theme Fund and the Mid Cap Fund for
the periods indicated.
Average Annual Total Returns for
Periods Ending 10/31/99(a)
<TABLE>
<CAPTION>
Since Inception
Fund Name 1 Year 5 Years 10 Years Inception Date
- ------------------------ ----------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Strategic Theme Fund
Class A 48.94% N/A N/A 25.37% 10/16/95
Class B 51.20% N/A N/A 25.71% 10/16/95
S&P 500 Stock Index(b) 25.79% 26.10% 17.85% 25.68% 10/16/95
Mid Cap Fund
Class A 29.51% 14.38% N/A 16.04% 11/1/89
Class B 30.94% 14.63% N/A 14.97% 7/18/94
S&P Mid-Cap Index(c) 21.07% 19.51% 16.71% 16.71% 10/31/89
</TABLE>
Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate, so that
shares, when redeemed, may be worth more or less than the original cost.
- ----------------
(a) The average annual returns in the table above reflect the deduction of the
maximum sales charge for an investment in Class A shares and a full
redemption of Class B shares.
(b) The S&P 500 Index is an unmanaged but commonly used measure of common stock
total return performance. The S&P 500's performance does not effect sales
charges.
(c) The S&P Mid-Cap Index is an unmanaged commonly used measure of total return
performance of mid- capitalization companies. The index is not available
for direct investment.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion summarizes some of the more significant
similarities and differences in the investment objectives, policies and
restrictions of the Strategic Theme Fund and the Mid Cap Fund. The discussion
below is qualified in its entirety by the discussion elsewhere in this
Prospectus/Proxy Statement, and in the Prospectus and Statement of Additional
Information for each fund.
Investment Objectives and Policies
The investment objectives of the Strategic Theme Fund and the Mid Cap Fund
are substantially identical. The Strategic Theme Fund has an investment
objective of long-term capital growth. The Mid Cap Fund has an investment
objective of long-term capital appreciation. The investment objectives of the
Strategic Theme Fund and the Mid Cap Fund are "fundamental" policies which may
not be changed without the approval of the holders of at least a "majority of
the outstanding voting securities" (as that term is defined in the 1940 Act) of
the respective fund.
The principal investment strategies of the Strategic Theme Fund are
generally similar to those of the Mid Cap Fund but differ in certain important
respects.
12
<PAGE>
The Strategic Theme Fund invests primarily in stocks of U.S. and foreign
(non-U.S.) companies that Seneca believes are well positioned to benefit from
cultural, demographic, regulatory, social, or technological changes worldwide.
Seneca establishes strategic (major changes affecting markets for prolonged
periods) and tactical (focused, short-term) investment themes that generally
reflect trends that appear likely to drive stocks with:
o similar technologies and products; or
o embody social, economical, political and technological considerations;
or
o present a visionary idea or creative solution.
Seneca seeks to identify companies which are well positioned to benefit
from an investment theme and possess:
o satisfactory return on capital;
o enhanced industry position; and
o superior management skills.
The themes should offer substantial appreciation potential and exhibit
some independence from economic cycles. More than one theme may be pursued at a
time and themes may change when Seneca believes that the theme is saturated or
fully exploited.
The Mid Cap Fund seeks to increase the value of shares by investing in
securities that Seneca believes have earnings growth potential and the
potential for capital appreciation over the intermediate or long term. The Mid
Cap Fund invests primarily in common stocks of U.S. companies with market
capitalizations of between $1 billion and $10 billion. The Mid Cap Fund may
invest in any class or type of security, including preferred stocks, bonds,
junk bonds, and convertible securities whether foreign (non-U.S.) or U.S., that
the sub-adviser believes have the potential to appreciate. Generally, the Mid
Cap Fund expects to hold at least 35 positions.
Seneca screens for growth in the mid-cap market. The focus is on stocks
that Seneca projects will have earnings growth rates at substantially higher
levels than the market and that it forecasts will have major earnings
acceleration. More specifically, Seneca selects stocks that it believes are
producing quality, substantial earnings, are well managed, and are reasonably
valued relative to the growth rate and to the market. Seneca reviews stock for
potential sale if earnings reports disappoint, valuation levels reach the top
of their historic level, or if earnings momentum peaks. Debt obligations
selected for investment may be of any credit quality or maturity.
The Strategic Theme Fund and the Mid Cap Fund have the same adviser and
subadviser. Phoenix Investment Counsel and Seneca Capital Management serve as
the investment adviser and subadviser to both funds, respectively. Phoenix is
responsible for managing each fund's investment and the general operations of
the funds. Seneca, as subadviser is responsible for the day-to-day management
of each fund's portfolio.
Certain Investment Restrictions
The Strategic Theme Fund and the Mid Cap Fund are both subject to certain
investment restrictions that restrict the scope of their investments.
Fundamental investment restrictions may not be changed without the affirmative
vote of the holders of a majority of the outstanding securities (as defined in
the 1940 Act) of the fund. However, investment restrictions that are not
fundamental may be changed by the Board of Trustees without shareholder
approval. The table below compares certain fundamental and non-fundamental
investment restrictions of the Strategic Theme Fund and the Mid Cap Fund.
Fundamental restrictions are followed by an (F); non-fundamental restrictions
are followed by an (nf).
13
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Strategic Theme Fund Mid Cap Fund
- ------------------------------ -------------------------------------------- ----------------------------------------------
<S> <C> <C>
Borrowing The Strategic Theme Fund may not The Mid Cap Fund may not borrow in
borrow money, except for investment excess of 10% of the market or other fair
purposes, provided that any such value of its total assets. Any such
borrowing for investment purposes with borrowings shall be from banks and shall
respect to the fund is (a) authorized by be undertaken only as a temporary
the Trustees prior to any public measure for administrative purposes.
distribution of the shares of such fund Deposits in escrow in connection with the
or is authorized by the shareholders of writing of covered call options, secured
the fund thereafter, (b) is limited to put options, or the purchase or sale of
331/3% of the value of the total assets financial futures contracts and related
(taken at market value) of the fund, and options are not deemed to be a pledge or
(c) is subject to an agreement by the other encumbrance. (F)
lender that any recourse is limited to the
assets of the fund with respect to which
the borrowing has been made. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Pledging The Strategic Theme Fund may not The Mid Cap Fund may not pledge its
pledge, mortgage or hypothecate any assets to an extent greater than 15% of
securities or other property. (F) the market or other fair value of its total
assets. Deposits in escrow in connection
with the writing of covered call options,
secured put options, or the purchase or
sale of financial futures contracts and
related options are not deemed to be a
pledge or other encumbrance. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Lending The Strategic Theme Fund may not The Mid Cap Fund may not make loans,
make loans to other persons except that except that the Mid Cap Fund may (a)
it may lend portfolio securities (up to purchase bond notes, debentures or similar
33% of net assets at the time the loan is obligations which are customarily
made) to brokers or dealers or other purchased by institutional investors,
financial institutions not affiliated with whether publicly distributed or not, (b)
the trust or the adviser, subject to invest in repurchase agreements, provided
conditions established by the adviser that an aggregate of no more than 10% of
and enter into repurchase transactions the Fund's net assets (taken at market
(in accordance with the trust's current value) may be invested in repurchase
prospectus). (F) agreements having maturities of more than
seven days and all other illiquid securities,
and (c) loan its portfolio securities in
amounts up to one third of the market or
other fair value of its total assets. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Strategic Theme Fund Mid Cap Fund
- ------------------------------- -------------------------------------------- ---------------------------------------------
<S> <C> <C>
Illiquid Securities/ The Strategic Theme Fund may not The Mid Cap Fund may not purchase
Restricted invest more than 15% of its net assets restricted securities (including repurchase
in illiquid securities, including (a) agreements having maturities of more
securities with legal or contractual than seven days) or securities for which
restrictions on resale (except in the case market value quotations are not readily
of securities issued pursuant to Rule available if as a result of such purchase
144A sold to qualifying institutional more than 10% of the Mid Cap Fund's
investors under special rules adopted total assets would be invested in the
by the Securities and Exchange aggregate of such securities. (F)
Commission for which the trustees of
the trust determine the secondary market
is liquid), (b) repurchase agreements
maturing in more than seven days, and
(c) securities that are not readily
marketable. (nf)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Purchase of Securities on The Strategic Theme Fund may not The Mid Cap Fund may not purchase
Margin and Short Sales purchase on margin. (F) securities on margin, except that the Mid
Cap Fund may obtain such short-term
credits as may be necessary for the
clearance of purchases and sales of
securities. The deposit or payment by the
Mid Cap Fund of initial or maintenance
margin in connection with financial
futures contracts or related options
transactions is not considered the
purchase of a security on margin. (F)
The Strategic Theme Fund may not The Mid Cap Fund may not make short
engage in short sales. (F) sales of securities, unless at the time of
sale the Mid Cap Fund owns an equal
amount of such securities.
- ------------------------------ -------------------------------------------- ----------------------------------------------
Unseasoned Issuers No fundamental or non-fundamental The Mid Cap Fund may not invest in the
restriction. aggregate more than 5% of its total assets
in the securities of any issuers (other than
real estate investment trusts) which have
(with predecessors) a record of less than
three years of continuous operations. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Strategic Theme Fund Mid Cap Fund
- ------------------------------- ------------------------------------------ ----------------------------------------------
<S> <C> <C>
Other Investment The Strategic Theme Fund may not The Mid Cap Fund may not purchase
Companies purchase any security of an investment securities of other investment companies,
trust except for purchases in the open except that the Mid Cap Fund may make
market where no commission or profit such a purchase (a) in the open market
to a sponsor or dealer results from such involving no commission or profit to
purchases, other than a customary a sponsor or dealer (other than the
brokers's commission. (F) customary broker's commission),
provided that immediately thereafter
(i) not more than 10% of the Mid Cap
Fund's total assets would be invested in
such securities and (ii) not more than 3%
of the voting stock of another investment
company would be owned by the Mid
Cap Fund or (b) as part of a merger,
consolidated, or acquisitions of assets. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Diversification The Strategic Theme Fund may not The Mid Cap Fund may not invest
purchase any securities (other than U.S. more than 5% of its total assets in the
Government obligations) if, as a result, securities of any one issuer (except the
more than 5% of the value of the total U.S. Government and any foreign
assets of the Fund would be invested government, its agencies and
in securities of a single issuer. (F) instrumentalities) or purchase more than
10% of the outstanding voting securities
The Strategic Theme Fund may not or more than 10% of the securities of any
purchase any security if, as a result, class of any one issuer. With respect to
more than 10% of any class of securities 75% of its assets, the Mid Cap Fund will
or more than 10% of the outstanding limit its investments in the securities of
voting securities of any issuer would be any one foreign government, its agencies
held. (F) and instrumentalities to 5% of the fund's
total assets. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Industry Concentration The Strategic Theme Fund may not The Mid Cap Fund may not concentrate
invest more than 25% of its total its assets in the securities of issuers which
assets in any one industry or group conduct their principal business activities
of industries.(F) in the same industry. This restriction
does not apply to obligations issued or
guaranteed by the U.S. Government, its
agencies or instrumentalities.
- ------------------------------ -------------------------------------------- ----------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Strategic Theme Fund Mid Cap Fund
- ------------------------------- ------------------------------------------ --------------------------------------------
<S> <C> <C>
Oil Contracts & Gas and The Strategic Theme Fund may not The Mid Cap Fund may not invest in
Commodity invest in interests in oil, gas or other interests in oil, gas, or other mineral
material exploration development exploration or development programs. (F)
programs or leases. (nf)
The Strategic Theme Fund may not
deal in commodities or commodities
contracts. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Senior Securities The Strategic Theme Fund may not The Mid Cap Fund may not issue senior
issue senior securities. (F) securities as defined in the Investment
Company Act of 1940 except to the
extent that it is permissible to (a) borrow
money from banks pursuant to the
investment restrictions regarding the
borrowing of money, and (b) enter into
transactions involving forward foreign
currency contracts and options thereon,
as described in the Mid Cap Fund's
Prospectus and Statement of Additional
Information. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Futures and Options No fundamental or non-fundamental The Mid Cap Fund may not write,
restriction. purchase or sell puts, calls or
combinations thereof, except that the
Mid Cap Fund may (a) write exchange-
traded covered call options on portfolio
securities and enter in closing purchase
transactions with respect to such options,
and may write exchange-traded covered
call options on foreign currencies and
secured put options on securities and
foreign currencies and write covered
call and secured put options on securities
and foreign currencies traded over the
counter, and enter into closing purchase
transactions with respect to such options,
(b) purchase exchange-traded call options
and put options, and may purchase call
and put options traded over the counter,
provided that the premiums on all
outstanding call and put options do
not exceed 5% of its total assets, and
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Strategic Theme Fund Mid Cap Fund
- ------------------------------- -------------------------------------------- ---------------------------------------------
<S> <C> <C>
enter into closing sale transactions with
respect to such options, and (c) engage in
financial futures contracts and related
options transactions, provided that the
sum of the initial margin deposits on the
fund's existing futures and related options
positions and the premiums paid for
related options would not exceed 5% of
its total assets. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Securities held by Trustees The Strategic Theme Fund may not The Mid Cap Fund may not invest in
and Officers purchase or retain any security of an securities of any issuer if any officer or
issuer if the trust officers, trustees Trustee of the Trust or any officer or
or adviser, who individually own director of the adviser owns more than
beneficially more than 1/2 of 1% of 1/2 of 1% of the outstanding securities
such issuer, together own more than 5% of such issuer and all such persons own
of such issuer's securities. (nf) in the aggregate more than 5% of the
securities of such issuer. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Real Estate The Strategic Theme Fund may not The Mid Cap Fund may not make any
deal in real estate (including real estate investment in real estate, real estate
limited partnerships) except that it limited partnerships, commodities
may purchase marketable securities of contracts, except that the fund may (a)
companies that deal in real estate or purchase or sell readily marketable
interests therein including real estate securities which are secured by interests
investment trusts (F). in real estate, including real estate
investment and mortgage investment
trusts, and (b) engage in financial futures
contracts and related options transactions,
provided that the sum of the initial
margin deposits on the Mid Cap Fund's
futures and related options positions and
the premiums paid for related options
would not exceed 5% of the Mid Cap
Fund's total assets, and (c) enter into
foreign currency transactions. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Underwriting The Strategic Theme Fund may not The Mid Cap Fund may not underwrite
underwrite the securities of others. (F) the securities of other issuers, except to
the extent that in connection with the
disposition of its portfolio securities, the
Mid Cap Fund may be deemed to be an
underwriter. The Mid Cap Fund (with
respect to up to one-third of its assets),
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Strategic Theme Fund Mid Cap Fund
- ------------------------------- ----------------------------------------------- --------------------------------------------
<S> <C> <C>
may buy and sell securities outside the
United States which are not registered
with the Commission or marketable in the
United States. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Control The Strategic Theme Fund may not No fundamental or non-fundamental
make an investment for the purpose of restriction.
exercising control or management. (F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Warrants The Strategic Theme Fund may not The Mid Cap Fund may not invest in
invest more than 5% of its net assets in warrants or rights except where acquired
warrants and stock rights, valued at the in units or attached to other securities.
lower of cost or market, or more than The Mid Cap Fund may invest up to 5%
2% of its net assets in warrants and of its total assets in warrants or rights
stock rights that are not listed on the which are not in units or attached to other
New York Stock Exchange or American securities. (F)
Stock Exchange.(nf)
- ------------------------------ -------------------------------------------- ----------------------------------------------
Joint Account The Strategic Theme Fund may not No fundamental or non-fundamental
participate in any joint trading accounts. restriction.
(F)
- ------------------------------ -------------------------------------------- ----------------------------------------------
</TABLE>
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS
Multiple Class Structure
The Mid Cap Fund currently offers two classes of shares: Class A and Class
B. The Strategic Theme Fund currently offers three classes of shares: Class A,
Class B and Class C. The Class A and Class B shares of the Strategic Theme Fund
are offered to the public under the same sales charge arrangements as the Class
A and Class B shares of the Mid Cap Fund.
In the proposed reorganization, you will receive the corresponding class
of shares of the Strategic Theme Fund in exchange for your shares in the Mid
Cap Fund. The reorganization will be effected at net asset value. No sales
charge will be imposed on your shares. For purposes of calculating the
contingent deferred sales charge that you may pay when you dispose of any
acquired Class B shares of the Strategic Theme Fund, the length of time you
hold shares, in the Strategic Theme Fund will be added to the length of time
you hold shares in the Mid Cap Fund. If you acquire Class B shares as a result
of the reorganization, you will continue to be subject to a contingent deferred
sales charge upon subsequent redemption to the same extent as if you had
continued to hold your shares of the Mid Cap Fund.
Class A Shares
o Are offered to the public at net asset value plus a maximum sales charge of
4.75% of the offering price (4.99% of the amount invested). The sales charge
may be reduced or waived under certain conditions.
o Are not subject to any charges when redeemed.
o Have lower distribution and service fees (0.25%) and therefore pay higher
dividends than Class B and Class C shares.
Class B Shares
o Are offered to the public at the next determined net asset value after
receipt of the order with no sales charge at the time of purchase.
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<PAGE>
o Are subject to a sales charge of up to 5.00% of the shares' value if they
are redeemed within the first five years of purchase.
o Will automatically convert to Class A shares eight years after purchase.
o Have higher distribution and service fees (1.00%) and pay lower dividends
than Class A shares.
Class C Shares (Strategic Theme Fund Only)
o Are offered to the public at the next determined net asset value after
receipt of the order with no sales charge at the time of purchase.
o Are subject to a sales charge of 1.00% if they are redeemed within the first
year after they are purchased.
o Have the same distribution and service fees (1.00%) as Class B shares and
thereafter pay comparable dividends.
o Class C shares do not convert to any other class of shares of the fund.
Distribution Plans
Phoenix Equity Planning Corporation serves as the distributor of shares
for both the Strategic Theme Fund and the Mid Cap Fund. The Acquiring Trust has
adopted separate amended and restated distribution plans under Rule 12b-1 of
the 1940 Act for each class of shares relating to the sale and promotion of
Strategic Theme Fund shares and the furnishing of shareholder services (the
"Acquiring Trust Class A Plan," the "Acquiring Trust Class B Plan" and the
"Acquiring Trust Class C Plan," and collectively, the "Acquiring Trust Plans").
Under the Acquiring Trust Class B Plan and the Acquiring Trust Class C
Plan, the Strategic Theme Fund reimburses Phoenix Equity Planning Corporation
monthly for actual expense of Phoenix Equity Planning Corporation up to 0.75% of
the average daily value of the net assets of the Strategic Theme Fund Class B
and Class C shares, respectively. In addition, the Strategic Theme Fund pays
Phoenix Equity Planning Corporation 0.25% annually of the average daily net
assets of the Class A, Class B and Class C shares for providing services to the
shareholders, including assistance in connection with inquiries related to
shareholder accounts. Phoenix Equity Planning Corporation's distribution
expenses from selling and servicing Class B shares may be more than the payments
received from contingent deferred sales charges collected on redeemed shares and
from the Acquiring Trust under the Acquiring Trust Class B Plan. Those expenses
may be carried over and paid in future years. At September 30, 1999, Phoenix
Equity Planning Corporation had incurred unreimbursed expenses under the
Acquiring Trust Class B Plan of $1,096,033 with respect to the Strategic Theme
Fund.
The Trust has also adopted distribution plans pursuant to Rule 12b-1 on
behalf of the Class A and Class B shares of the Mid Cap Fund, (the "Trust Class
A Plan," and "Trust Class B Plan" and collectively, the "Trust Plans"). Under
the Trust Class B Plan, the Mid Cap Fund reimburses Phoenix Equity Planning
Corporation monthly for actual expenses of Phoenix Equity Planning Corporation
up to 0.75% of the average daily net assets of the Mid Cap Fund's Class B
shares. In addition, the Mid Cap Fund pays Phoenix Equity Planning Corporation
0.25% annually of the average daily net assets of the Class A and Class B shares
as compensation for providing services to the shareholders, including assistance
in connection with inquires related to shareholder accounts. Phoenix Equity
Planning Corporation's distribution expenses from selling and servicing Class B
shares may be more than the payments received from contingent deferred sales
charges collected on redeemed shares from the Trust under the Trust Class B
Plan. Those expenses may be carried over and paid in future years. At September
30, 1999, Phoenix Equity Planning Corporation had incurred unreimbursed expenses
under the Trust Class B Plan of $367,783 with respect to the Mid Cap Fund. As a
result of the reorganization, the unreimbursed expenses incurred by Phoenix
Equity Planning Corporation in selling Class B shares of the Mid Cap Fund will
be subject to reimbursement under the Strategic Theme Fund's Class B Plan.
20
<PAGE>
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES
Both the Strategic Theme Fund and the Mid Cap Fund offer the same
shareholder services, including a Systematic Withdrawal Program, telephone
exchanges, telephone redemptions and access to the Investo-Matic Program, an
automatic investment program.
The Strategic Theme Fund and the Mid Cap Fund both distribute net
investment income semi-annually, and distribute net realized capital gains, if
any, at least annually. All dividends and distributions with respect to the
shares of the Strategic Theme Fund and the Mid Cap Fund are paid in additional
shares of the respective fund unless shareholders elect to receive cash. The
number of shares received in connection with any reinvestment of dividends will
be based upon the net asset value per share of the applicable class of shares
of the Strategic Theme Fund and the Mid Cap Fund in effect on the record date.
The Strategic Theme Fund and the Mid Cap Fund currently offer shareholders
identical exchange privileges. Shareholders of the Strategic Theme Fund and the
Mid Cap Fund may exchange their shares for shares of a corresponding class of
shares of other affiliated Phoenix funds, except for the mutual funds of the
Phoenix-Zweig Trust and Phoenix-Euclid Funds.
Shares of the Strategic Theme Fund and shares of the Mid Cap Fund may be
redeemed at a redemption price equal to the net asset value of the shares as
next determined following the receipt of a redemption order and any other
required documentation in proper form. In the case of redemptions of Class B
shares of the Strategic Theme Fund and the Mid Cap Fund and Class C shares of
the Strategic Theme Fund, investors will be subject to the applicable
determined deferred sales charge, if any, for such shares. Payment of
redemption proceeds for redeemed Mid Cap Fund and Strategic Theme Fund shares
are made within seven days after receipt of a redemption request in proper form
and documentation.
Because both the Strategic Theme Fund and the Mid Cap Fund offer the same
shareholder services, after the closing the same services will continue to be
available to the shareholders of the Mid Cap Fund but in their capacity as
shareholders of the Strategic Theme Fund.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The following is a summary of certain provisions of the Declarations of
Trust of the Strategic Theme Fund and the Mid Cap Fund.
Form of Organization
The Strategic Theme Fund is a series of the Phoenix Strategic Equity
Series Fund, an unincorporated voluntary association organized under the laws
of the Commonwealth of Massachusetts as a business trust, pursuant to a
Declaration of Trust dated June 25, 1986, as amended. The operations of the
Strategic Theme Fund are governed by its Declaration of Trust and by
Massachusetts law.
The Mid Cap Fund is a series of Phoenix Multi-Portfolio Fund, an
unincorporated voluntary association also organized under the laws of the
Commonwealth of Massachusetts as a business trust, pursuant to an Agreement and
Declaration of Trust dated October 15, 1987, as amended. The operations of the
Mid Cap Fund are governed by its Agreement and Declaration of Trust and by
Massachusetts law.
Both Phoenix Strategic Equity Series Fund and Phoenix Multi-Portfolio Fund
are registered with the SEC as open-end management investment companies and are
subject to the provisions of the 1940 Act and the rules and regulations of the
SEC thereunder.
21
<PAGE>
Shares
Each Declaration of Trust authorizes the Trustees to create an unlimited
number of series of shares in each trust. Within each series of shares, the
Trustees may create an unlimited number of classes, each with an unlimited
number of full and fractional shares. In addition to the currently existing
series, each trust may organize other series in the future.
The Phoenix Strategic Equity Series Fund trust currently has three series
outstanding: the Phoenix-Engemann Small Cap Fund, the Phoenix-Seneca Strategic
Theme Fund and the Phoenix-Seneca Equity Opportunities Fund.
The Phoenix Multi-Portfolio Fund currently has five series outstanding:
the Phoenix-Aberdeen International Fund, the Phoenix-Goodwin Emerging Markets
Bond Fund, the Phoenix-Goodwin Tax-Exempt Bond Fund, the Phoenix-Seneca Mid Cap
Fund and the Phoenix-Duff & Phelps Real Estate Securities Fund.
The Strategic Theme Fund currently offers Class A, Class B and Class C
shares. The Mid Cap Fund offers Class A and Class B shares. When issued, the
shares are fully paid and non-assessable, have no preferential or similar
rights unless designated by the Trustees, and are freely transferable. Shares
of the Mid Cap Fund have no preemptive rights. Shares of the Strategic Theme
Fund have no preemptive rights unless designated by the Trustees. The assets
and proceeds received by each trust from the issue or sale of shares of a
series or class are allocated to that series and class and constitute the
rights of that series or class, subject only to the rights of creditors. Any
underlying assets of a series or class are required to be segregated on the
books of account of the trusts. These assets are to be used to pay the expenses
of the series or class as well as a share of the general expenses of each
relevant trust.
Meetings
A majority of the trustees of the Strategic Theme Fund may call
shareholder meetings at any time. Trustees shall call meetings upon the written
request of shareholders holding at least ten percent of the outstanding shares
having voting rights. Generally, the presence of holders of one-third of the
outstanding shares, in person or by proxy, constitutes a quorum at shareholder
meetings.
Trustees of the Mid Cap Fund may call special meetings of shareholders as
necessary. Special meetings shall also be called upon written application by
shareholders holding at least ten percent of outstanding shares. Special
meetings for the purpose of electing trustees shall be called by trustees every
third year. Generally, a majority of shares entitled to vote constitutes a
quorum at shareholder meetings.
Shareholder Liability
Unlike the stockholders of a corporation, under certain circumstances
shareholders of a business trust may be held personally liable for the debts,
claims or other obligations of a business trust. However, the trust documents
of both the Strategic Theme Fund and the Growth Fund limit shareholder
liability.
The Strategic Theme Fund's Declaration of Trust provides that shareholders
shall not be subject to any personal liability in connection with trust
property or for the acts, obligations or affairs of the trust. The trust will
indemnify shareholders for all claims and liabilities to which they become
subject by reason of being a shareholder in the fund.
The Mid Cap Fund's Declaration of Trust provides that creditors shall look
to the assets of the trust, and not to shareholders, for claims against the
trust. Similar to the Strategic Theme Fund's Declaration of Trust, the trust
will indemnify any shareholder held personally liable for trust obligations
solely by reason of being a shareholder.
Liability of Trustees
Each Declaration of Trust provides that trustees will generally be
personally liable only for willful misfeasance, bad faith, gross negligence or
reckless disregard of duties.
22
<PAGE>
Under the Declaration of Trust of the Strategic Theme Fund and the
Declaration of Trust of the Mid Cap Fund, a trustee will not be personally
liable in connection with trust property, the affairs of the trust or the
actions of the trustee, unless the trustee acted in bad faith or with willful
misfeasance, gross negligence or reckless disregard of the trustee's duties.
The Trust may purchase insurance for trustee to cover potential liabilities and
will generally indemnify a trustee against such claims.
Pursuant to the Declaration of Trust of the Mid Cap Fund, the trust will
indemnify trustees against all liabilities.
Voting Requirements
Each shareholder of the Strategic Theme Fund is entitled to vote on any
matter required to be submitted to shareholders. Shareholders are entitled to
one vote for each whole share held and a fractional portion of one vote for
each fractional share held.
Similarly, each shareholder of the Mid Cap Fund is entitled to one vote
for each whole share owned and a proportionate vote for each fractional share
owned.
Generally, all shares of all series vote together as a single class. On
matters regarding any series, however, only shareholders of the affected series
are entitled to vote.
Liquidation or Dissolution
In the event of the liquidation or dissolution of either fund, the
trustees shall distribute the assets of the fund to the shareholders, according
to their respective rights, after accounting for the liabilities of the fund.
FISCAL YEAR
The Strategic Theme Fund operates on a fiscal year which ends April 30.
The Mid Cap Fund operates on a fiscal year which ends November 30.
MANAGEMENT AND OTHER SERVICE PROVIDERS
Responsibility for the overall supervision of the Strategic Theme Fund
rests with the Phoenix Strategic Equity Series Fund's Board of Trustees.
Responsibility for the overall supervision of the Mid Cap Fund rests with the
Phoenix Multi-Portfolio Fund's Board of Trustees. Phoenix Investment Counsel
serves as investment adviser to both funds. Seneca Capital Management LLC
serves as investment subadviser to both funds.
Investment and trade decisions for the funds are made by a team of
managers and analysts headed by Gail P. Seneca. Team leaders, which include Ms.
Seneca, Richard D. Little and Ronald K. Jacks are primarily responsible for the
day to day decisions related to the funds.
Ms. Seneca has been the Chief Executive and Investment Officer of Seneca,
or its predecessor firm GMG/Seneca, since November 1989. From October 1987
until October 1989, she was Senior Vice President of the Asset Management
Division of Wells Fargo Bank, and, from October 1983 to September 1987, she was
Investment Strategist and Portfolio Manager for Chase Lincoln Bank, heading the
fixed income division.
Mr. Little has been Director of Equities with Seneca or GMG/Seneca since
December 1989. Before he joined GMG/
Seneca, Mr. Little held positions as an analyst, board member, and regional
manager with Smith Barney, NatWest Securities, and Montgomery Securities.
23
<PAGE>
Mr. Jacks was Secretary of the Phoenix-Seneca Funds from February 1996
through February 1998. Mr. Jacks was a Trustee of Seneca Funds from February
1996 through June 1997. Since July 1990, Mr. Jacks has been a Portfolio Manager
of GMG/Seneca, and, since July 1996, he has been a portfolio manager of Seneca.
Phoenix Equity Planning Corporation serves as administrative agent of the
Strategic Theme Fund and the Mid Cap Fund and, as such, performs
administrative, bookkeeping and pricing functions. Phoenix Equity Planning also
acts as transfer agent for the Strategic Theme Fund and the Mid Cap Fund.
State Street Bank and Trust Company serves as custodian for both the
Strategic Theme Fund and the Mid Cap Fund.
PricewaterhouseCoopers LLP serve as independent accountants for the funds.
VOTING INFORMATION
Quorum and Voting Requirements
This Prospectus/Proxy Statement is being furnished to the shareholders of
the Mid Cap Fund in connection with the solicitation by the Board of Trustees
of Phoenix Multi-Portfolio Fund of proxies to be used at the meeting.
Shareholders of record of the Mid Cap Fund at the close of business on
December 29, 1999 will be entitled to vote at the meeting or at any
adjournments thereof. As of the record date, there were _____________ and
___________ issued and outstanding Class A and Class B shares, respectively, of
the Mid Cap Fund. Shareholders are entitled to one vote for each share held and
a proportionate vote for each fractional share held. Shareholders of the Mid
Cap Fund will vote together as a single class on the reorganization proposal.
The holders of a majority of the shares entitled to vote shall be a quorum for
the transaction of business at the meeting. A quorum being present, the
approval of the reorganization proposal requires the affirmative vote of a
"majority of the outstanding voting securities" of the Mid Cap Fund. The vote
of a "majority of the outstanding voting securities" means the lesser of (a)
67% or more of the shares represented at a meeting at which more than 50% of
the outstanding shares are represented or (b) more than 50% of the outstanding
shares. For purposes of determining the presence of a quorum for transacting
business at the meeting and for determining whether sufficient votes have been
received for approval of the proposal to be acted upon at the meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present at the meeting, but which have not been
voted. For this reason, abstentions and broker non-votes will assist the Mid
Cap Fund in obtaining a quorum, but both have the practical effect of a "no"
vote for purposes of obtaining the requisite vote for approval of the proposal.
If either (a) a quorum is not present at the meeting or (b) a quorum is
present but sufficient votes in favor of the reorganization proposal have not
been obtained, then the persons named as proxies may propose one or more
adjournments of the meeting without further notice to shareholders to permit
further solicitation of proxies provided such persons determine, after
consideration of all relevant factors, including the nature of the proposal,
the percentage of votes then cast, the percentage of negative votes then cast,
the nature of the proposed solicitation activities and the nature of the
reasons for such further solicitation, that an adjournment and additional
solicitation is reasonable and in the interests of shareholders. The persons
named as proxies will vote those proxies that such persons are required to vote
FOR the reorganization proposal in favor of such an adjournment and will vote
those proxies required to be voted AGAINST the reorganization proposal against
such adjournment.
24
<PAGE>
The meeting may be adjourned from time to time by a majority of the votes
properly cast upon the question of adjourning to another date and time, whether
or not a quorum is present, and the meeting may be held as adjourned within a
reasonable time after the date set for the original meeting without further
notice.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with the shareholder's direction, as indicated thereon, if the proxy
card is received and is properly executed. If the shareholder properly executes
a proxy and gives no voting instructions with respect to the reorganization
proposal, the shares will be voted in favor of the reorganization proposal. The
proxies, in their discretion, may vote upon such other matters as may properly
come before the meeting. The Board of Trustees of the Trust is not aware of any
other matters to come before the meeting.
Approval of the reorganization proposal by the shareholders of the Mid Cap
Fund is a condition of the consummation of the reorganization. If the
reorganization is not approved, the Mid Cap Fund will continue as a series of
the Trust and the Board of Trustees of the Trust may consider other
alternatives in the best interests of the shareholders of the Mid Cap Fund.
Revocation of Proxies
Any shareholder who has given a proxy has the right to revoke the proxy
any time prior to its exercise
o by written notice of the proxy's revocation to the Secretary of the Trust
at the above address prior to the meeting;
o by the subsequent execution and return of another proxy prior to the
meeting;
o by submitting a subsequent telephone vote; or
o by being present and voting in person at the meeting and giving oral
notice of revocation to the Chairman of the meeting.
No Appraisal Rights
The staff of the SEC has taken the position that any rights to appraisal
arising under state law are preempted by the provisions of the 1940 Act and
Rule 22c-1 thereunder, which generally requires that shares of a registered
open-end investment company be valued at their next determined net asset value.
Solicitation of Proxies
In addition to solicitation of proxies by mail, officers of the Trust and
officers and regular employees of Phoenix Investment Counsel, affiliates of
Phoenix Investment Counsel, or other representatives of the Trust may also
solicit proxies by telephone or telegram or in person. The Trust may also use a
proxy solicitation firm to assist with the mailing and tabulation effort and
any special, personal solicitation of proxies.
Shareholders of the Mid Cap Fund may be asked by the proxy solicitor's
representatives to cast their votes by authorizing the execution of a proxy by
telephone. Shareholders will either be contacted by a representative of the
proxy solicitor using information derived from a shareholder list provided by
the Trust or shareholders may be sent a written communication or left a
telephone message asking the shareholder to telephone the solicitor at a
designated toll-free number. In all such cases, the representative of the
solicitor will ask for the shareholder's full name and address, the last four
digits of the shareholder's social security number or employer identification
number, the person's title (in the case of a corporate shareholder) and
confirmation that the person is authorized to direct the voting of the shares.
The shareholder will be asked to confirm that the Prospectus/Proxy Statement
and proxy form have been received. If answered in the affirmative, the
solicitor representative will advise the shareholder that the shareholder may
authorize the execution of a proxy over
25
<PAGE>
the telephone and ask the shareholder if the shareholder desires to authorize
the execution of a proxy at that time. Telephone conversations will be
recorded. If the shareholder chooses to proceed, the representative of the
solicitor will then ask the shareholder if the shareholder wishes to support
the reorganization proposal. If answered in the affirmative, the solicitor will
read the reorganization proposal to the shareholder and ask for such
shareholder's voting instruction on the reorganization proposal.
Although the representative of the solicitor will assist with any
questions, the answers to which are contained in the Proxy Statement, the
representative of the solicitor will not make recommendations on how to vote on
the reorganization proposal. Finally, the representative of the solicitor will
explain that the solicitor will execute a written proxy as the shareholder's
agent in accordance with the shareholder's instructions and will forward the
proxy to the Trust. Within 72 hours after each telephone call, the solicitor
will send to each shareholder who used the telephone proxy voting method a
written confirmation of the shareholder's instructions. The shareholder will be
asked to contact the solicitor immediately if the shareholder's instructions
have not been properly recorded.
If a shareholder wishes to participate in the meeting, but does not wish
to authorize the execution of a proxy by telephone, the shareholder may still
submit the proxy form included with this Prospectus/Proxy Statement or attend
the meeting in person.
The costs of the meeting, such as the preparation and mailing of the
notice, the Prospectus/Proxy Statement and the proxy, and the solicitation of
proxies, including reimbursement to persons who forward proxy materials to
their clients, and the expenses connected with the solicitation of these
proxies in person, by telephone, or by telegraph, will be borne by Phoenix
Investment Partners. The costs of any additional solicitation and of any
adjourned session of the meeting will be borne by Phoenix Investment Partners.
Phoenix Investment Partners will reimburse banks, brokers, and other persons
holding Mid Cap Fund shares registered in their names or in the names of their
nominees, for their expenses incurred in sending proxy material to and
obtaining proxies from the beneficial owners of such Mid Cap Fund shares. D.F.
King, a proxy solicitation firm, has been engaged by Phoenix Investment
Partners to act as solicitor and will receive fees estimated at $8,000, plus
reimbursement of out-of-pocket expenses.
Ownership of Voting Securities
Based on holdings and total shares outstanding as of , 1999, the
Trustees and officers of the Trust owned as a group less than 1% of the
outstanding voting securities of the Mid Cap Fund. If the reorganization were
consummated as of , 1999, the Trustees and officers of the Trust would own
less than 1% of the outstanding voting securities of the combined Strategic
Theme Fund based on their holdings and total shares outstanding as of , 1999.
Based on holdings and total shares outstanding as of , 1999, and assuming
consummation of the reorganization, no person would own beneficially or of
record 5% or more of the outstanding shares of the Mid Cap Fund or the combined
Strategic Theme Fund.
THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING THE INDEPENDENT TRUSTEES OF
THE TRUST, RECOMMEND YOU APPROVE THE PLAN OF REORGANIZATION.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NECESSARY IF IT IS MAILED IN THE UNITED STATES.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Additional information about the Strategic Theme Fund and the Acquiring
Trust is included in the Strategic Theme Fund's Prospectus accompanying this
document and is incorporated by reference herein. Further information about the
26
<PAGE>
Strategic Theme Fund and the Acquiring Trust is included in the Statement of
Additional Information for the Strategic Theme Fund, dated December , 1999,
which has been filed with the SEC and is incorporated by reference herein. A
copy of the Strategic Theme Fund's Statement of Additional Information may be
obtained without charge by contacting Phoenix Equity Planning Corporation at
100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut
06083-2200, or by telephoning Phoenix Equity Planning Corporation toll-free at
1-800-243-4361.
Additional information about the Mid Cap Fund, is included in the current
Prospectus for the Mid Cap Fund dated March 30, 1999. A copy of the Mid Cap
Fund's Prospectus has been filed with the SEC, and is incorporated by reference
herein. Further information about the Mid Cap Fund is included in the Statement
of Additional Information for the Mid Cap Fund dated March 30, 1999, which also
has been filed with the SEC and is incorporated by reference herein. A copy of
the Mid Cap Fund's Prospectus and Statement of Additional Information may be
obtained without charge by contacting Phoenix Equity Planning Corporation at
100 Bright Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut
06083-2200, or by telephoning Phoenix Equity Planning Corporation toll-free at
1-800-243-4361.
MISCELLANEOUS
Available Information
The Acquiring Trust and the Trust are each registered under the 1940 Act
and are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and the 1940 Act, and, in accordance therewith, files
reports, proxy materials, and other information with the SEC. Such reports,
proxy materials, and other information can be inspected at the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 as well as at the following regional offices: New York Regional
Office, 75 Park Place, Room 1228, New York, NY 10007; and Chicago Regional
Office, Northwestern Atrium Center, 500 Madison Street, Suite 1400, Chicago, IL
60661. Copies of such material also can be obtained from the Public Relations
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The SEC maintains a Web Site (http://www.sec.gov) that
contains this Prospectus, Statement of Additional Information, material
incorporated by reference, and other information regarding registrants that
file electronically with the SEC.
Management's Discussion of the Strategic Theme Fund's Performance for the Year
Ended April 30, 1999
The Strategic Theme Fund seeks long-term capital appreciation. The
Strategic Theme Fund may invest in smaller capitalization companies, and
investors should note that small-company investing involves added risks,
including greater price volatility, less liquidity and increased competitive
threat.
For the 12 months ended April 30, 1999, Class A shares of the Strategic
Theme Fund returned 44.91%, Class B shares returned 43.98% and Class C shares
returned 43.87%. These returns were more than double the 21.82% return of the
S&P 500 Index. The S&P 500 Index is a measure of stock market total return
performance. The S&P 500 Index is unmanaged and not available for direct
investment. These performance figures assume reinvestment of distributions and
exclude the effect of sales charges.
The Strategic Theme Fund benefitted from a large technology position,
which accounted for almost 40% of the portfolio. EMC Corp. and Sun Microsystems
were among the Strategic Theme Fund's best performers. The Strategic Theme Fund
also owned a number of Internet-related stocks because the portfolio management
team believes the Internet is the next technology wave, and these stocks have
been particularly strong performers over the past year. Two names that
definitely helped the performance were America Online and Microsoft. The
portfolio management team also had a sizable portion of the portfolio invested
in health-care issues. The portfolio management team continues to expect
consistent earnings growth from this sector regardless of the pace of economic
growth. Of course, past performance is not indicative of future results.
27
<PAGE>
The portfolio management team believes the market, which was trading at
around 30 times consensus 1999 earning estimates as of April 30, 1999, is fully
valued. This multiple represents the highest level for the market in the past
30 years. In addition to high valuations, corporate profits may be a source of
investor anxiety. Several reports recently showed that corporate profits
declined in 1998, and some press coverage suggested that this should leave
investors nervously awaiting an inevitable recession. However, a closer look at
the profit picture shows that certain companies were affected much more than
others. For example, many manufacturers were unable to raise prices because
cheaper products were being imported from countries with devalued currencies.
The inability to export was particularly hard on the food industry. The
transportation sector was affected as well, along with commodity-related
businesses.
In the months ahead, similar conditions may continue to affect corporate
profits. However, the portfolio management team is making every effort to
select companies for the Strategic Theme Fund that the portfolio management
team believes can be resilient to such conditions. We will continue to seek
companies that have sound fundamentals and the potential for rapid, reliable
earnings growth.
PHOENIX STRATEGIC THEME FUND
Average Annual Total Returns(1) for Period Ending 4/30/99
<TABLE>
<CAPTION>
Inception Inception
1 Year to 4/30/99 Date
----------- ------------ ----------
<S> <C> <C> <C>
Class A Shares at NAV(2) 44.91% 27.80% 10/16/95
Class A Shares at POP(3) 38.03 26.05 10/16/95
Class B Shares at NAV(2) 43.98 26.88 10/16/95
Class B Shares with CDSC(4) 40.14 26.57 10/16/95
Class C Shares at NAV(2) 43.87 34.41 11/3/97
Class C Shares with CDSC(4) 43.87 34.41 11/3/97
S&P 500 Index(7) 21.82 Note 5 Note 5
</TABLE>
- ----------------
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) "CDSC" (Contingent Deferred Sales Charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for Class B shares decline from 5% to 0%
over a five year period. CDSC charges for Class C shares are 1% in the
first year and 0% thereafter.
(5) Index performance is 28.76% for Class A and Class B (since 10/16/95) and
28.60% for Class C (since 11/3/97).
(6) This chart illustrates POP returns on Class A and CDSC returns on Class B
Shares since inception. Returns on Class C Shares will vary due to
differing sales charges.
(7) The S&P 500 Index is a measure of stock market total return performance.
The S&P 500's performance does not reflect sales charges.
All returns represent past performance which may not be indicative of future
performance. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
28
<PAGE>
Growth of $10,000 for Periods Ending 4/30/99
<TABLE>
<CAPTION>
Phoenix Strategic Theme Phoenix Strategic Theme S&P 500
Fund Class A(6) Fund Class B(6) Stock Index(7)
------------------------- ------------------------- ---------------
<S> <C> <C> <C>
10/16/95 $ 9,525.00 $10,000.00 $10,000.00
04/30/96 $11,798.92 $12,340.59 $11,356.32
04/30/97 $11,495.53 $11,932.60 $14,218.66
04/30/98 $15,659.46 $16,130.69 $20,086.36
04/30/99 $22,692.55 $23,028.73 $24,468.45
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made
on 10/16/95 (inception of the fund) in Class A and Class B shares. The total
return for Class A shares reflects the maximum sales charge of 4.75% on the
initial investment. The total return for Class B shares reflects the CDSC
charges which decline from 5% to 0% over a five year period. Performance
assumes dividends and capital gains are reinvested. The performance of other
share classes will be greater or less than that shown based on differences in
inception dates, fees and sales charges.
Sector Weightings 4/30/99
As a percentage of equity holdings:
<TABLE>
<S> <C>
Technology 39%
Financials 16
Consumer Staples 12
Health Care 11
Consumer Cyclicals 9
Communication Services 8
Capital Goods 3
Energy 2
</TABLE>
29
<PAGE>
PHOENIX STRATEGIC THEME FUND
TEN LARGEST HOLDINGS AT APRIL 30, 1999 (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<S> <C> <C>
1. AT&T CORP.--LIBERTY MEDIA GROUP CLASS A 4.7%
Internet, television and digital technology provider
2. MICROSOFT CORP. 4.2%
World's leading computer software company
3. CAPITAL ONE FINANCIAL CORP. 3.5%
Its principal subsidiary, Capital One Bank, offers credit card products
4. CISCO SYSTEMS, INC. 3.4%
Develops multiprotocol internetworking systems
5. UNIPHASE CORP. 3.2%
Manufactures fiber optic telecommunications systems
6. AT&T CORP. 3.0%
Provides voice, data and video telecommunications services
7. AMERICA ONLINE, INC. 2.9%
Major provider of online services to consumers
8. INTERNATIONAL BUSINESS MACHINES CORP. 2.7%
Provides advanced information technologies
9. MORGAN STANLEY DEAN WITTER & CO. 2.6%
Provides a broad range of credit and investment products to individuals
10. WAL-MART STORES, INC. 2.5%
One of the largest U.S. discount retailers
</TABLE>
Legal Matters
Certain legal matters in connection with the issuance of the shares of the
Strategic Theme Fund will be passed upon by Goodwin, Procter & Hoar LLP.
Additional Financial Information
The table set forth below presents certain financial information for the
Strategic Theme Fund. The financial highlights for the year ended April 30, 1999
are derived from the Strategic Theme Fund's audited financial statements for the
year ended April 30, 1999. The data should be read in conjunction with the
audited financial statements and related notes, which are included in the
Statement of Additional Information related to this Prospectus/Proxy Statement.
The financial highlights for the six months ended October 31, 1999 are
unaudited. The financial highlights for the Strategic Theme Fund for prior
periods are contained in the Strategic Theme Fund's Prospectus, and the
financial statements for the Strategic Theme Fund for prior periods are
contained in the Acquiring Trust's Annual Report to Shareholders which are
included in the Statement of Additional Information related to this
Prospectus/Proxy Statement.
30
<PAGE>
PHOENIX STRATEGIC THEME FUND
Financial Highlights
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended April 30, 1999
-------------------------------------------------------
Class A Class B Class C
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 13.70 $ 13.46 $ 13.47
Income from investment operations(3)
Net investment income (loss) ( 0.11)(2) ( 0.22)(2) ( 0.22)(2)
Net realized and unrealized gain (loss) 6.03 5.91 5.90
---------- --------- --------
Total from investment operations 5.92 5.69 5.68
---------- --------- --------
Less distributions
Dividends from net investment income -- -- --
Dividends from net realized gains ( 1.40) ( 1.40) ( 1.40)
In excess of net realized gains -- -- --
Total distributions ( 1.40) ( 1.40) ( 1.40)
Change in net asset value 4.52 4.29 4.28
---------- --------- --------
Net asset value, end of period $ 18.22 $ 17.75 $ 17.75
========== ========= ========
Total return(1) 44.91% 43.98% 43.87%
Ratios/supplemental data:
Net assets, end of period (thousands) $107,871 $ 84,698 $ 682
Ratio to average net assets of:
Operating Expenses 1.38%(4) 2.13%(4) 2.13%(4)
Net investment income (loss) ( 0.72)% ( 1.48)% ( 1.47)%
Portfolio turnover 205% 205% 205%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in total return calculation.
(2) Computed using average shares outstanding.
(3) 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.
(4) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
31
<PAGE>
PHOENIX-SENECA STRATEGIC THEME FUND
Financial Highlights
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Six Months Ended October 31, 1999 (Unaudited)
-------------------------------------------------------
Class A Class B Class C
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 18.22 $ 17.75 $ 17.75
Income from investment operations(5)
Net investment income (loss) (0.06)(4) (0.12)(4) (0.12)(4)
Net realized and unrealized gain (loss) 1.80 1.73 1.73
---------- --------- --------
Total from investment operations 1.74 1.61 1.61
---------- --------- --------
Less distributions
Dividends from net investment income -- -- --
Dividends from net realized gains (1.54) (1.54) (1.54)
In excess of net realized income -- -- --
Tax return of capital -- -- --
---------- --------- --------
Total distributions (1.54) (1.54) (1.54)
---------- --------- --------
Change in net asset value 0.20 0.07 0.07
---------- --------- --------
Net asset value, end of period $ 18.42 $ 17.82 $ 17.82
========== ========= ========
Total return(1) 9.95%(3) 9.47%(3) 9.47%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $122,199 $ 92,047 $ 1,464
Ratio to average net assets of:
Operating expenses 1.31%(2)(6) 2.06%(2)(6) 2.06%(2)(6)
Net investment income (loss) (0.60)%(2) (1.35)%(2) (1.36)%(2)
Portfolio turnover 110%(3) 110%(3) 110%(3)
</TABLE>
- ----------------
(1) Maximum sales charge is not reflected in total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from
anticipated results depending on the timing of share purchases and
redemptions.
(6) The ratio of operating expenses to average net assets excludes the effect of
expense offsets for custodian fees; if expense offsets were included, the
ratio would not significantly differ.
32
<PAGE>
OTHER BUSINESS
The Board of Trustees of the Trust knows of no business to be brought
before the meeting other than the matters set forth in this Prospectus/Proxy
Statement. Should any other matter requiring a vote of Mid Cap Fund
shareholders arise, however, the proxies will vote thereon according to their
best judgment in the interests of the Mid Cap Fund and the shareholders of the
Mid Cap Fund.
33
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 27th day of August, 1999, by and between PHOENIX STRATEGIC EQUITY SERIES
FUND (the "Strategic Equity Series Trust"), a Massachusetts business trust with
its principal place of business at 101 Munson Street, Greenfield, Massachusetts
01301, on behalf of the Phoenix-Seneca Strategic Theme Fund, a portfolio series
thereof (the "Acquiring Fund") and PHOENIX MULTI-PORTFOLIO FUND (the
"Multi-Portfolio Trust"), a Massachusetts business trust with its principal
place of business at 101 Munson Street, Greenfield, Massachusetts 01301, on
behalf of the Phoenix-Seneca Mid Cap Fund, a portfolio series thereof (the
"Acquired Fund").
All references in this Agreement to action taken by the Acquiring Fund or
the Acquired Fund shall be deemed to refer to action taken by the Strategic
Equity Series Trust or the Multi-Portfolio Trust, on behalf of the respective
portfolio series.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer by the
Acquired Fund of all or substantially all of the assets of the Acquired Fund to
the Acquiring Fund, in exchange solely for Class A and Class B shares of
beneficial interest in the Acquiring Fund (the "Acquiring Fund Shares"), the
assumption by the Acquiring Fund of all the liabilities of the Acquired Fund,
and the distribution of the Acquiring Fund Shares to the shareholders of the
Acquired Fund in complete liquidation of the Acquired Fund as provided herein,
all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Strategic Equity Series Trust and the Multi-Portfolio Trust
are each open-end, registered investment companies of the management type;
WHEREAS, the Board of Trustees of the Strategic Equity Series Trust has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares and the assumption of all the
liabilities of the Acquired Fund by the Acquiring Fund is in the best interests
of the Acquiring Fund and that the interests of the existing shareholders of
the Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees of the Multi-Portfolio Trust has determined
that the exchange of all or substantially all of the assets of the Acquired
Fund for Acquiring Fund Shares and the assumption of all the liabilities of the
Acquired Fund by the Acquiring Fund is in the best interests of the Acquired
Fund and that the interests of the existing shareholders of the Acquired Fund
would not be diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. THE TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES, THE ASSUMPTION OF ALL THE LIABILITIES OF THE ACQUIRED FUND AND
THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund
agrees to transfer all or substantially all of the Acquired Fund's assets, as
set forth in paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund
agrees in exchange therefor: (i) to deliver to the Acquired Fund the number of
full and fractional Acquiring Fund Shares, computed in the manner and as of the
time and date set forth in Article 2 and (ii) to assume all the liabilities of
the Acquired Fund, as set forth in paragraph 1.3. Such transactions shall take
place at the closing provided for in paragraph 3.1 (the "Closing").
A-1
<PAGE>
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all property, including, without limitation, all cash,
securities, commodities and futures interests, and dividends or interest
receivable which are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing
date provided in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
assume all liabilities, expenses, costs, charges and reserves reflected on an
unaudited statement of assets and liabilities of the Acquired Fund, prepared by
Phoenix Equity Planning Corporation, in its capacity as financial agent for the
Acquired Fund as of the Valuation Date (as defined in paragraph 2.1) in
accordance with generally accepted accounting principles consistently applied
from the prior audited period.
1.4 Immediately after the transfer of assets provided for in paragraph
1.1, the Acquired Fund will distribute pro rata to the Acquired Fund's
shareholders of record, determined as of immediately after the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring
Fund Shares received by the Acquired Fund pursuant to paragraph 1.1 and will
completely liquidate. Such distribution and liquidation will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund Shareholders
and representing the respective pro rata number of the Acquiring Fund Shares of
the corresponding class due such shareholders. All issued and outstanding
shares of the Acquired Fund will simultaneously be canceled on the books of the
Acquired Fund, although share certificates representing interests in the
Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing Date as determined in accordance with paragraph 2.2. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange. Ownership of Acquiring Fund Shares will be shown
on the books of the Acquiring Fund's transfer agent.
2. VALUATION
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder and the net asset value of Acquiring Fund Shares of
each class shall be computed as of immediately after the close of business of
the New York Stock Exchange on the Closing Date (such time and date being
hereinafter called the ("Valuation Date")), using the valuation procedures set
forth in the Acquiring Fund's Declaration of Trust and then-current prospectus
or statement of additional information.
2.2 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's assets and the
assumption of liabilities shall be determined by dividing the value of the net
assets of the Acquired Fund attributable to each class of shares of the
Acquired Fund by the net asset value of an Acquiring Fund Share of the
corresponding class.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be the next Friday that is a full business day
following satisfaction (or waiver as provided herein) of all of the conditions
set forth in Articles 6, 7, and 8 of this Agreement (other than those
conditions which may by their terms be satisfied only at the Closing), or such
later date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of immediately after
the close of business on the Closing Date unless otherwise agreed to by the
parties. The close of business on the Closing Date shall be as of 4:00 p.m. New
York Time. The Closing shall be held at the offices of Phoenix Investment
Counsel, Inc. ("PIC"), 56 Prospect Street, Hartford, Connecticut 06115-0480, or
at such other time and/or place as the parties may agree.
3.2 The Multi-Portfolio Trust shall cause Phoenix Equity Planning
Corporation (the "Transfer Agent"), transfer agent of the Acquired Fund, to
deliver at the Closing a certificate of an authorized officer stating that its
records contain
A-2
<PAGE>
the names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares of each class owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund shall issue
and deliver a confirmation evidencing the Acquiring Fund Shares to be credited
on the Closing Date to the Secretary of Multi-Portfolio Trust or provide
evidence satisfactory to the Multi-Portfolio Trust that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sales, checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Multi-Portfolio Trust represents and warrants to the Strategic
Equity Series Trust as follows:
(a) The Multi-Portfolio Trust is a voluntary association with
transferable shares of the type commonly referred to as a Massachusetts
business trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts.
(b) The Multi-Portfolio Trust is a registered investment company
classified as a management company of the open-end type, and its
registration with the Securities and Exchange Commission (the
"Commission"), as an investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), and the registration of its shares under
the Securities Act of 1933, as amended (the "1933 Act"), are in full force
and effect.
(c) The Multi-Portfolio Trust is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
its Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking relating to the Acquired
Fund.
(d) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to the
Acquired Fund prior to the Closing Date.
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets. The Acquired Fund knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
(f) The Statement of Assets and Liabilities of the Acquired Fund at
November 30, 1998 has been audited by PricewaterhouseCoopers, LLP,
independent accountants, and is in accordance with generally accepted
accounting principles consistently applied and such statement (copies of
which have been furnished to Strategic Equity Series Trust), fairly
reflects the financial condition of the Acquired Fund as of such date, and
there are no known contingent liabilities of the Acquired Fund as of such
date not disclosed therein.
(g) Since November 30, 1998, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred. For the purposes of
this subparagraph (g), a decline in net asset value per share of the
Acquired Fund, the discharge of Acquired Fund liabilities, or the
redemption of Acquired Fund shares by Acquired Fund Shareholders shall not
constitute a material adverse change.
(h) All Federal and other tax returns and reports of the Acquired Fund
required by law to have been filed have been filed and are correct, and all
Federal and other taxes shown as due or required to be shown as due on said
returns
A-3
<PAGE>
and reports have been paid or provision has been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns.
(i) For each taxable year of its operation, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such.
(j) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund (recognizing that, under Massachusetts law, Acquired Fund
Shareholders could, under certain circumstances be held personally liable
for obligations of the Acquired Fund). The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares (except for the
conversion feature of the Class B shares into Class A shares as described
in the current prospectus of the Acquired Fund).
(k) The execution, delivery and performance of this Agreement has been
duly authorized prior to the Closing Date by all necessary action on the
part of the Board of Trustees of the Multi-Portfolio Trust, and, subject to
the approval of the Acquired Fund Shareholders, this Agreement constitutes
a valid and binding obligation of the Multi-Portfolio Trust enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights, and to general equity principles.
4.2 The Strategic Equity Series Trust represents and warrants to the
Multi-Portfolio Trust as follows:
(a) The Strategic Equity Series Trust is a voluntary association with
transferable shares of the type commonly referred to as a Massachusetts
business trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts.
(b) The Strategic Equity Series Trust is a registered investment company
classified as a management company of the open-end type, and its
registration with the Commission, as an investment company under the 1940
Act, and the registration of its shares under the 1933 Act are in full
force and effect.
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading.
(d) The Strategic Equity Series Trust is not, and the execution, delivery
and performance of this Agreement will not result in a material violation
of the Acquiring Fund's Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease or other undertaking
relating to the Acquiring Fund.
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body which materially and adversely affects the Acquiring Fund's business
or its ability to consummate the transactions herein contemplated.
A-4
<PAGE>
(f) The Statement of Assets and Liabilities of the Acquiring Fund at
April 30, 1999, has been audited by PricewaterhouseCoopers, LLP,
independent accountants and is in accordance with generally accepted
accounting principles consistently applied and such statement (copies of
which have been furnished to the Multi- Portfolio Trust), fairly reflects
the financial condition of the Acquiring Fund as of such date, and there
are no known contingent liabilities of the Acquiring Fund as of such date
not disclosed therein.
(g) Since April 30, 1999, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred. For the purposes of
this subparagraph (g), a decline in net asset value per share of the
Acquiring Fund Shares, the discharge of Acquiring Fund liabilities, or the
redemption of Acquiring Fund shares by Acquiring Fund shareholders, shall
not constitute a material adverse change.
(h) All Federal and other tax returns and reports of the Acquiring Fund
required by law to have been filed have been filed and are correct, and all
Federal and other taxes shown as due or required to be shown as due on said
returns and reports have been paid or provision has been made for the
payment thereof, and, to the best of the Acquiring Fund's knowledge, no
such return is currently under audit and no assessment has been asserted
with respect to such returns.
(i) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such.
(j) All issued and outstanding Acquiring Fund Shares are duly and validly
issued and outstanding, fully paid and non-assessable by the Acquiring Fund
(recognizing that, under Massachusetts law, Acquiring Fund shareholders
could under certain circumstances be held personally liable for the
obligations of the Acquiring Fund). The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares (except for the conversion
feature of the Class B shares into Class A shares as described in the
current prospectus of the Acquiring Fund).
(k) The execution, delivery and performance of this Agreement has been
fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Board of Trustees of the Strategic Equity Series Trust
and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights, and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund for the account of the Acquired Fund Shareholders, pursuant to the
terms of this Agreement at the Closing Date have been duly authorized.
5. COVENANTS OF THE ACQUIRING FUND, AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions, the dividends
contemplated by Section 8.6 hereof, and any other distribution that may be
advisable.
5.2 The Multi-Portfolio Trust will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
A-5
<PAGE>
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund Shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6 The Multi-Portfolio Trust will provide the Acquiring Fund with
information reasonably necessary for the preparation of a registration
statement on Form N-14 of the Strategic Equity Series Trust (the "Registration
Statement"), such Registration Statement to consist of, without limitation, a
prospectus (the "Prospectus") that includes a proxy statement of the Acquired
Fund (the "Proxy Statement").
5.7 The Strategic Equity Series Trust agrees to use all reasonable efforts
to obtain the approvals and authorizations required by the 1933 Act, the 1940
Act, and such of the state blue sky or securities laws as may be necessary in
order to continue the operations of the Acquiring Fund after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Multi-Portfolio Trust to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by the Strategic Equity Series Trust and the Acquiring Fund of all
the obligations to be performed by them hereunder on or before the Closing
Date, and, in addition thereto, to the following further conditions:
6.1 All representations and warranties of the Strategic Equity Series
Trust contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
6.2 The Strategic Equity Series Trust shall have delivered to the
Multi-Portfolio Trust a certificate executed in its name by its President or
Vice President and its Treasurer or Assistant Treasurer, in a form reasonably
satisfactory to the Multi-Portfolio Trust, and dated as of the Closing Date, to
the effect that the representations and warranties of the Strategic Equity
Series Trust made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement and as to such other matters as the
Multi-Portfolio Trust shall reasonably request.
6.3 The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund Shareholders when so issued and
delivered, shall be duly and validly issued, and shall be fully paid and non-
assessable by the Acquiring Fund (recognizing that, under Massachusetts law,
shareholders of the Acquiring Fund could under certain circumstances be held
personally liable for its obligations).
6.4 The Proxy Statement and Prospectus (only insofar as they relate to the
Acquiring Fund), on the effective date of the Registration Statement and on the
Closing Date, (i) shall comply in all material respects with the applicable
provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended
(the "1934 Act") and the 1940 Act and the regulations thereunder and (ii) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement herein in
light of the circumstances under which such statements were made, not
materially misleading.
A-6
<PAGE>
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Strategic Equity Series Trust to complete the
transactions provided for herein shall be subject, at its election, to the
performance by the Multi-Portfolio Trust and the Acquired Fund of all of the
obligations to be performed by them hereunder on or before the Closing Date
and, in addition thereto, to the following conditions:
7.1 All representations and warranties of the Multi-Portfolio Trust
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Multi-Portfolio Trust shall have delivered to the Strategic Equity
Series Trust a statement of the Acquired Fund's assets and liabilities, as of
the Closing Date, certified by the Treasurer of the Acquired Fund; and
7.3 The Multi-Portfolio Trust shall have delivered to the Strategic Equity
Series Trust on the Closing Date a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant Treasurer, in form
and substance satisfactory to the Strategic Equity Series Trust, and dated as
of the Closing Date, to the effect that the representations and warranties of
the Multi-Portfolio Trust made in this Agreement are true and correct in all
material respects at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other
matters as the Strategic Equity Series Trust shall reasonably request.
7.4 The Acquired Fund shall have good and marketable title to the Acquired
Fund's assets to be transferred to the Acquiring Fund pursuant to paragraph 1.1
and full right, power, and authority to sell, assign, transfer and deliver such
assets hereunder, and, upon delivery and payment for such assets.
7.5 The Proxy Statement and Prospectus (other than information therein
that relates to the Strategic Equity Series Trust or the Acquiring Fund), on
the effective date of the Registration Statement and on the Closing Date (i)
shall comply in all material respects with the applicable provisions of the
1933 Act, the 1934 Act, the 1940 Act and the regulations thereunder and (ii)
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not materially misleading.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
The obligations of the Multi-Portfolio Trust and the Strategic Equity
Series Trust to consummate the transactions contemplated by this Agreement
shall be subject, at their election (except as provided in paragraphs 8.1 and
8.5 below) to the following conditions:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the holders of the outstanding shares of beneficial interest in the
Acquired Fund in accordance with the provisions of the Declaration of Trust and
By-Laws of the Multi-Portfolio Trust and certified copies of the resolutions
evidencing such approval shall have been delivered to the Strategic Equity
Series Trust. Notwithstanding anything herein to the contrary, neither the
Strategic Equity Series Trust nor the Multi-Portfolio Trust may waive the
conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Strategic Equity Series Trust or the Multi-Portfolio Trust to permit
consummation,
A-7
<PAGE>
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent order or permit
would not involve a risk of a material adverse effect on the assets or
properties of the Strategic Equity Series Trust or the Multi-Portfolio Trust.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The parties shall have received an opinion from the law firm of
Goodwin, Procter & Hoar LLP addressed to the Strategic Equity Series Trust and
Multi-Portfolio Trust substantially to the effect that the transaction
contemplated by this Agreement shall constitute a tax-free reorganization for
Federal income tax purposes. The delivery of such opinion is conditioned upon
receipt by the law firm of Goodwin, Procter & Hoar LLP of representations it
shall request of the Strategic Equity Series Trust and the Multi-Portfolio
Trust. Notwithstanding anything herein to the contrary, neither the Strategic
Equity Series Trust nor the Multi-Portfolio Trust may waive the condition set
forth in this paragraph 8.5.
8.6 At or immediately prior to the Closing, the Acquired Fund shall have
declared and paid a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to the Acquired Fund
Shareholders all of such Acquired Fund's investment company taxable income for
taxable years ending at or prior to the Closing and all of its net capital
gain, if any, realized in taxable years ending at or prior to the Closing
(after reduction for any capital loss carry-forward).
9. BROKERAGE FEES AND EXPENSES
9.1 The Strategic Equity Series Trust and the Multi-Portfolio Trust each
represents and warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
9.2 All of the expenses and costs of the Reorganization and the
transactions contemplated thereby shall be borne by PIC.
10. ENTIRE AGREEMENT
10.1 The Strategic Equity Series Trust and the Multi-Portfolio Trust agree
that neither party has made any representation, warranty or covenant not set
forth herein and that this Agreement constitutes the entire agreement between
the parties.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by either party by resolution of the party's Board of Trustees,
at any time prior to the Closing Date, if circumstances should develop that, in
the opinion of such Board, make proceeding with the Agreement inadvisable. In
the event of any such termination, there shall be no liability for damages on
the part of either the Strategic Equity Series Trust or the Multi-Portfolio
Trust, or their respective Trustees or officers, to the other party.
12. AMENDMENTS
This agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Multi-Portfolio Trust and the Strategic Equity Series Trust; provided, however,
that following the meeting of the Acquired Fund Shareholders called by the
Multi-Portfolio Trust pursuant to paragraph 5.2 of this Agreement, no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring Fund Shares to be issued to the Acquired Fund
Shareholders under this Agreement to the detriment of such shareholders without
their further approval.
A-8
<PAGE>
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the parties hereto at their
principal place of business.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed that the obligations of the Multi-Portfolio
Trust hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents, or employees of the Multi-Portfolio Trust
personally, but shall bind only the trust property of the Multi-Portfolio
Trust, as provided in the Declaration of Trust of the Multi-Portfolio Trust.
The execution and delivery by such officers of the Multi- Portfolio Trust shall
not be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Acquired Fund as provided in the Declaration of Trust of the
Multi-Portfolio Trust. The Multi-Portfolio Trust is a series company with
multiple series, and has entered into this Agreement on behalf of one such
series, the Acquired Fund. With respect to any obligation of the
Multi-Portfolio Trust arising hereunder, the Strategic Equity Series Trust and
the Acquiring Fund shall look for payment or satisfaction of such obligations
solely to the assets and property of the Acquired Fund.
14.6 It is expressly agreed that the obligations of the Strategic Equity
Series Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the Strategic Equity
Series Trust personally, but shall bind only the trust property of the
Strategic Equity Series Trust, as provided in the Declaration of Trust of the
Strategic Equity Series Trust. The execution and delivery by such officers of
the Strategic Equity Series Trust shall not be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Strategic Equity Series Trust as
provided in the Declaration of Trust of the Strategic Equity Series Trust. The
Strategic Equity Series Trust is a series company with multiple series, and has
entered into this Agreement on behalf of one series, the Acquiring Fund. With
respect to any obligation of the Strategic Equity Series Trust arising
hereunder, the Multi-Portfolio Trust and the Acquired Fund shall look for
payment or satisfaction of such obligations solely to the assets and property
of the Acquiring Fund.
14.7 The sole remedy of a party hereto for a breach of any representation
or warranty made in this Agreement by the other party shall be an election by
the non-breaching party not to complete the transactions contemplated herein as
set forth in Paragraph 6.1 and 7.1.
A-9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its President or Vice President and its seal to be affixed
hereto and arrested by its Secretary or Assistant Secretary.
PHOENIX STRATEGIC EQUITY SERIES FUND, on
behalf of the Phoenix-Seneca Theme Fund
ATTEST:
/s/ G. Jeffrey Bohne By: /s/ Philip R. McLoughlin
- -------------------------------- --------------------------------------
G. Jeffrey Bohne Name: Philip R. McLoughlin
Secretary Title: President
PHOENIX MULTI-PORTFOLIO, on behalf of the
Phoenix-Seneca Mid Cap Fund
ATTEST:
/s/ G. Jeffrey Bohne By: /s/ Philip R. McLoughlin
- -------------------------------- --------------------------------------
G. Jeffrey Bohne Name: Philip R. McLoughlin
Secretary Title: President
A-10
<PAGE>
PROXY PHOENIX-SENECA MID CAP FUND PROXY
a series of
Phoenix Multi-Portfolio Fund
101 Munson Street
Greenfield, Massachusetts 01301
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
February 25, 2000
The undersigned shareholder of the Phoenix-Seneca Mid Cap Fund, revoking any and
all previous proxies heretofore given for shares of the Phoenix-Seneca Mid Cap
Fund held by the undersigned, does hereby appoint Philip R. McLoughlin and
Pamela S. Sinofsky, each and any of them, with full power of substitution each,
to be the attorneys and proxies of the undersigned, to attend the special
meeting of the shareholders of Phoenix-Seneca Mid Cap Fund to be held on the
25th day of February, 2000, at 10:00 a.m., local time, at the offices of Phoenix
Multi-Portfolio Fund, 101 Munson Street, Greenfield, Massachusetts 01301, and
any adjournments thereof and to represent and direct shares of each class of the
Phoenix-Seneca Mid Cap Fund held by the undersigned as of the record date for
the meeting for the proposal specified on the reverse side.
To avoid the expense of adjourning the Meeting to a subsequent date, please
return this proxy in the enclosed self-addressed, postage-paid envelope. In the
alternative, you may vote by telephone by calling toll-free 1-877-778-8883 and
following the recorded instructions. Prompt voting by shareholders will save the
Fund and shareholders the costs associated with further solicitation.
This proxy, if properly executed, will be voted in the manner as directed herein
by the undersigned shareholder. Unless otherwise specified in the boxes
provided, the undersigned's vote will be cast "FOR" the proposal. If no
direction is made for the proposal, this proxy will be voted "FOR" the proposal.
In their discretion, the proxies are authorized to transact and vote upon such
other matters and business as may come before the meeting or any adjournments
thereof.
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
PHOENIX-SENECA MID CAP FUND
- --------------------------------------------------------------------------------
CONTROL NUMBER:
Please be sure to sign and date this Proxy.
Date
Shareholder sign here Co-owner sign here
1. To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization, dated August 27, 1999, and the transactions it contemplates
including (a) the transfer of all or substantially all of the assets of the
Phoenix-Seneca Mid Cap Fund to the Phoenix-Seneca Strategic Theme Fund in
exchange solely for shares of the corresponding class of the Strategic Theme
Fund and the assumption by the Strategic Theme Fund of all the liabilities
of the Mid Cap Fund and (b) the distribution of the shares of the Strategic
Theme Fund so received to shareholders of the Mid Cap Fund.
For Against Abstain
[ ] [ ] [ ]
2. To consider and act upon any other business as may properly come before the
meeting and any adjournment thereof.
To avoid the expense of adjourning the meeting to a subsequent date, please
return this proxy in the enclosed self-addressed postage-paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF PHOENIX
MULTI-PORTFOLIO FUND, WHICH RECOMMENDS A VOTE FOR THE PROPOSAL.
RECORD DATE SHARES:
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
PHOENIX-SENECA MID CAP FUND
a series of
Phoenix Multi-Portfolio Fund
101 Munson Street
Greenfield, Massachusetts 01301
(800) 243-1574
By and in Exchange for Shares of
PHOENIX-SENECA STRATEGIC THEME FUND
a series of
Phoenix Strategic Equity Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
(800) 243-1574
This Statement of Additional Information, relating specifically to the
proposed transfer of all or substantially all of the assets and all the
liabilities of the Phoenix-Seneca Mid Cap Fund, a series of Phoenix
Multi-Portfolio Fund, to the Phoenix-Seneca Strategic Theme Fund, a portfolio
series of Phoenix Strategic Equity Series Fund, in exchange for shares of the
corresponding class of the Strategic Theme Fund, consists of this cover page and
the following described documents, each of which is attached hereto and
incorporated by reference herein:
(1) the Statement of Additional Information of Phoenix Strategic
Equity Series Fund dated August 27, 1999;
(2) the Statement of Additional Information of Phoenix
Multi-Portfolio Fund dated March 30, 1999;
(3) the Annual Report of Phoenix Strategic Equity Series Fund for
the year ended April 30, 1999;
(4) the Annual Report of Phoenix Multi-Portfolio Fund for the year
ended November 30, 1998;
(5) the Semiannual Report of Phoenix Multi-Portfolio Fund for the
six-month period ended May 31, 1999; and
(6) the Pro Forma Financial Statements.
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus/Proxy
Statement dated December _, 1999. A copy of the Prospectus/Proxy Statement may
be obtained without charge by contacting Equity Planning, at 100 Bright Meadow
Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200 or by
telephoning Equity Planning toll free at 1 (800) 243-4361.
The date of this Statement of Additional Information is December _,
1999.
2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Statement of Additional Information of Phoenix Strategic Equity Series Fund
dated August 27, 1999 B-
Statement of Additional Information of Phoenix Multi-Portfolio Fund dated
March 30, 1999 B-
Annual Report of the Phoenix Strategic Equity Series Fund for the year ended
April 30, 1999 B-
Annual Report of Phoenix Multi-Portfolio Fund for the year ended
November 30, 1998 B-
Semi-Annual Report of Phoenix Multi-Portfolio Fund for the six-month
period ended May 31, 1999 B-
Pro Forma Financial Statements.
</TABLE>
3
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
PHOENIX STRATEGIC THEME FUND
PHOENIX SMALL CAP FUND
101 Munson Street
Greenfield, MA 01301
STATEMENT OF ADDITIONAL INFORMATION
August 27, 1999
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of the
Phoenix Strategic Equity Series Fund (the "Trust"), dated August 27, 1999, and
should be read in conjunction with it. The Trust's Prospectus may be obtained by
calling Phoenix Equity Planning Corporation ("Equity Planning") at (800)
243-4361 or by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O.
Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
PAGE
----
THE TRUST.................................................................. 1
INVESTMENT OBJECTIVES AND POLICIES......................................... 1
INVESTMENT RESTRICTIONS.................................................... 1
INVESTMENT TECHNIQUES...................................................... 2
PERFORMANCE INFORMATION ................................................... 8
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 10
SERVICES OF THE ADVISERS................................................... 11
NET ASSET VALUE............................................................ 12
HOW TO BUY SHARES.......................................................... 12
ALTERNATIVE PURCHASE ARRANGEMENTS.......................................... 12
INVESTOR ACCOUNT SERVICES.................................................. 15
HOW TO REDEEM SHARES....................................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................... 17
TAX SHELTERED RETIREMENT PLANS............................................. 18
THE DISTRIBUTOR............................................................ 19
DISTRIBUTION PLANS......................................................... 20
MANAGEMENT OF THE TRUST ................................................... 22
ADDITIONAL INFORMATION..................................................... 29
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PXP731 (8/99)
<PAGE>
THE TRUST
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 Trust's Prospectus describes the investment objectives of
the Phoenix Equity Opportunities Fund (the "Equity Opportunities Fund"), the
Phoenix-Seneca Strategic Theme Fund (the "Theme Fund"), and the Phoenix-Engemann
Small Cap Fund (the "Small Cap Fund"). The Equity Opportunities Fund, Theme Fund
and Small Cap Fund are sometimes collectively referred to as the "Funds." The
following discussion supplements the description of these Funds and investment
policies and investment techniques in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
As discussed in the Prospectus, the investment objective of each Fund 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 Fund. Investment
restrictions described in this Statement of Additional Information are
fundamental policies of each Fund and may not be changed as to any Fund without
the approval of such Fund's shareholders. There is no assurance that any Fund
will meet its investment objective.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
The following investment restrictions constitute fundamental policies of each
Fund (unless otherwise indicated) which may be changed only upon approval by the
holders of a majority of the outstanding shares of each Fund's shareholders. No
Fund may:
1. Borrow money, except that the Theme Fund and Small Cap Fund may borrow money
for investment purposes, provided that any such borrowing for investment
purposes with respect to such Fund is (a) authorized by the Trustees prior to
any public distribution of the shares of such Fund or is authorized by the
shareholders of such Fund thereafter, (b) is limited to 33 1/3% of the value of
the total assets (taken at market value) of such Fund, and (c) is subject to an
agreement by the lender that any recourse is limited to the assets of that Fund
with respect to which the borrowing has been made;
2. Underwrite the securities of others;
3. Deal in real estate (including real estate limited partnerships) except that
any Fund 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 Fund 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 Trust or the
Adviser, subject to conditions established by the Adviser (see "Lending of
Securities") and enter into repurchase transactions (in accordance with the
Trust'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 Fund 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 Fund would be
invested in securities of a single issuer;
13. Purchase any security if, as a result, more than 10% of any class of
securities or more than 10% of the outstanding voting securities of any issuer
would be held;
14. Purchase any security for the Equity Opportunities Fund 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 Fund 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 Trust 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 Trust 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 Fund's 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.
In addition, the Theme Fund may invest in preferred stocks, investment grade
bonds (Moody's Baa or higher or S&P's BBB or higher), convertible preferred
stocks and convertible debentures if in the judgement of the Adviser the
investment would further its investment objective.
INVESTMENT TECHNIQUES
The Funds may utilize the following practices or techniques in pursuing its
investment objectives.
REPURCHASE AGREEMENTS
Repurchase Agreements are agreements by which the Funds 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 Funds
maintained in a central depository of book-entry system or by physical delivery
of the securities to the Trust's custodian in return for delivery of the
purchase price to the seller. Repurchase transactions are intended to be
short-term transactions with the seller repurchasing the securities, usually
within seven days.
Even though repurchase transactions usually do not impose market risks on the
purchasing Fund, if the seller of the repurchase agreement defaults and does not
repurchase the underlying securities, the Fund might incur a loss if the value
of the underlying securities declines, and disposition costs may be incurred in
connection with liquidating the underlying securities. In addition, if
bankruptcy proceedings are commenced regarding the seller, realization upon the
underlying securities may be delayed or limited, and a loss may be incurred if
the underlying securities decline in value.
SECURITIES AND INDEX OPTIONS
All Funds 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 Fund normally will
have expiration dates between three and nine months from the date written.
During the option period a Fund may be assigned an exercise notice by the
broker-dealer through which the call option was sold, requiring the Fund to
deliver the underlying security (or cash in the case of securities index calls)
against payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time as the Fund effects a
closing purchase transaction. A closing purchase transaction cannot be effected
with respect to an option once the Fund has received an exercise notice.
The exercise price of a call option written by a Fund may be below, equal to
or above the current market value of the underlying security or securities index
at the time the option is written.
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,
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and Gold/Silver Index. A Fund may write call options and purchase call and put
options on any other indices traded on a recognized exchange.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option written by a Fund to prevent an underlying
security from being called, or to enable a Fund to write another call option
with either a different exercise price or expiration date or both. A Fund may
realize a net gain or loss from a closing purchase transaction depending upon
whether the amount of the premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. If a call option
written by a Fund expires unexercised, a Fund will realize a gain in the amount
of the premium on the option less the commission paid.
The option activities of a Fund may increase its portfolio turnover rate and
the amount of brokerage commissions paid. A Fund will pay a commission each time
it purchases or sells a security in connection with the exercise of an option.
These commissions may be higher than those which would apply to purchases and
sales of securities directly.
LIMITATIONS ON OPTIONS. A Fund may write call options only if they are
covered and if they remain covered so long as a Fund is obligated as a writer.
If a Fund writes a call option on an individual security, a Fund will own the
underlying security at all times during the option period. A Fund will write
call options on indices only to hedge in an economically appropriate way
portfolio securities which are not otherwise hedged with options or financial
futures contracts. Call options on securities indices written by a Fund will be
"covered" by identifying the specific portfolio securities being hedged.
To secure the obligation to deliver the underlying security, the writer of a
covered call option on an individual security is required to deposit the
underlying security or other assets in escrow with the broker in accordance with
clearing corporation and exchange rules. In the case of an index call option
written by a Fund, a Fund will be required to deposit qualified securities. A
"qualified security" is a security against which a Fund has not written a call
option and which has not been hedged by a Fund by the sale of a financial
futures contract. If at the close of business on any day the market value of the
qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts, a Fund will deposit an amount of cash
or liquid assets equal in value to the difference. In addition, when a Fund
writes a call on an index which is "in-the-money" at the time the call is
written, a Fund will segregate with its custodian bank cash or liquid assets
equal in value to the amount by which the call is "in-the-money" times the
multiplier times the number of contracts. Any amount segregated may be applied
to a Fund's obligation to segregate additional amounts in the event that the
market value of the qualified securities falls below 100% of the current index
value times the multiplier times the number of contracts.
A Fund may invest up to 5% of its total assets in exchange-traded or
over-the-counter call and put options. A Fund may sell a call option or a put
option which it has previously purchased prior to the purchase (in the case of a
call) or the sale (in the case of a put) of the underlying security. Any such
sale of a call option or a put option would result in a net gain or loss,
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid.
In connection with a Fund qualifying as a regulated investment company under
the Internal Revenue Code, other restrictions on a Fund's ability to enter into
option transactions may apply from time to time. See "Dividends, Distributions
and Taxes."
RISKS RELATING TO OPTIONS. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that a Fund may lose
the premium it paid plus transaction costs. If a Fund does not exercise the
option and is unable to close out the position prior to expiration of the
option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although a Fund will write
and purchase options only when the Adviser believes that a liquid secondary
market will exist for options of the same series, there can be no assurance that
a liquid secondary market will exist for a particular option at a particular
time and that a Fund, if it so desires, can close out its position by effecting
a closing transaction. If the writer of a covered call 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.
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Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written on one or more
accounts or through one or more brokers). An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions. The Adviser believes that the position limits
established by the exchanges will not have any adverse impact upon a Fund or all
of the Funds, in the aggregate.
RISKS OF OPTIONS ON INDICES. Because the value of an index option depends
upon movements in the level of the index rather than movements in the price of a
particular security, whether a Fund will realize a gain or loss on the purchase
or sale of an option on an index depends upon movements in the level of prices
in the market generally or in an industry or market segment rather than upon
movements in the price of an individual security. Accordingly, successful use by
a Fund of options on indices will be subject to the Adviser's ability to predict
correctly movements in the direction of the market generally or in the direction
of a particular industry. This requires different skills and techniques than
predicting changes in the prices of individual securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, a Fund would not be able to
close out options which it had written or purchased and, if restrictions on
exercise were imposed, might be unable to exercise an option it purchased, which
would result in substantial losses to a Fund. However, it is the Trust's policy
to write or purchase options only on indices which include a sufficient number
of securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, a Fund will write call options on indices only subject to the
limitations described above.
Price movements in securities in a Fund's portfolio will not correlate
perfectly with movements in the level of the index and, therefore, a Fund bears
the risk that the price of the securities held by the Fund may not increase as
much as the level of the index. In this event, the Fund would bear a loss on the
call which would not be completely offset by movements in the prices of a Fund's
portfolio securities. It is also possible that the index may rise when the value
of a Fund's portfolio securities does not. If this occurred, the Fund would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and might also experience a loss in the market value of
portfolio securities.
Unless a Fund has other liquid assets which are sufficient to satisfy the
exercise of a call on an index, a Fund will be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be settled
within hours after receiving the notice of exercise, if a Fund fails to
anticipate an exercise, 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 Fund has written a call on an index, there is also a risk that the
market may decline between the time a Fund has the call exercised against it, at
a price which is fixed as of the closing level of the index on the date of
exercise, and the time a Fund is able to sell securities in its portfolio. As
with options on portfolio securities, a Fund will not learn that a call has been
exercised until the day following the exercise date but, unlike a call on a
portfolio security where a Fund would be able to deliver the underlying security
in settlement, a Fund may have to sell part of its portfolio securities in order
to make settlement in cash, and the price of such securities might decline
before they could be sold.
If a Fund exercises a put option on an index which it has purchased before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money" a Fund will be required
to pay the difference between the closing index value and the exercise price of
the option (multiplied by the applicable multiplier) to the assigned writer.
Although a Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS
Each Fund may use financial futures contracts and related options to hedge
against changes in the market value of its portfolio securities or securities
which it intends to purchase. Hedging is accomplished when an investor takes a
position in the futures market opposite to his cash market position. There are
two types of hedges--long (or buying) and short (or selling) hedges.
Historically, prices in the futures market have tended to move in concert with
cash market prices, and prices in the futures market have maintained a fairly
predictable relationship to prices in the cash market. Thus, a decline in the
market value of securities in a Fund's portfolio may be protected against to a
considerable extent by gains realized on futures contracts sales. Similarly, it
is possible to protect against an increase in the market price of securities
which a Fund may wish to purchase in the future by purchasing futures contracts.
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These Funds may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade. Financial futures contracts
consist of interest rate futures contracts and securities index futures
contracts. A public market presently exists in interest rate futures contracts
covering long-term U.S. Treasury bonds, U.S. Treasury notes, three-month U.S.
Treasury bills and GNMA certificates. Securities index futures contracts are
currently traded with respect to the Standard & Poor's 500 Composite Stock Price
Index and such other broad-based stock market indices as the New York Stock
Exchange Composite Stock Index and the Value Line Composite Stock Price Index. A
clearing corporation associated with the exchange or board of trade on which a
financial futures contract trades assumes responsibility for the completion of
transactions and also guarantees that open futures contracts will be performed.
In contrast to the situation when such Fund purchases or sells a security, no
security is delivered or received by these Funds upon the purchase or sale of a
financial futures contract. Initially, these Funds 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 Fund will pay commissions on financial futures contracts and related
options transactions. These commissions may be higher than those which would
apply to purchases and sales of securities directly.
LIMITATIONS ON FUTURES CONTRACTS AND RELATED OPTIONS. A Fund may not engage
in transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of its portfolio securities or securities which it intends to
purchase. A Fund may not purchase or sell financial futures contracts or related
options if, immediately thereafter, the sum of the amount of initial margin
deposits on that Fund's existing futures and related options positions and the
premiums paid for related options would exceed 5% of the market value of that
Fund's total assets after taking into account unrealized profits and losses on
any such contracts. At the time of purchase of a futures contract or a call
option on a futures contract, any asset, including equity securities and
noninvestment grade debt so long as the asset is liquid, unencumbered and marked
to market daily ("liquid assets"), equal to the market value of the futures
contract minus a Fund's initial margin deposit with respect thereto will be
deposited in a pledged account with the Trust's custodian bank to collateralize
fully the position and thereby ensure that it is not leveraged.
The extent to which a Fund may enter into financial futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code 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 Fund 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 Fund would continue to be required to make daily margin payments. In
this situation, if a Fund has insufficient cash to meet daily margin
requirements it may have to sell portfolio securities at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to take or make
delivery of the securities underlying the futures contracts it holds. The
inability to close out futures positions also could have an adverse impact on a
Fund's ability to hedge its portfolio effectively.
There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also preclude a hedger's opportunity to benefit from a
favorable
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market movement. In addition, investing in futures contracts and options on
futures contracts will cause a Fund to incur additional brokerage commissions
and may cause an increase in a Fund's portfolio turnover rate.
The successful use of futures contracts and related options also depends on
the ability of the Adviser to forecast correctly the direction and extent of
market movements within a given time frame. To the extent market prices remain
stable during the period a futures contract or option is held by a Fund or such
prices move in a direction opposite to that anticipated, a Fund may realize a
loss on the hedging transaction which is not offset by an increase in the value
of its portfolio securities. As a result, a Fund's return for the period may be
less than if it had not engaged in the hedging transaction.
Utilization of futures contracts by a Fund involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are being hedged. If the price of the futures
contract moves more or less than the price of the securities being hedged, a
Fund will experience a gain or loss which will not be completely offset by
movements in the price of the securities. It is possible that, where a Fund has
sold futures contracts to hedge its portfolio against decline in the market, the
market may advance and the value of securities held in a Fund's portfolio may
decline. If this occurred, a Fund would lose money on the futures contract and
would also experience a decline in value in its portfolio securities. Where
futures are purchased to hedge against a possible increase in the prices of
securities before a Fund is able to invest its cash (or cash equivalents) in
securities (or options) in an orderly fashion, it is possible that the market
may decline; if a Fund then determines not to invest in securities (or options)
at that time because of concern as to possible further market decline or for
other reasons, a Fund will realize a loss on the futures that would not be
offset by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in the
futures market 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 Fund
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to a Fund while the purchase
or sale of the futures contract would not have resulted in a loss, such as when
there is no movement in the price of the underlying securities.
LEVERAGE
The Funds may, from time to time, increase the Theme Fund's and Small Cap
Fund's ownership of securities holdings above the amounts otherwise possible by
borrowing from banks at fixed amounts of interest and investing the borrowed
funds. These Funds will borrow only from banks, and only if immediately after
such borrowing the value of the assets of these Funds (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 Funds to borrow up to 33 1/3% of the net assets of
these Funds, 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 Fund's assets computed as provided above becomes at any time less
than three times the amount of the borrowings for investment purposes, these
Funds, 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 Funds with respect to
which the borrowing has been made. Because such expense would not otherwise be
incurred, the net investment income of such Funds is not expected to be as high
as it otherwise would be during periods when borrowings for investment purposes
are substantial.
Bank borrowings for investment purposes must be obtained on an unsecured
basis. Any such borrowing must also be made subject to an agreement by the
lender that any recourse is limited to the assets of the Fund with respect to
which the borrowing has been made.
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of these Funds' 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 Funds, the net
asset value of these Funds will decrease faster than would otherwise be the
case.
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FOREIGN SECURITIES
Each of the Funds 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 Fund (provided,
however, the Theme Fund may invest up to 35% of its total assets in the
securities of foreign issuers). Investments in foreign securities, particularly
those of nongovernmental issuers, involve considerations which are not
ordinarily associated with investing in domestic issues. These considerations
include changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under foreign
securities markets, the impact of political, social or diplomatic developments,
difficulties in invoking legal process abroad and the difficulty of assessing
economic trends in foreign countries.
The Trust may use a foreign custodian in connection with its purchases of
foreign securities and may maintain cash and cash equivalents in the care of a
foreign custodian. The amount of cash or cash equivalents maintained in the care
of eligible foreign custodians will be limited to an amount reasonably necessary
to effect the Funds' foreign securities transactions. The use of a foreign
custodian invokes considerations which are not ordinarily associated with
domestic custodians. These considerations include the possibility of
expropriations, restricted access to books and records of the foreign custodian,
inability to recover assets that are lost while under the control of the foreign
custodian, and the impact of political, social or diplomatic developments.
LOWER RATED CONVERTIBLE SECURITIES
Convertible securities which are not rated in the four highest categories, in
which a Fund may invest, are predominantly speculative with respect to the
issuer's capacity to repay principal and interest and may include issues on
which the issuer defaults.
LENDING PORTFOLIO SECURITIES
In order to increase its return on investments, the Theme Fund and Small Cap
Fund 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 Fund's 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 Fund 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 Fund 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 Fund 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 Fund. The Trust's
custodian bank will be instructed to pledge liquid assets 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 Fund's commitments with respect to such contracts. Generally, no
Fund 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 Fund 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 Fund 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 Fund 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 Fund would not have to exercise
its call but could acquire in the spot market the amount of foreign currency
needed for settlement.
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FOREIGN CURRENCY FUTURES TRANSACTIONS. Each Fund may use foreign currency
futures contracts and options on such futures contracts. Through the purchase or
sale of such contracts, a Fund 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 Fund will maintain in a pledged account any asset,
including equity securities and noninvestment 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 Fund will
not enter into a futures contract or purchase an option thereon if immediately
thereafter the initial margin deposits for futures contracts (including foreign
currency and all other futures contracts) held by the Fund plus premiums paid by
it for open options on futures would exceed 5% of the Fund's total assets. No
Fund 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 Fund 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 Fund 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 Fund 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 Fund should be considered as a long-term investment and not as a
vehicle for seeking short-term profits, nor should an investment in the Fund 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 Fund's shares. The Fund 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 Funds anticipate increasing their
exposure, the Funds 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 Funds 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 each of the Funds, industry classifications are established by reference
to the Directory of Companies Filing Annual Reports published by the SEC.
PERFORMANCE INFORMATION
The Funds may, from time to time, include total return in advertisements or
reports to shareholders or prospective investors. Performance information in
advertisements and sales literature may be expressed as the yield of a Class or
Fund and as the total return of any Class or Fund.
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Standardized quotations of average annual total return for each Class of
Shares of a Fund will be expressed in terms of the average annual compounded
rate of return for a hypothetical investment in such Class of Shares of a Fund
over periods of 1, 5 and 10 years or up to the life of a Fund, calculated for
each Class separately pursuant to the following formula: P(1 + T)(n) = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of a proportional share of each Class's
expenses (on an annual basis), deduction of the maximum initial sales load in
the case of Class A Shares and the maximum contingent deferred sales charge
applicable to a complete redemption of the investment in the case of Class B and
Class C Shares, and assume that all dividends and distributions are reinvested
when paid. Performance data quoted for Class C Shares covering periods prior to
the inception of Class C Shares will reflect historical performance of Class A
Shares adjusted for the higher operating expenses applicable to Class C Shares.
The Funds 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 Funds 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 Business 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 Funds
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 Funds
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 Funds and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Funds to
respond quickly to changing market and economic conditions. From time to time,
the Funds may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Funds 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 Fund's portfolio; or compare a 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 Fund for the 1, 5 and 10 year periods ended April
30, 1999, the average annual total return of the Class A Shares was 11.52%,
15.49% and 12.78%, respectively. Class B average annual total return for the 1
year period and since inception July 19, 1994 to April 30, 1999 was 12.34% and
16.34%, respectively. The Theme Fund's 1 year average annual return and since
inception October 16, 1995 to April 30, 1999 for Class A shares was 38.03% and
26.05% and, for Class B Shares was 40.14% and 26.57%, respectively. The Theme
Fund's Class C Shares 1 year average annual total return and since inception
November 3, 1997 to April 30, 1999 was 43.87% and 34.41%, respectively. The
Small Cap Fund's 1 year average annual return and from inception October 16,
1995 to April 30, 1999 for Class A shares was (10.14)% and 20.57% and for Class
B Shares was (9.84)% and 20.98%, respectively. Performance information reflects
only the performance of a hypothetical investment in each Class during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objectives
and policies, characteristics and quality of the portfolio, and the market
condition during the given time period, and should not be considered as a
representation of what may be achieved in the future.
The Funds may also compute aggregate cumulative total return for specified
periods based on a hypothetical Class A, Class B or Class C account with an
assumed initial investment of $10,000. The aggregate total return is determined
by dividing the net asset value of this account at the end of the specified
period by the value of the initial investment and is expressed as a percentage.
Calculation of aggregate total return reflects payment of the Class A Shares'
maximum sales charge of 4.75% and assumes reinvestment of all income dividends
and capital gain distributions during the period. Based on the foregoing for the
Equity Opportunities Fund, the Class A Share's aggregate cumulative total return
quotation for the period commencing August 1, 1944 and ending April 30, 1999 was
33,789.44%.
The Funds also may quote annual, average annual and annualized total return
and aggregate total return performance data, for each Class of shares of the
Funds, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such data
will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate rate
of return calculations.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser and/or Subadviser places orders for the purchase and sale of
securities, supervises their execution and negotiates brokerage commissions on
behalf of the Funds. It is the practice of the Adviser and/or Subadviser to seek
the best prices and execution of orders and to negotiate brokerage commissions
which the Adviser's and/or Subadviser's opinion are reasonable in relation to
the value of the brokerage services provided by the executing broker. Brokers
who have executed orders for the Funds are asked to quote a fair commission for
their services. If the execution is satisfactory and if the requested rate
approximates rates currently being quoted by the other brokers selected by the
Adviser and/or Subadviser, the rate is deemed by the Adviser and/or Subadviser
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 Funds an unusually favorable
trading opportunity, or if the broker regards its research services as being of
exceptional value, and payment of such commissions is authorized by the Adviser
and/or Subadviser after the transaction has been consummated. If the Adviser
and/or Subadviser more than occasionally differs with the broker's appraisal of
opportunity or value, the broker would not be selected to execute trades in the
future.
The Adviser and/or Subadviser believes that the Funds benefit with a
securities industry comprised of many and diverse firms and that the long-term
interest of shareholders of the Funds is best served by its brokerage policies
which include paying a fair commission rather than seeking to exploit its
leverage to force the lowest possible commission rate. The primary factors
considered in determining the firms to which brokerage orders are given are the
Adviser's and/or Subadviser's appraisal of: the firm's ability to execute the
order in the desired manner; the value of research services provided by the
firm; and the firm's attitude toward and interest in mutual funds in general,
including the sale of mutual funds managed and sponsored by the Adviser and/or
Subadviser. The Adviser and/or Subadviser does not offer or promise to any
broker an amount or percentage of brokerage commissions as an inducement or
reward for the sale of shares of the Funds. Over-the-counter purchases and sales
are transacted directly with principal market-makers except in those
circumstances where in the opinion of the Adviser and/or Subadviser better
prices and execution are available elsewhere.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry
groups, and individual issues. Research services will vary from firm to firm,
with broadest coverage generally from the large full-line firms. Smaller firms
in general tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor federal,
state, local and foreign political developments; many of the brokers also
provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's and/or Subadviser's staff since the brokers
as a group tend to monitor a broader universe of securities and other matters
than the Adviser's and/or Subadviser's staff can follow. In addition, it
provides the Adviser and/or Subadviser 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/or Subadviser and is available for the
benefit of other accounts advised by the Adviser and/or Subadviser and its
affiliates and not all of this information will be used in connection with the
Trust. While this information may be useful in varying degrees and may tend to
reduce the Adviser's and/or Subadviser's expenses, it is not possible to
estimate its value and in the opinion of the Adviser and/or Subadviser it does
not reduce the Adviser's and/or Subadviser's expenses in a determinable amount.
The extent to which the Adviser and/or Subadviser makes use of statistical,
research and other services furnished by brokers is considered by the Adviser
and/or Subadviser in the allocation of brokerage business but there is no
formula by which such business is allocated. The Adviser and/or Subadviser does
so in accordance with its judgment of the best interest of the Trust and its
shareholders.
The Trust has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser and/or Subadviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is inconsistent with its
duty to seek best execution (which shall include the duty to seek best price)
for the Trust. No advisory account of the Adviser and/or Subadviser 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 and/or Subadviser in that security on a given
business day, with all transaction costs shared pro rata based on the Trust's
participation in the transaction. If the aggregated order is filled in its
entirety, it shall be allocated among the Adviser's and/or Subadviser'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 and/or
Subadviser 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 and/or Subadviser'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.
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<PAGE>
A high rate of Portfolio turnover involves a correspondingly higher amount of
brokerage commissions and other costs which must be borne directly by the Trust
and indirectly by shareholders.
During the fiscal years ended April 30, 1997, 1998 and 1999, brokerage
commissions paid by the Funds totalled $2,686,635, $3,579,420 and $2,087,042,
respectively. During the same periods, no commissions were paid to the
Distributor. Brokerage commissions of $246,907 paid during the fiscal year ended
April 30, 1999 were paid on portfolio transactions aggregating $216,628,082
executed by brokers who provided research and other statistical and factual
information.
SERVICES OF THE ADVISERS
The investment adviser to the Fund is Phoenix Investment Counsel, Inc. ("PIC"
or "Adviser"), which is located at 56 Prospect Street, Hartford, Connecticut
06115-0480. PIC also acts as the investment adviser for 14 other mutual funds,
as subadviser to three mutual funds, and as adviser to institutional clients.
PIC has acted as an investment adviser for over sixty years. PIC was originally
organized in 1932 as John P. Chase, Inc. As of December 31, 1998, PIC had
approximately $23.9 billion in assets under management. Philip R. McLoughlin, a
Trustee and officer of the Fund, is a director of PIC. All other executive
officers of the Fund are officers of PIC.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning" or "Distributor"), a subsidiary of Phoenix
Investment Partners, Ltd. ("PXP"). PXP is a New York Stock Exchange traded
company that provides investment management and related services to
institutional investors, corporations and individuals through operating
subsidiaries. Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life")
of Hartford, Connecticut is a majority shareholder of PXP. 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. Equity Planning, a mutual fund distributor, acts as the
national distributor of the Fund's shares and as Financial Agent of the Fund.
The principal office of Equity Planning is located at 100 Bright Meadow
Boulevard, Enfield, Connecticut, 06082.
PXP is a publicly-traded independent registered investment advisory firm and
has served investors for over 70 years. It manages over $57 billion in assets
(as of March 31, 1998) through its investment partners: Aberdeen Fund Managers,
Inc. (Aberdeen) in Aberdeen, London, Singapore and Fort Lauderdale; Duff &
Phelps Investment Management Co. (Duff & Phelps) in Chicago and Cleveland; Roger
Engemann & Associates, Inc. (Engemann) in Pasadena; Seneca Capital Management
LLC (Seneca) in San Francisco; Zweig/Glaser Advisers (Zweig) in New York; and
Phoenix Investment Counsel, Inc. (Goodwin, Hollister, and Oakhurst divisions) in
Hartford, Sarasota and Scotts Valley, CA, respectively.
Roger Engemann & Associates, Inc. ("Engemann") is the investment subadviser
to the fund and is located at 600 North Rosemead Boulevard, Pasadena, California
91107. Engemann acts as adviser to six mutual funds, as subadviser to four other
mutual funds and acts as investment adviser to institutions and individuals. As
of December 31, 1998, Engemann had $5.9 billion in assets under management.
Engemann has been an investment adviser since 1969.
Seneca Capital Management LLC ("Seneca") is the investment subadviser to the
fund and is located at 909 Montgomery Street, San Francisco, California 94133.
Seneca acts as a subadviser to nine other mutual funds and as investment adviser
to institutions and individuals. As of December 31, 1998, Seneca had $5.9
billion in assets under management. Seneca has been (with its predecessor,
GMG/Seneca Capital Management LP ("GMG/Seneca")) an investment adviser since
1989.
The Adviser provides certain services and facilities required to carry on the
day-to-day operations of the Funds (for which it receives 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 Trust's registration statement (but the
Distributor purchases such copies of the Funds' prospectuses and reports and
communications to shareholders as it may require for sales purposes); insurance
expense; association membership dues; brokerage fees; and taxes. Each Fund will
pay expenses incurred in its own operation and will also pay a portion of the
Trust's administration expenses allocated on the basis of the asset values of
the respective Fund.
As compensation for its services, PIC receives a fee from the Equity
Opportunities Fund, which is accrued daily against the value of the Fund's net
assets and is paid by the Fund monthly. The fee is computed at an annual rate of
.70% of the Fund's average daily net assets of up to $1 billion, .65% of the
Fund's average daily net assets from $1 billion to $2 billion, and .60% of the
Fund's average net assets in excess of $2 billion. As compensation for its
services, PIC receives a fee from the Theme Fund and the Small Cap Fund which is
accrued daily against the value of each Fund's net assets and is paid by the
Fund monthly. The fee is computed at an annual rate of 0.75% of the average
daily net asset values of each Fund 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 1997, and 1998 and 1999, the combined management
fees paid by the Funds were $4,145,821, $4,953,597 and $4,367,229, respectively.
The Management Agreement for Equity Opportunities Fund was approved by the
Trustees on March 16, 1993 and by the shareholders of the Equity Opportunities
Fund on April 30, 1993. Effective June 1, 1998, National Securities & Research
Corporation ("National") assigned its investment advisory agreement for the
Equity Opportunities Fund to PIC and PIC now serves as the Adviser to the Fund.
PIC and National are both subsidiaries of PXP. The Management Agreement for
Strategic
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Theme and Small Cap Funds was approved by the Trustees 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 or (b) vote of a
majority of the outstanding securities of the Trust (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 Trust 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 Trust 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 Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Since the Funds do not price securities on
weekends or United States national holidays, the net asset value of a Fund's
foreign assets may be significantly affected on days when the investor has no
access to the Funds. The net asset value per share of a Fund is determined by
adding the values of all securities and other assets of the Fund, subtracting
liabilities, and dividing by the total number of outstanding shares of the Fund.
Assets and liabilities are determined in accordance with generally accepted
accounting principles and applicable rules and regulations of the Securities and
Exchange Commission. The total liability allocated to a Class, plus that Class's
distribution fee and any other expenses allocated solely to that Class, are
deducted from the proportionate interest of such Class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that Class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Fund which invests in
foreign securities contemporaneously with the determination of the prices of the
majority of the portfolio securities of such Fund. All assets and liabilities
initially expressed in foreign currency values will be converted into United
States dollar values at the mean between the bid and ask quotations of such
currencies against United States dollars as last quoted by any recognized
dealer. If an event were to occur after the value of an investment was so
established but before the net asset value per share was determined, which was
likely to materially change the net asset value, then the instrument would be
valued using fair value considerations by the Trustees or their delegates. If at
any time a Fund has investments where market quotations are not readily
available, such investments are valued at the fair value thereof as determined
in good faith by the Trustees although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.
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.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their net
asset value per share, plus a sales charge which, at the election of the
purchaser, may be imposed either (i) at the time of the purchase (the "initial
sales charge alternative") or (ii) on a contingent deferred basis (the "deferred
sales charge alternative").
The alternative purchase 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 a Fund, the accumulated continuing
distribution and services
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<PAGE>
fees 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 Shares purchased at the same time. NOTE, ONLY THE THEME FUND OFFERS
CLASS C SHARES.
Dividends paid by the Funds, 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 and services fees 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 ongoing distribution and service fees at an annual rate of
up to 0.25% of the Funds' 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.
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.
Class B Shares are subject to ongoing distribution and service fees at an
aggregate annual rate of up to 1.00% of the Funds' aggregate average daily net
assets attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment is
made. The higher ongoing distribution and services fees 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. The purpose of the conversion feature is to relieve the holders of
the Class B Shares that have been outstanding for a period of time sufficient
for the adviser and the Distributor to have been compensated for distribution
expenses related to the Class B Shares from most of the burden of such
distribution related expenses.
Class B Shares include all shares purchased, pursuant to the deferred sales
charge alternative, which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution and service fees. 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
subaccount. Each time any Class B Shares in the shareholder's Fund account
(other than those in the subaccount) convert to Class A, an equal pro rata
portion of the Class B Share dividends in the subaccount will also convert to
Class A Shares.
CLASS C SHARES (THEME FUND ONLY)
Class C Shares are purchased without an initial sales charge but are subject
to a deferred sales charge if redeemed within one year of purchase. The deferred
sales charge may be waived in connection with certain qualifying redemptions.
Shares issued in conjunction with the automatic reinvestment of income
distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to an ongoing distribution and services fee
at an aggregate annual rate of up to 1.00% of the Fund's aggregate average daily
net assets attributable to Class C Shares. See the Funds' current Prospectus for
more information.
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 Shares: (1)
trustee, director or officer of the Phoenix Funds, the Phoenix-Engemann Funds,
Phoenix-Seneca Funds or any other mutual fund advised, subadvised or distributed
by the Adviser, Distributor or any of their corporate affiliates (an "Affiliated
Phoenix Fund"); (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 or any other Affiliated 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, Fund
company, or bank Fund 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
13
<PAGE>
$1,000,000; (15) any person who is investing redemption proceeds from investment
companies other than the Phoenix Funds or any other Affiliated Phoenix Fund 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 or any other Affiliated Phoenix Fund trustee
or director; provided that sales to persons listed in (1) through (16) 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 Shares bought through investment advisers
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; (19) 401(k) participants
in the Merrill Lynch Daily K Plan (the "Plan") if the Plan has at least $3
million in assets or 500 or more eligible employees; (20) 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 (20) 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 Affiliated 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.
An "Affiliated Phoenix Fund" means any other mutual fund advised, subadvised
or distributed by the Adviser or Distributor or any corporate affiliate of
either or both the Adviser and Distributor provided such other mutual fund
extends reciprocal privileges to shareholders of the Phoenix Fund.
LETTER OF INTENT. If you sign a Letter of Intent, your purchase of any class
of shares of this or any other Affiliated Phoenix Fund (other than Phoenix Money
Market Fund Series Class A Shares), if made by the same person within a 13-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. The Distributor will redeem restricted Class A 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 Affiliated 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.
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<PAGE>
CLASS B SHARES--WAIVER OF SALES CHARGES
The CDSC is waived on the redemption (sale) of Class B 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 70 1/2 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)
from the Merrill Lynch Daily K Plan ("Plan") invested in Class B Shares, in
which such shares the Distributor has not paid the dealer the Class B sales
commission; (f) based on the exercise of exchange privileges among Class B
Shares of this or any other Affiliated Phoenix Fund; (g) based on any direct
rollover transfer of shares from an established Affiliated Phoenix Fund
qualified plan into an Affiliated Phoenix Fund IRA by participants terminating
from the qualified plan; and (h) based on the systematic withdrawal program. 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 Shares are not redeemed within one year of the death, they will
remain subject to the applicable CDSC.
CONVERSION FEATURES--CLASS B SHARES
Class B Shares will automatically convert to Class A Shares of the same
Portfolio eight years after they are purchased. 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 Fund was 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 Fund.
INVESTOR ACCOUNT SERVICES
The Funds offer accumulation plans, withdrawal plans and reinvestment and
exchange privileges. Certain privileges may not be available in connection with
all classes. In most cases, changes to account services may be accomplished over
the phone. Inquiries regarding policies and procedures relating to shareholder
account services should be directed to Shareholder Services at (800) 243-1574.
EXCHANGES
Under certain circumstances, shares of any Affiliated Phoenix Fund may be
exchanged for shares of the same Class of another Affiliated Phoenix Fund on the
basis of the relative net asset values per share at the time of the exchange.
Exchanges are subject to the minimum initial investment requirement of the
designated Fund or Series, 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 Affiliated
Phoenix Fund, if currently offered. Exchanges will be based upon each fund's net
asset value per share next computed after the close of business, without sales
charge. 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 Affiliated Phoenix Fund automatically on a
monthly, quarterly, semiannual 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 Affiliated 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.
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 Affiliated Phoenix Funds at
net asset value. You should obtain a current prospectus and consider the
objectives and policies of each fund carefully before directing dividends and
distributions to another fund. Reinvestment election forms and prospectuses are
available from Equity
15
<PAGE>
Planning. Distributions may also be mailed to a second payee and/or address.
Requests for directing distributions to an alternate payee must be made in
writing with a signature guarantee of the registered owner(s). To be effective
with respect to a particular dividend or distribution, notification of the new
distribution option must be received by the Transfer Agent at least three days
prior to the record date of such dividend or distribution. If all shares in your
account are repurchased or redeemed or transferred between the record date and
the payment date of a dividend or distribution, you will receive cash for the
dividend or distribution regardless of the distribution option selected.
INVEST-BY-PHONE
This expedited investment service allows a shareholder to make an investment
in an account by requesting a transfer of funds from the balance of their bank
account. Once a request is phoned in, Equity Planning will initiate the
transaction by wiring a request for monies to the shareholder's commercial bank,
savings bank or credit union via Automated Clearing House (ACH). The
shareholder's bank, which must be an ACH member, will in turn forward the monies
to Equity Planning for credit to the shareholder's account. ACH is a computer
based clearing and settlement operation established for the exchange of
electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application and
attach a voided check if applicable. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) shareholders may call toll free
(800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. The Fund may delay the mailing of a check for redemption
proceeds of Fund shares purchased with a check or via Invest-by-Phone service
until the Fund has assured itself that good payment has been collected for the
purchase of the shares, which may take up to 15 days. The Fund and Equity
Planning reserve the right to modify or terminate the Invest-by-Phone service
for any reason or to institute charges for maintaining an Invest-by-Phone
account.
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 Fund worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. The purchase
of shares while participating in the withdrawal program will ordinarily be
disadvantageous to the Class A Shares investor since a sales charge will be paid
by the investor on the purchase of Class A Shares at the same time as other
shares are being redeemed. For this reason, investors in Class A Shares may not
participate in an automatic investment program while participating in the
Systematic Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any applicable
contingent deferred sales charge on all shares redeemed. Accordingly, the
purchase of Class B Shares will generally not be suitable for an investor who
anticipates withdrawing sums in excess of the above limits shortly after
purchase.
HOW TO REDEEM SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Trust to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days or more after
receipt of the check. See the Funds' current Prospectus for further information.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized
16
<PAGE>
designee, accepts the order. Customer orders will be priced at the Funds' net
asset values next computed after they are accepted by an authorized broker or
the broker's authorized designee.
Redemptions by Class B and Class C shareholders will be subject to the
applicable deferred sales charge, if any.
REDEMPTION OF SMALL ACCOUNTS
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the giving
of not less than 30 days written notice to the shareholder mailed to the address
of record. During the 60 day period the shareholder has the right to add to the
account to bring its value to $200 or more. See the Funds' current Prospectus
for more information.
BY MAIL
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written request
to Equity Planning that the Trust redeem the shares. See the Funds' current
Prospectus for more information.
TELEPHONE REDEMPTIONS
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Funds' current Prospectus for
additional information.
REDEMPTION IN KIND
To the extent consistent with state and federal law, the Fund may make
payment of the redemption price either in cash or in kind. However, the Fund has
elected to pay in cash all requests for redemption by any shareholder of record,
limited in respect to each shareholder during any 90-day period to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of such
period. This election has been made pursuant to Rule 18f-1 under the Investment
Company Act of 1940 and is irrevocable while the Rule is in effect unless the
Securities and Exchange Commission, by order, permits the withdrawal thereof. In
case of a redemption in kind, securities delivered in payment for shares would
be readily marketable and valued at the same value assigned to them in computing
the net asset value per share of the Fund. A shareholder receiving such
securities would incur brokerage costs when he sold the securities.
REINVESTMENT PRIVILEGE
Shareholders who may have overlooked features of their investment at the time
they redeemed have a privilege of reinvestment of their investment at net asset
value. See the Funds' current Prospectus for more information and conditions
attached to this privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund 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 Fund will not be subject
to federal income tax on such part of its ordinary income and net realized
capital gains which it distributes to shareholders provided it meets certain
distribution requirements. To qualify for treatment as a regulated investment
company, each Fund 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 Fund 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 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 Fund's net capital gains
for the 12-month period ending on October 31 of such calendar year. In addition,
an amount equal to any undistributed investment company taxable income or
capital gain net income from the previous 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 Fund has taxable income that would be subject to the excise
tax, the Fund intends to distribute such income so as to avoid payment of the
excise tax.
Under another provision of the Code, any dividend declared by the Funds 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 Fund
before February 1 of the following year.
The Funds' 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 Fund
intends to meet the other requirements of Part I of subchapter M, including the
17
<PAGE>
requirements with respect to diversification of assets and sources of income, so
that each Fund 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 Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund are
disposed of within 90 days after the date on which they were acquired and new
shares of a regulated investment company are acquired without a sales charge or
at a reduced sales charge. In that case, the gain or loss realized on the
disposition will be determined by excluding from the tax basis of the shares
disposed of all or a portion of the sales charge incurred in acquiring those
shares. This exclusion applies to the extent that the otherwise applicable sales
charge with respect to the newly acquired shares is reduced as a result of the
shareholder having incurred a sales charge initially. The portion of the sales
charge affected by this rule will be treated as a sales charge paid for the new
shares.
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value of a share below a
shareholder's cost for the 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 Fund. The
price of shares purchased at that time may include the amount of the forthcoming
distribution, but the distribution generally would be taxable to them.
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 Fund
during a taxable year or held by a Fund 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 Funds reserve the right to refuse to open an account for any
person failing to provide a taxpayer identification number along with the
required certifications.
Each Fund 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 are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA,
401(k), Profit-Sharing, Money Purchase Pension Plans and 403(b) Retirement
Plans. Write or call Equity Planning (800) 243-4361 for further information
about the plans.
MERRILL LYNCH DAILY K PLAN
Class A Shares of a Fund are made available to Merrill Lynch Daily K Plan
(the "Plan") participants at NAV without an initial sales charge if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch and,
on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service
Agreement, the Plan has $3 million or more in assets invested in broker/dealer
funds not advised or managed by Merrill Lynch Asset Management L.P. ("MLAM")
that are made available pursuant to a Service Agreement between Merrill Lynch
and the fund's principal underwriter or distributor and in funds advised or
managed by MLAM (collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or alliance
arrangement with Merrill Lynch, and, on the date the Plan Sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or more
in assets, excluding money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by a Merrill
Lynch plan conversion manager, on the date the Plan Sponsor signs the Merrill
Lynch Recordkeeping Service Agreement.
Alternatively, Class B Shares of a Fund are made available to Plan
participants at NAV without a CDSC if the Plan conforms with the requirements
for eligibility set forth in (i) through (iii) above but either does not meet
the $3 million asset threshold or does not have 500 or more eligible employees.
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<PAGE>
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing in
Class B Shares of a Fund convert to Class A Shares once the Plan has reached $5
million invested in Applicable Investments, or after the normal holding period
of seven years from the initial date of purchase.
THE DISTRIBUTOR
Phoenix Equity Planning Corporation (the "Equity Planning" or "Distributor"),
an indirect, less than wholly-owned subsidiary of Phoenix Home Life and an
affiliate of PIC, serves as Distributor for the Funds. The address of the
Distributor is 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut
06083-2200. 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 1997, 1998 and
1999, purchasers of Fund shares paid aggregate sales charges of $4,241,930,
$2,025,485 and $1,723,056, respectively, of which the Distributor for the Funds
received net commissions of $736,095, $1,058,952 and $1,279,374, respectively,
for its services, the balance being paid to dealers. For the fiscal year ended
April 30, 1999, the Distributor received net commissions of $55,140 for Class A
Shares and deferred sales charges of $1,224,234 for Class B and Class C Shares.
The Underwriting Agreement may be terminated at any time on not more than 60
days written notice, without payment of a penalty, by the Distributor, by vote
of a majority of the outstanding voting securities of the Trust, or by vote of a
majority of the Trustees who are not "interested persons" of the Trust and who
have no direct or indirect financial interest in the operation of the
Distribution Plans or in any related agreements.
The Underwriting Agreement will terminate automatically in the event of its
assignment.
DEALER CONCESSIONS
Dealers with whom the Distributor has entered into sales agreements receive a
discount or commission as described below.
<TABLE>
<CAPTION>
Amount of
Transaction Sales Charge as a percentage Sales Charge as a percentage Dealer Discount
at Offering Price of Offering Price of Amount Invested Percentage of Offering Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
In addition to the dealer discount on purchases of Class A 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. This sales commission will not be paid to
dealers for sales of Class B or Class C Shares purchased by 401(k) participants
of the Merrill Lynch Daily K Plan (the "Plan") due to waiver of the CDSC for
these Plan participants' purchases. 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
Fund and/or for providing other shareholder services. Such fees are in addition
to the sales commissions referenced above and may be based upon the amount of
sales of fund shares by a dealer; the provision of assistance in marketing of
fund shares; access to sales personnel and information dissemination services;
provision of recordkeeping and administrative services to qualified employee
benefit plans; and other criteria as established by the Distributor. Depending
on the nature of the services, these fees may be paid either from the Fund
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
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. From its own profits
and resources, the Distributor intends to pay the following additional
compensation to Merrill Lynch, Pierce, Fenner & Smith, Inc.: 0.25% on sales of
Class A and B shares, 0.10% on sales of Class C shares, 0.10% on sales of Class
A shares
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<PAGE>
sold at net asset value, and 0.10% annually on the average daily net
asset value of fund shares on which Merrill Lynch is broker of record and which
such shares exceed the amount of assets on which Merrill Lynch is broker of
record as of July 1, 1999. Any dealer who receives more than 90% of a sales
charge may be deemed to be an "underwriter" under the Securities Act of 1933.
Equity Planning reserves the right to discontinue or alter such fee payment
plans at any time.
ADMINISTRATIVE SERVICES
Equity Planning also acts as administrative agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Funds. For
services as financial agent, Equity Planning will be paid a fee equal to the sum
of (1) the documented cost of fund accounting and related services provided by
PFPC, Inc., as subagent, to the financial agent, plus (2) the documented cost of
the financial agent to provide financial reporting and tax services and
oversight of the subagent's performance. The current fee schedule of PFPC, Inc.
is based upon the average of the aggregate daily net asset values of each Fund,
at the following incremental annual rates:
First $200 million .085%
$200 million to $400 million .05%
$400 million to $600 million .03%
$600 million to $800 million .02%
$800 million to $1 billion .015%
Greater than $1 billion .0125%
Percentage rates are applied to the aggregate daily net asset values of the
Funds. PFPC, Inc. also charges minimum fees and additional fees for each
additional class of fund shares. Equity Planning retains PFPC, Inc. as subagent
for each of the funds for which Equity Planning serves as financial agent. PFPC,
Inc. agreed to a modified fee structure and waived certain charges. Because
PFPC, Inc.'s arrangement would have favored smaller funds over larger funds,
Equity Planning reallocates PFPC, Inc.'s overall asset-based charges among all
funds for which it serves as financial agent on the basis of the relative net
assets of each fund. As a result, the PFPC, Inc. charges to the Funds are
expected to be slightly less than the amount that would be found through direct
application of the table illustrated above. For its services during the Trust's
fiscal year ended April 30, 1999, Equity Planning received $523,541.
DISTRIBUTION PLANS
The Trust has adopted separate amended and restated distribution plans under
Rule 12b-1 of the 1940 Act for each Class of Shares of each Fund of the Trust
(the "Class A Plan," the "Class B Plan," the "Class C Plan," and collectively
the "Plans"). The Plans permit the Trust 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 Trust and to pay the Distributor for
providing shareholder services.
Pursuant to the Plans, the Funds will pay the Distributor 0.25% annually of
the average daily net assets of the Funds for furnishing services to
shareholders (the "Service Fee") and will reimburse the Distributor for actual
expenses of the Distributor up to 0.75% of the average daily net assets of the
Funds' Class B Shares and Class C Shares, respectively. Expenditures under the
Plans shall consist of: (i) commissions to sales personnel for selling shares of
the Funds (including underwriting fees and financing expenses incurred in
connection with 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
agreements with the Distributor in the form of the Dealer Agreement for Phoenix
Funds for services rendered in connection with the sale and distribution of
shares of the Funds; (iv) payment of expenses incurred in sales and promotional
activities, including advertising expenditures related to the Funds; (v) the
costs of preparing and distributing promotional materials; (vi) the cost of
printing the Funds' Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees determine are reasonably calculated to result in the sale of shares
of the Funds.
From the Service Fee the Distributor expects to pay a quarterly fee to
qualifying broker/dealer firms, as compensation for providing personal services
and/or the maintenance of shareholder accounts, with respect to shares sold by
such firms. This fee will not exceed on an annual basis 0.25% of the average
annual net asset value of such shares, and will be in addition to sales charges
on Fund shares which are reallowed to such firms. To the extent that the entire
amount of the Service Fee is not paid to such firms, the balance will serve as
compensation for personal and account maintenance services furnished by the
Distributor. The Distributor also pays to dealers as additional compensation
with respect to Class C Shares, 0.75% of the average annual net asset value of
that class.
From its own resources or pursuant to the Plan, and subject to the dealers'
prior approval, the Distributor may provide additional compensation to
registered representatives of dealers in the form of travel expenses, meals, and
lodging associated with training and educational meetings sponsored by the
Distributor. The Distributor may also provide gifts amounting in value to less
than $100, and occasional meals or entertainment, to registered representatives
of dealers. Any such travel expenses, meals, lodging, gifts or entertainment
paid will not be preconditioned upon the registered representatives' or dealers'
20
<PAGE>
achievement of a sales target. The Distributor may, from time to time, reallow
the entire portion of the sales charge on Class A shares 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.
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 Funds' shareholders; or services providing the Funds 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 Funds having fewer assets and the Distributor
incurring greater promotional expenses during the start-up phase. No amounts
paid or payable by the Funds 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 Funds. The other Plans, however, do 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 Funds to make payments to the Distributor pursuant to the
Plans will cease and the Funds will not be required to make any payments past
the date on which each Plan terminates.
On a quarterly basis, the 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 Trustees and by a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of the Plans
or any related agreements (the "Plan Trustees"). The Plans provide that they may
not be amended to increase materially the costs which the Funds may bear
pursuant to the Plans without approval of the shareholders of the Funds 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 Trust.
For the fiscal year ended April 30, 1999, the Funds paid Rule 12b-1 Fees in
the amount of $2,812,308, of which the principal underwriter received
$1,607,602, W.S. Griffith & Co., Inc., an affiliate, received $121,999 and
unaffiliated broker-dealers received $1,082,707. 12b-1 Fees paid by the Funds
during last fiscal year were spent on: (1) advertising, $387,276; (2) printing
and mailing of prospectuses to other than current shareholders, $14,070; (3)
compensation to dealers, $1,705,506; (4) compensation to sales personnel,
$932,692; (5) service costs, $143,929 and (6) other, $160,291. The Distributor's
expenses from selling and servicing Class B Shares may be more than the payments
received from contingent deferred sales charges collected on redeemed shares and
from the Fund under the Class B Plan. Those expenses may be carried over and
paid in future years. At December 31, 1998, the end of the last Plan year,
Distributor had incurred unreimbursed expenses under the Class B Plan of
$3,830,970 (equal to 0.63% of the Fund's net assets) which have been carried
over into the present Class B Plan year.
No interested person of the Fund and no Director who is not an interested
person of the Fund, as that term is defined in the Investment Company Act of
1940, had any direct or indirect financial interest in the operation of the
Plans.
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.
21
<PAGE>
MANAGEMENT OF THE TRUST
The Trust is an open-end management investment company known as a mutual
fund. The Trustees of the Trust ("Trustees") are responsible for the overall
supervision of the Trust and perform duties imposed on Trustees by the
Investment Company Act and Massachusetts business trust law.
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust 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 Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
Robert Chesek (64) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company (1980-1994).
E. Virgil Conway (69) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Freddie Mac Mortgage
Securities Fund (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present), The Harlem Youth Development Foundation
(1987-present) (Chairman, 1998-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 Academy of Political Science (Vice
Chairman) (1985-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). Member, Audit
Committee of the City of New York (1981-1996). Advisory Director,
Blackrock Fannie Mae Mortgage Securities Fund (1989-1996) and Fund
Directions (1993-1998). Chairman, Financial Accounting Standards
Advisory Council (1992-1995).
Harry Dalzell-Payne (69) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Apartment 29G Mutual Funds (1996-present). Director, Duff & Phelps Utilities Tax-Free
New York, NY 10022 Income Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director, Farragut Mortgage Co., Inc. (1991-1994).
Formerly a Major General of the British Army.
*Francis E. Jeffries (68) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps Institutional
Apt. 1601 Mutual Funds (1996-present). Director, Duff & Phelps Utilities Income
Naples, FL 33963 Inc. (1987-present), Duff & Phelps Utilities Tax-Free Income Inc.
(1991-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1993-present). Director, The Empire District Electric Company
(1984-present). Director (1989-1997), Chairman of the Board
(1993-1997), President (1989-1993), and Chief Executive Officer
(1989-1995), Phoenix Investment Partners, Ltd.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
Leroy Keith, Jr. (60) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Carson Products Company Institutional Mutual Funds (1996-present). Director, Equifax Corp.
64 Ross Road (1991-present) and Evergreen International Fund, Inc. (1989-present).
Savannah, GA 30750 Trustee, Evergreen Liquid Trust, Evergreen Tax Exempt Trust,
Evergreen 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).
*Philip R. McLoughlin (52) Trustee and Chairman (1997-present), Director (1995-present), Vice Chairman
President (1995-1997) and Chief Executive Officer (1995-present), Phoenix
Investment Partners, Ltd. 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,
Townsend Financial Advisers, Inc. (1992-present), Director, PHL
Associates, Inc. (1995-present).
Everett L. Morris (70) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, N.J. 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1993-present).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
*James M. Oates (52) Trustee Chairman, IBEX Capital Markets, Inc. (formerly, IBEX Capital Markets
Managing Director LLC) (1997-present). Managing Director, Wydown Group (1994-present).
The Wydown Group Director, Phoenix Investment Partners, Ltd. (1995-present).
IBEX Capital Markets LLC Director/Trustee, Phoenix Funds (1987-present). Trustee,
60 State Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Suite 950 Mutual Funds (1996-present). Director, AIB Govett Funds (1991-present),
Boston, MA 02109 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), Stifel
Financial (1996-present), Command Systems, Inc. (1998-present) and
Connecticut River Bancorp (1998-present). Vice Chairman, Massachusetts
Housing-Partnership (1998-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 (57) Trustee Director (1986-present), President (1993-present) and Executive Vice
Phoenix Investment President (1992-1993), Phoenix Investment Partners, Ltd. Director/
Partners, Ltd. Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
55 East Monroe Street Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
Suite 3600 (1996-present). President and Chief Executive Officer, Duff & Phelps
Chicago, IL 60603 Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps
Utilities Income Inc. (1994-present) and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present).
Herbert Roth, Jr. (70) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
P.O. Box 909 Mutual Funds (1996-present). Director, Boston Edison Company
Sherborn, MA 01770 (1978-present), Phoenix Home Life Mutual Insurance Company
(1972-1998), Landauer, Inc. (medical services) (1970-present), Tech
Ops./ Sevcon, Inc. (electronic controllers) (1987-present), and Mark
IV Industries (diversified manufacturer) (1985-present). Member,
Directors Advisory Council, Phoenix Home Life Mutual Insurance
Company (1998-present). Director, Key Energy Group (oil rig service)
(1988-1994).
Richard E. Segerson (53) Trustee Managing Director, Northway Management Company (1998-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). Managing Director, Mullin Associates
(1993-1998).
Lowell P. Weicker, Jr. (67) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Greenwich, CT 06830 Mutual Funds (1996-present). Director, UST Inc. (1995-present), HPSC
Inc. (1995-present), Duty Free International, Inc. (1997-present) and
Compuware (1996-present) and Burroughs Wellcome Fund (1996-present).
Visiting Professor, University of Virginia (1997-present). Chairman,
Dresing, Lierman, Weicker (1995-1996). Governor of the State of
Connecticut (1991-1995).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
Michael E. Haylon (41) Executive Director and Executive Vice President--Investments, Phoenix Investment
Vice Partners, Ltd. (1995-present). Executive Vice President, Phoenix
President Funds (1993-present) and Phoenix-Aberdeen Series Fund (1996-present).
Executive Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds. Director
(1994-present), President (1995-present), Executive Vice President
(1994-1995), Vice President (1991-1994), Phoenix Investment Counsel,
Inc. Director (1994-present), President (1996-present), Executive Vice
President (1994-1996), Vice President (1993-1994), National Securities
& Research Corporation. Director, Phoenix Equity Planning Corporation
(1995-present). Senior Vice President, Securities Investments, Phoenix
Home Life Mutual Insurance Company (1993-1995). Various other
positions with Phoenix Home Life Mutual Insurance Company (1990-1993).
John F. Sharry (46) Executive Executive Vice President, Phoenix Strategic Allocation Fund, Inc.
Vice (1998-present). Managing Director, Retail Distribution
President (1995-present). Executive Vice President, Phoenix Funds
(1998-present), Phoenix-Aberdeen Series Funds (1998-present), and
Phoenix Multi-Portfolio Fund (1998-present). Managing Director,
Director and National Sales Manager, Putnam Mutual Funds (until 1995).
J. Roger Engemann (57) Senior Vice President and Director, Roger Engemann & Associates, Inc.
President (1969-present). President and Director, Pasadena Capital Corporation
(1988-present). Chairman, President and Trustee, Phoenix-Engemann
Funds (1986-present). President and Director, Roger Engemann
Management Co., Inc. (1985-present). Managing Director, Equities,
Phoenix Investment Counsel, Inc. (1998-present). Senior Vice
President, The Phoenix Edge Series Fund and Phoenix Series Fund
(1998-present).
Gail P. Seneca (42) Senior Vice Managing Director, Equities, Phoenix Investment Counsel, Inc. and
909 Montgomery St. President National Securities & Research Corporation (1998-present). President
San Francisco, CA 94133 and Trustee (1996-present), Phoenix-Seneca Funds. Managing Member
(1996-present), GMG/Seneca Capital Management LLC. Chief Investment
Officer and managing general partner (1989-present), GMG/Seneca
Capital Management, L.P.
Ronald K. Jacks (30) Vice President Managing Director, Equities, Phoenix Investment Counsel, Inc. and
909 Montgomery St. National Securities & Research Corporation (1998-present). Secretary
San Francisco, CA 94133 (1996-present) and Trustee (1996-1997), Phoenix-Seneca Funds.
Portfolio Manager (1996-present), Seneca Capital Management LLC.
Portfolio Manager (1990-present), GMG/Seneca Capital Management, L.P.
Richard D. Little (49) Vice President Managing Director, Equities, Phoenix Investment Counsel, Inc. and
909 Montgomery St. National Securities & Research Corporation (1998-present). Vice
San Francisco, CA 94133 President, Phoenix-Seneca Funds (1996-present). General Partner and
Director of Equities, GMG/Seneca Capital Management, L.P.
(1989-present), Director of Equities, Seneca Capital Management LLC.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
James E. Mair (56) Vice President Executive Vice President (1994-present), Senior Vice President
(1983-1994), Roger Engemann & Associates, Inc. Director
(1990-present), Executive Vice President (1994-present), Senior Vice
President (1990-1994), Pasadena Capital Corporation. Director,
Pasadena National Trust (1989-present). Executive Vice President
(1994-present), Security Analyst (1985-1994), Roger Engemann
Management Co., Inc. Managing Director, Equities, Phoenix Investment
Counsel, Inc. (1998-present). Senior Vice President, The Phoenix Edge
Series Fund and Phoenix Series Fund (1998-present).
William R. Moyer (54) Vice President Senior Vice President and Chief Financial Officer, Phoenix Investment
100 Bright Meadow Blvd. Partners, Ltd. (1995-present). Director (1998-present), Senior Vice
P.O. Box 2200 President, Finance (1990-present), Chief Financial Officer
Enfield, CT 06083-2200 (1996-present), and Treasurer (1994-1996 and 1998-present), Phoenix
Equity Planning Corporation. Director (1998-present), Senior Vice
President (1990-present), Chief Financial Officer (1996-present) and
Treasurer (1994-present), Phoenix Investment Counsel, Inc. Director
(1998-present), 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). Vice President,
Investment Products Finance, Phoenix Home Life Mutual Insurance
Company (1990-1995). 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).
Leonard J. Saltiel (44) Vice President Managing Director, Operations and Service (1996-present), Senior Vice
President (1994-1996), Phoenix Equity Planning Corporation. Vice
President, Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Vice President, Investment Operations, Phoenix
Home Life Mutual Insurance Company (1994-1995). Various positions
with Phoenix Home Life Mutual Insurance Company (1987-1994).
John S. Tilson (54) Vice President Executive Vice President (1994-present), Senior Vice President
(1983-1994), Roger Engemann & Associates, Inc. Director (1990-present),
Executive Vice President (1994-present), Senior Vice President
(1990-1994), Pasadena Capital Corporation. Chief Financial Officer and
Secretary, Phoenix-Engemann Funds (1988-present). Executive Vice
President (1994-present), Security Analyst (1985-1994), Roger Engemann
Management Co., Inc. Managing Director, Equities, Phoenix Investment
Counsel, Inc. (1998-present). Senior Vice President, The Phoenix Edge
Series Fund and Phoenix Series Fund (1998-present).
G. Jeffrey Bohne (50) Secretary Vice President and General Manager, Phoenix Home Life Mutual Insurance
101 Munson Street Co. (1993-present). Vice President, Mutual Fund Customer Service,
Greenfield, MA 01301 Phoenix Equity Planning Corporation (1993-present). Secretary/Clerk,
Phoenix Funds (1993-present), Clerk, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present).
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------- -------------- -----------------------
<S> <C> <C>
Nancy G. Curtiss (45) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer, Phoenix
Funds (1994-present), Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present) and Phoenix-Aberdeen Series Fund (1996-present). Second
Vice President and Treasurer, Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with Phoenix Home Life
Mutual Insurance Company (1987-1994).
</TABLE>
- -------------------
*Indicates that the Trustee is an "interested person" of the Trust within the
meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
For services rendered to the Trust for the fiscal year ended April 30, 1999,
the Trustees received aggregate remuneration of $______. 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 $2,000 and $2,000 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 Trust.
For the Trust's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (14 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ----- --------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Robert Chesek $ * $
E. Virgil Conway+ $ $
Harry Dalzell-Payne+ $ $
Francis E. Jeffries $ * $
Leroy Keith, Jr. $ None None $
Philip R. McLoughlin+ $ for any for any $
Everett L. Morris+ $ Trustee Trustee $
James M. Oates+ $ $
Calvin J. Pedersen $ $
Herbert Roth, Jr. + $ $
Richard E. Segerson $ $
Lowell Weicker, Jr. $ $
*This compensation (and the earnings thereon) will be deferred pursuant to the Directors' Deferred Compensation Plan. At April 30,
1998, the total amount of deferred compensation (including interest and other accumulation earned on the original amounts
deferred) accrued for Messrs. Chesek, Jeffries, Morris and Roth was $_______, $_______, $_______ and $_______, respectively. At
present, by agreement among the Trust, the Distributor and the electing director, director fees that are deferred are paid by the
Trust 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.
</TABLE>
On August ___, 1999, the Trustees and officers of the Fund beneficially owned
less than 1% of the outstanding shares of the Trust.
27
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of August __, 1999 with respect
to each person who owns of record or is known by the Trust to own of record or
beneficially owns 5% or more of any Class of the Trust's equity securities.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER FUND AND CLASS NUMBER OF SHARES PERCENT OF CLASS
- -------------------- -------------- ---------------- ----------------
<S> <C> <C> <C>
TTEES of Phoenix Savings & Investment Plan Theme Fund Class A
100 Bright Meadow Blvd
PO Box 1900
Enfield CT 06083-1900
Trustees of APP for Company Contributions Theme Fund Class A
100 Bright Meadow Blvd
PO Box 1900
Enfield CT 06083-1900
Merrill Lynch Pierce Fenner & Smith Theme Fund Class B
For the Sole Benefit of its Customers
Attn Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville FL 32246-6484
Painewebber CDN FBO Theme Fund Class C
Vivian Lorman
P.O. Box 3321
Weehawken NJ 07087-8154
Painewebber for the Benefit of Theme Fund Class C
Stephanie Berger
225 West 12 Street #4E
New York NY 10011-7757
Painewebber for the Benefit of Theme Fund Class C
Jay L Aldrich and Sandra D Aldrich #2 JTWROS
10543 SW 129 PL
Miami FL 33186-3549
Painewebber for the Benefit of Theme Fund Class C
Luane Hirschman
20505 E Country Club Drive
Apt # 1131
Aventura FL 33180-3039
Painewebber for the Benefit of Theme Fund Class C
Harriet Sperry
520 A Autumn Crest Circle
Colorado Springs CO 80919-8157
Painewebber for the Benefit of Theme Fund Class C
Ilona Kinast as Custodian for Issac Salis
Under The PA Uniform Gifts to Minors Act
2528 Mt Royal Rd
Pittsburgh PA 15217-2542
State Street Bank & Trust Co Theme Fund Class C
Roth Converted IRA 1/1/98
Elizabeth L Thisius
RR 1 PO Box 58
Wells MN 56097-0058
Painewebber for the Benefit of Theme Fund Class C
Nancy L Setola and Camille J Garcia JTWROS
273 Florida Ave
Miami Springs FL 33166-4901
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER FUND AND CLASS NUMBER OF SHARES PERCENT OF CLASS
- -------------------- -------------- ---------------- ----------------
<S> <C> <C> <C>
Phoenix Home Life Theme Fund Class M
56 Prospect St
Hartford CT 06103-2818
Phoenix Investment Counsel Equity Opportunities
100 Bright Meadow Blvd Fund Class B
Enfield CT 06082-1957
Merrill Lynch Pierce Fenner & Smith Small Cap Fund Class B
For the Sole Benefit of its Customers
Attn Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville FL 32246-6484
</TABLE>
ADDITIONAL INFORMATION
CAPITAL STOCK
The Trust was organized under Massachusetts law in 1986 as a business trust.
On August 29, 1986, the Trust 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 Trust continued
the business of the Stock Series under the name "National Stock Fund." The
Trustees subsequently voted to change the name of the Trust 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 Trust to "Phoenix Strategic Equity Series Fund."
The Declaration of Trust provides that the Trust'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
Trust. The Equity Opportunities Fund and the Small Cap Fund offer Class A and
Class B Shares. The Strategic Theme Fund offers Class A, Class B, Class C Shares
and a fourth Class, Class M Shares, which is closed to new investors and
subsequent investments by existing shareholders.
The shares of the Trust, 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
Trust voting for the election of Trustees can elect all of the Trustees of the
Trust if they choose to do so and in such event the holders of the remaining
shares would not be able to elect any Trustees. Shareholders are entitled to
redeem their shares as set forth under "How to Redeem Shares."
The Declaration of Trust establishing the Trust, 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 Trust'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 Trust 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 Trust, but the "Trust Property" only shall be
liable.
FINANCIAL STATEMENTS
The Financial Statements for the fiscal year ended April 30, 1998 appearing
in the Trust's 1998 Annual Report to Shareholders, are incorporated herein by
reference.
REPORTS TO SHAREHOLDERS
The fiscal year of the Trust ends on April 30th. The Trust 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.
29
<PAGE>
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, serves as
independent accountants for the Trust (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"), P.O. Box 351, Boston,
MA 02101, serves as custodian of the Trust's assets (the "Custodian") and Equity
Planning acts as Transfer Agent for the Trust (the "Transfer Agent"). As
compensation, Equity Planning receives a fee equivalent to $17.95 for each
designated shareholder account plus out-of-pocket expenses. Transfer Agent fees
are also utilized to offset costs and fees paid to subtransfer agents employed
by Equity Planning. State Street serves as a subtransfer agent pursuant to a
Subtransfer Agency Agreement.
30
<PAGE>
[Version A]
PHOENIX-ABERDEEN INTERNATIONAL FUND
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES FUND
PHOENIX-GOODWIN EMERGING MARKETS BOND FUND
PHOENIX-GOODWIN TAX-EXEMPT BOND FUND
PHOENIX-SENECA MID CAP FUND
101 Munson Street
Greenfield, Massachusetts 01301
STATEMENT OF ADDITIONAL INFORMATION
March 30, 1999
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Multi-Portfolio Fund (the "Trust"), dated March 30, 1999, and should be
read in conjunction with it. The Trust's Prospectus may be obtained by calling
Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or by
writing to Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, CT 06083-2200.
TABLE OF CONTENTS
PAGE
THE TRUST ............................................................... 1
INVESTMENT OBJECTIVES AND POLICIES ...................................... 1
INVESTMENT RESTRICTIONS ................................................. 14
PERFORMANCE ............................................................. 15
PERFORMANCE COMPARISONS ................................................. 17
PORTFOLIO TURNOVER ...................................................... 17
PORTFOLIO TRANSACTIONS .................................................. 17
THE INVESTMENT ADVISERS ................................................. 18
DETERMINATION OF NET ASSET VALUE ........................................ 20
HOW TO BUY SHARES ....................................................... 21
ALTERNATIVE PURCHASE ARRANGEMENTS ....................................... 21
INVESTOR ACCOUNT SERVICES ............................................... 24
HOW TO REDEEM SHARES .................................................... 25
TAX SHELTERED RETIREMENT PLANS .......................................... 26
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 26
THE DISTRIBUTOR ......................................................... 29
DISTRIBUTION PLANS....................................................... 30
MANAGEMENT OF THE TRUST.................................................. 31
ADDITIONAL INFORMATION .................................................. 39
APPENDIX................................................................. 41
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device (TTY): (800) 243-1926
PXP468 (3/99)
<PAGE>
THE TRUST
Phoenix Multi-Portfolio Fund (the "Trust") is an open-end management
investment company which was organized under Massachusetts law in 1987 as a
Massachusetts business trust.
The Trust's Prospectus describes the investment objectives of the
Phoenix-Goodwin Tax-Exempt Bond Fund (the "Bond Fund"), the Phoenix-Seneca Mid
Cap Fund (the "Mid Cap Fund"), the Phoenix-Aberdeen International Fund (the
"International Fund"), the Phoenix-Goodwin Emerging Markets Bond Fund (the
"Emerging Markets Fund") and the Phoenix-Duff & Phelps Real Estate Securities
Fund (the "Real Estate Fund"), (each, a "Fund" and, together, the "Funds"), five
of the Funds currently offered by the Trust, and summarizes the investment
policies and investment techniques each Fund will employ in seeking to achieve
its investment objective. (A separate prospectus and Statement of Additional
Information apply to Phoenix-Goodwin Strategic Income Fund.) The following
discussion supplements the description of the Funds' investment policies and
investment techniques in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Fund is deemed to be a fundamental policy
and may not be changed without the approval of the shareholders of that Fund.
Investment restrictions described in this Statement of Additional Information
are fundamental policies of the Trust and may not be changed as to any Fund
without the approval of such Fund's shareholders.
MUNICIPAL SECURITIES
As described more fully in the Prospectus, the Bond Fund intends under normal
conditions to invest at least 80% of its net assets in municipal securities. As
used in the Prospectus and this Statement of Additional Information, the term
"municipal securities" means obligations, including municipal bonds and notes
and tax-exempt commercial paper, issued by or on behalf of states, territories
and possessions of the United States, the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from which
is, in the opinion of counsel to the issuers of such securities, exempt from
federal income tax. To the extent that an investment in municipal securities
does not run counter to any of the investment policies of the Bond Fund or any
of the investment restrictions to which the Bond Fund is subject, the Bond Fund
may invest in any combination of the various types of municipal securities
described below which, in the judgment of Phoenix Investment Counsel, Inc.
("PIC"), the investment adviser to the Bond, Mid Cap and International Funds
will contribute to the attainment of the Bond Fund's investment objective. Such
combination of municipal securities may vary from time to time. The two
principal classes of municipal securities are municipal bonds and municipal
notes.
Municipal Bonds. Municipal bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have two principal
classifications: general obligation bonds and revenue bonds. Another type of
municipal bond is referred to as an industrial development bond. These three are
discussed below.
General Obligation Bonds. Issuers of general obligation bonds include states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
Revenue Bonds. The principal security for a revenue bond is generally the net
revenues derived from a particular facility, group of facilities, or, in some
cases, the proceeds of a special excise or other specific revenue source.
Revenue bonds are issued to finance a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may
be used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security, including partially
or fully insured mortgages, rent subsidized and/or collateralized mortgages,
and/or the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without obligation)
to make up deficiencies in the debt service reserve fund.
Industrial Development Bonds. Industrial development bonds, which are
considered municipal bonds if the interest paid is exempt from federal income
tax, are issued by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing, housing,
sports arenas and pollution control. These bonds are also used to finance public
facilities such as airports, mass transit systems, ports and parking. The
payment of the principal and interest on such bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and the pledge,
if any, of real and personal property so financed as security for such payment.
Municipal Notes. Municipal notes generally are used to provide for short-term
working capital needs and generally have maturities of one year or less.
Municipal notes include:
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<PAGE>
Tax Anticipation Notes. Tax anticipation notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation of
various seasonal tax revenue, such as income, sales, use and business taxes, and
are payable from these specific future taxes.
Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as federal revenues
available under federal revenue sharing programs.
Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the notes.
Construction Loan Notes. Construction loan notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae"
(the Government National Mortgage Association).
Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by state and
local governments or their agencies to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term financing.
In addition, other types of municipal securities similar to the
above-described municipal bonds and municipal notes are, or may become,
available. For the purpose of the Trust's investment restrictions set forth in
this Statement of Additional Information, the identification of the "issuer" of
a municipal security which is not a general obligation bond is made by PIC on
the basis of the characteristics of the obligation, the most significant of
which is the source of funds for the payment of principal and interest on such
security.
RISKS RELATING TO MUNICIPAL SECURITIES
There can be no assurance that the Bond Fund will achieve its investment
objective. Yields on municipal securities are dependent on a variety of factors,
including the general conditions of the money market and the municipal bond
market, the size of a particular offering, the maturity of the obligations and
the rating of the issue. Municipal securities with longer maturities tend to
produce higher yields and are generally subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities and lower
yields. The market prices of municipal securities usually vary, depending upon
available yields. An increase in interest rates will generally reduce the value
of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments. The ability of the Fund to achieve
its investment objective is also dependent on the continuing ability of the
issuers of municipal securities in which the Fund invests to meet their
obligations for the payment of interest and principal when due. The ratings of
Moody's and Standard & Poor's represent their opinions as to the quality of
municipal securities which they undertake to rate. Ratings are not absolute
standards of quality; consequently, municipal securities with the same maturity,
coupon, and rating may have different yields. There are variations in municipal
securities, both within a particular classification and between classifications,
depending on numerous factors. It should also be pointed out that, unlike other
types of investments, municipal securities have traditionally not been subject
to regulation by, or registration with, the Securities and Exchange Commission
(the "Commission"), although there have been proposals which would provide for
such regulation in the future.
The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations.
Lawsuits challenging the validity under state constitutions of present
systems of financing public education have been initiated or adjusted in a
number of states, and legislation has been introduced to effect changes in
public school financing in some states. In other instances there have been
lawsuits challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which could ultimately
affect the validity of those municipal securities or the tax-free nature of the
interest thereon.
VARIABLE AND FLOATING RATE SECURITIES
Some municipal securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize fluctuation in values of
floating rate instruments. Variable rate instruments are those whose terms
provide for automatic establishment of a new interest rate on set dates.
Floating rate instruments are those whose terms provide for automatic adjustment
of their interest rates whenever some specified interest rate changes. Variable
rate and floating rate instruments will be referred to collectively as "Variable
Rate Securities." The interest rate on Variable Rate Securities is ordinarily
determined by reference to, or is a percentage of, a bank's prime rate, the
90-day U.S. Treasury Bill rate, the rate of return on commercial paper or bank
certificates of deposit, an index of short-term, tax-exempt rates, or some
objective standard. Generally, the changes in the interest rate on Variable Rate
Securities reduce the fluctuation in the market value of such securities.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than for fixed-rate obligations.
2
<PAGE>
Variable Rate Demand Securities are Variable Rate Securities which have
demand features entitling the purchaser to resell the securities to the issuer
at an amount approximately equal to amortized cost or the principal amount
thereof plus accrued interest, which may be more or less than the price the Bond
Fund paid for them. The interest rate on Variable Rate Demand Securities also
varies either according to some objective standard, such as an index of
short-term, tax-exempt rates, or according to rates set by or on behalf of the
issuer.
TAXABLE SECURITIES
The income from investments (either in the form of dividends or interest)
made by the Mid Cap Fund and the International Fund are expected to be taxable
as ordinary income.
The Bond Fund may also invest a portion of its net assets (up to 20% under
normal conditions and more under extraordinary circumstances, as described in
the Prospectus) in taxable securities.
Interest earned on investments in taxable securities may be taxable to
shareholders as ordinary income. Investors should be aware that investments in
taxable securities by the Bond Fund are restricted to:
U.S. Government Securities--obligations issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities (collectively
referred to as "U.S. Government" issues). Some of these securities are supported
by the full faith and credit of the U.S. Government; others are supported by the
right of the issuer to borrow from the U.S. Treasury; and the remainder are
supported only by the credit of the instrumentality.
Bank Obligations--certificates of deposit, bankers' acceptances, and other
short-term obligations of U.S. banks which at the date of the investment have
capital, surplus and undivided profits in excess of $100,000,000 as of the date
of their most recently published financial statements.
Commercial Paper--commercial paper which at the date of the investment is
rated P-l by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Corporation or, if not rated, is issued by a company which at the date of the
investment has an outstanding debt issue rated Aa or higher by Moody's or AA or
higher by Standard & Poor's.
Corporate Debt Securities--corporate debt securities which at the date of the
investment are rated Aa or higher by Moody's or AA or higher by Standard &
Poor's.
Repurchase Agreements--repurchase agreements with respect to any of the
foregoing.
The Bond Fund also has the right to hold cash reserves as the Adviser deems
necessary. For example, a Fund may invest in money market securities or hold
cash pending investment of proceeds from sales of its shares or from the sale of
portfolio securities and/or in anticipation of redemptions.
RATINGS
If the rating of a security purchased by a Fund is subsequently reduced below
the minimum rating required for purchase or a security purchased by the Fund
ceases to be rated, neither event will require the sale of the security.
However, the Adviser, as applicable, will consider any such event in determining
whether the Fund should continue to hold the security. To the extent that
ratings established by Moody's or Standard & Poor's may change as a result of
changes in such organizations or their rating systems, the Funds will invest in
securities which are deemed by the Fund's adviser to be of comparable quality to
securities whose current ratings render them eligible for purchase by the Fund.
RISKS OF HIGH YIELD BONDS
The Mid Cap and International Funds may invest up to 10% and 20%,
respectively, of their total assets in bonds considered to be less than
investment-grade, commonly known as "junk" bonds. The Emerging Markets Fund may
invest up to 100% of their total assets in these bonds. The Mid Cap and
International Funds did not invest in any bonds considered less than
investment-grade for the fiscal year ended November 30, 1998.
While management will seek to minimize risk through diversification and
continual evaluation of current developments in interest rates and economic
conditions, the market prices of lower-rated securities generally fluctuate more
than those of higher rated securities. Using credit ratings helps to evaluate
the safety of principal and interest payments but does not assess market risk.
Fluctuations in the market value of portfolio securities subsequent to
acquisition by the Funds will not normally affect cash income from such
securities but will be reflected in the Fund's net asset value. Additionally,
with lower-rated securities, there is a greater possibility that an adverse
change in the financial condition of the issuer, particularly a highly-leveraged
issuer, may affect its ability to make payments of income and principal and
increase the expenses of the Fund seeking recovery from the issuer. Also, to the
extent that the Fund invests in securities in the lower rating categories, the
achievement of its goals will be more dependent on management's ability than
would be the case if it were only investing in securities in the higher rating
categories. Lower-rated securities may be thinly traded and therefore harder to
value and more susceptible to adverse publicity concerning the issuer.
3
<PAGE>
WRITING AND PURCHASING OPTIONS ON SECURITIES AND SECURITIES INDICES
The Bond, Mid Cap, International and Emerging Markets Funds may engage in
option transactions.
Call options on securities and securities indices written by the Funds
normally will have expiration dates between three and nine months from the date
written. The exercise price of a call option written by a Fund utilizing this
investment technique 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.
During the option period, a Fund utilizing this investment technique may be
assigned an exercise notice by the broker-dealer through which the call option
was sold, requiring the Fund 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 Fund effects a closing purchase transaction. A closing
purchase transaction cannot be effected with respect to an option once the Fund
has received an exercise notice.
A multiplier for an index option performs a function similar to the unit of
trading for an option on an individual security. It determines the total dollar
value per contract of each point between the exercise price of the option and
the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices, Computer/Business
Equipment Index, Major Market Index, Amex Market Value Index, Computer
Technology Index, Oil and Gas Index, NYSE Options Index, Gaming/Hotel Index,
Telephone Index, Transportation Index, Technology Index, and Gold/ Silver Index.
The Mid Cap and International Funds may write call options and purchase call and
put options on these and any other indices traded on a recognized exchange.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option written by a Fund, to prevent an underlying
security from being called, or to enable the Fund to write another call option
with either a different exercise price or expiration date or both. A Fund may
realize a net gain or loss from a closing purchase transaction, depending upon
whether the amount of the premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. If a call option
written by a Fund expires unexercised, the Fund will realize a gain in the
amount of the premium on the option less the commission paid.
The option activities of a Fund may increase its portfolio turnover rate and
the amount of brokerage commissions paid. A Fund will pay a commission each time
it purchases or sells a security in connection with the exercise of an option.
These commissions may be higher than those which would apply to purchases and
sales of securities directly.
OVER-THE-COUNTER OPTIONS
The Mid Cap Fund, International and Emerging Markets Funds may deal in
over-the-counter options ("OTC options"). PIC understands the position of the
staff of the Commission to be that purchased OTC options and the assets used in
"cover" for written OTC options are illiquid securities. The Funds have adopted
procedures for engaging in OTC options for the purpose of reducing any potential
adverse effect of such transactions upon the liquidity of a Fund. A brief
description of such procedures is set forth below.
The Mid Cap, International and Emerging Markets Funds will engage in OTC
options transactions only with dealers that meet certain credit and other
criteria. The Funds and PIC believe that the approved dealers present minimal
credit risks to the Funds and, therefore, should be able to enter into closing
transactions if necessary. A Fund currently will not engage in OTC options
transactions if the amount invested by the Fund in OTC options, plus a
"liquidity charge" related to OTC options written by the Fund (as described
below) plus the amount invested by the Fund in other illiquid securities, would
exceed 10% of the Fund's total assets. The "liquidity charge" referred to above
is computed as described below.
The Funds anticipate entering into agreements with dealers to which the Funds
sell OTC options. Under these agreements the Funds would have the absolute right
to repurchase the OTC options from the dealer at any time at a price no greater
than a price established under the agreements (the "Repurchase Price"). The
"liquidity charge" referred to above for a specific OTC option transaction will
be the Repurchase Price related to the OTC option less the intrinsic value of
the OTC option. The intrinsic value of an OTC call option for such purposes will
be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value
will be the amount by which the exercise price exceeds the current market value
of the underlying security. If there is no such agreement requiring a dealer to
allow the Funds to repurchase a specific OTC option written by the Funds, the
"liquidity charge" will be the current market value of the assets serving as
"cover" for such OTC option.
LIMITATIONS ON OPTIONS ON SECURITIES AND SECURITIES INDICES
The Bond, Mid Cap, International and Emerging Markets Funds may write call
options only if they are covered and remain covered for as long as the Fund is
obligated as a writer. Thus, if a Fund utilizing this investment technique
writes a call option on an individual security, the Fund must own the underlying
security or other securities that are acceptable for a pledged account at all
4
<PAGE>
times during the option period. The Funds will write call options on indices
only to hedge in an economically appropriate way portfolio securities which are
not otherwise hedged with options or financial futures contracts. Call options
on securities indices written by a Fund will be "covered" by identifying the
specific portfolio securities being hedged.
To secure the obligation to deliver the underlying security, the writer of a
covered call option on an individual security is required to deposit the
underlying security or other assets in a pledged account in accordance with
clearing corporation and exchange rules.
In the case of an index call option written by a Fund, the Fund will be
required to deposit qualified securities. A "qualified security" is a security
against which the Fund has not written a call option and which has not been
hedged by the Fund by the sale of a financial futures contract. If at the close
of business on any day the market value of the qualified securities falls below
100% of the current index value times the multiplier times the number of
contracts, the Fund will deposit an amount of cash, U.S. Government Securities
or other liquid high quality debt obligations equal in value to the difference.
In addition, when the Fund writes a call on an index which is "in-the-money" at
the time the call is written, the Fund will pledge with the Trust's custodian
bank cash, U.S. Government securities or other liquid high quality debt
obligations equal in value to the amount by which the call is "in-the-money"
times the multiplier times the number of contracts. Any amount otherwise pledged
may be applied to the Fund's other obligations to pledge assets 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.
Each Fund utilizing this investment technique may invest up to 5% of its
total assets in exchange-traded call and put options on securities and
securities indices. A Fund may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the sale
(in the case of a put) of the underlying security. Any such sale of a call
option or a put option would result in a net gain or loss, depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid.
In connection with a Fund's qualifying as a regulated investment company
under the Internal Revenue Code of 1986, other restrictions on the Fund's
ability to enter into option transactions may apply from time to time. See
"Dividends, Distributions and Taxes."
RISKS RELATING TO OPTIONS ON SECURITIES
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 within the
option period when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that the Fund
utilizing this investment technique may lose the premium it paid plus
transaction costs, if the Fund does not exercise the option and is unable to
close out the position prior to expiration of the option.
An option position may be closed out on an exchange only if the exchange
provides a secondary market for an option of the same series. Although the Funds
utilizing this investment technique will write and purchase options only when
PIC 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 any Fund, 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 the following: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) inadequacy of the facilities of
an exchange or the clearing corporation to handle trading volume; and (v) a
decision by one or more exchanges to discontinue the trading of options in
general or of particular 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. PIC believes that the position limits established by
the exchanges will not have any adverse impact upon the Funds.
RISKS OF OPTIONS ON SECURITIES INDICES
Because the value of an index option depends upon movements in the level of
the index rather than movements in the price of a particular security, whether a
Fund utilizing this investment technique 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 (depending on
the index option in question) rather than upon movements in the price of an
individual security. Accordingly, successful use by a Fund of options on indices
will be subject to PIC's ability to predict correctly movements in the direction
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of the market generally or in the direction of a particular industry. This
requires different skills and techniques than predicting changes in the prices
of individual securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, a Fund utilizing this
investment technique would not be able to close out options which it had written
or purchased and, if restrictions on exercise were imposed, might be unable to
exercise an option it purchased, which would result in substantial losses to the
Fund. However, it is the Trust's policy to write or purchase options only on
indices which include a sufficient number of securities so that the likelihood
of a trading halt in the index is minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, the Funds will write call options only on indices which meet the
interim described above.
Price movements in securities held by a Fund utilizing this investment
technique will not correlate perfectly with movements in the level of the index
and, therefore, the Fund bears the risk that the price of the securities held by
the Fund might not increase as much as the level of the index. In this event,
the Fund would bear a loss on the call which would not be completely offset by
movements in the prices of the securities held by the Fund. It is also possible
that the index might rise when the value of the securities held by the Fund does
not. If this occurred, the Fund would experience a loss on the call which would
not be offset by an increase in the value of its portfolio and might also
experience a loss in the market value of its portfolio securities.
Unless a Fund utilizing this investment technique has other liquid assets
which are sufficient to satisfy the exercise of a call on an index, the Fund
will be required to liquidate securities in order to satisfy the exercise.
Because an exercise must be settled within hours after receiving the notice of
exercise, if the Fund fails to anticipate an exercise, it may have to borrow
from a bank (in an amount not exceeding 10% of the Fund's total assets) pending
settlement of the sale of securities in its portfolio and pay interest on such
borrowing.
When a Fund has written a call on an index, there is also a risk that the
market may decline between the time the Fund has the call exercised against it,
at a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell its securities. As with options
on its securities, the Fund will not learn that a call has been exercised until
the day following the exercise date but, unlike a call on a security where the
Fund would be able to deliver the underlying security in settlement, the Fund
may have to sell some of its securities in order to make settlement in cash, and
the price of such securities may decline before they can be sold.
If a Fund exercises a put option on an index which it has purchased before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money" the Fund will be required
to pay the difference between the closing index value and the exercise price of
the option (multiplied by the applicable multiplier) to the assigned writer.
Although the Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS
The Bond, Mid Cap, International and Emerging Markets Funds may use financial
futures contracts and related options to hedge against changes in the market
value of their portfolio securities or securities which they intend to purchase.
The Mid Cap, International and Emerging Markets Funds may use foreign currency
futures contracts to hedge against changes in the value of foreign currencies.
(See "Foreign Currency Transactions" below.) Hedging is accomplished when an
investor takes a position in the futures market opposite to the investor's 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 (although in inverse relation to) 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 or
the value of foreign currencies may be protected against to a considerable
extent by gains realized on futures contracts sales. Similarly, it is possible
to protect against an increase in the market price of securities which the Fund
utilizing this investment technique may wish to purchase in the future by
purchasing futures contracts.
The Bond, Mid Cap, International and Emerging Markets Funds may purchase or
sell any 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 as a hedge against anticipated changes in
the market value of its portfolio securities or securities which it intends to
purchase. Financial futures contracts consist of interest rate futures
contracts, securities index futures contracts and foreign currency 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
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are currently traded with respect to the Standard & Poor's 500 Composite Stock
Price Index and such other broad-based stock market indices as the New York
Stock Exchange Composite Stock Index and the Value Line Composite Stock Price
Index. A clearing corporation associated with the exchange or board of trade on
which a financial futures contract trades assumes responsibility for the
completion of transactions and also guarantees that open futures contracts will
be performed.
In contrast to the situation in which a Fund purchases or sells a security,
no security is delivered or received by the Fund upon the purchase or sale of a
financial futures contract (although an obligation to deliver or receive the
underlying security in the future is created by such a contract). Initially,
when it enters into a financial futures contract, a Fund utilizing this
investment technique will be required to deposit in a pledged account with the
Trust's custodian bank with respect to such Fund an amount of cash or U.S.
Treasury bills. This amount is known as an 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. However,
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 a margin
balance pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although financial futures contracts by their terms call for actual delivery
or acceptance of securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out is
accomplished by effecting an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.
The Funds utilizing this investment technique 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, and will be in addition to those paid for direct purchases and sales
of securities.
LIMITATIONS ON FUTURES CONTRACTS AND RELATED OPTIONS
The Funds utilizing this investment technique 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 portfolio
securities or securities which it intends to purchase or foreign currencies. A
Fund utilizing this investment technique may not purchase or sell financial
futures contracts or related options if, immediately thereafter, the sum of the
amount of initial margin deposits on the Fund's existing futures and related
options positions and the premiums paid for related options would exceed 5% of
the market value of the Fund's total assets after taking into account unrealized
profits and losses on any such contracts. At the time of purchase of a futures
contract or a call option on a futures contract, any asset, including equity
securities and non-investment-grade debt so long as the asset is liquid,
unencumbered and marked to market daily equal to the market value of the futures
contract minus the Fund's initial margin deposit with respect thereto will be
deposited in a pledged account with the Trust's custodian bank with respect to
such Fund to collateralize fully the position and thereby ensure that it is not
leveraged.
The extent to which a Fund may enter into financial futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company. See
"Dividends, Distributions and Taxes."
RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS
Positions in futures contracts and related options may be closed out on an
exchange if the exchange provides a secondary market for such contracts or
options. A Fund utilizing this investment technique will enter into a futures or
futures related option position only if there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market will
exist for any particular option or futures contract at any specific time. Thus,
it may not be possible to close out a futures or related option position. In the
case of a futures position, in the event of adverse price movements the Fund
would continue to be required to make daily margin payments. In this situation,
if the Fund has insufficient cash to meet daily margin requirements it may have
to sell portfolio securities to meet its margin obligations at a time when it
may be disadvantageous to do so. In addition, the Fund may be required to take
or make delivery of the securities underlying the futures contracts it holds.
The inability to close out futures positions also could have an adverse impact
on the Fund's ability to hedge its positions effectively.
There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also limit a hedger's opportunity to benefit fully from
favorable market
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movement. In addition, investing in futures contracts and options on futures
contracts will cause a Fund to incur additional brokerage commissions and may
cause an increase in a Fund's turnover rate.
The successful use of futures contracts and related options 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 Fund or such prices
move in a direction opposite to that anticipated, the Fund 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, the Fund's total return for the period may be
less than if it had not engaged in the hedging transaction.
Utilization of futures contracts by a Fund involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities or currencies which are being hedged. If the price of
the futures contract moves more or less than the price of the securities or
currency being hedged, the Fund will experience a gain or loss which will not be
completely offset by movements in the price of the securities or currency. It is
possible that, where a Fund has sold futures contracts to hedge against decline
in the market, the market may advance and the value of securities held in the
Fund or the currencies in which its foreign securities are denominated may
decline. If this occurred, the Fund would lose money on the futures contract and
would also experience a decline in value in its portfolio securities. Where
futures are purchased to hedge against a possible increase in the prices of
securities or foreign currencies before the Fund is able to invest its cash (or
cash equivalents) in securities (or options) in an orderly fashion, it is
possible that the market may decline; if the Fund then determines not to invest
in securities (or options) at that time because of concern as to possible
further market decline or for other reasons, the Fund will realize a loss on the
futures that would not be offset by a reduction in the price of the securities
purchased.
The market prices of futures contracts may be affected if participants in the
futures market elect to close out their contracts through offsetting
transactions rather than to meet margin deposit requirements. In such cases,
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 or
currencies rather than to engage in closing transactions because such action
would reduce the liquidity of the futures market. In addition, because, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the underlying securities market,
increased participation by speculators in the futures market could cause
temporary price distortions. Because of the possibility of price distortions in
the futures market and of the imperfect correlation between movements in the
prices of securities or foreign currencies and movements in the prices of
futures contracts, a correct forecast of market trends may still not result in a
successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for a Fund
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to the Fund (i.e., the loss
of the premium paid) 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.
REPURCHASE AGREEMENTS
Repurchase agreements will be entered into only with commercial banks,
brokers and dealers considered by the Trust to be creditworthy. The Trustees of
the Trust will monitor each Fund's repurchase agreement transactions
periodically and, with the Funds' investment advisers, will consider standards
which the investment advisers will use in reviewing the creditworthiness of any
party to a repurchase agreement with a Fund. No more than an aggregate of 10% of
a Fund's total assets, at the time of investment, will be invested in repurchase
agreements having maturities longer than seven days and other investments
subject to legal or contractual restrictions on resale, or for which there are
not readily available market quotations.
The use of repurchase agreements involves certain risks. For example, if the
seller under a repurchase agreement defaults on its obligation to repurchase the
underlying instrument at a time when the value of the instrument has declined, a
Fund may incur a loss upon its disposition. If the seller becomes insolvent and
subject to liquidation or reorganization under bankruptcy or other laws, a
bankruptcy court may determine that the underlying instrument is collateral for
a loan by the Fund and therefore is subject to sale by the trustee in
bankruptcy. Finally, it is possible that the Fund may not be able to
substantiate its interest in the underlying instrument. While the Trustees of
the Trust acknowledge these risks, it is expected that they can be controlled
through careful structuring of repurchase agreement transactions to meet
requirements for treatment as a purchase and sale under the bankruptcy laws and
through monitoring procedures designed to assure the creditworthiness of
counterparties to such transactions.
LENDING PORTFOLIO SECURITIES
The Funds may lend portfolio securities to broker-dealers and other financial
institutions in amounts up to 25% of the market or other fair value for its
total assets, provided that such loans are callable at any time by the Fund
utilizing this investment technique and are at all times secured by collateral
held by the Fund at least equal to the market value, determined daily, of the
loaned securities. The Fund utilizing this investment technique will continue to
receive any income on the loaned securities, and
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at the same time will earn interest on cash collateral (which will be invested
in short-term debt obligations) or a securities lending fee in the case of
collateral in the form of U.S. Government securities. A loan may be terminated
at any time by either the Fund or the borrower. Upon termination of a loan, the
borrower will be required to return the securities to the Fund, and any gain or
loss in the market price during the period of the loan would accrue to the Fund.
If the borrower fails to maintain the requisite amount of collateral, the loan
will automatically terminate, and the Fund may use the collateral to replace the
loaned securities while holding the borrower liable for any excess of the
replacement cost over the amount of the collateral.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, in order to exercise such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are the subject of the loan. The Fund may pay reasonable finders,
administrative and custodial fees in connection with loans of its portfolio
securities.
As with any extension of credit, there are risks of delay in recovery of the
loaned securities and in some cases loss of rights in the collateral should the
borrower of the securities fail financially. However, loans of portfolio
securities will be made only to firms considered by the Trust to be creditworthy
and when the Adviser believes the consideration to be earned justifies the
attendant risks.
WHEN-ISSUED SECURITIES
New issues of municipal and emerging market securities are often offered on a
when-issued basis, that is, delivery and payment for the securities normally
takes place 15 to 45 days or more after the date of the commitment to purchase.
The payment obligation and the interest rate that will be received on the
securities are each fixed at the time the buyer enters into the commitment. The
Bond and Emerging Markets Funds will generally make a commitment to purchase
such securities with the intention of actually acquiring the securities.
However, the Funds may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy. When the Bond and Emerging
Markets Funds purchase securities on a when-issued basis, cash or liquid high
quality debt securities equal in value to commitments for the when-issued
securities will be deposited in a segregated account with the Trust's custodian
bank. Such segregated securities either will mature or, if necessary, be sold on
or before the settlement date.
Securities purchased on a when-issued basis and the securities held in the
Bond and Emerging Markets Funds are subject to changes in market value based
upon the public perception of the creditworthiness of the issuer and changes in
the level of interest rates which will generally result in similar changes in
value; i.e., both experiencing appreciation when interest rates decline and
depreciation when interest rates rise. Therefore, to the extent the Bond and
Emerging Markets Funds remain substantially fully invested at the same time that
they have purchased securities on a when-issued basis, there will be greater
fluctuations in the net asset values than if the Funds merely set aside cash to
pay for when-issued securities. In addition, there will be a greater potential
for the realization of capital gains, which are not exempt from federal income
taxation. When the time comes to pay for when-issued securities, the Bond and
Emerging Markets Funds will meet their obligations from then available cash
flow, the sale of securities or, although it would not normally expect to do so,
from the sale of the when-issued securities themselves (which may have a value
greater or less than the payment obligation). The policies described in this
paragraph are not fundamental and may be changed without shareholder approval.
FOREIGN CURRENCY TRANSACTIONS
The Mid Cap, International and Emerging Markets Funds (each a "Foreign
Currency Fund") each may engage in foreign currency transactions, although the
Mid Cap Fund has no present intention of doing so. 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 Fund 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 Fund. The Trust's custodian banks will
segregate any asset, including equity securities and non-investment-grade debt
so long as the asset is liquid, unencumbered and marked to market daily in an
amount not less than the value of a Foreign Currency Fund's total assets
committed to forward foreign currency exchange contracts entered into for the
purchase of a foreign currency. If the value of the securities segregated
declines, additional cash or securities will be added so that the segregated
amount is not less than the amount of the Foreign Currency Fund's commitments
with respect to such contracts. Generally, the Foreign Currency Funds do not
enter into forward contracts with terms 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,
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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 Foreign Currency Fund 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 Foreign Currency Fund 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 Foreign Currency Fund 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 Foreign Currency Fund 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 Foreign Currency Fund may use
foreign currency futures contracts and options on such futures contracts.
Through the purchase or sale of such contracts, a Foreign Currency Fund 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 Foreign Currency Fund 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 Foreign
Currency Fund will not enter into a futures contract or purchase an option
thereon if immediately thereafter the initial margin deposits for futures
contracts (including foreign currency and all other futures contracts) held by
the Foreign Currency Fund plus premiums paid by it for open options on futures
would exceed 5% of the Foreign Currency Fund's total assets. Neither Foreign
Currency Fund 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 Fund 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.
EMERGING MARKET SECURITIES
The Emerging Markets Fund may invest in countries or regions with relatively
low gross national product per capita compared to the world's major economies,
and in countries or regions with the potential for rapid economic growth
(emerging markets). Emerging markets will include any country: (i) having an
"emerging stock market" as defined by the International Finance Corporation;
(ii) with low-to-middle-income economies according to the International Bank for
Reconstruction and Development (the "World Bank"); (iii) listed in World Bank
publications as developing; or (iv) determined by the Adviser to be an emerging
market as defined above. The Emerging Markets Fund may also invest in securities
of: (i) companies the principal securities trading market for which is an
emerging market country; (ii) companies organized under the laws of, and with a
principal office in, an emerging market country, or (iii) companies whose
principal activities are located in emerging market countries.
The risks of investing in foreign securities may be intensified in the case
of investments in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Funds are uninvested and
no return is earned thereon. The inability of the Funds to make intended
security purchases due to settlement problems could cause the Funds to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Funds
due to subsequent declines in value of portfolio securities or, if the Funds
have entered into a contract to sell the security, in possible liability to the
purchaser. Securities prices in emerging markets can be significantly more
volatile than in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions of repatriation of assets, and may have less
protection of property
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rights than more developed countries. The economies of countries with emerging
markets may be predominantly based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer from
extreme and volatile debt burdens or inflation rates. Local securities markets
may trade a small number of securities and may be unable to respond effectively
to increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Securities of issuers
located in countries with emerging markets may have limited marketability and
may be subject to more abrupt or erratic price movements.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Funds could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Funds of any restrictions on investments.
Investments in certain foreign emerging market debt obligations may be
restricted or controlled to varying degrees. These restrictions or controls may
at times preclude investment in certain foreign emerging market debt obligations
and increase the expenses of the Funds.
ADDITIONAL RISK FACTORS. As a result of its investments in foreign
securities, the Emerging Markets Fund may receive interest or dividend payments,
or the proceeds of the sale or redemption of such securities, in the foreign
currencies in which such securities are denominated. In that event, the Fund may
convert such currencies into dollars at the then current exchange rate. Under
certain circumstances, however, such as where the Adviser believes that the
applicable rate is unfavorable at the time the currencies are received or the
Adviser anticipates, for any other reason, that the exchange rate will improve,
the Fund may hold such currencies for an indefinite period of time.
In addition, the Fund may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into. This
could occur, for example, if an option written by the Fund is exercised or the
Fund is unable to close out a forward contract. The Fund may hold foreign
currency in anticipation of purchasing foreign securities. The Fund may also
elect to take delivery of the currencies' underlying options or forward
contracts if, in the judgment of the Adviser, it is in the best interest of the
Fund to do so. In such instances as well, the Fund may convert the foreign
currencies to dollars at the then current exchange rate, or may hold such
currencies for an indefinite period of time.
While the holding of currencies will permit the Fund to take advantage of
favorable movements in the applicable exchange rate, it also exposes the Fund to
risk of loss if such rates move in a direction adverse to the Fund's position.
Such losses could reduce any profits or increase any losses sustained by the
Fund from the sale or redemption of securities, and could reduce the dollar
value of interest or dividend payments received. In addition, the holding of
currencies could adversely affect the Fund's profit or loss on currency options
or forward contracts, as well as its hedging strategies.
RUSSIAN SECURITIES
The Emerging Markets Fund may invest in Russian securities. While investment
risks exist in many markets around the world, some of the risks inherent in
investing in Russia appear to be greater than those in other established and
emerging markets. These risks include, without limitation:
POLITICAL AND ECONOMIC RISKS. There is no history of stability in this market
and no guarantee of future stability. The emerging nature of the Russian
political system in its current democratic form leaves it more vulnerable to
break down in the event of economic instability or popular unrest. The dynamic
nature of the political environment can make the future uncertain. The economic
infrastructure is poor, and the country maintains a high level of external and
internal debt. Tax regulations are ambiguous and unclear, and there is a risk of
imposition of arbitrary or onerous taxes due to the lack of a fair and
economically-rational tax regime.
COMMERCIAL AND CREDIT RISKS. Banks and other financial systems are not well
developed or regulated, and as a result tend to be untested and have low credit
ratings. Organized crime and corruption are a feature of the business
environment, and bankruptcy and insolvency are commonplace as businesses are
learning how to cope in new conditions. In terms of cash, securities and other
investment transactions, the risk of broker, counterparty and other third-party
default is high. The same holds true for issuers, where the risk of default is
high. Insurance is expensive and difficult to obtain in light of the volatility
of the commercial environment.
LIQUIDITY RISKS. Foreign investment is affected by restrictions in terms of
repatriation and convertibility of the currency. The ruble is only convertible
internally, and the value of investments may be affected by fluctuations in
available currency rates and exchange control regulations. The repatriation of
profits may be restricted in some cases. Due to the undeveloped nature of the
banking system, considerable delays can occur in transferring funds, converting
rubles into other currencies and remitting funds out of Russia.
LEGAL AND REGULATORY RISKS. Russia's legal system is evolving and is not as
developed as that of a western country. It is based on a civil code with no
system of judicial precedents. The regulatory environment is sometimes uncertain
since the total law can
11
<PAGE>
encompass the civil code, legislative laws, presidential decrees, and ministry
resolutions. The code, laws, decrees, and resolutions ("Regulations") are
promulgated at separate times and are not necessarily consistent. The issuance
of Regulations does not always keep pace with market developments, thereby
creating ambiguities and inconsistencies.
Regulations governing securities investment may not exist or may be
interpreted and applied in an arbitrary or inconsistent manner. There may be a
risk of conflict between the rules and regulations of the local, regional, and
national governments. The concept of share ownership rights and controls may not
be in place or be enforceable. The independence of the courts from economic,
political, or national influence is basically untested and the courts and judges
are not experienced in business and corporate law. Foreign investors cannot be
guaranteed redress in a court of law for a breach of local laws, regulations or
contracts.
The securities market regulatory body, the Federal Commission on the Capital
Market, was established in 1994 and is responsible for overseeing market
participants, including registrars. However, the monitoring of and enforcement
of the obligations of registrar companies is difficult due to geographic
dispersion and inconsistent interpretation and application of regulations.
OPERATIONAL RISKS. Shareholder Title to Securities: Shareholder risk is a
major risk for equity investment in Russia. For example, shares are
dematerialized and the only legal evidence of ownership is the shareholder's
name entered in the register of the company. The concept of fiduciary duty on
the part of companies' management is generally non-existent. Therefore,
shareholders may suffer a dilution or loss of investment, due to arbitrary
changes in the shareholder register, with little or no recourse or redress
available. Local laws and regulations may not prohibit or restrict a company's
management from materially changing the company's structure without the consent
of shareholders. Legislation prohibiting insider trading activities is
rudimentary.
Clearing and Settlement: For equity settlements, the payments are usually
handled offshore in U.S. dollars after the shares are reregistered on the books
of the company or its registrar. However, the only evidence of the registration
is a company "extract" which is a photocopy of the appropriate page from the
register reflecting the new shareholder's name. The extract does not have a
legal basis for establishing ownership in the event of a loss.
For Ministry of Finance (MinFin) bond settlements, payments are made offshore
in U.S. dollars upon settlement of the bearer bonds at Vneshtorgbank's (VTB)
office in Moscow. If the bonds are transported between the local subcustodian
and VTB, the investor is exposed to transportation risk as the MinFins are
bearer bonds and are not replaceable in the event they are lost, stolen, or
destroyed.
Foreign investors can also invest in treasury issues through the Moscow
Interbank Currency Exchange (MICEX). These issues settle book-entry at MICEX in
rubles only.
Transparency: The rules regulating corporate governance may not exist or are
underdeveloped and offer little protection to minority shareholders. Disclosure
and reporting requirements are not to the expected level of most developed
western nations. The accounting standards generally used in Russia are not
international standards and in many cases may be cash based, nonaccrual method
of accounting. The quality, reliability, and availability of information on
companies in Russia is lower than in most western markets.
Derivative Investments. In order to seek 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, including
inverse securities. The Fund has express limitations on the percentage of its
assets that may be committed to certain of such investments. 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 require
limitations as to the type of permissible counter-party to the transaction.
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.
REAL ESTATE INVESTMENT TRUSTS
As described in the Prospectus, the Real Estate Fund intends under normal
conditions to invest in real estate investment trusts ("REITs"). REITs pool
investors' funds for investment primarily in income-producing commercial real
estate or real estate-related loans. A REIT is not taxed on income distributed
to shareholders if it complies with several requirements relating to its
organization, ownership, assets, and income and a requirement that it distribute
to its shareholders at least 95% of its taxable income (other than net capital
gains) for each taxable year.
REITs can generally be classified as follows:
--Equity REITs, which invest the majority of their assets directly in real
property and derive their income primarily from rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
12
<PAGE>
--Mortgage REITs, which invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments.
--Hybrid REITs, which combine the characteristics of both equity REITs and
mortgage REITs.
REITs are like closed-end investment companies in that they are essentially
holding companies which rely on professional managers to supervise their
investments. A shareholder in the Real Estate Fund should realize that by
investing in REITs indirectly through the Fund, he will bear not only his
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of underlying REITs.
RISKS OF INVESTMENT IN REAL ESTATE SECURITIES
Selecting REITs requires an evaluation of the merits of each type of asset a
particular REIT owns, as well as regional and local economics. Due to the
proliferation of REITs in recent years and the relative lack of sophistication
of certain REIT managers, the quality of REIT assets has varied significantly.
The Real Estate Fund will not invest in real estate directly, but only in
securities issued by real estate companies. However, the Fund may be subject to
risks similar to those associated with the direct ownership of real estate
because of its policy of concentrating in the securities of companies in the
real estate industry. These include declines in the value of real estate, risks
related to general and local economic conditions, dependence on management
skill, cash flow dependence, possible lack of availability of long-term mortgage
funds, over-building, extended vacancies of properties, decreased occupancy
rates and increased competition, increases in property taxes and operating
expenses, changes in neighborhood values and the appeal of the properties to
tenants and changes in interest rates.
In addition to these risks, equity REITs may be affected by changes in the
value of the underlying properties owned by the trusts, while mortgage REITs may
be affected by the quality of any credit extended. Further, equity and mortgage
REITs are dependent upon management skills and generally are not diversified.
Equity and mortgage REITs are also subject to potential defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for tax-free status
of income under the Code and failing to maintain exemption from the Investment
Company Act of 1940. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or lessor and may
incur substantial costs associated with protecting its investments. In addition,
investment in REITs could cause the Fund to possibly fail to qualify as a
regulated investment company.
DEBT SECURITIES
Up to 25% of the Real Estate Fund's total assets may be invested in debt
securities (which include for purposes of this investment policy convertible
debt securities which the Adviser believes have attractive equity
characteristics). The Real Estate Fund may invest in debt securities rated BBB
or better by Standard & Poor's Corporation ("S&P") or Baa or better by Moody's
Investor Service, Inc. ("Moody's") or, if not rated, are judged to be of
comparable quality as determined by the Adviser. In choosing debt securities for
purchase by the Fund, the Adviser will employ the same analytical and valuation
techniques utilized in managing the equity portion of the Real Estate Fund's
holdings (see "Investment Advisory and Other Services") and will invest in debt
securities only of companies that satisfy the Adviser's investment criteria.
The value of the Real Estate Fund's investments in debt securities will
change as interest rates fluctuate. When interest rates decline, the values of
such securities generally can be expected to increase and when interest rates
rise, the values of such securities can generally be expected to decrease. The
lower-rated and comparable unrated debt securities described above are subject
to greater risks of loss of income and principal than are higher-rated fixed
income securities. The market value of lower- rated securities generally tends
to reflect the market's perception of the creditworthiness of the issuer and
short-term market developments to a greater extent than is the case with more
highly rated securities, which reflect primarily functions in general levels of
interest rates.
ZERO COUPON BONDS
The Emerging Markets Fund may invest in debt obligations that do not make any
interest payments for a specified period of time prior to maturity or until
maturity. Even though such bonds do not pay current interest in cash, the
Emerging Markets Fund is required to accrue interest income on such investments
and to distribute such amounts to shareholders. Thus, the Emerging Markets Fund
would not be able to purchase income-producing securities to the extent of cash
used to pay such distributions and current income could be less than it
otherwise would have been. Alternatively, the Emerging Markets Fund might
liquidate investments in order to satisfy these distribution requirements. The
value of these obligations fluctuates more in response to interest rate changes,
if they are of the same maturity, than does the value of debt obligations that
make current interest payments.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The Emerging Markets Fund may also invest in fixed- or floating-rate loans
arranged through private negotiations between an issuer of emerging market debt
instruments and one or more financial institutions ("lenders"). Generally,
investments in loans would be in the form of loan participations and assignments
of loan portfolios from third parties.
13
<PAGE>
When investing in a loan participation, the Funds will typically have the
right to receive payments from the lender to the extent that the lender receives
payments from the borrower. In addition, the Funds will be able to enforce their
rights through the lender, and not directly against the borrower. As a result,
in a loan participation the Funds assume credit risk with respect to both the
borrower and the lender.
When the Funds purchase loan assignments from lenders, they will acquire
direct rights against the borrower, but these rights and the Funds' obligations
may differ from, and be more limited than, those held by the assigning lender.
Loan participations and assignments may be illiquid.
INVESTMENT RESTRICTIONS
The investment restrictions described below are fundamental policies and may
not be changed as to any Fund without the approval of the lesser of (i) a
majority of the Fund's outstanding shares or (ii) 67% of the Fund's shares
represented at a meeting of Trust shareholders at which the holders of 50% or
more of the Fund's outstanding shares are present. No Fund of the Trust may:
(1) Make short sales of securities, unless at the time of sale the Fund owns
an equal amount of such securities.
(2) Purchase securities on margin, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities. The deposit or payment by the Fund of initial or
maintenance margin in connection with financial futures contracts or
related options transactions is not considered the purchase of a security
on margin.
(3) Write, purchase or sell puts, calls or combinations thereof, except that
the Funds may (a) write exchange-traded covered call options on portfolio
securities and enter into closing purchase transactions with respect to
such options, and Funds, other than the Bond Fund, may write
exchange-traded covered call options on foreign currencies and secured
put options on securities and foreign currencies and write covered call
and secured put options on securities and foreign currencies traded over
the counter, and enter into closing purchase transactions with respect to
such options, (b) purchase exchange- traded call options and put options,
and such Funds, other than the Bond Fund, may purchase call and put
options traded over the counter, provided that the premiums on all
outstanding call and put options do not exceed 5% of its total assets,
and enter into closing sale transactions with respect to such options,
and (c) engage in financial futures contracts and related options
transactions, provided that the sum of the initial margin deposits on
such Fund's existing futures and related options positions and the
premiums paid for related options would not exceed 5% of its total
assets.
(4) Borrow in excess of 10% of the market or other fair value of its total
assets, or pledge its assets to an extent greater than 15% of the market
or other fair value of its total assets. Any such borrowings shall be
from banks and shall be undertaken only as a temporary measure for
administrative purposes. Deposits in escrow in connection with the
writing of covered call options, secured put options, or the purchase or
sale of financial futures contracts and related options are not deemed to
be a pledge or other encumbrance. The Bond Fund will not purchase
securities while temporary bank borrowings in excess of 5% of its net
assets are outstanding.
(5) Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of its portfolio securities, a Fund may
be deemed to be an underwriter. The Mid Cap (with respect to up to
one-third of its assets), International and Emerging Markets Funds may
buy and sell securities outside the United States which are not
registered with the Commission or marketable in the United States.
(6) Concentrate its assets in the securities of issuers which conduct their
principal business activities in the same industry, except that the Real
Estate Fund may so concentrate its assets and the Bond Fund may invest
more than 25% of its assets in a particular segment of the municipal
securities market. This restriction does not apply to obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
(7) Make any investment in real estate, real estate limited partnerships,
commodities or commodities contracts, except that a Fund may (a) purchase
or sell readily marketable securities which are secured by interests in
real estate, including real estate investment and mortgage investment
trusts, and (b) engage in financial futures contracts and related options
transactions, provided that the sum of the initial margin deposits on the
Fund's futures and related options positions and the premiums paid for
related options would not exceed 5% of the Fund's total assets, and (c)
the Mid Cap, International and Emerging Markets Funds may enter into
foreign currency transactions.
(8) Make loans, except that the Fund may (a) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors, whether publicly distributed or not, (b) invest
in repurchase agreements, provided that an aggregate of no more than 10%
of the Fund's net assets (taken at market value) may be invested in
repurchase agreements having maturities of more than seven days and all
other illiquid securities, and (c) loan its portfolio securities in
amounts up to one third of the market or other fair value of its total
assets, subject to restrictions described more fully above.
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<PAGE>
(9) Purchase securities of other investment companies, except that the Fund
may make such a purchase (a) in the open market involving no commission
or profit to a sponsor or dealer (other than the customary broker's
commission), provided that immediately thereafter (i) not more than 10%
of the Fund's total assets would be invested in such securities and (ii)
not more than 3% of the voting stock of another investment company would
be owned by the Fund, or (b) as part of a merger, consolidation, or
acquisition of assets.
(10) Invest more than 5% of its total assets in the securities of any one
issuer (except the U.S. Government and, in the case of the Mid Cap,
International and Emerging Markets Funds, any foreign government, its
agencies and instrumentalities) or purchase more than 10% of the
outstanding voting securities or more than 10% of the securities of any
class of any one issuer; however, the foregoing limitations do not apply
to the Real Estate Fund and Emerging Markets Fund. With respect to 75% of
its assets, a Fund which may invest in foreign securities will limit its
investments in the securities of any one foreign government, its agencies
and instrumentalities, to 5% of the Fund's total assets.
(11) Invest in securities of any issuer if any officer or Trustee of the Trust
or any officer or director of the Adviser owns more than 1/2 of 1% of the
outstanding securities of such issuer and all such persons own in the
aggregate more than 5% of the securities of such issuer.
(12) Invest in the aggregate more than 5% of its total assets in the
securities of any issuers (other than real estate investment trusts)
which have (with predecessors) a record of less than three years of
continuous operations.
(13) Invest in warrants or rights except where acquired in units or attached
to other securities. The Mid Cap, Real Estate, International and Emerging
Markets Funds each may invest up to 5% of its total assets in warrants or
rights which are not in units or attached to other securities.
(14) Purchase restricted securities (including repurchase agreements having
maturities of more than seven days) or securities for which market value
quotations are not readily available if as a result of such purchase more
than 10% of each Fund's, total assets would be invested in the aggregate
in such securities.
(15) Invest in interests in oil, gas, or other mineral exploration or
development programs.
(16) Issue senior securities as defined in the Investment Company Act of 1940
except to the extent that it is permissible to (a) borrow money from
banks pursuant to the Trust's investment restrictions regarding the
borrowing of money, and (b) enter into transactions involving forward
foreign currency contracts and options thereon, as described in the
Trust's Prospectus and this Statement of Additional Information.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the value or costs of the Fund's assets
will not be considered a violation of the restriction except as provided in (11)
above.
PERFORMANCE
Performance information for each Fund (and Class of Fund) may appear in
advertisements, sales literature, or reports to shareholders or prospective
shareholders. Performance information in advertisements and sales literature may
be expressed as the "yield" of the Bond Fund and Emerging Markets Fund, and as
"average annual total return" and "total return" of any of the other Funds.
Quotations of the yield for the Bond Fund and Emerging Markets Fund will be
based on all investment income per share earned during a particular 30-day
period (including dividends and interest), less expenses (including pro rata
Trust expenses and expenses applicable to each particular Fund or Class of Fund)
accrued during the period ("net investment income"), and are computed by
dividing net investment income by the value of a share of the Fund or Class on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)(6)-1]
---
cd
where a = dividends and interest earned during the period by the Fund,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the net asset value per share on the last day of the period.
For the 30-day period ended November 30, 1998, the yield for the Bond Fund
Class A shares and Class B shares was 4.29% and 3.76%, respectively and the
Emerging Markets Fund Class A shares, Class B shares and Class C shares was
14.57%, 14.59%, and 14.62%, respectively.
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<PAGE>
A Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Fund for a specific period
is found by first taking a hypothetical $1,000 investment ("initial investment")
in the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge, and computing the "redeemable value" of that investment at
the end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period.
Calculation of a Fund's total return is subject to a standardized formula.
Total return performance for a specific period is calculated by first taking an
investment ("initial investment") in the Fund's shares on the first day of the
period, either adjusting or not adjusting to deduct the maximum sales charge,
and computing the "redeemable value" of that investment at the end of the
period. The total return percentage is then determined by subtracting the
initial investment from the redeemable value and dividing the remainder by the
initial investment and expressing the result as a percentage. The calculation
assumes that all income and capital gains dividends by the Fund have been
reinvested at net asset value on the reinvestment dates during the period. Total
return may also be shown as the increased dollar value of the hypothetical
investment over the period. Total return calculations that do not include the
effect of the sales charge would be reduced if such charge were included.
The manner in which total return will be calculated for public use is
described above. The following table illustrates average annual total return for
each Fund for the 1, 5 and 10 year periods ended November 30, 1998.
AVERAGE ANNUAL TOTAL RETURN AS OF NOVEMBER 30, 1998
<TABLE>
<CAPTION>
PERIODS ENDED
-----------------------------------------------------
Fund 1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION(1)
---- ------ ------ ------- ------------------
<S> <C> <C> <C> <C>
Bond
Class A 0.70% 4.30% 7.36% 8.01%
Class B 1.14% N/A N/A 4.93%
Mid Cap
Class A 1.58% 10.00% N/A 14.69%
Class B 2.13% N/A N/A 11.85%
International
Class A 20.19% 12.76% N/A 9.59%
Class B 21.32% N/A N/A 11.25%
Real Estate
Class A (21.36)% N/A N/A 10.76%
Class B (20.88)% N/A N/A 10.99%
Emerging Markets
Class A (30.66)% N/A N/A 8.38%
Class B (30.01)% N/A N/A 8.79%
Class C N/A N/A N/A (35.91)%
</TABLE>
- - ----------
(1)The Bond, Mid Cap, and International Funds Class A commenced operations on
July 15, 1988, November 1, 1989 and November 1, 1989, respectively. Bond Fund
Class B commenced operations on March 16, 1994. Mid Cap and International
Funds Class B commenced operations on July 18, 1994 and July 15, 1994,
respectively. The Real Estate and Emerging Markets Funds' Class A and B
commenced operations on March 1, 1995 and September 5, 1995, respectively.
The Emerging Markets Bond Fund's Class C Shares commenced operations on March
26, 1998.
Performance information reflects only the performance of a hypothetical
investment in each class during the particular time period on which the
calculations are based. Performance information should be considered in light of
the Fund's investment objectives and policies, characteristics and quality of
the portfolio, and the market conditions during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
The Trust also may quote annual, average annual and annualized total return
and aggregate total return performance data, for each class of shares of the
Funds, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such data
will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate rate
of return calculations.
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<PAGE>
PERFORMANCE COMPARISONS
Each Fund or Class of Fund may, from time to time, include in advertisements
containing total return the ranking of those performance figures relative to
such figures for groups of mutual funds having similar investment objectives as
categorized by ranking services such as Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Weisenberger Financial Services, Inc., and rating
services such as Morningstar, Inc. Additionally, a Fund 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, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment
Adviser, The Wall Street Journal, New York Times, Consumer Reports, Registered
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard and Poor's The Outlook, Investor's Daily
and Personal Investor. The total return may be used to compare the performance
of the Funds 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, Europe Australia Far East Index
("EAFE"), NAREIT Equity Index, Consumer Price Index, J.P. Morgan Emerging
Markets Bond Index, Lehman Brothers Municipal Bond Index, Lehman Brothers
Aggregate Bond 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.
PORTFOLIO TURNOVER
The Funds pay brokerage commissions for purchases and sales of portfolio
securities. A high rate of portfolio turnover generally involves a
correspondingly greater amount of brokerage commissions and other costs which
must be borne directly by a Fund and thus indirectly by its shareholders. It may
also result in the realization of larger amounts of short-term capital gains,
which are taxable to shareholders as ordinary income. If such rate of turnover
exceeds 100%, the Funds will pay more in brokerage commissions than would be the
case if they had lower portfolio turnover rates. Historical turnover rates can
be found under the heading "Financial Highlights" located in the Trust's
Prospectus.
PORTFOLIO TRANSACTIONS
In effecting fund transactions for the Trust, each adviser adheres to the
Trust's policy of seeking best execution and price, determined as described
below, except to the extent it is permitted to pay higher brokerage commissions
for "brokerage and research services" as defined herein. The determination of
what may constitute best execution and price in the execution of a securities
transaction by a broker involves a number of considerations including, without
limitation, the overall direct net economic result to the Trust (involving both
price paid or received and any commissions and other costs paid), the efficiency
with which the transaction is effected, the ability to effect the transaction at
all where a large block is involved, availability of the broker to stand ready
to execute possibly difficult transactions in the future and the financial
strength and stability of the broker. Such considerations are judgmental and are
weighed by each adviser and the Subadviser in determining the overall
reasonableness of brokerage commissions paid by the Trust.
Each adviser may cause the Trust to pay a broker an amount of commission for
effecting a securities transaction in excess of the amount of commission which
another broker or dealer would have charged for effecting that transaction if
such adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker. As provided in Section 28(e) of the Securities Exchange
Act of 1934, "brokerage and research services" include advising as to the value
of securities, the advisability of investing in, purchasing or selling
securities, the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts, and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Brokerage and research
services provided by brokers to the Trust are considered to be in addition to
and not in lieu of services required to be performed by each adviser under its
contract with the Trust and may benefit both the Trust and other accounts of
such adviser. Conversely, brokerage and research services provided by brokers to
other accounts of an adviser may benefit the Trust.
If the securities in which a particular Fund of the Trust invests are traded
primarily in the over-the-counter market, where possible the Fund will deal
directly with the dealers who make a market in the securities involved unless
better prices and executions are available elsewhere. Such securities may be
purchased directly from the issuer. Bonds and money market instruments are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes.
Some fund transactions are, subject to the Conduct Rules of the National
Association of Securities Dealers, Inc. and subject to obtaining best prices and
executions, effected through dealers (excluding Equity Planning) who sell shares
of the Trust.
17
<PAGE>
The Trust has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser shall aggregate transactions unless it believes in its
sole discretion that such aggregation is inconsistent with its duty to seek best
execution (which shall include the duty to seek best price) for the Trust. No
advisory account of the Adviser is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the Adviser in that security on
a given business day, with all transaction costs share pro rata based on the
Trust's participation in the transaction. If the aggregated order is filled in
its entirety, it shall be allocated among the Adviser's accounts in accordance
with the allocation order, and if the order is partially filled, it shall be
allocated pro rata based on the allocation order. Notwithstanding the foregoing,
the order may be allocated on a basis different from that specified in the
allocation order if all accounts of the Adviser whose orders are allocated
receive fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by the Adviser's
compliance officer as soon as practicable after the opening of the markets on
the trading day following the day on which the order is executed. If an
aggregated order is partially filled and allocated on a basis different from
that specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or sale
for a reasonable period following the execution of the aggregated order that
would result in it receiving or selling more shares than the amount of shares it
would have received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall appear
appropriate.
For the fiscal years ended November 30, 1996, 1997 and 1998, brokerage
commissions paid by the Trust on Fund transactions totaled $3,104,255,
$2,269,745 and $2,904,276, respectively. Brokerage commissions of $1,564,683
paid during the fiscal year ended November 30, 1998, were paid on fund
transactions aggregating $989,159,000 executed by brokers who provided research
and other statistical and factual information.
Investment decisions for the Trust are made independently from those of the
other investment companies or accounts advised by either adviser. It may
frequently happen that the same security is held in the portfolio of more than
one fund. Simultaneous transactions are inevitable when several funds are
managed by the same investment adviser, particularly when the same security is
suited for the investment objectives of more than one fund. When two or more
funds advised by either adviser (or any subadviser) are simultaneously engaged
in the purchase or sale of the same security, the transactions are allocated
among the funds in a manner equitable to each fund. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as the Trust is concerned. In other cases, however, it is
believed that the ability of the Trust to participate in volume transactions
will produce better executions for the Trust. It is the opinion of the Board of
Trustees of the Trust that the desirability of utilizing each adviser as
investment adviser to the Trust outweighs the disadvantages that may be said to
exist from simultaneous transactions.
THE INVESTMENT ADVISERS
The investment adviser to the Bond, Mid Cap, International and Emerging
Markets Funds is Phoenix Investment Counsel, Inc. ("PIC"), which is located at
56 Prospect Street, Hartford, Connecticut 06115-0480. PIC also acts as the
investment adviser for 14 other mutual funds, as subadviser to three mutual
funds, and as adviser to institutional clients. PIC has acted as an investment
adviser for over sixty years. PIC was originally organized in 1932 as John P.
Chase, Inc. As of December 31, 1998, PIC had approximately $23.9 billion in
assets under management. Philip R. McLoughlin, a Trustee and officer of the
Trust, is a director of PIC. All other executive officers of the Trust are
officers of PIC.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning" or "Distributor"), a subsidiary of Phoenix
Investment Partners, Ltd. ("PXP"). PXP is a New York Stock Exchange traded
company that provides investment management and related services to
institutional investors, corporations and individuals through operating
subsidiaries. Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life")
of Hartford, Connecticut is a majority shareholder of PXP. 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. Equity Planning, a mutual fund distributor, acts as the
national distributor of the Trust's shares and as Financial Agent of the Trust.
The principal office of Equity Planning is located at 100 Bright Meadow
Boulevard, Enfield, Connecticut, 06082.
Phoenix Investment Partners, Ltd., is the 10th largest publicly traded
investment company in the nation, and has served investors for over 70 years. It
manages approximately $53.5 billion in assets through its investment partners:
Aberdeen Fund Managers, Inc. (Aberdeen) in Aberdeen, London, Singapore and Fort
Lauderdale; Duff & Phelps Investment Management Co. (Duff & Phelps) in Chicago
and Cleveland; Roger Engemann & Associates, Inc. (Engemann) in Pasadena; Seneca
Capital Management LLC (Seneca) in San Francisco; and Phoenix Investment
Counsel, Inc. (Goodwin, Hollister, and Oakhurst divisions) in Hartford, Sarasota
and Scotts Valley, CA, respectively.
Duff & Phelps Investment Management Co. ("Duff & Phelps") is the investment
adviser to the Real Estate Fund and is located at 55 East Monroe Street, Suite
3600, Chicago, Illinois 60603. Duff & Phelps also acts as investment adviser to
eight other mutual
18
<PAGE>
funds and as adviser to institutional clients. As of December 31, 1998, Duff &
Phelps had approximately $15.2 billion in assets under management on a
discretionary basis. Duff & Phelps is a subsidiary of PXP. Duff & Phelps also
serves as investment adviser to the Core Equity Fund of Phoenix Equity Series
Fund, the Enhanced Reserves Portfolio and Core Equity Portfolio of Phoenix Duff
& Phelps Institutional Mutual Funds and three closed-end funds: Duff & Phelps
Utilities Income Inc., Duff & Phelps Utilities Tax-Free Income Inc. and Duff &
Phelps Utility and Corporate Bond Trust Inc.
Aberdeen Fund Managers Inc. ("Aberdeen") is the subadviser to the
International Fund and is located at 1 Financial Plaza, Suite 2210, Fort
Lauderdale, FL 33394. Aberdeen is a wholly-owned subsidiary of Aberdeen Asset
Management PLC based in Aberdeen, Scotland. Together with its subsidiaries,
Aberdeen Asset Management PLC provides investment management services to unit
and investment trusts, segregated pension funds and other institutional and
private portfolios, and, through Aberdeen, U.S. mutual funds. Aberdeen has
served as subadviser for the following mutual funds since their inception in
1996: Phoenix-Aberdeen New Asia Fund, Phoenix-Aberdeen Global Small Cap Fund and
the Aberdeen New Asia Series of The Phoenix Edge Series Fund. Aberdeen also has
served as subadviser to Phoenix-Aberdeen Worldwide Opportunities Fund and the
International Series of The Phoenix Edge Series Fund since 1998. As of December
31, 1998, Aberdeen Asset Management PLC had $23.9 billion in assets under
management.
Seneca Capital Management LLC ("Seneca") is the subadviser to the Mid Cap
Fund and is located at 909 Montgomery Street, San Francisco, California 94133.
Seneca acts as a subadviser to two other mutual funds and as investment adviser
to institutions and individuals. As of December 31, 1998, Seneca had $5.9
billion in assets under management. Seneca has been (with its predecessor,
GMG/Seneca Capital Management LP ("GMG/Seneca")) an investment adviser since
1989.
The investment advisory agreements, approved by the Trustees, provide that
the Trust will bear all costs and expenses (other than those specifically
referred to as being borne by the Adviser) incurred in the operation of the
Trust. Such expenses include, but shall not be limited to, all expenses incurred
in the operation of the Trust and any public offering of its shares, including,
among others, interest, taxes, brokerage fees and commissions, fees of Trustees
who are not employees of PIC or any of its affiliates, expenses of Trustees, and
shareholders' meetings, expenses of printing and mailing proxy soliciting
material, expenses of the insurance premiums for fidelity and other coverage,
expenses of the repurchase and redemption of shares, expenses of the issue and
sale of shares (to the extent not borne by Equity Planning under its agreement
with the Trust), expenses of printing and mailing share certificates
representing shares of the Trust, association membership dues, charges of
custodians, transfer agents, dividend disbursing agents and financial agents,
and bookkeeping, auditing and legal expenses. The Trust will also pay the fees
and bear the expense of registering and maintaining the registration of the
Trust and its shares with the Securities and Exchange Commission and registering
or qualifying its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to shareholders. If authorized by
the Trustees, the Trust will also pay for extraordinary expenses and expenses of
a non-recurring nature which may include, but shall not be limited to, the
reasonable cost of any reorganization or acquisition of assets and the cost of
legal proceedings to which the Trust is a party.
Each Fund will pay expenses incurred in its own operation and will also pay a
portion of the Trust's general administration expenses allocated on the basis of
the asset values of the respective Funds.
For managing, or directing the management of, the investments of the Bond,
Mid Cap, International, Emerging Markets and Income Funds, PIC is entitled to a
fee, payable monthly, at the following annual rates:
<TABLE>
<CAPTION>
FUND 1ST $1 BILLION $1-2 BILLION $2+ BILLION
---- -------------- ------------ -----------
<S> <C> <C> <C>
Bond 0.45% 0.40% 0.35%
Mid Cap 0.75% 0.70% 0.65%
International 0.75% 0.70% 0.65%
Emerging Markets 0.75% 0.70% 0.65%
</TABLE>
For managing, or directing the management of, the investments of the Real
Estate Fund, Duff & Phelps is entitled to a monthly fee at the annual rate of
0.75% of the average aggregate daily net asset values of the Fund 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.
The investment advisory agreements provide that the applicable adviser will
reimburse the Trust for the amount, if any, by which the total operating and
management expenses of any Fund (including the investment adviser's
compensation, but excluding interest, taxes, brokerage fees and commissions and
extraordinary expenses) for any fiscal year exceed the level of expenses which
such Fund is permitted to bear under the most restrictive expense limitation
(which is not waived) imposed on mutual funds by any state in which shares of
such Fund are then qualified for sale. Currently the most restrictive state
expense limitation provisions limit such expenses of any Fund of the Trust to
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million. Such
reimbursement, if any, will be made by the applicable adviser to the Trust
within five days after the end of each month. In the event legislation were to
be adopted in each state so as to eliminate this restriction, the Trust would
take such action necessary to eliminate this expense limitation.
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<PAGE>
For its services to the Bond, Mid Cap, International and Emerging Markets
Funds of the Trust during the fiscal year ended November 30, 1998, PIC received
a fee of $5,102,768. Of this total, PIC received fees from each Fund as follows:
<TABLE>
<CAPTION>
Fund 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C>
Bond $ 646,989 $ 593,217 $ 544,278
Mid Cap 3,579,657 3,027,757 2,476,987
International 1,071,572 1,062,391 1,350,786
Emerging Markets 177,790 577,472 730,717
</TABLE>
For the fiscal year ended November 30, 1996, it was necessary that PIC bear
ordinary operating expenses of the Emerging Markets Fund of $123,979.
Accordingly, the fee of $177,790 to which PIC would otherwise have been entitled
was reduced to $53,811.
The Real Estate Fund, during the fiscal years ended November 30, 1996, 1997
and 1998, paid management fees of $168,177, $355,100 and $398,336, respectively.
For the fiscal years 1996, 1997 and 1998, the Adviser bore ordinary operating
expenses of the Real Estate Fund of $130,944, $112,306 and $111,386,
respectively. Accordingly, the fees which the Adviser would otherwise have been
entitled were reduced to $286,950 in fiscal year 1998, $242,794 in fiscal year
1997, and $37,233 in fiscal year 1996.
The investment advisory agreements also provide that each adviser shall not
be liable to the Trust or to any shareholder of the Trust for any error of
judgment or mistake of law or for any loss suffered by the Trust or by any
shareholder of the Trust in connection with the matters to which the agreement
relates, except a loss resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard on the part of such adviser in the performance
of its duties thereunder.
Provided it has been approved by a vote of the majority of the outstanding
shares of a Fund of the Trust which is subject to its terms and conditions, each
investment advisory agreement continues from year to year with respect of such
Fund so long as (1) such continuance is approved at least annually by the
Trustees or by a vote of the majority of the outstanding shares of such Fund and
(2) the terms and any renewal of the agreement with respect to such Fund have
been approved by the vote of a majority of the Trustees who are not parties to
the agreement or interested persons, as that term is defined in the Investment
Company Act of 1940, of the Trust or the relevant adviser, cast in person at a
meeting called for the purpose of voting on such approval. On sixty days'
written notice and without penalty the agreement may be terminated as to the
Trust or as to a Fund by the Trustees or by the relevant adviser and may be
terminated as to a Fund by a vote of the majority of the outstanding shares of
such Fund. The Agreement automatically terminates upon its assignment (within
the meaning of the Investment Company Act). The agreement provides that upon its
termination, or at the request of the relevant adviser, the Trust will eliminate
all reference to Phoenix from its name, and will not thereafter transact
business in a name using the word Phoenix.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Since the Trust does not price securities on
weekends or United States national holidays, the net asset value of a Fund's
foreign assets may be significantly affected on days when the investor has no
access to the Trust. The net asset value per share of a Fund is determined by
adding the values of all securities and other assets of the Fund, subtracting
liabilities, and dividing by the total number of outstanding shares of the Fund.
Assets and liabilities are determined in accordance with generally accepted
accounting principles and applicable rules and regulations of the Securities and
Exchange Commission. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Fund which invests in
foreign securities contemporaneously with the determination of the prices of the
majority of the portfolio securities of such Fund. All assets and liabilities
initially expressed in foreign currency values will be converted into United
States dollar values at the mean between the bid and ask quotations of such
currencies against United States dollars as last quoted by any recognized
dealer. If an event were to occur after the value of an investment was so
established but before the net asset value per share was determined, which was
likely to materially change the net asset value, then the instrument would be
valued using fair value considerations by the Trustees or their delegates. If at
any time a Fund has investments where market quotations are not readily
available, such investments are valued at the fair value thereof as determined
in good faith by the Trustees although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.
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<PAGE>
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.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their net
asset value per share, plus a sales charge which, 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 Authorized Agent
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 and services fees 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 Shares purchased at the same time. Note,
only the Emerging Markets Fund and the International Fund currently offer Class
C 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 and services fees 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 ongoing distribution and services fees at an annual rate
of 0.25% of the Fund's aggregate average daily net assets attributable to the
Class A Shares. In addition, certain purchases of Class A Shares qualify for
reduced initial sales charges. See the Funds' current Prospectus for additional
information.
CLASS B SHARES
Class B Shares do not incur a sales charge when they are purchased, but they
are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions. See the Funds' current Prospectus for additional
information.
Class B Shares are subject to ongoing distribution and services fees at an
aggregate annual rate of up to 1.00% of the Fund's aggregate average daily net
assets attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment is
made. The higher ongoing distribution and services fees paid by Class B Shares
will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related to Class A
Shares. Class B Shares will automatically convert to Class A Shares eight years
after the end of the calendar month in which the shareholder's order to purchase
was accepted, in the circumstances and subject to the qualifications described
in the Funds' Prospectus. The purpose of the conversion feature is to relieve
the holders of the Class B Shares that have been outstanding for a period of
time sufficient for the adviser and the Distributor to have been compensated for
distribution expenses related to the Class B Shares from most of the burden of
such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution and services fees. 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.
21
<PAGE>
For purposes of conversion to Class A Shares, 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--EMERGING MARKETS FUND AND INTERNATIONAL FUND ONLY
Class C Shares are purchased without an initial sales charge but are subject
to a deferred sales charge if redeemed within one year of purchase. The deferred
sales charge may be waived in connection with certain qualifying redemptions.
Shares issued in conjunction with the automatic reinvestment of income
distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to ongoing distribution and services fees at
an aggregate annual rate of up to 1.00% of the Fund's aggregate average daily
net assets attributable to Class C Shares. See the Funds' current Prospectus for
more information.
CLASS A SHARES--REDUCED INITIAL SALES CHARGES
Investors choosing Class A 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 Shares: (1)
trustee, director or officer of the Phoenix Funds, the Phoenix-Engemann Funds,
Phoenix-Seneca Funds or any other mutual fund advised, subadvised or distributed
by the Adviser, Distributor or any of their corporate affiliates (an "Affiliated
Phoenix Fund"); (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, Phoenix-Engemann Fund or Phoenix-Seneca 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, Phoenix-Engemann Fund or
Phoenix-Seneca Fund 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, Phoenix-Engemann Fund or
Phoenix-Seneca 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
Shares bought through investment advisers 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 Affiliated 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.
22
<PAGE>
An "Affiliated Phoenix Fund" means any other mutual fund advised, subadvised
or distributed by the Adviser or Distributor or any corporate affiliate of
either or both the Adviser and Distributor provided such other mutual fund
extends reciprocal privileges to shareholders of the Phoenix Funds.
LETTER OF INTENT. If you sign a Letter of Intent, your purchase of any class
of shares of this or any other Affiliated Phoenix Fund (other than Phoenix Money
Market Fund Series Class A Shares), if made by the same person within a 13-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. The Distributor will redeem restricted Class A 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 Affiliated 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.
CLASS B AND C SHARES--WAIVER OF SALES CHARGES
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 70 1/2 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 Affiliated Phoenix Fund; (f) based on any direct rollover transfer
of shares from an established Affiliated Phoenix Fund qualified plan into an
Affiliated 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
Portfolio 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 Trust 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.
IMMEDIATE INVESTMENT
In order to obtain immediate investment of funds, initial and subsequent
purchases of shares of a Fund may also be made by wiring Federal Trusts (monies
held in a bank account with a Federal Reserve Bank) directly pursuant to the
following instructions:
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(1) For initial investments, telephone the Trust at (800) 367-5877. Certain
information will be requested from you regarding the account, and an
account number will be assigned.
(2) Once an account number has been assigned, direct your bank to wire the
Federal Trusts to State Street Bank and Trust Company, Custody &
Shareholder Services Division, Boston, Massachusetts 02105, attention of
the appropriate Fund of the Phoenix Multi-Portfolio Fund. Your bank must
include the account number and the name(s) in which your account is
registered in its wire and also request a telephone advice. Your bank may
charge a fee to you for transmitting funds by wire.
An order for shares of a Fund purchased with Federal Trusts will be accepted
on the business day Federal Trusts are wired provided the Federal Trusts are
received by 4:00 p.m. on that day; otherwise, the order will not be accepted
until the next business day. Shareholders should bear in mind that wire
transfers may take two or more hours to complete.
Promptly after an initial purchase of shares made by wiring Federal Trusts
directly, the shareholder should complete and mail to Equity Planning an Account
Application.
INVESTOR ACCOUNT SERVICES
The Funds offer accumulation plans, withdrawal plans and reinvestment and
exchange privileges. Certain privileges may not be available in connection with
all classes. In most cases, changes to account services may be accomplished over
the phone. Inquiries regarding policies and procedures relating to shareholder
account services should be directed to Shareholder Services at (800) 243-1574.
EXCHANGES. Under certain circumstances, shares of any Phoenix Fund may be
exchanged for shares of the same Class of another Phoenix Fund or any other
Affiliated Phoenix Fund on the basis of the relative net asset values per share
at the time of the exchange. Exchanges are subject to the minimum initial
investment requirement of the designated Series or Fund, except if made in
connection with the Systematic Exchange privilege. Shareholders may exchange
shares held in book-entry form for an equivalent number (value) of the same
class of shares of any other Affiliated Phoenix Fund, if currently offered. On
exchanges with share classes that carry a contingent deferred sales charge, the
CDSC schedule of the original shares purchased continues to apply. The exchange
of shares is treated as a sale and purchase for federal income tax purposes (see
also "Dividends, Distributions and Taxes").
SYSTEMATIC EXCHANGES. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund or any other Affiliated Phoenix
Fund automatically on a monthly, quarterly, semiannual 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 Affiliated Phoenix Fund. This requirement
does not apply to Phoenix "Self Security" program participants. Systematic
exchanges will be executed upon the close of business on the 10th day of each
month or the next succeeding business day. Systematic exchange forms are
available from the Distributor. Exchanges will be based upon each Fund's net
asset value per share next computed after the close of business on the 10th day
of each month (or next succeeding business day), without sales charge.
DIVIDEND REINVESTMENT ACROSS ACCOUNTS. If you maintain an account balance of
at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of one
of the other Phoenix Funds or any other Affiliated Phoenix Fund at net asset
value. You should obtain a current prospectus and consider the objectives and
policies of each Fund carefully before directing dividends and distributions to
another Fund. Reinvestment election forms and prospectuses are available from
Equity Planning. Distributions may also be mailed to a second payee and/or
address. Requests for directing distributions to an alternate payee must be made
in writing with a signature guarantee of the registered owner(s). To be
effective with respect to a particular dividend or distribution, notification of
the new distribution option must be received by the Transfer Agent at least
three days prior to the record date of such dividend or distribution. If all
shares in your account are repurchased or redeemed or transferred between the
record date and the payment date of a dividend or distribution, you will receive
cash for the dividend or distribution regardless of the distribution option
selected.
INVEST-BY-PHONE. This expedited investment service allows a shareholder to
make an investment in an account by requesting a transfer of funds from the
balance of their bank account. Once a request is phoned in, Equity Planning will
initiate the transaction by wiring a request for monies to the shareholder's
commercial bank, savings bank or credit union via Automated Clearing House
(ACH). The shareholder's bank, which must be an ACH member, will in turn forward
the monies to Equity Planning for credit to the shareholder's account. ACH is a
computer based clearing and settlement operation established for the exchange of
electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application and
attach a voided check if applicable. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) shareholders may call toll free
(800) 367-5877 prior to
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3:00 p.m. (New York time) to place their purchase request. Instructions as to
the account number and amount to be invested must be communicated to Equity
Planning. Equity Planning will then contact the shareholder's bank via ACH with
appropriate instructions. The purchase is normally credited to the shareholder's
account the day following receipt of the verbal instructions. The Trust may
delay the mailing of a check for redemption proceeds of Trust shares purchased
with a check or via Invest-by-Phone service until the Trust has assured itself
that good payment has been collected for the purchase of the shares, which may
take up to 15 days. The Trust and Equity Planning reserve the right to modify or
terminate the Invest-by-Phone service for any reason or to institute charges for
maintaining an Invest-by-Phone account.
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 Fund 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 Shares
investor since a sales charge will be paid by the investor on the purchase of
Class A Shares at the same time as other shares are being redeemed. For this
reason, investors in Class A Shares may not participate in an automatic
investment program while participating in the Systematic Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any applicable
contingent deferred sales charge on all shares redeemed. Accordingly, the
purchase of Class B Shares will generally not be suitable for an investor who
anticipates withdrawing sums in excess of the above limits shortly after
purchase.
HOW TO REDEEM SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Trust to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days or more after
receipt of the check. See the Funds' current Prospectus for further information.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
Redemptions by Class B and Class C shareholders will be subject to the
applicable deferred sales charge, if any.
REDEMPTION OF SMALL ACCOUNTS
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the giving
of not less than 30 days written notice to the shareholder mailed to the address
of record. During the 60-day period the shareholder has the right to add to the
account to bring its value to $200 or more. See the 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 Trust redeem the shares. See the Funds' current
Prospectus for more information.
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TELEPHONE REDEMPTIONS
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Funds' current Prospectus for
additional information.
BY CHECK (BOND FUND AND EMERGING MARKETS FUND ONLY)
Any shareholder of these Funds may elect to redeem shares held in his Open
Account by check. Checks will be sent to an investor upon receipt by Equity
Planning of a completed application and signature card (attached to the
application). If the signature card accompanies an individual's initial account
application, the signature guarantee section of the form may be disregarded.
However, the Trust reserves the right to require that all signatures be
guaranteed prior to the establishment of a check writing service account. When
an authorization form is submitted after receipt of the initial account
application, all signatures must be guaranteed regardless of account value.
Checks may be drawn payable to any person in an amount of not less than $500,
provided that immediately after the payment of the redemption proceeds the
balance in the shareholder's Open Account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient number
of full and fractional shares in the shareholder's Open Account will be redeemed
to cover the amount of the check. The number of shares to be redeemed will be
determined on the date the check is received by the Transfer Agent. Presently
there is no charge to the shareholder for the check writing service, but this
may be changed or modified in the future upon two weeks written notice to
shareholders. Checks drawn from Class B and Class C accounts are subject to the
applicable deferred sales charge, if any.
The checkwriting procedure for redemption enables a shareholder to receive
income accruing on the shares to be redeemed until such time as the check is
presented to Equity Planning for payment. Inasmuch as canceled checks are
returned to shareholders monthly, no confirmation statement is issued at the
time of redemption.
Shareholders utilizing withdrawal checks will be subject to Equity Planning's
rules governing checking accounts. A shareholder should make sure that there are
sufficient shares in his Open Account to cover the amount of any check drawn. If
insufficient shares are in the account and the check is presented to Equity
Planning on a banking day on which the Trust does not redeem shares (for
example, a day on which the New York Stock Exchange is closed), or if the check
is presented against redemption proceeds of an investment made by check which
has not been in the account for at least fifteen calendar days, the check may be
returned marked "Non-sufficient Funds" and no shares will be redeemed. A
shareholder may not close his account by a withdrawal check because the exact
value of the account will not be known until after the check is received by
Equity Planning.
REDEMPTION IN KIND
To the extent consistent with state and federal law, the Trust may make
payment of the redemption price either in cash or in kind. However, the Trust
has elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90-day period to the
lesser of $250,000 or 1% of the net asset value of the Trust at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the
Investment Company Act of 1940 and is irrevocable while the Rule is in effect
unless the Securities and Exchange Commission, by order, permits the withdrawal
thereof. In case of a redemption in kind, securities delivered in payment for
shares would be readily marketable and valued at the same value assigned to them
in computing the net asset value per share of a Fund. A shareholder receiving
such securities would incur brokerage costs when he sold the securities.
ACCOUNT REINSTATEMENT PRIVILEGE
Shareholders who may have overlooked features of their investment at the time
they redeemed have a privilege of reinvestment of their investment at net asset
value. See the Funds' current Prospectus for more information.
TAX SHELTERED RETIREMENT PLANS
Shares of the Trust are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA,
401(k), Profit-Sharing, Money Purchase Pension Plans and 403(b) Retirement
Plans. Write or call Equity Planning (800) 243-4361 for further information
about the plans.
DIVIDENDS, DISTRIBUTIONS AND TAXES
QUALIFICATION AS A REGULATED INVESTMENT COMPANY ("RIC")
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund has elected to qualify and intends to remain qualified as a RIC under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
each taxable year a Fund qualifies as a RIC, it (but not its shareholders) will
be relieved of federal income tax on that portion of its net investment income
and net capital gains that are currently distributed (or deemed distributed) to
its shareholders. To the extent that a Fund fails to distribute all of its
taxable income, it will be subject to corporate income tax (currently 35%) on
any retained ordinary investment income or short-term capital gains, and
corporate income tax (currently 35%) on any undistributed long-term capital
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gains. Each Fund intends to make timely distributions, if necessary, sufficient
in amount to avoid the non-deductible 4% excise tax that is imposed on a RIC to
the extent that it fails to distribute, with respect to each calendar year, at
least 98% of its ordinary income for such calendar year and 98% of its net
capital gains as determined for a one-year period ending on October 31 of such
calendar year (or as determined on a fiscal year basis, if the Fund so elects).
The Code sets forth numerous criteria that must be satisfied in order for
each Fund to qualify as a RIC. Among these requirements, each Fund must meet the
following tests for each taxable year: (a) derive in each taxable year at least
90% of its gross income from dividends, interest and gains from the sale or
other disposition of securities; and (b) meet certain diversification
requirements imposed under the Code at the end of each quarter of the taxable
year. If in any taxable year each Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed at corporate rates.
In addition, if in any tax year the Fund does not qualify as a RIC for state tax
purposes a capital gain dividend may not retain its character in the hands of
the shareholder for state tax purposes.
In the case of the International and Emerging Markets Funds, gains from
foreign currencies (i.e., gains from foreign currency options, foreign currency
futures and foreign currency forward contracts) are anticipated to constitute
qualifying income for purposes of the 90% test.
Section 988 of the Code provides special rules for foreign currency
transactions under which foreign currency gains or losses from forward
contracts, futures contracts that are not required to be marked-to-market and
unlisted options generally will be treated as ordinary income or loss.
In addition to meeting the 90% and 30% tests, in order to qualify as a RIC
each Fund will be required to distribute annually to its shareholders as
dividends (not including "capital gains dividends," discussed below) at least
90% of its ordinary investment income, short-term capital gains and tax exempt
income, with certain modifications. Each Fund intends to make distributions to
shareholders that will be sufficient to meet the 90% distribution requirement.
Each Fund must also diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the value of its total assets
consists of cash, cash items, U.S. Government Securities, and other securities
limited generally with respect to any one issuer to not more than 5% of the
total assets of that Fund and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any issuer (other than U.S. Government
Securities). For purposes of these diversification tests, the issuer of an
option on a particular security is the issuer of the underlying security. In the
case of a stock index futures contract or option thereon, the position taken by
the Internal Revenue Service in a recent letter ruling is that the issuers of
the stocks underlying the index, in proportion to the weighing of the stocks in
the computation of the index, are treated as the issuers of the instrument
irrespective of whether the underlying index is broad- based or narrow-based. In
the case of a foreign currency option, futures contract or forward contract,
however, there is as yet no specific guidance in the tax law concerning who will
be treated as the issuer of such instruments or how they will be valued for
purposes of these diversification tests.
Each Fund intends to comply with all of the foregoing criteria for
qualification as a RIC; however, there can be no assurance that the Fund will so
qualify and continue to maintain its status as a RIC. If a Fund were unable for
any reason to maintain its status as a RIC for any taxable year, adverse tax
consequences would ensue.
TAXATION OF SHAREHOLDERS
The Bond Fund expects that under normal conditions, at least 80% of its net
assets will be invested in state, municipal and other obligations the interest
on which is excluded from gross income for federal income tax purposes, and that
substantially all of its dividends therefore will be exempt interest dividends
which will be treated by its shareholders as excludable from federal gross
income. (The character of tax-exempt interest distributed by the Bond Fund will
flow through as tax-exempt interest to its shareholders provided that 50% or
more of the value of its assets at the end of each quarter of its taxable year
is invested in obligations the interest on which is excluded from gross income
for federal income tax purposes). An exempt interest dividend is any dividend or
part thereof (other than a capital gain dividend) paid by the Bond Fund with
respect to its net federal excludable municipal security interest, and
designated as an exempt interest dividend in a written notice mailed to
shareholders not later than 60 days after the close of the taxable year. The
percentage of total dividends paid by the Bond Fund with respect to any taxable
year which qualify as exempt interest dividends will be the same for all
shareholders receiving dividends with respect to such year. If a shareholder
receives an exempt interest dividend with respect to any share and such share is
held for 6 months or less, any loss on the sale or exchange of such share will
not be allowed to the extent of the exempt interest dividend amount.
Interest on certain "private activity bonds" issued after August 7, 1986,
although otherwise tax-exempt, is treated as a tax preference item for
alternative minimum tax purposes. Under regulations to be promulgated, the Bond
Fund's exempt interest dividends will be treated as a tax preference item for
purposes of computing the alternative minimum tax liability of shareholders in
such Fund to the extent attributable to interest paid on "private activity"
bonds. Corporate shareholders should also be aware that the receipt of exempt
interest dividends could subject them to alternative minimum tax under the
provisions of Code Section 56(f) (relating generally to book income or adjusted
current earnings in excess of taxable income).
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Interest on indebtedness incurred or continued by shareholders to purchase or
carry shares of the Bond Fund will not be deductible for federal income tax
purposes to the extent of the portion of the interest expense relating to exempt
interest dividends; that portion is determined by multiplying the total amount
of interest paid or accrued on the indebtedness by a fraction, the numerator of
which is the exempt interest dividends received by a shareholder in the
shareholder's taxable year and the denominator of which is the sum of the exempt
interest dividends and the taxable distributions received by the shareholder.
Distributions by the Mid Cap, International, Real Estate and Emerging Markets
Funds from ordinary investment income and net short-term capital gains will be
taxed to the shareholders as ordinary dividend income to the extent of the
earnings and profits of the respective Funds. Similarly, any portion of the Bond
Fund's dividends which does not qualify as exempt interest dividends and any
short-term capital gain distribution will be taxed to the Bond Fund shareholders
as ordinary income for federal income tax purposes. Ordinary income dividends
received by corporate shareholders will qualify for the 70% dividends-received
deduction to the extent the Funds designate such amounts as qualifying dividend
distributions; however, the portion that may be so designated is subject to
certain limitations. As a result of these limitations, it is not currently
anticipated that certain distributions by Funds will be qualifying dividend
distributions. Distributions by a Fund that are designated as capital gain
distributions will be taxed to the shareholders as capital gains, and will not
be eligible for the corporate dividends-received deduction.
Dividends declared by the Funds to shareholders of record in October,
November or December will be taxable to such shareholders in the year that the
dividend is declared, even if it is not paid until the following year (so long
as it is actually paid by the Fund prior to February 1). Also, shareholders will
be taxable on the amount of long-term capital gains designated by a Fund by
written notice mailed to shareholders within 60 days after the close of the
year, even if such amounts are not actually distributed to them. Shareholders
will be entitled to claim a credit against their own federal income tax
liability for taxes paid by the Fund on such undistributed gains, if any. If a
shareholder receives a long-term capital dividend with respect to any share and
such share is held for less than 6 months, any loss on sale or exchange of such
share will be long-term capital loss to the extent of long-term capital dividend
payments.
Dividends (other than exempt interest dividends) and capital gain
distributions will be taxable to shareholders as described above whether
received in cash or in shares under a Fund's distribution reinvestment plan.
With respect to distributions received in cash or reinvested in shares purchased
on the open market, the amount of the distribution for tax purposes will be the
amount of cash distributed or allocated to the shareholder. With respect to
distributions made in shares issued by the Fund as a stock dividend, the amount
of the distribution will be the fair market value of the shares on the payment
date.
Shareholders should be aware that the price of shares of a Fund that are
purchased prior to a dividend or distribution by the Fund may reflect the amount
of the forthcoming dividend or distribution. Such dividend or distribution, when
made, would be taxable to shareholders under the principles discussed above even
though the dividend or distribution may reduce the net asset value of shares
below a shareholder's cost and thus represent a return of a shareholder's
investment in an economic sense.
FOREIGN TAX CREDIT
The International Fund may incur liability for foreign income and
withholding taxes on investment income. The Fund intends to qualify for and may
make an election permitted under Section 853 of the Code. The effect of such
election is that the shareholders of such Fund will be able to claim a credit or
deduction on their U.S. federal income tax returns for, and may treat as part of
the amounts distributed to them, their pro rata share of the income taxes paid
by the Fund to foreign countries. (The election is not available unless stocks
or securities in foreign corporations represent more than 50% of the value of
the total assets of the Fund). The shareholders may claim a deduction or credit
by reason of the Fund's election subject to the limitations imposed under
Section 904 of the Code. The deduction for foreign taxes paid may not be claimed
by individual shareholders who do not elect to itemize deductions on their
federal income tax returns although such shareholders may claim a credit for
foreign income taxes paid. In either case, shareholders will be required to
report taxable income in the amount of their respective pro rata share of
foreign taxes paid by the Fund. Although the International Fund intends to meet
the requirements of the Code to "pass through" such taxes, there can be no
assurance that it will be able to do so in the future.
SALE OR EXCHANGE OF FUND SHARES
Gain or loss will be recognized by a shareholder upon the sale of his shares
in a Fund or upon an exchange of his shares in a Fund for shares in another
Fund. Provided that the shareholder is not a dealer in such shares, such gain or
loss will generally be treated as capital gain or loss, measured by the
difference between the adjusted basis of the shares and the amount realized
therefrom. Under current law, capital gains (whether long-term or short-term) of
individuals and corporations are fully includable in income and are taxed at the
regular federal income tax rates applicable to the shareholder's ordinary
income. Capital losses (whether long-term or short-term) may offset capital
gains plus (for non-corporate taxpayers only) up to $3,000 per year of ordinary
income.
TAX INFORMATION
Written notices will be sent to shareholders regarding the tax status of all
distributions made (or deemed to have been made) during each taxable year,
including the tax-exempt portion thereof (if applicable), the amount qualifying
for the dividends-received
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deduction (if applicable) and the amount designated as capital gains dividends,
undistributed capital gains (if any), tax credits (if applicable), and
cumulative return of capital (if any).
BACKUP WITHHOLDING
The Funds may be required to withhold federal income tax at a rate of 31% on
reportable dividends paid to certain noncorporate shareholders. Generally,
shareholders subject to such backup withholding will be those for whom a
taxpayer identification number and certain required certifications are not filed
with the Funds or who, to a Fund's knowledge, have furnished an incorrect
number.
FOREIGN SHAREHOLDERS
Dividends paid by a Fund from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien individual,
a foreign trust or estate, a foreign corporation or a foreign partnership (a
"foreign shareholder") will be subject to United States withholding tax at a
rate of 30% unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Foreign shareholders are urged to consult
their own tax advisors concerning the applicability of the United States
withholding tax and any foreign taxes.
OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences, described above,
applicable to an investment in a Fund, there may be state or local tax
considerations and estate tax considerations applicable to the circumstances of
a particular investor. In particular, distributions by the Bond Fund may be
subject to state and local taxation even though wholly or partially exempt for
federal income tax purposes. The foregoing discussion is based upon the Code,
judicial decisions and administrative regulations, rulings and practices, all of
which are subject to change and which, if changed, may be applied retroactively
to a Fund, its shareholders and/or its assets. No rulings have been sought from
the Internal Revenue Service with respect to any of the tax matters discussed
above.
The information included in the Prospectus with respect to taxes, in
conjunction with the foregoing, is a general and abbreviated summary of
applicable provisions of the Code and Treasury regulations now in effect as
currently interpreted by the courts and the Internal Revenue Service. The Code
and these Regulations, as well as the current interpretations thereof, may be
changed at any time by legislative, judicial, or administrative action.
THE DISTRIBUTOR
Equity Planning, a registered broker-dealer which is an indirect less than
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company, serves as
Distributor of the Trust's shares. Philip R. McLoughlin, a Trustee and President
of the Trust, is a director and officer of Equity Planning. Michael E. Haylon,
an officer of the Trust, is a director of Equity Planning; and G. Jeffrey Bohne,
Nancy G. Curtiss, William R. Moyer, and Leonard J. Saltiel, officers of the
Trust, are officers of Equity Planning.
The Trust and Equity Planning have entered into distribution agreements under
which Equity Planning has agreed to use its best efforts to find purchasers for
Trust shares and the Trust has granted to Equity Planning the exclusive right to
purchase from the Trust and resell, as principal, shares needed to fill
unconditional orders for Trust shares. Equity Planning may sell Trust shares
through its registered representatives or through securities dealers with whom
it has sales agreements. Equity Planning may also sell Trust shares pursuant to
sales agreements entered into with bank-affiliated securities brokers who,
acting as agent for their customers, place orders for Trust shares with Equity
Planning. Although the Glass-Steagall Act prohibits banks and bank affiliates
from engaging in the business of underwriting, distributing or selling
securities (including mutual fund shares), banking regulators have indicated
that such institutions are not 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 and bank affiliated securities
brokers are not permitted under the Glass-Steagall Act, the Trustees will
consider what action, if any, is appropriate. In addition, state securities laws
on this issue may differ from federal law, and banks and bank affiliates may be
required to register as securities dealers pursuant to state law. It is not
anticipated that termination of sales agreements with banks and bank affiliated
securities brokers would result in a loss to their customers or a change in the
net asset value per share of a Fund of the Trust.
For its services under the distribution agreements, Equity Planning receives
sales charges on transactions in Trust shares and retains such charges less the
portion thereof allowed to its registered representatives and to securities
dealers and securities brokers with whom it has sales agreements. In addition,
Equity Planning may receive payments from the Trust pursuant to the Distribution
Plans described below. For the fiscal years ended November 30, 1996, 1997 and
1998, purchasers of shares of the Funds paid aggregate sales charges of
$1,599,637, $2,114,382 and $4,260,271, respectively, of which the Distributor
received net commission of $258,916, $494,335 and $545,050, respectively, for
its services, the balance being paid to dealers. For the fiscal year ended
November 30, 1998, the distributor received net commission of $122,184 for Class
A Shares and deferred sales charges of $422,867 for Class B and C Shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Dealers with whom the Distributor has entered into sales agreements receive a
discount or commission as described below.
29
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF
TRANSACTION SALES CHARGE AS A PERCENTAGE SALES CHARGE AS A PERCENTAGE DEALER DISCOUNT
AT OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
In addition to the dealer discount on purchases of Class A 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
Trust and/or for providing other shareholder services. Depending on the nature
of the services, these fees may be paid either from the Trust 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 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.
ADMINISTRATIVE SERVICES
Equity Planning also acts as administrative agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Funds. For
its services, Equity Planning will be paid a fee equal to the sum of (1) the
documented cost of fund accounting and related services provided by PFPC, Inc.,
as subagent, plus (2) the documented costs to Equity Planning to provide
financial reporting and tax services and to oversee the subagent's performance.
The current fee schedule of PFPC, Inc. is based upon the average of the
aggregate daily net asset values of the Funds, at the following incremental
annual rates.
First $200 million .085%
$200 million to $400 million .05%
$400 million to $600 million .03%
$600 million to $800 million .02%
$800 million to $1 billion .015%
Greater than $1 billion .0125%
Percentage rates are applied to the aggregate daily net asset values of the
Funds, PFPC, Inc. also charges minimum fees and additional fees to each
additional class of fund shares. Equity Planning retains PFPC, Inc. as subagent
for each of the funds for which Equity Planning serves as administrative agent.
PFPC, Inc. agreed to a modified fee structure and waived certain charges.
Because PFPC, Inc.'s arrangement would have favored smaller funds over larger
funds, Equity Planning reallocates PFPC, Inc.'s overall asset-based charges
among all funds for which it serves as administrative agent on the basis of the
relative net assets of each fund. As a result, the PFPC, Inc. charges to the
Fund are expected to be slightly less than the amount that would be found
through direct application of the table illustrated above. For services to the
Trust during the fiscal years ended November 30, 1996, 1997 and 1998, the
Financial Agent received fees of $243,021, $541,814 and $654,165, respectively.
DISTRIBUTION PLANS
The Trust has adopted separate amended and restated distribution plans under
Rule 12b-1 of the 1940 Act for each class of shares of each Fund of the Trust
(the "Class A Plan," the "Class B Plan," the "Class C Plan," and collectively
the "Plans"). The Plans
30
<PAGE>
permit the Trust to pay for services and 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 Trust.
Pursuant to the Plans, the Trust shall pay the Distributor for actual
expenses of the Distributor of 0.25% of the average daily net assets of the
Trust's average daily net assets for providing services to shareholders,
including assistance with inquiries related to shareholder accounts (the
"Service Fee"). Pursuant to the Class B Plan, the Trust may reimburse the
Distributor monthly for actual expenses of the Distributor up to 0.75% annually
of the average daily net assets of each Fund's Class B Shares. Pursuant to the
Class C Plan, the Trust may reimburse the Distributor monthly for actual
expenses of the Distributor up to 0.75%, 0.75% and 0.75% annually of the average
daily net assets of the Emerging Markets, Income, and International Funds' Class
C Shares, respectively.
Expenditures under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Trust (including underwriting fees and
financing expenses incurred in connection with 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 agreements with the Distributor in the form of the
Dealer Agreement for Phoenix Funds for services rendered in connection with the
sale and distribution of shares of the Funds; (iv) payment of expenses incurred
in sales and promotional activities, including advertising expenditures related
to the Funds; (v) the costs of preparing and distributing promotional materials;
(vi) the cost of printing the Trust's Prospectus and Statement of Additional
Information for distribution to potential investors; and (vii) such other
similar services that the Trustees determine are reasonably calculated to result
in the sale of shares of the Trust.
From the Service Fee the Distributor expects to pay a quarterly fee to
qualifying broker/dealer firms, as compensation for providing personal services
and/or the maintenance of shareholder accounts, with respect to shares sold by
such firms. This fee will not exceed on an annual basis 0.25% of the average
annual net asset value of such shares, and will be in addition to sales charges
on Trust 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.
From its own resources or pursuant to the Plan, and subject to the dealers'
prior approval, the Distributor may provide additional compensation to
registered representatives of dealers in the form of travel expenses, meals, and
lodging associated with training and educational meetings sponsored by the
Distributor. The Distributor may also provide gifts amounting in value to less
than $100, and occasional meals or entertainment, to registered representatives
of dealers. Any such travel expenses, meals, lodging, gifts or entertainment
paid will not be preconditioned upon the registered representatives' or dealers'
achievement of a sales target. The Distributor may, from time to time, reallow
the entire portion of the sales charge on Class A shares 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.
Each Plan requires that at least quarterly the Trustees of the Trust review a
written report with respect to the amounts expended under the Plans and the
purposes for which such expenditures were made. While the Plans are in effect,
the Trust will be required to commit the selection and nomination of candidates
for Trustees who are not interested persons of the Trust to the discretion of
other Trustees who are not interested persons. Each Plan continues in effect
from year to year only provided such continuance is approved annually in advance
by votes of the majority of both (a) the Board of Trustees of the Trust and (b)
the Rule 12b-1 Trustees, cast in person at a meeting called for the purpose of
voting on the Plan and any agreements related to the Plan.
For the fiscal year ended November 30, 1998 the Trust paid Rule 12b-1 Fees in
the amount of $2,708,081, of which the Distributor received $1,025,897,
unaffiliated broker-dealers received $1,404,016 and W.S. Griffith & Co., Inc.,
an affiliate, received $278,168. The Rule 12b-1 payments were used for (1)
compensating dealers, $3,182,864, (2) compensating sales personnel, $1,736,570,
(3) advertising, $815,800, (4) printing and mailing of prospectuses to other
than current shareholders, $60,074, (5) service costs, $236,653 and (6) other,
$314,389. No interested person of the Trust and no Trustee who is not an
interested person of the Trust, as that term is defined in the Investment
Company Act of 1940, had any direct or indirect financial interest in the
operation of the Plans.
MANAGEMENT OF THE TRUST
The Trust is an open-end management investment company known as a mutual
fund. The Trustees of the Trust ("Trustees") are responsible for the overall
supervision of the Trust and perform the various duties imposed on Trustees by
the Investment Company Act of 1940 and Massachusetts business trust law.
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the address
of each Trustee and executive officer is 56 Prospect Street, Hartford,
Connecticut, 06115-0480.
31
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- - --------------------- -------------- -----------------------
<S> <C> <C>
Robert Chesek (64) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994).
E. Virgil Conway (69) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Freddie Mac Mortgage
Securities Fund (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present), The Harlem Youth Development Foundation
(1987-present) (Chairman, 1998-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 Academy of Political Science
(Vice Chairman) (1985-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). Member,
Audit Committee of the City of New York (1981-1996). Advisory
Director, Blackrock Fannie Mae Mortgage Securities Fund
(1989-1996) and Fund Directions (1993-1998). Chairman, Financial
Accounting Standards Advisory Council (1992-1995).
Harry Dalzell-Payne (69) 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 & Phelps
New York, NY 10016 Utilities Tax-Free Income Inc. and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present). Director, Farragut
Mortgage Co., Inc. (1991-1994). Formerly a Major General of the
British Army.
*Francis E. Jeffries (68) 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 & Phelps
Naples, FL 33963 Utilities Income Inc. (1987-present), Duff & Phelps Utilities
Tax-Free Income Inc. (1991-present) and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1993-present). Director, The Empire
District Electric Company (1984-present). Director (1989-1997),
Chairman of the Board (1993-1997), President (1989-1993), and
Chief Executive Officer (1989-1995), Phoenix Investment Partners,
Ltd.
Leroy Keith, Jr. (60) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Carson Product Company Institutional Mutual Funds (1996-present). Director, Equifax Corp.
64 Ross Road (1991-present) and Evergreen International Fund, Inc.
Savannah, GA 30750 (1989-present). Trustee, Evergreen Liquid Trust, Evergreen Tax
Exempt Trust, Evergreen 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).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- - --------------------- -------------- -----------------------
<S> <C> <C>
*Philip R. McLoughlin (52) Trustee and Chairman (1997-present), Director (1995-present), Vice Chairman
President (1995-1997) and Chief Executive Officer (1995-present), Phoenix
Investment Partners, Ltd. 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, Townsend Financial Advisers, Inc. (1992-present),
Director, PHL Associates, Inc. (1995-present).
Everett L. Morris (70) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, NJ 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1993-present).
*James M. Oates (52) Trustee Chairman, IBEX Capital Markets, Inc. (formerly IBEX Capital
Managing Director Markets LLC) (1997-present). Managing Director, Wydown Group
The Wydown Group (1994-present). Director, Phoenix Investment Partners, Ltd.
IBEX Capital Markets, Inc. (1995-present). Director/Trustee, Phoenix Funds (1987-present).
60 State Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 950 Institutional Mutual Funds (1996-present). Director, AIB Govett
Boston, MA 02109 Funds (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), Stifel
Financial (1996-present), Command Systems, Inc. (1998-present)
and Connecticut River Bancorp (1998-present). Vice Chairman,
Massachusetts Housing-Partnership (1998-present). Member, Chief
Executives Organization (1996-present). Director (1984-1994),
President (1984-1994) and Chief Executive Officer (1986-1994),
Neworld Bank.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- - --------------------- -------------- -----------------------
<S> <C> <C>
*Calvin J. Pedersen (57) Trustee Director (1986-present), President (1993-present) and Executive
Phoenix Duff & Phelps Vice President (1992-1993), Phoenix Investment Partners, Ltd.
Corporation Director/Trustee, Phoenix Funds (1995-present). Trustee,
55 East Monroe Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 3600 Institutional Mutual Funds (1996-present). President and Chief
Chicago, IL 60603 Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present), Duff & Phelps Utilities Income Inc.
(1994-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present).
Herbert Roth, Jr. (70) 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 (1972-1998), Landauer, Inc. (medical services)
(1970-present), Tech Ops./Sevcon, Inc. (electronic controllers)
(1987-present), and Mark IV Industries (diversified manufacturer)
(1985-present). Member, Directors Advisory Council, Phoenix Home
Life Mutual Insurance Company (1998-present). Director, Key
Energy Group (oil rig service) (1988-1994). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Richard E. Segerson (53) Trustee Managing Director, Northway Management Company (1998-present).
102 Valley Road Director/Trustee, Phoenix Funds (1993-present). Trustee,
New Canaan, CT 07840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Managing Director,
Mullin Associates (1993-1998).
Lowell P. Weicker, Jr. (67) 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) and Burroughs
Wellcome Fund (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 (41) Executive Director and Executive Vice President--Investments, Phoenix
Vice Investment Partners, Ltd. (1995-present). Executive Vice
President President, Phoenix Funds (1993-present) and Phoenix-Aberdeen
Series Fund (1996-present). Executive Vice President
(1997-present), Vice President (1996-1997), Phoenix Duff & Phelps
Institutional Mutual Funds. Director (1994-present), President
(1995-present), Executive Vice President (1994-1995), Vice
President (1991-1994), Phoenix Investment Counsel, Inc. Director
(1994-present), President (1996-present), Executive Vice President
(1994-1996), Vice President (1993-1994), National Securities &
Research Corporation. Director, Phoenix Equity Planning
Corporation (1995-present). Senior Vice President, Securities
Investments, Phoenix Home Life Mutual Insurance Company
(1993-1995). Various other positions with Phoenix Home Life Mutual
Insurance Company (1990-1993).
John F. Sharry (47) Executive Managing Director, Retail Distribution, Phoenix Equity Planning
Vice Corporation (1995-present). Executive Vice President, Phoenix
President Funds (1998-present) and Phoenix-Aberdeen Series Fund
(1998-present). Managing Director, Director and National Sales
Manager, Putnam Mutual Funds (until 1995).
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- - --------------------- -------------- -----------------------
<S> <C> <C>
Gail P. Seneca (45) Senior Vice Senior Vice President, Phoenix Strategic Allocation Fund, Inc.
President (1998-present), Phoenix Multi-Portfolio Fund (1998-present).
Managing Director, Equities, Phoenix Investment Counsel, Inc.
(1998-present). Senior Vice President, The Phoenix Edge Series
Fund (1998-present) and Phoenix Strategic Equity Series Fund
(1998-present). President and Chief Executive and Investment
Officer, Seneca Capital Management LLC (1996-present). Managing
General Partner and Chief Executive and Investment Officer,
GMG/Seneca Capital Management LP (1989-present). President and
Trustee, Phoenix-Seneca Funds (1996-present). General Partner,
Genesis Merchant Group. LP (1990-present). President, GenCap, Inc.
(1994-present).
James D. Wehr (41) Senior Vice Senior Vice President (1998-present), Managing Director, Fixed
Income (1996-1998), Vice President (1991-1996), Phoenix Investment
President Counsel, Inc. Senior Vice President (1998-present), Managing
Director, Fixed Income (1996-1998), Vice President (1993-1996),
National Securities & Research Corporation. Senior Vice President
(1997-present), Vice President (1988-1997) Phoenix Multi-Portfolio
Fund; Senior Vice President (1997-present), Vice President
(1990-1997) Phoenix Series Fund; Senior Vice President
(1997-present), Vice President (1991-1997) The Phoenix Edge Series
Fund; Senior Vice President (1997-present), Vice President
(1993-1997) Phoenix California Tax Exempt Bonds, Inc., and Senior
Vice President (1997-present), Vice President (1996-1997) Phoenix
Duff & Phelps Institutional Mutual Funds. Senior Vice President
(1997-present) Phoenix Multi-Sector Fixed Income Fund, Inc.,
Phoenix Multi-Sector Short Term Bond Fund, Phoenix Income and
Growth Fund and Phoenix Strategic Allocation Fund, Inc. Managing
Director, Public Fixed Income, Phoenix Home Life Insurance Company
(1991-1995).
David L. Albrycht (37) Vice Managing Director, Fixed Income (1996-present) and Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present) and Investment Officer (1994-1996),
National Securities & Research Corporation. Vice President,
Phoenix Multi-Portfolio Fund (1993-present), Phoenix Multi-Sector
Short Term Bond Fund (1993-present), Phoenix Multi-Sector Fixed
Income Fund, Inc. (1994-present), The Phoenix Edge Series Fund
(1997-present) and Phoenix Series Fund (1997-present). Fund
Manager, Phoenix Home Life Mutual Insurance Company (1994-1995).
Timothy M. Heaney (33) Vice Managing Director, Fixed Income (1997-present), Director, Fixed
President Income Research (1996-1997), Investment Analyst (1995-1996),
Phoenix Investment Counsel, Inc. Vice President, Phoenix
Multi-Portfolio Fund (1996-present). Managing Director, Fixed
Income (1997-present), Director, Fixed Income Research
(1996-1997), National Securities & Research Corporation.
Investment Analyst, Phoenix Home Life Mutual Insurance Company
(1992-1994). Vice President, Phoenix California Tax Exempt Bonds,
Inc. (1996-present) and Duff & Phelps Utilities Tax Free Income,
Inc. (1997-present).
Ron K. Jacks (33) Vice Managing Director, Equities, Phoenix Investment Counsel, Inc.
President (1998-present). Vice President, The Phoenix Edge Series Fund
(1998-present), Phoenix Strategic Equity Series Fund
(1998-present), and Phoenix Multi-Portfolio Fund (1998-present).
Secretary, Phoenix-Seneca Funds (1996-1998). Trustee,
Phoenix-Seneca Funds (1996-1997). General Partner and Equity
Portfolio Manager, GMG/Seneca Capital Management LP
(1995-present). Equity Portfolio Manager, Seneca Capital
Management LLC (1996-present).
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- - --------------------- -------------- -----------------------
<S> <C> <C>
Peter S. Lannigan (38) Vice Managing Director, Fixed Income (1997-present), Director, Fixed
President Income Research (1996-1997), Vice President (1995-1996), Phoenix
Investment Counsel, Inc. Managing Director, Fixed Income
(1998-present), Director, Fixed Income Research (1996-present),
National Securities & Research Corporation, Inc. Vice President,
Phoenix Multi-Portfolio Fund (1995-present). Director, Public
Fixed Income, Phoenix Home Life Mutual Insurance Company
(1993-1995). Various positions with Standard & Poor's Corporation
(1989-1993).
William R. Moyer (54) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. President Phelps Corporation (1995-present). Senior Vice President, Finance
PO Box 2200 (1990-present), Director (1998-present), Treasurer (1998-present
Enfield, CT 06083-2200 and 1994-1996), and Chief Financial Officer (1996-present),
Phoenix Equity Planning Corporation. Senior Vice President
(1990-present), Director (1998-present), Chief Financial Officer
(1996-present) and Treasurer (1994-present), Phoenix Investment
Counsel, Inc. Senior Vice President, Finance (1993-present), Chief
Financial Officer (1996-present), and Treasurer (1994-present),
National Securities & Research Corporation. Senior Vice President
and Chief Financial Officer, Duff & Phelps Investment Management
Co. (1996-present). Vice President, Phoenix Funds (1990-present),
Phoenix-Duff & Phelps Institutional Mutual Funds (1996-present)
and Phoenix-Aberdeen Series Fund (1996-present). Senior Vice
President and Chief Financial Officer,
W. S. Griffith & Co., Inc. (1992-1995) and Townsend Financial
Advisers, Inc. (1993-1995). Vice President, the National
Affiliated Investment Companies (until 1993). Vice President,
Investment Products Finance, Phoenix Home Life Mutual Insurance
Company (1990-1995).
Richard D. Little (50) Vice Managing Director, Equities, Phoenix Investment Counsel, Inc.
President (1998-present). Vice President, The Phoenix Edge Series Fund
(1998-present), Phoenix Strategic Equity Series Fund
(1998-present), and Phoenix Multi-Portfolio Fund (1998-present).
Director of Equities, Seneca Capital Management LLC
(1996-present). General Partner and Director of Equities, Seneca
Capital Management LP (1989-present).
Leonard J. Saltiel (45) Vice Managing Director, Operations and Service (1996-present), Senior
President Vice President, (1994-1996), Phoenix Equity Planning Corporation.
Vice President, Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present), and Phoenix-Aberdeen
Series Fund (1996-present). Vice President, National Securities &
Research Corporation (1994-1996). 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).
Michael Schatt (51) Vice Managing Director, Phoenix Investment Partners, Ltd.
President (1994-present). Senior Vice President, Phoenix Realty Securities,
Inc. (1997-present). Vice President, Duff & Phelps Investment
Management Co. (1997-present), Duff & Phelps Utilities Income,
Inc. (1997-present), Phoenix Duff & Phelps Institutional Mutual
Funds (1997-present), The Phoenix Edge Series Fund (1997-present),
and Phoenix Multi-Portfolio Fund (1997-present). Director, Real
Estate Advisory Practice, Coopers & Lybrand (1990-1994).
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- - --------------------- -------------- -----------------------
<S> <C> <C>
Pierre G. Trinque (43) Vice Vice President, Phoenix Strategic Allocation Fund, Inc.
President (1998-present), The Phoenix Edge Series Fund (1997-present),
Phoenix Multi-Portfolio Fund (1998-present), Phoenix Series Fund
(1997-present), Phoenix Duff & Phelps Institutional Mutual Funds
(1997-present), Phoenix Worldwide Opportunities Fund (1998-present),
and Phoenix Strategic Equity Series Fund (1998-present). Managing
Director, Large Cap Growth Team (1998-present), Managing Director,
Equities (1997-1998), Sr. Research Analyst, Equities (1996), and
Managing Director, Equity Research (1996-1997), Phoenix Investment
Counsel, Inc.
Nancy G. Curtiss (46) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Second Vice President and Treasurer, Fund
Accounting, Phoenix Home Life Mutual Insurance Company
(1994-1995). Various positions with Phoenix Home Life Insurance
Company (1987-1994).
G. Jeffrey Bohne (51) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations (1993-1996), Vice President, Mutual Fund Customer
Service (1996-present), Phoenix Equity Planning Corporation.
Secretary/Clerk, Phoenix Funds (1993-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present) and
Phoenix-Aberdeen Series Fund (1996-present). Vice President, Home
Life of New York Insurance Company (1984-1992). Clerk, Phoenix
Investment Council (1995-present).
</TABLE>
- - ----------------
*Trustees identified with an asterisk are considered to be interested persons
of the Trust (within the meaning of the Investment Company Act of 1940, as
amended) because of their affiliation with Phoenix Investment Counsel, Inc.,
or Phoenix Equity Planning Corporation or Phoenix Investment Partners, Ltd.
For services rendered to the Trust for the fiscal year ended November 30,
1998, the Trustees received an aggregate of $92,876. 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 $2,000 and $2,000 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.
Trustee fee costs are allocated equally to each of the Funds and the Funds
within the Phoenix Funds complex. The foregoing fees do not include
reimbursement of expenses incurred in connection with meeting attendance.
Officers and employees of the Adviser who are not interested persons are
compensated for their services by the Adviser and receive no compensation from
the Trust.
37
<PAGE>
For the Trust's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS ESTIMATED FUND COMPLEX
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS (14 FUNDS)
NAME FROM FUND OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES
---- --------- ---------------- --------------- ----------------
<CAPTION>
<S> <C> <C> <C> <C>
Robert Chesek $8,019 $60,000
E. Virgil Conway+ $10,625 $79,500
Harry Dalzell-Payne+ $9,559 $71,250
Francis E. Jeffries $7,986 $60,000
Leroy Keith, Jr. $8,368 None None $62,500
Philip R. McLoughlin+ $0 for any for any $0
Everett L. Morris+ $9,177 Trustee Trustee $69,500
James M. Oates+ $9,177 $68,750
Calvin J. Pedersen $0 $0
Herbert Roth, Jr.+ $11,007 $81,250
Richard E. Segerson $9,434 $70,750
Lowell P. Weicker $9,434 $70,000
</TABLE>
- - ----------
*This compensation (and the earnings thereon) will be deferred pursuant to the
Deferred Compensation Plan. At December 31, 1998, the total amount of deferred
compensation (including interest and other accumulation earned on the original
amounts deferred) accrued for Messrs. Jeffries, Morris and Roth was $175,029,
$151,807 and $147,653, 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.
At March 18, 1999, the Trustees and officers as a group owned less than 1% of
the then outstanding shares of the Trust.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 18, 1999 with respect
to each person who owns of record or is known by the Trust to own of record or
beneficially own 5% or more of any class of the Funds' equity securities.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NAME OF FUND NUMBER OF SHARES PERCENT OF CLASS
- - ------------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Phoenix Home Life Emerging Markets Class A 2,083,489.4080 34.82%
One American Row Emerging Markets Class C 8,484.4530 5.45%
Hartford, CT 06115 Real Estate Class A 526,415.8300 29.12%
Income Class X
MLPF&S for the sole benefit Emerging Markets Class B 712,342.3690 12.84%
of its customers Emerging Markets Class C 26,291.3810 16.88%
ATTN: Fund Administration International Class A 1,324,384.8680 9.86%
4800 Deer Lake Dr E 3rd FL International Class B 138,556.8830 9.16%
Jacksonville, FL 32246-6484 Bond Class B 140,423.3570 22.45%
Real Estate Class B 65,453.7760 5.00%
Phoenix Charter Oak Trust Co. TTEE International Class A 1,885,268.0510 14.04%
Phoenix Home Life Employee Pension Plan
One American Row
Hartford, CT 06103
Norwest Bank Iowa N.A. Emerging Markets Class C 16,166.0250 10.38%
ATTN: Trust Operations
822 Central PO Box 658
Ft. Dodge, IA 50501-0658
Don M Sears Emerging Markets Class C 15,408.3200 9.89%
Glenda R Sears
1526 S 105th St
Omaha, NE 68124-1012
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NAME OF FUND NUMBER OF SHARES PERCENT OF CLASS
- - ------------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Elmer J Krauss Partner Emerging Markets Class C 13,869.6260 8.90%
Krauss Portfolio Ltd
715 N Sherrill St
Tampa, FL 33609-1109
Dain Rauscher Custodian Emerging Markets Class C 9,297.6600 5.97%
Jerome A Hofelt
6202 Revere Place
Dallas, TX 75214-3044
</TABLE>
ADDITIONAL INFORMATION
The Trust's Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission which may be obtained from the Commission's
principal office at 450 Fifth Street, N.W., Washington, DC 20549, upon payment
of the fee prescribed by the rules and regulations promulgated by the
Commission.
CAPITAL STOCK
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest. The Trust currently offers shares in different
series or "Funds" and different classes of those Funds. Holders of shares of a
Fund are entitled to one full vote for each full share owned and a fractional
vote for any fractional share. Shares of a Fund participate equally in dividends
and distributions paid with respect to such Fund and in such Fund's net assets
on liquidation, except that Class B and C Shares of any Fund which bear higher
distribution fees and, certain incrementally higher expenses associated with the
deferred sales arrangement, pay correspondingly lower dividends per share than
Class A Shares of the same Fund. Shareholders of all Funds vote on the election
of Trustees. On matters affecting an individual Fund (such as approval of an
investment advisory agreement or a change in fundamental investment policies),
and on matters affecting an individual class (such as approval of matters
relating to a Distribution Plan for a particular class of shares), a separate
vote of that Fund or Class is required. Shares of a Fund are fully paid and
non-assessable when issued and are transferable and redeemable. Shares have no
preemptive or conversion rights (other than as described herein).
The assets received by the Trust for the issue or sale of shares of a Fund
and any class thereof and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are allocated to such Fund and Class
respectively, subject only to the rights of creditors, and constitute the
underlying assets of such Fund or Class. Any underlying assets of a Fund are
required to be segregated on the books of account and are to be charged with the
expenses in respect to such Fund and with a share of the general expenses of the
Trust. Any general expenses of the Trust not readily identifiable as belonging
to a particular Fund or Class will be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a business trust such as the Trust may be personally liable for
debts or claims against the Trust. The Declaration of Trust provides that
shareholders will not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that effect.
The Declaration of Trust provides for indemnification out of the Trust property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability, which is considered remote, is limited
to circumstances in which the Trust itself would be unable to meet its
obligations.
FINANCIAL STATEMENTS
The Financial Statements for the Fund's fiscal year ended November 30, 1998,
appearing in the Fund's 1998 Annual Report to Shareholders, are incorporated
herein by reference.
REPORTS TO SHAREHOLDERS
The fiscal year of the Trust ends on November 30. The Trust will send
financial statements to its shareholders at least semiannually. An annual report
containing financial statements audited by the Trust's independent accountants,
will be sent to shareholders each year.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, has been
selected independent accountants for the Trust. PricewaterhouseCoopers LLP
audits the Trust's annual financial statements and expresses an opinion thereon.
39
<PAGE>
CUSTODIANS AND TRANSFER AGENT
The custodian of the assets of the Bond Fund, Mid Cap Fund, Real Estate Fund,
Emerging Markets Fund and Income Fund is State Street Bank and Trust Company,
P.O. Box 351, Boston, Massachusetts, 02101. The custodian of the assets of the
International Fund is Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109. The Trust has authorized the custodians to appoint one or
more subcustodians for the assets of the Trust held outside the United States.
The securities and other assets of each Fund of the Trust are held by each
Custodian or any subcustodian separate from the securities and assets of each
other Fund.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Trust (the "Transfer Agent") for
which it is paid $22.25 for each designated daily dividend shareholder account
and $17.95 for each designated non-daily dividend shareholder account plus
out-of-pocket expenses. The Transfer Agent is authorized to engage subagents to
perform certain shareholder servicing functions from time to time for which such
agents shall be paid a fee by the Transfer Agent.
40
<PAGE>
APPENDIX
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Trust will only invest in commercial paper which at the date of
investment is rated A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Services, Inc., or, if not rated, is issued or guaranteed by companies
which at the date of investment have an outstanding debt issue rated AA or
higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationship which exists with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they compromise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
STANDARD AND POOR'S CORPORATION'S CORPORATE BOND RATINGS
AAA: This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay
principal and interest.
41
<PAGE>
AA: Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in small
degree.
A: Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and
interest for bonds in this category than for bonds in the A category.
BB, B,
CCC, CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
The D rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
42
<PAGE>
Phoenix Investment Partners
APRIL 30, 1999
ANNUAL REPORT
Phoenix
Small Cap Fund
Phoenix Strategic
Theme Fund
Phoenix Equity
Opportunities Fund
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
MESSAGE FROM THE PRESIDENT
DEAR SHAREHOLDER:
[PHOTO]
We are pleased to provide this report for the Phoenix Small Cap Fund, the
Phoenix Strategic Theme Fund and the Phoenix Equity Opportunities Fund for the
12 months ended April 30, 1999.
The last 12 months marked another period of wide disparity in performance of
large-capitalization stocks versus small-capitalization stocks and
growth-oriented investment styles versus value investing. For example, the
Russell 1000 Growth Index(1) was up 26.5%, while the Russell 1000 Value Index(2)
only gained 14.1% for the period. In contrast, the small-company Russell 2000
Growth Index(3) fell (3.8)% compared with a decline of (15.3)% for the Russell
2000 Value Index(4).
Given this difficult environment, we are pleased to report that the Phoenix
Strategic Theme Fund outperformed the S&P 500 Index(5), the Phoenix Equity
Opportunities Fund outperformed the Russell 2000 Growth Index and the Phoenix
Small Cap Fund outperformed the Russell 2000 Index(6). We believe that by
remaining true to our investment discipline, we will continue to add value for
our shareholders over the long term. Of course, past performance is not a
guarantee of future results.
On the following pages, each of the Funds' portfolio management teams discuss
market factors that affected the portfolio and share their outlooks for the next
six to 12 months. We hope you find their comments informative. If you have any
questions, please contact your financial advisor or call us at 1-800-243-1574
(option 0), between 8:00 a.m. and 6:00 p.m. Eastern Time, Monday through Friday.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
MAY 17, 1999
(1) THE RUSSELL 1000 GROWTH INDEX IS A MEASURE OF LARGE-CAPITALIZATION,
GROWTH-ORIENTED STOCK TOTAL RETURN PERFORMANCE.
(2) THE RUSSELL 1000 VALUE INDEX IS A MEASURE OF LARGE-CAPITALIZATION,
VALUE-ORIENTED STOCK TOTAL RETURN PERFORMANCE.
(3) THE RUSSELL 2000 GROWTH INDEX IS A MEASURE OF SMALL-CAPITALIZATION,
GROWTH-ORIENTED STOCK TOTAL RETURN PERFORMANCE.
(4) THE RUSSELL 2000 VALUE INDEX IS A MEASURE OF SMALL-CAPITALIZATION,
VALUE-ORIENTED STOCK TOTAL RETURN PERFORMANCE.
(5) THE S&P 500 INDEX IS A MEASURE OF STOCK MARKET TOTAL RETURN PERFORMANCE.
(6) THE RUSSELL 2000 INDEX IS A MEASURE OF SMALL-CAPITALIZATION STOCK TOTAL
RETURN PERFORMANCE.
INDICES REFERENCED ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT.
Mutual Funds are not insured by the FDIC; are not
deposits or other obligations of a bank and are not
guaranteed by a bank; and are subject to
investment risks, including possible loss of the
principal invested.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Phoenix Small Cap Fund.................................................... 3
Phoenix Strategic Theme Fund.............................................. 11
Phoenix Equity Opportunities Fund......................................... 20
Notes to Financial Statements............................................. 27
</TABLE>
2
<PAGE>
PHOENIX SMALL CAP FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund is appropriate for long-term investors seeking above-average capital
appreciation through investments in small-capitalization stocks. Investors
should note that small-company investing involves added risks, including greater
price volatility, less liquidity and increased competitive threat.
Q: HOW DID THE FUND PERFORM FOR THE FISCAL YEAR ENDED APRIL 30, 1999?
A: For the 12 months ended April 30, 1999, Class A shares of the Fund were down
(5.66)% and Class B shares were down (6.39)%. This compares with the Russell
2000 Index(1), which decreased (9.25)% and the S&P 600 SmallCap Index(2), which
declined (14.30)% over this same time period. The Russell 2000 Growth Index(3)
fell (3.77)% for the year. All performance figures assume reinvestment of
distributions and exclude the effect of sales charges.
Q: WHAT HAS CHANGED SINCE THE LAST TIME YOU WROTE TO US AT THE END OF OCTOBER?
A: At that time we had just begun to see the recovery of the market after the
Fed cut interest rates in response to a fragile global economy. In essence, this
move towards stabilization worked, and equity markets have continued to climb
since last October. More importantly, small-cap stocks are becoming bigger
participants in the bull market. For example, over the past six months, the
Fund's Class A shares have returned 18.49% compared to 15.16% for the Russell
2000 Index and 9.03% for the S&P 600 SmallCap Index.
Q: WHAT ARE OF SOME OF THE POSITIVES THAT HAVE HELPED THE FUND?
A: With the domestic economy continuing to perform better than expected, the
Fund's retail holdings have done particularly well. Some of our top holdings in
this sector include Claire's and Cost Plus. Financials were one of the hardest
hit industries during last summer's selloff. The Fund took this opportunity to
increase its holdings in this area. In fact, the Fund's largest holding, Metris,
a small issuer of credit cards, was among the top performers over the last six
months.
Q: PLEASE DISCUSS SOME STOCKS THAT DID NOT PERFORM WELL.
A: The Fund's worst performing holding was Curative Health Services. The company
was plagued by a slowdown in its core business and was the subject of a
whistleblower suit brought by the federal government. Although the company
steadfastly maintains its innocence, investors sold the stock given the
uncertainty of the situation. CKR Restaurants was another poor performer as the
company was having difficulties with their Hardee's division. With the company
solidly profitable and management's commitment to get Hardee's back on track, we
increased our position.
(1) THE RUSSELL 2000 INDEX IS A MEASURE OF SMALL-CAPITALIZATION TOTAL RETURN
PERFORMANCE.
(2) THE S&P 600 SMALLCAP INDEX IS A MEASURE OF SMALL-CAP STOCK TOTAL RETURN
PERFORMANCE.
(3) THE RUSSELL 2000 GROWTH INDEX IS A MEASURE OF SMALL-CAPITALIZATION,
GROWTH-ORIENTED STOCK TOTAL RETURN PERFORMANCE.
INDICES REFERENCED ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT.
3
<PAGE>
PHOENIX SMALL CAP FUND (CONTINUED)
Q: WHAT IS THE OUTLOOK FOR SMALL-CAP STOCKS?
A: As we mentioned earlier, small-cap performance has improved somewhat since
the Fed lowered interest rates back in October. However, they have still had a
difficult time keeping up with the large-cap segment of the market. Several
things have changed over the past several months, which we believe will help
small stocks outperform. First, despite fears that the U.S. economy would slow
in 1999, the economy has in fact remained robust. As investors gain confidence
that the economy is likely to remain healthy, we expect the market to broaden
out and not focus on only the largest companies. Over the past three months, we
have seen this begin to happen. Second, for a long time we have argued that
small-cap stocks are cheap, yet no serious buyers emerged. This has changed
recently as well, as large corporations have recognized the value in the
small-cap sector and have begun to acquire many small companies. Over the past
six months, larger companies acquired three of the Fund's holdings at premium
prices. As a result, we believe that these corporate buyers have set a floor for
valuations on small-cap companies. Given these elements, we are optimistic that
small caps are a very attractive asset class and should begin to close the
valuation gap relative to large-cap stocks.
MAY 20, 1999
4
<PAGE>
Phoenix Small Cap Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 4/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 4/30/99 DATE
------- ----------- -----------
<S> <C> <C> <C>
Class A Shares at NAV(2) (5.66)% 22.24% 10/16/95
Class A Shares at POP(3) (10.14) 20.57 10/16/95
Class B Shares at NAV(2) (6.39) 21.32 10/16/95
Class B Shares with CDSC(4) (9.84) 20.98 10/16/95
Russell 2000 Growth Index(6) (3.77) 10.75 10/16/95
Russell 2000 Index(7) (9.25) 12.18 10/16/95
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for B shares decline from 5% to 0% over a
five year period.
(5) This chart illustrates POP returns on Class A and CDSC returns on Class B
Shares since inception.
(6) The Russell 2000 Growth Index is a measure of small-capitalization growth-
oriented stock total return performance. The index's performance does not
reflect sales charges.
(7) The Russell 2000 Index is a measure of small-capitalization total return
performance. The index's performance does not reflect sales charges.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 4/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX SMALL CAP FUND CLASS A(1) PHOENIX SMALL CAP FUND CLASS B(5) RUSSELL 2000 GROWTH INDEX(6)
<S> <C> <C> <C>
10/16/95 $9,525.00 $10,000.00 $10,000.00
04/30/96 $15,950.41 $16,680.00 $12,004.61
04/30/97 $13,489.29 $14,006.97 $10,378.68
04/30/98 $20,548.02 $21,173.57 $14,914.21
04/30/99 $19,384.81 $19,625.02 $14,351.41
<CAPTION>
RUSSELL 2000 INDEX(7)
<S> <C>
10/16/95 $10,000.00
04/30/96 $11,616.78
04/30/97 $11,622.64
04/30/98 $16,550.84
04/30/99 $15,019.32
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
10/16/95 (inception of the Fund) in Class A and Class B shares. The total return
for Class A shares reflects the maximum sales charge of 4.75% on the initial
investment. The total return for Class B shares reflects the CDSC charges which
decline from 5% to 0% over a five year period. Performance assumes dividends and
capital gains are reinvested.
SECTOR WEIGHTINGS 4/30/99
As a percentage of equity holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 29%
Consumer Cyclicals 28
Consumer Staples 18
Financials 12
Health Care 4
Capital Goods 3
Energy 3
Other 3
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix Small Cap Fund
TEN LARGEST HOLDINGS AT APRIL 30, 1999 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Metris Companies, Inc. 5.2%
DIRECT MARKETER OF CONSUMER CREDIT PRODUCTS
2. Claire's Stores, Inc. 5.1%
SPECIALTY TEEN RETAILER
3. Cheesecake Factory, Inc. (The) 4.5%
RESTAURANT CHAIN
4. Whole Foods Market, Inc. 3.9%
NATURAL FOODS RETAILER
5. Cost Plus, Inc. 3.6%
SPECIALTY RETAILER OF CASUAL HOME LIVING AND ENTERTAINING
PRODUCTS
6. 99 Cents Only Stores 3.6%
GENERAL MERCHANDISE RETAILER
7. Abacus Direct Corp. 2.9%
PROVIDES MARKET RESEARCH SERVICES TO THE DIRECT-MAIL INDUSTRY
8. Encal Energy Ltd. (Canada) 2.8%
INTERMEDIATE OIL AND GAS EXPLORER
9. CKE Restaurants, Inc. 2.7%
OPERATES, FRANCHISES AND LICENSES QUICK-SERVICE RESTAURANTS
10. Fastenal Co. 2.6%
INDUSTRIAL FASTENER DISTRIBUTOR
</TABLE>
INVESTMENTS AT APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
COMMON STOCKS--94.8%
AIR FREIGHT--1.3%
Expeditors International of
Washington, Inc............... 45,000 $ 2,728,125
BIOTECHNOLOGY--1.9%
Biomatrix, Inc.(b)............ 80,000 2,635,000
Coulter Pharmaceutical,
Inc.(b)....................... 72,000 1,449,000
------------
4,084,000
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--1.8%
Metro Networks, Inc.(b)....... 86,000 3,870,000
COMMUNICATIONS EQUIPMENT--0.9%
Ortel Corp.(b)................ 275,000 1,856,250
COMPUTERS (SOFTWARE & SERVICES)--15.5%
Abacus Direct Corp.(b)........ 83,000 6,142,000
Broadcast.com, Inc.(b)........ 28,200 3,616,650
Concentric Network Corp.(b)... 32,000 2,672,000
EarthLink Network, Inc.(b).... 32,000 2,206,000
Inktomi Corp.(b).............. 6,400 766,400
International Network
Services(b)................... 42,000 1,596,000
Legato Systems, Inc.(b)....... 89,700 3,627,244
Network Solutions, Inc.(b).... 46,000 3,576,500
New Era of Networks,
Inc.(b)....................... 78,000 2,929,875
Peregrine Systems, Inc.(b).... 146,000 3,285,000
Verio, Inc.(b)................ 30,000 2,130,000
------------
32,547,669
------------
CONSUMER FINANCE--5.2%
Metris Companies, Inc......... 180,000 11,002,500
DISTRIBUTORS (FOOD & HEALTH)--3.2%
Schein (Henry), Inc.(b)....... 150,000 3,928,125
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)--CONTINUED
Smart & Final, Inc............ 275,000 $ 2,767,187
------------
6,695,312
------------
ELECTRICAL EQUIPMENT--3.3%
Advanced Energy Industries,
Inc.(b)....................... 103,000 2,851,812
Flextronics International
Ltd.(b)....................... 90,000 4,201,875
------------
7,053,687
------------
ELECTRONICS (INSTRUMENTATION)--0.5%
Meade Instruments Corp.(b).... 85,000 1,136,875
ELECTRONICS (SEMICONDUCTORS)--8.1%
Applied Micro Circuits
Corp.(b)...................... 87,500 4,664,844
Conexant Systems, Inc.(b)..... 93,000 3,789,750
Micrel, Inc.(b)............... 77,000 4,533,375
Vitesse Semiconductor
Corp.(b)...................... 90,000 4,168,125
------------
17,156,094
------------
ENTERTAINMENT--1.3%
Carmike Cinemas, Inc.(b)...... 125,000 2,695,312
FINANCIAL (DIVERSIFIED)--1.7%
Federal Agricultural Mortgage
Corp. Class C(b).............. 62,000 3,530,125
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--3.1%
Championship Auto Racing
Teams, Inc.(b)................ 70,000 2,156,875
International Speedway Corp.
Class A....................... 85,000 4,377,500
------------
6,534,375
------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--1.2%
Inhale Therapeutic Systems,
Inc.(b)....................... 90,000 2,587,500
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix Small Cap Fund
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)--0.4%
Omnicare, Inc................. 35,000 $ 842,187
INVESTMENT BANKING/BROKERAGE--2.9%
Ameritrade Holding Corp. Class
A(b).......................... 26,000 3,472,625
Investment Technology Group,
Inc........................... 45,000 1,558,125
Jefferies Group, Inc.(b)...... 45,000 1,029,375
------------
6,060,125
------------
INVESTMENT MANAGEMENT--1.8%
Gabelli Asset Management,
Inc.(b)....................... 245,000 3,690,312
RESTAURANTS--7.2%
CKE Restaurants, Inc.......... 346,500 5,673,938
Cheesecake Factory, Inc.
(The)(b)...................... 340,000 9,520,000
------------
15,193,938
------------
RETAIL (BUILDING SUPPLIES)--2.6%
Fastenal Co................... 115,000 5,491,250
RETAIL (DISCOUNTERS)--3.6%
99 Cents Only Stores(b)....... 160,775 7,576,522
RETAIL (FOOD CHAINS)--3.9%
Whole Foods Market, Inc.(b)... 211,000 8,229,000
RETAIL (SPECIALTY)--15.1%
Claire's Stores, Inc.......... 323,000 10,699,375
Cost Plus, Inc.(b)............ 217,500 7,666,875
Lithia Motors, Inc. Class
A(b).......................... 150,000 2,821,875
Restoration Hardware,
Inc.(b)....................... 331,500 5,179,688
Sonic Automotive, Inc.(b)..... 363,500 5,384,344
------------
31,752,157
------------
SERVICES (ADVERTISING/MARKETING)--1.0%
DoubleClick, Inc.(b).......... 15,000 2,097,188
SERVICES (COMMERCIAL & CONSUMER)--2.6%
Corporate Executive Board Co.
(The)(b)...................... 90,000 2,531,250
NCO Group, Inc.(b)............ 92,000 3,001,500
------------
5,532,750
------------
SERVICES (COMPUTER SYSTEMS)--2.3%
Whittman-Hart, Inc.(b)........ 170,000 4,802,500
SHIPPING--0.5%
Dril-Quip, Inc.(b)............ 40,800 994,500
TELECOMMUNICATIONS (LONG DISTANCE)--1.9%
WinStar Communications,
Inc.(b)....................... 82,000 3,987,250
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
TEXTILES (APPAREL)--0.0%
Boss Holdings, Inc.(b)........ 2,915 $ 5,830
- - --------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $166,487,940) 199,733,333
- - --------------------------------------------------------------------
FOREIGN COMMON STOCKS--4.2%
COMMUNICATIONS EQUIPMENT--0.7%
Research in Motion Ltd.
(Canada)(b)................... 120,000 1,454,360
COMPUTERS (SOFTWARE & SERVICES)--0.7%
Fundtech Ltd. (Israel)(b)..... 40,000 1,377,500
OIL & GAS (EXPLORATION & PRODUCTION)--2.8%
Encal Energy Ltd.
(Canada)(b)................... 1,200,000 5,850,403
- - --------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $7,131,840) 8,682,263
- - --------------------------------------------------------------------
PREFERRED STOCKS--0.7%
COMPUTERS (NETWORKING)--0.7%
Women.com(b).................. 455,930 1,500,010
- - --------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $1,500,010) 1,500,010
- - --------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--99.7%
(IDENTIFIED COST $175,119,790) 209,915,606
- - --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ ------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--0.3%
COMMERCIAL PAPER--0.3%
AT&T Corp. 4.93%, 5/3/99...... A-1+ $655 654,821
- - ----------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $654,821) 654,821
- - ----------------------------------------------------------------------
TOTAL INVESTMENTS--100.0%
(IDENTIFIED COST $175,774,611) 210,570,427(a)
Cash and receivables, less liabilities--0.0% 91,619
--------------
NET ASSETS--100.0% $ 210,662,046
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $45,935,813 and gross
depreciation of $12,573,213 for federal income tax purposes. At April 30,
1999, the aggregate cost of securities for federal income tax purposes was
$177,207,827.
(b) Non-income producing.
See Notes to Financial Statements
7
<PAGE>
Phoenix Small Cap Fund
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $175,774,611) $ 210,570,427
Cash 1,633,960
Receivables
Fund shares sold 2,571,950
Prepaid expenses 5,897
--------------
Total assets 214,782,234
--------------
LIABILITIES
Payables
Investment securities purchased 2,999,401
Fund shares repurchased 625,938
Transfer agent fee 126,946
Investment advisory fee 129,850
Distribution fee 98,494
Financial agent fee 15,033
Trustees' fee 4,110
Accrued expenses 120,416
--------------
Total liabilities 4,120,188
--------------
NET ASSETS $ 210,662,046
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 201,175,766
Accumulated net realized loss (25,309,536)
Net unrealized appreciation 34,795,816
--------------
NET ASSETS $ 210,662,046
--------------
--------------
CLASS A
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $121,313,331) 7,709,289
Net asset value per share $15.74
Offering price per share $15.74/(1-4.75%) $16.52
CLASS B
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $89,348,715) 5,854,781
Net asset value and offering price per share $15.26
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 971,501
Dividends 315,605
Foreign taxes withheld (9,053)
--------------
Total investment income 1,278,053
--------------
EXPENSES
Investment advisory fee 1,885,586
Distribution fee, Class A 360,521
Distribution fee, Class B 1,072,031
Financial agent 205,062
Transfer agent 689,371
Printing 126,487
Registration 38,237
Professional 36,547
Custodian 34,415
Trustees 16,507
Miscellaneous 13,580
--------------
Total expenses 4,478,344
Custodian fees paid indirectly (10,392)
--------------
Net expenses 4,467,952
--------------
NET INVESTMENT LOSS (3,189,899)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (24,980,470)
Net realized loss on foreign currency transactions (3,310)
Net change in unrealized appreciation (depreciation) on
investments 6,208,917
--------------
NET LOSS ON INVESTMENTS (18,774,863)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (21,964,762)
--------------
--------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Phoenix Small Cap Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
4/30/99 4/30/98
-------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (3,189,899) $ (2,593,774)
Net realized gain (loss) (24,983,780) 99,577,404
Net change in unrealized appreciation
(depreciation) 6,208,917 30,589,425
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (21,964,762) 127,573,055
-------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (5,773,229) (35,702,853)
Net realized gains, Class B (4,219,826) (26,132,919)
-------------- -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (9,993,055) (61,835,772)
-------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares
(18,013,110 and 5,292,562 shares,
respectively) 273,064,204 91,738,490
Net asset value of shares issued from
reinvestment of distributions
(360,829 and 2,365,346 shares,
respectively) 5,383,573 34,439,436
Cost of shares repurchased (22,385,155
and 6,909,942 shares, respectively) (343,459,404) (119,890,542)
-------------- -------------
Total (65,011,627) 6,287,384
-------------- -------------
CLASS B
Proceeds from sales of shares (987,925
and 1,984,492 shares, respectively) 14,507,598 35,124,815
Net asset value of shares issued from
reinvestment of distributions
(243,730 and 1,737,551 shares,
respectively) 3,536,528 24,812,223
Cost of shares repurchased (4,075,435
and 2,007,557 shares, respectively) (61,757,518) (33,352,450)
-------------- -------------
Total (43,713,392) 26,584,588
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
SHARE TRANSACTIONS (108,725,019) 32,871,972
-------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (140,682,836) 98,609,255
NET ASSETS
Beginning of period 351,344,882 252,735,627
-------------- -------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $ 210,662,046 $ 351,344,882
-------------- -------------
-------------- -------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Phoenix Small Cap Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED APRIL 30 FROM INCEPTION
-------------------------------------- 10/16/95 TO
1999 1998 1997 4/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.37 $ 14.13 $ 16.74 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.14)(5) (0.08)(5) (0.05)(5) (0.04)(1)(5)
Net realized and unrealized gain
(loss) (0.88) 6.80 (2.53) 6.79
-------- -------- -------- -----
TOTAL FROM INVESTMENT
OPERATIONS (1.02) 6.72 (2.58) 6.75
-------- -------- -------- -----
LESS DISTRIBUTIONS
Dividends from net realized gains (0.61) (3.48) (0.02) --
In excess of net investment income -- -- -- (0.01)
In excess of net realized gains -- -- (0.01) --
-------- -------- -------- -----
TOTAL DISTRIBUTIONS (0.61) (3.48) (0.03) (0.01)
-------- -------- -------- -----
Change in net asset value (1.63) 3.24 (2.61) 6.74
-------- -------- -------- -----
NET ASSET VALUE, END OF PERIOD $ 15.74 $ 17.37 $ 14.13 $ 16.74
-------- -------- -------- -----
-------- -------- -------- -----
Total return(2) (5.66)% 52.33% (15.43)% 67.48%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $121,313 $203,560 $155,089 $98,372
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.46%(6) 1.31% 1.37% 1.50%(3)
Net investment income (loss) (0.95)% (0.48)% (0.28)% (0.53)%(3)
Portfolio turnover 276% 498% 325% 103%(4)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------
FROM
INCEPTION
YEAR ENDED APRIL 30 10/16/95
------------------------------------ TO
1999 1998 1997 4/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.99 $ 13.98 $ 16.68 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.25)(5) (0.21)(5) (0.17)(5) (0.09)(1)(5)
Net realized and unrealized gain
(loss) (0.87) 6.70 (2.50) 6.77
------- -------- ------- --------
TOTAL FROM INVESTMENT
OPERATIONS (1.12) 6.49 (2.67) 6.68
------- -------- ------- --------
LESS DISTRIBUTIONS
Dividends from net realized gains (0.61) (3.48) (0.02) --
In excess of net realized gains -- -- (0.01) --
------- -------- ------- --------
TOTAL DISTRIBUTIONS (0.61) (3.48) (0.03) --
------- -------- ------- --------
Change in net asset value (1.73) 3.01 (2.70) 6.68
------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 15.26 $ 16.99 $ 13.98 $ 16.68
------- -------- ------- --------
------- -------- ------- --------
Total return(2) (6.39)% 51.16% (16.03)% 66.80%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $89,349 $147,785 $97,647 $45,168
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.21%(6) 2.06% 2.12% 2.26%(3)
Net investment income (loss) (1.70)% (1.22)% (1.03)% (1.44)%(3)
Portfolio turnover 276% 498% 325% 103%(4)
</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 the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
10
See Notes to Financial Statements
<PAGE>
PHOENIX STRATEGIC THEME FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund seeks long-term capital appreciation. The Fund may invest in smaller
capitalization companies, and investors should note that small-company investing
involves added risks, including greater price volatility, less liquidity and
increased competitive threat.
Q: HOW DID THE FUND PERFORM FOR THE FISCAL YEAR ENDED APRIL 30, 1999?
A: For the 12 months ended April 30, 1999, Class A shares returned 44.91%, Class
B shares returned 43.98% and Class C shares returned 43.87%. These returns were
more than double the 21.82% return of the S&P 500 Index(1). All performance
figures assume reinvestment of distributions and exclude the effect of sales
charges.
Q: WHAT CONTRIBUTED TO THE FUND'S STRONG RESULTS?
A: We benefited from our large technology position, which accounted for almost
40% of the portfolio. EMC Corp. and Sun Microsystems were among our best
performers. We also owned a number of Internet-related stocks because we believe
the Internet is the next technology wave, and these stocks have been
particularly strong performers over the past year. Two names that definitely
helped our performance were America Online and Microsoft. We also had a sizable
portion of the portfolio invested in health-care issues. We continue to expect
consistent earnings growth from this sector regardless of the pace of economic
growth. Of course, past performance is not indicative of future results.
Q: WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
A: We believe the market, which is currently trading at around 30 times
consensus 1999 earnings estimates, is fully valued. This multiple represents the
highest level for the market in the past 30 years. In addition to high
valuations, corporate profits may be a source of investor anxiety. Reports out
recently showed that corporate profits declined in 1998, and some press coverage
suggested that this should leave us all nervously awaiting an inevitable
recession. However, a closer look at the profit picture shows that certain
companies were affected much more than others. For example, many manufacturers
were unable to raise prices because cheaper products were being imported from
countries with devalued currencies. Our inability to export was particularly
hard on the food industry. The transportation sector was affected as well, along
with commodity-related businesses.
In the months ahead, similar conditions may continue to affect corporate
profits. However, we are making every effort to select companies for the Fund
that we believe can be resilient to such conditions. We will continue to seek
companies that have sound fundamentals and the potential for rapid, reliable
earnings growth.
MAY 18, 1999
(1) THE S&P 500 INDEX IS A MEASURE OF STOCK MARKET TOTAL RETURN PERFORMANCE. THE
INDEX IS UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT.
11
<PAGE>
Phoenix Strategic Theme Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 4/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 4/30/99 DATE
------ ----------- -----------
<S> <C> <C> <C>
Class A Shares at NAV(2) 44.91% 27.80% 10/16/95
Class A Shares at POP(3) 38.03 26.05 10/16/95
Class B Shares at NAV(2) 43.98 26.88 10/16/95
Class B Shares with CDSC(4) 40.14 26.57 10/16/95
Class C Shares at NAV(2) 43.87 34.41 11/3/97
Class C Shares with CDSC(4) 43.87 34.41 11/3/97
S&P 500 Index(7) 21.82 Note 5 Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for B shares decline from 5% to 0% over a
five year period. CDSC charges for C shares are 1% in the first year and 0%
thereafter.
(5) Index performance is 28.76% for Class A and Class B (since 10/16/95) and
28.60% for Class C (since 11/3/97).
(6) This chart illustrates POP returns on Class A and CDSC returns on Class B
Shares since inception. Returns on Class C Shares will vary due to
differing sales charges.
(7) The S&P 500 Index is a measure of stock market total return performance.
The S&P 500's performance does not reflect sales charges.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 4/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX STRATEGIC THEME PHOENIX STRATEGIC THEME S&P 500
FUND CLASS A(6) FUND CLASS B(6) STOCK INDEX(7)
<S> <C> <C> <C>
10/16/95 $9,525.00 $10,000.00 $10,000.00
04/30/96 $11,798.92 $12,340.59 $11,356.32
04/30/97 $11,495.53 $11,932.60 $14,218.66
04/30/98 $15,659.46 $16,130.69 $20,086.36
04/30/99 $22,692.55 $23,028.73 $24,468.45
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
10/16/95 (inception of the Fund) in Class A and Class B shares. The total return
for Class A shares reflects the maximum sales charge of 4.75% on the initial
investment. The total return for Class B shares reflects the CDSC charges which
decline from 5% to 0% over a five year period. Performance assumes dividends and
capital gains are reinvested. The performance of other share classes will be
greater or less than that shown based on differences in inception dates, fees
and sales charges.
SECTOR WEIGHTINGS 4/30/99
As a percentage of equity holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 39%
Financials 16
Consumer Staples 12
Health Care 11
Consumer Cyclicals 9
Communication Services 8
Capital Goods 3
Energy 2
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Theme Fund
TEN LARGEST HOLDINGS AT APRIL 30, 1999 (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<C> <S> <C>
1. AT&T Corp. - Liberty Media Group Class A 4.7%
INTERNET, TELEVISION AND DIGITAL TECHNOLOGY PROVIDER
2. Microsoft Corp. 4.2%
WORLD'S LEADING COMPUTER SOFTWARE COMPANY
3. Capital One Financial Corp. 3.5%
ITS PRINCIPAL SUBSIDIARY, CAPITAL ONE BANK, OFFERS CREDIT CARD
PRODUCTS
4. Cisco Systems, Inc. 3.4%
DEVELOPS MULTIPROTOCOL INTERNETWORKING SYSTEMS
5. Uniphase Corp. 3.2%
MANUFACTURES FIBER OPTIC TELECOMMUNICATIONS SYSTEMS
6. AT&T Corp. 3.0%
PROVIDES VOICE, DATA AND VIDEO TELECOMMUNICATIONS SERVICES
7. America Online, Inc. 2.9%
MAJOR PROVIDER OF ONLINE SERVICES TO CONSUMERS
8. International Business Machines Corp. 2.7%
PROVIDES ADVANCED INFORMATION TECHNOLOGIES
9. Morgan Stanley Dean Witter & Co. 2.6%
PROVIDES A BROAD RANGE OF CREDIT AND INVESTMENT PRODUCTS TO
INDIVIDUALS
10. Wal-Mart Stores, Inc. 2.5%
ONE OF THE LARGEST U.S. DISCOUNT RETAILERS
</TABLE>
INVESTMENTS AT APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
COMMON STOCKS--93.8%
BANKS (MAJOR REGIONAL)--0.9%
Firstar Corp...................... 59,100 $ 1,776,694
BANKS (MONEY CENTER)--1.9%
Bank of America Corp.............. 51,753 3,726,216
BEVERAGES (NON-ALCOHOLIC)--0.9%
PepsiCo, Inc...................... 47,600 1,758,225
BIOTECHNOLOGY--2.2%
Amgen, Inc.(b).................... 26,100 1,603,519
Genzyme Corp. (b)................. 49,200 1,857,300
Gilead Sciences, Inc.(b).......... 17,700 814,753
------------
4,275,572
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--6.4%
AT&T Corp.- Liberty Media Group
Class A(b)........................ 142,500 9,102,187
Clear Channel Communications,
Inc.(b)........................... 46,600 3,238,700
------------
12,340,887
------------
COMMUNICATIONS EQUIPMENT--3.8%
Echostar Communications
Corp.(b).......................... 28,800 2,889,000
General Motors Corp. Class H...... 35,300 1,954,737
Tellabs, Inc.(b).................. 22,900 2,508,981
------------
7,352,718
------------
COMPUTERS (HARDWARE)--7.7%
Apple Computer, Inc.(b)........... 41,100 1,890,600
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
COMPUTERS (HARDWARE)--CONTINUED
Dell Computer Corp.(b)............ 67,700 $ 2,788,394
International Business Machines
Corp.............................. 24,900 5,208,769
Sun Microsystems, Inc.(b)......... 81,600 4,880,700
------------
14,768,463
------------
COMPUTERS (NETWORKING)--3.4%
Cisco Systems, Inc.(b)............ 58,200 6,638,437
COMPUTERS (PERIPHERALS)--1.9%
EMC Corp.(b)...................... 33,200 3,616,725
COMPUTERS (SOFTWARE & SERVICES)--13.6%
America Online, Inc.(b)........... 39,800 5,681,450
At Home Corp. Series A(b)......... 21,600 3,109,050
BMC Software, Inc.(b)............. 17,900 770,819
Inktomi Corp.(b).................. 25,100 3,005,725
Microsoft Corp.(b)................ 100,600 8,180,037
USWeb Corp.(b).................... 81,800 1,835,387
Yahoo!, Inc.(b)................... 21,500 3,755,781
------------
26,338,249
------------
CONSUMER FINANCE--3.5%
Capital One Financial Corp........ 38,700 6,721,706
DISTRIBUTORS (FOOD & HEALTH)--0.8%
Cardinal Health, Inc.............. 26,050 1,558,116
ELECTRICAL EQUIPMENT--2.4%
General Electric Co............... 43,300 4,568,150
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Phoenix Strategic Theme Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
ELECTRONICS (SEMICONDUCTORS)--3.9%
Transwitch Corp.(b)............... 26,300 $ 1,157,200
Uniphase Corp.(b)................. 51,700 6,275,087
------------
7,432,287
------------
ENGINEERING & CONSTRUCTION--0.3%
J. Ray Mcdermott SA(b)............ 20,800 655,200
EQUIPMENT (SEMICONDUCTOR)--1.7%
Novellus Systems, Inc.(b)......... 34,800 1,644,300
Teradyne, Inc.(b)................. 35,600 1,679,875
------------
3,324,175
------------
FINANCIAL (DIVERSIFIED)--5.7%
Citigroup, Inc.................... 59,700 4,492,425
Freddie Mac....................... 25,300 1,587,575
Morgan Stanley Dean Witter &
Co................................ 50,300 4,989,131
------------
11,069,131
------------
HEALTH CARE (DIVERSIFIED)--0.9%
American Home Products Corp....... 28,300 1,726,300
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--3.8%
Merck & Co., Inc.................. 21,900 1,538,475
Pfizer, Inc....................... 28,800 3,313,800
Schering-Plough Corp.............. 52,400 2,531,575
------------
7,383,850
------------
HEALTH CARE (GENERIC AND OTHER)--1.3%
Mylan Laboratories, Inc........... 65,000 1,474,687
Sepracor Inc.(b).................. 13,100 1,106,950
------------
2,581,637
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.5%
Affymetrix, Inc.(b)............... 45,500 1,859,813
Invitrogen Corporation(b)......... 51,500 923,781
------------
2,783,594
------------
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.0%
Clorox Co. (The).................. 19,000 2,192,125
Procter & Gamble Co. (The)........ 17,200 1,613,575
------------
3,805,700
------------
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
INSURANCE (MULTI-LINE)--1.5%
American International Group,
Inc............................... 24,640 $ 2,893,660
INVESTMENT BANKING/BROKERAGE--1.5%
Merrill Lynch & Co., Inc.......... 35,300 2,962,994
OIL & GAS (DRILLING & EQUIPMENT)--1.8%
Halliburton Co.................... 25,100 1,069,888
Schlumberger Ltd.................. 15,900 1,015,613
Transocean Offshore, Inc.......... 21,700 644,219
Varco International, Inc.(b)...... 59,100 668,569
------------
3,398,289
------------
PERSONAL CARE--0.9%
Gillette Co. (The)................ 33,000 1,722,188
RETAIL (BUILDING SUPPLIES)--2.2%
Home Depot, Inc. (The)............ 69,000 4,135,688
RETAIL (DEPARTMENT STORES)--2.0%
Kohl's Corp.(b)................... 59,200 3,933,100
RETAIL (FOOD CHAINS)--0.9%
Safeway, Inc.(b).................. 33,200 1,790,725
RETAIL (GENERAL MERCHANDISE)--3.7%
Costco Companies, Inc.(b)......... 26,700 2,161,031
Wal-Mart Stores, Inc.............. 106,800 4,912,800
------------
7,073,831
------------
RETAIL (HOME SHOPPING)--1.3%
Amazon.com, Inc.(b)............... 14,800 2,546,525
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--1.4%
AirTouch Communications,
Inc.(b)........................... 29,800 2,782,575
TELECOMMUNICATIONS (LONG DISTANCE)--4.6%
AT&T Corp......................... 115,954 5,855,677
MCI WorldCom, Inc.(b)............. 37,800 3,106,688
------------
8,962,365
------------
TELEPHONE--1.5%
SBC Communications, Inc........... 50,100 2,805,600
- - ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $132,845,500) 181,209,572
- - ----------------------------------------------------------------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Theme Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--2.7%
COMPUTERS (SOFTWARE & SERVICES)--0.9%
Learout & Hauspic Speech Products
N.V.(b)........................... 42,700 $ 1,670,638
ELECTRONICS (INSTRUMENTATION)--0.9%
Qiagen NV (Netherlands)(b)........ 25,000 1,831,250
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--0.9%
Elan Corp. PLC Sponsored ADR
(Ireland)(b)...................... 34,800 1,792,200
- - ----------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $5,952,411) 5,294,088
- - ----------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--96.5%
(IDENTIFIED COST $138,797,911) 186,503,660
- - ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.3%
COMMERCIAL PAPER--3.3%
Goldman Sachs Group, Inc.
4.92%, 5/3/99................. A-1+ $ 2,950 $ 2,949,193
Ford Motor Credit Co. 4.84%,
5/4/99........................ A-1 3,380 3,378,637
-------------
6,327,830
-------------
- - ----------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $6,327,830) 6,327,830
- - ----------------------------------------------------------------------
TOTAL INVESTMENTS--99.8%
(IDENTIFIED COST $145,125,741) 192,831,490(a)
Cash and receivables, less liabilities--0.2% 419,395
-------------
NET ASSETS--100.0% $ 193,250,885
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $50,507,778 and gross
depreciation of $3,190,370 for federal income tax purposes. At April 30,
1999, the aggregate cost of securities for federal income tax purposes was
$145,514,082.
(b) Non-income producing.
See Notes to Financial Statements
15
<PAGE>
Phoenix Strategic Theme Fund
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $145,125,741) $ 192,831,490
Cash 1,914
Receivables
Fund shares sold 828,099
Dividends and interest 64,954
Prepaid expenses 3,428
--------------
Total assets 193,729,885
--------------
LIABILITIES
Payables
Fund shares repurchased 136,219
Investment advisory fee 117,538
Distribution fee 94,831
Transfer agent fee 58,198
Financial agent fee 14,999
Trustees' fee 3,319
Accrued expenses 53,896
--------------
Total liabilities 479,000
--------------
NET ASSETS $ 193,250,885
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 129,096,816
Accumulated net realized gain 16,448,320
Net unrealized appreciation 47,705,749
--------------
NET ASSETS $ 193,250,885
--------------
--------------
CLASS A
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $107,870,953) 5,919,225
Net asset value per share $18.22
Offering price per share $18.22/(1-4.75%) $19.13
CLASS B
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $84,698,182) 4,772,864
Net asset value per share and offering per share $17.75
CLASS C
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $681,750) 38,408
Net asset value per share and offering per share $17.75
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 651,163
Interest 333,164
Foreign taxes withheld (259)
--------------
Total investment income 984,068
--------------
EXPENSES
Investment advisory fee 1,129,085
Distribution fee, Class A 208,712
Distribution fee, Class B 667,573
Distribution fee, Class C 2,665
Distribution fee, Class M 273
Financial agent fee 143,236
Transfer agent 305,439
Registration 32,832
Professional 31,327
Printing 20,390
Custodian 16,699
Trustees 15,367
Miscellaneous 7,226
--------------
Total expenses 2,580,824
Custodian fees paid indirectly (4,419)
--------------
Net expenses 2,576,405
--------------
NET INVESTMENT LOSS (1,592,337)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 18,354,872
Net change in unrealized appreciation (depreciation) on
investments 38,225,117
--------------
NET GAIN ON INVESTMENTS 56,579,989
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 54,987,652
--------------
--------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Theme Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
4/30/99 4/30/98
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,592,337) $ (860,603)
Net realized gain (loss) 18,354,872 37,824,448
Net change in unrealized appreciation
(depreciation) 38,225,117 7,260,964
------------- -------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 54,987,652 44,224,809
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
In excess of net investment income,
Class A -- (101,991)
Net realized gains, Class A (6,923,924) (13,931,615)
Net realized gains, Class B (5,772,230) (9,617,855)
Net realized gains, Class C (28,108) (21,083)
Net realized gains, Class M -- (15,426)
------------- -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (12,724,262) (23,687,970)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares
(3,919,529 and 1,116,085 shares,
respectively) 64,808,215 15,627,146
Net asset value of shares issued from
reinvestment of distributions
(419,976 and 1,156,842 shares,
respectively) 6,560,032 13,731,378
Cost of shares repurchased (4,982,395
and 2,197,107 shares, respectively) (76,814,571) (29,983,137)
------------- -------------
Total (5,446,324) (624,613)
------------- -------------
CLASS B
Proceeds from sales of shares (819,204
and 666,515 shares, respectively) 13,391,640 9,141,162
Net asset value of shares issued from
reinvestment of distributions
(329,762 and 783,925 shares,
respectively) 5,028,874 9,156,239
Cost of shares repurchased (1,286,009
and 724,153 shares, respectively) (18,585,029) (9,883,220)
------------- -------------
Total (164,515) 8,414,181
------------- -------------
CLASS C
Proceeds from sales of shares (36,724
and 18,017 shares, respectively) 589,799 248,777
Net asset value of shares issued from
reinvestment of distributions
(1,354 and 1,797 shares,
respectively) 20,648 20,990
Cost of shares repurchased (19,484 and
0 shares, respectively) (266,095) --
------------- -------------
Total 344,352 269,767
------------- -------------
CLASS M
Proceeds from sales of shares (0 and
14,974 shares, respectively) -- 196,112
Net asset value of shares issued from
reinvestment of distributions
(0 and 1,314 shares, respectively) -- 15,357
Cost of shares repurchased (16,288 and
0 shares, respectively) (223,551) --
------------- -------------
Total (223,551) 211,469
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
SHARE TRANSACTIONS (5,490,038) 8,270,804
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS 36,773,352 28,807,643
NET ASSETS
Beginning of period 156,477,533 127,669,890
------------- -------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $ 193,250,885 $ 156,477,533
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Phoenix Strategic Theme Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
FROM
INCEPTION
YEAR ENDED APRIL 30 10/16/95
---------------------------------- TO
1999 1998 1997 4/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.70 $ 12.03 $ 12.37 $ 10.00
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.11)(5) (0.04)(5) 0.06(5) 0.00(1)(5)
Net realized and unrealized gain
(loss) 6.03 4.03 (0.38) 2.39
-------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 5.92 3.99 (0.32) 2.39
-------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- (0.01) --
Dividends from net realized gains (1.40) (2.29) -- --
In excess of net investment income -- (0.03) -- --
In excess of net realized gains -- -- (0.01) --
Tax return of capital -- -- -- (0.02)
-------- ------- ------- -------
TOTAL DISTRIBUTIONS (1.40) (2.32) (0.02) (0.02)
-------- ------- ------- -------
Change in net asset value 4.52 1.67 (0.34) 2.37
-------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 18.22 $ 13.70 $ 12.03 $ 12.37
-------- ------- ------- -------
-------- ------- ------- -------
Total return(2) 44.91% 36.22% (2.57)% 23.89%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $107,871 $89,884 $77,827 $33,393
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.38%(7) 1.33% 1.40% 1.40%(3)
Net investment income (loss) (0.72)% (0.26)% 0.49% (0.09)%(3)
Portfolio turnover 205% 618% 532% 175%(4)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.04.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Computed using average shares outstanding.
(6) 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) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
18 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Theme Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------- -------------------
FROM FROM
INCEPTION INCEPTION
YEAR ENDED APRIL 30 10/16/95 YEAR 11/3/97
-------------------------------- TO ENDED TO
1999 1998 1997 4/30/96 4/30/99 4/30/98
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.46 $ 11.91 $ 12.33 $ 10.00 $13.47 $14.93
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.22)(5) (0.14)(5) (0.03)(5) (0.06)(1)(5) (0.22)(5) (0.05)(5)
Net realized and unrealized gain
(loss) 5.91 3.98 (0.38) 2.40 5.90 0.88
------- ------- ------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 5.69 3.84(5) (0.41) 2.34 5.68 0.83
------- ------- ------- ------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- -- --
Dividends from net realized gains (1.40) (2.29) -- -- (1.40) (2.29)
In excess of net investment income -- -- -- -- -- --
In excess of net realized gains -- -- (0.01) -- -- --
Tax return of capital -- -- -- (0.01) -- --
------- ------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS (1.40) (2.29) (0.01) (0.01) (1.40) (2.29)
------- ------- ------- ------- ------ ------
Change in net asset value 4.29 1.55 (0.42) 2.33 4.28 (1.46)
------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 17.75 $ 13.46 $ 11.91 $ 12.33 $17.75 $13.47
------- ------- ------- ------- ------ ------
------- ------- ------- ------- ------ ------
Total return(2) 43.98% 35.18% (3.31)% 23.41%(4) 43.87% 7.92%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $84,698 $66,107 $49,843 $11,920 $682 $267
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.13%(7) 2.08% 2.15% 2.16%(3) 2.13%(7) 2.08%(3)
Net investment income (loss) (1.48)% (1.02)% (0.23)% (1.06)%(3) (1.47)% (0.87)%(3)
Portfolio turnover 205% 618% 532% 175%(4) 205% 618%(4)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.04.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Computed using average shares outstanding.
(6) 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) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
See Notes to Financial Statements 19
<PAGE>
PHOENIX EQUITY OPPORTUNITIES FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund seeks long-term capital appreciation by investing primarily in
stocks of dynamic, rapidly growing companies and focusing on strong relative
earnings growth. The Fund may invest in smaller capitalization companies, and
investors should note that small-company investing involves added risks,
including greater price volatility, less liquidity and increased competitive
threat.
Q: HOW DID THE FUND PERFORM FOR THE FISCAL YEAR ENDED APRIL 30, 1999?
A: For the 12 months ended April 30, 1999, Class A shares returned 17.08% and
Class B shares returned 16.18%, far surpassing the negative (3.77)% return of
the Fund's benchmark, the Russell 2000 Growth Index(1). All performance figures
assume reinvestment of distributions and exclude the effect of sales charges.
Q: WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE?
A: This has been an extremely volatile time for the market, spurred by the
global liquidity crisis that erupted last summer. It has also been a market with
very narrow leadership. A few of the very largest growth stocks have been
responsible for virtually all of the market's gains. Issue selection has been
critical. We benefited from good stock picking and our largest holdings
generally performed well. Companies that reported strong earnings were rewarded,
while those that missed their forecasted earnings estimates by even the smallest
amount were severely punished.
Q: WHAT IS YOUR PERSPECTIVE ON THE RECENT FOCUS ON INTERNET STOCKS?
A: It seems the ".com" craze has reached new heights. At the time of this
writing, the market capitalization of America Online exceeds that of IBM. The
value of Priceline.com, which sells airline tickets online, tops the market
valuation of most U.S. airlines. eBay, an online auctioneer with a three-year
history, is now worth 11 times the value of 250-year-old Sotheby's. We know of
no valuation metric or analytic framework, which can explain these outcomes.
We expect the Internet bubble will deflate as the exciting promise of this
technology gives way to the more sober reality of managing profitable
businesses. Only time will distinguish the few genuine contenders in this highly
competitive field. Non-speculative Internet investing is possible. MCI WorldCom,
Cisco and many others are going concerns with major Internet involvement.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET?
A: The market turbulence that we have been experiencing will probably plague
investors throughout 1999. Periods of euphoria are likely to alternate with
periods of despair. Investors who persevere will, we believe, be rewarded with
solid returns, but not the stellar returns of the past few years. Overall
earnings growth is modest, valuations cannot rise sharply from their already
lofty levels, and stock prices currently reflect very optimistic growth
expectations. Fortunately, there are many opportunities that have not yet been
fully exploited, and we believe our investment discipline will lead us to them.
MAY 20, 1999
(1) THE RUSSELL 2000 GROWTH INDEX IS A MEASURE OF SMALL-CAPITALIZATION,
GROWTH-ORIENTED STOCK TOTAL RETURN PERFORMANCE. THE INDEX IS UNMANAGED AND
NOT AVAILABLE FOR DIRECT INVESTMENT.
20
<PAGE>
Phoenix Equity Opportunities Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 4/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEARS 10 YEARS TO 4/30/99 DATES
------ ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Class A Shares at NAV(2) 17.08% 16.62% 13.33% -- --
Class A Shares at POP(3) 11.52 15.49 12.78 -- --
Class B Shares at NAV(2) 16.18 -- -- 16.57% 7/19/94
Class B Shares with CDSC(4) 12.34 -- -- 16.34 7/19/94
Russell 2000 Growth Index(6) (3.77) 12.62 10.96 14.29 7/19/94
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for B shares decline from 5% to 0% over a
five year period.
(5) This chart illustrates POP returns on Class A Shares for ten years. Returns
on Class B Shares will vary due to differing sales charges.
(6) The Russell 2000 Growth Index is a measure of small-capitalization growth-
oriented stock total return performance. The index's performance does not
reflect sales charges.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 4/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX EQUITY
OPPORTUNITIES RUSSELL 2000 S&P 500
FUND CLASS A(5) GROWTH INDEX(6) STOCK INDEX(7)
<S> <C> <C> <C>
04/28/1989 $9,525.00 $10,000.00 $10,000.00
04/30/1990 $10,204.33 $10,064.42 $11,043.42
04/30/1991 $11,445.07 $11,351.92 $12,990.55
04/30/1992 $12,623.50 $12,875.14 $14,804.53
04/30/1993 $14,706.64 $13,634.65 $16,172.93
04/29/1994 $15,440.08 $15,616.56 $17,037.31
04/28/1995 $16,855.16 $16,979.94 $20,014.55
04/30/1996 $22,393.87 $23,662.09 $26,074.00
04/30/1997 $19,663.45 $20,457.24 $32,645.91
04/30/1998 $28,444.92 $29,397.14 $46,118.09
04/30/1999 $33,304.73 $28,287.82 $56,179.32
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
4/30/89 in Class A shares and reflects the maximum sales charge of 4.75% on the
initial investment. Performance assumes dividends and capital gains are
reinvested. The performance of other share classes will be greater or less than
that shown based on differences in inception dates, fees and sales charges.
SECTOR WEIGHTINGS 4/30/99
As a percentage of equity holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 30%
Financials 16
Consumer Cyclicals 12
Capital Goods 11
Consumer Staples 10
Communication Services 6
Health Care 5
Other 10
</TABLE>
21
<PAGE>
Phoenix Equity Opportunities Fund
TEN LARGEST HOLDINGS AT APRIL 30, 1999 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Microsoft Corp. 4.8%
WORLD'S LEADING COMPUTER SOFTWARE COMPANY
2. Mellon Bank Corp. 4.2%
LARGE REGIONAL BANK
3. Motorola, Inc. 4.0%
GLOBAL PROVIDER OF INTEGRATED COMMUNICATIONS PRODUCTS
4. Citigroup, Inc. 3.9%
DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY
5. Morgan Stanley Dean Witter & Co. 3.9%
PROVIDES A BROAD RANGE OF CREDIT AND INVESTMENT PRODUCTS TO
INDIVIDUALS
6. Sun Microsystems, Inc. 3.6%
SUPPLIER OF ENTERPRISE NETWORK COMPUTING PRODUCTS
7. General Electric Co. 3.6%
DIVERSIFIED MANUFACTURING AND FINANCIAL SERVICES PROVIDER
8. International Business Machines Corp. 3.5%
PROVIDES ADVANCED INFORMATION TECHNOLOGIES
9. Bristol-Myers Squibb Co. 3.4%
COMPREHENSIVE HEALTH-CARE COMPANY
10. Lucent Technologies, Inc. 3.4%
LEADING SUPPLIER OF TELECOMMUNICATIONS EQUIPMENT
</TABLE>
INVESTMENTS AT APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
COMMON STOCKS--94.9%
ALUMINUM--1.8%
Alcoa, Inc........................ 58,310 $ 3,629,797
AUTOMOBILES--0.9%
General Motors Corp............... 20,000 1,778,750
BANKS (MAJOR REGIONAL)--4.2%
Mellon Bank Corp.................. 115,420 8,577,149
BEVERAGES (ALCOHOLIC)--3.1%
Anheuser-Busch Companies, Inc..... 87,070 6,366,994
BROADCASTING (TELEVISION, RADIO & CABLE)--1.0%
Chancellor Media Corp.(b)......... 38,950 2,137,381
COMMUNICATIONS EQUIPMENT--7.3%
Lucent Technologies, Inc.(b)...... 114,300 6,872,287
Motorola, Inc..................... 100,830 8,079,004
------------
14,951,291
------------
COMPUTERS (HARDWARE)--7.1%
International Business Machines
Corp.............................. 33,820 7,074,721
Sun Microsystems, Inc.(b)......... 123,570 7,391,031
------------
14,465,752
------------
COMPUTERS (NETWORKING)--2.2%
Cisco Systems, Inc.(b)............ 39,738 4,532,616
COMPUTERS (PERIPHERALS)--2.5%
EMC Corp.(b)...................... 46,600 5,076,487
COMPUTERS (SOFTWARE & SERVICES)--4.8%
Microsoft Corp.(b)................ 120,000 9,757,500
CONSUMER FINANCE--3.3%
Providian Financial Corp.......... 52,125 6,727,383
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT--3.6%
General Electric Co............... 70,000 $ 7,385,000
ELECTRONICS (SEMICONDUCTORS)--5.3%
Intel Corp........................ 83,070 5,082,846
Texas Instruments, Inc............ 55,410 5,658,746
------------
10,741,592
------------
FINANCIAL (DIVERSIFIED)--7.8%
Citigroup, Inc.................... 107,170 8,064,542
Morgan Stanley Dean Witter &
Co................................ 79,690 7,904,252
------------
15,968,794
------------
FOODS--1.9%
General Mills, Inc................ 52,050 3,806,156
HEALTH CARE (DIVERSIFIED)--3.4%
Bristol-Myers Squibb Co........... 110,000 6,991,875
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.5%
Guidant Corp.(b).................. 56,800 3,049,450
HOUSEHOLD PRODUCTS (NON-DURABLES)--2.0%
Colgate-Palmolive Co.............. 40,220 4,120,036
MANUFACTURING (DIVERSIFIED)--5.2%
Tyco International Ltd............ 80,020 6,501,625
United Technologies Corp.......... 27,970 4,052,154
------------
10,553,779
------------
OFFICE EQUIPMENT & SUPPLIES--2.0%
Pitney Bowes, Inc................. 59,340 4,150,091
OIL & GAS (DRILLING & EQUIPMENT)--1.5%
Halliburton Co.................... 70,500 3,005,063
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Phoenix Equity Opportunities Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
OIL (INTERNATIONAL INTEGRATED)--1.5%
Texaco, Inc....................... 50,500 $ 3,168,875
PAPER & FOREST PRODUCTS--2.9%
Georgia-Pacific Group............. 63,400 5,864,500
RETAIL (DRUG STORES)--1.9%
CVS Corp.......................... 83,300 3,967,163
RETAIL (GENERAL MERCHANDISE)--2.2%
Wal-Mart Stores, Inc.............. 100,100 4,604,600
RETAIL (SPECIALTY)--2.7%
Staples, Inc.(b).................. 187,620 5,628,600
RETAIL (SPECIALTY-APPAREL)--2.5%
TJX Companies, Inc. (The)......... 152,250 5,071,828
SERVICES (ADVERTISING/MARKETING)--3.2%
Lamar Advertising Co.(b).......... 48,110 1,617,699
Outdoor Systems, Inc.(b).......... 198,560 5,001,230
------------
6,618,929
------------
TELECOMMUNICATIONS (LONG DISTANCE)--2.4%
MCI WorldCom, Inc.(b)............. 60,370 4,961,659
TELEPHONE--3.2%
Bell Atlantic Corp................ 112,240 6,467,830
- - ----------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $149,445,582) 194,126,920
- - ----------------------------------------------------------------------
FOREIGN COMMON STOCKS--0.0%
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--0.0%
Elan Corp. PLC Sponsored ADR
(Ireland)(b)...................... 1,300 66,950
- - ----------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $94,111) 66,950
- - ----------------------------------------------------------------------
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
UNIT INVESTMENT TRUSTS--2.0%
S&P 500 Depository Receipts....... 30,000 4,003,125
- - ----------------------------------------------------------------------
TOTAL UNIT INVESTMENT TRUSTS
(IDENTIFIED COST $4,067,613) 4,003,125
- - ----------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--96.9%
(IDENTIFIED COST $153,607,306) 198,196,995
- - ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.7%
COMMERCIAL PAPER--3.7%
Pitney Bowes Credit Corp.
5.05%, 5/3/99................. A-1+ $ 290 $ 289,919
Merrill Lynch & Co., Inc.
4.85%, 5/4/99................. A-1+ 2,195 2,194,113
Exxon Imperial U.S., Inc.
4.82%, 5/6/99................. A-1+ 1,720 1,718,849
Ford Motor Credit Co. 4.83%,
5/6/99........................ A-1 2,000 1,998,658
Beta Finance, Inc. 5.01%,
5/17/99....................... A-1+ 660 655,542
Enterprise Funding Corp.
4.80%, 5/20/99................ A-1+ 736 734,135
------------
7,591,216
------------
- - ---------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $7,594,203) 7,591,216
- - ---------------------------------------------------------------------
</TABLE>
TOTAL INVESTMENTS--100.6%
(IDENTIFIED COST $161,201,509) 205,788,211(a)
Cash and receivables, less liabilities--(0.6%) (1,322,430)
------------
NET ASSETS--100.0% $204,465,781
------------
------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $45,558,339 and gross
depreciation of $1,237,639 for federal income tax purposes. At April 30,
1999, the aggregate cost of securities for federal income tax purposes was
$161,467,511.
(b) Non-income producing.
See Notes to Financial Statements
23
<PAGE>
Phoenix Equity Opportunities Fund
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $161,201,509) $ 205,788,211
Cash 4,663
Receivables
Investment securities sold 9,043,628
Dividends and interest 190,345
Fund shares sold 24,559
Prepaid expenses 4,408
--------------
Total assets 215,055,814
--------------
LIABILITIES
Payables
Investment securities purchased 10,198,626
Fund shares repurchased 91,456
Investment advisory fee 118,762
Transfer agent fee 50,083
Distribution fee 44,083
Financial agent fee 14,334
Trustees' fee 4,110
Accrued expenses 68,579
--------------
Total liabilities 10,590,033
--------------
NET ASSETS $ 204,465,781
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest 151,829,569
Accumulated net realized gain 8,049,510
Net unrealized appreciation 44,586,702
--------------
NET ASSETS $ 204,465,781
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $0.0001
Par value, unlimited authorization
(Net Assets $201,788,577) 23,144,444
Net asset value per share $8.72
Offering price per share $8.72/(1-4.75%) $9.15
CLASS B
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $2,677,204) 319,866
Net asset value and offering price per share $8.37
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 1,633,642
Interest 389,582
Foreign taxes withheld (21,844)
--------------
Total investment income 2,001,380
--------------
EXPENSES
Investment advisory fee 1,352,558
Distribution fee, Class A 477,228
Distribution fee, Class B 23,305
Financial agent fee 175,243
Transfer agent 243,524
Printing 56,757
Professional 33,756
Registration 21,310
Custodian 15,089
Trustees 12,304
Miscellaneous 7,608
--------------
Total expenses 2,418,682
Custodian fees paid indirectly (2,422)
--------------
Net expenses 2,416,260
--------------
NET INVESTMENT LOSS (414,880)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 8,800,896
Net change in unrealized appreciation (depreciation) on
investments 22,526,413
--------------
NET GAIN ON INVESTMENTS 31,327,309
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 30,912,429
--------------
--------------
</TABLE>
24 See Notes to Financial Statements
<PAGE>
Phoenix Equity Opportunities Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
4/30/99 4/30/98
------------- ---------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (414,880) $ (1,058,136)
Net realized gain (loss) 8,800,896 52,694,656
Net change in unrealized appreciation
(depreciation) 22,526,413 16,227,091
------------- ---------------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 30,912,429 67,863,611
------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (14,338,287) (35,351,518)
Net realized gains, Class B (184,555) (371,756)
------------- ---------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (14,522,842) (35,723,274)
------------- ---------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (776,243
and 580,916 shares, respectively) 6,205,793 4,485,413
Net asset value of shares issued from
reinvestment of distributions
(1,318,749 and 3,754,855 shares,
respectively) 10,444,800 25,457,918
Cost of shares repurchased (3,121,846
and 3,877,643 shares, respectively) (25,370,488) (30,879,705)
------------- ---------------
Total (8,719,895) (936,374)
------------- ---------------
CLASS B
Proceeds from sales of shares (113,886
and 46,609 shares, respectively) 896,049 361,942
Net asset value of shares issued from
reinvestment of distributions
(20,248 and 54,117 shares,
respectively) 154,289 357,170
Cost of shares repurchased (77,292 and
83,812 shares, respectively) (601,028) (638,121)
------------- ---------------
Total 449,310 80,991
------------- ---------------
DECREASE IN NET ASSETS FROM SHARE
TRANSACTIONS (8,270,585) (855,383)
------------- ---------------
NET INCREASE IN NET ASSETS 8,119,002 31,284,954
NET ASSETS
Beginning of period 196,346,779 165,061,825
------------- ---------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $ 204,465,781 $ 196,346,779
------------- ---------------
------------- ---------------
</TABLE>
See Notes to Financial Statements 25
<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,
----------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.04 $ 6.89 $ 8.81 $ 7.40 $ 7.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.02)(4) (0.04)(4) (0.03)(4) (0.04)(4) 0.04
Net realized and unrealized gain
(loss) 1.33 2.82 (0.90) 2.34 0.58
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.31 2.78 (0.93) 2.30 0.62
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- (0.05)
Dividends from net realized gains (0.63) (1.63) (0.94) (0.89) (0.48)
In excess of net realized gains -- -- (0.05) -- --
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.63) (1.63) (0.99) (0.89) (0.53)
-------- -------- -------- -------- --------
Change in net asset value 0.68 1.15 (1.92) 1.41 0.09
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 8.72 $ 8.04 $ 6.89 $ 8.81 $ 7.40
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total return(1) 17.08% 44.66% (12.19)% 32.86% 9.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $201,789 $194,296 $163,396 $213,600 $179,666
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.24%(5) 1.18% 1.23% 1.25% 1.32%
Net investment income (loss) (0.21)% (0.55)% (0.39)% (0.53)% 0.60%
Portfolio turnover 143% 371% 412% 302% 358%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
FROM
INCEPTION
YEAR ENDED APRIL 30, 7/19/94
------------------------------------------ TO
1999 1998 1997 1996 4/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.80 $ 6.77 $ 8.73 $ 7.39 $7.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.08)(4) (0.10)(4) (0.09)(4) (0.10)(4) 0.00
Net realized and unrealized gain
(loss) 1.28 2.76 (0.88) 2.33 0.59
------ ------ ------ ------ -----
TOTAL FROM INVESTMENT OPERATIONS 1.20 2.66 (0.97) 2.23 0.59
------ ------ ------ ------ -----
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains (0.63) (1.63) (0.94) (0.89) (0.48)
In excess of net realized gains -- -- (0.05) -- --
------ ------ ------ ------ -----
TOTAL DISTRIBUTIONS (0.63) (1.63) (0.99) (0.89) (0.48)
------ ------ ------ ------ -----
Change in net asset value 0.57 1.03 (1.96) 1.34 0.11
------ ------ ------ ------ -----
NET ASSET VALUE, END OF PERIOD $ 8.37 $ 7.80 $ 6.77 $ 8.73 $7.39
------ ------ ------ ------ -----
------ ------ ------ ------ -----
Total return(1) 16.18% 43.58% (12.79)% 31.92% 8.69%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $2,677 $2,051 $1,666 $1,348 $ 525
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.99%(5) 1.93% 1.98% 2.06% 2.15%(2)
Net investment income (loss) (0.97)% (1.30)% (1.15)% (1.18)% (0.06)%(2)
Portfolio turnover 143% 371% 412% 302% 358%
</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 the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
26
See Notes to Financial Statements
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Strategic Equity Series Fund (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as a diversified open-end management investment company.
Each Fund has distinct investment objectives. The Small Cap Fund 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 Fund 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 Fund seeks to achieve long-term growth of capital from investment
in a diversified group of stocks or securities convertible into stocks.
Each Fund offers both Class A and Class B shares. The Strategic Theme Fund
also offers Class C shares. Class M shares have been closed. Class A shares are
sold with a front-end sales charge of up to 4.75%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a 1%
contingent deferred sales charge if redeemed within one year of purchase. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. Income and expenses of each Fund are borne pro rata by the
holders of all classes of shares, except that each class bears distribution
expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. SECURITY VALUATION:
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at their fair value as
determined in good faith by or under the direction of the Trustees.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign securities,
as soon as the Fund is notified. Interest income is recorded on the accrual
basis. Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
Fund in the Trust to comply with the requirements of the Internal Revenue Code
(the "Code") applicable to regulated investment companies, and to distribute all
of its taxable income to its shareholders. In addition, each Fund intends to
distribute an amount sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision for federal income taxes or
excise taxes has been made.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Fund 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 Trust does not separate that
portion of the results of operations arising from changes in exchange rates and
that portion arising from changes in the market prices of securities.
F. EXPENSES:
Expenses incurred by the Trust with respect to any two or more Funds are
allocated in proportion to the net assets of each Fund, except where allocation
of direct expense to each Fund or an alternative allocation method can be more
fairly made.
27
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (CONTINUED)
G. OPTIONS:
The Trust may write covered options or purchase options contracts for the
purpose of hedging against changes in the market value of the underlying
securities or foreign currencies.
The Trust will realize a gain or loss upon the expiration or closing of the
option transaction. Gains and losses on written options are reported separately
in the Statement of Operations. When a written option is exercised, the proceeds
on sales or amounts paid are adjusted by the amount of premium received. Options
written are reported as a liability in the Statement of Assets and Liabilities
and subsequently marked-to-market to reflect the current value of the option.
The risk associated with written options is that the change in value of options
contracts may not correspond to the change in value of the hedged instruments.
In addition, losses may arise from changes in the value of the underlying
instruments, or if a liquid secondary market does not exist for the contracts.
The Trust may purchase options which are included in the Trust's Schedule of
Investments and subsequently marked-to-market to reflect the current value of
the option. When a purchased option is exercised, the cost of the security is
adjusted by the amount of premium paid. The risk associated with purchased
options is limited to the premium paid.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
Effective June 1, 1998, National Securities and Research Corporation assigned
its investment advisory agreement for the Equity Opportunities Fund to Phoenix
Investment Counsel, Inc. ("PIC"), both an indirect majority-owned subsidiary of
Phoenix Home Life Mutual Insurance Company ("PHL"). PIC is entitled to a fee
based upon the following annual rates as a percentage of the average daily net
assets of each Fund:
<TABLE>
<CAPTION>
1st $1 $1-2 $2+
Fund Billion Billion Billion
- - ---------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Small Cap Fund.......................... 0.75% 0.70% 0.65%
Strategic Theme Fund.................... 0.75% 0.70% 0.65%
Equity Opportunities Fund............... 0.70% 0.65% 0.60%
</TABLE>
Seneca Capital Management LLC ("Seneca") serves as subadviser to PIC for the
Equity Opportunities Fund. For its services, Seneca is paid a fee by PIC ranging
from 0.35% to 0.20% of the average daily net assets of the Equity Opportunities
Fund. A majority of the equity interests of Seneca are owned by Phoenix
Investment Partners Ltd. ("PXP"), an indirect majority-owned subsidiary of PHL.
Roger Engemann & Associates, Inc. ("REA") serves as subadviser to PIC for the
Small Cap Fund. For its services, REA is paid a fee by the Adviser ranging from
0.375% to 0.20% of the average daily net assets of the Small Cap Fund. REA is a
wholly owned subsidiary of Pasadena Capital Corporation which in turn is a
wholly owned subsidiary of PXP.
As Distributor of the Trust's shares, Phoenix Equity Planning Corp. ("PEPCO"),
an indirect majority-owned subsidiary of PHL, has advised the Trust that it
retained net selling commissions of $55,140 for Class A shares and deferred
sales charges of $1,223,469 for Class B shares and $765 for Class C shares, for
the year ended April 30, 1999. In addition, each Series pays PEPCO a
distribution fee at an annual rate of 0.25% for Class A shares, 1.00% for Class
B shares, 1.00% for Class C shares and, prior to closing, 0.50% for Class M
shares applied to the average daily net assets of each Fund. The Distribution
Plan for Class A shares provides for fees to be paid up to a maximum on an
annual basis of 0.30%; the Distributor has voluntarily agreed to limit the fee
to 0.25%. The Distributor has advised the Trust that of the total amount
expensed for the year ended April 30, 1999, $1,607,602 was earned by the
Distributor, $1,082,707 was earned by unaffiliated participants and $121,999 was
paid to W.S. Griffith, an indirect subsidiary of PHL.
As Financial Agent of the Trust, PEPCO received a fee for bookkeeping,
administration, and pricing services through May 31, 1998, 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 applied. Effective June 1, 1998, PEPCO
receives a financial agent fee equal to the sum of (1) the documented cost of
fund accounting and related services provided by PFPC, Inc. (subagent to PEPCO),
plus (2) the documented cost to PEPCO to provide financial reporting, tax
services and oversight of subagent's performance. The current fee schedule of
PFPC, Inc. ranges from 0.085% to 0.0125% of the average daily net asset values
of the Trust. Certain minimum fees and fee waivers may apply.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended April 30, 1999, transfer agent
fees were $1,238,334 of which PEPCO retained $435,178 which is net of the fees
paid to State Street.
At April 30, 1999, PHL and its affiliates held shares of the Trust as follows:
<TABLE>
<CAPTION>
Aggregate
Net Asset
Shares Value
--------- ---------
<S> <C> <C>
Equity Opportunities Fund--Class A............ 166 $ 1,451
Equity Opportunities Fund--Class B............ 25,410 212,680
</TABLE>
28
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (CONTINUED)
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities (excluding short-term securities and
options) for the year ended April 30, 1999, aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Small Cap Fund....................... $658,542,968 $722,915,699
Strategic Theme Fund................. 298,564,798 314,372,543
Equity Opportunities Fund............ 266,817,938 291,477,943
</TABLE>
There were no purchases or sales of long-term U.S. Government securities.
4. CAPITAL LOSS CARRYOVERS
At April 30, 1999, the Small Cap Fund had a capital loss carryover of
$23,761,798 expiring in 2007, which may be used to offset future capital gains.
Under current tax law, capital losses realized after October 31, 1998 may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended April 30, 1999, the Small Cap Fund deferred $114,522 in
capital losses.
5. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Funds have recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Funds 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, 1999, the Funds recorded
the following reclassifications to increase (decrease) the accounts listed
below:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of benefical
income gain (loss) interest
-------------- -------------- ------------
<S> <C> <C> <C>
Small Cap Fund................ $3,189,899 $ (35,985) $(3,153,914)
Strategic Theme Fund.......... 1,592,337 (1,596,375) 4,038
Equity Opportunities Fund..... 414,880 (414,880) --
</TABLE>
TAX INFORMATION NOTICE (UNAUDITED)
The Trust distributed long-term capital gain dividends of:
<TABLE>
<CAPTION>
Total
Long-Term
Fund Distributions
- - --------------------------------------------------- ------------
<S> <C>
Small Cap Fund..................................... $ --
Strategic Theme Fund............................... 373
Equity Opportunities Fund.......................... 3,272,689
</TABLE>
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.
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Trustees and Shareholders of
Phoenix Strategic Equity Series Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets, and the financial
highlights present fairly, in all material respects, the financial position of
the Phoenix 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 "Trust") at April 30, 1999,
the results of each of their operations, the changes in each of their net assets
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust'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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 11, 1999
30
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
TRUSTEES
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
OFFICERS
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
John F. Sharry, Executive Vice President
J. Roger Engemann, Senior Vice President
Gail P. Seneca, Senior Vice President
Steven L. Colton, Vice President
Ron K. Jacks, Vice President
Richard D. Little, Vice President
James E. Mair, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
John S. Tilson, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
INVESTMENT ADVISER
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
PRINCIPAL UNDERWRITER
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO CONTACT US
The Fund Connection 1-800-243-1574
Customer Service 1-800-243-1574 (option 0)
Automated Voice
Response Unit 1-800-243-1574 (option 1)
Investment Strategy Hotline 1-800-243-4361 (option 2)
Marketing Department 1-800-243-4361 (option 3)
Text Telephone 1-800-243-1926
World Wide Web address:
www.phoenixinvestments.com
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION ---------------
PO Box 2200 Bulk Rate Mail
Enfield CT 06083-2200 U.S. Postage
PAID
Springfield, MA
Permit No. 444
---------------
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 744 (6/99)
<PAGE>
Phoenix Investment Partners
NOVEMBER 30, 1998
ANNUAL REPORT
Phoenix
Tax-Exempt Bond
Portfolio
Phoenix
Mid Cap Portfolio
Phoenix
International
Portfolio
Phoenix
Real Estate
Securities Portfolio
Phoenix
Emerging Markets
Bond Portfolio
Phoenix
Strategic Income
Portfolio
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
Mutual funds are not insured by the FDIC; are not
deposits or other obligations of a bank and are not
guaranteed by a bank; and are subject to
investment risks, including possible loss of the
principal invested.
<PAGE>
MESSAGE FROM THE PRESIDENT
DEAR MULTI-PORTFOLIO FUND SHAREHOLDER:
[PHOTO]
PHILIP MCLOUGHLIN
We are pleased to provide this report for Phoenix Multi-Portfolio Fund for the
fiscal year ended November 30, 1998. Many investors may remember the last 12
months for the extreme volatility we witnessed, particularly last summer when
markets around the world fell as the economic crises continued in Russia, Japan
and emerging markets. During the month of August, the J.P. Morgan Emerging
Market Bond Index Plus(1) plummeted nearly (29)%, the MSCI EAFE Index(2) fell
(12)%, the S&P 500 Index(3) declined over (14)%, and the Russell 2000 Index(4)
dropped (19%).
By the end of this reporting period, most market indices had recovered.
However, the performance discrepancy between the perceived "high quality, lowest
risk" investments was significant. Large-capitalization, high-quality stocks
significantly outperformed small-capitalization stocks as investors sought out
the most liquid and "safest" investments. While the S&P 500 returned 23.74% for
the year ended November 30, 1998, the Russell 2000 Index was down (6.62)%.
Investors' "flight to quality" was most notable in the bond market. The Lehman
Brothers Government Bond Index(5) gained 10.75% for the year compared with a
return of 9.45% for the broader based Lehman Brothers Aggregate Bond Index(6)
and a negative return of (9.13)% for the J.P. Morgan Emerging Market Bond Index
Plus and an essentially flat return of 1.73% for the C.S. First Boston High
Yield Index.(7)
During such market extremes, it is important to maintain a long-term
perspective. We believe that by remaining true to our investment discipline, we
will continue to add value to our shareholders over time. Of course, past
performance is not a guarantee of future results.
On the following pages, your Funds' portfolio managers provide a review of the
last year and share their outlook for 1999. We hope you find their comments
informative. If you have any questions, please contact your financial advisor or
call us at 1-800-243-1574.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
(1) THE J.P. MORGAN EMERGING MARKET BOND INDEX PLUS IS AN UNMANAGED, COMMONLY
USED MEASURE OF EMERGING-MARKET DEBT TOTAL RETURN PERFORMANCE. THE INDEX
TRACKS TOTAL RETURN FOR TRADED EXTERNAL DEBT INSTRUMENTS IN EMERGING
MARKETS. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT.
(2) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX IS AN UNMANAGED,
COMMONLY USED MEASURE OF FOREIGN STOCK TOTAL RETURN PERFORMANCE. THE INDEX
IS NOT AVAILABLE FOR DIRECT INVESTMENT.
(3) THE S&P 500 INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF STOCK MARKET
TOTAL RETURN PERFORMANCE. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT.
(4) THE RUSSELL 2000 INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF TOTAL
RETURN PERFORMANCE OF SMALL COMPANY STOCKS. THE INDEX IS NOT AVAILABLE FOR
DIRECT INVESTMENT.
(5) THE LEHMAN BROTHERS GOVERNMENT BOND INDEX IS AN UNMANAGED, COMMONLY USED
MEASURE OF TOTAL RETURN PERFORMANCE OF GOVERNMENT BONDS. THE INDEX IS NOT
AVAILABLE FOR DIRECT INVESTMENT.
(6) THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN UNMANAGED, COMMONLY USED
MEASURE OF BROAD BOND MARKET TOTAL RETURN PERFORMANCE. THE INDEX IS NOT
AVAILABLE FOR DIRECT INVESTMENT.
(7) THE C.S. FIRST BOSTON HIGH YIELD INDEX IS AN UNMANAGED, COMMONLY USED
MEASURE OF TOTAL RETURN PERFORMANCE FOR HIGH-YIELD BONDS. THE INDEX IS NOT
AVAILABLE FOR DIRECT INVESTMENT AND IS CALCULATED MONTHLY RATHER THAN DAILY.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Phoenix Tax-Exempt Bond Portfolio......................................... 3
Phoenix Mid Cap Portfolio................................................. 12
Phoenix International Portfolio........................................... 19
Phoenix Real Estate Securities Portfolio.................................. 32
Phoenix Emerging Markets Bond Portfolio................................... 40
Phoenix Strategic Income Portfolio........................................ 49
Notes to Financial Statements............................................. 58
</TABLE>
2
<PAGE>
PHOENIX TAX-EXEMPT BOND PORTFOLIO
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, TIMOTHY M. HEANEY, CFA
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund is appropriate for investors seeking to maximize tax-exempt yield
and after-tax total return. Investors should note that income from the Fund
might be subject to state and local taxes and the alternative minimum tax, if
applicable.
Q: HOW DID THE FUND PERFORM OVER THE LAST 12 MONTHS?
A: For the 12-month reporting period ended November 30, 1998, Class A shares
returned 5.75% and Class B shares returned 4.97% compared with a return of 7.76%
for the Lehman Brothers Municipal Bond Index(1). The average return for a peer
universe of 240 general municipal funds was 6.82%, according to Lipper Inc. All
performance figures assume the reinvestment of distributions and exclude the
effect of sales charges.
Q: WHAT FACTORS AFFECTED PERFORMANCE?
A: Since our last report as of May 31, 1998, long U.S. Treasury rates declined
by 70 basis points as global nervousness continued over Asia and Russia,
liquidity became a global problem and the U.S. inflation environment remained
uncertain. During this time, the U.S. Treasury market outperformed the municipal
market due primarily to supply and demand factors. As interest rates declined,
municipal issuers flooded the market to take advantage of the favorable
conditions. However, investors continued to favor the "safer" Treasury issues.
Q: HOW IS THE FUND CURRENTLY POSITIONED?
A: We continue to emphasize higher quality issues as the yield premium between
high-quality and lower-quality municipal bonds is near historically narrow
levels across the municipal bond yield curve. Continued good news on the
inflation front and a slowdown in new municipal bond issues should benefit the
market.
Q: WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A: As we move forward in 1999, factors that could drive the relative value of
municipal bonds over the next six months include: the global economic outlook
and its impact on the U.S. economy and its investment markets, legislative
developments that could change the current tax laws relating to municipal bonds,
and lastly, the amount of new municipal supply that the market will experience,
especially in light of the large amount of new issue supply that the market had
to digest in 1998. Finally, should the U.S. stock market continue to experience
the same pace of appreciation that it has enjoyed subsequent to its large
sell-off during the third quarter of 1998, it could divert money away from the
tax-exempt sector, thus putting some additional pressure on municipals. Despite
these potential risks, we believe the municipal market represents excellent
relative value at current levels. If we continue to get good news on the U.S.
economic picture and start to see a slowdown in municipal issuance, we believe
the municipal market should fare well in 1999.
DECEMBER 15, 1998
(1) THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED, COMMONLY USED
MEASURE OF LONG-TERM, INVESTMENT-GRADE TAX-EXEMPT MUNICIPAL BOND TOTAL
RETURN PERFORMANCE. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT AND
DOES NOT REFLECT INVESTMENT MANAGEMENT OR OTHER MUTUAL FUND-RELATED FEES.
3
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 11/30/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEAR 10 YEAR TO 11/30/98 DATE
<S> <C> <C> <C> <C> <C>
Class A Shares at NAV(2) 5.75% 5.33% 7.89% -- --
Class A Shares at POP(3) 0.70 4.30 7.36 -- --
Class B Shares at NAV(2) 4.97 -- -- 5.28% 3/16/94
Class B Shares with CDSC(4) 1.14 -- -- 4.93 3/16/94
Lehman Muni Bond Index(7) 7.76 6.62 8.30 6.83(5) 2/28/94
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at
the time of purchase. CDSC charges for B shares decline from 5% to 0%
over a five year period.
(5) Index performance is 6.83% for Class B (since 2/28/94).
(6) This chart illustrates POP returns on Class A Shares for ten years.
Returns on Class B Shares will vary due to differing sales charges.
(7) The Lehman Muni Bond Index is an unmanaged, commonly used measure of
long-term, investment-grade, tax-exempt municipal bond total return
performance. The Lehman Brothers Municipal Bond Index's performance
does not reflect sales charges.
All returns represent past performance which may not be indicative
of future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 11/30
Phoenix Tax-Exempt Bond Lehman Muni
Fund Class A(6) Bond Index(7)
11/01/88 $9,522.92 $10,000.00
11/30/89 $10,678.26 $11,100.64
11/30/90 $10,371.40 $11,954.95
11/30/91 $12,431.78 $13,182.54
11/30/92 $13,913.44 $14,505.06
11/30/93 $15,692.99 $16,111.91
11/30/94 $14,508.03 $15,265.31
11/30/95 $17,390.92 $18,150.90
11/30/96 $18,139.29 $19,219.36
11/30/97 $19,235.69 $20,598.00
11/30/98 $20,342.47 $22,196.93
This growth of $10,000 chart assumes an initial investment of $10,000 made on
11/1/88 in Class A shares and reflects the maximum sales charge of 4.75% on
the initial investment. Performance assumes dividends and capital gains are
reinvested. The performance of other share classes will be greater or less
than that shown based on differences in inception dates, fees and sales
charges.
STATE WEIGHTINGS 11/30/98
As a percentage of net assets
Pennsylvania 13%
Texas 9%
New York 7%
California 7%
Illinois 6%
Virginia 6%
Georgia 6%
Other 46%
4
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
TEN LARGEST STATES AT NOVEMBER 30, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Pennsylvania 13.3%
2. Texas 9.0%
3. New York 7.3%
4. California 6.8%
5. Illinois 5.7%
6. Virginia 5.6%
7. Georgia 5.6%
8. Connecticut 4.5%
9. Colorado 3.9%
10. Indiana 3.0%
</TABLE>
INVESTMENTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--97.9%
ALABAMA--3.0%
Alabama Special Care Facility 5%,
11/1/25................................. AA+ $ 3,500 $ 3,421,250
ALASKA--1.1%
Valdez Marine Terminal Revenue 7%,
12/1/25(d).............................. AA 1,125 1,229,062
ARIZONA--0.9%
Pima County Pre-refunded 6.75%, 7/1/15
(FGIC Insured).......................... AAA 460 499,100
Pima County Unrefunded 6.75%, 7/1/15
(FGIC Insured).......................... AAA 540 583,200
-------------
1,082,300
-------------
ARKANSAS--1.3%
Drew County Public Facilities Board
Series A-2 7.90%, 8/1/11 (FNMA
Collateralized)......................... Aaa(c) 255 275,827
Jacksonville Residential Housing Board
Series A-2 7.90%, 1/1/11 (FNMA
Collateralized)......................... Aaa(c) 443 476,505
Lonoke County Residential Housing
Facilities Board Series A-2 7.90%,
4/1/11 (FNMA Collateralized)............ Aaa(c) 447 493,512
Stuggart Public Facilities Board Series
A-2 7.90%, 9/1/11 (FNMA
Collateralized)......................... Aaa(c) 208 223,300
-------------
1,469,144
-------------
CALIFORNIA--6.8%
California Housing Financing Agency
Series A 7.75%, 8/1/17.................. AA- 225 232,335
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
CALIFORNIA--CONTINUED
Pittsburg Redevelopment Series A 4.625%,
8/1/21 (AMBAC Insured).................. AAA $ 1,650 $ 1,565,437
Riverside County Series B 8.625%, 5/1/16
(GNMA Collateralized)................... AAA 4,300 5,923,250
-------------
7,721,022
-------------
COLORADO--3.9%
Arapahoe County Capital Improvement
Series E Pre-refunded 6.90%, 8/31/15.... Aaa(c) 2,500 2,990,625
Jefferson County School District G.O.
Bond 6.50%, 12/15/07 (MBIA Insured)..... AAA 1,250 1,475,000
-------------
4,465,625
-------------
CONNECTICUT--4.5%
Connecticut State Health and Educational
Facilities Authority Series B 5.125%,
7/1/07.................................. BBB 1,000 1,045,000
Mashantucket Western Pequot Tribe
Special Development Revenue Bond Series
A Pre-refunded 144A 6.50%, 9/1/05(f).... AAA 845 963,300
Mashantucket Western Pequot Tribe
Special Development Revenue Bond Series
A Pre-refunded 144A 6.50%, 9/1/06(f).... AAA 495 571,106
Mashantucket Western Pequot Tribe
Special Development Revenue Bond Series
A Unrefunded 144A 6.50%, 9/1/05(f)...... BBB- 855 964,012
Mashantucket Western Pequot Tribe
Special Development Revenue Bond Series
A Unrefunded 144A 6.50%, 9/1/06(f)...... BBB- 505 576,331
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
CONNECTICUT--CONTINUED
Mashantucket Western Pequot Tribe
Special Development Revenue Bond Series
B 144A 5.60%, 9/1/09(f)................. Baa(c) $ 1,000 $ 1,061,250
-------------
5,180,999
-------------
FLORIDA--1.5%
Martin County Industrial Development
Revenue Bond Indiantown Cogeneration
Series A 7.875%, 12/15/25............... BBB- 1,500 1,725,000
GEORGIA--5.6%
Atlanta Water and Sewer Revenue Bond
4.50%, 1/1/18 (FGIC Insured)............ AAA 2,250 2,120,625
Cartersville Development Authority
Revenue Bond 5.625%, 5/1/09............. A+ 2,000 2,167,500
Georgia Municipal Electric Authority
Power Revenue Bond Series Z 5.50%,
1/1/20 (FGIC Insured)................... AAA 2,000 2,147,500
-------------
6,435,625
-------------
ILLINOIS--5.7%
Chicago Board of Education Series A 6%,
1/1/20 (MBIA Insured)................... AAA 500 568,750
Chicago Gas Supply Revenue Bond Series B
7.50%, 3/1/15........................... AA- 1,000 1,056,250
Chicago O'Hare International Airport
Special Facility Revenue Bond 8.85%,
5/1/18.................................. BB+ 855 943,706
Illinois Development Finance Authority
Pollution Control Revenue Bond Series B
7.60%, 9/1/13........................... A+ 2,000 2,117,500
Illinois Health Facilities Authority
Revenue Bond Series C 7%, 4/1/08 (FSA
Insured)................................ AAA 1,100 1,318,625
Illinois Housing Development Authority
Residential Mortgage Revenue Bond Series
A 7%, 8/1/17............................ A+ 475 483,313
Metropolitan Pier & Exposition Authority
Revenue Bond Unrefunded 6.50%, 6/15/07
(FGIC Insured).......................... AA- 30 33,450
-------------
6,521,594
-------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
INDIANA--3.0%
Indianapolis Public Local Improvement
Revenue Bond Series A 0%, 2/1/05........ Aa(c) $ 1,765 $ 1,367,875
Indianapolis Public Local Improvement
Revenue Bond Series C 0%, 1/1/03........ A(c) 2,500 2,118,750
-------------
3,486,625
-------------
KENTUCKY--2.7%
Kentucky State Turnpike Authority
Economic Development Revenue Bond 0%,
1/1/10 (FGIC Insured)................... AAA 3,300 2,013,000
Perry County Solid Waste Disposal
Revenue Bond 7%, 6/1/24................. NR 1,000 1,085,000
-------------
3,098,000
-------------
LOUISIANA--2.9%
St. Mary Public Transportation Financing
Authority Revenue Bond Series A 7.625%,
3/25/12................................. Aaa(c) 51 54,445
St. Tammany Public Transportation
Financing Authority Revenue Bond Series
A 7%, 6/1/02 (FNMA Collateralized)...... Aaa(c) 88 91,556
St. Tammany Sales Tax Revenue Bond
4.70%, 4/1/09 (FGIC Insured)............ AAA 2,000 2,052,500
St. Tammany Sales Tax Revenue Bond
4.80%, 4/1/10 (FGIC Insured)............ AAA 1,105 1,136,769
-------------
3,335,270
-------------
MARYLAND--0.5%
Baltimore G.O. Bond 7%, 10/15/09 (MBIA
Insured)................................ AAA 500 618,125
MASSACHUSETTS--1.8%
Massachusetts Bay Transportation
Authority Revenue Bond Series B 6.20%,
3/1/16.................................. AA- 1,000 1,171,250
Massachusetts State Industrial Financing
Agency Revenue Bond 0%, 8/1/05.......... A+ 1,100 831,875
-------------
2,003,125
-------------
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
MICHIGAN--3.0%
Western Townships Utilities Authority
Sewage Disposal System G.O. Bond 8.20%,
1/1/18.................................. BBB+ $ 1,500 $ 1,535,250
Williamston Community School G.O. Bond
5.50%, 5/1/25 (MBIA Insured)............ AAA 1,725 1,878,094
-------------
3,413,344
-------------
MISSISSIPPI--1.5%
Lowndes County Solid Waste Disposal &
Pollution Control Revenue Bond Series A
6.80%, 4/1/22........................... A 1,450 1,772,625
NEBRASKA--1.2%
Nebraska Revenue Bond Jr Sub Lien Series
A-6 6.70%, 12/1/02 (Called 12/1/98)..... Aaa(c) 1,345 1,345,000
NEVADA--1.5%
Clark County School District G.O. Bond
Series B 0%, 6/1/03 (MBIA Insured)...... AAA 2,000 1,680,000
NEW JERSEY--2.4%
Atlantic City Improvement Authority
Lease Pre-refunded 8.875%, 2/1/10....... NR 1,000 1,009,280
Camden County Municipal Utilities
Authority Sewer Revenue Bond 0%, 9/1/11
(FGIC Insured).......................... AAA 3,000 1,687,500
-------------
2,696,780
-------------
NEW YORK--7.3%
Erie County Water Authority Revenue Bond
0%, 12/1/17 (AMBAC Insured)............. AAA 550 140,894
New York State Dormitory Authority
Revenue Bond Series U Pre-refunded
6.375%, 7/1/08.......................... BBB+ 575 636,094
Niagara Falls Bridge Commission Toll
Revenue Bond Series B 5.25%, 10/1/15
(FGIC Insured)(e)....................... AAA 4,000 4,250,000
Port Authority New York & New Jersey
Special Obligation Revenue Bond 6.75%,
10/1/11................................. NR 3,000 3,363,750
-------------
8,390,738
-------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
NORTH CAROLINA--1.4%
North Carolina Municipal Power Agency
Revenue Bond 6%, 1/1/09 (AMBAC
Insured)................................ AAA $ 1,385 $ 1,561,588
PENNSYLVANIA--13.3%
Delaware Valley Regional Finance
Authority Revenue Bond Series B 5.70%,
7/1/27 (AMBAC Insured).................. AAA 2,000 2,225,000
New Castle Area Hospital Authority
Revenue Bond Series A 6.50%,
11/15/09(b)............................. A(c) 1,000 1,060,000
Pennsylvania Economic Development
Financing Authority Recycling Revenue
Bond Series A 9.25%, 1/1/22(b)(g)....... NR 3,995 2,277,150
Pennsylvania Economic Development
Financing Authority Resource Recovery
Revenue Bond Series A 6.40%, 1/1/09..... BBB- 5,000 5,287,500
Pennsylvania State Finance Authority
Revenue Bond 6.60%, 11/1/09............. A 4,000 4,390,000
-------------
15,239,650
-------------
TENNESSEE--1.5%
Metropolitan Government Nashville &
Davidson County Health & Educational
Facilities Board Revenue Bond 6%,
12/1/16 (AMBAC Insured)................. AAA 1,500 1,700,625
TEXAS--9.0%
Alliance Airport Authority Special
Facilities Revenue Bond 7%, 12/1/11..... BBB- 1,100 1,299,375
Austin Convention Center Revenue Bond
Series B 8.25%, 11/15/14................ AAA 930 992,533
Brazos River Authority Revenue Bond
Series A 7.625%, 5/1/19................. A- 1,000 1,040,290
Colorado River Municipal Water Revenue
Bond Pre-refunded 8.25%, 1/1/15......... NR 540 589,275
Hurst Euless Bedford Independant School
District G.O. Bond 4.75%, 8/15/28....... AAA 2,000 1,912,500
San Antonio Electric & Gas Revenue Bond
5%, 2/1/12(e)........................... AA 2,000 2,060,000
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
TEXAS--CONTINUED
Texas State Public Finance Authority
Building Revenue Bond 6.25%, 8/1/09
(MBIA Insured).......................... AAA $ 1,250 $ 1,439,063
Texas Water Resource Finance Authority
Revenue Bond 7.625%, 8/15/08............ A 890 912,099
-------------
10,245,135
-------------
VIRGINIA--5.6%
Pittsylvania County Industrial
Development Authority Revenue Bond
Series A 7.30%, 1/1/04.................. NR 1,000 1,071,250
Pittsylvania County Industrial
Development Revenue Bond Series A 7.45%,
1/1/09.................................. NR 3,000 3,296,250
Upper Occoquan Sewer Authority Regional
Sewer Revenue Bond Series A 5.15%,
7/1/20 (MBIA Insured)................... AAA 2,000 2,072,500
-------------
6,440,000
-------------
WEST VIRGINIA--2.8%
Upshur County Solid Waste Disposal
Revenue Bond 7%, 7/15/25................ NR 2,000 2,182,500
West Virginia State Housing Development
Fund Revenue Bond 6.625%, 7/1/20 (FHA
Insured)................................ AA 1,000 1,000,290
-------------
3,182,790
-------------
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -------------
<S> <C> <C> <C>
WISCONSIN--0.8%
Wisconsin State Clean Water Revenue Bond
Series 1 6.875%, 6/1/11................. AA+ $ 750 $ 916,875
OTHER TERRITORIES--1.4%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Bond
Series V 6.625%, 7/1/12................. A 1,500 1,642,500
- - --------------------------------------------------------------------------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(IDENTIFIED COST $103,837,658) 112,020,416
- - --------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--97.9%
(IDENTIFIED COST $103,837,658) 112,020,416
- - --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--1.1%
COMMERCIAL PAPER--1.1%
Ford Motor Credit Co. 4.84%, 12/4/98.... A-1 1,250 1,249,496
- - --------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,249,496) 1,249,496
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--99.0%
(IDENTIFIED COST $105,087,154) 113,269,912(a)
Cash and receivables, less liabilities--1.0% 1,101,677
--------------
NET ASSETS--100.0% $ 114,371,589
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net appreciation of investment securities
is comprised of gross appreciation of $10,143,099 and gross depreciation of
$1,894,092 for federal income tax purposes. At November 30, 1998, the
aggregate cost of securities for federal income tax purpose was
$105,020,905.
(b) Non-income producing.
(c) As rated by Moody's, Fitch or Duff & Phelps.
(d) Variable security; interest rate reflects the rate currently in effect.
(e) All or a portion segregated as collateral.
(f) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30,
1998, these securities amounted to a value of $4,135,999 or 3.6% of net
assets.
(g) Security in default.
At November 30, 1998, 37.3% of the securities in the portfolio are backed by
insurance of financial institutions and financial guaranty assurance agencies.
Insurers with a concentration greater than 10% of net assets are as follows:
FGIC, 14.6%
8 See Notes to Financial Statements
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $105,087,154) $ 113,269,912
Cash 90,283
Receivables
Fund shares sold 1,921
Interest 1,877,543
--------------
Total assets 115,239,659
--------------
LIABILITIES
Payables
Variation margin for futures contracts 10,000
Dividend distributions 114,135
Fund shares repurchased 572,959
Investment advisory fee 42,388
Distribution fee 28,161
Financial agent fee 11,140
Transfer agent fee 7,061
Trustees' fee 5,514
Accrued expenses 76,712
--------------
Total liabilities 868,070
--------------
NET ASSETS $ 114,371,589
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 106,684,614
Distributions in excess of net investment income (114,135)
Accumulated net realized loss (352,089)
Net unrealized appreciation 8,153,199
--------------
NET ASSETS $ 114,371,589
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $107,370,966) 9,581,538
Net asset value per share $11.21
Offering price per share $11.21/(1-4.75%) $11.77
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $7,000,623) 622,243
Net asset value and offering price per share $11.25
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 6,943,511
--------------
Total investment income 6,943,511
--------------
EXPENSES
Investment advisory fee 544,278
Distribution fee, Class A 286,241
Distribution fee, Class B 64,542
Financial agent fee 102,535
Transfer agent 84,634
Professional 45,738
Registration 29,072
Trustees 21,706
Printing 18,949
Custodian 14,688
Miscellaneous 5,739
--------------
Total expenses 1,218,122
--------------
NET INVESTMENT INCOME 5,725,389
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (18,863)
Net realized loss on futures contracts (390,703)
Net change in unrealized appreciation on investments 1,555,273
--------------
NET REALIZED GAIN ON INVESTMENTS 1,145,707
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,871,096
--------------
--------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 5,725,389 $ 7,025,130
Net realized gain (loss) (409,566) 175,101
Net change in unrealized appreciation 1,555,273 420,432
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 6,871,096 7,620,663
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (5,342,324) (6,755,466)
Net investment income, Class B (259,422) (233,919)
Net realized gains, Class A (96,887) (1,898,761)
Net realized gains, Class B (4,637) (65,944)
In excess of net investment income, Class A (566,555) (5,836)
In excess of net investment income, Class B (27,512) (202)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (6,297,337) (8,960,128)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (3,799,813 and
5,119,900 shares, respectively) 42,705,753 56,427,974
Net asset value of shares issued from
reinvestment of distributions
(286,921 and 458,029 shares, respectively) 3,230,781 5,044,059
Cost of shares repurchased (5,491,445 and
6,702,201 shares, respectively) (61,903,573) (73,960,582)
-------------- --------------
Total (15,967,039) (12,488,549)
-------------- --------------
CLASS B
Proceeds from sales of shares (259,511 and
200,165 shares, respectively) 2,940,057 2,212,684
Net asset value of shares issued from
reinvestment of distributions
(12,310 and 15,780 shares, respectively) 139,134 174,441
Cost of shares repurchased (166,434 and 119,828
shares, respectively) (1,874,018) (1,319,055)
-------------- --------------
Total 1,205,173 1,068,070
-------------- --------------
DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (14,761,866) (11,420,479)
-------------- --------------
NET DECREASE IN NET ASSETS (14,188,107) (12,759,944)
-------------- --------------
NET ASSETS
Beginning of period 128,559,696 141,319,640
-------------- --------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME OF ($114,135) AND
($123,643), RESPECTIVELY) $ 114,371,589 $ 128,559,696
-------------- --------------
-------------- --------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Phoenix Tax-Exempt Bond Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
YEAR ENDED NOVEMBER 30
------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.17 $ 11.28 $ 11.40 $ 10.09 $ 11.58
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.57 0.59 0.60 0.61 0.65
Net realized and unrealized gain
(loss) 0.20 0.05 (0.12) 1.34 (1.49)
---------- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.77 0.64 0.48 1.95 (0.84)
---------- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.53) (0.59) (0.60) (0.61) (0.65)
Dividends in excess of net
investment income (0.11) -- -- -- --
Dividends from net realized gains (0.09) (0.16) -- (0.03) --
---------- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.73) (0.75) (0.60) (0.64) (0.65)
---------- ----- ----- ----- -----
Change in net asset value 0.04 (0.11) (0.12) 1.31 (1.49)
---------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 11.21 $ 11.17 $ 11.28 $ 11.40 $ 10.09
---------- ----- ----- ----- -----
---------- ----- ----- ----- -----
Total return(1) 5.75% 6.04% 4.30% 19.87% (7.55)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $107,371 $122,763 $136,558 $147,821 $141,623
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 0.97% 0.96% 0.94% 0.97% 0.96%
Net investment income 4.77% 5.36% 5.42% 5.65% 5.65%
Portfolio turnover 14% 15% 27% 25% 54%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
---------------------------------------------------- 3/16/94 TO
1998 1997 1996 1995 11/30/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.22 $ 11.32 $ 11.44 $ 10.12 $ 11.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.48 0.50 0.52 0.53 0.39
Net realized and unrealized gain
(loss) 0.19 0.06 (0.12) 1.35 (1.09)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.67 0.56 0.40 1.88 (0.70)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.45) (0.50) (0.52) (0.53) (0.39)
Dividends in excess of net
investment income (0.10) -- -- -- --
Dividends from net realized gains (0.09) (0.16) -- (0.03) --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.64) (0.66) (0.52) (0.56) (0.39)
----- ----- ----- ----- -----
Change in net asset value 0.03 (0.10) (0.12) 1.32 (1.09)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 11.25 $ 11.22 $ 11.32 $ 11.44 $ 10.12
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) 4.97% 5.13% 3.60% 19.07% (6.42)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $7,001 $5,797 $4,762 $3,142 $1,147
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.69% 1.71% 1.69% 1.72% 1.54%(2)
Net investment income 3.98% 4.60% 4.68% 4.90% 5.07%(2)
Portfolio turnover 14% 15% 27% 25% 54%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
See Notes to Financial Statements 11
<PAGE>
PHOENIX MID CAP PORTFOLIO
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, GAIL SENECA, PH.D. AND RICHARD
LITTLE, CFA
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: Phoenix Mid Cap Portfolio is appropriate for investors seeking long-term
capital appreciation by investing primarily in stocks of dynamic, rapidly
growing companies and focusing on strong relative earnings growth. The Fund may
invest in companies of all sizes, and investors should note that small company
investing involves added risks, including greater price volatility, less
liquidity and increased competitive threat.
Q: HOW HAS THE FUND PERFORMED DURING THIS DIFFICULT MARKET ENVIRONMENT?
A: For the 12-month reporting period, the Phoenix Mid Cap Portfolio Class A
shares returned 6.64% and Class B shares returned 5.80% compared with a return
of 10.40% for the S&P MidCap Index(1) and (7.12)% for the Russell 2000 Growth
Index(2). All performance figures assume reinvestment of distributions and
exclude the effect of sales charges.
Q: HOW WAS THE FUND AFFECTED BY EVENTS AROUND THE WORLD?
A: The growing economic crises in Russia, Japan and emerging markets led to
devastating results across all major U.S. stock market indices. Investors
flocked to the most highly liquid and "lowest risk" investments available. U.S.
Treasuries were the only true beneficiaries of this trend. The largest U.S.
stocks widely outperformed smaller capitalization companies. Year-to-date
through November 30, the S&P 500 Index is up 21.68%(3), while the return for the
Russell 2000 Index(4), a measure of small companies' performance, is negative
(8.23)%.
Our investment strategy produced strong relative results. Year-to-date
through November 30, Class A shares were up 5.04% based on net asset value
versus a return of only 1.95% for the average mid-cap fund in a peer universe of
326 funds, according to Lipper Inc., while the average small cap fund is down
(7.47)% for the year, according to Lipper Inc., based on a universe of 638
small-stock funds.
Q: HOW DID SOME OF THE STOCKS PERFORM?
A: Despite the market carnage, some of our stock holdings advanced for the
quarter: Dell Computer (microcomputers), EMC Corp. (memory devices), Intel Corp.
(semiconductor company), and Sun America (insurance) to name a few. Stocks in
our portfolio continue to produce significantly above-market earnings growth
rates.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET?
A: Unless the fear of global depression is realized, we believe U.S.
corporations should continue to exhibit profit growth in the coming year. This,
and a low inflation, low interest rate environment, should bode well for the
stock market in 1999.
Market volatility and panic liquidation is now so intense that investors can
find no place in the market that has been unaffected by recent events. When the
storm clouds dissipate, as we believe they will, diversified portfolios of
high-quality stocks, such as ours, should be well-positioned.
DECEMBER 10, 1998
(1) THE S&P MIDCAP INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF TOTAL RETURN
PERFORMANCE OF MID-CAPITALIZATION COMPANIES. THE INDEX IS NOT AVAILABLE FOR
DIRECT INVESTMENT.
(2) THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF
TOTAL RETURN PERFORMANCE FOR SMALL-CAPITALIZATION COMPANIES WITH ABOVE-
AVERAGE GROWTH ORIENTATION. THE INDEX IS NOT AVAILABLE FOR DIRECT
INVESTMENT.
(3) THE S&P 500 INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF STOCK MARKET
TOTAL RETURN PERFORMANCE. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT.
(4) THE RUSSELL 2000 INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF TOTAL
RETURN PERFORMANCE FOR SMALL-CAPITALIZATION COMPANIES. THE INDEX IS NOT
AVAILABLE FOR DIRECT INVESTMENT.
12
<PAGE>
Phoenix Mid Cap Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 11/30/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEAR TO 11/30/98 DATE
<S> <C> <C> <C> <C>
Class A Shares at NAV(2) 6.64% 11.08% 15.29% 11/1/89
Class A Shares at POP(3) 1.58 10.00 14.69 11/1/89
Class B Shares at NAV(2) 5.80 -- 12.14 7/18/94
Class B Shares with CDSC(4) 2.13 -- 11.85 7/18/94
S&P MidCap Index(6) 10.40 17.23 Note 5 Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of
any sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at
the time of purchase. CDSC charges for B shares decline from 5% to 0%
over a five year period.
(5) Index performance is 16.70 for Class A (since 11/1/89) and 19.16 for
Class B (since 7/18/94).
(6) This chart illustrates POP returns on Class A Shares for ten years.
Returns on Class B Shares will vary due to differing sales charges.
(7) The S&P MidCap Index is an unmanaged, commonly used measure of total
return performance of mid-capitalization companies. The Index is not
available for direct investment.
All returns represent past performance which may not be indicative
of future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 11/30
Phoenix Mid Cap S&P MidCap
Class A Index(7)
11/01/89 $9,523.81 $10,000.00
11/30/89 $9,800.00 $10,220.57
11/30/90 $11,491.40 $9,493.24
11/30/91 $16,177.93 $13,482.21
11/30/92 $18,837.70 $16,324.07
11/30/93 $20,521.90 $18,373.36
11/30/94 $20,733.07 $18,368.64
11/30/95 $26,511.59 $24,334.80
11/30/96 $30,095.15 $28,903.47
11/30/97 $32,540.12 $36,842.11
11/30/98 $34,701.62 $40,672.25
This growth of $10,000 chart assumes an initial investment of $10,000 made on
11/1/89 in Class A shares and reflects the maximum sales charge of 4.75% on
the initial investment. Performance assumes dividends and capital gains are
reinvested. The performance of other share classes will be greater or less
than that shown based on differences in inception dates, fees and sales
charges.
SECTOR WEIGHTINGS 11/30/98
As a percentage of net assets
Computers (Software & Services) 16%
Electronics (Semiconductors) 8%
Banks (Major Regional) 8%
Health Care (Drugs-Major Pharmaceuticals) 8%
Computers (Networking) 5%
Retail (Discounters) 5%
Other 50%
13
<PAGE>
Phoenix Mid Cap Portfolio
TEN LARGEST HOLDINGS AT NOVEMBER 30, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Outdoor Systems, Inc. 3.6%
OPERATES MALL AND TRANSIT ADVERTISING DISPLAYS
2. Xilinx, Inc. 3.5%
DESIGNS AND SELLS PROGRAMMABLE LOGIC DEVICES
3. Ascend Communications, Inc. 3.5%
DEVELOPS AND MARKETS WIDE-AREA NETWORKING SOLUTIONS
4. Compuware Corp. 3.0%
SELLS AND SUPPORTS AN INTEGRATED LINE OF SOFTWARE PRODUCTS
5. America Online, Inc. 3.0%
PROVIDES ONLINE SERVICES TO CONSUMERS
6. Comerica, Inc. 2.9%
GENERAL COMMERCIAL BANKING
7. Mylan Laboratories, Inc. 2.8%
DISTRIBUTES GENERIC AND PROPRIETARY PHARMACEUTICAL PRODUCTS
8. Gemstar International Group, Ltd. 2.7%
DEVELOPS SYSTEMS RELATED TO TELEVISION PROGRAMMING
9. Northern Trust Corp. 2.7%
PROVIDES BANKING AND TRUST SERVICES
10. Maytag Corp. 2.6%
MAKES, DISTRIBUTES AND SERVICES CONSUMER APPLIANCES
</TABLE>
INVESTMENTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
COMMON STOCKS--95.0%
BANKS (MAJOR REGIONAL)--7.6%
AmSouth Bancorporation.................. 142,240 $ 6,009,640
Comerica, Inc........................... 133,550 8,613,975
Northern Trust Corp..................... 97,500 7,873,125
-------------
22,496,740
-------------
BEVERAGES (ALCOHOLIC)--1.7%
Coors (Adolph) Co. Class B.............. 103,000 5,124,250
BEVERAGES-SOFT DRINK--1.0%
Whitman Corp............................ 127,350 2,881,294
BROADCASTING (TELEVISION, RADIO & CABLE)--2.3%
Chancellor Media Corp.(b)............... 179,070 6,748,701
COMPUTERS (HARDWARE)--1.7%
International Business Machines Corp.... 30,000 4,950,000
COMPUTERS (NETWORKING)--5.0%
Ascend Communications, Inc.(b).......... 183,000 10,282,312
Network Appliance, Inc.................. 59,530 4,472,191
-------------
14,754,503
-------------
COMPUTERS (SOFTWARE & SERVICES)--16.1%
America Online, Inc.(b)................. 100,000 8,756,250
BMC Software, Inc.(b)................... 141,080 7,203,897
Computer Horizons Corp.(b).............. 167,830 3,776,175
Compuware Corp.(b)...................... 144,200 8,976,450
Documentum, Inc.(b)..................... 92,950 3,909,709
Legato Systems, Inc.(b)................. 59,800 2,859,187
Microsoft Corp.(b)...................... 35,000 4,270,000
VERITAS Software Corp.(b)............... 129,610 7,744,197
-------------
47,495,865
-------------
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
ELECTRONICS (INSTRUMENTATION)--1.9%
Micron Electronics, Inc.(b)............. 245,450 $ 5,583,987
ELECTRONICS (SEMICONDUCTORS)--7.6%
Advance Micro Devices, Inc.(b).......... 165,900 4,593,356
Micron Technology, Inc.(b).............. 180,140 7,442,034
Xilinx, Inc.(b)......................... 205,740 10,441,305
-------------
22,476,695
-------------
ENTERTAINMENT--2.2%
SFX Entertainment, Inc. Class A(b)...... 127,210 6,376,401
FINANCIAL (DIVERSIFIED)--1.4%
Providian Financial Corp................ 43,960 4,036,078
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--7.7%
McKesson Corp........................... 97,520 6,942,205
MedImmune, Inc.(b)...................... 85,000 5,684,375
Mylan Laboratories, Inc................. 247,100 8,200,631
Warner-Lambert Co....................... 25,000 1,887,500
-------------
22,714,711
-------------
HEALTH CARE (HOSPITAL MANAGEMENT)--1.2%
Health Management Associates, Inc. Class
A(b).................................... 169,440 3,674,730
HEALTH CARE (LONG TERM CARE)--1.6%
Omnicare, Inc........................... 170,150 4,870,544
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--1.3%
Ocular Sciences, Inc.(b)................ 164,660 3,704,850
HOUSEHOLD FURNITURE & APPLIANCES--2.6%
Maytag Corp............................. 143,730 7,779,386
INSURANCE (LIFE/HEALTH)--1.6%
Annuity and Life Re (Holdings), Ltd..... 182,610 4,633,729
INSURANCE (PROPERTY, CASUALTY, & TITLE)--0.9%
Progressive Corp. (The)................. 17,270 2,562,436
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Phoenix Mid Cap Portfolio
<TABLE>
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
MANUFACTURING (DIVERSIFIED)--1.5%
Tyco International Ltd.................. 65,539 $ 4,313,285
OFFICE EQUIPMENT & SUPPLIES--1.3%
Miller (Herman), Inc.................... 181,150 3,849,438
OIL (DOMESTIC INTEGRATED)--2.4%
USX-Marathon Group...................... 253,230 7,185,401
OIL & GAS (DRILLING & EQUIPMENT)--1.6%
Cooper Cameron Corp.(b)................. 100,000 2,437,500
Smith International, Inc.(b)............ 100,000 2,412,500
-------------
4,850,000
-------------
RETAIL (COMPUTERS & ELECTRONICS)--1.1%
Tandy Corp.............................. 75,000 3,379,688
RETAIL (DISCOUNTERS)--5.2%
Dollar Tree Stores, Inc.(b)............. 165,540 7,511,378
Kmart Corp.(b).......................... 507,350 7,737,088
-------------
15,248,466
-------------
RETAIL (SPECIALTY)--2.3%
Staples, Inc.(b)........................ 192,470 6,724,421
RETAIL (SPECIALTY-APPAREL)--2.3%
TJX Companies, Inc. (The)............... 268,000 6,867,500
SERVICES (ADVERTISING/MARKETING)--3.6%
Outdoor Systems, Inc.(b)................ 388,100 10,478,700
SERVICES (COMMERCIAL & CONSUMER)--3.8%
Administaff, Inc.(b).................... 114,620 3,101,904
Gemstar International Group, Ltd.(b).... 132,720 8,062,740
-------------
11,164,644
-------------
TELECOMMUNICATIONS-CELLULAR--1.0%
Crown Castle International Corp.(b)..... 223,200 2,999,250
WASTE MANAGEMENT--3.5%
Republic Services, Inc. Class A(b)...... 378,560 7,050,680
Waste Management, Inc................... 74,300 3,185,613
-------------
10,236,293
-------------
- - -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $264,544,067) 280,161,986
- - -----------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
-------- -------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--2.1%
ELECTRONICS (SEMICONDUCTORS)--2.1%
PMC-Sierra, Inc. (Canada)(b)............ 112,530 $ 6,062,554
- - -----------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $4,547,950) 6,062,554
- - -----------------------------------------------------------------------------
UNIT INVESTMENT TRUSTS--1.1%
S & P Mid Cap 400 Depositary Receipts... 50,000 3,350,000
- - -----------------------------------------------------------------------------
TOTAL UNIT INVESTMENT TRUSTS
(IDENTIFIED COST $3,359,755) 3,350,000
- - -----------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--98.2%
(IDENTIFIED COST $272,451,772) 289,574,540
- - -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ -------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.7%
COMMERCIAL PAPER--3.7%
Shell Oil Co. 5.30%, 12/1/98............ A-1+ $ 230 230,000
Colgate-Palmolive Co. 5%, 12/17/98...... A-1 2,810 2,803,755
Greenwich Funding Corp. 5.20%, 1/4/99... A-1+ 2,000 1,984,612
Lexington Parker Capital LLC 5.31%,
1/13/99................................. A-1 5,000 4,958,774
Minnesota Mining & Manufacturing Co.
4.95%, 1/21/99.......................... A-1+ 1,000 989,194
-------------
10,966,335
-------------
- - --------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $10,985,209) 10,966,335
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--101.9%
(IDENTIFIED COST $283,436,981) 300,540,875(a)
Cash and receivables, less liabilities--(1.9%) (5,527,136)
--------------
NET ASSETS--100.0% $ 295,013,739
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net appreciation of investment securities
is comprised of gross appreciation of $34,646,500 and gross depreciation of
$17,704,670 for federal income tax purposes. At November 30, 1998, the
aggregate cost of securities for federal income tax purposes was
$283,599,045.
(b) Non-income producing.
See Notes to Financial Statements 15
<PAGE>
Phoenix Mid Cap Portfolio
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $283,436,981) $ 300,540,875
Short term investments held as collateral for loaned securities 6,957,460
Cash 4,041
Receivables
Investment securities sold 4,594,014
Interest and dividends 135,550
Fund shares sold 137,059
--------------
Total assets 312,368,999
--------------
LIABILITIES
Payables
Investment securities purchased 9,462,426
Fund shares repurchased 463,703
Collateral on securities loaned 6,957,460
Investment advisory fee 182,048
Distribution fee 70,354
Transfer agent fee 66,642
Financial agent fee 19,739
Trustees' fee 5,514
Accrued expenses 127,374
--------------
Total liabilities 17,355,260
--------------
NET ASSETS $ 295,013,739
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 216,741,954
Accumulated net realized gain 61,167,891
Net unrealized appreciation 17,103,894
--------------
NET ASSETS $ 295,013,739
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization (Net Assets $279,326,040) 14,035,651
Net asset value per share $19.90
Offering price per share $19.90/(1-4.75%) $20.89
CLASS B
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization (Net Assets $15,687,699) 817,833
Net asset value and offering price per share $19.18
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 2,655,076
Dividends 1,154,346
Security lending 141,922
Foreign tax withheld (562)
--------------
Total investment income 3,950,782
--------------
EXPENSES
Investment advisory fee 2,476,987
Distribution fee, Class A 783,434
Distribution fee, Class B 168,938
Financial agent fee 198,734
Transfer agent 563,414
Printing 80,377
Professional 42,675
Registration 41,007
Custodian 35,510
Trustees 21,986
Miscellaneous 5,244
--------------
Total expenses 4,418,306
--------------
NET INVESTMENT LOSS (467,524)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 61,746,081
Net change in unrealized appreciation (depreciation) on
investments (38,514,321)
--------------
NET GAIN ON INVESTMENTS 23,231,760
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 22,764,236
--------------
--------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Phoenix Mid Cap Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss $ (467,524) $ (450,831)
Net realized gain 61,746,081 36,321,860
Net change in unrealized appreciation
(depreciation) (38,514,321) (8,036,315)
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 22,764,236 27,834,714
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (33,084,355) (51,980,339)
Net realized gains, Class B (1,776,186) (2,025,912)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (34,860,541) (54,006,251)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (2,824,332 and
2,046,000 shares, respectively) 55,807,991 41,010,257
Net asset value of shares issued from
reinvestment of distributions
(1,780,474 and 2,624,028 shares, respectively) 32,263,501 49,101,364
Cost of shares repurchased (8,014,004 and
8,074,195 shares, respectively) (157,423,669) (156,230,117)
-------------- --------------
Total (69,352,177) (66,118,496)
-------------- --------------
CLASS B
Proceeds from sales of shares (92,246 and
229,655 shares, respectively) 1,729,101 4,456,304
Net asset value of shares issued from
reinvestment of distributions
(96,993 and 102,293 shares, respectively) 1,705,266 1,877,087
Cost of shares repurchased (295,559 and 234,195
shares, respectively) (5,608,396) (4,479,411)
-------------- --------------
Total (2,174,029) 1,853,980
-------------- --------------
DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (71,526,206) (64,264,516)
-------------- --------------
NET DECREASE IN NET ASSETS (83,622,511) (90,436,053)
NET ASSETS
Beginning of period 378,636,250 469,072,303
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY) $ 295,013,739 $ 378,636,250
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements 17
<PAGE>
Phoenix Mid Cap Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.64 $ 21.65 $ 22.03 $ 18.03 $ 18.70
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) 0.01 (0.02)(1) (0.03)(1) 0.05(1) 0.11
Net realized and unrealized gain 1.18 1.52 2.53 4.74 0.10
------- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.19 1.50 2.50 4.79 0.21
------- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income -- -- -- (0.06) (0.10)
Dividends from net realized gains (1.93) (2.51) (2.88) (0.73) (0.78)
------- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.93) (2.51) (2.88) (0.79) (0.88)
------- ----- ----- ----- -----
Change in net asset value (0.74) (1.01) (0.38) 4.00 (0.67)
------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 19.90 $ 20.64 $ 21.65 $ 22.03 $ 18.03
------- ----- ----- ----- -----
------- ----- ----- ----- -----
Total return(2) 6.64% 8.12% 13.52% 27.87% 1.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $279,326 $360,053 $451,474 $487,674 $419,760
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.30% 1.33% 1.35% 1.42% 1.36%
Net investment income (loss) (0.10)% (0.08)% (0.17)% 0.28% 0.59%
Portfolio turnover 379% 161% 242% 218% 227%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
------------------------------------------------------------ 7/18/94 TO
1998 1997 1996 1995 11/30/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.11 $ 21.30 $ 21.85 $ 17.97 $ 17.68
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.18) (0.16)(1) (0.18)(1) (0.12)(1) (0.01)
Net realized and unrealized gain 1.18 1.47 2.51 4.75 0.30
------ ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 1.00 1.31 2.33 4.63 0.29
------ ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income -- -- -- (0.02) --
Dividends from net realized gains (1.93) (2.50) (2.88) (0.73) --
------ ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.93) (2.50) (2.88) (0.75) --
------ ----- ----- ----- -----
Change in net asset value (0.93) (1.19) (0.55) 3.88 0.29
------ ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 19.18 $ 20.11 $ 21.30 $ 21.85 $ 17.97
------ ----- ----- ----- -----
------ ----- ----- ----- -----
Total return(2) 5.80% 7.27% 12.75% 26.92% 1.64%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $15,688 $18,583 $17,599 $10,908 $1,519
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.04% 2.08% 2.11% 2.18% 2.05%(3)
Net investment income (loss) (0.85)% (0.85)% (0.92)% (0.58)% (0.23)%(3)
Portfolio turnover 379% 161% 242% 218% 227%(4)
</TABLE>
(1) Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in the total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
18
See Notes to Financial Statements
<PAGE>
PHOENIX INTERNATIONAL PORTFOLIO
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund is appropriate for investors seeking high total return consistent
with reasonable risk by investing primarily in an internationally diversified
portfolio of equity securities. The Fund essentially focuses on quality
companies with strong management, solid growth prospects and attractive relative
valuations. Investors should note that foreign investments pose added risks,
such as currency fluctuation, less public disclosure, as well as economic and
political risks.
Q: HOW DID THE FUND PERFORM DURING THIS VOLATILE MARKET ENVIRONMENT?
A: For the year ended November 30, 1998, Class A shares returned 26.17% and
Class B shares returned 25.17% compared with a return of 16.77% for the Fund's
benchmark index, the Morgan Stanley Capital International (MSCI) EAFE Index(1).
The average return for a peer universe of 511 international funds was 10.43%,
according to Lipper Inc. All performance figures assume reinvestment of
distributions and exclude the effect of sales charges.
Q: WHAT FACTORS MOST AFFECTED PERFORMANCE?
A: For the first half of the year, the Fund benefited from its overweight
exposure in Europe and its lack of exposure to Asia. The advent of the euro has
given European institutions access to a much greater pool of domestic currency
investments. Also, European markets attracted significant levels of foreign
investment enamored by a region with growing economics. This, coupled with the
need for corporations to restructure in order to be prepared for a more
competitive pan-European market and an emerging trend of improving shareholder
returns, enabled the European equity markets to post particularly strong
returns.
Meanwhile, the currency-led collapse in the Pacific Basin left the region's
markets in tatters, with investors nursing heavy losses. Only a determined
effort by the International Monetary Fund and the U.S. to establish credible
recovery plans contained the crisis mostly within the region, allowing a
selective market recovery in the first quarter of 1998. Even this, however,
petered out as investors' relief that the worst was over gave way to the
realization that there was still much deeper economic pain to endure. Even Hong
Kong and Singapore saw their stock markets fall heavily.
The second half of the fiscal year was a period of amazing volatility. After
European and U.S. markets reached their peak in early July, markets worldwide
tumbled on a flood of bad news. The initial catalyst for the dramatic downturn
was the financial crisis in Russia where the ruble collapsed. Nervousness spread
to other markets, particularly Latin America where it was feared that Brazil was
the next in line to devalue. All of the region's currencies came under intense
pressure, interest rates soared, and equity markets plunged almost 50% in less
than two months. Confirmation that Japan was suffering its worst economic slump
since 1945 added to international market worries. The crash of the Russian ruble
and the severe downturn in worldwide markets also put many hedge funds in severe
financial
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX IS AN UNMANAGED,
COMMONLY USED MEASURE OF FOREIGN STOCK FUND PERFORMANCE WHICH INCLUDES NET
DIVIDENDS REINVESTED. THE EAFE INDEX IS AN AGGREGATE OF 19 INDIVIDUAL
COUNTRY INDEXES IN EUROPE, AUSTRALIA, NEW ZEALAND AND THE FAR EAST. THE
INDEX'S PERFORMANCE DOES NOT REFLECT SALES CHARGES.
19
<PAGE>
PHOENIX INTERNATIONAL PORTFOLIO (CONTINUED)
difficulties, and the announcement that U.S. hedge fund manager Long-Term
Capital Management LP had been bailed out to the extent of $3.5 billion sent
shockwaves through the financial community.
All this bad news completely wiped out the year-to-date gains for many
markets, and by early October several markets had fallen to a one-year low.
However, concerted worldwide action since that time has resulted in a dramatic
recovery in worldwide markets as stocks rose on expectations that corporate
profits would benefit from lower interest rates. Much of the credit must be
given to the U.S. Federal Reserve, which cut interest rates three times in seven
weeks to ensure that the U.S. economy did not slide into recession. We have also
seen cuts in European interest rates, and the Japanese government announced a
major package to stimulate its failing economy. Markets in Southeast Asia also
showed signs of recovery, with the perception being that the worst is now over
for that region. The successful completion of an International Monetary Fund
rescue package for Brazil also helped bolster world markets, with a strong
rebound for emerging markets that had been particularly affected by the late
summer downturn.
Q: WHAT CHANGES HAVE BEEN MADE TO THE FUND'S ASSET ALLOCATION?
A: In the second half of the year, we reduced our large overweighting to
European equities. This area had resulted in substantial outperformance, but we
were concerned that valuations had advanced too quickly in many instances. We
decided that it would be opportune to take profits in Europe and reinvest the
proceeds in Japan where we previously had no holdings. This strategy has proved
successful to date, as although both the European and Japanese markets have
fallen since July, the Japanese yen has strengthened significantly, resulting in
net dollar gains for our Japanese investments.
Q: WHAT IS THE OUTLOOK FOR INTERNATIONAL MARKETS?
A: While the manufacturing sector continues under pressure in most countries,
consumer confidence is rebounding once again in a number of economies,
suggesting still relatively buoyant consumer spending.
The rally in the UK has returned it to a level that is above most revised
expectations for this year. However, it is the excellent technical position that
provides the strongest support together with the prospect of further monetary
easing in the UK. Economic growth forecasts meanwhile remain under pressure and
will clearly impact further on earnings expectations. As with the UK,
Continental Europe appears less at risk than the U.S. from a valuation
perspective, even given the degree to which perceptions surrounding Europe's
economic growth and earnings prospects have deteriorated since the tremendous
rally earlier in the year. We believe additional rate cuts are on the agenda for
early next year and should offset any concerns over the launch of the euro.
In the Far East, sentiment towards Japan is improving, with fund managers
becoming increasingly nervous of their generally underweight positions in the
stock market and currency. There is growing optimism about the economy and
banking system following the government's recent measures, but possibly this is
due more to the hope that this will prevent imminent free-fall than belief that
the plans solve Japan's structural problems. Further short-term support for the
stock market may emerge from an eventual deal between the LDP
20
<PAGE>
PHOENIX INTERNATIONAL PORTFOLIO (CONTINUED)
and Liberals to suspend the sales tax. Elsewhere in Asia, currencies have
stabilized and interest rates have fallen. A protracted recovery is likely,
provided that there is no worsening of the U.S. and Japanese economies.
The emerging markets outside Asia have also bounced strongly, and a pause
now seems probable. In Latin America, the International Monetary Fund
restructure package has presented Brazil with the opportunity to resolve
structural issues that have held the country back for some time.
Overall, the scale of recent rallies suggests a period of consolidation is
due. But, liquidity-driven rallies tend to be stronger and continue longer than
most people expect, and it would be no surprise to see markets squeezed higher
over the short term. We believe the U.S. will set the trends for other equity
markets, and a soft landing, very low inflation, falling interest rates and
steady earnings growth are a possibility. Add in excess liquidity, continuing
merger and acquisition activity, and we believe valuations could go even higher.
DECEMBER 11, 1998
21
<PAGE>
Phoenix International Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 11/30/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEAR TO 11/30/98 DATE
<S> <C> <C> <C> <C>
Class A Shares at NAV(2) 26.17% 13.87% 10.17% 11/01/89
Class A Shares at POP(3) 20.19% 12.76% 9.59% 11/01/89
Class B Shares at NAV(2) 25.17% -- 11.55% 7/15/94
Class B Shares with CDSC(4) 21.32% -- 11.25% 7/15/94
MSCI EAFE(6) 16.77% 10.18% Note 5 Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and
the reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of
any sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for B shares decline from 5% to 0% over a
five year period.
(5) Index performance is 5.81% for ClassA (since 10/31/89) and 7.74% for
Class B (since 6/30/94) for the MSCI EAFE Index.
(6) This chart illustrates POP returns on Class A Shares for ten years
or inception date if inception is less than 10 years. Returns on Class B
Shares will vary due to differing sales charges.
(7) The Morgan Stanley Capital International EAFE Index is an unmanaged,
commonly used measure of foreign stock fund performance which includes
net dividends reinvested. The EAFE index is an aggregate of 19 individual
country indexes in Europe, Australia, New Zealand and the Far East. The
index's performance does not reflect sales charges.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 11/30
International
Portfolio
Class A(6) MSCI EAFE(7)
11/1/89 $9,523.81 $10,000.00
11/30/89 $9,942.86 $10,505.00
11/30/90 $9,868.89 $8,229.63
11/30/91 $10,684.60 $8,946.42
11/30/92 $9,625.85 $8,250.82
11/30/93 $11,989.35 $10,284.41
11/30/94 $13,568.59 $11,841.01
11/30/95 $14,127.19 $12,776.41
11/30/96 $16,815.66 $14,321.11
11/30/97 $18,195.45 $14,303.14
11/30/98 $22,956.40 $16,702.37
This growth of $10,000 chart assumes an initial investment of
$10,000 made on 11/1/89 in Class A shares and reflects the maximum
sales charge of 4.75% on the initial investment. Performance assumes
dividends and capital gains are reinvested. The performance of other
share classes will be greater or less than that shown based on differences
in inception dates, fees and sales charges.
COUNTRY WEIGHTINGS 11/30/98
As a percentage of net assets
United Kingdom 22%
Japan 18%
France 10%
Germany 9%
Netherlands 7%
Sweden 6%
Italy 5%
Other 23%
22
<PAGE>
Phoenix International Portfolio
TEN LARGEST HOLDINGS AT NOVEMBER 30, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Novartis AG Registered Shares 2.5%
MANUFACTURES HEALTH-CARE PRODUCTS FOR WORLDWIDE DISTRIBUTION
2. DaimlerChrysler AG 1.7%
WORLD'S THIRD LARGEST AUTOMAKER
3. Nokia Oyj Class A 1.4%
MANUFACTURES MOBILE PHONES AND OTHER TELECOM PRODUCTS
4. Glaxo Wellcome PLC 1.4%
CONDUCTS RESEARCH AND MARKETS PHARMACEUTICAL PRODUCTS
5. Telefonica SA 1.4%
EXCLUSIVE SUPPLIER OF VOICE TELEPHONE SERVICES IN SPAIN
6. Zurich Allied AG 1.4%
INSURANCE AND ASSET MANAGEMENT PROVIDER
7. Mannesmann AG 1.3%
MANUFACTURES WIDE RANGE OF INDUSTRIAL PRODUCTS
8. Telecom Italia Mobile SPA 1.3%
EUROPE'S LARGEST CELLULAR TELEPHONE COMPANY
9. Istituto Bancario San Paolo di Torino 1.3%
ITALIAN COMMERCIAL BANK
10. British Petroleum Co. PLC 1.2%
PRODUCES, TRANSPORTS, REFINES AND MARKETS CRUDE OIL
</TABLE>
INVESTMENTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--96.9%
AUSTRALIA--1.1%
Australian Gas Light Co., Ltd. (Oil
(International Integrated))......... 135,000 $ 1,005,159
QBE Insurance Group Ltd. (Insurance
(Property-Casualty))................ 250,000 1,078,393
-------------
2,083,552
-------------
BRAZIL--1.3%
Tele Centro Sul Participacoes SA ADR
(Telephone)(b)...................... 6,500 370,906
Tele Norte Leste Participacoes SA
ADR (Telephone)(b).................. 26,000 442,000
Tele Sudeste Celular Participacoes
SA ADR (Telecommunications
(Cellular/Wireless))(b)............. 13,000 351,000
Telecomunicacoes Brasileiras SA
Sponsored ADR (Telephone)........... 13,900 1,317,894
-------------
2,481,800
-------------
DENMARK--0.5%
Tele Danmark A/S (Telecommunications
(Cellular/ Wireless))............... 8,200 918,477
FINLAND--2.3%
Nokia Oyj Class A
(Telecommunications (Cellular/
Wireless)).......................... 27,500 2,700,918
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
FINLAND--CONTINUED
Raisio Group PLC (Foods)............ 129,900 $ 1,687,614
-------------
4,388,532
-------------
FRANCE--9.7%
Alcatel (Telecommunications
(Cellular/Wireless))................ 12,300 1,630,975
Alstom (Machinery (Diversified)).... 58,750 1,378,828
Axa (Insurance (Multi-Line))........ 16,931 2,194,291
Cap Gemini SA (Computers (Software &
Services)).......................... 5,480 803,948
Castorama Dubois (Retail (Building
Supplies)).......................... 4,800 973,337
Coflexip SA (Oil & Gas (Drilling &
Equipment))......................... 10,800 791,831
Compagnie Financiere de Paribas
(Investment Banking/Brokerage)...... 21,600 1,931,017
Elf Aquitaine SA (Oil (International
Integrated))........................ 12,000 1,500,209
Galeries Lafayette (Retail
(Department Stores))................ 1,390 1,588,233
Groupe Danone (Foods)............... 6,100 1,785,510
Pechiney SA Class A (Aluminum)...... 51,600 1,723,272
Pinault-Printemps-Redoute SA (Retail
(Department Stores))................ 6,250 1,068,996
Rhodia SA (Chemicals
(Specialty))(b)..................... 61,000 957,829
-------------
18,328,276
-------------
GERMANY--8.6%
Adidas-Salomon AG (Textiles
(Apparel)).......................... 8,050 880,807
Bayerische Motoren Werke AG
(Automobiles)....................... 1,600 1,239,665
Bayerische Motoren Werke AG New
(Automobiles)(b).................... 479 362,626
DaimlerChrysler AG
(Automobiles)(b).................... 33,685 3,237,448
Deutsche Bank AG (Banks (Money
Center))............................ 29,200 1,808,183
Hoechst AG (Chemicals).............. 44,000 1,894,510
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Phoenix International Portfolio
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
GERMANY--CONTINUED
Mannesmann AG (Machinery
(Diversified))...................... 23,000 $ 2,496,185
Metro AG (Retail (Department
Stores))............................ 13,100 822,827
Muenchener
Rueckversicherungs-Gesellschaft AG
(Insurance (Reinsurance))........... 4,576 2,111,026
RWE AG (Oil (International
Integrated))........................ 26,800 1,429,731
-------------
16,283,008
-------------
GREECE--0.3%
Alpha Credit Bank (Banks (Major
Regional)).......................... 5,000 475,804
HONG KONG--1.3%
Henderson China Holding Ltd. (Real
Estate Development)................. 780 355
Hong Kong Electric Holdings Ltd.
(Electric Companies)................ 375,000 1,247,094
Swire Pacific Ltd. Class B
(Diversified Miscellaneous)(b)...... 1,800,000 1,266,951
-------------
2,514,400
-------------
HUNGARY--0.6%
Magyar Tavkozlesi Rt. Sponsored ADR
(Telecommunications (Long
Distance)).......................... 40,700 1,111,619
INDONESIA--0.4%
PT Indosat (Telecommunications
(Cellular/Wireless))................ 186,000 268,039
PT Indosat ADR (Telecommunications
(Cellular/ Wireless))............... 38,000 532,000
-------------
800,039
-------------
ITALY--4.6%
Istituto Bancario San Paolo di
Torino (Banks (Money Center))....... 145,464 2,393,772
Mediolanum SPA (Insurance
(Life/Health))...................... 305,000 1,840,038
Telecom Italia Mobile SPA
(Telecommunications
(Cellular/Wireless))................ 365,000 2,398,232
Telecom Italia SPA (Communications
Equipment).......................... 255,000 2,072,260
-------------
8,704,302
-------------
JAPAN--17.1%
77 Bank Ltd. (The) (Banks (Major
Regional)).......................... 154,000 1,437,016
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
JAPAN--CONTINUED
Canon, Inc. (Office Equipment &
Supplies)........................... 72,000 $ 1,593,231
Dai Nippon Printing Co., Ltd.
(Specialty Printing)................ 102,000 1,481,207
Fuji Photo Film Co.
(Photography/Imaging)............... 44,000 1,646,599
Hitachi Credit Corp. (Consumer
Finance)............................ 98,000 1,829,726
Ito-Yokado Co., Ltd. (Retail
(General Merchandise)).............. 30,000 1,835,340
Kao Corp. (Personal Care)........... 100,000 1,895,541
Kawasumi Laboratories, Inc. (Health
Care (Medical Products &
Supplies)).......................... 79,000 1,349,658
Kirin Beverage Corp. (Beverages
(Non-Alcoholic)).................... 68,000 1,228,115
Mabuchi Motor Co., Ltd. (Electronics
(Component Distributors))........... 24,000 1,767,003
Nippon COMSYS Corp. (Communications
Equipment).......................... 120,000 1,534,656
Nippon Telegraph & Telephone Corp.
(Telephone)......................... 1,500 1,122,681
Rinnai Corp. (Building Materials)... 87,000 1,468,638
Rohm Co., Ltd (Electronics
(Semiconductors))................... 17,000 1,438,333
Sanwa Bank Ltd. (The) (Banks (Money
Center))............................ 226,000 2,050,032
Secom Co., Ltd. (Services
(Commercial & Consumer))............ 30,000 2,223,397
Shin-Etsu Chemical Co., Ltd.
(Chemicals)......................... 101,000 2,259,599
Suzuki Motor Corp. (Automobiles).... 180,000 2,064,757
Takeda Chemical Industries (Health
Care (Drugs-Major
Pharmaceuticals))................... 63,000 2,126,993
-------------
32,352,522
-------------
MALAYSIA--0.2%
Carlsberg Brewery Malaysia Berhad
(Beverages (Alcoholic))(c).......... 125,000 254,934
Malaysian Oxygen Berhad
(Chemicals)(c)...................... 85,000 136,075
-------------
391,009
-------------
MEXICO--1.3%
Cemex SA de C.V. Class B (Building
Materials).......................... 142,500 419,976
Cemex SA de C.V. CPO (Building
Materials).......................... 4,275 10,357
</TABLE>
24 See Notes to Financial Statements
<PAGE>
Phoenix International Portfolio
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
MEXICO--CONTINUED
Telefonos de Mexico SA Sponsored ADR
Class L (Telephone)................. 43,800 $ 2,039,437
-------------
2,469,770
-------------
NETHERLANDS--7.2%
AKZO Nobel NV (Chemicals)........... 39,700 1,632,494
ASM Lithography Holding NV
(Electronics (Semiconductors))(b)... 56,100 1,638,940
Fortis Amev NV (Insurance
(Multi-Line))....................... 20,000 1,473,843
Getronics NV (Computers (Software &
Services)).......................... 43,700 1,916,164
Koninklijke Ahold NV (Foods)........ 52,900 1,839,561
Koninklijke KPN NV
(Telecommunications (Cellular/
Wireless)).......................... 27,000 1,168,322
Royal Dutch Petroleum Co. (Oil
(International Integrated))......... 42,500 2,041,876
Verenigde Nederlandse
Uitgeversbedrijven NV
(Publishing)........................ 53,400 1,840,143
-------------
13,551,343
-------------
NEW ZEALAND--0.2%
Telecom Corporation of New Zealand
Ltd. (Telecommunications
(Cellular/Wireless))................ 80,000 341,918
PHILIPPINES--0.5%
Ayala Land, Inc. (Real Estate
Development)........................ 1,250,000 388,641
Philippine Long Distance Telephone
Co. Sponsored ADR (Telephone)....... 18,000 472,500
-------------
861,141
-------------
SINGAPORE--0.8%
Rothmans Industries Ltd.
(Tobacco)........................... 150,000 856,112
United Overseas Bank Ltd. (Banks
(Money Center))..................... 105,000 608,842
-------------
1,464,954
-------------
SOUTH AFRICA--0.2%
Liberty Life Association of Africa
(Insurance (Life/ Health)).......... 26,000 444,605
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
SPAIN--3.1%
Argentaria, Caja Postal y Banco
Hipotecario de Espana SA (Banks
(Major Regional))................... 71,400 $ 1,667,389
Banco Popular Espanol SA (Banks
(Major Regional))................... 21,700 1,598,693
Banco Santander SA (Banks (Money
Center))............................ 1,684 34,527
Telefonica SA (Telephone)........... 55,900 2,634,153
-------------
5,934,762
-------------
SWEDEN--5.6%
AssiDoman AB (Paper & Forest
Products)........................... 59,000 1,032,727
Astra AB Class A (Health Care
(Drugs-Major Pharmaceuticals))...... 103,100 1,893,609
ForeningsSparbanken AB (Banks (Major
Regional)).......................... 48,000 1,349,029
Mandamus AB (Real Estate
Development)(b)..................... 2,400 12,721
Skandia Forsakrings AB (Insurance
(Multi-Line))....................... 134,000 1,907,797
Svenska Handlesbanken Class A (Banks
(Major Regional))................... 32,900 1,330,194
Telefonaktiebolaget LM Ericsson
Class B (Telecommunications
(Cellular/Wireless))................ 70,000 1,950,077
Volvo AB Class B (Automobiles)...... 50,000 1,164,869
-------------
10,641,023
-------------
SWITZERLAND--8.1%
Nestle AG (Foods)................... 830 1,729,801
Novartis AG Registered Shares
(Health Care (Drugs-Major
Pharmaceuticals))................... 2,540 4,782,499
Roche Holding AG (Health Care
(Drugs-Major Pharmaceuticals))...... 150 1,767,889
Schweizerische
Lebensversicherungs-und
Rentenanstalt Bearer (Insurance
(Life/Health))...................... 2,060 1,444,897
Schweizerische
Rueckersicherungs-Gesellschaft
Registered (Insurance
(Reinsurance))...................... 430 1,090,227
UBS AG (Banks (Money Center))....... 5,900 1,780,825
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Phoenix International Portfolio
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
SWITZERLAND--CONTINUED
Zurich Allied AG (Insurance
(Multi-Line))....................... 3,670 $ 2,629,548
-------------
15,225,686
-------------
TAIWAN--0.2%
Standard Foods Taiwan Ltd. GDR
(Foods)............................. 27,000 307,125
UNITED KINGDOM--21.7%
3I Group PLC (Investment
Banking/Brokerage).................. 67,000 630,364
Bank of Scotland (Banks (Money
Center))............................ 100,000 1,105,903
Barclays PLC (Banks (Money
Center))............................ 45,000 1,021,309
Bass PLC (Beverages (Alcoholic)).... 45,000 620,956
Berkeley Group PLC (The) (Real
Estate Development)................. 55,000 443,929
BG PLC (Oil & Gas (Exploration &
Production))........................ 112,000 768,124
British Aerospace PLC
(Aerospace/Defense)................. 125,400 1,078,394
British Petroleum Co. PLC (Oil
(International Integrated))......... 145,000 2,261,736
British Telecommunications PLC
(Telecommunications
(Cellular/Wireless))................ 150,000 2,056,236
Cable & Wireless PLC
(Telecommunications
(Cellular/Wireless))................ 130,000 1,652,251
Compass Group PLC (Foods)........... 131,000 1,381,701
FirstGroup PLC
(Transportation-Services)........... 104,000 673,775
GKN PLC (Auto Parts & Equipment).... 64,000 706,721
Glaxo Wellcome PLC (Health Care
(Drugs-Major Pharmaceuticals))...... 84,000 2,657,929
Granada Group PLC (Leisure Time
(Products))......................... 55,000 858,808
HSBC Holdings PLC (Banks (Money
Center))............................ 33,000 893,305
Kingfisher PLC (Retail (Department
Stores))............................ 103,800 990,301
Ladbroke Group PLC (Gaming, Lottery
& Parimutuel Companies)............. 143,000 553,504
Legal & General Group PLC (Insurance
(Life/ Health))..................... 96,000 1,176,548
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
UNITED KINGDOM--CONTINUED
Lloyds TSB Group PLC (Banks (Money
Center))............................ 140,000 $ 1,946,884
Logica PLC (Computers (Software &
Services)).......................... 110,000 798,891
National Westminster Bank PLC (Banks
(Money Center))..................... 65,000 1,186,617
Norwich Union PLC (Insurance
(Life/Health))...................... 106,000 743,596
Rentokil Initial PLC (Services
(Commercial & Consumer))............ 126,000 811,105
Reuters Group PLC (Services
(Commercial & Consumer))............ 76,000 734,484
Rio Tinto PLC (Metals Mining)....... 47,000 550,806
RMC Group PLC (Building
Materials).......................... 55,000 718,094
Safeway PLC (Foods)................. 138,000 681,071
Schroders PLC (Banks (Money
Center))............................ 38,000 780,272
Shell Transport & Trading Co. PLC
(Oil (International Integrated)).... 160,000 965,271
Siebe PLC (Electrical Equipment).... 224,800 808,900
SmithKline Beecham PLC (Health Care
(Drugs-Major Pharmaceuticals))...... 110,000 1,350,852
Southern Electric PLC (Electric
Companies).......................... 85,000 978,600
Tesco PLC (Foods)................... 352,628 1,041,865
Unilever PLC (Consumer Products
(Miscellaneous)).................... 76,000 790,935
United Utilities PLC (Electric
Companies).......................... 50,000 728,740
Vodafone Group PLC
(Telecommunications
(Cellular/Wireless))................ 108,000 1,595,471
Woolwich PLC (Banks (Major
Regional)).......................... 190,000 1,209,767
Zeneca Group PLC (Health Care
(Drugs-Major Pharmaceuticals))...... 23,000 956,688
-------------
40,910,703
-------------
- - ----------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $165,539,529) 182,986,370
- - ----------------------------------------------------------------------------
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Phoenix International Portfolio
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C> <C>
RIGHTS--0.0%
GERMANY--0.0%
Metro AG Rights (Retail (Department
Stores))(b)......................... 13,100 $ 28,125
- - ----------------------------------------------------------------------------
TOTAL RIGHTS
(IDENTIFIED COST $0) 28,125
- - ----------------------------------------------------------------------------
WARRANTS--0.0%
GERMANY--0.0%
Muenchener
Rueckversicherungs-Gesellschaft AG
Warrants (Insurance
(Reinsurance))(b)................... 176 7,412
- - ----------------------------------------------------------------------------
TOTAL WARRANTS
(IDENTIFIED COST $0) 7,412
- - ----------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS--0.9%
GERMANY--0.9%
SAP AG Vorzug Pfd. (Computers
(Software & Services)).............. 3,100 1,618,957
- - ----------------------------------------------------------------------------
TOTAL FOREIGN PREFERRED STOCKS
(IDENTIFIED COST $752,357) 1,618,957
- - ----------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--97.8%
(IDENTIFIED COST $166,291,886) 184,640,864
- - ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.9%
COMMERCIAL PAPER--2.9%
Home Products Inc., 5.25%,
12/01/98........................ A-1+ $ 1,700 $ 1,700,000
Marsh & McLennan Co., Inc.
4.85%, 12/02/98................. A-1+ 2,235 2,234,699
Preferred Receivables Funding
5.05%, 12/02/98................. A-1 1,610 1,609,774
-------------
5,544,473
-------------
- - ----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $5,544,473) 5,544,473
- - ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--100.7%
(IDENTIFIED COST $171,836,359) 190,185,337(a)
Cash and receivables, less liabilities--(0.7%) (1,407,840)
-------------
NET ASSETS--100.0% $ 188,777,497
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $25,612,280 and gross
depreciation of $7,326,527 for federal income tax purposes. At November 30,
1998, the aggregate cost of securities for federal income tax purposes was
$171,899,584.
(b) Non-income producing.
(c) Security valued at fair value as determined in good faith by or under the
direction of the directors.
See Notes to Financial Statements 27
<PAGE>
Phoenix International Portfolio
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Aerospace/Defense........................................................ 0.6%
Aluminum................................................................. 0.9
Auto Parts & Equipment................................................... 0.4
Automobiles.............................................................. 4.4
Banks (Major Regional)................................................... 4.9
Banks (Money Center)..................................................... 8.4
Beverages (Alcoholic).................................................... 0.5
Beverages (Non-Alcoholic)................................................ 0.7
Building Materials....................................................... 1.4
Chemicals................................................................ 3.2
Chemicals (Specialty).................................................... 0.5
Communications Equipment................................................. 3.3
Computers (Software & Services).......................................... 2.8
Consumer Finance......................................................... 1.0
Consumer Products (Miscellaneous)........................................ 0.4
Diversified Miscellaneous................................................ 0.7
Health Care (Drugs-Major Pharmaceuticals)................................ 8.3
Health Care (Medical Products & Supplies)................................ 0.7
Electric Companies....................................................... 1.6
Electrical Equipment..................................................... 0.4
Electronics (Component Distributors)..................................... 1.0
Electronics (Semiconductors)............................................. 1.7
Foods.................................................................... 5.7
Gaming, Lottery & Parimutuel Companies................................... 0.3
Insurance (Life/Health).................................................. 3.1
Insurance (Multi-Line)................................................... 4.4
Insurance (Property-Casualty)............................................ 0.6
Insurance (Reinsurance).................................................. 1.7%
Investment Banking/Brokerage............................................. 1.4
Leisure Time (Products).................................................. 0.5
Machinery (Diversified).................................................. 2.1
Metals Mining............................................................ 0.3
Office Equipment & Supplies.............................................. 0.9
Oil & Gas (Drilling & Equipment)......................................... 0.4
Oil & Gas (Exploration & Production)..................................... 0.4
Oil (International Integrated)........................................... 5.0
Paper & Forest Products.................................................. 0.6
Personal Care............................................................ 1.0
Photography/Imaging...................................................... 0.9
Publishing............................................................... 1.0
Real Estate Development.................................................. 0.5
Retail (Building Supplies)............................................... 0.5
Retail (Department Stores)............................................... 2.4
Retail (General Merchandise)............................................. 1.0
Services (Commercial & Consumer)......................................... 2.0
Specialty Printing....................................................... 0.8
Telecommunications (Long Distance)....................................... 0.6
Telecommunications (Cellular/Wireless)................................... 8.2
Telephone................................................................ 4.5
Textiles (Apparel)....................................................... 0.5
Tobacco.................................................................. 0.5
Transportation--Services................................................. 0.4
-----
100.0%
-----
-----
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Phoenix International Portfolio
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $171,836,359) $ 190,185,337
Cash 1,202,278
Foreign currency at value
(Identified cost $576,607) 584,199
Receivables
Investment securities sold 3,991,994
Fund shares sold 604,657
Dividends and interest 170,380
Tax reclaim 169,985
--------------
Total assets 196,908,830
--------------
LIABILITIES
Payables
Fund shares repurchased 5,583,952
Investment securities purchased 2,143,991
Investment advisory fee 119,430
Distribution fee 50,212
Transfer agent fee 45,394
Financial agent fee 6,602
Trustees' fee 5,514
Accrued expenses 176,238
--------------
Total liabilities 8,131,333
--------------
NET ASSETS $ 188,777,497
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 132,064,884
Undistributed net investment income 805,667
Accumulated net realized gain 37,536,027
Net unrealized appreciation 18,370,919
--------------
NET ASSETS $ 188,777,497
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $171,462,754) 10,731,189
Net asset value per share $15.98
Offering price per share $15.98/(1-4.75%) $16.78
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $17,314,743) 1,121,391
Net asset value and offering price per share $15.44
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 2,953,335
Interest 515,499
Foreign taxes withheld (290,037)
--------------
Total investment income 3,178,797
--------------
EXPENSES
Investment advisory fee 1,350,786
Distribution fee, Class A 414,622
Distribution fee, Class B 142,559
Financial agent fee 127,252
Transfer agent 192,676
Custodian 184,310
Professional 47,799
Printing 40,125
Registration 28,080
Trustees 21,998
Miscellaneous 16,440
--------------
Total expenses 2,566,647
--------------
NET INVESTMENT INCOME 612,150
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 39,063,948
Net realized gain on foreign currency transactions 525,954
Net change in unrealized appreciation (depreciation) on
investments (654,741)
Net change in unrealized appreciation (depreciation) on foreign
currency and foreign currency transactions 20,093
--------------
NET GAIN ON INVESTMENTS 38,955,254
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 39,567,404
--------------
--------------
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Phoenix International Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 612,150 $ 234,826
Net realized gain 39,589,902 11,443,109
Net change in unrealized appreciation
(depreciation) (634,648) (622,326)
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 39,567,404 11,055,609
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A -- (2,608,239)
Net investment income, Class B -- (129,259)
Net realized gains, Class A (12,005,464) (12,021,547)
Net realized gains, Class B (942,871) (658,133)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (12,948,335) (15,417,178)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (14,403,040 and
4,286,206 shares, respectively) 222,721,708 59,385,258
Net asset value of shares issued from
reinvestment of distributions
(829,298 and 1,013,490 shares, respectively) 10,631,599 12,960,134
Cost of shares repurchased (13,954,794 and
5,208,361 shares, respectively) (218,052,596) (72,329,439)
-------------- --------------
Total 15,300,711 15,953
-------------- --------------
CLASS B
Proceeds from sales of shares (1,090,651 and
728,032 shares, respectively) 16,507,911 9,939,001
Net asset value of shares issued from
reinvestment of distributions
(68,327 and 56,632 shares, respectively) 852,722 713,037
Cost of shares repurchased (786,659 and 524,764
shares, respectively) (12,000,603) (7,287,447)
-------------- --------------
Total 5,360,030 3,364,591
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 20,660,741 3,380,544
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 47,279,810 (981,025)
NET ASSETS
Beginning of period 141,497,687 142,478,712
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME AND DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME OF $805,667 AND
($332,438), RESPECTIVELY) $ 188,777,497 $ 141,497,687
-------------- --------------
-------------- --------------
</TABLE>
30 See Notes to Financial Statements
<PAGE>
Phoenix International Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
YEAR ENDED NOVEMBER 30
----------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.89 $ 14.48 $ 12.20 $ 12.63 $ 11.16
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) 0.06(1) 0.03(1) 0.04(1) 0.03(1) (0.01)
Net realized and unrealized gain 3.27 1.01 2.28 0.42 1.48
---------- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 3.33 1.04 2.32 0.45 1.47
---------- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment income -- (0.29) -- -- --
Dividends from net realized gains (1.24) (1.34) (0.04) (0.88) --
---------- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.24) (1.63) (0.04) (0.88) --
---------- ----- ----- ----- -----
Change in net asset value 2.09 (0.59) 2.28 (0.43) 1.47
---------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 15.98 $ 13.89 $ 14.48 $ 12.20 $ 12.63
---------- ----- ----- ----- -----
---------- ----- ----- ----- -----
Total return(2) 26.17% 8.21% 19.03% 4.12% 13.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $171,463 $131,338 $135,524 $129,352 $167,918
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.37% 1.56% 1.57% 1.70% 1.47%
Net investment income 0.40% 0.22% 0.33% 0.23% 0.20%
Portfolio turnover 104% 167% 151% 236% 186%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
------------------------------------------------------- 7/15/94 TO
1998 1997 1996 1995 11/30/94
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.56 $ 14.22 $ 12.07 $ 12.60 $ 12.80
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.05)(1) (0.08)(1) (0.05)(1) (0.07)(1) (0.01)
Net realized and unrealized gain
(loss) 3.17 1.00 2.24 0.42 (0.19)
---------- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 3.12 0.92 2.19 0.35 (0.20)
---------- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment income -- (0.24) -- -- --
Dividends from net realized gains (1.24) (1.34) (0.04) (0.88) --
---------- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.24) (1.58) (0.04) (0.88) --
---------- ----- ----- ----- -----
Change in net asset value 1.88 (0.66) 2.15 (0.53) (0.20)
---------- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 15.44 $ 13.56 $ 14.22 $ 12.07 $ 12.60
---------- ----- ----- ----- -----
---------- ----- ----- ----- -----
Total return(2) 25.17% 7.37% 18.16% 3.28% (1.56)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $17,315 $10,159 $6,955 $3,261 $1,991
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.11% 2.31% 2.31% 2.50% 1.93%(3)
Net investment income (0.34)% (0.55)% (0.39)% (0.61)% 0.36%(3)
Portfolio turnover 104% 167% 151% 236% 186%
</TABLE>
(1) Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
See Notes to Financial Statements 31
<PAGE>
PHOENIX REAL ESTATE SECURITIES PORTFOLIO
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, MICHAEL SCHATT
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: Phoenix Real Estate Securities Portfolio is appropriate for investors seeking
investment in a diversified portfolio of real estate investment trusts and real
estate operating companies. The Fund's objective is to emphasize appreciation
and current yield equally. Investors should note that real estate investing
involves certain risks, including refinancing, economic impact on the industry,
changes in the value of properties owned, dependency on management skills and
liquidity risks similar to those associated with small company investing.
Q: HOW DID THE FUND PERFORM FOR THE PAST FISCAL YEAR?
A: For the 12 months ended November 30, 1998, the Real Estate Securities
Portfolio provided a return of (17.42)% for Class A shares and (18.01)% for
Class B shares. The return for the NAREIT Equity Total Return Index(1) for the
fiscal year was (13.37)%. All performance figures assume reinvestment of
distributions and exclude the effect of sales charges.
Q: HOW WAS THE GENERAL MARKET ENVIRONMENT FOR REITS?
A: The year has clearly been disappointing from a stock price performance
perspective. However, growth expectations in funds from operations (FFO)--the
proxy for earnings--which one year ago we indicated should be 9% to 12% per
share, have been met to date. Despite the negative press and broad-brush strokes
of criticism, the bottom line earnings were delivered overall. In fact, FFO per
share has grown by over 12% in the last two quarters. This compares to flat to
negative earnings growth for the broader market for the last two quarters.
Earnings growth for equity REITs has peaked in this year as we have moved
closer to equilibrium in the real estate cycle. This is not a surprise, but the
level of erosion of investor confidence in the sector has been. Some of the
concerns that surfaced in 1998 were valid, but others were exaggerated and were
frequently used to critique all equity REITs (over 170 NYSE-listed companies in
14 sectors). The concerns included the threats of overbuilding, legislative
action and a softening economy. They also included legitimate questions about a
lack of demonstrated discipline by some equity REITs in issuing additional
common shares and debt.
More than a few management teams did not recognize when their cost of
capital was greater than the return available in the market for acquisitions,
development or redevelopment. The capital markets ultimately disciplined them
and private developers appropriately. However, discipline was meted out
throughout the sector with very little distinction between offending REITs and
REITs with demonstrated fiscal responsibility.
Q: WHAT FACTORS AFFECTED PERFORMANCE?
A: Larger, more liquid equity REITs underperformed their peers overall this past
year, as investors were net sellers. Last years "growth" REITs, with significant
imbedded internal growth, were nevertheless abandoned by investors who no
(1) THE NAREIT (NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUSTS) EQUITY
TOTAL RETURN INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF REAL ESTATE
EQUITY MARKET TOTAL RETURN PERFORMANCE. THE INDEX IS NOT AVAILABLE FOR
DIRECT INVESTMENT.
32
<PAGE>
PHOENIX REAL ESTATE SECURITIES PORTFOLIO (CONTINUED)
longer saw growth and momentum in those names. As we favor visible earnings,
particularly from internal growth, we were overweight in those companies. We
were also overweight in the two sectors that experienced the most multiple
contraction, office and hotels. The office and hotel sectors had the highest
earnings growth per share this year and traded at the deepest discount to net
asset value, but they were also subject to the largest swings on changes of
sentiment or fundamentals. These reasons caused us to underperform our benchmark
for the year.
Q: WHAT IS YOUR OUTLOOK FOR THE REIT MARKET?
A: Equity REITs experienced a multiple contraction of 21% versus the broader
market's multiple expansion of 20%. Equity REITs have also seen a decline in
earnings growth expectations from 9%-12% one year ago to 7%-9% today. Keep in
mind that the expectations of earnings growth for equity REITs were delivered
this year, whereas the broader market is expected to miss the original forecast
of 6.9% and deliver something under 2%.
Conservative growth estimates of funds from operations per share range from
5% to 7% in 1999 assuming no external growth and 7%-9% assuming modest external
growth in 1999. Equity REIT earnings fundamentals should, in our opinion,
continue to beat the broader market. In addition the dividend payout ratio as a
percentage of cash flow is at its lowest in the history of equity REITs, thus
allowing companies to retain cash flow in capital constrained times.
Based on this, we believe the broader market is expensive relative to REITs.
Last year we could not make the claim that real estate was cheaper on Wall
Street, than Main Street. This year we can. Whether one is looking at office or
industrial property values per square foot, apartment values per unit, hotel
values per key, health-care property values per bed, discounts to net asset
value, or FFO yield versus cap rates, equity REITs are cheaper today than
private market real estate.
Given the earnings expectation for the broader stock market combined with
its record high multiple and a return to a rational level of investor sentiment,
we believe equity REITs offer an attractive alternative to the broader market
with continued attractive yields.
DECEMBER 16, 1998
33
<PAGE>
Phoenix Real Estate Securities Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 11/30/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 11/30/98 DATE
<S> <C> <C> <C>
Class A Shares at NAV(2) (17.42)% 12.21% 03/01/95
Class A Shares at POP(3) (21.36) 10.76% 03/01/95
Class B Shares at NAV(2) (18.01) 11.37% 03/01/95
Class B Shares with CDSC(4) (20.88) 10.99% 03/01/95
NAREIT Index(6) (13.37) 13.02% 03/01/95
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at the
time of purchase. CDSC charges for B shares decline from 5% to 0% over a
five year period.
(5) This chart illustrates POP returns on Class A Shares and Class B Shares
since inception of the fund on 3/1/95.
(6) The National Association of Real Estate Investment Trusts (NAREIT) Equity
Total Return Index is a commonly used, unmanaged indicator of REIT
performance. The index does not reflect sales charges.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 11/30
Phoenix Real Phoenix Real
Estate Class A(5) Estate Class B(5) NAREIT Index(6)
3/1/95 $9,523.81 $10,000.00 $10,000.00
11/30/95 $10,463.41 $10,921.40 $10,903.00
11/30/96 $13,518.67 $14,006.49 $14,087.45
11/30/97 $17,769.30 $18,270.25 $18,275.16
11/30/98 $14,673.78 $14,783.89 $15,831.31
This growth of $10,000 chart assumes an initial investment of $10,000 made
on 3/1/95 in Class A shares and reflects the maximum sales charge of 4.75%
on the initial investment. Class B shares reflect the 5% contingent
deferred sales charge (CDSC), which is applicable on all shares redeemed
during the first year after purchase and 4% for all shares redeemed
during the second year after purchase (scaled down to 3% - third year,
2% - 4th and 5th YEARS, and 0% thereafter). Performance assumes dividends
and capital gains are reinvested. The performance of other share classes will
be greater or less than that shown based on differences in inception dates,
fees and sales charges.
SECTOR WEIGHTINGS 11/30/98
As a percentage of net assets
Office/Industrial 44%
Diversified 17%
Apartments 14%
Regional Malls 6%
Manufactured Homes 5%
Other 14%
34
<PAGE>
Phoenix Real Estate Securities Portfolio
TEN LARGEST HOLDINGS AT NOVEMBER 30, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Vornado Realty Trust 7.1%
DIVERSIFIED REIT
2. Boston Properties, Inc. 6.6%
OFFICE/INDUSTRIAL REIT
3. Spieker Properties, Inc. 6.5%
OFFICE/INDUSTRIAL REIT
4. Crescent Real Estate Equities Co. 5.4%
DIVERSIFIED REIT
5. Equity Residential Properties Trust 5.3%
APARTMENT REIT
6. Duke Realty Investments, Inc. 4.8%
OFFICE/INDUSTRIAL REIT
7. Mack-Cali Realty Corp. 3.9%
OFFICE/INDUSTRIAL REIT
8. TriNet Corporate Realty Trust, Inc. 3.7%
OFFICE/INDUSTRIAL REIT
9. Highwoods Properties, Inc. 3.6%
OFFICE/INDUSTRIAL REIT
10. Colonial Properties Trust 3.4%
DIVERSIFIED REIT
</TABLE>
INVESTMENTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
COMMON STOCKS--98.7%
REAL ESTATE INVESTMENT TRUSTS--98.4%
COMMERCIAL--45.8%
OFFICE/INDUSTRIAL--43.4%
Alexandria Real Estate Equities, Inc.... 30,000 $ 926,250
Boston Properties, Inc.................. 92,200 2,910,062
Duke Realty Investments, Inc............ 93,400 2,119,012
Equity Office Properties Trust.......... 40,360 1,014,045
First Industrial Realty Trust, Inc...... 59,000 1,427,062
Highwoods Properties, Inc............... 58,000 1,576,875
Mack-Cali Realty Corp................... 57,900 1,718,906
Reckson Associates Realty Corp.......... 60,700 1,399,894
Spieker Properties, Inc................. 79,400 2,868,325
TriNet Corporate Realty Trust, Inc...... 60,000 1,608,750
Weeks Corp.............................. 37,300 1,067,712
------------
18,636,893
------------
STORAGE--2.4%
Storage USA, Inc........................ 31,700 1,006,475
- - -------------------------------------------------------------------------------
TOTAL COMMERCIAL 19,643,368
- - -------------------------------------------------------------------------------
DIVERSIFIED--16.3%
Colonial Properties Trust............... 55,000 1,488,438
Crescent Real Estate Equities Co........ 96,400 2,391,925
Vornado Realty Trust.................... 81,500 3,097,000
------------
6,977,363
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
HEALTH CARE--3.9%
Nationwide Health Properties, Inc....... 56,400 $ 1,261,950
OMEGA Healthcare Investors, Inc......... 14,000 425,250
------------
1,687,200
------------
HOTELS--2.9%
Patriot American Hospitality, Inc....... 55,301 407,845
Starwood Hotels & Resorts............... 27,600 838,350
------------
1,246,195
------------
RESIDENTIAL--18.4%
APARTMENTS--13.9%
Avalonbay Communities, Inc.............. 40,700 1,378,713
Equity Residential Properties Trust..... 54,800 2,318,725
Essex Property Trust, Inc............... 38,400 1,188,000
Irvine Apartment Communities, Inc....... 40,500 1,085,906
------------
5,971,344
------------
MANUFACTURED HOMES--4.5%
Manufactured Home Communities, Inc...... 41,500 1,016,750
Sun Communities, Inc.................... 28,200 918,263
------------
1,935,013
------------
- - -------------------------------------------------------------------------------
TOTAL RESIDENTIAL 7,906,357
- - -------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Phoenix Real Estate Securities Portfolio
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
RETAIL--11.1%
FACTORY OUTLET--2.5%
Chelsea GCA Realty, Inc................. 31,600 $ 1,068,475
REGIONAL MALLS--6.4%
Macerich Co. (The)...................... 43,800 1,166,175
Simon Property Group, Inc............... 22,208 657,912
Urban Shopping Centers, Inc............. 28,000 920,500
------------
2,744,587
------------
STRIP CENTERS--2.2%
Developers Diversified Realty Corp...... 49,200 950,175
- - -------------------------------------------------------------------------------
TOTAL RETAIL 4,763,237
- - -------------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $43,212,338) 42,223,720
- - -------------------------------------------------------------------------------
REAL ESTATE OPERATING COMPANIES--0.3%
COMMERCIAL--0.2%
OFFICE/INDUSTRIAL--0.2%
Reckson Services Industries, Inc........ 29,136 85,587
DIVERSIFIED--0.1%
Vornado Operating Inc.(b)............... 4,075 25,978
HEALTH CARE--0.0%
OMEGA Worldwide, Inc.(b)................ 4,641 21,176
- - -------------------------------------------------------------------------------
TOTAL REAL ESTATE OPERATING COMPANIES
(IDENTIFIED COST $122,775) 132,741
- - -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $43,335,113) 42,356,461
- - -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------ -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.9%
COMMERCIAL PAPER--1.9%
Exxon Imperial, Inc. 5.32%, 12/1/98..... A-1+ $820 $ 820,000
- - -------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $820,000) 820,000
- - -------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.6%
(IDENTIFIED COST $44,155,113) 43,176,461(a)
Cash and receivables, less liabilities--(0.6)% (252,796)
-------------
NET ASSETS--100.0% $ 42,923,665
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net depreciation of investment securities
is comprised of gross appreciation of $4,041,966 and gross depreciation of
$5,021,622 for federal income tax purposes. At November 30, 1998, the
aggregate cost of securities for federal income tax purpose was
$44,156,117.
(b) Non-income producing.
36 See Notes to Financial Statements
<PAGE>
Phoenix Real Estate Securities Portfolio
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $44,155,113) $ 43,176,461
Cash 4,134
Receivables
Dividends and interest 59,631
Fund shares sold 15,882
--------------
Total assets 43,256,108
--------------
LIABILITIES
Payables
Fund shares repurchased 209,329
Distribution fee 20,136
Investment advisory fee 15,045
Transfer agent fee 5,624
Financial agent fee 5,533
Trustees' fee 5,515
Accrued expenses 71,261
--------------
Total liabilities 332,443
--------------
NET ASSETS $ 42,923,665
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 43,409,899
Undistributed net investment income 563,936
Accumulated net realized loss (71,518)
Net unrealized depreciation (978,652)
--------------
NET ASSETS $ 42,923,665
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $24,686,262) 2,015,284
Net asset value per share $12.25
Offering price per share $12.25/(1-4.75%) $12.86
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $18,237,403) 1,496,083
Net asset value and offering price per share $12.19
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 2,674,086
Interest 40,807
--------------
Total investment income 2,714,893
--------------
EXPENSES
Investment advisory fee 398,336
Distribution fee, Class A 77,859
Distribution fee, Class B 219,679
Financial agent fee 74,616
Transfer agent 86,663
Professional 33,199
Registration 24,441
Printing 21,794
Trustees 20,071
Custodian 9,930
Miscellaneous 5,549
--------------
Total expenses 972,137
Less expenses borne by investment adviser (111,386)
--------------
Net expenses 860,751
--------------
NET INVESTMENT INCOME 1,854,142
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (70,514)
Net change in unrealized appreciation (depreciation) on
investments (12,098,214)
--------------
NET LOSS ON INVESTMENTS (12,168,728)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (10,314,586)
--------------
--------------
</TABLE>
See Notes to Financial Statements 37
<PAGE>
Phoenix Real Estate Securities Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 1,854,142 $ 1,449,798
Net realized gain (loss) (70,514) 3,771,039
Net change in unrealized appreciation
(depreciation) (12,098,214) 6,590,856
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (10,314,586) 11,811,693
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (967,687) (1,017,253)
Net investment income, Class B (535,003) (412,660)
Net realized gains, Class A (2,254,756) (436,592)
Net realized gains, Class B (1,514,857) (164,397)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (5,272,303) (2,030,902)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (445,657 and
1,072,429 shares, respectively) 6,419,885 15,754,217
Net asset value of shares issued from
reinvestment of distributions
(207,094 and 96,059 shares, respectively) 3,035,928 1,368,531
Cost of shares repurchased (855,051 and 692,074
shares, respectively) (11,951,570) (10,024,000)
-------------- --------------
Total (2,495,757) 7,098,748
-------------- --------------
CLASS B
Proceeds from sales of shares (362,036 and
851,567 shares, respectively) 5,231,142 12,428,285
Net asset value of shares issued from
reinvestment of distributions
(120,031 and 32,975 shares, respectively) 1,757,836 472,566
Cost of shares repurchased (400,698 and 100,202
shares, respectively) (5,408,854) (1,484,452)
-------------- --------------
Total 1,580,124 11,416,399
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS (915,633) 18,515,147
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (16,502,522) 28,295,938
NET ASSETS
Beginning of period 59,426,187 31,130,249
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME OF $563,936 AND $212,484,
RESPECTIVELY) $ 42,923,665 $ 59,426,187
-------------- --------------
-------------- --------------
</TABLE>
38 See Notes to Financial Statements
<PAGE>
Phoenix Real Estate Securities Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
-------------------------------------------- 3/1/95 TO
1998 1997 1996 11/30/95
----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.39 $ 13.14 $ 10.72 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.55(4)(5) 0.49(4)(5) 0.53(5) 0.43(4)(5)
Net realized and unrealized gain
(loss) (3.18) 3.52 2.50 0.55
---------- ----- ----- ----------
TOTAL FROM INVESTMENT
OPERATIONS (2.63) 4.01 3.03 0.98
---------- ----- ----- ----------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.44) (0.51) (0.59) (0.26)
Dividends from net realized gains (1.07) (0.25) (0.02) --
---------- ----- ----- ----------
TOTAL DISTRIBUTIONS (1.51) (0.76) (0.61) (0.26)
---------- ----- ----- ----------
Change in net asset value (4.14) 3.25 2.42 0.72
---------- ----- ----- ----------
NET ASSET VALUE, END OF PERIOD $ 12.25 $ 16.39 $ 13.14 $ 10.72
---------- ----- ----- ----------
---------- ----- ----- ----------
Total return(1) (17.42)% 31.44% 29.20% 9.87%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $24,686 $36,336 $22,872 $13,842
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.31% 1.30% 1.30% 1.30%(2)
Net investment income 3.79% 3.34% 4.55% 5.79%(2)
Portfolio turnover 11% 54% 24% 9%(3)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
-------------------------------------------- 3/1/95 TO
1998 1997 1996 11/30/95
----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.32 $ 13.10 $ 10.68 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.43(4)(6) 0.38(4)(6) 0.46(6) 0.36(4)(6)
Net realized and unrealized gain
(loss) (3.15) 3.50 2.47 0.56
---------- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (2.72) 3.88 2.93 0.92
---------- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.34) (0.41) (0.49) (0.24)
Dividends from net realized gains (1.07) (0.25) (0.02) --
---------- ----- ----- -----
TOTAL DISTRIBUTIONS (1.41) (0.66) (0.51) (0.24)
---------- ----- ----- -----
Change in net asset value (4.13) 3.22 2.42 0.68
---------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 12.19 $ 16.32 $ 13.10 $ 10.68
---------- ----- ----- -----
---------- ----- ----- -----
Total return(1) (18.01)% 30.44% 28.25% 9.21%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $18,237 $23,091 $8,259 $2.239
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.06% 2.05% 2.05% 2.05%(2)
Net investment income 3.07% 2.55% 3.95% 5.03%(2)
Portfolio turnover 11% 54% 24% 9%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of
$0.02, $0.04, $0.07 and $0.12, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of
$0.02, $0.04, $0.07 and $0.12, respectively.
See Notes to Financial Statements
39
<PAGE>
PHOENIX EMERGING MARKETS BOND PORTFOLIO
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, PETER S. LANNIGAN, CFA
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: Phoenix Emerging Markets Bond Portfolio seeks as its primary investment
objective high current income. The secondary objective is long-term capital
appreciation. The Fund invests in high-yield, high-risk debt securities issued
by governments and corporations in emerging markets. Debt securities issued by
foreign issuers entail greater risks of default, untimely interest and principal
payments, and price volatility than higher-rated securities and may present
problems of liquidation and valuation.
Q: HOW DID THE FUND PERFORM OVER THE LAST YEAR?
A: For the 12 months ended November 30, 1998, Class A shares returned (27.20)%
and Class B shares returned (27.86)% compared with a return of (9.13)% for the
J.P. Morgan Emerging Market Bond Index Plus(1). Since their inception on March
26, 1998, Class C shares returned (35.33)%, while the J.P. Morgan Emerging
Market Bond Index Plus was down (16.51)% since March 31, 1998.
Q: WHAT WERE SOME OF THE FACTORS THAT AFFECTED PERFORMANCE?
A: During this reporting period, emerging markets worldwide experienced declines
touched off by troubles in Southeast Asia that began last year. As has been
widely reported by the press, the continuing global financial crisis has forced
many foreign governments to devalue their currencies, and the devaluation of
Russia's currency had a negative impact on the Fund. Russia had very strong
results in the beginning of the year, but second-half results have been very
laggard. Although short-term performance has been disappointing, we believe the
long-term outlook will be positive once the global situation stabilizes.
Q: WHAT IS YOUR OUTLOOK FOR EMERGING MARKETS?
A: Despite recent weakness, our long-term outlook is constructive. It is
important at times like this to keep a long-term perspective as, we believe,
extreme market moves generally tend to reverse themselves over time. We have
seen a number of market events like this over the last decade; for example, the
"junk" bond panic of 1990-91 and the Mexican peso devaluation in 1994-95.
Although both of these events triggered dips in the market, long-term investors
were rewarded for their patience and conviction. Of course, past performance is
no guarantee of future performance, and there can be no assurance that there
will be a similar turnaround in emerging markets.
DECEMBER 22, 1998
(1) THE J.P. MORGAN EMERGING MARKET BOND INDEX PLUS (JP MORGAN EMBI+) IS AN
UNMANAGED, COMMONLY USED MEASURE OF EMERGING MARKET DEBT TOTAL RETURN
PERFORMANCE. THE INDEX TRACKS TOTAL RETURN FOR TRADED EXTERNAL DEBT
INSTRUMENTS IN EMERGING MARKETS. THE INDEX IS NOT AVAILABLE FOR DIRECT
INVESTMENT.
40
<PAGE>
Phoenix Emerging Markets Bond Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 11/30/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 11/30/98 DATE
<S> <C> <C> <C>
Class A Shares at NAV(2) (27.20)% 10.02% 09/05/95
Class A Shares at POP(3) (30.66) 8.38 09/05/95
Class B Shares at NAV(2) (27.86) 9.14 09/05/95
Class B Shares with CDSC(4) (30.01) 8.79 09/05/95
Class C Shares at NAV(2) -- (35.33) 03/26/98
Class C Shares with CDSC(4) -- (35.91) 03/26/98
JP Morgan EMBI+(7) (9.13) -- Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at
the time of purchase. CDSC charges for B shares decline from 5% to 0%
over a five year period. CDSC charges for Class C shares are 1% in the
first year and 0% thereafter.
(5) Index performance is 14.73% for Class A (since 9/5/95), 14.73% for
Class B (since 9/5/95) and (16.51%) for Class C (since 3/31/98),
respectively.
(6) This chart illustrates POP returns on Class A Shares and Class B Shares
for ten years or inception date if inception date is earlier. Returns on
Class B and C Shares will vary due to differing sales charges.
(7) The J.P. Morgan Emerging Market Bond Index Plus is an unmanaged, commonly
used measure of emerging-market debt total return performance. The Index
tracks total return for traded external debt instruments in emerging
markets. The index is not available for direct investment.
All returns represent past performance which may not be indicative of
future performance. The investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 11/30
Phoenix Emerging Phoenix Emerging
Markets Markets J.P. Morgan
Bond Class A(6) Bond Class B(6) EMBI+(7)
09/05/95 $9,523.81 $10,000.00 $10,000.00
11/30/95 $9,942.76 $10,422.48 $10,536.89
11/29/96 $15,926.31 $16,565.12 $15,531.11
11/28/97 $17,823.52 $18,399.67 $17,172.25
11/30/98 $12,975.32 $13,132.73 $15,604.64
This growth of $10,000 chart assumes an initial investment of $10,000 made on
9/5/95 in Class A and Class B shares and reflects the maximum sales charge of
4.75% on the initial investment for Class A. Performance assumes dividends
and capital gains are reinvested. The performance of other share classes will
be greater or less than that shown based on differences in inception dates,
fees and sales charges.
COUNTRY WEIGHTINGS 11/30/98
As a percentage of net assets
Brazil 25%
Argentina 23%
Mexico 22%
Russia 5%
Ecuador 3%
Indonesia 3%
Venezuela 3%
Other 16%
41
<PAGE>
Phoenix Emerging Markets Bond Portfolio
TEN LARGEST HOLDINGS AT NOVEMBER 30, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. Republic of Argentina Bocon Pro1 M1 7.1%
FOREIGN GOVERNMENT SECURITY
2. Republic of Brazil NMB-L Bearer 6.7%
FOREIGN GOVERNMENT SECURITY
3. Brazil MYDFA Trust Certificate RegS 6.4%
FOREIGN GOVERNMENT SECURITY
4. Republic of Argentina RegS, 2/12/07 5.5%
FOREIGN GOVERNMENT SECURITY
5. Republic of Argentina RegS, 7/10/02 5.2%
FOREIGN GOVERNMENT SECURITY
6. APP Finance VII Mauritius, Ltd. 3.0%
FOREIGN CORPORATE BOND
7. Republic of Argentina Bocon Pre1 M1 2.8%
FOREIGN GOVERNMENT SECURITY
8. United Mexican States Global Bond, 5/15/26 2.7%
FOREIGN GOVERNMENT SECURITY
9. United Mexican States Global Bond, 9/15/16 2.7%
FOREIGN GOVERNMENT SECURITY
10. Algeria Tranch 1 Unaffected Loans 2.5%
FOREIGN GOVERNMENT SECURITY
</TABLE>
INVESTMENTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
FOREIGN GOVERNMENT SECURITIES--68.2%
ALGERIA--2.5%
Algeria Tranch 1 Unaffected Loans
7.188%, 3/4/00(b)....................... NR $ 2,300 $ 2,029,750
ARGENTINA--20.6%
Republic of Argentina Bocon Pre1 M1, PIK
interest capitalization, 2.909%,
4/1/01(b)............................... Ba 2,513(e) 2,226,587
Republic of Argentina Bocon Pro1 M1, PIK
interest capitalization, 2.909%,
4/1/07(b)............................... Ba 8,671(e) 5,669,526
Republic of Argentina RegS 8.75%,
7/10/02................................. Ba 5,010(e) 4,202,894
Republic of Argentina RegS 11.75%,
2/12/07................................. Ba 5,000(e) 4,394,541
-------------
16,493,548
-------------
BRAZIL--16.8%
Brazil MYDFA Trust Certificate RegS
6.25%, 9/15/07(b)....................... NR 7,790 5,180,556
Republic of Brazil C Bond, PIK interest
capitalization, 8%, 4/15/14(b).......... B 88 58,292
Republic of Brazil FLIRB Registered 5%,
4/15/09(b).............................. B 2,000 1,130,000
Republic of Brazil NMB-L Bearer 6.188%,
4/15/09(b).............................. B 8,250 5,419,219
Republic of Brazil NMB-L Registered
Series RG 6.188%, 4/15/09(b)............ B 2,500 1,642,187
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
BRAZIL--CONTINUED
Republic of Brazil Series EI-L 6.125%,
4/15/06(b).............................. B $ 96 $ 71,280
-------------
13,501,534
-------------
BULGARIA--2.2%
Republic of Bulgaria FLIRB RegA 2.50%,
7/28/12(b).............................. B 1,250 768,750
Republic of Bulgaria FLIRB Series A
Bearer Euro 2.50%, 7/28/12(b)........... B 1,615 993,225
-------------
1,761,975
-------------
ECUADOR--3.2%
Ecuador Bearer PDI Euro, PIK interest
capitalization, 6.625%, 2/17/15(b)...... B 3,123 1,546,061
Ecuador Global Bearer Series IE 6.563%,
12/21/04(b)............................. B 825 585,750
Ecuador Registered PDI Euro, PIK
interest capitalization, 6.625%,
2/27/15(b).............................. B 905 448,135
-------------
2,579,946
-------------
IVORY COAST--0.1%
Ivory Coast FLIRB Series FRF 2%,
3/29/18(b)(k)........................... NR 950(f) 49,416
Ivory Coast PDI Series FRF 1.90%,
12/29/49(b)(k).......................... NR 630(f) 33,882
-------------
83,298
-------------
</TABLE>
42 See Notes to Financial Statements
<PAGE>
Phoenix Emerging Markets Bond Portfolio
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
KOREA--2.5%
Korean Won Denominated Bond 0%,
4/26/99................................. NR $ 2,600(i) $ 2,004,671
MEXICO--6.8%
United Mexican States 6.63%,
12/31/19(j)............................. Ba 8,250(f) 1,152,862
United Mexican States Global Bond
11.375%, 9/15/16........................ Ba 2,000 2,135,000
United Mexican States Global Bond
11.50%, 5/15/26......................... Ba 2,050 2,198,625
-------------
5,486,487
-------------
MOROCCO--1.0%
Morocco Restructure & Consolidation
Agreement Series A 6.063%, 1/1/09(b).... NR 1,000 815,000
NIGERIA--1.6%
Nigeria Promissory Notes 5.092%,
1/5/10.................................. NR 1,841 1,241,927
PANAMA--0.8%
Republic of Panama 8.875%, 9/30/27...... Ba 700 663,250
PERU--0.7%
Peru FLIRB 3.25%, 3/7/17(b)............. BB(d) 1,000 567,500
POLAND--1.5%
Poland Treasury Bill 0%, 1/13/99........ NR 4,310(g) 1,217,093
RUSSIA--5.1%
Russia Federal Loan Bond Series 25022
15%, 2/23/00............................ NR 25,556(h) 592,843
Russia IAN Series U.S. 6.625%,
12/15/15................................ Ca 197 25,164
Russia Principal Loans, PIK interest
capitalization, 6.625%,
12/15/20(b)(l).......................... NR 250 17,188
Russia Treasury Bill OFZ 14%, 9/12/01... NR 52,885(h) 438,558
Russian Federated Government Bond 144A
11%, 7/24/18(c)......................... B 5,418 1,381,590
Russian Federated Government Bond RegS
11%, 7/24/18............................ B 6,500 1,657,500
-------------
4,112,843
-------------
VENEZUELA--2.8%
Republic of Venezuela DCB Series DL
6.625%, 12/18/07(b)..................... B 1,131 647,469
Republic of Venezuela FLIRB Series A
6.125%, 3/31/07(b)...................... B 1,619 890,472
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
VENEZUELA--CONTINUED
Republic of Venezuela FLIRB Series B
6.125%, 3/31/07(b)...................... B $ 1,214 $ 667,854
-------------
2,205,795
-------------
- - --------------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $56,794,106) 54,764,617
- - --------------------------------------------------------------------------------------
FOREIGN CORPORATE BONDS--29.0%
ARGENTINA--2.0%
Acindar Industria Argentina de Aceros SA
11.25%, 2/15/04 (Iron & Steel).......... B 1,000 855,000
Imasac 11%, 5/2/05 (Broadcasting
(Television, Radio & Cable))............ B 1,000 745,000
-------------
1,600,000
-------------
BRAZIL--8.6%
Globo Communicacoes Co. 144A 10.625%,
12/5/08 (Telecommunications (Long
Distance))(c)........................... B 1,100 825,000
Localiza Rent a Car 10.25%, 10/1/05
(Services (Commercial & Consumer))...... B 1,500 930,000
MRS. Logistica SA RegS Series A 9%,
8/15/05 (Transportation (Railroads)).... B(d) 2,000 1,515,400
MRS. Logistica SA RegS Series B 10.625%,
8/15/05 (Transportation (Railroads)).... B(d) 1,500 818,400
Petroleo Ipirang 10.625%, 2/25/02 (Oil &
Gas)(b)................................. NR 1,000 905,000
Tevecap SA Senior Notes 12.625%,
11/26/04 (Broadcasting (Television,
Radio & Cable))......................... B 1,600 1,080,000
TV Bandeirantes 144A 12.875%, 5/15/06
(Publishing (Newspapers))(c)............ B 1,500 825,000
-------------
6,898,800
-------------
INDONESIA--3.0%
APP Finance II Mauritius, Ltd. 0%,
12/29/49(b)............................. Caa 3,890 2,372,900
JAMAICA--1.4%
Mechala Group Jamaica Series B 12.75%,
12/30/99 (Engineering & Construction)... NR 1,500 1,132,500
</TABLE>
See Notes to Financial Statements 43
<PAGE>
Phoenix Emerging Markets Bond Portfolio
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
MEXICO--13.1%
Azteca Holdings SA 11%, 6/15/02
(Broadcasting (Television, Radio &
Cable))................................. B $ 1,000 $ 890,000
Bufete Industrial RegS Series B-22
11.375%, 7/15/99 (Engineering &
Construction)........................... B 500 407,500
Corporacion Geo SA de C.V. RegS Series 1
10%, 5/23/02
(Homebuilding).......................... NR 610 527,650
Dine SA de C.V. RegS 8.75%, 10/15/07
(Diversified)........................... Ba 745 666,775
Grupo Elektra SA de C.V. 12.75%, 5/15/01
(Banks (Major Regional))................ B(d) 1,000 955,000
Grupo Industrial Durango 12%, 7/15/01
(Paper & Forest Products)............... B 800 756,000
Grupo Industrial Durango 12.625%, 8/1/03
(Paper & Forest Products)............... B 2,000 1,850,000
Innova S de R.L. Sr. Notes 12.875%,
4/1/07 (Broadcasting (Television, Radio
& Cable))............................... B 1,000 795,000
Sanluis Corp SA de C.V. 8.875%, 3/18/08
(Auto Parts & Equipment)................ NR 1,000 825,000
Transporte Maritma Yankee Senior Notes
10%, 11/15/06 (Services (Commercial &
Consumer)).............................. Ba 1,000 860,000
Vicap SA 11.375%, 5/15/07 (Banks (Money
Center))................................ Ba 2,100 1,953,000
-------------
10,485,925
-------------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
NETHERLANDS--0.9%
TJIWI Kim-Global 13.25%, 8/1/01 (Paper &
Forest Products)........................ Caa $ 1,000 $ 735,000
RUSSIA--0.0%
Unexim International Finance RegS
9.875%, 8/1/00 (Banks (Money Center))... Ca 200 15,000
- - --------------------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $23,651,955) 23,240,125
- - --------------------------------------------------------------------------------------
FOREIGN CONVERTIBLE BONDS--0.3%
CANADA--0.3%
PLD Telekom Cv. 144A 9%, 6/1/06
(Telephone)(c).......................... NR 600 225,000
- - --------------------------------------------------------------------------------------
TOTAL FOREIGN CONVERTIBLE BONDS
(IDENTIFIED COST $750,000) 225,000
- - --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL LONG-TERM INVESTMENTS--97.5%
(IDENTIFIED COST $81,196,061) 78,229,742
-------------
TOTAL INVESTMENTS--97.5%
(IDENTIFIED COST $81,196,061) 78,229,742(a)
Cash and receivables, less liabilities--2.5% 1,969,430
-------------
NET ASSETS--100.0% $ 80,199,172
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $5,913,750 and gross
depreciation of $12,201,280 for federal income tax purposes. At November
30, 1998, the aggregate cost of securities for federal income tax purposes
was $84,517,272.
(b) Variable or step coupon security; interest rate reflects the rate currently
in effect.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30,
1998, these securities amounted to a value of $3,256,590 or 4.1% of net
assets.
(d) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(e) Par value represents Argentine Pesos.
(f) Par value represents French Francs.
(g) Par value represents Polish Zloty.
(h) Par value represents Russian Rubles.
(i) Par value represents South Korean Won rounded in millions.
(j) Rights incorporated as a unit.
(k) Non-income producing.
(l) Security defaulted subsequent to November 30, 1998.
44 See Notes to Financial Statements
<PAGE>
Phoenix Emerging Markets Bond Portfolio
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $81,196,061) $ 78,229,742
Cash 1,094,350
Receivables
Investment securities sold 3,140,067
Interest 2,173,419
Fund shares sold 1,455,780
--------------
Total assets 86,093,358
--------------
LIABILITIES
Payables
Investment securities purchased 5,394,296
Fund shares repurchased 323,944
Investment advisory fee 46,730
Distribution fee 37,647
Transfer agent fee 9,441
Financial agent fee 7,090
Trustees' fee 5,515
Accrued expenses 69,523
--------------
Total liabilities 5,894,186
--------------
NET ASSETS $ 80,199,172
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 131,968,368
Distributions in excess of net investment income (50,697)
Accumulated net realized loss (48,714,714)
Net unrealized depreciation (3,003,785)
--------------
NET ASSETS $ 80,199,172
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $41,724,985) 5,795,710
Net asset value per share $7.20
Offering price per share $7.20/(1-4.75%) $7.56
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $37,269,642) 5,223,771
Net asset value and offering price per share $7.13
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,204,545) 168,054
Net asset value and offering price per share $7.17
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 15,021,162
Foreign taxes withheld (228,185)
--------------
Total investment income 14,792,977
--------------
EXPENSE
Investment advisory fee 730,717
Distribution fee, Class A 142,226
Distribution fee, Class B 400,847
Distribution fee, Class C 4,491
Financial agent fee 94,013
Transfer agent 155,061
Custodian 69,768
Professional 35,321
Registration 35,213
Printing 17,591
Trustees 17,063
Miscellaneous 2,434
--------------
Total expenses 1,704,745
--------------
NET INVESTMENT INCOME 13,088,232
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (39,143,275)
Net realized loss on foreign currency transactions (4,055,155)
Net realized gain on written options 49,783
Net change in unrealized appreciation (depreciation)
on investments 1,606,800
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions (37,466)
--------------
NET LOSS ON INVESTMENTS (41,579,313)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (28,491,081)
--------------
--------------
</TABLE>
See Notes to Financial Statements 45
<PAGE>
Phoenix Emerging Markets Bond Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
11/30/98 11/30/97
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 13,088,232 $ 7,435,613
Net realized gain (loss) (43,148,647) 1,466,964
Net change in unrealized appreciation
(depreciation) 1,569,334 (7,091,439)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (28,491,081) 1,811,138
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (5,581,936) (4,916,690)
Net investment income, Class B (3,942,930) (2,280,551)
Net investment income, Class C (54,521) --
Net realized gains, Class A (1,201,906) (4,477,700)
Net realized gains, Class B (697,910) (1,490,259)
Net realized gains, Class C -- --
In excess of net realized gains, Class A (6,002,330) --
In excess of net realized gains, Class B (3,485,367) --
In excess of net realized gains, Class C -- --
Tax return of capital, Class A (1,984,297) --
Tax return of capital, Class B (1,343,438) --
Tax return of capital, Class C (14,524) --
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (24,309,159) (13,165,200)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (2,907,456 and
4,047,705 shares, respectively) 27,208,118 56,372,468
Net asset value of shares issued from
reinvestment of distributions
(1,029,832 and 636,006 shares, respectively) 10,935,153 8,387,234
Cost of shares repurchased (3,428,413 and
1,401,387 shares, respectively) (34,342,515) (19,377,800)
-------------- --------------
Total 3,800,756 45,381,902
-------------- --------------
CLASS B
Proceeds from sales of shares (3,220,244 and
2,934,383 shares, respectively) 30,065,148 41,013,074
Net asset value of shares issued from
reinvestment of distributions
(492,109 and 163,679 shares, respectively) 4,864,295 2,172,877
Cost of shares repurchased (1,516,158 and
727,786 shares, respectively) (13,762,067) (10,039,719)
-------------- --------------
Total 21,167,376 33,146,232
-------------- --------------
CLASS C
Proceeds from sales of shares (170,364 and 0
shares, respectively) 1,509,747 --
Net asset value of shares issued from
reinvestment of distributions
(2,515 and 0 shares, respectively) 19,878 --
Cost of shares repurchased (4,825 and 0 shares,
respectively) (46,423) --
-------------- --------------
Total 1,483,202 --
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 26,451,334 78,528,134
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (26,348,906) 67,174,072
NET ASSETS
Beginning of period 106,548,078 39,374,006
-------------- --------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME AND UNDISTRIBUTED NET
INVESTMENT INCOME OF $(50,697) AND $362,088,
RESPECTIVELY) $ 80,199,172 $ 106,548,078
-------------- --------------
-------------- --------------
</TABLE>
46 See Notes to Financial Statements
<PAGE>
Phoenix Emerging Markets Bond Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
---------------------------------------- 9/5/95 TO
1998 1997 1996 11/30/95
----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.84 $ 14.80 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.32 1.38(4) 1.26(5) 0.25(4)(5)
Net realized and unrealized gain
(loss) (4.22) 0.17 4.56 0.18
----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (2.90) 1.55 5.82 0.43
----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (1.00) (1.28) (1.20) (0.25)
Dividends from net realized gains (0.23) (2.23) -- --
Distributions in excess of net
realized gains (1.16) -- -- --
Return of capital (0.35) -- -- --
----- ----- ----- -----
TOTAL DISTRIBUTIONS (2.74) (3.51) (1.20) (0.25)
----- ----- ----- -----
Change in net asset value (5.64) (1.96) 4.62 0.18
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 7.20 $ 12.84 $ 14.80 $ 10.18
----- ----- ----- -----
----- ----- ----- -----
Total return(1) (27.20)% 11.91% 60.18% 4.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $41,725 $67,875 $29,661 $12,149
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.43% 1.40%(7) 1.50% 1.50%(2)
Net investment income 13.74% 9.90% 10.41% 10.48%(2)
Portfolio turnover 405% 614% 378% 38%(3)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------
FROM
YEAR ENDED NOVEMBER 30 INCEPTION
---------------------------------------- 9/5/95 TO
1998 1997 1996 11/30/95
----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 14.78 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.23 1.26(4) 1.19(6) 0.22(4)(6)
Net realized and unrealized gain
(loss) (4.18) 0.18 4.53 0.20
----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (2.95) 1.44 5.72 0.42
----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.97) (1.22) (1.12) (0.24)
Dividends from net realized gains (0.23) (2.23) -- --
Distributions in excess of net
realized gains (1.16) -- -- --
Return of capital (0.33) -- -- --
----- ----- ----- -----
TOTAL DISTRIBUTIONS (2.69) (3.45) (1.12) (0.24)
----- ----- ----- -----
Change in net asset value (5.64) (2.01) 4.60 0.18
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 7.13 $ 12.77 $ 14.78 $ 10.18
----- ----- ----- -----
----- ----- ----- -----
Total return(1) (27.86)% 11.07% 58.94% 4.22%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $37,270 $38,673 $9,713 $596
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.20% 2.15%(7) 2.25% 2.25%(2)
Net investment income 12.98% 9.14% 9.79% 10.29%(2)
Portfolio turnover 405% 614% 378% 38%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.03, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.03, respectively.
(7) For the year ended November 30, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees. Prior period ratios include these amounts.
See Notes to Financial Statements 47
<PAGE>
Phoenix Emerging Markets Bond Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS C
----------
FROM
INCEPTION
3/26/98 TO
11/30/98
----------
<S> <C>
Net asset value, beginning of period $ 12.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.85(4)
Net realized and unrealized gain
(loss) (5.10)
-----
TOTAL FROM INVESTMENT OPERATIONS (4.25)
-----
LESS DISTRIBUTIONS
Dividends from net investment income (0.66)
Dividends from net realized gains --
Distributions in excess of net
realized gains --
Return of capital (0.17)
-----
TOTAL DISTRIBUTIONS (0.83)
-----
Change in net asset value (5.08)
-----
NET ASSET VALUE, END OF PERIOD $ 7.17
-----
-----
Total return(1) (35.33)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,205
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.29%(2)
Net investment income 15.59%(2)
Portfolio turnover 405%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
48 See Notes to Financial Statements
<PAGE>
PHOENIX STRATEGIC INCOME PORTFOLIO
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, DAVID L. ALBRYCHT, CFA
Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
A: The Fund seeks to maximize current income by investing in debt securities.
Capital appreciation is a secondary objective. Investors should note that the
Fund may invest in foreign investments, which pose added risks, such as currency
fluctuation, less public disclosure, and political and economic uncertainty, and
high-yield securities, which are generally subject to greater market
fluctuations and risk of loss of income and principal than are investments in
lower-yielding fixed-income securities.
Q: HOW HAS THE FUND PERFORMED?
A: Since their inception on March 27, 1998, Class A shares returned (12.89)%,
and Class B and Class C shares returned (13.25)% and (13.15)%, respectively
compared with a return of 6.83% for the Fund's benchmark, the Lehman Brothers
Aggregate Bond Index.(1) For the 12 months ending November 30, 1998, Class X
shares returned (8.63)% compared with a return of 9.45% for the benchmark. All
performance figures assume reinvestment of distributions and exclude the effect
of sales charges.
Q: WHAT FACTORS AFFECTED PERFORMANCE?
A: The disappointing performance was due to our exposure to more
credit-sensitive sectors of the bond market. During 1998, the world financial
markets have been experiencing a global "flight to quality" that has been driven
by the financial crises in Asia and Russia. U.S. Treasuries have been the sole
benefactor, while the biggest losers have been higher-yielding sectors, such as
emerging-markets and domestic high-yield, two of our largest portfolio
positions.
Q: WHAT IS YOUR CURRENT STRATEGY?
A: The two biggest risks in fixed income investing are interest rate risk and
credit risk. Our investment approach does not try to anticipate the direction of
interest rates. Instead, we seek to add value by identifying undervalued sectors
of the bond market. This contrarian approach is one that requires discipline and
conviction, but has served us well in the past. Of course, past performance is
no guarantee of future results.
We will continue to follow our value-oriented investment approach,
overweighting those sectors where we find the best values. Despite recent
weakness, our long-term outlook remains constructive. We feel the market has
overreacted to global events, resulting in extraordinary values for long-term
investors. We will continue to maintain a well-diversified portfolio (investing
across 12 market sectors), with exposure to more credit-sensitive sectors, which
we perceive to be considerably undervalued.
Q: WHAT IS YOUR OUTLOOK?
A: It is important at times like this to keep a long-term perspective as extreme
market moves like the one we are currently experiencing generally reverse
themselves over time. We have seen a number of market events like this over the
last decade. Two that most resemble the current situation were the "junk" bond
panic of 1990-91 and the Mexican peso devaluation in 1994-95. Although both of
these events triggered dips in the market, long-term investors were rewarded for
their patience and conviction. Of course, past performance is no guarantee of
future performance, and there can be no assurance that there will be a similar
turnaround in emerging markets.
DECEMBER 15, 1998
(1) THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN UNMANAGED, COMMONLY USED
MEASURE OF BROAD BOND MARKET TOTAL RETURN PERFORMANCE. THE INDEX IS NOT
AVAILABLE FOR DIRECT INVESTMENT.
49
<PAGE>
Phoenix Strategic Income Portfolio
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURNS(1) PERIODS ENDING 11/30/98
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR 5 YEAR TO 11/30/98 DATE
<S> <C> <C> <C> <C>
Class A Shares at NAV(2) -- -- (12.89)% 03/27/98
Class A Shares at POP(3) -- -- (17.05) 03/27/98
Class B Shares at NAV(2) -- -- (13.25) 03/27/98
Class B Shares with CDSC(4) -- -- (17.13) 03/27/98
Class C Shares at NAV(2) -- -- (13.15) 03/27/98
Class C Shares with CDSC(4) -- -- (13.95) 03/27/98
Class X Shares at NAV(2) (8.63)% 4.81% 5.19 04/01/93
Lehman Brothers Aggregate Bond Index(7) 9.45 7.33 -- Note 5
</TABLE>
(1) Total returns are historical and include changes in share price and the
reinvestment of both dividends and capital gains distributions.
(2) "NAV" (Net Asset Value) total returns do not include the effect of any
sales charge.
(3) "POP" (Public Offering Price) total returns include the effect of the
maximum front-end 4.75% sales charge.
(4) CDSC (contingent deferred sales charge) is applied to redemptions of
certain classes of shares that do not have a sales charge applied at
the time of purchase. CDSC charges for B shares decline from 5% to 0%
over a five year period. CDSC charges for C shares are 1% in the first
year and 0% thereafter.
(5) Index performance is 6.83% for Class A, B and C Shares (since 3/27/98)
and 7.32% for Class X (since 4/1/93), respectively.
(6) This chart illustrates NAV returns on Class X Shares for ten years or at
inception date whichever is less. Returns on Class A, Class B and C Shares
will vary due to differing sales charges.
(7) The Lehman Brothers Aggregate Bond Index is an unmanaged, commonly used
measure of broad bond market total return performance. The index is not
available for direct investment.
All returns represent past performance which may not be indicative
of future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
GROWTH OF $10,000 PERIODS ENDING 11/30
Phoenix Strategic Lehman Brothers
Income Aggregate
Portfolio Class X(6) Bond Index(7)
4/1/93 $10,000.00 $10,000.00
11/30/93 $10,534.83 $10,482.46
11/30/94 $9,981.20 $10,161.68
11/30/95 $11,642.98 $11,954.86
11/30/96 $13,426.91 $12,680.66
11/30/97 $14,579.49 $13,638.04
11/30/98 $13,321.98 $14,927.24
This growth of $10,000 chart assumes an initial investment of $10,000
made on 4/1/93 in Class X shares . Performance assumes dividends and
capital gains are reinvested. The performance of other share classes
will be greater or less than that shown based on differences in inception
dates, fees and sales charges.
SECTOR WEIGHTINGS 11/30
As a percentage of net assets
Corporate 33%
Foreign Government 30%
Non-Agency Mortgage 20%
Foreign Corporate 12%
Municipal Bonds 5%
50
<PAGE>
Phoenix Strategic Income Portfolio
TEN LARGEST HOLDINGS AT NOVEMBER 30, 1998 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<C> <S> <C>
1. United Mexican States Global Bond, 5/15/26 4.3%
FOREIGN GOVERNMENT SECURITY
2. Republic of Brazil C Bond 3.8%
FOREIGN GOVERNMENT SECURITY
3. GE Mortgage Services, Inc. 3.6%
NON-AGENCY MORTGAGE-BACKED SECURITY
4. Republic of Argentina RegS 3.6%
FOREIGN GOVERNMENT SECURITY
5. Republic of Argentina Series WW 3.4%
FOREIGN GOVERNMENT SECURITY
6. ContiMortgage Home Equity Loan Trust 3.2%
NON-AGENCY MORTGAGE-BACKED SECURITY
7. Republic of Bulgaria IAB Series PDI Euro 3.0%
FOREIGN GOVERNMENT SECURITY
8. Dupont (E.I.) de Nemours & Co. 2.8%
COMMERCIAL PAPER
9. Poland Treasury Bill 2.7%
FOREIGN GOVERNMENT SECURITY
10. Teligent, Inc. Sr. Notes 2.6%
CORPORATE BOND
</TABLE>
INVESTMENTS AT NOVEMBER 30, 1998
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
<S> <C> <C> <C>
MUNICIPAL BONDS--4.9%
FLORIDA--0.8%
University of Miami Exchangeable Revenue
Bond Series A Taxable 7.65%,
4/1/20(c)............................... Aaa $ 45 $ 48,769
ILLINOIS--2.3%
Illinois Educational Facilities
Authority Revenue Bond--Loyola
University Series A Taxable 7.84%,
7/1/24.................................. Aaa 125 140,625
PENNSYLVANIA--1.8%
Pennsylvania Economic Development
Financing Authority Recycling Revenue
Bond Series B 9.25%, 1/1/12(e)(h)....... NR 200 114,000
- - ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $378,170) 303,394
- - ------------------------------------------------------------------------------
CORPORATE BONDS--32.3%
COMPUTERS (SOFTWARE & SERVICES)--1.6%
PSINET, Inc. Series B 10%, 2/15/05...... B 100 101,000
COSMETICS/PERSONAL CARE--2.2%
Revlon Consumer Products Sr. Notes
8.625%, 2/1/08.......................... B 75 74,250
Revlon Consumer Products Sr. Notes 144A
9%, 11/1/06(b).......................... B 60 62,175
-----------
136,425
-----------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
<S> <C> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES--1.1%
Mashantucket Pequot Tribe Revenue Bond
Series A 144A 6.57%, 9/1/13(b).......... Aaa $ 70 $ 70,525
HEALTH CARE (DIVERSIFIED)--3.7%
Bally Total Fitness Holding Corp. Sr.
Notes Series B, 9.875%, 10/15/07........ B 150 148,875
Global Health Sciences Series 11%,
5/1/08.................................. Caa 100 80,000
-----------
228,875
-----------
HEALTH CARE (DRUGS--MAJOR PHARMACEUTICALS)--1.2%
Schein Pharmaceutical, Inc. 8.467%,
12/15/04(c)............................. B 85 74,800
MANUFACTURING (SPECIALIZED)--3.2%
Indesco International, Inc. Sr. Notes
9.75%, 4/15/08.......................... B 100 94,000
Nortek, Inc. Sr. Notes 9.875%, 3/1/04... B 100 103,750
-----------
197,750
-----------
METALS MINING--0.8%
NSM Steel, Inc. 144A 12%, 2/1/06(b)..... Caa 200 50,000
OFFICE EQUIPMENT & SUPPLIES--1.2%
U.S. Office Products Co. Sr. Notes 144A
9.75%, 6/15/08(b)....................... B 100 74,000
OIL & GAS (EXPLORATION & PRODUCTION)--3.6%
Forcenergy, Inc. Sr. Notes Series B
8.50%, 2/15/07.......................... B 175 149,625
</TABLE>
See Notes to Financial Statements 51
<PAGE>
Phoenix Strategic Income Portfolio
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
<S> <C> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)--CONTINUED
Lomak Petroleum, Inc. 8.75%, 1/15/07.... B $ 75 $ 71,250
-----------
220,875
-----------
PAPER & FOREST PRODUCTS--1.6%
Buckeye Technologies, Inc. Sr. Notes 8%,
10/15/10................................ Ba 100 99,500
SERVICES (COMMERCIAL & CONSUMER)--1.6%
Anthony Crane Rentals Sr. Notes 144A
10.375%, 8/1/08(b)...................... B 100 97,250
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--6.5%
Comcast Cellular Holdings, Inc. Sr.
Notes Series B 9.50%, 5/1/07............ Ba 100 107,750
Pathnet, Inc. Sr. Notes 12.25%,
4/15/08................................. NR 175 133,000
Teligent, Inc. Sr. Notes 11.50%,
12/1/07................................. Caa 170 163,200
-----------
403,950
-----------
TELECOMMUNICATIONS (LONG DISTANCE)--2.5%
RCN Corp. Sr. Notes Series B, 0%,
2/15/08(c).............................. B 275 151,250
TELEPHONE--1.5%
FirstCom Corp. Sr. Notes 144A 14%,
10/27/07(b)............................. NR 170 90,525
- - ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $2,361,055) 1,996,725
- - ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES--19.6%
ContiMortgage Home Equity Loan Trust
98-1, B 7.86%, 4/15/29.................. Baa 200 197,812
DLJ Mortgage Acceptance Corp. 144A
97-CF2, B2 7.14%, 11/15/08(b)........... Baa 100 91,000
First Chicago/Lennar Trust 97-CHL1, E
144A 8.129%, 2/28/11(b)................. B(d) 175 133,547
GE Capital Mortgage Services, Inc. 96-8,
2A5 7.50%, 5/25/26...................... AAA(d) 219 223,225
Norwest Asset Securities Corp. 96-3, B2
7.25%, 9/25/26.......................... BBB(d) 147 144,183
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
<S> <C> <C> <C>
Resolution Trust Corp. 92-C3, B 9.05%,
8/25/23................................. AA(d) $ 119 $ 118,956
Structured Asset Securities Corp. 95-C1,
D 7.375%, 9/25/24(j).................... BBB(d) 150 150,187
Structured Asset Securities Corp. 95-C4,
D 7%, 6/25/26(j)........................ BBB(d) 150 149,344
- - ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $1,225,121) 1,208,254
- - ------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES--29.2%
ARGENTINA--6.9%
Republic of Argentina RegS 11.75%,
2/12/07................................. Ba 250(f) 219,727
Republic of Argentina Series WW 11%,
12/4/05................................. Ba 200 209,500
-----------
429,227
-----------
BRAZIL--3.8%
Republic of Brazil C Bond, PIK interest
capitalization, 8%, 4/15/14(c).......... B 353 233,168
BULGARIA--3.5%
Republic of Bulgaria FLIRB Series A
Bearer Euro 2.50%, 7/28/12(c)........... B 50 30,750
Republic of Bulgaria IAB Series PDI Euro
6.688%, 7/28/11(c)...................... B 250 183,437
-----------
214,187
-----------
ECUADOR--2.5%
Ecuador Bearer PDI Euro, PIK interest
capitalization, 6.625%, 2/17/15(c)...... B 311 154,047
KOREA--1.6%
Republic of Korea 8.75%, 4/15/03........ Ba 100 100,438
MEXICO--5.6%
United Mexican States Global Bond
11.375%, 9/15/16........................ Ba 80 85,400
United Mexican States Global Bond
11.50%, 5/15/26......................... Ba 245 262,763
-----------
348,163
-----------
</TABLE>
52 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Income Portfolio
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
<S> <C> <C> <C>
PERU--1.3%
Peru PDI 4%, 3/7/17(c).................. BB(d) $ 125 $ 78,750
POLAND--3.1%
Poland Bearer PDI 5%, 10/27/14(c)....... Baa 25 23,453
Poland Treasury Bill 0%, 1/13/99........ NR 600(g) 167,130
-----------
190,583
-----------
RUSSIA--0.9%
Russia IAN Series U.S. 6.625%,
12/2/15(c).............................. Ca 259 32,993
Russia Principal Loans, PIK interest
capitalization, 6.625%, 12/15/15(i)..... NR 350 24,063
-----------
57,056
-----------
- - ------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $2,283,216) 1,805,619
- - ------------------------------------------------------------------------------
FOREIGN CORPORATE BONDS--11.7%
BERMUDA--1.1%
AES China Generating Co. Yankee 10.125%,
12/15/06................................ Ba(d) 100 68,000
CANADA--0.5%
Metronet Communications Corp. Sr. Notes
0%, 6/15/08(c).......................... B 50 31,500
INDONESIA--1.0%
APP Finance VII Mauritius, Ltd. 12%,
12/29/49(c)............................. Caa 100 61,000
JAPAN--2.4%
SB Treasury Co. LLC Series A 144A 9.4%,
12/29/49(b)(c).......................... Baa 150 148,777
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
<S> <C> <C> <C>
MEXICO--1.3%
Innova S de R.L. Sr. Notes 12.875%,
4/1/07.................................. B $ 100 $ 79,500
NETHERLANDS--3.3%
Kazkommertsbank International 144A
11.25%, 5/8/01(b)....................... B 100 51,000
Netia Holdings BV Yankee Series B, 0%,
11/1/07(e).............................. B 250 156,250
-----------
207,250
-----------
UNITED KINGDOM--2.1%
RSL Communications PLC Yankee 0%,
3/1/08(c)............................... B 225 127,687
- - ------------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $890,763) 723,714
- - ------------------------------------------------------------------------------
<CAPTION>
SHARES
-------
<S> <C> <C> <C>
WARRANTS--0.2%
SERVICES (DATA PROCESSING)--0.2%
FirstCom, Corp. 144A Warrants(b)(e)..... NR 5,950 8,925
TELEPHONE--0.0%
Pathnet, Inc. 144A Warrants(b)(e)....... NR 175 175
- - ------------------------------------------------------------------------------
TOTAL WARRANTS
(IDENTIFIED COST $0) 9,100
- - ------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--97.9%
(IDENTIFIED COST $7,138,325) 6,046,806
- - ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements 53
<PAGE>
Phoenix Strategic Income Portfolio
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- -----------
SHORT-TERM OBLIGATIONS--2.8%
<S> <C> <C> <C>
COMMERCIAL PAPER--2.8%
Dupont (E.I.) de Nemours & Co. 4.91%,
12/7/98................................. A-1+ $ 175 $ 174,857
- - ------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $174,857) 174,857
- - ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--100.7%
(IDENTIFIED COST $7,313,182) 6,221,663(a)
Cash and receivables, less liabilities--(0.7%) (45,991)
------------
NET ASSETS--100.0% $ 6,175,672
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $129,122 and gross
depreciation of $1,243,108 for federal income tax purposes. At November 30,
1998, the aggregate cost of securities for federal income tax purposes was
$7,335,649.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30,
1998, these securities amounted to a value of $877,899 or 14.2% of net
assets.
(c) Variable or step coupon security; the interest rate shown reflects the rate
currently in effect.
(d) As rated by Standard & Poor's, Fitch, or Duff & Phelps.
(e) Non-income producing
(f) Par value represents Argentine Pesos.
(g) Par value represents Polish Zloty.
(h) Security in default.
(i) Security defaulted subsequent to November 30, 1998.
(j) All or a portion segregated as collateral.
54 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Income Portfolio
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $7,313,182) $ 6,221,663
Cash 56,387
Receivables
Investments securities sold 61,134
Interest 135,762
Receivable from advisor 40,123
--------------
Total assets 6,515,069
--------------
LIABILITIES
Payables
Investment securities purchased 262,430
Transfer agent fee 17,104
Trustees' fee 5,515
Financial agent fee 2,710
Distribution fee 329
Accrued expenses 51,309
--------------
Total liabilities 339,397
--------------
NET ASSETS $ 6,175,672
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 7,421,422
Undistributed net investment income 23,078
Accumulated net realized loss (177,309)
Net unrealized depreciation (1,091,519)
--------------
NET ASSETS $ 6,175,672
--------------
--------------
CLASS X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $5,652,819) 705,966
Net asset value and offering price per share $8.01
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $182,530) 22,833
Net asset value per share $7.99
Offering price per share $7.99/(1-4.75%) $8.39
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $223,804) 28,030
Net asset value and offering price per share $7.98
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $116,519) 14,591
Net asset value and offering price per share $7.99
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 628,142
Dividends 9,183
--------------
Total investment income 637,325
--------------
EXPENSES
Investment advisory fee 35,019
Distribution fee, Class A 416
Distribution fee, Class B 1,468
Distribution fee, Class C 759
Financial agent 57,015
Transfer agent 47,732
Registration 34,649
Professional 22,398
Printing 15,781
Trustees 14,032
Custodian 7,813
Miscellaneous 1,794
--------------
Total expenses 238,876
Less expenses borne by the advisor (185,168)
--------------
Net expenses 53,708
--------------
NET INVESTMENT INCOME 583,617
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (159,654)
Net realized loss on foreign currency transactions (923)
Net change in unrealized appreciation (depreciation) on
investments (1,069,496)
--------------
NET LOSS ON INVESTMENTS (1,230,073)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (646,456)
--------------
--------------
</TABLE>
See Notes to Financial Statements 55
<PAGE>
Phoenix Strategic Income Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 583,617 $ 466,575
Net realized gain (loss) (160,577) 251,177
Net change in unrealized appreciation
(depreciation) (1,069,496) (194,058)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (646,456) 523,694
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (555,887) (459,335)
Net investment income, Class A (14,411) --
Net investment income, Class B (13,521) --
Net investment income, Class C (6,781) --
Net realized gains, Class X (241,425) (72,586)
Net realized gains, Class A -- --
Net realized gains, Class B -- --
Net realized gains, Class C -- --
-------------- --------------
DECREASE IN NET ASSETS RESULTING FROM
DISTRIBUTIONS TO SHAREHOLDERS (832,025) (541,921)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (0 and 27,068
shares, respectively) -- 263,374
Net asset value of shares issued from
reinvestment of distributions
(87,775 and 54,582 shares, respectively) 797,305 541,924
Cost of shares repurchased (30,675 and 27,376
shares, respectively) (300,006) (273,623)
-------------- --------------
Total 497,299 531,675
-------------- --------------
CLASS A
Proceeds from sales of shares (52,172 and 0
shares, respectively) 490,240 --
Net asset value of shares issued from
reinvestment of distributions
(1,541 and 0 shares, respectively) 13,240 --
Cost of shares repurchased (30,880 and 0 shares,
respectively) (234,729) --
-------------- --------------
Total 268,751 0
-------------- --------------
CLASS B
Proceeds from sales of shares (38,952 and 0
shares, respectively) 370,835 --
Net asset value of shares issued from
reinvestment of distributions
(863 and 0 shares, respectively) 7,274 --
Cost of shares repurchased (11,785 and 0 shares,
respectively) (107,605) --
-------------- --------------
Total 270,504 0
-------------- --------------
CLASS C
Proceeds from sales of shares (24,153 and 0
shares, respectively) 209,622 --
Net asset value of shares issued from
reinvestment of distributions
(807 and 0 shares, respectively) 6,779 --
Cost of shares repurchased (10,369 and 0 shares,
respectively) (78,932) --
-------------- --------------
Total 137,469 0
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 1,174,023 531,675
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (304,458) 513,448
NET ASSETS
Beginning of period 6,480,130 5,966,682
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME OF $23,078 AND $14,837,
RESPECTIVELY) $ 6,175,672 $ 6,480,130
-------------- --------------
-------------- --------------
</TABLE>
56 See Notes to Financial Statements
<PAGE>
Phoenix Strategic Income Portfolio
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
----------------------------------------------------------------------
YEAR ENDED NOVEMBER 30
----------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.99 $ 10.03 $ 9.45 $ 8.97 $ 10.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.83(2) 0.74(2)(8) 0.78(2) 0.91(2) 0.63(2)
Net realized and unrealized gain
(loss) (1.62) 0.09 0.59 0.51 (1.13)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (0.79) 0.83 1.37 1.42 (0.50)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.82) (0.75) (0.79) (0.94) (0.59)
Dividends from net realized gains (0.37) (0.12) -- -- (0.06)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (1.19) (0.87) (0.79) (0.94) (0.65)
----- ----- ----- ----- -----
Change in net asset value (1.98) (0.04) 0.58 0.48 (1.15)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 8.01 $ 9.99 $ 10.03 $ 9.45 $ 8.97
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) (8.63)% 8.58% 15.32% 16.65% (5.26)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $5,653 $6,480 $5,967 $5,170 $1,780
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 0.72%(6) 0.65% 0.65% 0.65% 0.65%
Net investment income 8.92%(6) 7.45% 8.11% 7.60% 6.64%
Portfolio turnover 138% 194% 231% 618% 124%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------- ---------- ----------
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
3/27/98 TO 3/27/98 TO 3/27/98 TO
11/30/98 11/30/98 11/30/98
---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.78 $ 9.78 $ 9.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.55(3)(8) 0.50(4)(8) 0.50(5)(8)
Net realized and unrealized gain
(loss) (1.79) (1.77) (1.76)
----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (1.24) (1.27) (1.26)
----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.55) (0.53) (0.53)
Dividends from net realized gains -- -- --
----- ----- -----
TOTAL DISTRIBUTIONS (0.55) (0.53) (0.53)
----- ----- -----
Change in net asset value (1.79) (1.80) (1.79)
----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 7.99 $ 7.98 $ 7.99
----- ----- -----
----- ----- -----
Total return(1) (12.89)%(7) (13.25)%(7) (13.15)%(7)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $183 $224 $117
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.00%(6) 1.75%(6) 1.75%(6)
Net investment income 8.79%(6) 8.37%(6) 8.47%(6)
Portfolio turnover 138%(7) 138%(7) 138%(7)
</TABLE>
(1) Maximum sales charges are not included in total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.26, $0.22, $0.15, $0.40, $0.34 and $0.35, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.20.
(4) Includes reimbursement of operating expenses by investment adviser of
$0.20.
(5) Includes reimbursement of operating expenses by investment adviser of
$0.20.
(6) Annualized.
(7) Not annualized.
(8) Computed using average shares outstanding.
See Notes to Financial Statements 57
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix Multi-Portfolio Fund ("the Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. To date, six
Portfolios are offered for sale: Tax-Exempt Bond Portfolio, Mid Cap Portfolio,
International Portfolio, Real Estate Securities Portfolio, Emerging Markets Bond
Portfolio, and Strategic Income Portfolio (formerly the Diversified Income
Portfolio.) Each Portfolio has distinct investment objectives. The Tax-Exempt
Bond Portfolio seeks as high a level of current income exempt from federal
income taxation as is consistent with preservation of capital. The Mid Cap
Portfolio seeks as its investment objective long-term appreciation of capital.
The International Portfolio seeks a high total return consistent with reasonable
risk through investment in an internationally diversified portfolio of equity
securities. The Real Estate Securities Portfolio seeks capital appreciation and
income with approximately equal emphasis. The Emerging Markets Bond Portfolio
seeks to achieve high current income with a secondary objective of long-term
capital appreciation. The Strategic Income Portfolio seeks to maximize current
income by investing in debt securities, with a secondary objective of capital
appreciation.
The Trust offers both Class A and Class B shares on each Portfolio and one
additional class of shares Class C on Emerging Markets Bond Portfolio and Class
C and Class X on the Strategic Income Portfolio. Class A shares are sold with a
front-end sales charge of up to 4.75%. Class B shares are sold with a contingent
deferred sales charge which declines from 5% to zero depending on the period of
time the shares are held. Class C shares are sold with a 1% contingent deferred
sales charge if redeemed within one year of purchase. Class X are currently
closed to new investors. Each class of shares has 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 Portfolio are
borne pro rata by the holders of each class of shares, except that each class
bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. SECURITY VALUATION:
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Debt securities are valued on the basis of
broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at 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. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date or, in the case of certain foreign securities, as soon as the Portfolio is
notified. Realized gains and losses are determined on the identified cost basis.
The Trust does not amortize premiums but does amortize discounts except for the
Tax-Exempt Bond Portfolio which amortizes both premiums and discounts over the
life of the respective securities using the effective interest method.
C. INCOME TAXES:
Each of the Portfolios is treated as a separate taxable entity. It is the
policy of each Portfolio in the Trust 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 and tax-exempt income to its
shareholders. In addition, each Portfolio 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 Portfolio 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, operating
losses 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 Trust does not separate that
portion of the results of operations arising from changes in exchange rates and
that portion arising from changes in the market prices of securities.
F. FORWARD CURRENCY CONTRACTS:
The Mid Cap Portfolio, the Emerging Markets Bond Portfolio, the International
Portfolio and the Strategic Income Portfolio may enter
58
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (CONTINUED)
into forward currency contracts in conjunction with the planned purchase or sale
of foreign denominated securities in order to hedge the U.S. dollar cost or
proceeds. Forward currency contracts involve, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. Risks arise from the possible movements in foreign exchange rates
or if the counterparty does not perform under the contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in market
value is recorded by each Portfolio as an unrealized gain (or loss). When the
contract is closed or offset with the same counterparty, the Portfolio records a
realized gain (or loss) equal to the change in the value of the contract when it
was opened and the value at the time it was closed or offset.
G. FUTURES CONTRACTS:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Each Portfolio (other than the Real
Estate Securities Portfolio) may enter into financial futures contracts as a
hedge against anticipated changes in the market value of their portfolio
securities. Upon entering into a futures contract, the Portfolios are required
to pledge to the broker an amount of cash and/or securities equal to the
"initial margin" requirements of the futures exchange on which the contract is
traded. Pursuant to the contract, the Portfolios agree to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as daily variation margin and are
recorded by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. The potential risk to the Portfolio is that the change in
value of the futures contract may not correspond to the change in value of the
hedged instruments.
H. OPTIONS:
Each Portfolio (other than the Real Estate Securities Portfolio), may write
covered options or purchase options contracts for the purpose of hedging against
changes in the market value of the underlying securities or foreign currencies.
Each Portfolio will realize a gain or loss upon the expiration or closing of
the option transaction. Gains and losses on written options are reported
separately in the Statement of Operations. When a written option is exercised,
the proceeds on sales or amounts paid are adjusted by the amount of premium
received. Options written are reported as a liability in the Statement of Assets
and Liabilities and subsequently marked to market to reflect the current value
of the option. The risk associated with written options is that the change in
value of options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the value of
the underlying instruments, or if a liquid secondary market does not exist for
the contracts.
The Portfolios may purchase options which are included in the Portfolio's
Schedule of Investments and subsequently marked to market to reflect the current
value of the option. When a purchased option is exercised, the cost of the
security is adjusted by the amount of premium paid. The risk associated with
purchased options is limited to the premium paid.
I. LOAN AGREEMENTS:
The Trust may invest in direct debt instruments which are interests in amounts
owed by a corporate, governmental, or other borrower to lenders or lending
syndicates. The Trust's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from third
parties. A loan is often administered by a bank or other financial institution
(the lender) that acts as agent for all holders. The agent administers the terms
of the loan, as specified in the loan agreement. When investing in a loan
participation, the Trust has the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
loan agreement and only upon receipt by the lender of payments from the
borrower. The Trust generally has no right to enforce compliance with the terms
of the loan agreement with the borrower. As a result, the Trust may be subject
to the credit risk of both the borrower and the lender that is selling the loan
agreement. When the Trust purchases assignments from lenders it acquires direct
rights against the borrower on the loan. Direct indebtedness of emerging
countries involves a risk that the government entities responsible for the
repayment of the debt may be unable, or unwilling to pay the principal and
interest when due.
J. SECURITY LENDING:
The Trust (with the exception of the Real Estate Securities Portfolio) loans
securities to qualified brokers through an agreement with State Street Bank &
Trust (the Custodian) and Brown Brothers, Harriman, custodian for the
International Portfolio. Under the terms of the agreement, the Trust receives
collateral with a market value not less than 100% of the market value of loaned
securities. Collateral consists of cash, securities issued or guaranteed by the
U.S. Government or its agencies and the sovereign debt of foreign countries.
Interest earned on the collateral and premiums paid by the borrower are recorded
as income by the Trust net of fees charged by the Custodian for its services in
connection with this securities lending program. Lending portfolio securities
involves a risk of delay in the recovery of the loaned securities or in the
foreclosure on collateral. At November 30, 1998, the Trust had the following
market value of security loans and collateral:
<TABLE>
<CAPTION>
Value of
Securities Value of
on Loan Collateral
---------- ----------
<S> <C> <C>
Mid Cap Portfolio........................ $6,719,029 $6,957,460
</TABLE>
59
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (CONTINUED)
K. EXPENSES:
Expenses incurred by the Trust with respect to any two or more Portfolios are
allocated in proportion to the net assets of each Portfolio, except where
allocation of direct expense to each Portfolio or an alternative allocation
method can be more fairly made.
L. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS:
The Trust may engage in when-issued or delayed delivery transactions. The
Trust records when-issued securities on the trade date and maintains collateral
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Advisers, Phoenix
Investment Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home
Life Insurance Company ("PHL"), and Duff & Phelps Investment Management ("DPIM")
Co., an indirect wholly-owned subsidiary of PHL, the Adviser for the Real Estate
Securities Portfolio, are entitled to a fee, based upon the following annual
rates as a percentage of the average daily net assets of each Portfolio:
<TABLE>
<CAPTION>
1st $1-2 $2+
$1 Billion Billion Billion
------------ ---------- ----------
<S> <C> <C> <C>
Tax-Exempt Bond Portfolio.............. 0.45% 0.40% 0.35%
Mid Cap Portfolio...................... 0.75% 0.70% 0.65%
International Portfolio................ 0.75% 0.70% 0.65%
Real Estate Securities Portfolio....... 0.75% 0.70% 0.65%
Emerging Markets Bond Portfolio........ 0.75% 0.70% 0.65%
Strategic Income Portfolio............. 0.55% 0.50% 0.45%
</TABLE>
The respective Advisers have agreed to reimburse the Real Estate Securities
Portfolio and the Strategic Income Portfolio to the extent that total expenses
(excluding interest, taxes, brokerage fees and commissions, and extraordinary
expenses) exceed 1.30% and 1.00%, respectively, of the average daily net assets
for Class A shares, and 2.05% and 1.75%, for Class B shares and 1.75% and 0.75%
for Class C and Class X of Strategic Income Portfolio, respectively. Prior to
March 27, 1998, the advisory and reimbursement rates for Strategic Income
Portfolio Class X were 0.50% and 0.65%, respectively.
Effective October 27, 1998, Seneca Capital Management LLC ("Seneca") was
appointed subadvisor to the Phoenix Mid Cap Portfolio, a majority of the equity
interests of Seneca is owned by Phoenix Investment Partners, Ltd. For its
services, Seneca is paid a fee by the Adviser ranging from 0.375% through 0.20%
of the average daily net assets of the Phoenix Mid Cap Portfolio.
Effective October 27, 1998, Aberdeen Fund Managers, Inc. ("Aberdeen") was
appointed subadvisor to the Phoenix International Portfolio, Aberdeen is a
subsidiary of Aberdeen Asset Management PLC. For its services, Aberdeen is paid
a fee by the Adviser equal to 0.375% of the average daily net assets of the
Phoenix International Portfolio up to $1 billion, 0.35% between $1 billion and
$2 billion, and 0.325% in excess of $2 billion.
Phoenix Equity Planning Corporation ("PEPCO") an indirect majority-owned
subsidiary of PHL, which serves as the national distributor of the Trust's
shares has advised the Trust that it retained net selling commissions of
$122,184 for Class A shares and deferred sales charges of $422,549 for Class B
shares and $318 for Class C shares for the year ended November 30, 1998. In
addition, each Portfolio pays PEPCO a distribution fee at an annual rate of
0.25% for Class A shares and 1.00% for Class B and Class C shares applied to the
average daily net assets of each Portfolio. The distributor has advised the
Trust that of the total amount expensed for the year ended November 30, 1998,
$1,025,897 was retained by the Distributor and $1,404,016 was paid out to
unaffiliated Participant and $278,168 was paid to W.S. Griffith, an indirect
subsidiary of PHL.
As Financial Agent of the Trust, PEPCO received a fee for bookkeeping,
administration, and pricing services through May 31, 1998, 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 applied.
Effective June 1, 1998, PEPCO receives a financial agent fee equal to the sum
of (1) the documented cost of fund accounting and related services provided by
PFPC Inc. (subagent to PEPCO), plus (2) the documented cost to PEPCO to provide
financial reporting, tax services and oversight of subagent's performance. The
current fee schedule of PFPC Inc. ranges from 0.085% to 0.0125% of the average
daily net asset values of the Fund. Certain minimum fees and fee waivers may
apply.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended November 30, 1998, transfer
agent fees were $1,130,180 of which PEPCO retained $526,661 which is net of fees
paid to State Street.
60
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (CONTINUED)
At November 30, 1998 PHL and its affiliates held Phoenix Multi-Portfolio Fund
shares which aggregated the following:
<TABLE>
<CAPTION>
Aggregate
Net Asset
Shares Value
---------- ------------
<S> <C> <C>
Tax-Exempt Bond Portfolio
--Class A..................... 163,803 $1,836,229
International
--Class A..................... 1,521,314 24,310,598
Real Estate Securities Portfolio
--Class A..................... 514,562 6,303,379
--Class B..................... 12,290 149,814
Emerging Markets Bond Portfolio
--Class A..................... 2,083,489 15,001,120
--Class B..................... 17,508 124,832
--Class C..................... 8,484 60,830
Strategic Income Portfolio
--Class X..................... 699,738 5,604,901
--Class A..................... 10,902 87,107
--Class B..................... 10,870 86,743
--Class C..................... 10,870 86,851
</TABLE>
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended November 30, 1998
(excluding U.S. Government and agency securities, short-term securities, futures
contracts and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
------------- -------------
<S> <C> <C>
Tax-Exempt Bond Portfolio......... $ 16,534,538 $ 29,372,392
Mid Cap Portfolio................. 1,072,164,078 1,125,149,460
International Portfolio........... 204,714,991 175,987,086
Real Estate Securities
Portfolio........................ 5,551,422 8,306,157
Emerging Markets Bond Portfolio... 377,244,699 388,087,244
Strategic Income Portfolio........ 8,497,008 7,675,230
</TABLE>
Purchase and sales of U.S. Government and agency securities during the year
ended November 30, 1998, aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
--------- ---------
<S> <C> <C>
Strategic Income Portfolio.................. $ 807,704 $ 967,484
</TABLE>
At November 30, 1998, the Tax-Exempt Bond Portfolio had entered into futures
contracts as follows:
<TABLE>
<CAPTION>
Value of
Contracts Market Net
Number of when Value of Unrealized
Description Contracts Opened Contracts Depreciation
- - --------------------------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Bond Dec 98
(Short)................... 8 $1,009,191 $1,038,750 $ (29,559)
</TABLE>
Written option activity for the year ended November 30, 1998 aggregated the
following:
<TABLE>
<CAPTION>
Call Options
------------------------
Number of Amount
Emerging Markets Bond Portfolio Options of Premiums
- - ------------------------------------------- ----------- -----------
<S> <C> <C>
Options outstanding at November 30, 1997... -- $ --
Options written............................ 21.0 84,804
Options canceled in closing purchase
transactions.............................. (5.0) (36,547)
Options expired............................ (16.0) (48,257)
Options exercised.......................... -- --
--- -----------
Options outstanding at November 30, 1998... -- $ --
--- -----------
--- -----------
</TABLE>
4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts. Given the uncertain economic condition of Russia and
the defaults that have occurred, there is no guarantee that continued payments
on Russian government bonds will be made.
5. CAPITAL LOSS CARRYOVERS
The following Portfolios have capital loss carryforwards which may be used to
offset future capital gains.
<TABLE>
<CAPTION>
Strategic Emerging Real
Expiration Date Tax-Exempt Income Markets Estate
- - ------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
2006............... $ 381,648 $ 154,841 $42,735,153 $ 70,513
----------- --------- ----------- ---------
Total............ $ 381,648 $ 154,841 $42,735,153 $ 70,513
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
6. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Portfolios of the Trust have
recorded several reclassifications in the capital accounts. These
reclassifications have no impact on the net asset value of the Portfolios and
are designed generally to present undistributed income and realized gains on a
tax basis which is
61
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (CONTINUED)
considered to be more informative to the shareholder. As of November 30, 1998,
the Portfolios recorded the following reclassifications to increase (decrease)
the accounts listed below:
<TABLE>
<CAPTION>
Undistributed Accumulated Capital paid
net net realized in on shares
investment gain of beneficial
income (loss) interest
------------- ---------------- ----------------
<S> <C> <C> <C>
Tax-Exempt Bond Portfolio... $ 479,932 $ 51,664 $ (531,596)
Mid Cap Portfolio........... 467,524 (467,524) --
International Portfolio..... 525,955 (525,955) --
Emerging Markets Bond
Portfolio................. (3,921,630 ) 3,921,630 --
Strategic Income
Portfolio................. 15,224 (16,732) 1,508
</TABLE>
TAX NOTICE (UNAUDITED)
For the fiscal year ended November 30, 1998, the Tax-Exempt Bond Portfolio
distributed $5,465,095 of exempt-interest dividends.
For the fiscal year ended November 30, 1998, the following Portfolios
distributed long-term capital gains dividends as follows:
<TABLE>
<CAPTION>
28% 20%
----------- ----------
<S> <C> <C>
Tax-Exempt Bond Portfolio............... $ 94,830 --
Mid Cap Portfolio....................... 14,325,003 $8,224,856
International Portfolio................. 8,680,892 4,099,040
Real Estate Securities Portfolio........ 1,022,237 1,500,701
Emerging Markets Bond Portfolio......... 420,839 --
Strategic Income Portfolio.............. 33,264 4,400
</TABLE>
This report is not authorized for distribution to prospective investors in
the Phoenix Multi-Portfolio Fund unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Trustees and Shareholders of
Phoenix Multi-Portfolio Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Tax-Exempt Bond Portfolio, the Mid Cap Portfolio, the International
Portfolio, the Real Estate Securities Portfolio, the Emerging Markets Bond
Portfolio and the Strategic Income Portfolio (formerly Diversified Income
Portfolio) (constituting series of the Phoenix Multi-Portfolio Fund, hereafter
referred to as the "Fund") at November 30, 1998 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 November 30, 1998 by correspondence with the
custodians and brokers provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 21, 1999
63
<PAGE>
RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
A special meeting of Shareholders of the Phoenix International Portfolio of
Phoenix Multi-Portfolio Fund was held on October 27, 1998 to approve the
following matter:
1. Approval of a subadvisory agreement with Aberdeen Fund Managers, Inc.
On the record date for this meeting there were 5,848,931 shares outstanding and
50.13% of the shares outstanding and entitled to vote were present by proxy.
NUMBER OF VOTES
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- ---------
<S> <C> <C> <C>
1. Approval of investment subadvisory
agreement 5,376,525 132,631 339,775
</TABLE>
A special meeting of Shareholders of the Phoenix Mid Cap Portfolio of Phoenix
Multi-Portfolio Fund was held on October 27, 1998 to approve the following
matter:
1. Approval of a subadvisory agreement with Seneca Capital Management LLC.
On the record date for this meeting there were 8,784,306 shares outstanding and
56.22% of the shares outstanding and entitled to vote were present by proxy.
NUMBER OF VOTES
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- ---------
<S> <C> <C> <C>
1. Approval of investment subadvisory
agreement 7,613,064 281,207 890,035
</TABLE>
64
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
101 Munson Street
Greenfield, MA 01301
TRUSTEES
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
OFFICERS
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
John F. Sharry, Executive Vice President
Gail P. Seneca, Senior Vice President
James D. Wehr, Senior Vice President
David L. Albrycht, Vice President
Timothy M. Heaney, Vice President
Ron K. Jacks, Vice President
William E. Keen, III, Vice President
Peter S. Lannigan, Vice President
Richard D. Little, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Michael Schatt, Vice President
Pierre G. Trinque, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
INVESTMENT ADVISERS
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, CT 06115-0480
Duff & Phelps Investment Management Co.
(Real Estate Securities Portfolio)
55 East Monroe Street, Suite 3600
Chicago, IL 60603
PRINCIPAL UNDERWRITER
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
CUSTODIANS
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Brown Brothers Harriman & Co.
(International Portfolio)
40 Water Street
Boston, MA 02109
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO CONTACT US
The Fund Connection 1-800-243-1574
Customer Service 1-800-243-1574 (option 0)
Investment Strategy Hotline 1-800-243-4361 (option 2)
Marketing Department 1-800-243-4361 (option 3)
Text Telephone 1-800-243-1926
Internet access:
www.phoenixinvestments.com
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
PO Box 2200 PRESORTED
Enfield CT 06083-2200 U.S. Postage
PAID
Springfield, MA
Permit No. 444
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 490 (1/99)
<PAGE>
Phoenix Investment Partners
SEMIANNUAL REPORT
MAY 31, 1999
- -- Aberdeen -- Phoenix-Aberdeen
International Fund
- -- Duff & Phelps -- Phoenix-Duff & Phelps
Real Estate Securities Fund
- -- Goodwin-SM- -- Phoenix-Goodwin
Emerging Markets
Bond Fund
Phoenix-Goodwin
Tax-Exempt Bond Fund
- -- Seneca -- Phoenix-Seneca
Mid Cap Fund
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
MESSAGE FROM THE PRESIDENT
DEAR MULTI-PORTFOLIO FUND SHAREHOLDER:
[PHOTO]
PHILIP R. MCLOUGHLIN
We are pleased to provide this semiannual financial summary for the Phoenix
Multi-Portfolio Funds for the six months ended May 31, 1999.
If you have any questions, please contact your financial advisor or call us at
1-800-243-1574 (option 0), between 8:00 a.m. and 6:00 p.m. Eastern Time, Monday
through Friday.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
Mutual funds are not insured by the FDIC; are not
deposits or other obligations of a bank and are not
guaranteed by a bank; and are subject to
investment risks, including possible loss of the
principal invested.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Phoenix-Aberdeen International Fund....................................... 3
Phoenix-Duff & Phelps Real Estate Securities Fund......................... 13
Phoenix-Goodwin Emerging Markets Bond Fund................................ 18
Phoenix-Goodwin Tax-Exempt Bond Fund...................................... 26
Phoenix-Seneca Mid Cap Fund............................................... 33
Notes to Financial Statements............................................. 38
</TABLE>
2
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL FUND
INVESTMENTS AT MAY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS--96.3%
ARGENTINA--0.4%
Perez Companc SA Sponsored ADR (Oil &
Gas (Exploration & Production))......... 25,000 $ 298,725
Telecom Argentina SA Sponsored ADR
(Telecommunications (Long Distance)).... 7,800 222,300
YPF Sociedad Anonima Sponsored ADR (Oil
(International Integrated))............. 6,500 273,812
------------
794,837
------------
AUSTRALIA--1.4%
Australian Gas Light Co., Ltd. (Natural
Gas).................................... 200,000 1,268,422
QBE Insurance Group Ltd. (Insurance
(Property-Casualty)).................... 375,000 1,471,107
------------
2,739,529
------------
BRAZIL--1.2%
Tele Centro Sul Participacoes SA ADR
(Telephone)............................. 8,500 459,000
Tele Norte Leste Participacoes SA ADR
(Telephone)............................. 41,000 671,375
Tele Sudeste Celular Participacoes SA
ADR (Telecommunications
(Cellular/Wireless)).................... 21,000 511,875
Telesp Participacoes SA ADR
(Telephone)............................. 26,000 568,750
------------
2,211,000
------------
CANADA--2.9%
Nortel Networks Corp. (Communications
Equipment).............................. 25,500 1,912,500
Seagram Co. Ltd. (The) (Beverages
(Alcoholic))............................ 34,000 1,765,875
Toronto-Dominion Bank (The) (Banks
(Regional))............................. 36,000 1,908,000
------------
5,586,375
------------
DENMARK--1.4%
Danisco A/S (Foods)..................... 22,500 1,082,930
Tele Danmark A/S (Telephone)(b)......... 16,400 1,680,224
------------
2,763,154
------------
FINLAND--1.8%
Nokia Oyj Class A (Communications
Equipment).............................. 30,800 2,196,365
Stora Enso Oyj (Paper & Forest
Products)............................... 76,375 781,015
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
FINLAND--CONTINUED
UPM-Kymmene Oyj (Paper & Forest
Products)............................... 15,000 $ 440,724
------------
3,418,104
------------
FRANCE--11.5%
Air Liquide (Chemicals (Specialty))..... 5,715 862,885
Alstom (Engineering &
Construction)(b)........................ 58,750 1,739,071
Axa (Insurance (Multi-Line))............ 10,631 1,228,304
Canal Plus (Broadcasting (Television,
Radio & Cable))......................... 1,600 464,251
Carrefour SA (Retail (Food Chains))..... 9,840 1,294,331
Castorama Dubois (Retail (Building
Supplies)).............................. 6,620 1,619,733
Coflexip SA (Metal Fabricators)......... 14,000 1,144,733
Compagnie de Saint Gobain (Manufacturing
(Diversified)).......................... 2,800 440,620
Dexia France (Banks (Major Regional))... 6,200 863,506
Elf Aquitaine SA (Oil (International
Integrated))............................ 10,600 1,538,384
Groupe Danone (Foods)................... 3,500 966,143
Lafarge SA (Construction (Cement &
Aggregates))............................ 16,500 1,490,621
Pechiney SA Class A (Containers &
Packaging (Paper))...................... 31,800 1,235,584
Renault SA (Automobiles)................ 37,600 1,464,481
Rhodia SA (Chemicals (Specialty))....... 52,700 898,740
Schneider SA (Electrical Equipment)..... 7,500 446,998
Societe Generale Class A (Banks (Major
Regional)).............................. 6,300 1,147,515
Total Fina SA Class B (Oil & Gas
(Refining & Marketing))................. 11,270 1,372,838
Valeo SA (Auto Parts & Equipment)....... 16,550 1,354,969
Vivendi (Manufacturing (Diversified))... 5,800 430,582
------------
22,004,289
------------
GERMANY--8.5%
Allianz AG Vinkulierte Registered Shares
(Insurance (Multi-Line))................ 4,800 1,314,958
BASF AG (Chemicals (Diversified))....... 25,000 975,031
Bayer AG (Chemicals (Diversified))...... 22,200 865,827
Bayerische Motoren Werke AG
(Automobiles)........................... 2,079 1,334,727
Bayerische Vereinsbank AG (Banks (Major
Regional)).............................. 22,000 1,191,577
Bewag AG (Electric Companies)........... 35,550 602,177
DaimlerChrysler AG (Automobiles)........ 22,468 1,944,025
Deutsche Bank AG (Banks (Major
Regional)).............................. 18,200 951,505
</TABLE>
See Notes to Financial Statements 3
<PAGE>
Phoenix-Aberdeen International Fund
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
GERMANY--CONTINUED
Deutsche Lufthansa AG (Airlines)........ 86,255 $ 1,857,894
Mannesmann AG (Manufacturing
(Diversified)).......................... 11,200 1,534,118
Metro AG (Retail (Specialty))........... 20,300 1,284,165
Muenchener Rueckversicherungs New Shares
(Insurance (Life/Health))(b)............ 4,576 775,123
Muenchener
Rueckversicherungs-Gesellschaft AG
(Insurance (Multi-Line))................ 4,576 784,692
RWE AG (Manufacturing (Diversified)).... 18,900 846,803
------------
16,262,622
------------
GREECE--0.4%
Alpha Credit Bank (Banks (Major
Regional)).............................. 5,232 355,712
Hellenic Telecommunications Organization
SA (Telephone).......................... 18,700 405,757
------------
761,469
------------
HONG KONG--1.7%
Hongkong Electric Holdings Ltd.
(Electric Companies).................... 500,000 1,566,834
Swire Pacific Ltd. Class B
(Manufacturing (Diversified))........... 2,250,000 1,624,865
------------
3,191,699
------------
HUNGARY--0.5%
Magyar Tavkozlesi Rt Sponsored ADR
(Telecommunications (Long Distance)).... 17,300 484,400
Mol Magyar Olaj-Es Gazipari Rt. (Oil
(Domestic Integrated)).................. 17,000 415,172
------------
899,572
------------
INDIA--0.5%
Mahanagar Telephone Nigam Ltd. GDR
(Telecommunications (Long Distance)).... 115,000 1,049,375
INDONESIA--0.6%
PT Indosat (Telephone).................. 186,000 377,142
PT Indosat ADR (Telecommunications (Long
Distance)).............................. 38,000 752,875
------------
1,130,017
------------
ISRAEL--0.4%
Bank Hapoalim Ltd. (Banks (Major
Regional)).............................. 121,000 306,951
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
ISRAEL--CONTINUED
Koor Industries Ltd. (Manufacturing
(Diversified)).......................... 4,712 $ 509,504
------------
816,455
------------
ITALY--3.1%
Assicurazioni Generali (Insurance
(Life/Health)).......................... 25,000 891,382
Banca Intesa SPA (Banks (Major
Regional)).............................. 565,900 1,343,183
San Paolo-IMI SPA (Banks (Major
Regional)).............................. 75,664 1,024,539
Telecom Italia Mobile SPA (Telephone)... 147,900 872,201
Telecom Italia SPA (Telephone).......... 166,900 1,724,181
------------
5,855,486
------------
JAPAN--12.1%
77 Bank Ltd. (The) (Banks (Major
Regional)).............................. 110,000 960,520
Canon, Inc. (Office Equipment &
Supplies)............................... 55,000 1,388,429
Dai Nippon Printing Co., Ltd. (Specialty
Printing)............................... 80,000 1,199,801
Fuji Photo Film Co.
(Photography/Imaging)................... 28,000 1,001,159
Hitachi Credit Corp. (Consumer
Finance)................................ 55,000 1,092,534
Ito-Yokado Co., Ltd. (Retail (Food
Chains))................................ 20,000 1,193,511
Kao Corp. (Household Products
(Non-Durables))......................... 45,000 1,236,550
Kawasumi Laboratories, Inc. (Health Care
(Medical Products & Supplies)).......... 100,000 1,403,741
Kirin Beverage Corp. (Beverages
(Alcoholic))............................ 68,000 1,190,366
Mabuchi Motor Co., Ltd. (Electrical
Equipment).............................. 18,000 1,407,879
Nippon COMSYS Corp. (Engineering &
Construction)........................... 72,000 1,054,792
Nippon Telegraph & Telephone Corp.
(Telephone)............................. 1,450 1,416,156
Rinnai Corp. (Household Furnishings &
Appliances)............................. 60,000 1,340,837
Rohm Co., Ltd (Electronics
(Semiconductors))....................... 10,000 1,310,213
Sanwa Bank Ltd. (The) (Banks (Major
Regional)).............................. 115,000 1,117,447
Secom Co., Ltd. (Services (Commercial &
Consumer)).............................. 15,000 1,427,743
Shin-Etsu Chemical Co., Ltd. (Chemicals
(Specialty))............................ 40,000 1,241,516
Suzuki Motor Corp. (Automobiles)........ 90,000 1,278,265
Takeda Chemical Industries (Health Care
(Drugs-Major Pharmaceuticals)).......... 20,000 888,926
------------
23,150,385
------------
MALAYSIA--0.2%
Carlsberg Brewery Malaysia Berhad
(Beverages (Alcoholic))(c).............. 125,000 296,053
</TABLE>
4 See Notes to Financial Statements
<PAGE>
Phoenix-Aberdeen International Fund
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
MALAYSIA--CONTINUED
Malaysian Oxygen Berhad (Chemicals
(Specialty))(c)......................... 85,000 $ 164,967
------------
461,020
------------
MEXICO--1.1%
Coca-Cola Femsa SA Sponsored ADR
(Beverages (Non-Alcoholic))............. 53,000 957,312
Grupo Televisa SA Sponsored GDR
(Broadcasting (Television, Radio &
Cable))(b).............................. 18,000 752,625
Telefonos de Mexico SA Sponsored ADR
Class L (Telecommunications (Long
Distance)).............................. 6,000 479,625
------------
2,189,562
------------
NETHERLANDS--6.9%
ASM Lithography Holding NV (Equipment
(Semiconductor))(b)..................... 21,900 967,476
Benckiser NV B (Household Products (Non-
Durables)).............................. 31,000 1,679,040
Elsevier NV (Publishing)................ 65,600 833,393
Equant NV (Services (Data
Processing))(b)......................... 15,400 1,272,088
Fortis (NL) NV (Financial
(Diversified)).......................... 37,700 1,227,917
Getronics NV (Services (Data
Processing))............................ 32,700 1,265,083
IHC Caland NV (Oil & Gas (Drilling &
Equipment))............................. 9,591 378,574
ING Groep NV (Financial
(Diversified)).......................... 23,600 1,264,665
KPN NV (Telephone)...................... 16,900 818,158
Royal Dutch Petroleum Co. (Oil (Domestic
Integrated))............................ 39,000 2,177,586
VNU NV (Publishing)..................... 21,400 910,705
Wolters Klumer (Publishing)............. 11,500 463,545
------------
13,258,230
------------
NEW ZEALAND--0.2%
Telecom Corporation of New Zealand Ltd.
(Telephone)............................. 100,000 432,125
PHILIPPINES--0.7%
Ayala Land, Inc. (Financial
(Diversified)).......................... 2,000,000 643,889
Philippine Long Distance Telephone Co.
Sponsored ADR (Telecommunications (Long
Distance)).............................. 25,000 714,062
------------
1,357,951
------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
POLAND--0.2%
Elektrim Spolka Akcyjna SA (Distributors
(Food & Health))........................ 37,800 $ 441,297
SINGAPORE--1.6%
Rothmans Industries Ltd. (Tobacco)...... 220,000 1,747,520
United Overseas Bank Ltd. (Banks (Major
Regional)).............................. 205,000 1,354,995
------------
3,102,515
------------
SOUTH AFRICA--0.7%
Anglo American PLC (Metals Mining)(b)... 7,550 342,064
BOE Ltd. (Financial (Diversified))...... 222,320 210,290
Liberty Life Association of Africa
(Insurance (Life/ Health)).............. 32,530 438,081
South African Breweries PLC (Beverages
(Alcoholic))(b)......................... 48,000 385,538
------------
1,375,973
------------
SOUTH KOREA--0.7%
Pohang Iron & Steel Co. Ltd. (Iron &
Steel).................................. 14,000 1,294,072
SPAIN--3.6%
Argentaria, Caja Postal y Banco
Hipotecario de Espana SA (Banks (Major
Regional)).............................. 38,400 862,854
Banco Popular Espanol SA (Banks (Major
Regional)).............................. 21,700 1,590,550
Banco Santander Central Hispano SA
(Banks (Money Center)).................. 62,184 1,300,404
Iberdrola SA (Electric Companies)....... 55,100 791,604
Repsol SA (Oil & Gas (Refining &
Marketing))............................. 47,700 865,840
Telefonica SA (Telephone)............... 29,818 1,433,564
------------
6,844,816
------------
SWEDEN--5.2%
AstraZeneca Group PLC (Health Care
(Drugs-Major Pharmaceuticals))(b)....... 52,013 2,050,591
Electrolux AB (Household Furnishings &
Appliances)............................. 77,200 1,499,277
Mandamus AB (Real Estate Development)... 2,400 13,437
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix-Aberdeen International Fund
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
SWEDEN--CONTINUED
SSAB Svenskt Stal AB Series A (Iron &
Steel).................................. 38,000 $ 429,938
Sandvik AB Class B (Machinery
(Diversified)).......................... 21,200 463,647
Skandia Forsakrings AB (Insurance
(Life/Health)).......................... 123,800 2,129,919
Skandinaviska Enskilda Banken Class A
(Banks (Major Regional))................ 135,000 1,637,637
Telefonaktiebolaget LM Ericsson Class B
(Communications Equipment).............. 63,250 1,693,143
------------
9,917,589
------------
SWITZERLAND--5.5%
Credit Suisse Group (Banks (Major
Regional)).............................. 6,300 1,095,810
Nestle SA Registered (Foods)............ 1,120 2,017,945
Novartis AG Registered Shares (Health
Care (Drugs-Major Pharmaceuticals))..... 1,220 1,774,511
Roche Holding AG (Health Care
(Drugs-Major Pharmaceuticals)).......... 230 2,439,597
UBS AG (Banks (Major Regional))......... 7,450 2,161,362
Zurich Allied AG (Financial
(Diversified)).......................... 1,820 1,072,746
------------
10,561,971
------------
TAIWAN--0.3%
Standard Foods Taiwan Ltd. GDR
(Foods)(b).............................. 54,837 479,824
------------
TURKEY--0.3%
Yapi ve Kredi Bankasi AS (Banks (Major
Regional)).............................. 33,000,000 421,933
Yapi ve Kredi Bankasi AS Bonus Shares
(Banks (Major Regional))(d)............. 6,600,000 76,272
------------
498,205
------------
UNITED KINGDOM--20.7%
3i Group PLC (Investment
Banking/Brokerage)...................... 82,847 934,594
BG PLC (Natural Gas).................... 101,136 556,276
BOC Group PLC (Chemicals (Specialty))... 25,564 437,496
Bank of Scotland (Banks (Major
Regional)).............................. 91,062 1,268,033
Barclays PLC (Banks (Major Regional))... 39,908 1,210,554
Bass PLC (Beverages (Alcoholic))........ 33,000 487,020
Berkeley Group PLC (The)
(Homebuilding).......................... 50,337 552,525
British Aerospace PLC
(Aerospace/Defense)..................... 103,547 683,195
British American Tobacco PLC
(Tobacco)............................... 45,000 409,215
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
UNITED KINGDOM--CONTINUED
British Petroleum Co. PLC (Oil (Domestic
Integrated))............................ 159,299 $ 2,851,280
British Telecommunications PLC
(Telephone)............................. 139,698 2,330,315
Cable & Wireless PLC (Telephone)........ 62,757 774,331
Compass Group PLC (Services (Commercial
& Consumer))............................ 66,155 670,497
Debenhams PLC (Retail (Department
Stores))................................ 53,624 351,014
FirstGroup PLC (Services (Commercial &
Consumer)).............................. 104,000 603,275
GKN PLC (Auto Parts & Equipment)........ 39,606 661,623
Glaxo Wellcome PLC (Health Care
(Drugs-Major Pharmaceuticals)).......... 78,437 2,202,058
Granada Group PLC (Broadcasting
(Television, Radio & Cable))............ 22,281 456,288
HSBC Holdings PLC (Financial
(Diversified)).......................... 44,689 1,493,787
Hilton Group PLC (Gaming, Lottery &
Pari-mutuel Companies)(b)............... 116,380 510,046
Kingfisher PLC (Retail (Specialty))..... 77,667 976,345
Legal & General Group PLC (Insurance
(Multi-Line))........................... 317,446 927,067
Lloyds TSB Group PLC (Financial
(Diversified)).......................... 130,000 1,718,585
Logica PLC (Services (Data
Processing))............................ 113,952 1,057,241
National Westminster Bank PLC (Banks
(Major Regional))....................... 57,492 1,319,241
Norwich Union PLC (Insurance
(Life/Health)).......................... 87,500 620,433
PowerGen PLC (Electric Companies)....... 55,783 606,939
RMC Group PLC (Construction (Cement &
Aggregates))............................ 45,410 606,136
Reuters Holdings Group PLC
(Publishing)............................ 71,879 995,728
Rio Tinto PLC (Metals Mining)........... 42,911 629,163
Schroders PLC (Investment
Banking/Brokerage)...................... 26,200 545,361
Scottish and Southern Energy PLC
(Electric Companies).................... 46,212 437,639
Serco Group PLC (Services (Commercial &
Consumer)).............................. 16,532 336,436
Shell Transport & Trading Co. PLC (Oil
(Domestic Integrated)).................. 162,749 1,178,122
Siebe PLC (Machinery (Diversified))..... 136,254 621,162
SmithKline Beecham PLC (Health Care
(Drugs-Major Pharmaceuticals)).......... 102,448 1,336,293
Tesco PLC (Retail (Food Chains))........ 319,000 929,049
Thames Water PLC (Water Utilities)...... 32,536 516,147
Unilever PLC (Foods).................... 65,658 577,611
Vodafone Group PLC (Telecommunications
(Cellular/Wireless)).................... 108,200 2,061,497
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix-Aberdeen International Fund
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
UNITED KINGDOM--CONTINUED
Woolwich PLC (Consumer Finance)......... 73,116 $ 489,151
Zeneca Group PLC (Health Care
(Drugs-Major Pharmaceuticals)).......... 42,261 1,680,120
------------
39,608,888
------------
- - -------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $170,362,777) 184,458,406
- - -------------------------------------------------------------------------------
RIGHTS--0.0%
GREECE--0.0%
Alpha Credit Bank Rights (Banks (Major
Regional))(b)........................... 5,232 17,912
ITALY--0.0%
Banca Intesa SPA Rights (Banks (Major
Regional))(b)........................... 565,900 12,011
- - -------------------------------------------------------------------------------
TOTAL RIGHTS
(IDENTIFIED COST $0) 29,923
- - -------------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C> <C>
WARRANTS--0.0%
GERMANY--0.0%
Muenchener
Rueckversicherungs-Gesellschaft AG
Warrants (Insurance (Life/Health))(b)... 176 $ 5,245
- - -------------------------------------------------------------------------------
TOTAL WARRANTS
(IDENTIFIED COST $0) 5,245
- - -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--96.3%
(IDENTIFIED COST $170,362,777) 184,493,574(a)
Cash and receivables, less liabilities--3.7% 7,137,605
--------------
NET ASSETS--100.0% $ 191,631,179
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $22,882,424 and gross
depreciation of $8,816,859 for federal income tax purposes. At May 31,
1999, the aggregate cost of securities for federal income tax purposes was
$170,428,009.
(b) Non-income producing.
(c) Security valued at fair value as determined in good faith by or under the
direction of the trustees.
(d) Non-tradable bonus shares.
See Notes to Financial Statements
7
<PAGE>
Phoenix-Aberdeen International Fund
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Aerospace/Defense........................................................ 0.4%
Airlines................................................................. 1.0
Auto Parts & Equipment................................................... 1.1
Automobiles.............................................................. 3.3
Banks (Major Regional)................................................... 12.2
Banks (Money Center)..................................................... 0.7
Banks (Regional)......................................................... 1.0
Beverages (Alcoholic).................................................... 2.2
Beverages (Non-Alcoholic)................................................ 0.5
Broadcasting (Television, Radio & Cable)................................. 0.9
Chemicals (Diversified).................................................. 1.0
Chemicals (Specialty).................................................... 2.0
Communications Equipment................................................. 3.1
Construction (Cement & Aggregates)....................................... 1.1
Consumer Finance......................................................... 0.9
Containers & Packaging (Paper)........................................... 0.7
Distributors (Food & Health)............................................. 0.2
Electric Companies....................................................... 2.2
Electrical Equipment..................................................... 1.0
Electronics (Semiconductors)............................................. 0.7
Engineering & Construction............................................... 1.5
Equipment (Semiconductor)................................................ 0.5
Financial (Diversified).................................................. 4.1
Foods.................................................................... 2.8
Gaming, Lottery & Pari-Mutuel Companies.................................. 0.3
Health Care (Drugs-Major Pharmaceuticals)................................ 6.7
Health Care (Medical Products & Supplies)................................ 0.8
Homebuilding............................................................. 0.3
Household Furnishings & Appliances....................................... 1.5
Household Products (Non-Durables)........................................ 1.6
Insurance (Life/Health).................................................. 2.6
Insurance (Multi-Line)................................................... 2.3
Insurance (Property-Casualty)............................................ 0.8%
Investment Banking/Brokerage............................................. 0.8
Iron & Steel............................................................. 0.9
Machinery (Diversified).................................................. 0.6
Manufacturing (Diversified).............................................. 2.9
Metal Fabricators........................................................ 0.6
Metals Mining............................................................ 0.5
Natural Gas.............................................................. 1.0
Office Equipment & Supplies.............................................. 0.8
Oil & Gas (Drilling & Equipment)......................................... 0.2
Oil & Gas (Exploration & Production)..................................... 0.2
Oil & Gas (Refining & Marketing)......................................... 1.2
Oil (Domestic Integrated)................................................ 3.6
Oil (International Integrated)........................................... 0.9
Paper & Forest Products.................................................. 0.7
Photography/Imaging...................................................... 0.5
Publishing............................................................... 1.7
Real Estate Development.................................................. 0.0
Retail (Building Supplies)............................................... 0.9
Retail (Department Stores)............................................... 0.2
Retail (Food Chains)..................................................... 1.9
Retail (Specialty)....................................................... 1.2
Services (Commercial & Consumer)......................................... 1.6
Services (Data Processing)............................................... 1.9
Specialty Printing....................................................... 0.7
Telecommunications (Cellular/Wireless)................................... 1.4
Telecommunications (Long Distance)....................................... 2.0
Telephone................................................................ 7.6
Tobacco.................................................................. 1.2
Water Utilities.......................................................... 0.3
-----
100.0%
-----
-----
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Phoenix-Aberdeen International Fund
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $170,362,777) $ 184,493,574
Receivables
Fund shares sold 8,167,873
Investment securities sold 1,627,108
Dividends and interest 599,247
Tax reclaim 216,604
Prepaid expenses 4,336
--------------
Total assets 195,108,742
--------------
LIABILITIES
Foreign currency at value
(Identified cost $984,456) 984,420
Custodian 608,578
Payables
Fund shares repurchased 977,703
Investment securities purchased 660,642
Transfer agent fee 67,880
Distribution fee 55,097
Financial agent fee 15,417
Investment advisory fee 9,099
Trustees' fee 4,274
Accrued expenses 94,453
--------------
Total liabilities 3,477,563
--------------
NET ASSETS $ 191,631,179
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 161,548,502
Undistributed net investment income 1,045,481
Accumulated net realized gain 14,917,087
Net unrealized appreciation 14,120,109
--------------
NET ASSETS $ 191,631,179
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $171,894,858) 12,703,113
Net asset value per share $13.53
Offering price per share $13.53/(1-4.75%) $14.20
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $19,472,936) 1,504,359
Net asset value and offering price per share $12.94
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $263,385) 20,352
Net asset value and offering price per share $12.94
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 2,064,111
Interest 162,992
Foreign taxes withheld (189,221)
--------------
Total investment income 2,037,882
--------------
EXPENSES
Investment advisory fee 737,612
Distribution fee, Class A 222,229
Distribution fee, Class B 94,303
Distribution fee, Class C 267
Financial agent fee 99,916
Transfer agent 184,945
Custodian 101,472
Printing 36,107
Professional 16,951
Trustees 5,809
Registration 8,175
Miscellaneous 2,610
--------------
Total expenses 1,510,396
--------------
NET INVESTMENT INCOME 527,486
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 14,977,700
Net realized gain on foreign currency transactions 64,829
Net change in unrealized appreciation (depreciation) on
investments (4,218,181)
Net change in unrealized appreciation (depreciation) on foreign
currency and foreign currency transactions (32,629)
--------------
NET GAIN ON INVESTMENTS 10,791,719
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,319,205
--------------
--------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Phoenix-Aberdeen International Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
5/31/99 Year Ended
(Unaudited) 11/30/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 527,486 $ 612,150
Net realized gain (loss) 15,042,529 39,589,902
Net change in unrealized appreciation
(depreciation) (4,250,810) (634,648)
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 11,319,205 39,567,404
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (287,672) --
Net realized gains, Class A (34,388,042) (12,005,464)
Net realized gains, Class B (3,273,427) (942,871)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (37,949,141) (12,948,335)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (26,163,413 and
14,403,040 shares, respectively) 359,113,082 222,721,708
Net asset value of shares issued from
reinvestment of distributions
(2,262,839 and 829,298 shares, respectively) 29,643,188 10,631,599
Cost of shares repurchased (26,454,328 and
13,954,794 shares, respectively) (364,276,799) (218,052,596)
-------------- --------------
Total 24,479,471 15,300,711
-------------- --------------
CLASS B
Proceeds from sales of shares (1,287,343 and
1,090,651 shares, respectively) 16,890,772 16,507,911
Net asset value of shares issued from
reinvestment of distributions
(223,331 and 68,327 shares, respectively) 2,807,265 852,722
Cost of shares repurchased (1,127,706 and
786,659 shares, respectively) (14,961,820) (12,000,603)
-------------- --------------
Total 4,736,217 5,360,030
-------------- --------------
CLASS C
Proceeds from sales of shares (20,352 and 0
shares, respectively) 267,930 --
-------------- --------------
Total 267,930 --
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 29,483,618 20,660,741
-------------- --------------
NET INCREASE IN NET ASSETS 2,853,682 47,279,810
NET ASSETS
Beginning of period 188,777,497 141,497,687
-------------- --------------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME OF $1,045,481 AND $805,667,
RESPECTIVELY] $ 191,631,179 $ 188,777,497
-------------- --------------
-------------- --------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Phoenix-Aberdeen International Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30
5/31/99 -----------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.98 $ 13.89 $ 14.48 $ 12.20 $ 12.63 $ 11.16
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) 0.04(1) 0.06(1) 0.03(1) 0.04(1) 0.03(1) (0.01)
Net realized and unrealized gain
(loss) 0.65 3.27 1.01 2.28 0.42 1.48
----- --------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.69 3.33 1.04 2.32 0.45 1.47
----- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) -- (0.29) -- -- --
Dividends from net realized gains (3.11) (1.24) (1.34) (0.04) (0.88) --
----- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (3.14) (1.24) (1.63) (0.04) (0.88) --
----- --------- --------- --------- --------- ---------
Change in net asset value (2.45) 2.09 (0.59) 2.28 (0.43) 1.47
----- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 13.53 $ 15.98 $ 13.89 $ 14.48 $ 12.20 $ 12.63
----- --------- --------- --------- --------- ---------
----- --------- --------- --------- --------- ---------
Total return(2) 4.92%(4) 26.17% 8.21% 19.03% 4.12% 13.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $171,895 $171,463 $131,338 $135,524 $129,352 $167,918
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.46%(3) 1.37% 1.56% 1.57% 1.70% 1.47%
Net investment income 0.60%(3) 0.40% 0.22% 0.33% 0.23% 0.20%
Portfolio turnover 45%(4) 104% 167% 151% 236% 186%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ----------------------------------------------- 7/15/94 TO
(UNAUDITED) 1998 1997 1996 1995 11/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.44 $ 13.56 $ 14.22 $ 12.07 $ 12.60 $ 12.80
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) --(1) (0.05)(1) (0.08)(1) (0.05)(1) (0.07)(1) (0.01)
Net realized and unrealized gain
(loss) 0.61 3.17 1.00 2.24 0.42 (0.19)
----- -------- -------- -------- -------- -----
TOTAL FROM INVESTMENT OPERATIONS 0.61 3.12 0.92 2.19 0.35 (0.20)
----- -------- -------- -------- -------- -----
LESS DISTRIBUTIONS
Dividends from net investment income -- -- (0.24) -- -- --
Dividends from net realized gains (3.11) (1.24) (1.34) (0.04) (0.88) --
----- -------- -------- -------- -------- -----
TOTAL DISTRIBUTIONS (3.11) (1.24) (1.58) (0.04) (0.88) --
----- -------- -------- -------- -------- -----
Change in net asset value (2.50) 1.88 (0.66) 2.15 (0.53) (0.20)
----- -------- -------- -------- -------- -----
NET ASSET VALUE, END OF PERIOD $ 12.94 $ 15.44 $ 13.56 $ 14.22 $ 12.07 $ 12.60
----- -------- -------- -------- -------- -----
----- -------- -------- -------- -------- -----
Total return(2) 4.61%(4) 25.17% 7.37% 18.16% 3.28% (1.56)%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $19,473 $17,315 $10,159 $6,955 $3,261 $1,991
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.23%(3) 2.11% 2.31% 2.31% 2.50% 1.93%(3)
Net investment income (0.04)%(3) (0.34)% (0.55)% (0.39)% (0.61)% 0.36%(3)
Portfolio turnover 45%(4) 104% 167% 151% 236% 186%
</TABLE>
(1) Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
See Notes to Financial Statements
11
<PAGE>
Phoenix-Aberdeen International Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS C
-----------
FROM
INCEPTION
3/30/99 TO
5/31/99
(UNAUDITED)
<C> <S>
Net asset value, beginning of period $ 12.82
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.02(1)
Net realized and unrealized gain
(loss) 0.10
-----
TOTAL FROM INVESTMENT OPERATIONS 0.12
-----
LESS DISTRIBUTIONS
Dividends from net investment income --
Dividends from net realized gains --
-----
TOTAL DISTRIBUTIONS --
-----
Change in net asset value 0.12
-----
NET ASSET VALUE, END OF PERIOD $ 12.94
-----
-----
Total return(2) 0.94%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $263
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.44%(3)
Net investment income 1.14%(3)
Portfolio turnover 45%(4)
</TABLE>
(1) Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
12
See Notes to Financial Statements
<PAGE>
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES FUND
INVESTMENTS AT MAY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C> <C>
COMMON STOCKS--97.4%
REAL ESTATE INVESTMENT TRUSTS--96.3%
DIVERSIFIED--13.3%
Colonial Properties Trust......... 55,000 $ 1,543,437
Crescent Real Estate Equities
Co................................ 61,400 1,416,037
Vornado Realty Trust.............. 56,500 2,192,906
-----------
5,152,380
-----------
HEALTH CARE--3.0%
Nationwide Health Properties,
Inc............................... 56,400 1,149,150
INDUSTRIAL/OFFICE--40.1%
INDUSTRIAL--7.4%
CenterPoint Properties Trust...... 2,500 89,687
First Industrial Realty Trust,
Inc............................... 59,000 1,596,687
Weeks Corp........................ 37,300 1,165,625
-----------
2,851,999
-----------
MIXED--8.7%
Duke Realty Investments, Inc...... 78,400 1,813,000
Reckson Associates Realty Corp.... 60,700 1,570,612
-----------
3,383,612
-----------
OFFICE--24.0%
Alexandria Real Estate Equities,
Inc............................... 30,000 948,750
Boston Properties, Inc............ 72,200 2,594,687
Equity Office Properties Trust.... 25,000 706,250
Highwoods Properties, Inc......... 20,000 526,250
Mack-Cali Realty Corp............. 57,900 1,874,513
Spieker Properties, Inc........... 65,000 2,660,938
-----------
9,311,388
-----------
- - ---------------------------------------------------------------------
TOTAL INDUSTRIAL/ OFFICE 15,546,999
- - ---------------------------------------------------------------------
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C> <C>
LODGING/RESORTS--0.8%
Patriot American Hospitality,
Inc.(b)........................... 59,356 $ 307,908
RESIDENTIAL--19.8%
APARTMENTS--15.8%
Apartment Investment & Management
Co................................ 20,000 840,000
Avalonbay Communities, Inc........ 40,700 1,439,763
Equity Residential Properties
Trust............................. 54,800 2,626,975
Essex Property Trust, Inc......... 38,400 1,233,600
-----------
6,140,338
-----------
MANUFACTURED HOMES--4.0%
Manufactured Home Communities,
Inc............................... 41,500 1,073,813
Sun Communities, Inc.............. 13,200 482,625
-----------
1,556,438
-----------
- - ---------------------------------------------------------------------
TOTAL RESIDENTIAL 7,696,776
- - ---------------------------------------------------------------------
RETAIL--17.9%
OUTLET CENTERS--3.1%
Chelsea GCA Realty, Inc........... 31,600 1,198,825
REGIONAL MALLS--8.7%
CBL & Associates Properties,
Inc............................... 10,000 258,125
General Growth Properties, Inc.... 10,000 384,375
Macerich Co. (The)................ 43,800 1,157,963
Simon Property Group, Inc......... 22,208 649,584
Urban Shopping Centers, Inc....... 28,000 924,000
-----------
3,374,047
-----------
STRIP CENTERS--6.1%
Developers Diversified Realty
Corp.............................. 49,200 811,800
JDN Realty Corp................... 25,000 546,875
Kimco Realty Corp................. 25,000 998,438
-----------
2,357,113
-----------
- - ---------------------------------------------------------------------
TOTAL RETAIL 6,929,985
- - ---------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Phoenix-Duff & Phelps Real Estate Securities Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C> <C>
SELF STORAGE--1.4%
Storage USA, Inc.................. 16,700 $ 557,363
- - ---------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $36,171,769) 37,340,561
- - ---------------------------------------------------------------------
REAL ESTATE OPERATING COMPANIES--1.1%
DIVERSIFIED--0.1%
Vornado Operating, Inc.(b)........ 4,075 28,525
HEALTH CARE--0.0%
OMEGA Worldwide Inc.(b)........... 4,641 19,724
INDUSTRIAL/OFFICE--1.0%
MIXED--1.0%
Reckson Services Industries,
Inc.(b)........................... 26,636 372,904
- - ---------------------------------------------------------------------
TOTAL REAL ESTATE OPERATING COMPANIES
(IDENTIFIED COST $107,149) 421,153
- - ---------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $36,278,918) 37,761,714
- - ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- -------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.8%
COMMERCIAL PAPER--2.8%
Koch Industries, Inc. 4.90%,
6/1/99............................ A-1+ $ 1,075 $ 1,075,000
- - ----------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,075,000) 1,075,000
- - ----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--100.2%
(IDENTIFIED COST $37,353,918) 38,836,714(a)
Cash and receivables, less liabilities--(0.2%) (59,780)
-------------
NET ASSETS--100.0% $ 38,776,934
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $4,033,384 and gross
depreciation of $3,085,954 for federal income tax purposes. At May 31,
1999, the aggregate cost of securities for federal income tax purposes was
$37,889,284.
(b) Non-income producing.
14
See Notes to Financial Statements
<PAGE>
Phoenix-Duff & Phelps Real Estate Securities Fund
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $37,353,918) $ 38,836,714
Cash 964
Receivables
Dividends and interest 62,303
Fund shares sold 27,457
Prepaid expenses 1,012
--------------
Total assets 38,928,450
--------------
LIABILITIES
Payables
Fund shares repurchased 55,390
Transfer agent fee 20,481
Distribution fee 18,644
Investment advisory fee 18,175
Financial agent fee 4,581
Trustees' fee 4,274
Accrued expenses 29,971
--------------
Total liabilities 151,516
--------------
NET ASSETS $ 38,776,934
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 37,676,062
Undistributed net investment income 236,947
Accumulated net realized loss (618,871)
Net unrealized appreciation 1,482,796
--------------
NET ASSETS $ 38,776,934
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $22,219,911) 1,725,935
Net asset value per share $12.87
Offering price per share $12.87/(1-4.75%) $13.51
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $16,557,023) 1,293,142
Net asset value and offering price per share $12.80
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 1,303,203
Interest 18,445
--------------
Total investment income 1,321,648
--------------
EXPENSES
Investment advisory fee 142,795
Distribution fee, Class A 27,592
Distribution fee, Class B 80,028
Financial agent fee 27,610
Transfer agent 58,371
Professional 9,162
Registration 8,156
Trustees 5,809
Custodian 3,990
Printing 9,806
--------------
Total expenses 373,319
Less expenses borne by investment adviser (66,213)
--------------
Net expenses 307,106
--------------
NET INVESTMENT INCOME 1,014,542
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (547,353)
Net change in unrealized appreciation (depreciation) on
investments 2,461,448
--------------
NET GAIN ON INVESTMENTS 1,914,095
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,928,637
--------------
--------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Phoenix-Duff & Phelps Real Estate Securities Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
5/31/99 Year Ended
(Unaudited) 11/30/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,014,542 $ 1,854,142
Net realized gain (loss) (547,353) (70,514)
Net change in unrealized appreciation
(depreciation) 2,461,448 (12,098,214)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 2,928,637 (10,314,586)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (807,137) (967,687)
Net investment income, Class B (534,394) (535,003)
Net realized gains, Class A -- (2,254,756)
Net realized gains, Class B -- (1,514,857)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (1,341,531) (5,272,303)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (94,299 and
445,657 shares, respectively) 1,153,800 6,419,885
Net asset value of shares issued from
reinvestment of distributions
(64,737 and 207,094 shares, respectively) 741,532 3,035,928
Cost of shares repurchased (448,385 and 855,051
shares, respectively) (5,249,589) (11,951,570)
-------------- --------------
Total (3,354,257) (2,495,757)
-------------- --------------
CLASS B
Proceeds from sales of shares (101,596 and
362,036 shares, respectively) 1,219,844 5,231,142
Net asset value of shares issued from
reinvestment of distributions
(37,542 and 120,031 shares, respectively) 429,056 1,757,836
Cost of shares repurchased (342,079 and 400,698
shares, respectively) (4,028,480) (5,408,854)
-------------- --------------
Total (2,379,580) 1,580,124
-------------- --------------
DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (5,733,837) (915,633)
-------------- --------------
NET DECREASE IN NET ASSETS (4,146,731) (16,502,522)
NET ASSETS
Beginning of period 42,923,665 59,426,187
-------------- --------------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME (LOSS) OF $236,947 AND
$563,936, RESPECTIVELY] $ 38,776,934 $ 42,923,665
-------------- --------------
-------------- --------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Phoenix-Duff & Phelps Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ----------------------------------------- 3/1/95 TO
(UNAUDITED) 1998 1997 1996 11/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.25 $ 16.39 $ 13.14 $ 10.72 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.33(4)(5) 0.55(4)(5) 0.49(4)(5) 0.53(5) 0.43(4)(5)
Net realized and unrealized gain
(loss) 0.71 (3.18) 3.52 2.50 0.55
----- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.04 (2.63) 4.01 3.03 0.98
----- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.42) (0.44) (0.51) (0.59) (0.26)
Dividends from net realized gains -- (1.07) (0.25) (0.02) --
----- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.42) (1.51) (0.76) (0.61) (0.26)
----- --------- --------- --------- ---------
Change in net asset value 0.62 (4.14) 3.25 2.42 0.72
----- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.87 $ 12.25 $ 16.39 $ 13.14 $ 10.72
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
Total return(1) 9.04%(3) (17.42)% 31.44% 29.20% 9.87%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $22,220 $24,686 $36,336 $22,872 $13,842
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.30%(2) 1.31% 1.30% 1.30% 1.30%(2)
Net investment income 5.65%(2) 3.79% 3.34% 4.55% 5.79%(2)
Portfolio turnover 8%(3) 11% 54% 24% 9%(3)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ----------------------------------------- 3/1/95 TO
(UNAUDITED) 1998 1997 1996 11/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.19 $ 16.32 $ 13.10 $ 10.68 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.29(4)(6) 0.43(4)(6) 0.38(4)(6) 0.46(6) 0.36(4)(6)
Net realized and unrealized gain
(loss) 0.70 (3.15) 3.50 2.47 0.56
----- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.99 (2.72) 3.88 2.93 0.92
----- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.38) (0.34) (0.41) (0.49) (0.24)
Dividends from net realized gains -- (1.07) (0.25) (0.02) --
----- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.38) (1.41) (0.66) (0.51) (0.24)
----- --------- --------- --------- ---------
Change in net asset value 0.61 (4.13) 3.22 2.42 0.68
----- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.80 $ 12.19 $ 16.32 $ 13.10 $ 10.68
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
Total return(1) 8.64%(3) (18.01)% 30.44% 28.25% 9.21%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $16,557 $18,237 $23,091 $8,259 $2.239
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.05%(2) 2.06% 2.05% 2.05% 2.05%(2)
Net investment income 4.88%(2) 3.07% 2.55% 3.95% 5.03%(2)
Portfolio turnover 8%(3) 11% 54% 24% 9%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of
$0.02, $0.02, $0.04, $0.07 and $0.12, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of
$0.02, $0.02, $0.04, $0.07 and $0.12, respectively.
See Notes to Financial Statements
17
<PAGE>
PHOENIX-GOODWIN EMERGING MARKETS BOND FUND
INVESTMENTS AT MAY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
CORPORATE BONDS--1.4%
TELECOMMUNICATIONS (LONG DISTANCE)--1.4%
Interamericas Communications Corp.
14%, 10/27/07....................... NR $ 2,000 $ 1,300,000
- - -------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $1,063,933) 1,300,000
- - -------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES--66.4%
ALGERIA--2.5%
Algeria Tranche A 7.188%,
3/4/00(b)........................... NR 1,533 1,429,833
Algeria Tranche 3 9.581%,
9/4/10(h)........................... NR 300,000 912,514
------------
2,342,347
------------
ARGENTINA--15.2%
Republic of Argentina RegS 8.75%,
7/10/02(e).......................... Ba 5,010 4,192,757
Republic of Argentina RegS 11.75%,
2/12/07(e).......................... Ba 8,000 6,614,961
Republic of Argentina Bocon Pro1 M1,
PIK interest capitalization, 3%,
4/1/07(b)(e)........................ Ba 5,416 3,536,491
------------
14,344,209
------------
BRAZIL--11.2%
Brazil MYDFA Trust Certificates RegS
5.875%, 9/15/07(b).................. NR 8,665 5,567,463
Republic of Brazil Bearer 5%,
4/15/09(b).......................... B 1,500 855,000
Republic of Brazil NMB-L Bearer
5.938%, 4/15/09(b).................. B 1,500 966,562
Republic of Brazil NMB-L Registered
Series RG 5.938%, 4/15/09(b)........ B 4,950 3,189,656
------------
10,578,681
------------
BULGARIA--3.3%
Republic of Bulgaria FLIRB Bearer
Series A 2.50%, 7/28/12(b).......... B 3,607 2,087,509
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
BULGARIA--CONTINUED
Republic of Bulgaria FLIRB RegA
2.50%, 7/28/12(b)................... B $ 1,250 $ 723,437
Republic of Bulgaria FLIRB Series B
3%, 7/28/12(b)...................... B 508 294,047
------------
3,104,993
------------
ECUADOR--5.5%
Ecuador Bearer PDI, PIK interest
capitalization, 6%, 2/27/15(b)(n)... B 7,481 2,842,894
Ecuador Global Bearer Series IE 6%,
12/21/04(b)......................... B 800 492,000
Republic of Ecuador RegS 11.25%,
4/25/02............................. B 2,500 1,854,687
------------
5,189,581
------------
IVORY COAST--0.1%
Ivory Coast PDI Series F 1.90%,
3/29/18(f).......................... NR 614 26,436
Ivory Coast FLIRB Series FRF 2%,
3/29/18(b)(f)....................... NR 950 36,344
------------
62,780
------------
MACEDONIA--1.0%
Macedonia C Bond, PIK interest
capitalization 5.893%, 7/2/12(b).... NR 2,119 905,838
MEXICO--7.6%
Mexican Cetes 0%, 1/13/00........... NR 1,271 1,123,921
United Mexican States 6.63%,
12/31/19(l)......................... Ba 8,250 1,010,958
United Mexican States Global Bond
11.50%, 5/15/26..................... Ba 4,500 4,989,375
------------
7,124,254
------------
MOLDOVA--0.9%
Republic of Moldova RegS 9.875%,
6/13/02............................. B 2,000 830,000
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
NIGERIA--1.6%
Nigeria Promissory Notes Series RC
5.092%, 1/5/10...................... NR $ 1,318 $ 859,900
Nigeria Series WW 6.25%,
11/15/20(b)......................... NR 1,000 610,000
------------
1,469,900
------------
PAKISTAN--1.3%
Islamic Republic of Pakistan RegS
11.50%, 12/22/99.................... Caa 1,500 1,237,500
PANAMA--0.5%
Republic of Panama 8.875%,
9/30/27............................. Ba 500 442,500
RUSSIA--6.5%
Oblast Nizhniy Novgorod RegS 8.75%,
10/3/02(g).......................... Caa 9,000 1,620,000
Russia Treasury Bill GKO Series
21133 0%, 6/16/99(g)................ Ca 10 78
Russia Treasury Bill OFZ Linked
Notes 14%, 9/12/01(g)............... NR 52,885 191,823
Russian Federal Loan Bond Series
25022 15%, 2/23/00(g)............... NR 25,556 234,375
Russian Federal Loan Bond OFZ Series
25030 0%, 12/15/01(g)............... NR 47 370
Russian Federal Loan Bond OFZ Series
27001 30%, 2/6/02(b)(g)............. NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27002 30%, 5/22/02(b)(g)............ NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27003 30%, 6/5/02(b)(g)............. NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27004 30%, 9/18/02(b)(g)............ NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27005 30%, 10/9/02(b)(g)............ NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27006 30%, 1/22/03(b)(g)............ NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27007 30%, 2/5/03(b)(g)............. NR 1,365 10,809
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
RUSSIA--CONTINUED
Russian Federal Loan Bond OFZ Series
27008 30%, 5/21/03(b)(g)............ NR $ 1,365 $ 10,809
Russian Federal Loan Bond OFZ Series
27009 30%, 6/4/03(b)(g)............. NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27010 30%, 9/17/03(b)(g)............ NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
27011 30%, 10/8/03(b)(g)............ NR 1,365 10,809
Russian Federal Loan Bond OFZ Series
28001 30%, 1/21/04(b)(g)............ NR 1,365 10,809
Russian Federation RegS 11.75%,
6/10/03............................. B 4,000 1,980,000
Russian Federation RegS 8.75%,
7/24/05............................. B 2,000 865,000
Russian Federation RegS 11%,
7/24/18............................. B 418 181,830
Russian Federation RegS 12.75%,
6/24/28............................. B 2,000 960,000
------------
6,163,184
------------
TURKEY--1.3%
Turkey Treasury Bill 0%,
10/6/99(j).......................... NR 640,000 1,215,811
UKRAINE--2.4%
EM Sovereign Finance BV 0%,
9/22/00............................. NR 8,320 2,246,400
VENEZUELA--5.5%
Republic of Venezuela NMB-A 6.063%,
12/18/05(b)......................... B 1,647 1,222,957
Republic of Venezuela FLIRB Series A
6%, 3/31/07(b)...................... B 762 561,901
Republic of Venezuela FLIRB Series B
6%, 3/31/07(b)...................... B 1,905 1,404,753
Republic of Venezuela 13.625%,
8/15/18............................. B 1,500 1,350,000
Republic of Venezuela 9.25%,
9/15/27............................. B 1,000 633,750
------------
5,173,361
------------
- - -------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $70,315,141) 62,431,339
- - -------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
FOREIGN CORPORATE BONDS--26.4%
ARGENTINA--3.0%
Imasac SA RegS 11%, 5/2/05 (Iron &
Steel).............................. B $ 1,500 $ 967,500
Industrias Metalurgicas Pescarmona
SA Series 2 144A 9.50%, 5/31/02
(Metals Mining)(c).................. B 4,000 1,890,000
------------
2,857,500
------------
BRAZIL--10.4%
Companhia Brasileira de Petroleo
Ipiranga 10.625%, 2/25/02 (Oil & Gas
(Exploration & Production))(b)...... NR 1,000 910,000
Globo Cabo SA Series B 12.625%,
6/18/04 (Broadcasting (Television,
Radio & Cable))..................... B 3,000 2,670,000
Localiza Rent a Car 10.25%, 10/1/05
(Services (Commercial &
Consumer)).......................... B 1,500 1,087,500
Net Sat Servicos Ltda. 12.75%,
8/15/04 (Broadcasting (Television,
Radio & Cable))..................... Caa 1,560 1,248,000
Net Sat Servicos Ltda. RegS 144A
12.75%, 8/5/04 (Broadcasting
(Television, Radio & Cable))(c)..... Caa 1,070 807,850
Radio e Televisao Bandeirantes Ltd.
144A 12.875%, 5/15/06 (Broadcasting
(Television, Radio & Cable))(c)..... B 1,500 637,500
Tevecap SA 12.625%, 11/26/04
(Broadcasting (Television, Radio &
Cable))............................. Caa 3,600 2,412,000
------------
9,772,850
------------
INDONESIA--3.8%
APP Finance II Mauritius Ltd. 12%,
12/29/49 (Paper & Forest
Products)(b)........................ Caa 3,890 2,450,700
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
INDONESIA--CONTINUED
Indah Kiat International Finance
6.15%, 3/14/00 (Paper & Forest
Products)(h)........................ Caa 160,000 $ 1,152,127
------------
3,602,827
------------
KAZAKHSTAN--1.5%
Kazkommertsbank International RegS
11.25%, 5/8/01 (Banks (Major
Regional)).......................... B $ 2,000 1,400,000
MEXICO--6.7%
Alestra SA de RL de CV 144A 12.125%,
5/15/06 (Telephone)(c).............. B 950 912,000
Altos Hornos de Mexico SA Series B
11.875%, 4/30/04 (Metals
Mining)(m).......................... Caa 2,250 708,750
Corporacion GEO SA de CV RegS Series
1 10%, 5/23/02 (Consumer Finance)... NR 1,310 1,198,650
Grupo Transportacion Ferroviaria
Mexicana SA de CV 0%, 6/15/09
(Railroads)(b)...................... B 1,045 642,675
Innova S de R.L. 12.875%, 4/1/07
(Publishing)........................ B 1,000 825,000
Nacional Financiera SNC 22%, 5/20/02
(Financial (Diversified))(k)........ NR 20,000 1,956,765
------------
6,243,840
------------
ROMANIA--1.0%
Renel RA 7.75%, 2/21/02 (Electric
Companies)(b)....................... NR 1,200 948,000
- - -------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $25,527,300) 24,825,017
- - -------------------------------------------------------------------------
</TABLE>
20 See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
<TABLE>
<CAPTION>
PAR
MOODY'S VALUE
RATING (000) VALUE
-------- --------- ------------
<S> <C> <C> <C>
FOREIGN CONVERTIBLE BONDS--1.9%
CANADA--0.4%
PLD Telecom Cv. 144A 9%, 6/1/06
(Telephone)(c)...................... NR $ 600 $ 348,000
RUSSIA--1.5%
Lukinter Finance Cv. RegS 3.50%,
5/6/02 (Oil (International
Integrated))........................ CCC-(d) 2,000 1,410,000
- - -------------------------------------------------------------------------
TOTAL FOREIGN CONVERTIBLE BONDS
(IDENTIFIED COST $1,720,000) 1,758,000
- - -------------------------------------------------------------------------
<CAPTION>
SHARES
---------
<S> <C> <C> <C>
WARRANTS--0.2%
FirstCom Corp. Warrants(m).......... 70,000 192,500
- - -------------------------------------------------------------------------
TOTAL WARRANTS
(IDENTIFIED COST $0) 192,500
- - -------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--96.3%
(IDENTIFIED COST $98,626,374) 90,506,856
- - -------------------------------------------------------------------------
<CAPTION>
PAR
VALUE
(000) VALUE
--------- ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.5%
FEDERAL AGENCY SECURITIES--4.5%
Fannie Mae 4.70%, 6/1/99............ $ 4,250 $ 4,250,000
- - -------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $4,250,000) 4,250,000
- - -------------------------------------------------------------------------
</TABLE>
TOTAL INVESTMENTS--100.8%
(IDENTIFIED COST $102,876,374) 94,756,856(a)
Cash and receivables, less liabilities--(0.8%) (727,333)
------------
NET ASSETS--100.0% $ 94,029,523
------------
------------
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $5,286,534 and gross
depreciation of $15,093,484 for federal income tax purposes. At May 31,
1999, the aggregate cost of securities for federal income tax purposes was
$104,563,806.
(b) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1999,
these securities amounted to a value of $4,595,350 or 4.9% of net assets.
(d) As rated by Standard & Poors, Fitch or Duff & Phelps.
(e) Par value represents Argentine Pesos.
(f) Par value represents French Francs.
(g) Par value represents Russian Rubles.
(h) Par value represents Japanese Yens.
(i) Par value represents Euro.
(j) Par value represents Turkish Liras rounded in millions.
(k) Par value represents Mexican Pesos.
(l) Rights incorporated as a unit.
(m) Non-income producing.
(n) All or a portion segregated as collateral.
See Notes to Financial Statements
21
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $102,876,374) $ 94,756,856
Foreign currency at value
(Identified cost 238,263) 226,576
Unrealized appreciation on forward
foreign currency contracts 34,606
Receivables
Interest 3,084,324
Fund shares sold 1,022,891
Investment securities sold 283,173
Prepaid expenses 1,955
--------------
Total assets 99,410,381
--------------
LIABILITIES
Custodian 39,670
Payables
Investment securities purchased 5,044,970
Fund shares repurchased 99,686
Investment advisory fee 61,033
Distribution fee 50,743
Transfer agent fee 28,329
Financial agent fee 7,714
Trustees' fee 5,489
Accrued expenses 43,224
--------------
Total liabilities 5,380,858
--------------
NET ASSETS $ 94,029,523
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 146,339,361
Undistributed net investment income 1,566,820
Accumulated net realized loss (45,771,738)
Net unrealized depreciation (8,104,920)
--------------
NET ASSETS $ 94,029,523
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $46,823,174) 6,562,685
Net asset value per share $7.13
Offering price per share $7.13/(1-4.75%) $7.49
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $44,672,517) 6,324,120
Net asset value and offering price per share $7.06
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,533,832) 357,288
Net asset value and offering price per share $7.09
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 9,028,868
--------------
Total investment income 9,028,868
--------------
EXPENSE
Investment advisory fee 302,439
Distribution fee, Class A 51,618
Distribution fee, Class B 189,740
Distribution fee, Class C 7,007
Financial agent fee 44,635
Transfer agent 109,689
Custodian 27,870
Registration 17,275
Printing 9,826
Professional 7,653
Trustees 7,025
Miscellaneous 5,760
--------------
Total expenses 780,537
Custodian fees paid indirectly (1,077)
--------------
Net expenses 779,460
--------------
NET INVESTMENT INCOME 8,249,408
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 2,963,114
Net realized loss on foreign currency transactions (20,138)
Net change in unrealized appreciation (depreciation)
on investments (5,153,199)
Net change in unrealized appreciation (depreciation) on
foreign currency and foreign currency transactions 52,064
--------------
NET LOSS ON INVESTMENTS (2,158,159)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,091,249
--------------
--------------
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
5/31/99 Year Ended
(Unaudited) 11/30/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 8,249,408 $ 13,088,232
Net realized gain (loss) 2,942,976 (43,148,647)
Net change in unrealized appreciation
(depreciation) (5,101,135) 1,569,334
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS 6,091,249 (28,491,081)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (3,458,995) (5,581,936)
Net investment income, Class B (3,060,140) (3,942,930)
Net investment income, Class C (112,756) (54,521)
Net realized gains, Class A -- (1,201,906)
Net realized gains, Class B -- (697,910)
Net realized gains, Class C -- --
In excess of net realized gains, Class A -- (6,002,330)
In excess of net realized gains, Class B -- (3,485,367)
In excess of net realized gains, Class C -- --
Tax return of capital, Class A -- (1,984,297)
Tax return of capital, Class B -- (1,343,438)
Tax return of capital, Class C -- (14,524)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (6,631,891) (24,309,159)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (1,848,976 and
2,907,456 shares, respectively) 12,734,817 27,208,118
Net asset value of shares issued from
reinvestment of distributions
(173,761 and 1,029,832 shares, respectively) 1,178,919 10,935,153
Cost of shares repurchased (1,255,762 and
3,428,413 shares, respectively) (8,590,657) (34,342,515)
-------------- --------------
Total 5,323,079 3,800,756
-------------- --------------
CLASS B
Proceeds from sales of shares (1,700,405 and
3,220,244 shares, respectively) 11,776,693 30,065,148
Net asset value of shares issued from
reinvestment of distributions
(208,692 and 492,109 shares, respectively) 1,403,389 4,864,295
Cost of shares repurchased (808,748 and
1,516,158 shares, respectively) (5,489,153) (13,762,067)
-------------- --------------
Total 7,690,929 21,167,376
-------------- --------------
CLASS C
Proceeds from sales of shares (256,804 and
170,364 shares, respectively) 1,827,347 1,509,747
Net asset value of shares issued from
reinvestment of distributions
(6,166 and 2,515 shares, respectively) 42,915 19,878
Cost of shares repurchased (73,736 and 4,825
shares, respectively) (513,277) (46,423)
-------------- --------------
Total 1,356,985 1,483,202
-------------- --------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 14,370,993 26,451,334
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 13,830,351 (26,348,906)
NET ASSETS
Beginning of period 80,199,172 106,548,078
-------------- --------------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME AND DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME OF $1,566,820 AND
($50,697), RESPECTIVELY] $ 94,029,523 $ 80,199,172
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ----------------------------------------- 9/5/95 TO
(UNAUDITED) 1998 1997 1996 11/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.20 $ 12.84 $ 14.80 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.69 1.32 1.38(4) 1.26(5) 0.25(4)(5)
Net realized and unrealized gain (loss) (0.19) (4.22) 0.17 4.56 0.18
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.50 (2.90) 1.55 5.82 0.43
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.57) (1.00) (1.28) (1.20) (0.25)
Dividends from net realized gains -- (0.23) (2.23) -- --
Distributions in excess of net realized
gains -- (1.16) -- -- --
Return of capital -- (0.35) -- -- --
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.57) (2.74) (3.51) (1.20) (0.25)
----------- --------- --------- --------- ---------
Change in net asset value (0.07) (5.64) (1.96) 4.62 0.18
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 7.13 $ 7.20 $ 12.84 $ 14.80 $ 10.18
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return(1) 7.66%(3) (27.20)% 11.91% 60.18% 4.40%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $46,823 $41,725 $67,875 $29,661 $12,149
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.57%(2)(7) 1.43% 1.40%(7) 1.50% 1.50%(2)
Net investment income 20.82%(2) 13.74% 9.90% 10.41% 10.48%(2)
Portfolio turnover 127%(3) 405% 614% 378% 38%(3)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ----------------------------------------- 9/5/95 TO
(UNAUDITED) 1998 1997 1996 11/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.13 $ 12.77 $ 14.78 $ 10.18 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.67 1.23 1.26(4) 1.19(6) 0.22(4)(6)
Net realized and unrealized gain (loss) (0.20) (4.18) 0.18 4.53 0.20
----------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.47 (2.95) 1.44 5.72 0.42
----------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.54) (0.97) (1.22) (1.12) (0.24)
Dividends from net realized gains -- (0.23) (2.23) -- --
Distributions in excess of net realized
gains -- (1.16) -- -- --
Return of capital -- (0.33) -- -- --
----------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.54) (2.69) (3.45) (1.12) (0.24)
----------- --------- --------- --------- ---------
Change in net asset value (0.07) (5.64) (2.01) 4.60 0.18
----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 7.06 $ 7.13 $ 12.77 $ 14.78 $ 10.18
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total return(1) 7.16%(3) (27.86)% 11.07% 58.94% 4.22%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $44,673 $37,270 $38,673 $9,713 $596
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.32%(2)(7) 2.20% 2.15%(7) 2.25% 2.25%(2)
Net investment income 20.07%(2) 12.98% 9.14% 9.79% 10.29%(2)
Portfolio turnover 127%(3) 405% 614% 378% 38%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.03, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.03, respectively.
(7) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
24
See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Emerging Markets Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS C
-------------------------------
SIX MONTHS FROM
ENDED INCEPTION
5/31/99 3/26/98 TO
(UNAUDITED) 11/30/98
<S> <C> <C>
Net asset value, beginning of period $ 7.17 $ 12.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.66 0.85(4)
Net realized and unrealized gain (loss) (0.20) (5.10)
----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.46 (4.25)
----- -----
LESS DISTRIBUTIONS
Dividends from net investment income (0.54) (0.66)
Dividends from net realized gains -- --
Distributions in excess of net realized gains -- --
Return of capital -- (0.17)
----- -----
TOTAL DISTRIBUTIONS (0.54) (0.83)
----- -----
Change in net asset value (0.08) (5.08)
----- -----
NET ASSET VALUE, END OF PERIOD $ 7.09 $ 7.17
----- -----
----- -----
Total return(1) 7.12%(3) (35.33)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $2,534 $1,205
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.33%(2)(5) 2.29%(2)
Net investment income 20.16%(2) 15.59%(2)
Portfolio turnover 127%(3) 405%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
See Notes to Financial Statements
25
<PAGE>
PHOENIX-GOODWIN TAX-EXEMPT BOND FUND
INVESTMENTS AT MAY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS -- 96.2%
ALABAMA--3.1%
Alabama Special Care Facilities
Financing Authority 5%, 11/1/25... AA+ $ 3,500 $ 3,303,125
ALASKA--1.1%
Valdez Marine Terminal Revenue 7%,
12/1/25(c)........................ AA+ 1,125 1,220,625
ARIZONA--1.0%
Pima County Sewer Revenue
Pre-refunded 6.75%, 7/1/15 (FGIC
Insured).......................... AAA 460 491,625
Pima County Sewer Revenue
Unrefunded 6.75%, 7/1/15 (FGIC
Insured).......................... AAA 540 574,425
-----------
1,066,050
-----------
ARKANSAS--1.2%
Drew County Public Facilities
Board Series A-2 7.90%, 8/1/11
(FNMA Collateralized)............. Aaa(b) 231 247,363
Jacksonville Residential Housing
Facilities Board Series A-2 7.90%,
1/1/11 (FNMA Collateralized)...... Aaa(b) 404 430,241
Lonoke County Residential Housing
Facilities Board Series A-2 7.90%,
4/1/11 (FNMA Collateralized)...... Aaa(b) 392 427,624
Stuttgart Public Facilities Board
Series A-2 7.90%, 9/1/11 (FNMA
Collateralized)................... Aaa(b) 193 204,965
-----------
1,310,193
-----------
CALIFORNIA--7.3%
California Housing Financing
Agency Revenue Series A 7.75%,
8/1/17 (FHA Insured).............. AA- 160 163,667
Pittsburg Redevelopment Agency
Series A 4.625%, 8/1/21 (AMBAC
Insured).......................... AAA 1,650 1,511,812
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
CALIFORNIA--CONTINUED
Riverside County 8.625%, 5/1/16
(GNMA Collaterized)............... AAA $ 4,300 $ 6,057,625
-----------
7,733,104
-----------
COLORADO--2.8%
Arapahoe County Capital
Improvement Series E Pre-refunded
6.90%, 8/31/15.................... Aaa(b) 2,500 2,921,875
CONNECTICUT--4.7%
Connecticut State Health and
Educational Facilities Authority
Series B 5.125%, 7/1/07........... BBB 1,000 1,010,000
Mashantucket Western Pequot Tribe
Special Revenue Series A
Pre-refunded 144A 6.50%,
9/1/05(d)......................... AAA 845 951,681
Mashantucket Western Pequot Tribe
Special Revenue Series A
Pre-refunded 144A 6.50%,
9/1/06(d)......................... AAA 495 563,062
Mashantucket Western Pequot Tribe
Special Revenue Series B 144A
5.60%, 9/1/09(d).................. Baa(b) 1,000 1,040,000
Mashantucket Western Pequot Tribe
Special Revenue Series A 5.50%,
9/1/28............................ Baa(b) 1,500 1,464,375
-----------
5,029,118
-----------
GEORGIA--7.8%
Atlanta Water and Sewer Revenue
4.50%, 1/1/18 (FGIC Insured)...... AAA 2,250 2,286,562
Cartersville Development Authority
Revenue 5.625%, 5/1/09............ A+ 2,000 2,130,000
Georgia Municipal Electric
Authority Power Revenue Series Z
5.50%, 1/1/20 (FGIC Insured)...... AAA 2,000 2,067,500
Georgia State General Obligation
Series A 7.45%, 1/1/09............ AAA 1,500 1,837,500
-----------
8,321,562
-----------
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Tax-Exempt Bond Fund
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
ILLINOIS--5.9%
Chicago Board of Education Series
A 6%, 1/1/20 (MBIA Insured)....... AAA $ 500 $ 551,250
Chicago Gas Supply Revenue Series
B 7.50%, 3/1/15................... AA- 1,000 1,046,420
Chicago O'Hare International
Airport Special Facility Revenue
8.85%, 5/1/18..................... BB+ 835 907,019
Illinois Development Finance
Authority Pollution Control
Revenue Series B 7.60%, 9/1/13.... A+ 2,000 2,092,920
Illinois Health Facilities
Authority Revenue Series C 7%,
4/1/08 (FSA Insured).............. AAA 1,100 1,292,500
Illinois Housing Development
Authority Residential Mortgage
Revenue Series A 7%, 8/1/17....... AA 330 333,052
Metropolitan Pier & Exposition
Authority Revenue Unrefunded
6.50%, 6/15/07 (FGIC Insured)..... AA- 30 32,812
-----------
6,255,973
-----------
INDIANA--3.3%
Indianapolis Public Local
Improvement Revenue Series C 0%,
1/1/03............................ A(b) 2,500 2,159,375
Indianapolis Public Local
Improvement Revenue Series A 0%,
2/1/05............................ Aa(b) 1,765 1,383,319
-----------
3,542,694
-----------
KENTUCKY--2.9%
Kentucky State Turnpike Authority
Economic Development Revenue 0%,
1/1/10 (FGIC Insured)............. AAA 3,300 2,000,625
Perry County Solid Waste Disposal
Revenue 7%, 6/1/24................ NR 1,000 1,073,750
-----------
3,074,375
-----------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
LOUISIANA--4.5%
Louisiana Environmental Facilities
Community Development Authority
Revenue 5.25%, 12/1/18............ AAA $ 1,500 $ 1,501,875
St. Mary Public Transportation
Financing Authority Revenue Bond
Series A 7.625%, 3/25/12.......... Aaa(b) 39 41,050
St. Tammany Public Transportation
Financing Authority Revenue Series
A 7%, 6/1/02 (FNMA
Collateralized)................... Aaa(b) 64 66,429
St. Tammany Sales Tax Revenue
4.70%, 4/1/09 (FGIC Insured)...... AAA 2,000 2,007,500
St. Tammany Sales Tax Revenue
4.80%, 4/1/10 (FGIC Insured)...... AAA 1,105 1,113,288
-----------
4,730,142
-----------
MARYLAND--0.6%
Baltimore G. O. 7%, 10/15/09 (MBIA
Insured).......................... AAA 500 600,000
MASSACHUSETTS--1.9%
Massachusetts Bay Transportation
Authority Revenue Series B 6.20%,
3/1/16............................ AA- 1,000 1,132,500
Massachusetts State Industrial
Financing Agency Revenue 0%,
8/1/05............................ A+ 1,100 837,375
-----------
1,969,875
-----------
MICHIGAN--1.7%
Williamston Community School G. O.
5.50%, 5/1/25 (MBIA Insured)...... AAA 1,725 1,802,625
MISSISSIPPI--1.6%
Lowndes County Solid Waste
Disposal & Pollution Control
Revenue Series A 6.80%, 4/1/22.... A 1,450 1,711,000
NEVADA--1.6%
Clark County School District G. O.
Series B 0%, 6/1/03 (MBIA
Insured).......................... AAA 2,000 1,697,500
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Phoenix-Goodwin Tax-Exempt Bond Fund
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
NEW JERSEY--1.5%
Camden County Municipal Utilities
Authority Sewer Revenue 0%, 9/1/11
(FGIC Insured).................... AAA $ 3,000 $ 1,620,000
NEW YORK--8.5%
New York State Dormitory Authority
Revenue Series U Pre-refunded
6.375%, 7/1/08.................... BBB+ 575 626,750
Niagara Falls Bridge Commission
Toll Revenue Series B 5.25%,
10/1/15 (FGIC Insured)............ AAA 4,000 4,135,000
Port Authority of New York & New
Jersey Special Obligation Revenue
6.75%, 10/1/11.................... NR 3,000 3,288,750
Suffolk County Industrial
Development Agency Revenue 5.50%,
1/1/23............................ NR 1,000 988,750
-----------
9,039,250
-----------
NORTH CAROLINA--1.4%
North Carolina Municipal Power
Agency Revenue 6%, 1/1/09 (AMBAC
Insured).......................... AAA 1,385 1,532,156
PENNSYLVANIA--8.6%
Delaware Valley Regional Finance
Authority Revenue Series B 5.70%,
7/1/27 (AMBAC Insured)............ AAA 2,000 2,152,500
New Castle Area Hospital Authority
Revenue Series A 6.50%,
11/15/09.......................... Baa(b) 1,000 1,046,250
Pennsylvania Economic Development
Financing Authority Resource
Recovery Revenue Series A 6.40%,
1/1/09............................ BBB- 1,500 1,578,750
Pennsylvania State Finance
Authority Revenue 6.60%,
11/1/09........................... A 4,000 4,395,000
-----------
9,172,500
-----------
TENNESSEE--1.6%
Metropolitan Government Nashville
& Davidson County Health &
Educational Facilities Board
Revenue 6%, 12/1/16 (AMBAC
Insured).......................... AAA 1,500 1,663,125
TEXAS--9.4%
Alliance Airport Authority Special
Facilities Revenue 7%, 12/1/11.... BBB- 1,100 1,267,750
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
TEXAS--CONTINUED
Austin Convention Center Revenue
Series B 8.25%, 11/15/14.......... Aaa(b) $ 930 $ 969,116
Brazos River Authority Revenue
Series A 7.625%, 5/1/19........... A- 1,000 1,023,260
Colorado River Municipal District
Water Revenue Pre-refunded 8.25%,
1/1/15............................ NR 540 577,125
Hurst Euless Bedford Independent
School District G. O. 4.75%,
8/15/28........................... AAA 2,000 1,830,000
San Antonio Electric & Gas Revenue
5%, 2/1/12........................ AA 2,000 2,034,944
Texas State Public Finance
Authority Building Revenue 6.25%,
8/1/09 (MBIA Insured)............. AAA 1,250 1,404,688
Texas Water Resource Finance
Authority Revenue 7.625%,
8/15/08........................... A 830 835,312
-----------
9,942,195
-----------
VIRGINIA--5.9%
Pittsylvania County Industrial
Development Authority Revenue
Series A 7.30%, 1/1/04............ NR 935 991,100
Pittsylvania County Industrial
Development Authority Revenue
Series A 7.45%, 1/1/09............ NR 3,000 3,258,750
Upper Occoquan Regional Sewer
Authority Revenue Series A 5.15%,
7/1/20 (MBIA Insured)............. AAA 2,000 2,017,500
-----------
6,267,350
-----------
WASHINGTON--1.0%
Washington State G. O. Series C
5.50%, 7/1/13..................... AA+ 1,000 1,057,500
WEST VIRGINIA--3.0%
Upshur County Solid Waste Disposal
Revenue 7%, 7/15/25............... NR 2,000 2,160,000
West Virginia State Housing
Development Fund Revenue 6.625%,
7/1/20 (FHA Insured).............. AA 1,000 1,002,040
-----------
3,162,040
-----------
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Tax-Exempt Bond Fund
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
WISCONSIN--0.8%
Wisconsin State Clean Water
Revenue Series 1 6.875%, 6/1/11... AA+ $ 750 $ 891,563
OTHER TERRITORIES--1.5%
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue
Series V 6.625%, 7/1/12........... A 1,500 1,623,750
- - ---------------------------------------------------------------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(IDENTIFIED COST $94,491,367) 102,261,265
- - ---------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--96.2%
(IDENTIFIED COST $94,491,367) 102,261,265
- - ---------------------------------------------------------------------
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
--------- ------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.6%
COMMERCIAL PAPER--1.6%
Koch Industries, Inc. 4.90%,
6/1/99............................ A-1+ $ 1,480 $ 1,480,000
Potomac Electric Power Co. 4.80%,
6/7/99............................ A-1 165 164,868
-----------
1,644,868
-----------
- - ---------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,644,868) 1,644,868
- - ---------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--97.8%
(IDENTIFIED COST $96,136,235) 103,906,133(a)
Cash and receivables, less liabilities--2.2% 2,384,467
--------------
NET ASSETS--100.0% $ 106,290,600
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $8,026,952 and gross
depreciation of $214,238 for federal income tax purposes. At May 31, 1999,
the aggregate cost of securities for federal income tax purposes was
$96,093,419.
(b) As rated by Moodys, Fitch or Duff & Phelps.
(c) Variable or step coupon security; interest rate reflects the rate currently
in effect.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified buyers. At May 31, 1999, these
securities amounted to a value of $2,554,743 or 2.4% of net assets.
At May 31, 1999, 38.7% of the net assets in the fund are backed by
insurance of financial institutions and financial guaranty assurance
agencies. Insurers with a concentration greater than 10% of net assets are
as follows: FGIC, 15.4%.
See Notes to Financial Statements
29
<PAGE>
Phoenix-Goodwin Tax-Exempt Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $96,136,235) $ 103,906,133
Cash 3,925
Receivables
Fund shares sold 40,948
Investment securities sold 1,085,531
Interest 1,633,035
Prepaid expenses 2,725
--------------
Total assets 106,672,297
--------------
LIABILITIES
Payables
Dividend distributions 105,307
Fund shares repurchased 112,332
Investment advisory fee 41,028
Distribution fee 27,204
Transfer agent fee 21,396
Financial agent fee 11,982
Trustees' fee 8,956
Accrued expenses 53,492
--------------
Total liabilities 381,697
--------------
NET ASSETS $ 106,290,600
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 102,545,755
Accumulated net investment loss (686,440)
Accumulated net realized loss (3,338,613)
Net unrealized appreciation 7,769,898
--------------
NET ASSETS $ 106,290,600
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $99,369,676) 9,191,054
Net asset value per share $10.81
Offering price per share $10.81/(1-4.75%) $11.35
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $6,920,924) 637,053
Net asset value and offering price per share $10.86
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 2,849,893
--------------
Total investment income 2,849,893
--------------
EXPENSES
Investment advisory fee 248,609
Distribution fee, Class A 129,382
Distribution fee, Class B 34,934
Financial agent fee 58,664
Transfer agent 53,635
Professional 16,616
Trustees 10,492
Printing 10,392
Custodian 8,553
Registration 13,472
Miscellaneous 5,613
--------------
Total expenses 590,362
--------------
NET INVESTMENT INCOME 2,259,531
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (2,960,161)
Net realized loss on future contracts (26,363)
Net change in unrealized appreciation (depreciation) on
investments (383,301)
--------------
NET REALIZED LOSS ON INVESTMENTS (3,369,825)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($ 1,110,294)
--------------
--------------
</TABLE>
30 See Notes to Financial Statements
<PAGE>
Phoenix-Goodwin Tax-Exempt Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
5/31/99 Year Ended
(Unaudited) 11/30/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 2,259,531 $ 5,725,389
Net realized gain (loss) (2,986,524) (409,566)
Net change in unrealized appreciation
(depreciation) (383,301) 1,555,273
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS (1,110,294) 6,871,096
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (2,681,980) (5,342,324)
Net investment income, Class B (149,856) (259,422)
Net realized gains, Class A -- (96,887)
Net realized gains, Class B -- (4,637)
In excess of net investment income, Class A -- (566,555)
In excess of net investment income, Class B -- (27,512)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (2,831,836) (6,297,337)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (608,214 and
3,799,813 shares, respectively) 6,702,898 42,705,753
Net asset value of shares issued from
reinvestment of distributions
(133,036 and 286,921 shares, respectively) 1,469,364 3,230,781
Cost of shares repurchased (1,131,734 and
5,491,445 shares, respectively) (12,478,741) (61,903,573)
-------------- --------------
Total (4,306,479) (15,967,039)
-------------- --------------
CLASS B
Proceeds from sales of shares (94,364 and
259,511 shares, respectively) 1,050,888 2,940,057
Net asset value of shares issued from
reinvestment of distributions
(5,493 and 12,310 shares, respectively) 60,962 139,134
Cost of shares repurchased (85,047 and 166,434
shares, respectively) (944,230) (1,874,018)
-------------- --------------
Total 167,620 1,205,173
-------------- --------------
DECREASE IN NET ASSETS FROM SHARE TRANSACTIONS (4,138,859) (14,761,866)
-------------- --------------
NET DECREASE IN NET ASSETS (8,080,989) (14,188,107)
-------------- --------------
NET ASSETS
Beginning of period 114,371,589 128,559,696
-------------- --------------
END OF PERIOD [INCLUDING DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME (LOSS) OF ($686,440)
AND ($114,135), RESPECTIVELY] $ 106,290,600 $ 114,371,589
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Phoenix-Goodwin Tax-Exempt Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30
5/31/99 --------------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.21 $ 11.17 $ 11.28 $ 11.40 $ 10.09 $ 11.58
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.23 0.57 0.59 0.60 0.61 0.65
Net realized and unrealized gain
(loss) (0.34) 0.20 0.05 (0.12) 1.34 (1.49)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS (0.11) 0.77 0.64 0.48 1.95 (0.84)
----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.29) (0.53) (0.59) (0.60) (0.61) (0.65)
Dividends in excess of net
investment income -- (0.11) -- -- -- --
Dividends from net realized
gains -- (0.09) (0.16) -- (0.03) --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.29) (0.73) (0.75) (0.60) (0.64) (0.65)
----- ----- ----- ----- ----- -----
Change in net asset value (0.40) 0.04 (0.11) (0.12) 1.31 (1.49)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 10.81 $ 11.21 $ 11.17 $ 11.28 $ 11.40 $ 10.09
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Total return(1) (1.03)%(3) 5.75% 6.04% 4.30% 19.87% (7.55)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $99,370 $107,371 $122,763 $136,558 $147,821 $141,623
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.02%(2) 0.97% 0.96% 0.94% 0.97% 0.96%
Net investment income 4.14%(2) 4.77% 5.36% 5.42% 5.65% 5.65%
Portfolio turnover 8%(3) 14% 15% 27% 25% 54%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ---------------------------------------------------- 3/16/94 TO
(UNAUDITED) 1998 1997 1996 1995 11/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.25 $ 11.22 $ 11.32 $ 11.44 $ 10.12 $ 11.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.19 0.48 0.50 0.52 0.53 0.39
Net realized and unrealized gain
(loss) (0.34) 0.19 0.06 (0.12) 1.35 (1.09)
----- ----- -------- -------- -------- -----
TOTAL FROM INVESTMENT
OPERATIONS (0.15) 0.67 0.56 0.40 1.88 (0.70)
----- ----- -------- -------- -------- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.24) (0.45) (0.50) (0.52) (0.53) (0.39)
Dividends in excess of net
investment income -- (0.10) -- -- -- --
Dividends from net realized
gains -- (0.09) (0.16) -- (0.03) --
----- ----- -------- -------- -------- -----
TOTAL DISTRIBUTIONS (0.24) (0.64) (0.66) (0.52) (0.56) (0.39)
----- ----- -------- -------- -------- -----
Change in net asset value (0.39) 0.03 (0.10) (0.12) 1.32 (1.09)
----- ----- -------- -------- -------- -----
NET ASSET VALUE, END OF PERIOD $10.86 $ 11.25 $ 11.22 $ 11.32 $ 11.44 $ 10.12
----- ----- -------- -------- -------- -----
----- ----- -------- -------- -------- -----
Total return(1) (1.37)%(3) 4.97% 5.13% 3.60% 19.07% (6.42)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $6,921 $7,001 $5,797 $4,762 $3,142 $1,147
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.77%(2) 1.69% 1.71% 1.69% 1.72% 1.54%(2)
Net investment income 3.40%(2) 3.98% 4.60% 4.68% 4.90% 5.07%(2)
Portfolio turnover 8%(3) 14% 15% 27% 25% 54%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
32
See Notes to Financial Statements
<PAGE>
PHOENIX-SENECA MID CAP FUND
INVESTMENTS AT MAY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C> <C>
COMMON STOCKS--87.4%
AUTO PARTS & EQUIPMENT--2.7%
Lear Corp.(b)..................... 151,610 $ 7,457,317
BANKS (MAJOR REGIONAL)--3.1%
Comerica, Inc..................... 138,420 8,365,759
BANKS (REGIONAL)--3.4%
UnionBanCal Corp.................. 254,730 9,417,050
BEVERAGES (ALCOHOLIC)--0.7%
Coors (Adolph) Co. Class B........ 40,190 1,909,025
BEVERAGES (NON-ALCOHOLIC)--2.0%
Whitman Corp...................... 313,820 5,334,940
BROADCASTING (TELEVISION, RADIO & CABLE)--2.2%
Chancellor Media Corp.(b)......... 118,990 6,046,179
CHEMICALS (SPECIALTY)--2.5%
Hercules, Inc..................... 195,010 6,813,162
COMMUNICATIONS EQUIPMENT--14.8%
American Tower Corp. Class A(b)... 359,560 8,090,100
Comverse Technology, Inc.(b)...... 130,020 8,784,476
Copper Mountain Networks,
Inc.(b)........................... 45,470 2,910,080
Crown Castle International
Corp.(b).......................... 223,200 4,491,900
Echostar Communications
Corp.(b).......................... 43,290 4,967,527
QUALCOMM, Inc.(b)................. 77,540 7,540,765
Terayon Communication Systems,
Inc.(b)........................... 120,000 3,855,000
------------
40,639,848
------------
COMPUTERS (SOFTWARE & SERVICES)--0.2%
USinternetworking, Inc.(b)........ 21,300 620,362
DISTRIBUTORS (FOOD & HEALTH)--1.9%
WESCO International, Inc.(b)...... 256,120 5,074,377
ELECTRICAL EQUIPMENT--0.1%
SPX Corp.(b)...................... 4,720 366,390
ELECTRONICS (SEMICONDUCTORS)--9.9%
Linear Technology Corp............ 70,000 3,710,000
RF Micro Devices, Inc.(b)......... 181,100 7,719,387
Uniphase Corp.(b)................. 60,610 8,121,740
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C> <C>
ELECTRONICS (SEMICONDUCTORS)--CONTINUED
Xilinx, Inc.(b)................... 172,140 $ 7,649,471
------------
27,200,598
------------
ENTERTAINMENT--2.3%
SFX Entertainment, Inc. Class
A(b).............................. 114,310 6,222,751
EQUIPMENT (SEMICONDUCTOR)--2.5%
KLA-Tencor Corp.(b)............... 150,210 6,834,555
HEALTH CARE (GENERIC AND OTHER)--2.5%
Alpharma, Inc. Class A............ 40,900 1,091,519
Medimmune, Inc.(b)................ 90,000 5,726,250
------------
6,817,769
------------
HEALTH CARE (MANAGED CARE)--2.2%
Wellpoint Health Networks,
Inc.(b)........................... 74,360 6,130,053
INVESTMENT BANKING/BROKERAGE--4.0%
Donaldson, Lufkin & Jenrette,
Inc............................... 162,280 10,872,760
OIL & GAS (DRILLING & EQUIPMENT)--2.6%
Weatherford International,
Inc.(b)........................... 214,560 7,080,480
PAPER & FOREST PRODUCTS--4.3%
Champion International Corp....... 75,000 3,843,750
Mead Corp. (The).................. 214,830 8,029,271
------------
11,873,021
------------
RETAIL (COMPUTERS & ELECTRONICS)--5.6%
Best Buy Co., Inc.(b)............. 145,690 6,628,895
Tandy Corp........................ 104,950 8,658,375
------------
15,287,270
------------
RETAIL (SPECIALTY)--4.2%
Staples, Inc.(b).................. 288,705 8,300,269
Venator Group, Inc.(b)............ 297,420 3,253,031
------------
11,553,300
------------
RETAIL (SPECIALTY-APPAREL)--6.0%
Abercrombie & Fitch Co. Class
A(b).............................. 98,340 8,272,853
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Phoenix-Seneca Mid Cap Fund
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C> <C>
RETAIL (SPECIALTY-APPAREL)--CONTINUED
TJX Companies, Inc. (The)......... 268,000 $ 8,040,000
------------
16,312,853
------------
SERVICES (ADVERTISING/MARKETING)--4.2%
Outdoor Systems, Inc.(b).......... 388,100 11,618,744
TELECOMMUNICATIONS (LONG DISTANCE)--1.8%
ITC/Inc.(b)....................... 202,500 4,834,688
TELEPHONE--1.7%
Pinnacle Holdings, Inc.(b)........ 250,000 4,546,875
- - -----------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $222,936,854) 239,230,126
- - -----------------------------------------------------------------------
FOREIGN COMMON STOCKS--2.0%
PAPER & FOREST PRODUCTS--0.3%
Grupo Industrial Durango SA
(Mexico)(b)....................... 108,600 977,400
TELECOMMUNICATIONS (LONG DISTANCE)--1.7%
MetroNet Communications Corp.
(Canada)(b)....................... 80,000 4,600,000
- - -----------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $5,310,910) 5,577,400
- - -----------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--89.4%
(IDENTIFIED COST $228,247,764) 244,807,526
- - -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
------------ --------- ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--8.3%
COMMERCIAL PAPER--8.3%
Merrill Lynch & Co., Inc. 4.90%,
6/1/99............................ A-1+ $ 5,500 $ 5,500,000
Lexington Parker Capital Co. LLC
4.85%, 6/2/99..................... A-1 4,535 4,534,389
Corporate Asset Funding Co., Inc.
4.84%, 6/3/99..................... A-1+ 3,000 2,999,193
Marsh & McLennan Cos., Inc. 4.83%,
6/4/99............................ A-1+ 3,670 3,668,523
Kimberly-Clark Corp. 4.87%,
6/9/99............................ A-1+ 4,020 4,015,650
Greenwich Funding Corp. 4.85%,
6/25/99........................... A-1+ 2,000 1,993,533
------------
22,711,288
------------
- - ---------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $22,711,288) 22,711,288
- - ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--97.7%
(IDENTIFIED COST $250,959,052) 267,518,814(a)
Cash and receivables, less liabilities--2.3% 6,191,932
--------------
NET ASSETS--100.0% $ 273,710,746
--------------
--------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $28,428,354 and gross
depreciation of $11,868,592 for federal income tax purposes. At May 31,
1999, the aggregate cost of securities for federal income tax purposes was
$250,959,052.
(b) Non-income producing.
34
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid Cap Fund
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $250,959,052) $ 267,518,814
Short-term investments held as collateral for loaned securities 13,098,570
Cash 66,595
Receivables
Investment securities sold 15,851,147
Fund shares sold 1,570,721
Interest and dividends 50,948
Prepaid expenses 7,284
--------------
Total assets 298,164,079
--------------
LIABILITIES
Payables
Collateral on securities loaned 13,098,570
Investment securities purchased 10,496,360
Fund shares repurchased 356,501
Investment advisory fee 168,619
Transfer agent fee 139,146
Distribution fee 69,750
Financial agent fee 21,048
Trustees' fee 4,274
Accrued expenses 99,065
--------------
Total liabilities 24,453,333
--------------
NET ASSETS $ 273,710,746
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 241,409,009
Accumulated net investment loss (1,296,469)
Accumulated net realized gain 17,038,444
Net unrealized appreciation 16,559,762
--------------
NET ASSETS $ 273,710,746
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization (Net Assets $258,773,796) 15,515,898
Net asset value per share $16.68
Offering price per share $16.68/(1-4.75%) $17.51
CLASS B
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization (Net Assets $14,936,950) 941,560
Net asset value and offering price per share $15.86
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 519,577
Interest 360,144
Security lending income 11,453
--------------
Total investment income 891,174
--------------
EXPENSES
Investment advisory fee 1,128,990
Distribution fee, Class A 355,889
Distribution fee, Class B 81,766
Financial agent fee 118,801
Transfer agent 399,500
Printing 58,532
Professional 21,286
Custodian 11,759
Trustees 5,809
Registration 1,783
Miscellaneous 3,528
--------------
Total expenses 2,187,643
--------------
NET INVESTMENT LOSS (1,296,469)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 16,680,189
Net change in unrealized appreciation (depreciation) on
investments (544,132)
--------------
NET GAIN ON INVESTMENTS 16,136,057
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 14,839,588
--------------
--------------
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Phoenix-Seneca Mid Cap Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
5/31/99 Year Ended
(Unaudited) 11/30/98
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,296,469) $ (467,524)
Net realized gain (loss) 16,680,189 61,746,081
Net change in unrealized appreciation
(depreciation) (544,132) (38,514,321)
-------------- --------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 14,839,588 22,764,236
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (57,428,008) (33,084,355)
Net realized gains, Class B (3,381,628) (1,776,186)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (60,809,636) (34,860,541)
-------------- --------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (834,404 and
2,824,332 shares, respectively) 14,596,911 55,807,991
Net asset value of shares issued from
reinvestment of distributions
(3,233,416 and 1,780,474 shares, respectively) 54,547,724 32,263,501
Cost of shares repurchased (2,587,573 and
8,014,004 shares, respectively) (46,399,655) (157,423,669)
-------------- --------------
Total 22,744,980 (69,352,177)
-------------- --------------
CLASS B
Proceeds from sales of shares (72,610 and 92,246
shares, respectively) 1,225,351 1,729,101
Net asset value of shares issued from
reinvestment of distributions
(193,961 and 96,993 shares, respectively) 3,122,778 1,705,266
Cost of shares repurchased (142,844 and 295,559
shares, respectively) (2,426,054) (5,608,396)
-------------- --------------
Total (1,922,075) (2,174,029)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS 24,667,055 (71,526,206)
-------------- --------------
NET DECREASE IN NET ASSETS (21,302,993) (83,622,511)
NET ASSETS
Beginning of period 295,013,739 378,636,250
-------------- --------------
END OF PERIOD [INCLUDING DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME (LOSS) OF
($1,244,987) AND $0,
RESPECTIVELY] $ 273,710,746 $ 295,013,739
-------------- --------------
-------------- --------------
</TABLE>
36 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid Cap Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30
5/31/99 ---------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 19.90 $ 20.64 $ 21.65 $ 22.03 $ 18.03 $ 18.70
INCOME FROM INVESTMENT
OPERATIONS(5)
Net investment income (loss) (0.11)(1) 0.01 (0.02)(1) (0.03)(1) 0.05(1) 0.11
Net realized and unrealized
gain (loss) 1.08 1.18 1.52 2.53 4.74 0.10
------- ---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS 0.97 1.19 1.50 2.50 4.79 0.21
------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment
income -- -- -- -- (0.06) (0.10)
Dividends from net realized
gains (4.19) (1.93) (2.51) (2.88) (0.73) (0.78)
------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (4.19) (1.93) (2.51) (2.88) (0.79) (0.88)
------- ---------- ---------- ---------- ---------- ----------
Change in net asset value (3.22) (0.74) (1.01) (0.38) 4.00 (0.67)
------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 16.68 $ 19.90 $ 20.64 $ 21.65 $ 22.03 $ 18.03
------- ---------- ---------- ---------- ---------- ----------
------- ---------- ---------- ---------- ---------- ----------
Total return(2) 4.63%(4) 6.64% 8.12% 13.52% 27.87% 1.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $258,774 $279,326 $360,053 $451,474 $487,674 $419,760
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.41% 1.30% 1.33% 1.35% 1.42% 1.36%
Net investment income (loss) (0.82)%(3) (0.10)% (0.08)% (0.17)% 0.28% 0.59%
Portfolio turnover 106%(4) 379% 161% 242% 218% 227%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED NOVEMBER 30 INCEPTION
5/31/99 ------------------------------------------------------- 7/18/94 TO
(UNAUDITED) 1998 1997 1996 1995 11/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 19.18 $ 20.11 $ 21.30 $ 21.85 $ 17.97 $ 17.68
INCOME FROM INVESTMENT
OPERATIONS(5)
Net investment income (loss) (0.14)(1) (0.18) (0.16)(1) (0.18)(1) (0.12)(1) (0.01)
Net realized and unrealized
gain (loss) 1.01 1.18 1.47 2.51 4.75 0.30
------ ---------- ---------- ---------- ---------- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.87 1.00 1.31 2.33 4.63 0.29
------ ---------- ---------- ---------- ---------- -----
LESS DISTRIBUTIONS
Dividends from net investment
income -- -- -- -- (0.02) --
Dividends from net realized
gains (4.19) (1.93) (2.50) (2.88) (0.73) --
------ ---------- ---------- ---------- ---------- -----
TOTAL DISTRIBUTIONS (4.19) (1.93) (2.50) (2.88) (0.75) --
------ ---------- ---------- ---------- ---------- -----
Change in net asset value (3.32) (0.93) (1.19) (0.55) 3.88 0.29
------ ---------- ---------- ---------- ---------- -----
NET ASSET VALUE, END OF PERIOD $ 15.86 $ 19.18 $ 20.11 $ 21.30 $ 21.85 $ 17.97
------ ---------- ---------- ---------- ---------- -----
------ ---------- ---------- ---------- ---------- -----
Total return(2) 4.27%(4) 5.80% 7.27% 12.75% 26.92% 1.64%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $14,937 $15,688 $18,583 $17,599 $10,908 $1,519
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.16%(3) 2.04% 2.08% 2.11% 2.18% 2.05%(3)
Net investment income (loss) (1.57)%(3) (0.85)% (0.85)% (0.92)% (0.58)% (0.23)%(3)
Portfolio turnover 106%(4) 379% 161% 242% 218% 227%(4)
</TABLE>
(1) Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in the total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
See Notes to Financial Statements
37
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix Multi-Portfolio Fund ("the Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. To date, five
Funds are offered for sale: International Fund, Real Estate Securities Fund,
Emerging Markets Bond Fund, Tax-Exempt Bond Fund and Mid Cap Fund. Each Fund has
distinct investment objectives. The International Fund seeks a high total return
consistent with reasonable risk through investment in an internationally
diversified portfolio of equity securities. The Real Estate Securities Fund
seeks capital appreciation and income with approximately equal emphasis. The
Emerging Markets Bond Fund seeks to achieve high current income with a secondary
objective of long-term capital appreciation. The Tax-Exempt Bond Fund seeks as
high a level of current income exempt from federal income taxation as is
consistent with preservation of capital. The Mid Cap Fund seeks as its
investment objective long-term appreciation of capital.
The Trust offers both Class A and Class B shares on each Fund and one
additional class of shares, Class C on International Fund and Emerging Markets
Bond Fund. Class A shares are sold with a front-end sales charge of up to 4.75%.
Class B shares are sold with a contingent deferred sales charge which declines
from 5% to zero depending on the period of time the shares are held. Class C
shares are sold with a 1% contingent deferred sales charge if redeemed within
one year of purchase. Each class of shares has 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 Fund are borne pro
rata by the holders of each class of shares, except that each class bears
distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. SECURITY VALUATION:
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Debt securities are valued on the basis of
broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at 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. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date or, in the case of certain foreign securities, as soon as the Fund is
notified. Realized gains and losses are determined on the identified cost basis.
The Trust does not amortize premiums but does amortize discounts except for the
Tax-Exempt Bond Fund which amortizes both premiums and discounts over the life
of the respective securities using the effective interest method.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
Fund in the Trust 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 and tax-exempt income to its shareholders. In
addition, each Fund intends to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Code. Therefore, no
provision for federal income taxes or excise taxes has been made.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Fund 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, operating
losses 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 Trust does not separate that
portion of the results of operations arising from changes in exchange rates and
that portion arising from changes in the market prices of securities.
F. FORWARD CURRENCY CONTRACTS:
The International Fund, Emerging Markets Bond Fund and Mid Cap Fund may enter
into forward currency contracts in conjunction with the planned purchase or sale
of foreign denominated securities in order to hedge the U.S. dollar cost or
proceeds. Forward currency contracts involve, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
38
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED) (CONTINUED)
Liabilities. Risks arise from the possible movements in foreign exchange rates
or if the counterparty does not perform under the contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in market
value is recorded by each Fund as an unrealized gain (or loss). When the
contract is closed or offset with the same counterparty, the Fund records a
realized gain (or loss) equal to the change in the value of the contract when it
was opened and the value at the time it was closed or offset.
G. FUTURES CONTRACTS:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Each Fund (other than Real Estate
Securities Fund) may enter into financial futures contracts as a hedge against
anticipated changes in the market value of their portfolio securities. Upon
entering into a futures contract, the Funds are required to pledge to the broker
an amount of cash and/or securities equal to the "initial margin" requirements
of the futures exchange on which the contract is traded. Pursuant to the
contract, the Funds agree to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as daily variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The potential
risk to the Fund is that the change in value of the futures contract may not
correspond to the change in value of the hedged instruments.
H. OPTIONS:
Each Fund (other than Real Estate Securities Fund), may write covered options
or purchase options contracts for the purpose of hedging against changes in the
market value of the underlying securities or foreign currencies.
Each Fund will realize a gain or loss upon the expiration or closing of the
option transaction. Gains and losses on written options are reported separately
in the Statement of Operations. When a written option is exercised, the proceeds
on sales or amounts paid are adjusted by the amount of premium received. Options
written are reported as a liability in the Statement of Assets and Liabilities
and subsequently marked to market to reflect the current value of the option.
The risk associated with written options is that the change in value of options
contracts may not correspond to the change in value of the hedged instruments.
In addition, losses may arise from changes in the value of the underlying
instruments, or if a liquid secondary market does not exist for the contracts.
The Funds may purchase options which are included in the Fund's Schedule of
Investments and subsequently marked to market to reflect the current value of
the option. When a purchased option is exercised, the cost of the security is
adjusted by the amount of premium paid. The risk associated with purchased
options is limited to the premium paid.
I. LOAN AGREEMENTS:
The Trust may invest in direct debt instruments which are interests in amounts
owed by a corporate, governmental, or other borrower to lenders or lending
syndicates. The Trust's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from third
parties. A loan is often administered by a bank or other financial institution
(the lender) that acts as agent for all holders. The agent administers the terms
of the loan, as specified in the loan agreement. When investing in a loan
participation, the Trust has the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
loan agreement and only upon receipt by the lender of payments from the
borrower. The Trust generally has no right to enforce compliance with the terms
of the loan agreement with the borrower. As a result, the Trust may be subject
to the credit risk of both the borrower and the lender that is selling the loan
agreement. When the Trust purchases assignments from lenders it acquires direct
rights against the borrower on the loan. Direct indebtedness of emerging
countries involves a risk that the government entities responsible for the
repayment of the debt may be unable, or unwilling to pay the principal and
interest when due.
J. SECURITY LENDING:
The Trust (with the exception of the Real Estate Securities Fund) loans
securities to qualified brokers through an agreement with State Street Bank &
Trust (the Custodian) and Brown Brothers, Harriman, custodian for the
International Fund. Under the terms of the agreement, the Trust receives
collateral with a market value not less than 100% of the market value of loaned
securities. Collateral consists of cash, securities issued or guaranteed by the
U.S. Government or its agencies and the sovereign debt of foreign countries.
Interest earned on the collateral and premiums paid by the borrower are recorded
as income by the Trust net of fees charged by the Custodian for its services in
connection with this securities lending program. Lending portfolio securities
involves a risk of delay in the recovery of the loaned securities or in the
foreclosure on collateral. At May 31, 1999, the Trust had the following market
value of security loans and collateral:
<TABLE>
<CAPTION>
Value of
Securities Value of
on Loan Collateral
----------- -----------
<S> <C> <C>
Mid Cap Fund........................... $12,740,515 $13,098,570
</TABLE>
K. EXPENSES:
Expenses incurred by the Trust with respect to any two or more Funds are
allocated in proportion to the net assets of each Fund, except where allocation
of direct expense to each Fund or an alternative allocation method can be more
fairly made.
39
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED) (CONTINUED)
L. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS:
The Trust may engage in when-issued or delayed delivery transactions. The
Trust records when-issued securities on the trade date and maintains collateral
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Advisers, Phoenix
Investment Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home
Life Insurance Company ("PHL"), and Duff & Phelps Investment Management ("DPIM")
Co., an indirect wholly-owned subsidiary of PHL, the Adviser for the Real Estate
Securities Fund, are entitled to a fee, based upon the following annual rates as
a percentage of the average daily net assets of each Fund:
<TABLE>
<CAPTION>
1st $1-2 $2+
$1 Billion Billion Billion
------------ ---------- ----------
<S> <C> <C> <C>
International Fund..................... 0.75% 0.70% 0.65%
Real Estate Securities Fund............ 0.75% 0.70% 0.65%
Emerging Markets Bond Fund............. 0.75% 0.70% 0.65%
Tax-Exempt Bond Fund................... 0.45% 0.40% 0.35%
Mid Cap Fund........................... 0.75% 0.70% 0.65%
</TABLE>
The respective Advisers have agreed to reimburse the Real Estate Securities
Fund to the extent that total expenses (excluding interest, taxes, brokerage
fees and commissions, and extraordinary expenses) exceed 1.30% of the average
daily net assets for Class A shares, and 2.05% of the average daily net assets
for Class B shares.
Aberdeen Fund Managers, Inc. ("Aberdeen") is subadvisor to the Phoenix
International Fund, Aberdeen is a subsidiary of Aberdeen Asset Management PLC.
For its services, Aberdeen is paid a fee by the Adviser equal to 0.375% of the
average daily net assets of the Phoenix International Portfolio up to $1
billion, 0.35% between $1 billion and $2 billion, and 0.325% in excess of $2
billion.
Seneca Capital Management LLC ("Seneca") is subadvisor to the Phoenix Mid Cap
Fund, a majority of the equity interests of Seneca is owned by Phoenix
Investment Partners, Ltd. For its services, Seneca is paid a fee by the Adviser
ranging from 0.375% through 0.325% of the average daily net assets of the
Phoenix Mid Cap Fund.
Phoenix Equity Planning Corporation ("PEPCO") an indirect majority-owned
subsidiary of PHL, which serves as the national distributor of the Trust's
shares has advised the Trust that it retained net selling commissions of $53,025
for Class A shares and deferred sales charges of $190,875 for Class B shares and
$2,884 for Class C shares for the six months ended May 31, 1999. In addition,
each Portfolio pays PEPCO a distribution fee at an annual rate of 0.25% for
Class A shares and 1.00% for Class B and Class C shares applied to the average
daily net assets of each Portfolio. The distributor has advised the Trust that
of the total amount expensed for the six months ended May 31, 1999, $501,961 was
retained by the Distributor and $653,583 was paid out to unaffiliated
Participant and $119,211 was paid to W.S. Griffith, an indirect subsidiary of
PHL.
As Financial Agent of the Trust, PEPCO receives a financial agent fee equal to
the sum of (1) the documented cost of fund accounting and related services
provided by PFPC Inc. (subagent to PEPCO), plus (2) the documented cost to PEPCO
to provide financial reporting, tax services and oversight of subagent's
performance. The current fee schedule of PFPC Inc. ranges from 0.085% to 0.0125%
of the average daily net asset values of the Fund. Certain minimum fees and fee
waivers may apply.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the six months ended May 31, 1999, transfer
agent fees were $806,140 of which PEPCO retained $253,933 which is net of fees
paid to State Street.
At May 31, 1999 PHL and its affiliates held Phoenix Multi-Portfolio Fund
shares which aggregated the following:
<TABLE>
<CAPTION>
Aggregate
Net Asset
Shares Value
---------- ------------
<S> <C> <C>
International Fund
--Class C..................... 7,800 $ 100,932
Real Estate Securities Fund
--Class A..................... 533,620 6,867,689
--Class B..................... 12,706 162,637
Emerging Markets Bond Fund
--Class A..................... 2,083,489 14,855,277
--Class B..................... 17,508 123,606
--Class C..................... 8,484 60,152
Tax-Exempt Bond Fund
--Class A..................... 274 2,962
</TABLE>
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the six months ended May 31, 1999
(excluding U.S. Government and agency securities, short-term securities, futures
contracts and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
International Fund................... $ 91,389,549 $102,296,824
Real Estate Securities Fund.......... 2,890,852 9,425,290
Emerging Markets Bond Fund........... 111,230,873 99,808,451
Tax-Exempt Bond Fund................. 8,673,348 16,165,764
Mid Cap Fund......................... 303,538,222 364,363,814
</TABLE>
40
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED) (CONTINUED)
4. FORWARD CURRENCY CONTRACTS
As of May 31, 1999, the Emerging Market Bond Fund had entered into the
following forward currency contracts which contractually obligate the Fund to
deliver currencies at specified dates:
<TABLE>
<CAPTION>
In Net Unrealized
Contracts Exchange Settlement Appreciation
to Deliver For Date Value (Depreciation)
- - --------------- ------------ ---------- ----------- --------------
<S> <C> <C> <C> <C>
JPY 1,750,000 US 14,692 9/7/99 $ 14,684 $ 8
JPY 4,920,000 US 42,414 9/14/99 41,325 1,089
JPY 1,300,000 US 11,194 3/6/00 11,212 (18)
JPY 164,920,000 US 1,440,495 3/14/00 1,406,968 33,527
------
$34,606
------
------
</TABLE>
JPY = Japanese Yen
US = U.S. Dollar
5. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts. Given the uncertain economic condition of Russia and
the defaults that have occurred, there is no guarantee that continued payments
on Russian government bonds will be made.
6. CAPITAL LOSS CARRYOVERS
The following Funds have capital loss carryovers which may be used to offset
future capital gains.
<TABLE>
<CAPTION>
Real Emerging
Expiration Date Estate Markets Tax-Exempt
- - ------------------------------ --------- ----------- -----------
<S> <C> <C> <C>
2006.......................... $ 70,513 $42,735,153 $ 381,648
--------- ----------- -----------
Total....................... $ 70,513 $42,735,153 $ 381,648
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
This report is not authorized for distribution to prospective investors in
the Phoenix Multi-Portfolio Fund unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
41
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
101 Munson Street
Greenfield, MA 01301
TRUSTEES
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
OFFICERS
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
John F. Sharry, Executive Vice President
Gail P. Seneca, Senior Vice President
James D. Wehr, Senior Vice President
David L. Albrycht, Vice President
Robert S. Driessen, Vice President
Timothy M. Heaney, Vice President
Ron K. Jacks, Vice President
Peter S. Lannigan, Vice President
Richard D. Little, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Michael Schatt, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
INVESTMENT ADVISERS
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, CT 06115-0480
Duff & Phelps Investment Management Co.
(Real Estate Securities Portfolio)
55 East Monroe Street, Suite 3600
Chicago, IL 60603
PRINCIPAL UNDERWRITER
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
CUSTODIANS
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Brown Brothers Harriman & Co.
(International Portfolio)
40 Water Street
Boston, MA 02109
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
HOW TO CONTACT US
The Fund Connection 1-800-243-1574
Customer Service 1-800-243-1574 (option 0)
Investment Strategy Hotline 1-800-243-4361 (option 2)
Marketing Department 1-800-243-4361 (option 3)
Text Telephone 1-800-243-1926
World Wide Web address:
www.phoenixinvestments.com
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION PRSRT STD
PO Box 2200 U.S. Postage
Enfield CT 06083-2200 PAID
Springfield, MA
Permit No. 444
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 490A (7/99)
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
Phoenix Strategic Theme Fund / Phoenix-Seneca Mid Cap Fund
Pro Forma Combining Statement of Assets and Liabilities
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
=============== ============== =========== ==========
Phoenix Phoenix-Seneca Pro Forma
Strategic Theme Mid Cap Adjustments Combining
Fund Fund Portfolios
=============== ============== =========== ==========
<S> <C> <C> <C> <C>
ASSETS
Investment securities at value
(Identified cost $175,001,344, $233,057,280 and $408,058,624) $210,590,291 $309,108,009 $519,698,300
Cash 1,622 4,918 6,540
Receivables
Investment securities sold 7,716,073 999,604 8,715,677
Fund shares sold 170,369 157,789 328,158
Dividends and interest 20,475 2,800 23,275
Prepaid expenses 2,630 5,933 8,563
----------- ------------ ----------- ------------
Total assets 218,501,460 310,279,053 - 528,780,513
----------- ------------ ----------- ------------
LIABILITIES
Payables
Investment securities purchased 2,408,992 360,000 2,768,992
Fund shares repurchased 55,840 70,345 126,185
Investment advisory fee 129,545 169,002 298,547
Distribution fee 99,395 66,858 166,253
Transfer agent fee 30,643 111,016 141,659
Financial agent fee 20,848 23,605 44,453
Trustees' fee 4,481 2,011 6,492
Accrued expenses 41,774 133,974 175,748
----------- ------------ ----------- ------------
Total liabilities 2,791,518 936,811 - 3,728,329
----------- ------------ ----------- ------------
NET ASSETS $215,709,942 $309,342,242 - $525,052,184
============ ============ ============ ============
CLASS A
Shares of beneficial interest outstanding 6,634,775 14,396,029 1,471,248(a) 22,502,052
Net assets $122,198,546 $292,275,239 $414,473,785
Net asset value per share $ 18.42 $ 20.30 $ 18.42
Offering price per share NAV/(1- 4.75%) $ 19.34 $ 21.31 $ 19.34
CLASS B
Shares of beneficial interest outstanding 5,165,204 886,568 71,176(a) 6,122,948
Net assets $ 92,047,015 $ 17,067,003 $109,114,018
Net asset value and offering price per share $ 17.82 $ 19.25 $ 17.82
CLASS C
Shares of beneficial interest outstanding 82,170 82,170
Net assets $ 1,464,381 $ 1,464,381
Net asset value and offering price per share $ 17.82 $ 17.82
</TABLE>
(a) Adjustment reflects additional shares issued in conversion.
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Strategic Theme Fund / Phoenix-Seneca Mid Cap Fund
Pro Forma Combining Statement of Operations
Year Ended October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
=============== ============== =========== ============
Phoenix Phoenix-Seneca Pro Forma
Strategic Theme Mid Cap Adjustments Combining
Fund Fund Portfolios
=============== ============== =========== ============
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 797,312 $ 960,571 $ $ 1,757,883
Interest 365,836 681,309 1,047,145
Securities lending income - 41,168 41,168
--------------- -------------- ----------- ------------
Total investment income 1,163,148 1,683,048 2,846,196
--------------- -------------- ----------- ------------
EXPENSES
Investment advisory fee 1,382,076 2,249,062 3,631,138
Distribution fee - Class A 257,588 712,470 970,058
Distribution fee - Class B 806,068 165,224 971,292
Distribution fee - Class C 6,538 - 6,538
Financial agent fee 181,301 242,472 (154,420) (a) 269,353
Transfer agent 305,165 679,651 984,816
Registration 22,918 26,919 (20,000) (b) 29,837
Printing 25,610 194,303 (15,000) (b) 204,913
Professional 35,660 47,023 (30,000) (b) 52,683
Custodian 15,114 22,091 37,205
Trustees 13,162 17,000 (10,000) (b) 20,162
Miscellaneous 2,291 17,352 (2,500) (b) 17,143
--------------- -------------- ----------- ------------
Total expenses 3,053,491 4,373,567 (231,920) 7,195,138
Custodian fees paid indirectly (7,107) (7,107)
--------------- -------------- ----------- ------------
Net expenses 3,046,384 4,373,567 (231,920) 7,188,031
--------------- -------------- ----------- ------------
NET INVESTMENT INCOME (LOSS) (1,883,236) (2,690,519) 231,920 (4,341,835)
--------------- -------------- ----------- ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on securities 50,497,507 29,467,611 - 79,965,118
Net change in unrealized appreciation
(depreciation) on investments 23,705,808 81,075,738 - 104,781,546
Net gain on investments 74,203,315 110,543,349 - 184,746,664
--------------- -------------- ----------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERAIONS $ 72,320,079 $ 107,852,830 $ 231,920 $180,404,829
=============== ============== =========== ============
</TABLE>
Adjustments:
(a) Fees were adjusted to reflect the application of the fee schedule in effect
at 10/31/99.
(b) Reflects elimination of target fund contract.
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Strategic Theme Fund / Phoenix-Seneca Mid Cap Fund
Pro Forma Combining Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
=================== ==================== ============ ====================================
Phoenix Phoenix-Seneca Pro Forma
Strategic Mid Cap Combining DESCRIPTION
Theme Fund Portfolios
=================== ==================== ============ ====================================
shares
<S> <C> <C> <C>
COMMON STOCKS--90.6%
119,850 - 119,850 Alcoa, Inc.
- 20,000 20,000 Allied Riser Communication Corp.
- 359,560 359,560 American Tower Corp. Class A
57,500 224,800 282,300 AMFM, Inc.
119,100 - 119,100 Applied Materials, Inc.
260,200 - 260,200 Baker Hughes, Inc.
31,160 42,970 74,130 Best Buy Co., Inc.
89,550 - 89,550 Citigroup, Inc.
- 120,000 120,000 Comverse Technology, Inc.
- 43,870 43,870 Copper Mountain Networks, Inc.
- 223,200 223,200 Crown Castle International Corp.
59,000 - 59,000 Dow Chemical Co.
152,200 246,500 398,700 EchoStar Communications Corp.
30,700 121,320 152,020 Extreme Networks, Inc.
43,300 - 43,300 General Electric Co.
146,000 87,500 233,500 General Motors Corp. Class H
193,000 - 193,000 Halliburton Co.
54,400 - 54,400 Intel Corp.
37,000 - 37,000 Johnson & Johnson
- 173,620 173,620 KLA-Tencor Corp.
- 125,000 125,000 LAM Research Corp.
- 70,000 70,000 Linear Technology Corp.
150,950 244,540 395,490 LSI Logic Corp.
87,240 - 87,240 MCI WorldCom, Inc.
- 242,020 242,020 Mead Corp. (The)
- 115,000 115,000 MedImmune, Inc.
100,600 - 100,600 Microsoft Corp.
75,300 - 75,300 Morgan Stanley Dean Witter & Co.
89,000 - 89,000 Motorola, Inc.
- 355,690 Nabors Industries, Inc.
46,500 - 46,500 Nextel Communications, Inc.
- 388,100 388,100 Outdoor Systems, Inc.
- 114,990 114,990 PMC-Sierra, Inc.
- 40,000 40,000 Readback Networks, Inc.
- 203,800 203,800 RF Micro Devices, Inc.
- 222,700 222,700 Smurfit-Stone Container Corp.
92,000 - 92,000 Sprint Corp. (PCS Group)
- 68,480 68,480 SPX Corp.
109,600 - 109,600 Sun Microsystems, Inc.
155,000 211,300 366,300 Tandy Corp.
129,200 250,000 379,200 Teradyne, Inc.
135,000 - 135,000 Texas Instruments, Inc.
- 305,600 305,600 TJX Companies, Inc. (The)
- 254,730 254,730 UnionBanCal Corp.
- 175,960 175,960 VERITAS Software Corp.
79,500 65,000 144,500 VISX, Inc.
- 287,000 287,000 Weatherford International, Inc.
- 186,640 186,640 Xilinx, Inc.
TOTAL COMMON STOCKS
FOREIGN COMMON STOCKS --7.1%
Foreign Common Stocks
- 125,000 125,000 Gemstar International Group Ltd.
- 128,600 128,600 Grupo Industrial Durango SA
92,900 - 92,900 Nokia Oyj Sponsored ADR
147,000 - 147,000 Nortel Networks Corp.
TOTAL FOREIGN COMMON STOCKS
PAR
VALUE
(000) SHORT-TERM OBLIGATIONS--2.3%
---------- Commercial Paper--2.3%
- 1,260 1,260 General Electric Capital Corp. 5.25%, 11/1/99
3,245 - 3,245 Koch Industries, Inc. 5.34%, 11/1/99
1,500 - 1,500 Albertson's, Inc. 5.30%, 11/2/99
- 2,755 2,755 Exxon Imperial U.S., Inc. 5.30%, 11/2/99
1,575 - 1,575 Gannett Co., Inc.5.30%, 11/5/99
1,000 - 1,000 Private Export Funding Corp. 5.28%, 11/9/99
- 675 675 Receivables Capital Corp. 5.80%, 1/14/00
TOTAL SHORT-TERM OBLIGATIONS
TOTAL INVESTMENTS--99.0%
(Identified cost $175,001,344, $233,058,676
and $408,060,020)
Cash and receivables, less liabilities--(1.0%)
NET ASSETS--100.0%
<CAPTION>
VALUE
==================================== ================= ==================== ============
Phoenix Phoenix-Seneca Pro Forma
DESCRIPTION Strategic Mid Cap Combining
Theme Fund Portfolios
==================================== ================= ==================== ============
<C> <C> <C> <C>
COMMON STOCKS--90.6%
Alcoa, Inc. $ 7,280,887 $ - $ 7,280,887
Allied Riser Communication Corp. - 360,000 360,000
American Tower Corp. Class A - 6,854,112 6,854,112
AMFM, Inc. 4,025,000 15,736,000 19,761,000
Applied Materials, Inc. 10,696,669 - 10,696,669
Baker Hughes, Inc. 7,269,337 - 7,269,337
Best Buy Co., Inc. 1,731,328 2,387,521 4,118,849
Citigroup, Inc. 4,846,894 - 4,846,894
Comverse Technology, Inc. - 13,620,000 13,620,000
Copper Mountain Networks, Inc. - 3,235,412 3,235,412
Crown Castle International Corp. - 4,296,600 4,296,600
Dow Chemical Co. 6,976,750 - 6,976,750
EchoStar Communications Corp. 9,417,375 15,252,187 24,669,562
Extreme Networks, Inc. 2,465,594 9,743,512 12,209,106
General Electric Co. 5,869,856 - 5,869,856
General Motors Corp. Class H 10,630,625 6,371,094 17,001,719
Halliburton Co. 7,273,687 - 7,273,687
Intel Corp. 4,212,600 - 4,212,600
Johnson & Johnson 3,875,750 - 3,875,750
KLA-Tencor Corp. - 13,748,534 13,748,534
LAM Research Corp. - 10,554,688 10,554,688
Linear Technology Corp. - 4,895,625 4,895,625
LSI Logic Corp. 8,028,653 13,006,471 21,035,124
MCI WorldCom, Inc. 7,486,283 - 7,486,283
Mead Corp. (The) - 8,712,720 8,712,720
MedImmune, Inc. - 12,880,000 12,880,000
Microsoft Corp. 9,311,787 - 9,311,787
Morgan Stanley Dean Witter & Co. 8,306,531 - 8,306,531
Motorola, Inc. 8,671,937 - 8,671,937
Nabors Industries, Inc. - 8,069,717 8,069,717
Nextel Communications, Inc. 4,007,719 - 4,007,719
Outdoor Systems, Inc. - 16,445,738 16,445,738
PMC-Sierra, Inc. - 10,837,807 10,837,807
Readback Networks, Inc. - 4,620,000 4,620,000
RF Micro Devices, Inc. - 10,521,175 10,521,175
Smurfit-Stone Container Corp. - 4,815,888 4,815,888
Sprint Corp. (PCS Group) 7,630,250 - 7,630,250
SPX Corp. - 5,803,680 5,803,680
Sun Microsystems, Inc. 11,597,050 - 11,597,050
Tandy Corp. 9,755,313 13,298,694 23,054,007
Teradyne, Inc. 4,974,200 9,625,000 14,599,200
Texas Instruments, Inc. 12,116,250 - 12,116,250
TJX Companies, Inc. (The) - 8,289,400 8,289,400
UnionBanCal Corp. - 11,064,834 11,064,834
VERITAS Software Corp. - 18,981,685 18,981,685
VISX, Inc. 4,973,719 4,066,563 9,040,282
Weatherford International, Inc. - 9,722,125 9,722,125
Xilinx, Inc. - 14,674,570 14,674,570
----------------- -------------------- ------------
TOTAL COMMON STOCKS 183,432,044 292,491,352 475,923,396
----------------- -------------------- ------------
FOREIGN COMMON STOCKS --7.1%
Foreign Common Stocks
Gemstar International Group Ltd. - 10,859,375 10,859,375
Grupo Industrial Durango SA - 1,077,025 1,077,025
Nokia Oyj Sponsored ADR 10,735,756 - 10,735,756
Nortel Networks Corp. 9,104,813 - 9,104,813
----------------- -------------------- ------------
TOTAL FOREIGN COMMON STOCKS 19,840,569 11,936,400 31,776,969
----------------- -------------------- ------------
SHORT-TERM OBLIGATIONS--2.3%
Commercial Paper--2.3%
General Electric Capital Corp. 5.25%, 11/1/99 - 1,259,633 1,259,633
Koch Industries, Inc. 5.34%, 11/1/99 3,245,000 - 3,245,000
Albertson's, Inc. 5.30%, 11/2/99 1,499,779 - 1,499,779
Exxon Imperial U.S., Inc. 5.30%, 11/2/99 - 2,753,783 2,753,783
Gannett Co., Inc.5.30%, 11/5/99 1,574,072 - 1,574,072
Private Export Funding Corp. 5.28%, 11/9/99 998,827 - 998,827
Receivables Capital Corp. 5.80%, 1/14/00 - 666,841 666,841
----------------- -------------------- ------------
TOTAL SHORT-TERM OBLIGATIONS 7,317,678 4,680,257 11,997,935
----------------- -------------------- ------------
TOTAL INVESTMENTS--99.0%
(Identified cost $175,001,344, $233,058,676 210,590,291 309,108,009 519,698,300
and $408,060,020)
Cash and receivables, less liabilities--(1.0%) 5,119,651 234,233 5,353,884
----------------- -------------------- ------------
NET ASSETS--100.0% $ 215,709,942 $ 309,342,242 $525,052,184
================= ==================== ============
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix Strategic Theme Fund/Phoenix-Seneca Mid Cap Fund
Notes to Pro Forma Combining Financial Statements
October 31, 1999 (Unaudited)
1. Basis of Combination
The Pro Forma Statement of Assets and Liabilities, including the Pro Forma
Schedule of Investments, and the related Pro Forma Statement of Operations ("Pro
Forma Statements") reflect the accounts of Phoenix Strategic Theme Fund
("Strategic Theme") and Phoenix-Seneca Mid Cap Fund ("Mid Cap") as if the
reorganization occurred as of and for the year ended October 31, 1999. These
statements have been derived from the books and records utilized in calculating
daily net asset value of each fund at October 31, 1999 and for the year then
ended.
The Pro Forma Statements give effect to the proposed transfer of the assets and
stated liabilities of Mid Cap in exchange for shares of the respective class of
Strategic Theme. Phoenix Investment Council, Inc. ("PIC" or the "Adviser") will
bear all costs and expenses of the reorganization.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of the fund incorporated by reference in the Statement of
Additional Information.
2. Shares of Beneficial Interest
The Pro Forma net asset value per share assumes the issuance of additional
shares of Strategic Theme which would have been issued at October 31, 1999 in
connection with the proposed reorganization. The amount of additional shares
assumed be to issued was calculated based on the net assets, as of October 31,
1999, of Mid Cap Class A of $292,275,239 and the net asset value of Strategic
Theme Class A of $18.42; and net assets of Mid Cap Class B of $14,396,029 and
the net asset value of Strategic Theme Class B of $17.82. The Pro Forma
Statement of Assets & Liabilities reflects the combined Pro Forma shares
outstanding as calculated above.
3. Pro Forma Operations
Pro Forma operating expenses include the actual expenses of each Fund and the
combined Fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity. The investment advisory, distribution and financial
agent fees have been calculated for the combined Fund based on the fee schedule
in effect for Strategic Theme at the combined level of average net assets for
the year ended October 31, 1999.
4. Portfolio Valuation
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the last bid price. Debt securities are valued on the basis of
broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at fair value as determined
in good faith by or under the direction of the Trustees.
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
PART C
OTHER INFORMATION
Item 15. Indemnification
The response to this item is incorporated by reference to Part A of the
Prospectus/Proxy Statement in this Registration Statement under the caption
"Comparative Information on Shareholder Rights--Liability of Trustees."
Item 16. Exhibit
(1)(a) Declaration of Trust of the Registrant, previously filed, and filed via
EDGAR as Exhibit 1.1 with Post-Effective Amendment No. 26 on August 29,
1997, incorporated herein by reference.
(1)(b) 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 as Exhibit 1.2 with
Post-Effective Amendment No. 25 on August 20, 1997, incorporated herein
by reference.
(1)(c) Amendment to Declaration of Trust of the Registrant, changing name of
the Trust and establishing additional Series of the Trust, filed via
EDGAR as Exhibit 1.3 with Post-Effective Amendment No. 13 on October 16,
1995, incorporated herein by reference.
(1)(d) Amendment to Declaration of Trust of the Registrant, changing the name
of the Series of the Trust filed via EDGAR as Exhibit 1.4 with
Post-Effective Amendment No. 14 on April 15, 1996, incorporated herein
by reference.
(1)(e) Amendment to Declaration of Trust establishing an additional Series of
the Trust filed via EDGAR as Exhibit 1.5 with Post-Effective Amendment
No. 15 on May 24, 1996, incorporated herein by reference.
(1)(f) Amendment to Declaration of Trust creating additional classes and
multi-class distribution system filed via EDGAR as Exhibit 1.6 with
Post-Effective Amendment No. 27 on October 27, 1997, incorporated herein
by reference.
(2) By-laws of the Registrant, previously filed and filed via EDGAR as
Exhibit 2.1 with Post-Effective Amendment No. 29 on August 28, 1998,
incorporated herein by reference.
(3) [Not Applicable.]
(4) Agreement and Plan of Reorganization (included as Exhibit A to the
Prospectus/Proxy Statement contained in Part A of this Registration
Statement).
(5) Reference is hereby made to Article VI of Registrant's Declaration of
Trust referenced in Exhibit 1 above.
(6)(a) Management Agreement between Registrant and National Securities &
Research Corporation dated January 1, 1994, as assigned to Phoenix
Investment Counsel Inc. effective June 1, 1998, previously filed, filed
via EDGAR as Exhibit 5.1 with Post-Effective Amendment No. 25 on August
20, 1997, incorporated herein by reference.
(6)(b) Investment Advisory between Registrant and Phoenix Investment Counsel,
Inc. dated October 16, 1995, filed via EDGAR as Exhibit 5.2 with
Post-Effective Amendment No. 13 on October 16, 1995, incorporated herein
by reference.
<PAGE>
(6)(c) First Amendment to Phoenix Strategic Equity Series Fund Management
Agreement between Registrant and National Securities Research
Corporation dated January 1, 1994, as assigned to Phoenix Investment
Counsel, Inc. effective June 1, 1998, filed via EDGAR as Exhibit 5.3
with Post-Effective Amendment No. 25 on August 20, 1997, incorporated
herein by reference.
(6)(d) Second Amendment to Phoenix Strategic Equity Series Fund Management
Agreement between Registrant and National Securities and Research
Corporation dated October 16, 1995, as assigned to Phoenix Investment
Counsel, Inc. effective June 1, 1998, filed via EDGAR as Exhibit 5.4
with Post-Effective Amendment No. 25 on August 20, 1997, incorporated
herein by reference.
(6)(e) Subadvisory Agreement between Phoenix Investment Counsel, Inc. and
Seneca Capital Management LLC, dated June 26, 1998, on behalf of Equity
Opportunities Fund filed via EDGAR as Exhibit 5.5 with Post-Effective
Amendment No. 29 on August 28, 1998, incorporated herein by reference.
(6)(f) Subadvisory Agreement between Phoenix Investment Counsel, Inc. and Roger
Engemann & Associates, Inc., dated June 26, 1998, on behalf of Small Cap
Fund filed via EDGAR as Exhibit 5.6 with Post-Effective Amendment No. 29
on August 28, 1998, incorporated herein by reference.
(7)(a) Underwriting Agreement between Registrant and Phoenix Equity Planning
Corporation dated November 19, 1997, filed via EDGAR as Exhibit 6.1 with
Post-Effective Amendment No. 28 on February 13, 1998, incorporated
herein by reference.
(7)(b) Form of Sales Agreement between Phoenix Equity Planning Corporation and
dealers filed via EDGAR as Exhibit 6.2 with Post-Effective Amendment No.
29 on August 28, 1998, incorporated herein by reference.
(7)(c) Form of Supplement to Phoenix Family of Funds Sales Agreement filed via
EDGAR as Exhibit 6.3 with Post-Effective Amendment No. 29 on August 28,
1998, incorporated herein by reference.
(7)(d) Form of Financial Institution Sales Contract for the Phoenix Family of
Funds filed via EDGAR as Exhibit 6.4 with Post-Effective Amendment No.
29 on August 28, 1998, incorporated herein by reference.
(8) Not Applicable.
(9) Custodian Contract between Registrant and State Street Bank and Trust
Company dated May 1, 1997, filed via EDGAR as Exhibit 8 with
Post-Effective Amendment No. 27 on October 27, 1997, incorporated herein
by reference.
(10)(a) Amended and Restated Distribution Plan for Class A Shares filed via
EDGAR as Exhibit 15.1 with Post-Effective Amendment No. 27 on October
27, 1997, incorporated herein by reference.
(10)(b) Amended and Restated Distribution Plan for Class B Shares filed via
EDGAR as Exhibit 15.2 with Post-Effective Amendment No. 27 on October
27, 1997, incorporated herein by reference.
(10)(c) Amended and Restated Distribution Plan for Class C Shares filed via
EDGAR as Exhibit 15.3 with Post-Effective Amendment No. 27 on October
27, 1997, incorporated herein by reference.
(11) Opinion and consent of Goodwin, Procter & Hoar LLP with respect to
legality of the shares being issued, filed via EDGAR as Exhibit 11 on
September 16, 1999.
(12) Opinion and Consent of Goodwin, Procter & Hoar LLP with respect to tax
matters relating to acquisition of the Phoenix-Seneca Mid Cap Fund (to
be filed by Post-Effective Amendment).
C-2
<PAGE>
(13)(a) Transfer Agency and Service Agreement between Registrant and Phoenix
Equity Planning dated June 1, 1994, filed with Post-Effective Amendment
No. 9 on July 19, 1994, filed via EDGAR as Exhibit 9.1 with
Post-Effective Amendment No. 25 on August 20, 1997, incorporated herein
by reference.
(13)(b) Sub-Transfer Agency Agreement between Registrant and Phoenix Equity
Planning Corporation dated June 1, 1994 and filed via EDGAR as Exhibit
9.2 with Post-Effective Amendment No. 29 on August 28, 1998,
incorporated herein by reference.
(13)(c) Amended and Restated Financial Agent Agreement between Registrant and
Phoenix Equity Planning dated November 19, 1997 and filed via EDGAR as
Exhibit 9.3 with Post-Effective Amendment No. 28 on February 13, 1998,
incorporated herein by reference.
(13)(d) First Amendment to Financial Agent Agreement between Registrant and
Phoenix Equity Planning Corporation dated March 23, 1998 and filed via
EDGAR as Exhibit 9.4 with Post-Effective Amendment No. 29 on August 28,
1998, incorporated herein by reference.
(13)(e) Second Amendment to Financial Agent Agreement between Registrant and
Phoenix Equity Planning Corporation dated July 31, 1998 and filed via
EDGAR as Exhibit 9.5 with Post-Effective Amendment No. 29 on August 28,
1998, incorporated herein by reference.
(14)* Consent of Independent Accountants.
(15) Not Applicable.
(16) Powers of Attorney, previously filed via EDGAR with Post-Effective
Amendment No. 30 on June 28, 1999.
(17)a* Form of Proxy Card for Phoenix-Seneca Mid Cap Fund.
(17)b* Prospectus of Phoenix-Seneca Strategic Theme Fund dated August 27, 1999.
*Filed herewith.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a
part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities
Act of 1933, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment,
an Opinion of Counsel or a copy of an IRS ruling supporting the tax
consequences of the reorganization within a reasonable time after
receipt of such opinion or ruling.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of the Registrant in the City
of Hartford and State of Connecticut on the 22nd day of December 1999.
Phoenix Strategic Equity Series Fund
By: /s/ Philip R. McLoughlin
-----------------------------------
Name: Philip R. McLoughlin
Title: President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
- -----------------------------------
Robert Chesek* Trustee
- -----------------------------------
E. Virgil Conway* Trustee
/s/ Nancy G. Curtiss
- -----------------------------------
Nancy G. Curtiss Treasurer
- -----------------------------------
Harry Dalzell-Payne* Trustee
- -----------------------------------
Francis E. Jeffries* Trustee
- -----------------------------------
Leroy Keith, Jr.* Trustee
/s/ Philip R. McLoughlin
- -----------------------------------
Philip R. McLoughlin Trustee and President
- -----------------------------------
Everett L. Morris* Trustee
- -----------------------------------
James M. Oates* Trustee
- -----------------------------------
Calvin J. Pedersen* Trustee
- -----------------------------------
Herbert Roth, Jr.* Trustee
- -----------------------------------
Richard E. Segerson* Trustee
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------
Lowell P. Weicker, Jr.* Trustee
*By: /s/ Philip R. McLoughlin
------------------------------
</TABLE>
*Philip R. McLoughlin pursuant to powers of attorney filed previously.
C-5
<PAGE>
Index To Exhibits
(14) Consent of Independent Accountants
(17)(a) Form of Proxy Card for the Phoenix-Seneca Mid Cap Fund
(17)(b) Prospectus of Phoenix-Seneca Strategic Theme Fund dated, August 27, 1999
C-6
Exhibit (14)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined
Prospectus/Proxy Statement and Statement of Additional Information constituting
parts of this Registration Statement on Form N-14 (the "Registration Statement")
of our report dated June 11, 1999, relating to the financial statements and
financial highlights of Phoenix Strategic Theme Fund (currently known as
Phoenix-Seneca Strategic Theme Fund, a series of Phoenix Strategic Equity Series
Fund) appearing in the April 30, 1999 Annual Report to Shareholders, and of our
report dated January 21, 1999, relating to the financial statements and
financial highlights of Phoenix-Mid Cap Fund (currently known as Phoenix-Seneca
Mid Cap Fund, a series of Phoenix Multi-Portfolio Fund) appearing in the
November 30, 1998 Annual Report to Shareholders, which financial statements and
financial highlights are also incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading "Management
and Other Service Providers" and in Exhibit A, "Agreement and Plan of
Reorganization" in such Combined Prospectus/Proxy Statement. We further consent
to the reference to us under the heading "Financial Highlights" in the
Prospectus of Phoenix-Seneca Strategic Theme Fund dated August 27, 1999 and
under the heading "Additional Information - Independent Accountants" in the
Statements of Additional Information of Phoenix-Seneca Strategic Theme Fund
dated August 27, 1999 and of Phoenix-Seneca Mid Cap Fund dated March 30, 1999
which are incorporated by reference into the Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 21, 1999
C-7
Exhibit (17)a
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
February 25, 2000
The undersigned shareholder of the Phoenix-Seneca Mid Cap Fund, revoking any and
all previous proxies heretofore given for shares of the Mid Cap Fund held by the
undersigned, does hereby appoint Philip R. McLoughlin, and Pamela S. Sinofksy,
each and any of them, with full power of substitution each, to be the attorneys
and proxies of the undersigned, to attend the special meeting of the
shareholders of Phoenix-Seneca Mid Cap Fund to be held on the 25th day of
February, 2000, at 10:00 a.m., local time, at the offices of Phoenix
Multi-Portfolio Fund, 101 Munson Street, Greenfield, Massachusetts 01301, and
any adjournments thereof and to represent and direct shares of each class of the
Phoenix-Seneca Mid Cap Fund held by the undersigned as of the record date for
the meeting for the proposal specified below.
This proxy, if properly executed, will be voted in the manner as directed herein
by the undersigned shareholder. Unless otherwise specified below in the boxes
provided, the undersigned's vote will be cast "FOR" the proposal. If no
direction is made for the proposal, this proxy will be voted "FOR" the proposal.
In their discretion, the proxies are authorized to transact and vote upon such
other matters and business as may come before the meeting or any adjournments
thereof.
To consider and act upon a proposal to approve the Agreement and Plan of
Reorganization, dated August 27, 1999, and the transactions it
contemplates, including (a) the transfer of all or substantially all of
the assets of the Phoenix-Seneca Mid Cap Fund to the Phoenix-Seneca
Strategic Theme Fund in exchange solely for shares of the corresponding
class of the Strategic Theme Fund and the assumption by the Strategic
Theme Fund of all the liabilities of the Mid Cap Fund and (b) the
distribution of the shares of the Strategic Theme Fund so received to
shareholders of the Mid Cap Fund.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
To consider and act upon any other business as may properly come before
the meeting and any adjournment thereof.
To avoid the expense of adjourning the meeting to a subsequent date,
please return this proxy in the enclosed self-addressed, postage-paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF PHOENIX
MULTI-PORTFOLIO FUND, WHICH RECOMMENDS A VOTE FOR THE PROPOSAL.
Dated: _____________________, 2000
Name
-----------------------------
Signature of Shareholder
C-8
Phoenix Investment Partners
Prospectus
August 27, 1999
- - -------- Engemann
Phoenix-Engemann
Small Cap Fund
- - -------- Seneca
Phoenix-Seneca
Equity Opportunities Fund
Phoenix-Seneca
Strategic Theme Fund
Neither the Securities and Exchange
Commission nor any state securities
commission has approved or
disapproved of these securities or
determined if this prospectus is
truthful or complete. Any representation
to the contrary is a criminal offense.
This prospectus contains important
information that you should know
before investing in the Phoenix-Engemann
Small Cap Fund, Phoenix-Seneca Equity
Opportunities Fund, and Phoenix-Seneca
Strategic Theme Fund.
[logo] PHOENIX
INVESTMENT PARTNERS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Phoenix-Engemann Small Cap Fund
Investment Risk and Return Summary..................................... 1
Fund Expenses.......................................................... 4
Management of the Fund................................................. 5
Phoenix-Seneca Equity Opportunities Fund
Investment Risk and Return Summary..................................... 7
Fund Expenses.......................................................... 10
Management of the Fund................................................. 11
Phoenix-Seneca Strategic Theme Fund
Investment Risk and Return Summary..................................... 14
Fund Expenses.......................................................... 17
Management of the Fund................................................. 18
Additional Investment Techniques.......................................... 20
Pricing of Fund Shares.................................................... 21
Sales Charges............................................................. 22
Your Account.............................................................. 24
How to Buy Shares......................................................... 26
How to Sell Shares........................................................ 26
Things You Should Know When Selling Shares................................ 27
Account Policies.......................................................... 28
Investor Services......................................................... 29
Tax Status of Distributions............................................... 30
Financial Highlights...................................................... 31
Additional Information.................................................... 35
[triangle] Phoenix
Strategic
Equity
Series
Fund
<PAGE>
PHOENIX-ENGEMANN SMALL CAP FUND
INVESTMENT RISK AND RETURN SUMMARY
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Phoenix-Engemann Small Cap Fund has an investment objective of long-term capital
growth. There is no guarantee that the fund will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[arrow] The fund invests primarily in stocks of companies with total market
capitalizations of $1.5 billion or less at the time of investment. The
fund may invest in both U.S. and foreign (non-U.S.) issuers.
[arrow] The subadviser selects companies that it believes have the potential for
long-term, rapid growth. Companies are selected on the basis of their:
[bullet] ability to expand existing product lines, introduce new
products and expand geographically,
[bullet] market share gains,
[bullet] improved operating efficiency, and
[bullet] unexploited themes or acquisitions.
Additionally, the fund seeks companies with strong financial structures
and strong fundamental prospects.
[arrow] Any income derived from investments will be incidental.
[arrow] The subadviser's investment strategy may result in a higher portfolio
turnover rate for the fund. High portfolio turnover rates may increase
costs to the fund, may negatively affect fund performance, and may
increase capital gains distributions, resulting in greater tax liability
to you.
[arrow] Securities are evaluated for sale when they fail to meet the
subadviser's expectations.
Temporary Defensive Strategy: When, in the subadviser's opinion, adverse market
or economic conditions warrant, any part of the fund's assets may be held in
cash or money market instruments, including U.S. Treasury obligations maturing
within one year from the date of purchase. In such instances, the fund may not
achieve its stated objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the fund.
PRINCIPAL RISKS
If you invest in this fund, you risk that you may lose your investment.
Phoenix-Engemann Small Cap Fund 1
<PAGE>
GENERAL
The value of the fund's investments that support your share value can decrease
as well as increase. If between the time you purchase shares and the time you
sell shares the value of the fund's investments decreases, you will lose money.
Conditions affecting the overall economy, specific industries or companies in
which the fund invests can be worse then expected. As a result, the value of
your shares may decrease.
SMALL CAPITALIZATIONS
Given the limited operating history and rapidly changing fundamental prospects,
investment returns from smaller capitalization companies can be highly volatile.
Small capitalization companies may be affected to a greater extent to changes in
economic conditions and conditions in particular industries, are subject to
varying patterns of trading volume and may, at times, be more difficult to sell.
Focusing fund investments in small companies may also subject the fund to
greater risks than a fund that invests in a broad range of securities that do
not have the potential to appreciate, and companies with small capitalizations
may find it more difficult to raise capital.
GROWTH STOCKS
Because growth stocks typically make little or no dividend payments to
shareholders, return is based on a stock's capital appreciation, making return
more dependent on market increases and decreases. Growth stocks are therefore
more volatile than non-growth stocks to market changes.
FOREIGN INVESTING
Foreign markets and currencies may not perform as well as U.S. markets.
Political and economic uncertainty in foreign countries, as well as less public
information about foreign investments may negatively impact the fund's
portfolio. Dividends and other income payable on foreign securities may be
subject to foreign taxes. Some investments may be made in currencies other than
U.S. dollars that will fluctuate in value as a result of changes in the currency
exchange rate.
IMPACT OF THE YEAR 2000 ISSUE ON FUND INVESTMENTS
The year 2000 issue is the result of computer programs being written using two
rather than four digits to define the applicable year. There is the possibility
that some or all of an entity's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If an entity whose securities are held by the fund does not "fix" its Year
2000 issue it is possible that its operations and financial results would be
hurt. Also the cost of modifying computer programs to become Year 2000 compliant
may hurt the financial performance and market price of companies whose
securities are held by the fund.
2 Phoenix-Engemann Small Cap Fund
<PAGE>
PERFORMANCE TABLES
The bar chart and table below provide some indication of the risks of investing
in the Phoenix-Engemann Small Cap Fund. The bar chart shows changes in the
fund's Class A Shares performance from year to year.(1) The table below shows
how the fund's average annual returns for one year and for the life of the fund
compare to those of a broad-based securities market index. The fund's past
performance is not necessarily an indication of how the fund will perform in the
future.
[graphic omitted]
ANNUAL RETURN (%)
CALENDAR YEAR
1996 1997 1998
29.96 9.51 11.40
(1) The fund's average annual returns in the chart above do not reflect the
deduction of any sales charges. The returns would have been less than those
shown if sales charges were deducted. During the period shown in the chart
above, the highest return for a quarter was 30.34% (quarter ending December 31,
1998) and the lowest return for a quarter was (15.62)% (quarter ending March 31,
1997). Year to date performance (through June 30, 1999) is 5.99%.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Returns
(for the periods ending 12/31/98)(1) One Year Life of the Fund(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Shares 6.12% 24.37%
- -----------------------------------------------------------------------------------------------------------------
Class B Shares 6.71% 24.96%
- -----------------------------------------------------------------------------------------------------------------
Russell 2000 Growth Index (3) 1.23% 9.57%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect the deduction
of the maximum sales charge for an investment in the fund's Class A Shares and a
full redemption in the fund's Class B Shares.
(2) Since October 16, 1995.
(3) The Russell 2000 Growth Index is a commonly used, unmanaged indicator of
stock market total return performance for small-cap companies with above-average
growth orientation. The index does not reflect sales charges.
Phoenix-Engemann Small Cap Fund 3
<PAGE>
FUND EXPENSES
- --------------------------------------------------------------------------------
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------ ------
<S> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (load) (as a percentage of
the lesser of the value redeemed or the amount invested) None 5%(a)
Maximum Sales Charge (load) Imposed on Reinvested None
Dividends None
Redemption Fee None None
Exchange Fee None None
----------------------------------------------------
CLASS A CLASS B
SHARES SHARES
------ ------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees (b) 0.25% 1.00%
Other Expenses 0.46% 0.46%
---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES 1.46% 2.21%
==== ====
</TABLE>
- - ----------
(a) The maximum deferred sales charge is imposed on Class B Shares redeemed
during the first year; thereafter, it decreases 1% annually to 2% during the
fourth and fifth years and to 0% after the fifth year.
(b) Distribution and Service 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").
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. In the case of Class B Shares, it is
assumed that your shares are converted to Class A after eight years. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
4 Phoenix-Engemann Small Cap Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $617 $915 $1,235 $2,138
- ------------------------------------------------------------------------------------------------------------------
Class B $624 $891 $1,185 $2,355
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B $224 $691 $1,185 $2,355
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE ADVISERS
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment adviser to the
fund and is located at 56 Prospect Street, Hartford, CT 06115. Phoenix also acts
as the investment adviser for 14 other mutual funds, as subadviser to three
mutual funds and as adviser to institutional clients. As of December 31, 1998,
Phoenix had $23.9 billion in assets under management. Phoenix has acted as an
investment adviser for over sixty years.
Roger Engemann & Associates, Inc. ("Engemann") is the investment subadviser to
the fund and is located at 600 North Rosemead Boulevard, Pasadena, California
91107. Engemann acts as adviser to six mutual funds, as subadviser to four other
mutual funds and acts as investment adviser to institutions and individuals. As
of December 31, 1998, Engemann had $5.9 billion in assets under management.
Engemann has been an investment adviser since 1969.
Subject to the direction of the fund's Board of Trustees, Phoenix is responsible
for managing the fund's investment program and the general operations of the
funds. Engemann, as subadviser, is responsible for day-to-day management of the
fund's portfolio. Engemann manages the fund's assets to conform with the
investment policies as described in this prospectus. The fund pays Phoenix a
monthly investment management fee that is accrued daily against the value of
that fund's net assets at the following rates:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
$1+ billion
1(st) billion through $2 billion $2+ billion
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fee 0.75% 0.70% 0.65%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Phoenix-Engemann Small Cap Fund 5
<PAGE>
Phoenix pays Engemann a subadvisory fee at the following rates:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Up to $323 million $1+ billion
$323 million through $1 billion through $2 billion $2+ billion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subadvisory Fee 0.20% 0.375% 0.35% 0.325%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
During the fund's last fiscal year, the fund paid total management fees of
$1,885,586. The ratio of management fees to average net assets for the fiscal
year ended April 30, 1999 was 0.75%. The total advisory fee of 0.75% of the
aggregate net assets of the fund is greater than that for most mutual funds;
however, the Trustees have determined that it is comparable to fees charged by
other mutual funds whose investment objectives are similar to those of the fund.
PORTFOLIO MANAGEMENT
Roger Engemann, James E. Mair and John S. Tilson head the team that is primarily
responsible for the day-to-day management of the fund. Each is a Managing
Director, Equities of Phoenix. Mr. Engemann has been President of Engemann since
its inception in 1969. Messrs. Mair and Tilson are both Executive Vice
Presidents of Portfolio Management of Engemann and both have been with Engemann
since 1983. Messrs. Engemann and Mair have been Chartered Financial Analysts
("CFAs") since 1972, and Mr. Tilson has been a CFA since 1974.
IMPACT OF THE YEAR 2000 ISSUE ON FUND OPERATIONS
The Trustees have directed management to ensure that the systems used by service
providers (Phoenix and its affiliates) in support of the funds' operations be
assessed and brought into Year 2000 compliance. Based upon its assessments,
Phoenix determined that it would be required to modify or replace portions of
its software so that its computer systems would properly utilize dates beyond
December 31, 1999. Phoenix management believes that the majority of these
systems are already Year 2000 compliant. Phoenix believes that with
modifications to existing software and conversions to new software, the Year
2000 issue will be mitigated. However, if the problem is not fully addressed,
the fund may be negatively impacted.
Phoenix is utilizing both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. As of June 30, 1999,
Phoenix mission-critical systems have been upgraded and tested for Year 2000
compliance. The total cost to become Year 2000 compliant is not an expense of
the fund and is not expected to have a material impact on the operating results
of Phoenix.
6 Phoenix-Engemann Small Cap Fund
<PAGE>
PHOENIX-SENECA EQUITY OPPORTUNITIES FUND
INVESTMENT RISK AND RETURN SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Phoenix-Seneca Equity Opportunities Fund has an investment objective of
long-term capital growth. There is no guarantee that the fund will achieve its
objective.
Principal Investment Strategies
[arrow] Under normal circumstances, the fund will invest at least 65% of its
total assets in common stocks.
[arrow] The subadviser uses a screening process to select stocks of companies
that it believes are:
[bullet] growing at the fastest rates;
[bullet] producing quality, sustainable earnings;
[bullet] well managed; and
[bullet] reasonably valued relative to their growth rate and to the
market.
[arrow] Stocks are reviewed for sale if:
[bullet] earnings reports disappoint;
[bullet] valuation levels reach the top of their historic levels; or
[bullet] earnings momentum peaks.
[arrow] The fund may invest in both U.S. and foreign (non-U.S.) stocks of any
type and from any industry.
[arrow] Any income derived from investments will be incidental.
[arrow] The subadviser's investment strategy may result in a higher portfolio
turnover rate for the fund. High portfolio turnover rates may increase
costs to the fund, may negatively affect fund performance, and may
increase capital gains distributions, resulting in greater tax liability
to you.
Temporary Defensive Strategy: When, in the subadviser's opinion, adverse market
or economic conditions warrant, any part of the fund's assets may be held in
cash or money market instruments, including U.S. Treasury obligations maturing
within one year from the date of purchase. In such instances, the fund may not
achieve its stated objective.
Phoenix-Seneca Equity Opportunities Fund 7
<PAGE>
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the fund.
PRINCIPAL RISKS
If you invest in this fund, you risk that you may lose your investment.
GENERAL
The value of the fund's investments that support your share value can decrease
as well as increase. If between the time you purchase shares and the time you
sell shares the value of the fund's investments decreases, you will lose money.
Conditions affecting the overall economy, specific industries or companies in
which the fund invests can be worse than expected. As a result, the value of
your shares may decrease.
GROWTH STOCKS
Because growth stocks typically make little or no dividend payments to
shareholders, return is based on a stock's capital appreciation, making return
more dependent on market increases and decreases. Growth stocks are therefore
more volatile than non-growth stocks to market changes.
SMALL CAPITALIZATIONS
Given the limited operating history and rapidly changing fundamental prospects,
investment returns from smaller capitalization companies can be highly volatile.
Small capitalization companies may be affected to a greater extent to changes in
economic conditions and conditions in particular industries, are subject to
varying patterns of trading volume and may, at times, be more difficult to sell.
FOREIGN INVESTING
Foreign markets and currencies may not perform as well as U.S. markets.
Political and economic uncertainty in foreign countries, as well as less public
information about foreign investments may negatively impact the fund's
portfolio. Dividends and other income payable on foreign securities may be
subject to foreign taxes. Some investments may be made in currencies other than
U.S. dollars that will fluctuate in value as a result of changes in the currency
exchange rate.
IMPACT OF THE YEAR 2000 ISSUE ON FUND INVESTMENTS
The year 2000 issue is the result of computer programs being written using two
rather than four digits to define the applicable year. There is the possibility
that some or all of an entity's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If an entity whose securities are held by the fund does not "fix" its Year
2000 issue it is possible that its operations and financial results would be
hurt.
8 Phoenix-Seneca Equity Opportunities Fund
<PAGE>
Also the cost of modifying computer programs to become Year 2000 compliant
may hurt the financial performance and market price of companies whose
securities are held by the fund.
PERFORMANCE TABLES
The bar chart and table below provide some indication of the risks of investing
in the Phoenix-Seneca Equity Opportunities Fund. The bar chart shows changes in
the fund's Class A Shares performance from year to year over a 10-year
period.(1) The table below shows how the fund's average annual returns for one,
five and ten years and for the life of the fund compare to those of a
broad-based securities market index. The fund's past performance is not
necessarily an indication of how the fund will perform in the future.
[graphic omitted]
ANNUAL RETURN (%)
CALENDAR YEAR
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
26.67 -6.59 23.17 16.80 13.35 -5.07 33.75 11.73 9.14 24.89
(1) The fund's average annual returns in the chart above do not reflect the
deduction of any sales charges. The returns would have been less than those
shown if sales charges were deducted. During the period shown in the chart
above, the highest return for a quarter was 20.50% (quarter ending December 31,
1998) and the lowest return for a quarter was (14.36)% (quarter ending September
30, 1990). Year to date performance (through June 30, 1999) is 12.35%.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Life of the Fund(2)
Average Annual Total Returns -------------------------
(for the periods ending 12/31/98)(1) One Year Five Years Ten Years Class A Class B
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 18.89% 12.98% 13.52% 11.20% --
- -------------------------------------------------------------------------------------------------------------------
Class B Shares 20.18% N/A N/A -- 16.34%
- -------------------------------------------------------------------------------------------------------------------
Russell 2000 Growth Index(3) 1.23% 10.22% 11.54% 12.79%(4) 13.68%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect the deduction
of the maximum sales charge for an investment in the fund's Class A Shares and a
full redemption in the fund's Class B Shares.
(2) Class A Shares since August 1, 1944 and Class B Shares since July 19, 1994.
(3) The Russell 2000 Growth Index is a commonly used, unmanaged indicator of
stock market total return performance for small-cap companies with above-average
growth orientation. The index does not reflect sales charges.
(4) Index performance since December 31, 1978, inception of the Russell 2000
Growth Index.
Phoenix-Seneca Equity Opportunities Fund 9
<PAGE>
FUND EXPENSES
- --------------------------------------------------------------------------------
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
------ ------
<S> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 4.75% None
Maximum Deferred Sales Charge (load) (as a percentage of
the lesser of the value redeemed or the amount invested) None 5%(a)
Maximum Sales Charge (load) Imposed on Reinvested None
Dividends None
Redemption Fee None None
Exchange Fee None None
----------------------------------------------------
CLASS A CLASS B
SHARES SHARES
------ ------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.70% 0.70%
Distribution and Service (12b-1) Fees (b) 0.25% 1.00%
Other Expenses 0.29% 0.29%
---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES 1.24% 1.99%
==== ====
</TABLE>
- - ----------
(a) The maximum deferred sales charge is imposed on Class B Shares redeemed
during the first year; thereafter, it decreases 1% annually to 2% during the
fourth and fifth years and to 0% after the fifth year.
(b) Distribution and Service 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").
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. In the case of Class B Shares, it is
assumed that your shares are converted to Class A after eight years. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
10 Phoenix-Seneca Equity Opportunities Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $595 $850 $1,124 $1,904
- ------------------------------------------------------------------------------------------------------------------
Class B $602 $824 $1,073 $2,123
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B $202 $624 $1,073 $2,123
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE ADVISERS
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment adviser to the
fund and is located at 56 Prospect Street, Hartford, CT 06115. Phoenix also acts
as the investment adviser for 14 other mutual funds, as subadviser to three
mutual funds and as adviser to institutional clients. As of December 31, 1998,
Phoenix had $23.9 billion in assets under management. Phoenix has acted as an
investment adviser for over sixty years.
Seneca Capital Management LLC ("Seneca") is the investment subadviser to the
fund and is located at 909 Montgomery Street, San Francisco, California 94133.
Seneca acts as a subadviser to nine other mutual funds and as investment adviser
to institutions and individuals. As of December 31, 1998, Seneca had $5.9
billion in assets under management. Seneca has been (with its predecessor,
GMG/Seneca Capital Management LP ("GMG/Seneca")) an investment adviser since
1989.
Subject to the direction of the fund's Board of Trustees, Phoenix is responsible
for managing the fund's investment program and the general operations of the
fund. Seneca, as subadviser, is responsible for day-to-day management of the
fund's portfolio. Seneca manages the fund's assets to conform with the
investment policies as described in this prospectus. The fund pays Phoenix a
monthly investment management fee that is accrued daily against the value of the
fund's net assets at the following rates:
Phoenix-Seneca Equity Opportunities Fund 11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
$1(st) billion $1+ billion through $2 billion $2+ billion
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fee 0.70% 0.65% 0.60%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Phoenix pays Seneca a subadvisory fee at the following rates:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Up to $184 million $1+ billion
$184 million through $1 billion through $2 billion $2+ billion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subadvisory Fee 0.20% 0.35% 0.325% 0.30%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
During the fund's last fiscal year, the fund paid total management fees of
$1,352,558. The ratio of management fees to average net assets for the fiscal
year ended April 30, 1999 was 0.70%.
PORTFOLIO MANAGEMENT
Investment and trading decisions for the fund are made by a team of managers and
analysts headed by Gail P. Seneca. The team leaders, which include Ms. Seneca,
Richard D. Little and Ronald K. Jacks, are primarily responsible for the
day-to-day decisions related to the fund.
Gail P. Seneca. Ms. Seneca has served as Co-Manager of the fund since January
1998. She also serves as Co-Manager of the Phoenix-Seneca Strategic Theme Fund
of Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap Fund
of Phoenix Multi-Portfolio Fund. Ms. Seneca also serves as a team leader for
each of the Phoenix-Seneca Funds. Ms. Seneca has been the Chief Executive and
Investment Officer of Seneca or GMG/Seneca since November 1989. From October
1987 until October 1989, she was Senior Vice President of the Asset Management
Division of Wells Fargo Bank, and, from October 1983 to September 1987, she was
Investment Strategist and Portfolio Manager for Chase Lincoln Bank, heading the
fixed income division.
Richard D. Little. Mr. Little has served as Co-Manager of the fund since January
1998. He also serves as Co-Manager of the Phoenix-Seneca Strategic Theme Fund of
Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap Fund of
Phoenix Multi-Portfolio Fund. Mr. Little also serves as a Portfolio Manager for
Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap "EDGE"[service mark] Fund
of Phoenix-Seneca Funds. Mr. Little has been Director of Equities with Seneca or
GMG/Seneca since December 1989. Before he joined GMG/Seneca, Mr. Little held
positions as an analyst, board member, and regional manager with Smith Barney,
NatWest Securities, and Montgomery Securities.
Ronald K. Jacks. Mr. Jacks has served as Co-Manager of the fund since January
1998. He also serves as Co-Manager of the Phoenix-Seneca Strategic Theme Fund of
Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap Fund of
Phoenix Multi-Portfolio Fund. Mr. Jacks also serves as a Portfolio Manager for
Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap "EDGE"[service mark] Fund
of Phoenix-Seneca Funds. Mr. Jacks was Secretary of the Phoenix-Seneca Funds
from February 1996 through February 1998. Mr. Jacks was a Trustee of
Phoenix-Seneca Funds from February 1996 through June 1997. Mr. Jacks has been a
Portfolio Manager with Seneca or GMG/Seneca since July 1990.
12 Phoenix-Seneca Equity Opportunities Fund
<PAGE>
IMPACT OF THE YEAR 2000 ISSUE ON FUND OPERATIONS
The Trustees have directed management to ensure that the systems used by service
providers (Phoenix and its affiliates) in support of the funds' operations be
assessed and brought into Year 2000 compliance. Based upon its assessments,
Phoenix determined that it would be required to modify or replace portions of
its software so that its computer systems would properly utilize dates beyond
December 31, 1999. Phoenix management believes that the majority of these
systems are already Year 2000 compliant. Phoenix believes that with
modifications to existing software and conversions to new software, the Year
2000 issue will be mitigated. However, if the problem is not fully addressed,
the fund may be negatively impacted.
Phoenix is utilizing both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. As of June 30, 1999,
Phoenix mission-critical systems have been upgraded and tested for Year 2000
compliance. The total cost to become Year 2000 compliant is not an expense of
the fund and is not expected to have a material impact on the operating results
of Phoenix.
Phoenix-Seneca Equity Opportunities Fund 13
<PAGE>
PHOENIX-SENECA STRATEGIC THEME FUND
INVESTMENT RISK AND RETURN SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
Phoenix-Seneca Strategic Theme Fund has an investment objective of long-term
capital growth. There is no guarantee that the fund will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[arrow] The fund invests primarily in stocks of U.S. and foreign (non-U.S.)
companies that the subadviser believes are well positioned to benefit
from cultural, demographic, regulatory, social, or technological changes
worldwide and that offer growth potential.
[arrow] The subadviser establishes strategic (major changes affecting markets
for prolonged periods) and tactical (focused, short-term) investment
themes that generally reflect trends that appear likely to drive stocks
with:
[bullet] similar technologies and products; or
[bullet] embody social, economic, political and technological
considerations; or
[bullet] present a visionary idea or creative solution.
The themes should offer substantial appreciation potential and exhibit
some independence from economic cycles.
[arrow] The subadviser seeks to identify companies which are well positioned to
benefit from an investment theme and possess:
[bullet] satisfactory return on capital;
[bullet] enhanced industry position; and
[bullet] superior management skills.
[arrow] More than one theme may be pursued at a time and themes may change when
the subadviser believes that the theme is saturated or fully exploited.
[arrow] The subadviser's investment strategy may result in a higher portfolio
turnover rate for the fund. High portfolio turnover rates may increase
costs to the fund, may negatively affect fund performance, and may
increase capital gains distributions, resulting in greater tax liability
to you.
Temporary Defensive Strategy: When, in the subadviser's opinion, adverse market
conditions warrant, investments may be made in fixed income securities with or
without warrants or
14 Phoenix-Seneca Strategic Theme Fund
<PAGE>
conversion features. The fund may also pursue a policy of retaining cash or
investing all or part of its assets in cash equivalents. In such instances, the
fund may not achieve its stated objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the fund.
PRINCIPAL RISKS
If you invest in this fund, you risk that you may lose your investment.
GENERAL
The value of the fund's investments that support your share value can decrease
as well as increase. If between the time you purchase shares and the time you
sell shares the value of the fund's investments decreases, you will lose money.
Conditions affecting the overall economy, specific industries or companies in
which the fund invests can be worse than expected. As a result, the value of
your shares may decrease.
THEME INVESTING
Theme investing is dependent upon the subadviser's ability to anticipate
emerging market trends, exploit such investment opportunities and to thereafter
sell securities once the theme is saturated.
There is no assurance that the themes selected will increase as the market
increases.
If a limited number of themes are selected for fund investment, adverse
economic, political or regulatory developments may have a greater adverse effect
on the fund than if the fund invested in a larger number of themes.
Themes not selected for investment may prove more profitable than themes
selected for investment by the subadviser.
SMALL CAPITALIZATIONS
Given the limited operating history and rapidly changing fundamental prospects,
investment returns from smaller capitalization companies can be highly volatile.
Small capitalization companies may be affected to a greater extent to changes in
economic conditions, and conditions in particular industries are subject to
varying patterns of trading volume and may, at times, be more difficult to sell.
FOREIGN INVESTING
Foreign markets and currencies may not perform as well as U.S. markets.
Political and economic uncertainty in foreign countries, as well as less public
information about foreign investments may negatively impact the fund's
portfolio. Dividends and other income payable on foreign securities may be
subject to foreign taxes. Some investments may be made in
Phoenix-Seneca Strategic Theme Fund 15
<PAGE>
currencies other than U.S. dollars that will fluctuate in value as a result of
changes in the currency exchange rate.
IMPACT OF THE YEAR 2000 ISSUE ON FUND INVESTMENTS
The year 2000 issue is the result of computer programs being written using two
rather than four digits to define the applicable year. There is the possibility
that some or all of an entity's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If an entity whose securities are held by the fund does not "fix" its Year
2000 issue it is possible that its operations and financial results would be
hurt. Also the cost of modifying computer programs to become Year 2000 compliant
may hurt the financial performance and market price of companies whose
securities are held by the fund.
PERFORMANCE TABLES
The bar chart and table below provide some indication of the risks of investing
in the Phoenix-Seneca Strategic Theme Fund. The bar chart shows changes in the
fund's Class A Shares performance from year to year.(1) The table below shows
how the fund's average annual returns for one year and for the life of the fund
compare to those of a broad-based securities market index. The fund's past
performance is not necessarily an indication of how the fund will perform in the
future.
[graphic omitted]
ANNUAL RETURN (%)
CALENDAR YEAR
1996 1997 1998
15.19 17.05 44.52
(1) The fund's average annual returns in the chart above do not reflect the
deduction of any sales charges. The returns would have been less than those
shown if sales charges were deducted. During the period shown in the chart
above, the highest return for a quarter was 37.17% (quarter ending December 31,
1998) and the lowest return for a quarter was (7.68)% (quarter ending September
30, 1998). Year to date performance (through June 30, 1999) is 16.83%.
16 Phoenix-Seneca Strategic Theme Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Life of the Fund(2)
-------------------------------------------------
Average Annual Total Returns
(for the periods ending 12/31/98)(1) One Year Class A Class B Class C
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Shares 37.70% 24.79% -- --
- ------------------------------------------------------------------------------------------------------------------
Class B Shares 39.60% -- 25.40% --
- ------------------------------------------------------------------------------------------------------------------
Class C Shares 43.65% -- -- 33.39%
- ------------------------------------------------------------------------------------------------------------------
S&P 500 Stock Index(3) 28.76% 28.66% 28.66% 28.27%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect the deduction
of the maximum sales charge for an investment in the fund's Class A Shares and a
full redemption in the fund's Class B Shares.
(2) Class A and Class B Shares since October 16, 1995 and Class C Shares since
November 3, 1997.
(3) The S&P 500 Stock Index is an unmanaged but commonly used measure of common
stock total return performance. The S&P 500's performance does not reflect sales
charges.
FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
<S> <C> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 4.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of
the lesser of the value redeemed or the amount invested) None 5%(a) 1%(b)
Maximum Sales Charge (load) Imposed on Reinvested
Dividends None None None
Redemption Fee None None None
Exchange Fee None None None
-------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees (c) 0.25% 1.00% 1.00%
Other Expenses 0.38% 0.38% 0.38%
---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES 1.38% 2.13% 2.13%
==== ==== ====
</TABLE>
- - ----------
(a) The maximum deferred sales charge is imposed on Class B Shares redeemed
during the first year; thereafter, it decreases 1% annually to 2% during the
fourth and fifth years and to 0% after the fifth year.
(b) The deferred sales charge is imposed on Class C Shares redeemed during the
first year only.
(c) Distribution and Service 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").
Phoenix-Seneca Strategic Theme Fund 17
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. In the case of Class B Shares, it is
assumed that your shares are converted to Class A after eight years. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $609 $891 $1,194 $2,054
- ------------------------------------------------------------------------------------------------------------------
Class B $616 $867 $1,144 $2,271
- ------------------------------------------------------------------------------------------------------------------
Class C $316 $667 $1,144 $2,462
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B $216 $667 $1,144 $2,271
- ------------------------------------------------------------------------------------------------------------------
Class C $216 $667 $1,144 $2,462
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE ADVISERS
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment adviser to the
fund and is located at 56 Prospect Street, Hartford, CT 06115. Phoenix also acts
as the investment adviser for 14 other mutual funds, as subadviser to three
mutual funds and as adviser to institutional clients. As of December 31, 1998,
Phoenix had $23.9 billion in assets under management. Phoenix has acted as an
investment adviser for over sixty years.
Seneca Capital Management LLC ("Seneca") is the investment subadviser to the
fund and is located at 909 Montgomery Street, San Francisco, California 94133.
Seneca acts as a subadviser to nine other mutual funds and as investment adviser
to institutions and individuals. As of December 31, 1998, Seneca had $5.9
billion in assets under management. Seneca has
18 Phoenix-Seneca Strategic Theme Fund
<PAGE>
been (with its predecessor, GMG/Seneca Capital Management LP ("GMG/Seneca")) an
investment adviser since 1989.
Subject to the direction of the fund's Board of Trustees, Phoenix is responsible
for managing the fund's investment program and the general operations of the
fund. Seneca, as subadviser, is responsible for day-to-day management of the
fund's portfolio. Seneca manages the fund's assets to conform with the
investment policies as described in this prospectus. The fund pays Phoenix a
monthly investment management fee that is accrued daily against the value of the
fund's net assets at the following rates:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
$1(st) billion $1+ billion through $2 billion $2+ billion
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fee 0.75% 0.70% 0.65%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Phoenix pays Seneca a subadvisory fee at the following rates:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Up to $201 million $1+ billion
$201 million to $1 billion through $2 billion $2+ billion
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subadvisory Fee 0.10% 0.375% 0.350% 0.325%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
During the fund's last fiscal year, the fund paid total management fees of
$1,129,085. The ratio of management fees to average net assets for the fiscal
year ended April 30, 1999 was 0.75%. The total advisory fee of 0.75% of the
aggregate net assets of the fund is greater than that for most mutual funds;
however, the Trustees have determined that it is comparable to fees charged by
other mutual funds whose investment objectives are similar to those of the fund.
PORTFOLIO MANAGEMENT
Investment and trading decisions for the fund are made by a team of managers and
analysts headed by Gail P. Seneca. The team leaders, which include Ms. Seneca,
Richard D. Little and Ronald K. Jacks, are primarily responsible for the
day-to-day decisions related to the fund.
Gail P. Seneca. Ms. Seneca has served as Co-Manager of the fund since April
1999. She also serves as Co-Manager of the Phoenix-Seneca Equity Opportunities
Fund of Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap
Fund of Phoenix Multi-Portfolio Fund. Ms. Seneca also serves as a team leader
for each of the Phoenix-Seneca Funds. Ms. Seneca has been the Chief Executive
and Investment Officer of Seneca or GMG/Seneca since November 1989. From October
1987 until October 1989, she was Senior Vice President of the Asset Management
Division of Wells Fargo Bank, and, from October 1983 to September 1987, she was
Investment Strategist and Portfolio Manager for Chase Lincoln Bank, heading the
fixed income division.
Phoenix-Seneca Strategic Theme Fund 19
<PAGE>
Richard D. Little. Mr. Little has served as Co-Manager of the fund since April
1999. He also serves as Co-Manager of the Phoenix-Seneca Equity Opportunities
Fund of Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap
Fund of Phoenix Multi-Portfolio Fund. Mr. Little also serves as a Portfolio
Manager for Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap "EDGE"[service
mark] Fund of Phoenix-Seneca Funds. Mr. Little has been Director of Equities
with Seneca or GMG/Seneca since December 1989. Before he joined GMG/Seneca, Mr.
Little held positions as an analyst, board member, and regional manager with
Smith Barney, NatWest Securities, and Montgomery Securities.
Ronald K. Jacks. Mr. Jacks has served as Co-Manager of the fund since April
1999. He also serves as Co-Manager of the Phoenix-Seneca Equity Opportunities
Fund of Phoenix Strategic Equity Series Fund and of the Phoenix-Seneca Mid Cap
Fund of Phoenix Multi-Portfolio Fund. Mr. Jacks also serves as a Portfolio
Manager for Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap "EDGE"[service
mark] Fund of Phoenix-Seneca Funds. Mr. Jacks was Secretary of the
Phoenix-Seneca Funds from February 1996 through February 1998. Mr. Jacks was a
Trustee of Phoenix-Seneca Funds from February 1996 through June 1997. Mr. Jacks
has been a Portfolio Manager with Seneca or GMG/Seneca since July 1990.
IMPACT OF THE YEAR 2000 ISSUE ON FUND OPERATIONS
The Trustees have directed management to ensure that the systems used by service
providers (Phoenix and its affiliates) in support of the funds' operations be
assessed and brought into Year 2000 compliance. Based upon its assessments,
Phoenix determined that it would be required to modify or replace portions of
its software so that its computer systems would properly utilize dates beyond
December 31, 1999. Phoenix management believes that the majority of these
systems are already Year 2000 compliant. Phoenix believes that with
modifications to existing software and conversions to new software, the Year
2000 issue will be mitigated. However, if the problem is not fully addressed,
the fund may be negatively impacted.
Phoenix is utilizing both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. As of June 30, 1999,
Phoenix mission-critical systems have been upgraded and tested for Year 2000
compliance. The total cost to become Year 2000 compliant is not an expense of
the fund and is not expected to have a material impact on the operating results
of Phoenix.
ADDITIONAL INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------
Each of the funds may invest in convertible securities. Convertible securities
have several unique investment characteristics, such as:
[bullet] Higher yields than common stocks but lower yields than
comparable nonconvertible securities;
20 Phoenix Strategic Equity Series Fund
<PAGE>
[bullet] Typically less fluctuation in value than the "underlying"
common stock, that is, the common stock that the investor
receives if he converts; and
{bullet] The potential for capital appreciation if the market price of
the underlying common stock increases.
PRICING OF FUND SHARES
- --------------------------------------------------------------------------------
HOW IS THE SHARE PRICE DETERMINED?
The fund calculates a share price for each class of its shares. The share price
is based on the net assets of the fund and the number of outstanding shares. In
general, the fund calculates net asset value by:
{bullet] adding the values of all securities and other assets of the
fund,
{bullet] subtracting liabilities, and
{bullet] dividing by the total number of outstanding shares of the fund.
Asset Value: The fund's investments are valued at market value. If market
quotations are not available, the fund determines a "fair value" for an
investment according to rules and procedures approved by the Trustees. 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 sixty days or
less are valued at amortized cost, which the Trustees have determined
approximates market value.
Liabilities: Class specific expenses, distribution fees, service fees and other
liabilities are deducted from the assets of each class. Expenses and
liabilities that are not class specific (such as management fees) are allocated
to each class in proportion to each class's net assets, except where an
alternative allocation can be more fairly made.
Net Asset Value: The liability allocated to a class plus any other expenses are
deducted from the proportionate interest of such class in the assets of the
fund. The resulting amount for each class is then divided by the number of
shares outstanding of that class to produce each class's net asset value per
share.
The net asset value per share of each class of the fund is determined on days
when the New York Stock Exchange (the "NYSE") is open for trading as of the
close of trading (normally 4:00 PM eastern time). The fund will not calculate
its net asset values per share on days when the NYSE is closed for trading.
Trading of securities held by the fund in foreign markets may
Phoenix Strategic Equity Series Fund 21
<PAGE>
negatively or positively impact the value of such securities on days when the
fund neither trades securities nor calculates its net asset values (i.e.,
weekends and certain holidays).
AT WHAT PRICE ARE SHARES PURCHASED?
All investments received by the fund's authorized agents prior to the close of
regular trading on the NYSE (normally 4:00 PM eastern time) will be executed
based on that day's net asset value. Shares credited to your account from the
reinvestment of fund distributions will be in full and fractional shares that
are purchased at the closing net asset value on the next business day on which
the fund's net asset value is calculated following the dividend record date.
SALES CHARGES
- --------------------------------------------------------------------------------
WHAT ARE THE CLASSES AND HOW DO THEY DIFFER?
The fund presently offers two classes of shares of each fund, and an additional
class of shares of the Strategic Theme Fund. Each class of shares has different
sales and distribution charges (see "Fund Expenses" previously in this
prospectus). The fund has adopted distribution and service plans allowed under
Rule 12b-1 of the Investment Company Act of 1940 that authorize the fund to pay
distribution and service fees for the sale of its shares and for services
provided to shareholders.
WHAT ARRANGEMENT IS BEST FOR YOU?
The different classes permit you to choose the method of purchasing shares that
is most beneficial to you. In choosing a class, consider the amount of your
investment, the length of time you expect to hold the shares, whether you decide
to receive distributions in cash or to reinvest them in additional shares, and
any other personal circumstances. Depending upon these considerations, the
accumulated distribution and service fees and contingent deferred sales charges
of one class may be more or less than the initial sales charge and accumulated
distribution and service fees of another class of shares bought at the same
time. Because distribution and service fees are paid out of the fund's assets on
an ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
Class A Shares. If you purchase 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 redeemed. Class A
Shares have lower distribution and service fees (0.25%) and pay higher dividends
than any other class.
Class B Shares. If you purchase 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 purchased, you
22 Phoenix Strategic Equity Series Fund
<PAGE>
will pay a sales charge of up to 5% of your shares' value. See "Deferred Sales
Charge Alternative--Class B and Class C Shares" below. This charge declines to
0% over a period of 5 years and may be waived under certain conditions. Class B
shares have higher distribution and service fees (1.00%) and pay lower dividends
than Class A Shares. Class B Shares automatically convert to Class A Shares
eight years after purchase. Purchase of Class B Shares may be inappropriate for
any investor who may qualify for reduced sales charges of Class A Shares and
anyone who is over 85 years of age. The underwriter may decline purchases in
such situations.
Class C Shares. If you purchase 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 purchased, you will pay a sales charge of 1%. See "Deferred Sales
Charge Alternative--Class B and Class C Shares" below. Class C Shares have the
same distribution and service fees (1.00%) and pay comparable dividends as Class
B Shares. Class C Shares do not convert to any other class of shares of the
fund.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The public offering price of Class A Shares is the net asset value plus a sales
charge that varies depending on the size of your purchase (see "Class A
Shares--Reduced Sales Charges: Combination Purchase Privilege" in the Statement
of Additional Information). Shares purchased 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
fund's underwriter (Phoenix Equity Planning Corporation or "PEPCO").
SALES CHARGE YOU MAY PAY TO PURCHASE CLASS A SHARES
<TABLE>
<CAPTION>
SALES CHARGE AS
A PERCENTAGE OF
----------------------------------------------------
AMOUNT OF NET
TRANSACTION OFFERING AMOUNT
AT OFFERING PRICE PRICE INVESTED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Under $50,000 4.75% 4.99%
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 3.00 3.09
$500,000 but under $1,000,000 2.00 2.04
$1,000,000 or more None None
</TABLE>
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B AND CLASS C SHARES
Class B and Class 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 ("CDSC") at the rates listed below. The sales
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 or on shares purchased through the reinvestment
of income dividends or capital gains distributions. To minimize the sales
charge,
Phoenix Strategic Equity Series Fund 23
<PAGE>
shares not subject to any charge will be redeemed first, followed by
shares held the longest time. To calculate the amount of shares owned and time
period held, all Class B Shares purchased in any month are considered purchased
on the last day of the preceding month and all Class C Shares are considered
purchased on the trade date.
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS B SHARES
<TABLE>
<CAPTION>
YEAR 1 2 3 4 5 6+
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 3% 2% 2% 0%
</TABLE>
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS C SHARES
(STRATEGIC THEME FUND ONLY)
YEAR 1 2+
- --------------------------------------------------------------------------------
CDSC 1% 0%
YOUR ACCOUNT
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
Your financial advisor can assist you with your initial purchase as well as all
phases of your investment program. If you are opening an account by yourself,
please follow the instructions outlined below.
STEP 1.
Your first choice will be the initial amount you intend to invest.
Minimum INITIAL investments:
[bullet] $25 for individual retirement accounts, or accounts that use
the systematic exchange privilege, or accounts that use the
Investo-Matic program (see below for more information on the
Investo-Matic program).
[bullet] There is no initial dollar requirement for defined contribution
plans, profit-sharing plans, or employee benefit plans. There
is also no minimum for reinvesting dividends and capital gains
into another account.
[bullet] $500 for all other accounts.
24 Phoenix Strategic Equity Series Fund
<PAGE>
Minimum ADDITIONAL investments:
[bullet] $25 for any account.
[bullet] There is no minimum for defined contribution plans,
profit-sharing plans, or employee benefit plans. There is also
no minimum for reinvesting dividends and capital gains into an
existing account.
STEP 2.
Your second choice will be what class of shares to buy. The fund offers up to
three classes of shares for individual investors. Each has different sales and
distribution charges. Because all future investments in your account will be
made in the share class you choose when you open your account, you should make
your decision carefully. Your financial advisor can help you pick the share
class that makes the most sense for your situation.
STEP 3.
Your next choice will be how you want to receive any dividends and capital gain
distributions. Your options are:
[bullet] Receive both dividends and capital gain distributions in
additional shares;
[bullet] Receive dividends in additional shares and capital gain
distributions in cash;
[bullet] Receive dividends in cash and capital gain distributions in
additional shares; or
[bullet] Receive both dividends and capital gain distributions in cash.
No interest will be paid on uncashed distribution checks.
Phoenix Strategic Equity Series Fund 25
<PAGE>
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
- ----------------------------------------------------------------------------------------------------------------
Through the mail Complete a New Account Application and send it with a check payable to the
fund. Mail them to: State Street Bank, P.O. Box 8301, Boston, MA
02266-8301.
- ----------------------------------------------------------------------------------------------------------------
By Federal Funds wire Call us at (800)243-1574 (press 1, then 0).
- ----------------------------------------------------------------------------------------------------------------
Through express delivery Complete a New Account Application and send it with a check payable to the
fund. Send them to: Boston Financial Data Services, Attn: Phoenix Funds,
66 Brooks Drive, Braintree, MA 02184.
- ----------------------------------------------------------------------------------------------------------------
By Investo-Matic Complete the appropriate section on the application and send it with your
initial investment payable to the fund. Mail them to: State Street Bank,
P.O. Box 8301, Boston, MA 02266-8301.
- ----------------------------------------------------------------------------------------------------------------
By telephone exchange Call us at (800)243-1574 (press 1, then 0).
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO SELL 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 by the fund's Transfer Agent or
an authorized agent. In the case of a Class B or Class C Share redemption, you
will be subject to the applicable deferred sales charge, if any, for such
shares. 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; however, 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.
26 Phoenix Strategic Equity Series Fund
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TO SELL SHARES
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
- -------------------------------------------------------------------------------------------------------------------
Through the mail Send a letter of instruction and any share certificates (if you hold
certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA
02266-8301. Be sure to include the registered owner's name, fund and account
number, number of shares or dollar value you wish to sell.
- -------------------------------------------------------------------------------------------------------------------
Through express delivery Send a letter of instruction and any share certificates (if you hold
certificate shares) to: Boston Financial Data Services, Attn: Phoenix
Funds, 66 Brooks Drive, Braintree, MA 02184. Be sure to include the
registered owner's name, fund and account number.
- -------------------------------------------------------------------------------------------------------------------
By telephone For sales up to $50,000 requests can be made by calling (800)243-1574.
- -------------------------------------------------------------------------------------------------------------------
By telephone exchange Call us at (800)243-1574 (press 1, then 0).
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THINGS YOU SHOULD KNOW WHEN SELLING SHARES
- --------------------------------------------------------------------------------
You may realize a taxable gain or loss (for federal income tax purposes) if you
redeem shares of the fund. The fund reserves the right to pay large redemptions
"in-kind" (in securities owned by the fund rather than in cash). Large
redemptions are those over $250,000 or 1% of the fund's net assets. Additional
documentation will be required for redemptions by organizations, fiduciaries, or
retirement plans, or if redemption is requested by anyone but the shareholder(s)
of record. Transfers between broker-dealer "street" accounts are governed by the
accepting broker-dealer. Questions regarding this type of transfer should be
directed to your financial advisor. Redemption requests will not be honored
until all required documents in proper form have been received. To avoid delay
in redemption or transfer, shareholders having questions about specific
requirements should contact the fund's Transfer Agent at (800) 243-1574.
REDEMPTIONS BY MAIL
[arrow] If you are selling shares held individually, jointly, or as custodian
under the Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act.
Send a clear letter of instructions if all of these apply:
[bullet] The proceeds do not exceed $50,000.
[bullet] The proceeds are payable to the registered owner at the address
on record.
Phoenix Strategic Equity Series Fund 27
<PAGE>
Send a clear letter of instructions with a signature guarantee when
any of these apply:
[bullet] You are selling more than $50,000 worth of shares.
[bullet] The name or address on the account has changed within the last
60 days.
[bullet] You want the proceeds to go to a different name or address than
on the account.
[arrow] If you are selling shares held in a corporate or fiduciary account,
please contact the fund's Transfer Agent at (800) 243-1574.
If required, the signature guarantee on your request must be by an eligible
guarantor institution as defined by the fund's Transfer Agent in accordance with
its signature guarantee procedures. Currently, such procedures generally permit
guarantees by banks, broker dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations.
SELLING SHARES BY TELEPHONE
The Transfer Agent will use reasonable procedures to confirm that telephone
instructions are genuine. Address and bank account information are verified,
redemption instructions are taped, and all redemptions are confirmed in writing.
The individual investor bears the risk from instructions given by an
unauthorized third-party that the Transfer Agent reasonably believed to be
genuine.
The Transfer Agent may modify or terminate the telephone redemption privilege at
any time with 60 days notice to shareholders.
During times of drastic economic or market changes, telephone redemptions may be
difficult to make or temporarily suspended.
ACCOUNT POLICIES
- --------------------------------------------------------------------------------
ACCOUNT REINSTATEMENT PRIVILEGE
For 180 days after you sell your Class A, Class B or Class C Shares, you can
purchase Class A Shares of any fund at net asset value, with no sales charge, by
reinvesting all or part of your proceeds, but not more. Send your written
request to State Street Bank, P.O. Box 8301, Boston, MA 02266-8301. You can call
us at (800)243-1574 for more information.
Please remember, a redemption and reinvestment are considered to be a sale and
purchase for tax-reporting purposes. Class B shareholders who have had the
contingent deferred sales charge waived because they are in the Systematic
Withdrawal Program are not eligible for this reinstatement privilege.
28 Phoenix Strategic Equity Series Fund
<PAGE>
REDEMPTION OF SMALL ACCOUNTS
Due to the high cost of maintaining small accounts, if your account balance is
less than $200, you may receive a notice requesting you to bring the balance up
to $200 within 60 days. If you do not, the shares in the account will be sold at
net asset value, and a check will be mailed to the address of record.
EXCHANGE PRIVILEGES
You should read the prospectus carefully before deciding to make an exchange.
You can obtain a prospectus from your financial advisor or by calling us at
(800)243-4361 or accessing our Web site at www.phoenixinvestments.com.
[bullet] You may exchange shares for another fund in the same class of
shares; e.g., Class A for Class A.
[bullet] Exchanges may be made by phone ((800)243-1574) or by mail
(State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).
[bullet] The amount of the exchange must be equal to or greater than the
minimum initial investment required.
[bullet] The exchange of shares is treated as a sale and a purchase for
federal income tax purposes.
[bullet] Because excessive trading can hurt fund performance and harm
other shareholders, the fund reserves the right to temporarily
or permanently end exchange privileges or reject an order from
anyone who appears to be attempting to time the market,
including investors who request more than one exchange in any
30-day period. The fund's underwriter has entered into
agreements with certain timing firms permitting them to
exchange by telephone. These privileges are limited, and the
fund distributor has the right to reject or suspend them.
RETIREMENT PLANS
Shares of the fund may be used as investments under the following qualified
prototype retirement plans: traditional IRA, rollover IRA, SIMPLE IRA, Roth IRA,
401(k) plans, profit-sharing, money purchase plans, and 403(b) plans. For more
information, call (800)243-4361.
INVESTOR SERVICES
- --------------------------------------------------------------------------------
INVESTO-MATIC is a systematic investment plan that allows you to have a
specified amount automatically deducted from your checking or savings account
and then deposited into your
Phoenix Strategic Equity Series Fund 29
<PAGE>
mutual fund account. Just complete the Investo-Matic Section on the application
and include a voided check.
SYSTEMATIC EXCHANGE allows you to automatically move money from one Phoenix Fund
to another on a monthly, quarterly, semiannual or annual basis. Shares of one
Phoenix Fund will be exchanged for shares of the same class of another fund at
the interval you select. To sign up, just complete the Systematic Exchange
Section on the application.
TELEPHONE EXCHANGE lets you exchange shares of one fund for the same class of
shares in another fund, using our customer service telephone service. See the
Telephone Exchange Section on the application.
SYSTEMATIC WITHDRAWAL PROGRAM allows you to periodically redeem a portion of
your account on a predetermined monthly, quarterly, semiannual, or annual basis.
Sufficient shares will be redeemed on the 15(th) of the month at the closing net
asset value so that the payment is made about the 20(th) of the month. The
program also provides for redemptions on or about the 10(th), 15(th), or 25(th)
with proceeds directed through Automated Clearing House (ACH) to your bank. The
minimum withdrawal is $25, and minimum account balance requirements continue.
Shareholders in the program must own fund shares worth at least $5,000.
TAX STATUS OF DISTRIBUTIONS
- --------------------------------------------------------------------------------
The fund plans to make distributions from net investment income at intervals
stated on the table below and to distribute net realized capital gains, if any,
at least annually.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FUND DIVIDEND PAID
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Small Cap Fund Semiannually
- -------------------------------------------------------------------------------------------------------------------
Equity Opportunities Fund Semiannually
- -------------------------------------------------------------------------------------------------------------------
Strategic Theme Fund Semiannually
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Distributions of short-term capital gains and net investment income are taxable
to shareholders as ordinary income. Long-term capital gains, if any, distributed
to shareholders and which are designated by the fund as capital gains
distributions, are taxable to shareholders as long-term capital gain
distributions regardless of the length of time you have owned your shares.
Unless you elect to receive distributions in cash, dividends and capital gain
distributions are paid in additional shares. All distributions, cash or
additional shares, are subject to federal income tax and may be subject to
state, local and other taxes.
30 Phoenix Strategic Equity Series Fund
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
These tables are intended to help you understand the funds' financial
performance for the past five years or for the life of the funds. Certain
information reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the funds (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
independent accountants. Their report, together with the funds' financial
statements, are included in the funds' most recent Annual Report, which is
available upon request.
PHOENIX-ENGEMANN SMALL CAP FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
FROM INCEPTION
YEAR ENDED APRIL 30, 10/16/95 TO
1999 1998 1997 4/30/96
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.37 $14.13 $16.74 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.14)(5) (0.08)(5) (0.05)(5) (0.04)(1)(5)
Net realized and unrealized gain (loss) (0.88) 6.80 (2.53) 6.79
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (1.02) 6.72 (2.58) 6.75
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net realized gains (0.61) (3.48) (0.02) --
In excess of accumulated net realized gains -- -- (0.01) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.61) (3.48) (0.03) (0.01)
------ ------ ------ ------
Change in net asset value (1.63) 3.24 (2.61) 6.74
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.74 $17.37 $14.13 $16.74
====== ====== ====== ======
Total return(2) (5.66)% 52.33% (15.43)% 67.48%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $121,313 $203,560 $155,089 $98,372
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 1.46%(6) 1.31% 1.37% 1.50%(3)
Net investment income (loss) (0.95)% (0.48)% (0.28)% (0.53)%(3)
Portfolio turnover 276% 498% 325% 103%(4)
</TABLE>
- - ----------
(1) Includes reimbursement of operating expenses by investment advisor of $0.02.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Computed using average shares outstanding.
(6) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
Phoenix Strategic Equity Series Fund 31
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
PHOENIX-ENGEMANN SMALL CAP FUND
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
FROM INCEPTION
YEAR ENDED APRIL 30, 10/16/95 TO
1999 1998 1997 4/30/96
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.99 $13.98 $16.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.25)(5) (0.21)(5) (0.17)(5) (0.09)(1)(5)
Net realized and unrealized gain (loss) (0.87) 6.70 (2.50) 6.77
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (1.12) 6.49 (2.67) 6.68
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net realized gains (0.61) (3.48) (0.02) --
In excess of accumulated net realized gains -- -- (0.01) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.61) (3.48) (0.03) --
------ ------ ------ ------
Change in net asset value (1.73) 3.01 (2.70) 6.68
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.26 $16.99 $13.98 $16.68
====== ====== ====== ======
Total return(2) (6.39)% 51.16% (16.03)% 66.80%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $89,349 $147,785 $97,647 $45,168
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 2.21%(6) 2.06% 2.12% 2.26%(3)
Net investment income (loss) (1.70)% (1.22)% (1.03)% (1.44)%(3)
Portfolio turnover 276% 498% 325% 103%(4)
</TABLE>
PHOENIX-SENECA EQUITY OPPORTUNITIES FUND
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
YEAR ENDED APRIL 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.04 $6.89 $8.81 $7.40 $7.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.02)(5) (0.04)(5) (0.03)(5) (0.04)(5) 0.04
Net realized and unrealized gain (loss) 1.33 2.82 (0.90) 2.34 0.58
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 1.31 2.78 (0.93) 2.30 0.62
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- (0.05)
Dividends from net realized gains (0.63) (1.63) (0.94) (0.89) (0.48)
In excess of accumulated net realized gains -- -- (0.05) -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.63) (1.63) (0.99) (0.89) (0.53)
----- ----- ----- ----- -----
Change in net asset value 0.68 1.15 (1.92) 1.41 0.09
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $8.72 $8.04 $6.89 $8.81 $7.40
===== ===== ===== ===== =====
Total return(2) 17.08% 44.66% (12.19)% 32.86% 9.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $201,789 $194,296 $163,396 $213,600 $179,666
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 1.24%(6) 1.18% 1.23% 1.25% 1.32%
Net investment income (loss) (0.21)% (0.55)% (0.39)% (0.53)% 0.60%
Portfolio turnover 143% 371% 412% 302% 358%
</TABLE>
- - ----------
(1) Includes reimbursement of operating expenses by investment advisor of $0.02.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Computed using average shares outstanding.
(6) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
32 Phoenix Strategic Equity Series Fund
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
PHOENIX-SENECA EQUITY OPPORTUNITIES FUND
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
YEAR ENDED APRIL 30, FROM INCEPTION
7/19/94 TO
1999 1998 1997 1996 4/30/95
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.80 $6.77 $8.73 $7.39 $7.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.08)(5) (0.10)(5) (0.09)(5) (0.10)(5) 0.00
Net realized and unrealized gain (loss) 1.28 2.76 (0.88) 2.33 0.59
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 1.20 2.66 (0.97) 2.23 0.59
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains (0.63) (1.63) (0.94) (0.89) (0.48)
In excess of accumulated net realized gains -- -- (0.05) -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.63) (1.63) (0.99) (0.89) (0.48)
----- ----- ----- ----- -----
Change in net asset value 0.57 1.03 (1.96) 1.34 0.11
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $8.37 $7.80 $6.77 $8.73 $7.39
===== ===== ===== ===== =====
Total return(2) 16.18% 43.58% (12.79)% 31.92% 8.69%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $2,677 $2,051 $1,666 $1,348 $525
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 1.99%(7) 1.93% 1.98% 2.06% 2.15%(3)
Net investment income (loss) (0.97)% (1.30)% (1.15)% (1.18)% (0.06)%(3)
Portfolio turnover 143% 371% 412% 302% 358%
</TABLE>
PHOENIX-SENECA STRATEGIC THEME FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------
FROM INCEPTION
YEAR ENDED APRIL 30, 10/16/95 TO
1999 1998 1997 4/30/96
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.70 $12.03 $12.37 $10.00
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.11)(5) (0.04)(5) 0.06(5) 0.00(1)(5)
Net realized and unrealized gain (loss) 6.03 4.03 (0.38) 2.39
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 5.92 3.99 (0.32) 2.39
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- (0.01) --
Dividends from net realized gains (1.40) (2.29) -- --
In excess of net investment income -- (0.03) -- --
In excess of accumulated net realized gains -- -- (0.01) --
Tax return of capital -- -- -- (0.02)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.40) (2.32) (0.02) (0.02)
------ ------ ------ ------
Change in net asset value 4.52 1.67 (0.34) 2.37
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $18.22 $13.70 $12.03 $12.37
====== ====== ====== ======
Total return(2) 44.91% 36.22% (2.57)% 23.89%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $107,871 $89,884 $77,827 $33,393
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 1.38%(7) 1.33% 1.40% 1.40%(3)
Net investment income (loss) (0.72)% (0.26)% 0.49% (0.09)%(3)
Portfolio turnover 205% 618% 532% 175%(4)
- - ----------
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor of $0.04.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Computed using average shares outstanding.
(6) 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) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
Phoenix Strategic Equity Series Fund 33
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
PHOENIX-SENECA STRATEGIC THEME FUND
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------
FROM INCEPTION
YEAR ENDED APRIL 30, 10/16/95 TO
1999 1998 1997 4/30/96
---- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.46 $11.91 $12.33 $10.00
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.22)(5) (0.14)(5) (0.03)(5) (0.06)(1)(5)
Net realized and unrealized gain (loss) 5.91 3.98 (0.38) 2.40
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 5.69 3.84 (0.41) 2.34
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.40) (2.29) -- --
In excess of net investment income -- -- -- --
In excess of accumulated net realized gains -- -- (0.01) --
Tax return of capital -- -- -- (0.01)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.40) (2.29) (0.01) (0.01)
------ ------ ------ ------
Change in net asset value 4.29 1.55 (0.42) 2.33
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $17.75 $13.46 $11.91 $12.33
====== ====== ====== ======
Total return(2) 43.98% 35.18% (3.31)% 23.41%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $84,698 $66,107 $49,843 $11,920
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 2.13%(7) 2.08% 2.15% 2.16%(3)
Net investment income (loss) (1.48)% (1.02)% (0.23)% (1.06)%(3)
Portfolio turnover 205% 618% 532% 175%(4)
</TABLE>
PHOENIX-SENECA STRATEGIC THEME FUND
<TABLE>
<CAPTION>
CLASS C
----------------------------------
YEAR ENDED FROM INCEPTION
APRIL 30, 11/3/97 TO
1999 4/30/98
---- -------
<S> <C> <C>
Net asset value, beginning of period $13.47 $14.93
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.22)(5) (0.05)(5)
Net realized and unrealized gain (loss) 5.90 0.88
------ ------
TOTAL FROM INVESTMENT OPERATIONS 5.68 0.83
------ ------
LESS DISTRIBUTIONS
Dividends from net realized gains (1.40) (2.29)
------ ------
TOTAL DISTRIBUTIONS (1.40) (2.29)
------ ------
Change in net asset value 4.28 (1.46)
------ ------
NET ASSET VALUE, END OF PERIOD $17.75 $13.47
====== ======
Total return(2) 43.87% 7.92%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $682 $267
RATIO TO AVERAGE NET ASSETS OF:
Operating Expenses 2.13%(7) 2.08%(3)
Net investment income (loss) (1.47)% (0.87)%(3)
Portfolio turnover 205% 618%(4)
</TABLE>
- - ----------
(1) Includes reimbursement of operating expenses by investment advisor of $0.04.
(2) Maximum sales charge is not reflected in total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Computed using average shares outstanding.
(6) 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) For the year ended April 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
34 Phoenix Strategic Equity Series Fund
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
The fund has filed a Statement of Additional Information about the fund, dated
August 27, 1999, with the Securities and Exchange Commission. The Statement
contains more detailed information about the fund. It is incorporated into this
prospectus by reference and is legally part of the prospectus. You may obtain a
free copy of the Statement:
[arrow] by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
[arrow] by calling (800) 243-4361.
You may also obtain information about the fund from the Securities and Exchange
Commission:
[arrow] through its internet site (http://www.sec.gov),
[arrow] by visiting its Public Reference Room in Washington, DC or
[arrow] by writing to its Public Reference Section, Washington, DC 20549-6009
(a fee may be charged).
Information about the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330.
SHAREHOLDER REPORTS
The fund semiannually mails to its shareholders detailed reports containing
information about the fund's investments. The fund's Annual Report contains a
detailed discussion of the market conditions and investment strategies that
significantly affected the fund's performance from May 1 through April 30. You
may request a free copy of the fund's Annual and Semiannual Reports:
[arrow] by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
[arrow] by calling (800) 243-4361.
CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
SEC File Nos. 33-6931 and 811-4727 Printed on recycled paper using soybean ink
Phoenix Strategic Equity Series Fund 35
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
PO Box 2200
Enfield CT 06083-2200
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 690 (8/99)
