As filed with the Securities and Exchange Commission on February 15, 2000
Registration No. 333-87209
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[checkmark] Pre-Effective Amendment No. 1 [ ] 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)
c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrants Telephone Number, including Area Code)
--------------------
Pamela S. Sinofsky
Assistant Vice President
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 8(a),
may determine.
================================================================================
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Caption or Location in
Form N-14 Item No. and Caption Prospectus/Proxy Statement
- ------------------------------ --------------------------
Part A Information Required in Prospectus/Proxy Statement
------
<S> <C> <C>
1. Beginning of Registration Statement Cover Page; Cross Reference Sheet
and Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Table of Contents
Page of Prospectus
3. Fee Table, Synopsis Information and Risk Factors Synopsis; Principal Risk Factors; Comparison 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 Acquired Synopsis; Comparison of Investment Objectives
and Policies; The Proposed Reorganization;
Comparative Information on Distribution
Arrangements; Comparative Information on
Shareholder Services; Comparative Information
on Shareholder Rights; Additional Information
About The Funds; Prospectus of the Phoenix-Seneca
Growth Fund dated January 28, 2000
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 Applicable
Reoffering By Persons Deemed to be Underwriters
<PAGE>
Caption or Location in
Form N-14 Item No. and Caption Prospectus/Proxy Statement
- ------------------------------ --------------------------
Part B: Information Required in Statement of Additional Information
------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information about the Registrant Cover Page; Statement of Additional Information
of Registrant dated August 27, 1999
13. Additional Information about the Cover Page; Statement of Additional Information
Company Being Acquired of Phoenix-Seneca Funds dated January 28, 2000
14. Financial Statements Annual Report of the Registrant for the year ended
April 30, 1999; Annual Report of Phoenix-Seneca
Funds for the year ended September 30, 1999;
Semi-Annual Report of the Registrant for the
six-month period ended October 31, 1999; and Pro
Forma Financial Statements
Part C: Other Information
------
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
</TABLE>
<PAGE>
PHOENIX-SENECA GROWTH FUND
a series of
Phoenix-Seneca Funds
909 Montgomery Street
San Francisco, California 94133
------------------------------------
March __, 2000
Dear Shareholder:
The Phoenix-Seneca Growth Fund, a series of Phoenix-Seneca Funds (the
"Trust"), will hold a special meeting of shareholders at 10:00 a.m., local time,
on April 28, 2000, at the offices of Phoenix Equity Planning Corporation, 101
Munson Street, Greenfield, Massachusetts. At the meeting, the shareholders of
the Phoenix-Seneca Growth Fund will vote on an agreement and plan of
reorganization under which the Phoenix-Seneca Growth Fund will be combined with
the Phoenix-Seneca Equity Opportunities Fund, a series of the Phoenix Strategic
Equity Series Fund. Immediately prior to the closing date, the Phoenix-Seneca
Equity Opportunities Fund will effect a reverse stock split to adjust the net
asset value per share to match that of the Phoenix-Seneca Growth Fund. The
Phoenix-Seneca Equity Opportunities Fund has a substantially identical
investment objective to that of the Phoenix-Seneca Growth Fund. If the
reorganization agreement is implemented, you will become a shareholder of the
Phoenix-Seneca Equity Opportunities Fund and will receive shares of the
corresponding class of the Phoenix-Seneca Equity Opportunities Fund with an
aggregate value equal to the aggregate value of your investment in the
Phoenix-Seneca Growth 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 Board of Trustees of the Trust believes that the reorganization
offers you the opportunity to pursue your goals in a larger 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 Phoenix-Seneca Growth Fund
and its shareholders. Therefore, the Board of Trustees 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 April 24, 2000.
Please note that you may receive more than one proxy package if you
hold shares of the Phoenix-Seneca Growth 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,
Gail P. Seneca
President
<PAGE>
PHOENIX-SENECA GROWTH FUND
a series of
Phoenix-Seneca Funds
909 Montgomery Street
San Francisco, California 94133
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Notice of Special Meeting of Shareholders
to be Held April 28, 2000
----------------------------
TO THE SHAREHOLDERS:
The Phoenix-Seneca Growth Fund, a series of Phoenix-Seneca Funds, a
Delaware business trust, will hold a special meeting of shareholders at the
offices of Phoenix Equity Planning Corporation, 101 Munson Street, Greenfield,
Massachusetts 01301 on April 28, 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 November 17, 1999, and the transactions it
contemplates, including (a) the transfer of all or substantially all of the
assets of the Growth Fund to Phoenix-Seneca Equity Opportunities Fund, a series
of the Phoenix Strategic Equity Series Fund, in exchange solely for shares of
the corresponding class of the Equity Opportunities Fund and the assumption by
the Equity Opportunities Fund of all known liabilities of the Growth Fund and
(b) the distribution of the shares of the Equity Opportunities Fund so received
to shareholders of the Growth Fund in complete liquidation of the Growth 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 Growth Fund at the close of business on February 29, 2000.
If you attend the meeting, you may vote your shares in person. If you do not
expect to attend the meeting, please indicate your voting instructions, date,
sign, and return the enclosed proxy card in the enclosed self-addressed,
postage-paid return envelope.
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-Seneca Funds,
Thomas N. Steenburg
Secretary
San Francisco, California
March __, 2000
<PAGE>
PHOENIX-SENECA EQUITY OPPORTUNITIES FUND
a series of
Phoenix Strategic Equity Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
1 (800) 243-1574
PHOENIX-SENECA GROWTH FUND
a series of
Phoenix-Seneca Funds
909 Montgomery Street
San Francisco, California 94133
1 (800) 243-1574
PROSPECTUS/PROXY STATEMENT
Dated March _, 2000
This Prospectus/Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Trustees of Phoenix-Seneca Funds, a
Delaware business trust (the "Trust"), for use at the special meeting of
shareholders of the Phoenix-Seneca Growth Fund to be held at 10:00 a.m., local
time, on April 28, 2000 at the offices of Phoenix Equity Planning Corporation,
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 that would effect the reorganization of the Growth Fund into the
Phoenix-Seneca Equity Opportunities Fund, a series of 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 Growth Fund would be
transferred to the Equity Opportunities Fund in exchange solely for Class A,
Class B, Class C, and Class X shares of beneficial interest in the Equity
Opportunities Fund and the assumption by the Equity Opportunities Fund of all
known liabilities of the Growth Fund. These shares of the Equity Opportunities
Fund would then be distributed pro rata to the shareholders of the corresponding
classes of the Growth Fund, and then the Growth Fund would be liquidated.
Immediately prior to the closing date, the Equity Opportunities Fund will effect
a reverse stock split to adjust the net asset value per share to match that of
the Growth Fund. As a result of the proposed transactions, each shareholder of
the Growth Fund would receive a number of full and fractional shares of the
corresponding class of the Equity Opportunities Fund with an aggregate net asset
value equal to the aggregate net asset value of the shareholder's Growth Fund
shares on the effective date of the reorganization. After the reorganization
agreement is implemented, the Trustees of the Acquiring Trust will change the
name of the Equity Opportunities Fund to the "Phoenix-Seneca Growth Fund."
The Equity Opportunities Fund and the Growth Fund are both portfolio
series of open-end management investment companies. The Equity Opportunities
Fund has an investment objective of long-term capital growth. The Growth Fund
has an investment objective of capital appreciation. Both funds employ Phoenix
Investment Counsel, Inc. as their investment 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
Growth Fund, the Equity Opportunities 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 Growth
Fund and the Equity Opportunities Fund, collectively, and the term "trusts"
refers to the Trust and the Acquiring Trust, collectively. A copy of the
prospectus for the Equity Opportunities Fund, dated August 27, 1999, is included
with this Prospectus/Proxy Statement and is incorporated by reference in this
Prospectus/Proxy Statement.
A Prospectus and a Statement of Additional Information for the Growth
Fund, each dated January 28, 2000, 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
<PAGE>
Equity Opportunities 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 March __, 2000 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
March __, 2000 and other material incorporated by reference, together with
other information regarding the Equity Opportunities Fund and the Growth Fund.
This Prospectus/Proxy Statement constitutes the proxy statement of the
Growth Fund for the meeting and the prospectus for shares of the Equity
Opportunities 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 March __, 2000.
----------------------
- --------------------------------------------------------------------------------
The securities of the Equity Opportunities 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 March __, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
SYNOPSIS..........................................................................................................1
PRINCIPAL RISK FACTORS............................................................................................8
THE PROPOSED REORGANIZATION......................................................................................10
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.................................................................15
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS.............................................................23
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES..................................................................24
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS....................................................................25
FISCAL YEAR......................................................................................................27
MANAGEMENT AND OTHER SERVICE PROVIDERS...........................................................................27
VOTING INFORMATION...............................................................................................28
ADDITIONAL INFORMATION ABOUT THE FUNDS...........................................................................30
MISCELLANEOUS....................................................................................................31
OTHER BUSINESS...................................................................................................36
</TABLE>
<PAGE>
SYNOPSIS
Background
The proposed reorganization is the outcome of deliberations by the
Boards of Trustees of the two trusts. Phoenix Investment Counsel, the adviser to
each of the funds, recommended that the Trustees of each trust consider the
benefits that the shareholders would realize if the Growth Fund were to be
combined with the Equity Opportunities 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 the Acquiring Trust and the Trust, including the
independent trustees, at meetings held on August 25, 1999 and August 26, 1999,
respectively, 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
Growth Fund by the Equity Opportunities Fund in exchange solely for
Class A, Class B, Class C and Class X shares of the Equity
Opportunities Fund;
o the assumption by the Equity Opportunities Fund of all known
liabilities of the Growth Fund;
o the pro rata distribution of the corresponding class of Equity
Opportunities Fund shares to the Growth Fund shareholders; and
o the liquidation of the Growth Fund and of the outstanding Growth Fund
shares.
The reorganization is anticipated to occur on or about May 12, 2000.
If the reorganization agreement is implemented, each Growth Fund shareholder
will receive a number of full and fractional shares of the corresponding class
of Equity Opportunities Fund shares with an aggregate net asset value equal to
the aggregate net asset value of his or her Growth Fund shares, as of the
closing date of the reorganization.
After the reorganization agreement is implemented, the Trustees of the
Acquiring Trust will change the name of the Equity Opportunities Fund to the
"Phoenix-Seneca Growth Fund."
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 Growth Fund.
The reorganization agreement provides that Phoenix Investment Partners 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 and principal investment strategies of the Growth
Fund and the Equity Opportunities Fund are substantially
identical:
o The Growth Fund has an investment objective of capital appreciation.
The Equity Opportunities Fund has an investment objective of long-term
capital growth.
o The Growth Fund invests at least 65% of its total assets in common
stocks, primarily common stocks of growth companies of any size. The
Equity Opportunities Fund also invests at least 65% of its assets in
common stocks.
<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 Equity
Opportunities Fund and the Growth Fund. You can also find additional information
in the Equity Opportunities Fund's Prospectus.
Distribution and Purchase Arrangements
The Growth Fund currently offers four classes of shares: Class A, Class B,
Class C and Class X shares. Shares are offered to the public at a price equal to
the net asset value per share plus a sales charge for Class A, Class B and Class
C shares which, at the election of the purchaser, may be imposed as follows:
o Class A shares--at the time of purchase.
o Class B and Class C shares--on a contingent deferred basis.
Class X shares are offered primarily to certain institutional investors.
The Equity Opportunities Fund currently offers two classes of shares: Class
A and Class B shares. The Class A and Class B shares of the Equity Opportunities
Fund are offered to the public under the same sales charge arrangements as the
Class A and Class B shares of the Growth Fund. As a result of the
reorganization, expenses incurred by Phoenix Equity Planning Corporation in
selling the Class B shares of the Growth Fund that have not been reimbursed by
Rule 12b-1 fees or contingent deferred sales charges will become subject to
reimbursement by the Equity Opportunities Fund.
The Equity Opportunities Fund does not currently offer Class C and Class X
shares. On the closing date of the reorganization, the Equity Opportunities Fund
will issue Class C and Class X shares with the same sales charges and
distribution arrangements as the Growth Fund's existing Class C and Class X
shares to shareholders of the Growth Fund. Therefore, all shareholders of the
Growth Fund will receive the corresponding class of shares of the Equity
Opportunities Fund in exchange for their shares in the Growth Fund.
See "Comparative Information on Distribution Arrangements" below for further
information on the distribution arrangements of the Growth Fund and the Equity
Opportunities Fund. You can also find additional information on distribution
arrangements in the Equity Opportunities Fund's Prospectus.
Dividends and Distributions
The dividend and distribution policies of the funds are substantially
identical.
o The Growth Fund distributes net investment income annually and
distributes net realized capital gains, if any, at least annually.
o The Equity Opportunities Fund distributes net investment income
semi-annually and distributes net realized capital gains, if any, at
least annually.
All dividends and distributions of the Growth Fund and the Equity
Opportunities 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 Equity Opportunities Fund's Prospectus.
Exchanges
The Growth Fund and the Equity Opportunities Fund currently offer
shareholders identical exchange privileges. Shareholders of the Growth Fund and
the Equity Opportunities Fund may exchange their shares for shares of a
corresponding class of shares of any other affiliated Phoenix funds, except for
the mutual funds of the Phoenix-Zweig Trust and Phoenix-Euclid Funds.
On exchanges with corresponding classes of shares 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 Equity Opportunities Fund's Prospectus.
Redemption Procedures
Shareholders of both the Growth Fund and the Equity Opportunities 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.
Ordinarily payments of redemption proceeds for redeemed Growth Fund and Equity
Opportunities Fund shares
2
<PAGE>
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 Equity
Opportunities 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, subject to customary assumptions and
representations, that:
o shareholders of the Growth Fund will recognize no gain or loss for
federal income tax purposes on their receipt of shares of the Equity
Opportunities Fund;
o the aggregate tax basis of the Equity Opportunities Fund shares,
including any fractional shares, received by each shareholder of the
Growth Fund pursuant to the reorganization will be the same as the
aggregate tax basis of the Growth Fund shares held by such shareholder
immediately prior to the reorganization; and
o the holding period of the Equity Opportunities Fund shares, including
fractional shares, to be received by each shareholder of the Growth
Fund will include the period during which the Growth Fund shares
exchanged therefor were held by such shareholder (provided that the
Growth 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 Equity Opportunities Fund is subject to specific risks
arising from the types of securities in which the Equity Opportunities Fund
invests and general risks arising from investing in any mutual fund. Investors
can lose money by investing in the Equity Opportunities Fund. There is no
assurance that the Equity Opportunities Fund will meet its investment objective.
Because the Equity Opportunities Fund's investment objectives and policies are
substantially identical to those of the Growth Fund, an investment in the Equity
Opportunities Fund is subject to many of the same risks as an investment in the
Growth Fund. See "Principal Risk Factors" for the principal risks associated
with an investment in the Equity Opportunities Fund.
Management and Other Service Providers
Investment and trading decisions for each fund are made by a team of
managers and analysts. The team leaders for each fund are primarily responsible
for the day-to-day decisions related to that fund. The team leader of any one
fund may be on another fund team. The team leaders for the Equity Opportunities
Fund are Gail P. Seneca, Richard D. Little and Ronald K. Jacks. The team leaders
for the Growth Fund are Gail P. Seneca and Richard D. Little.
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 Equity Opportunities 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 Equity Opportunities Fund and the Growth Fund is based upon
expenses for the twelve months ended October 31, 1999.
3
<PAGE>
As indicated in the tables below, immediately upon effectiveness of the
reorganization, the "Total Annual Fund Operating Expenses" for the combined
Equity Opportunities Fund are expected to be lower than the "Total Annual Fund
Operating Expenses" for the Growth Fund.
<TABLE>
<CAPTION>
CLASS A SHARES
Equity Opportunities Growth Pro Forma Combined
Fund Fund Equity Opportunities Fund
-------------------- ------ -------------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1 Fees) (a) 0.25% 0.25% 0.25%
Other Expenses 0.29% 0.49% 0.26%
----- ----- -----
Total Annual Fund Operating Expenses (b) 1.24% 1.44% 1.21%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES
Equity Opportunities Growth Pro Forma Combined
Fund Fund Equity Opportunities Fund
-------------------- ------ -------------------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
Management Fees 0.70% 0.70% 0.70%
Distribution and Service (12b-1 Fees) (a) 1.00% 1.00% 1.00%
Other Expenses 0.29% 1.76% 0.26%
----- ----- -----
Total Annual Fund Operating Expenses (b) 1.99% 3.46% 1.96%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES
Growth Pro Forma Combined
Fund Equity Opportunities Fund
------ -------------------------
<S> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
Management Fees 0.70% 0.70%
Distribution and Service (12b-1 Fees) (a) 1.00% 1.00%
Other Expenses 3.97% 0.26%
----- -----
Total Annual Fund Operating Expenses (b) 5.67% 1.96%
===== =====
</TABLE>
<TABLE>
<CAPTION>
CLASS X SHARES
Growth Pro Forma Combined
Fund Equity Opportunities Fund
------ -------------------------
<S> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted from
fund assets)
Management Fees 0.70% 0.70%
Distribution and Service (12b-1 Fees) (a) None None
Other Expenses 0.46% 0.26%
----- -----
Total Annual Fund Operating Expenses (b) 1.16% 0.96%
===== =====
</TABLE>
The following tables show shareholder transaction expenses currently
applicable to the purchase of Class A and Class B shares of both funds and the
Class C and Class X shares of the Growth Fund. These expenses, including the
expenses of the Class C and Class X shares of the Growth Fund, will remain in
effect as to the combined Equity Opportunities Fund following the
reorganization.
<TABLE>
<CAPTION>
Class A Class B
Equity Opportunities Fund Shares Shares
- ------------------------- ------ ------
<S> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases 4.75% None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a
percentage of the lesser of the value redeemed
or the amount invested) None 5%(c)
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None
Redemption Fee None None
Exchange Fee None None
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Class A Class B Class C Class X
Growth Fund Shares Shares Shares Shares
- ----------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases 4.75% None None None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a
percentage of the lesser of the value redeemed
or the amount invested) None 5%(c) 1%(d) None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None 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 Growth Fund's adviser has agreed to reimburse through January 31,
2001, the Growth Fund's operating expenses to the extent that such
expenses exceed 1.85% for Class A shares, 2.60% for Class B and Class C
shares and 1.25% for Class X shares. Total Annual Fund Operating
Expenses for the Growth Fund, after reimbursement, are 1.44% for Class A
shares, 2.60% for Class B shares, 2.60% for Class C shares and 1.16% for
Class X shares.
(c) 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.
(d) The Deferred Sales Charge is imposed on Class C shares redeemed during
the first year only.
5
<PAGE>
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>
Equity Opportunities Fund.......................... $ 595 $ 850 $ 1,124 $ 1,904
Growth Fund........................................ $ 615 $ 909 $ 1,225 $ 2,117
Pro Forma Combined Equity Opportunities Fund....... $ 592 $ 841 $ 1,108 $ 1,871
<CAPTION>
Class B Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Opportunities Fund.......................... $ 602 $ 824 $ 1,073 $ 2,123
Growth Fund........................................ $ 749 $1,262 $ 1,798 $ 3,571
Pro Forma Combined Equity Opportunities Fund....... $ 599 $ 815 $ 1,057 $ 2,091
<CAPTION>
Class C Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Opportunities Fund.......................... N/A N/A N/A N/A
Growth Fund........................................ $ 665 $1,684 $ 2,788 $ 5,484
Pro Forma Combined Equity Opportunities Fund....... $ 299 $ 615 $ 1,057 $ 2,285
<CAPTION>
Class X Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Opportunities Fund.......................... N/A N/A N/A N/A
Growth Fund........................................ $ 118 $ 368 $ 638 $ 1,409
Pro Forma Combined Equity Opportunities Fund....... $ 98 $ 306 $ 531 $ 1,178
</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>
Equity Opportunities Fund.......................... $ 595 $ 850 $ 1,124 $ 1,904
Growth Fund........................................ $ 615 $ 909 $ 1,225 $ 2,117
Pro Forma Combined Equity Opportunities Fund....... $ 592 $ 841 $ 1,108 $ 1,871
<CAPTION>
Class B Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Opportunities Fund.......................... $ 202 $ 624 $ 1,073 $ 2,123
Growth Fund........................................ $ 349 $1,062 $ 1,798 $ 3,571
Pro Forma Combined Equity Opportunities Fund....... $ 199 $ 615 $ 1,057 $ 2,091
<CAPTION>
Class C Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Opportunities Fund.......................... N/A N/A N/A N/A
Growth Fund........................................ $ 565 $1,684 $ 2,788 $ 5,484
Pro Forma Combined Equity Opportunities Fund....... $ 199 $ 615 $ 1,057 $ 2,285
<CAPTION>
Class X Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
<S> <C> <C> <C> <C>
Equity Opportunities Fund.......................... N/A N/A N/A N/A
Growth Fund........................................ $ 118 $ 368 $ 638 $ 1,409
Pro Forma Combined Equity Opportunities Fund....... $ 98 $ 306 $ 531 $ 1,178
</TABLE>
Note: Actual expenses for the Growth Fund may be lower than those shown
in the tables above since the expense levels used to calculate
the figures shown do not include the reimbursement of expenses
over certain levels by the Growth Fund's adviser.
6
<PAGE>
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.
7
<PAGE>
PRINCIPAL RISK FACTORS
Because the Equity Opportunities Fund's investment objective and
policies are substantially identical to those of the Growth Fund, an investment
in the Equity Opportunities Fund is subject to many of the same specific risks
as an investment in the Growth Fund. The following highlights the principal
similarities and differences between the principal risk factors associated with
an investment in the Equity Opportunities Fund as contrasted with those
associated with the Growth Fund and is qualified in its entirety by the more
extensive discussion of risk factors in the Prospectuses and Statements of
Additional Information of the Equity Opportunities Fund and the Growth Fund,
respectively.
An investment in the Equity Opportunities Fund is subject to specific
risks arising from the types of securities in which the Equity Opportunities
Fund invests and general risks arising from investing in any mutual fund. You
can lose money by investing in the Equity Opportunities Fund. There is no
assurance that the Equity Opportunities Fund will meet its investment objective.
General
The Equity Opportunities Fund and the Growth Fund both invest in common
stocks for capital appreciation. If between the time you purchase shares and the
time you sell shares the value of the funds 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 shares may decrease.
Foreign Investing
Both the Equity Opportunities Fund and the Growth Fund may invest in
foreign countries. 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
funds 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 still
a 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 still 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 funds.
Small Capitalization Companies
Both the Equity Opportunities Fund and the Growth Fund may invest in
small companies as well as large companies. 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. Also, small capitalization companies are
subject to varying patterns of trading volume and may at times, be more
difficult to sell. Smaller companies may be relatively new and do not have
the same operating history and "track record" as larger companies. This could
make future performance of smaller companies more difficult to predict.
Growth Stocks
The Equity Opportunities Fund and the Growth Fund invest in growth
stocks. Because growth stocks typically make little or no dividend payments to
shareholders, return is based on a stock's capital appreciation and is more
8
<PAGE>
dependent on market increases and decreases. Growth stocks are therefore more
volatile than non-growth stocks to market changes.
Limited Number of Investments
Conditions which negatively affect securities in the portfolio will
have a greater impact on the Growth Fund as compared to a fund that holds a
greater number of security positions. In addition, the Growth Fund may be more
sensitive to changes in the market value of a single issuer in its portfolio and
therefore the value of the Growth Fund shares may be more volatile.
9
<PAGE>
THE PROPOSED REORGANIZATION
Agreement and Plan of Reorganization
The terms and conditions under which the proposed reorganization may be
consummated are set forth in the 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 Equity Opportunities Fund, on the closing
date of the reorganization, of all or substantially all of the
assets of the Growth Fund in exchange solely for Class A, Class
B, Class C and Class X shares of the Equity Opportunities Fund
and the assumption by the Equity Opportunities Fund of all known
liabilities of the Growth Fund; and
o the distribution of shares of the corresponding class of the
Equity Opportunities Fund to the shareholders of the Growth Fund
in exchange for their respective shares of the Growth Fund.
The assets of the Growth Fund to be acquired by the Equity Opportunities
Fund include all property, including, without limitation, all cash, securities,
and dividends or interest receivables which are owned by the Growth Fund and any
deferred or prepaid expenses shown as an asset on the books of the Growth Fund
on the closing date of the reorganization. The Equity Opportunities Fund will
assume all liabilities, accrued expenses, costs, charges, and reserves of the
Growth 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 May 12, 2000), or such later date as the parties may agree.
The value of the Growth Fund's assets to be acquired and the Growth Fund's
liabilities to be assumed by the Equity Opportunities Fund and the net asset
value of each class of shares of the Equity Opportunities Fund will be
determined 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
Equity Opportunities Fund's then current Prospectus and Statement of Additional
Information. The number of Class A, Class B, Class C and Class X shares of the
Equity Opportunities Fund to be issued to the Growth Fund will be determined by
dividing (a) the value of the aggregate net assets attributable to each class of
shares of the Growth Fund by (b) the net asset value per share of the
corresponding class of the Equity Opportunities Fund.
Immediately prior to the closing date, the Equity Opportunities Fund
will effect a reverse stock split to adjust the net asset value per share to
match that of the Growth Fund. On the closing date, the Growth Fund will
liquidate and distribute pro rata to its shareholders of record the Equity
Opportunities Fund shares received by the Growth Fund in exchange for their
respective shares in the Growth Fund. This liquidation and distribution will be
accomplished by opening an account on the books of the Equity Opportunities Fund
in the name of each shareholder of record in the Growth Fund and by crediting to
each account the shares due pursuant to the reorganization. Every Growth Fund
shareholder will own shares of the corresponding class of the Equity
Opportunities Fund immediately after the reorganization, the value of which will
be equal to the value of the shareholder's Growth Fund shares immediately prior
to the reorganization.
At or prior to the closing date, the Growth Fund will declare a dividend
or dividends which, together with all previous such dividends, will have the
effect of distributing to the Growth Fund shareholders all of the Growth 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.
Subject to certain limitations on liability, the Equity Opportunites
Fund has agreed to indemnify and hold harmless the Trustees of the Trust who are
not "interested persons" of the adviser or distributor of the Growth Fund (the
"Independent Trustees") from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses and liabilities of any sort or
kind (collectively "Liability") which may be asserted against them or for which
the Independent Trustees may become liable arising out of or attributable to the
transactions contemplated by the reorganization agreement, provided that any
Independent Trustee seeking the benefit of this indemnification shall not have
materially contributed to the creation of such Liability by acting in a manner
contrary to his or her fiduciary duties as a trustee under the 1940 Act.
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.
10
<PAGE>
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 aspects of the reorganization and (b) the approval of
the reorganization agreement by the shareholders of the Growth Fund. The Plan
may be terminated and the reorganization abandoned at any time, before or after
approval by the shareholders of the Growth Fund, prior to the closing date, by
either party by resolution of its Board of Trustees. 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 Equity
Opportunities Fund shares to be issued to shareholders of the Growth 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, the adviser to
each of the funds, recommended that the Trustees of each trust consider the
benefits that shareholders would realize if the Growth Fund were to be combined
with the Equity Opportunities 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 to be realized by shareholders from 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 principal investment strategies and would
permit the shareholders of the Growth Fund to pursue their investment goals in a
larger fund. In reaching this conclusion, the Board considered a number of
additional factors, including the following:
o the total expense ratio of the combined Equity
Opportunities Fund following the reorganization is
projected to be lower than the current total expense ratio
of the Growth Fund;
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 Growth Fund or the Equity Opportunities Fund or to the
shareholders of either of the funds; and
o the reorganization could result in economies of scale
through the spreading of fixed costs over a larger asset
base. At only $30.7 million in net assets (as of
October 31, 1999), the Growth Fund's fixed costs are
spread over that relatively small 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 26, 1999 that the reorganization would be in the best interests
of the Growth Fund and its shareholders and that the interests of existing
Growth Fund shareholders will not be diluted as a result of the transactions
contemplated by the reorganization. In the course of their review, the Board of
Trustees of the Trust noted that Phoenix Investment Counsel has elected to use
the historical financial statements and performance record of the Growth Fund.
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 Equity
Opportunities Fund and the shareholders and that the interests of existing
Equity Opportunities Fund shareholders will not be diluted as a result of the
reorganization. In the course of their review, the Board of Trustees of the
Acquiring Trust noted that Phoenix Investment Counsel has elected to use the
historical financial statements and performance record of the Growth Fund. The
Board of Trustees of the Acquiring Trust also noted that the expenses incurred
by Equity Planning Corporation in selling the Class B shares of the Growth Fund
that
11
<PAGE>
have not been reimbursed by Rule 12b-1 fees or contingent deferred sales charges
will become subject to reimbursement by the Equity Opportunities 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
Growth Fund solely in exchange for Equity Opportunities Fund
shares and the assumption by the Equity Opportunities Fund of all
known liabilities of the Growth Fund, and the distribution of
such shares to the shareholders of the Growth Fund, will
constitute a "reorganization" within the meaning of Section
368(a) of the Code; the Equity Opportunities Fund and the Growth
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 Growth Fund on the
transfer of the assets of the Growth Fund to the Equity
Opportunities Fund in exchange for Equity Opportunities Fund
shares and the assumption by the Equity Opportunities Fund of all
known liabilities of the Growth Fund or upon the distribution of
Equity Opportunities Fund shares to the Growth Fund shareholders
in exchange for their shares of the Growth Fund;
o the tax basis of the Growth Fund's assets acquired by the Equity
Opportunities Fund will be the same to the Equity Opportunities
Fund as the tax basis of such assets to the Growth Fund
immediately prior to the reorganization, and the holding period
of the assets of the Growth Fund in the hands of the Equity
Opportunities Fund will include the period during which those
assets were held by the Growth Fund;
o no gain or loss will be recognized by the Equity Opportunities
Fund upon the receipt of the assets of the Growth Fund solely in
exchange for the Equity Opportunities Fund shares and the
assumption by the Equity Opportunities Fund of all known
liabilities of the Growth Fund;
o no gain or loss will be recognized by shareholders of the Growth
Fund upon the receipt of Equity Opportunities Fund shares by such
shareholders, provided such shareholders receive solely Equity
Opportunities Fund shares (including fractional shares) in
exchange for their Growth Fund shares; and
o the aggregate tax basis of the Equity Opportunities Fund shares,
including any fractional shares, received by each shareholder of
the Growth Fund pursuant to the reorganization will be the same
as the aggregate tax basis of the Growth Fund shares held by such
shareholder immediately prior to the reorganization, and the
holding period of the Equity Opportunities Fund shares, including
fractional shares, to be received by each shareholder of the
Growth Fund will include the period during which the Growth Fund
shares exchanged therefor were held by such shareholder (provided
that the Growth 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 Growth Fund in exchange for Equity Opportunities
Fund shares and the assumption by the Equity Opportunities Fund of all known
liabilities of the Growth Fund do not constitute a tax-free reorganization, each
Growth Fund shareholder generally will recognize gain or loss equal to the
difference between the value of Equity Opportunities Fund shares such
shareholder acquires and the tax basis of such shareholder's Growth Fund shares.
12
<PAGE>
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 Equity
Opportunities Fund and the Growth Fund, and on a pro forma basis for the
combined Equity Opportunities Fund as of October 31, 1999 giving effect to the
proposed acquisition of net assets of the Growth Fund at net asset value.
Immediately prior to the closing date, the Equity Opportunities Fund will effect
a reverse stock split to adjust the net asset value per share to match that of
the Growth Fund. The pro forma data reflects the effect of the reverse stock
split and an exchange ratio of approximately 1.00 for Class A, Class B, Class C
and Class X shares, respectively, of the Equity Opportunities Fund issued for
each Class A, Class B, Class C and Class X share, respectively, of the Growth
Fund.
<TABLE>
<CAPTION>
Pro Forma
Equity Growth Combined Equity
Opportunities Fund Fund Opportunities Fund
------------------ ------ ------------------
<S> <C> <C> <C>
Net assets
Class A $220,832,264 $30,709,557 $251,541,821
Class B 3,082,483 5,121,486 8,203,969
Class C N/A 2,388,084 2,388,084
Class X N/A 36,419,128 36,419,128
Net asset value per share
Class A $ 9.56 $ 21.55 $ 21.55
Class B 9.13 21.22 21.22
Class C N/A 21.18 21.18
Class X N/A 21.95 21.95
Shares outstanding
Class A 23,103,652 1,425,095 11,672,946
Class B 337,793 241,370 386,644
Class C N/A 112,728 112,728
Class X N/A 1,659,335 1,659,335
</TABLE>
The table set forth above should not be relied on to determine the
number of Equity Opportunities 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 Growth Fund and the Equity Opportunities
Fund at the time of the reorganization.
13
<PAGE>
Historical Performance Information
The following table sets forth the average annual total return of the
Class A, Class B, Class C and Class X shares of the Equity Opportunities Fund
and the Growth 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>
Equity Opportunities Fund
Class A 32.64% 18.23% 13.13% 11.39% 8/1/1944
Class B 34.29% 18.52% N/A 17.73% 7/18/1994
Russell 2000 Growth Index(b) 25.79% 26.10% 17.85% 14.07% 12/31/1978
Growth Fund
Class A 32.14% N/A N/A 29.58% 3/8/1996
Class B 33.15% N/A N/A 14.72% 7/1/1998
Class C 36.98% N/A N/A 17.41% 7/1/1998
Class X 39.15% N/A N/A 32.11% 3/8/1996
S&P 500 Stock Index (c) 29.28% 12.49% 10.79% 25.56% 3/8/1996
</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 Equity Opportunities Fund's 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.
The Growth 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 of Class B and Class C shares.
(b) 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.
(c) The S&P 500 Stock Index is an unmanaged but commonly used measure of
common stock total return performance. The S&P's performance does not
reflect sales charges.
14
<PAGE>
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 Equity Opportunities Fund and the Growth Fund. The
discussion below is qualified in its entirety by the discussion elsewhere in
this Prospectus/Proxy Statement, and in each fund's Prospectus and Statement
of Additional Information.
Investment Objectives and Policies
The investment objectives of the Equity Opportunities Fund and the
Growth Fund are substantially identical. The Equity Opportunities Fund has an
investment objective of long-term capital growth. The Growth Fund has an
investment objective of capital appreciation. The investment objectives of the
Equity Opportunities Fund and the Growth 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 Equity Opportunities Fund are
substantially identical to the principal investment strategies of the Growth
Fund.
Both the Equity Opportunities Fund and the Growth Fund invest in stocks
they believe are:
o growing at the fastest rates;
o producing quality, sustainable earnings;
o well managed; and
o reasonably valued relative to their growth rate and to
the market.
The Equity Opportunities Fund may invest in both U.S. and foreign
(non-U.S.) stocks of any type and from any industry. Under normal circumstances,
the Growth Fund invests at least 65% of its total assets in common stocks of
companies of any size. The Growth Fund may also invest in securities of foreign
issuers.
The Equity Opportunities Fund and Growth Fund will review stocks for
sale if earnings reports disappoint, valuation levels reach the top of their
historic levels or earnings momentum peaks.
The Growth Fund's subadviser seeks growth with controlled risk by
investing a portion of its portfolio in companies that have long and proven
records of financial success ("earnings sustainers"). Earnings sustainers are
generally large, well-known companies that have established histories of
profitability and/or dividend payment. The Growth Fund also invests in companies
that are growing rapidly and that the subadviser believes have the potential to
exceed earnings expectations ("earnings surprisers"). Earnings surprisers are
generally small and mid-cap companies. Using statistical modeling and analysis
that evaluates a stock's earnings strength, quality and sustainability, as well
as the management of the issuer and the stock's valuation, approximately 30 to
50 securities are selected for the fund's portfolio.
Both the Equity Opportunities Fund and the Growth Fund have the same
adviser and subadviser. Phoenix Investment Counsel and Seneca Capital Management
serve as the investment adviser and subadviser to both funds,
15
<PAGE>
respectively. Phoenix is responsible for managing each fund's investment program
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 Equity Opportunities Fund and the Growth Fund are both subject to
certain investment restrictions that restrict the scope of their investments.
Fundamental investment restrictions may not be changed without the affirmative
vote of the holders of a majority of the outstanding securities (as defined in
the 1940 Act) of the 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 Equity Opportunities Fund and the Growth Fund.
Fundamental restrictions are followed by an (F); non-fundamental restrictions
are followed by an (nf).
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Borrowing The Equity Opportunities Fund may not The Growth Fund may not borrow money,
borrow money. (F) except that it may borrow from banks or
enter into reverse repurchase agreements or
dollar rolls up to one-third of the value of
its total assets (calculated when the loan is
made) to take advantage of investment
opportunities and may pledge up to one-
third of the value of its total assets to secure
such borrowings. The Growth Fund is also
authorized to borrow an additional 5% of its
total assets without regard to the foregoing
limitations for temporary purposes such as
the clearance of transactions and share
redemptions. For purposes of this
investment restriction, short sales, the
purchase or sale of securities on a "when-
issued," delayed delivery or forward
commitment basis, the purchase or sale of
options, futures contracts, and options on
futures contracts, securities or indices and
collateral arrangements with respect thereto
shall not constitute borrowing. (F)
- ----------------------------------------------------------------------------------------------------------------------------
Pledging The Equity Opportunities Fund may not The Growth Fund may not pledge,
pledge, mortgage or hypothecate any mortgage or hypothecate its assets, except
securities or other property. (F) to secure permitted borrowings and then
only if such pledging, mortgaging or
hypothecating does not exceed one-third of the
Growth Fund's total assets taken at market value.
Collateral arrangements with respect to margin,
option and other risk management and when-issued
and forward commitment transactions are not
deemed to be pledges or other encumbrances
for purposes of this restriction. (nf)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Lending The Equity Opportunities Fund may not The Growth Fund may not make loans,
make loans to other persons except that it except that the Growth Fund may (a) lend
may lend portfolio securities (up to 33% portfolio securities in accordance with the
of net assets at the time the loan is made) Growth Fund's investment policies up to
to brokers or dealers or other financial one-third of the Growth Fund's total assets
institutions not affiliated with the taken at market value, (b) enter into
Acquiring Trust or the adviser, subject to repurchase agreements, and (c) purchase all
conditions established by the adviser and or a portion of an issue of debt securities,
enter into repurchase transactions (in bank loan participation interests, bank
accordance with the trust's current certificates of deposit, bankers'
prospectus). (F) acceptances, debentures or other securities,
whether or not the purchase is made upon
the original issuance of the securities. (F)
- ----------------------------------------------------------------------------------------------------------------------------
Illiquid The Equity Opportunities Fund may not The Growth Fund may not invest in
Securities/ invest more than 15% of its net assets in securities that are illiquid if, as a result,
Restricted illiquid securities, including (a) securities more than 15% of its net assets would
with legal or contractual restrictions on consist of such securities, including
resale (except in the case of securities repurchase agreements maturing in more
issued pursuant to Rule 144A sold to than seven days, securities that are not
qualifying institutional investors under readily marketable, and restricted securities
special rules adopted by the Securities and not eligible for resale pursuant to Rule
Exchange Commission for which the 144A under the 1933 Act; provided,
trustees of the Acquiring Trust determine however, that the fund may invest all or
the secondary market is liquid), (b) part of its investable assets in an open-end
repurchase agreements maturing in more investment company with substantially the
than seven days, and (c) securities that are same investment objectives, policies and
not readily marketable. (nf) restrictions as the fund. (nf)
- ----------------------------------------------------------------------------------------------------------------------------
Purchases of The Equity Opportunities Fund may not The Growth Fund may not purchase
Securities on purchase on margin. (F) securities on margin (but the Growth Fund
Margin and may obtain such short-term credits as may
Short Sales The Equity Opportunities Fund may not be necessary for the clearance of
engage in short sales. (F) transactions); provided that the deposit or
payment of initial or variation margin in
connection with options or future contracts
is not considered the purchase of securities
on margin. (F)
The Growth Fund may not make short sales of
securities or maintain a short position, unless at
all times when a short position is open, the
Growth Fund owns an equal amount of the securities
or securities convertible into or exchangeable for,
without payment of any further consideration,
securities of the same issue as, and equal in amount
to, the securities sold short. (nf)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Unseasoned The Equity Opportunities Fund may not No fundamental or non-fundamental
Issuers purchase any security unless (a) the issuer restriction.
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. (F)
- ----------------------------------------------------------------------------------------------------------------------------
Other The Equity Opportunities Fund may not The Growth Fund may not purchase a
Investment purchase any security of an investment security of other investment companies,
Companies trust except for purchases in the open except when the purchase is part of a plan
market where no commission or profit to of merger, consolidation, reorganization
or a sponsor or dealer results from such acquisition or except where such purchase
purchases, other than a customary would not result in (a) more than 10% of
broker's commission. (F) the Growth Fund's assets being invested in
securities of other investment companies,
(b) more than 3% of the total outstanding
voting securities of any one such
investment company being held by the
Growth Fund or (c) more than 5% of the
Growth Fund's assets being invested in any
one such investment company; provided,
however, that the fund may invest all of
its investable assets in an open-end
investment company with substantially the
same investment objectives, policies and
restrictions as the fund. (nf)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Diversification The Equity Opportunities Fund may not The Growth Fund may not, as to 75% of its
purchase any securities (other than U.S. total assets, purchase securities of an issuer
Government obligations) if, as a result, (other than the U.S. Government, its
more than 5% of the value of the total agencies, instrumentalities or authorities or
assets of the Equity Opportunities Fund repurchase agreements collateralized by
would be invested in securities of a single U.S. Government securities and other
issuer. (F) investment companies), if:
The Equity Opportunities Fund may not (a) such purchase would cause more
purchase any security if, as a result, more than 5% of the Growth Fund's total
than 10% of any class of securities or assets taken at market value to be
more than 10% of the outstanding voting invested in the securities of such
securities of any issuer would be held. (F) issuer; or
(b) such purchase would at the time
result in more than 10% of the
outstanding voting securities of
such issuer being held by the
Growth Fund; provided, however,
that the Growth Fund may, subject
to restrictions imposed by the 1940
Act and applicable state laws,
invest all or part of its investable
assets in an open-end investment
company with substantially the
same investment objectives,
policies and restrictions as the
Growth Fund. (F)
- -----------------------------------------------------------------------------------------------------------------------
Industry The Equity Opportunities Fund may not The Growth Fund may not purchase the
Concentration invest more than 25% of its total assets in securities of issuers conducting their
any one industry or group of industries. principal activity in a single industry if,
(F) immediately after such purchase, the value
of its investments in such industry would
exceed 25% of its total assets taken at
market value at the time of such investment
(except investments in obligations of the
U.S. Government or any of its agencies,
instrumentalities or authorities); provided,
however, that the fund may invest all or
part of its investable assets in an open-end
investment company with substantially the
same investment objectives, policies and
restrictions as the fund. (F)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Oil & Gas and The Equity Opportunities Fund may not The Growth Fund may not purchase
Commodity invest in interests in oil, gas or other interests in oil, gas, or other mineral
Contracts mineral exploration development exploration programs or mineral leases;
programs or leases. (nf) however, this policy will not prohibit the
acquisition of securities of companies
The Equity Opportunities Fund may not engaged in the production or transmission of
deal in commodities or commodities oil, gas or other minerals. (nf)
contracts. (F)
The Growth Fund may not invest in
commodities, except that the fund may
purchase and sell options on securities,
securities indices and currency, futures
contracts on securities, securities indices
and currency and options on such futures,
forward foreign currency exchange
contracts (including, foreign currency
warrants, principal exchange rated linked
securities, and performance indexed paper),
forward commitments, securities index put
or call warrants and repurchase agreements
entered into in accordance with the Growth
Fund's investment policies, subject to
restrictions as may be set forth elsewhere in
the prospectus or the statement of additional
information. (F)
- -----------------------------------------------------------------------------------------------------------------------
Senior Securities The Equity Opportunities Fund may not The Growth Fund may not issue senior
issue senior securities. (F) securities, except as permitted above. For
purposes of this restriction, the issuance of
shares of beneficial interest in multiple
classes or series, the purchase or sale of
options, futures contracts, forward
commitments and reverse repurchase
agreements entered into in accordance with
the fund's investment policies or within the
meaning of the borrowing restriction
described above, are not deemed to be
senior securities. (F)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Futures and No fundamental or non-fundamental The Growth Fund may not buy and sell puts
Options restriction. and calls on securities, stock index futures
or options on stock index futures or
financial futures or options on financial
futures if (a) the aggregate premiums paid
on all such options which are held at any
time exceed 20% of the Growth Fund's
aggregate net assets and (b) the aggregate
margin deposits required on all such
futures or options thereon held at any
time exceed 5% of the Growth Fund's total
assets. (nf)
The Growth Fund may not write (sell)
options that are not "covered" as
described in its statement of additional
information or write puts on securities if
the aggregate value of the obligations
underlying the puts exceeds 50% of the
Growth Fund's net assets. (nf)
The Growth Fund may not purchase puts,
calls, straddles, spreads, or any
combination thereof if by reason thereof,
the value of its aggregate investment in
such classes of securities (other than
protective puts) will exceed 5% of its net
assets. (nf)
- -----------------------------------------------------------------------------------------------------------------------
Securities held The Equity Opportunities Fund may not The Growth Fund may not purchase or
by Trustees and purchase or retain any security of an retain securities of an issuer if one or more
Officers issuer if the trust officers, trustees or of the trustees or officers of the trust or
adviser, who individually own beneficially principals or officers of the investment
more than 1/2 of 1% of such issuer, adviser, any subadviser or any investment
together own more than 5% of such management subsidiary of the investment
issuer's securities.(nf) adviser individually owns beneficially more
than 0.5% and together own beneficially
more than 5% of the securities of such
issuer. (nf)
- -----------------------------------------------------------------------------------------------------------------------
Real Estate The Equity Opportunities Fund may not The Growth Fund may not purchase or sell
deal in real estate (including real estate real estate except that the Growth Fund may
limited partnerships) except that it may (a) acquire or lease office space for its own
purchase marketable securities of use, (b) invest in securities of issuers that
companies that deal in real estate or invest in real estate or interests therein, (c)
interests therein including real estate invest in securities that are secured by real
investment trusts. (F) estate or interests therein, (d) purchase
and sell mortgage-related securities and (e) hold
and sell real estate acquired by the Growth
Fund as result of the ownership of
securities. (F)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Subject Matter
of Restriction Equity Opportunities Fund Growth Fund
--------------- ------------------------- -----------
<S> <C> <C>
Underwriting The Equity Opportunities Fund may not The Growth Fund may not act as an
underwrite the securities of others. (F) underwriter with respect to the securities of
other issuers, except to the extent that in
connection with the disposition of portfolio
securities, the Growth Fund may be deemed
to be an underwriter for purposes of the
1933 Act; provided, however, that the fund
may invest all or part of its investable assets
in an open-end investment company with
substantially the same investment
objectives, policies and restrictions as the
Growth Fund. (F)
- -----------------------------------------------------------------------------------------------------------------------
Control The Equity Opportunities Fund may not The Growth Fund may not invest for the
make an investment for the purpose of purpose of exercising control over or
exercising control or management. (F) management of any company; provided that
the Growth Fund may do so where it is
deemed advisable to protect or enhance the
value of an existing investment; and
provided further, that the Growth Fund may
invest all or part of its investable
assets in an open-end investment company
with substantially the same investment
objectives, policies and restrictions as
the Growth Fund. (nf)
-----------------------------------------------------------------------------------------------------------------------
Warrants The Equity Opportunities Fund may not The Growth Fund may not purchase
invest more than 5% of its net assets in warrants of any issuer, if, as a result of
warrants and stock rights, valued at the such purchase, more than 2% of the value
lower of cost or market, or more than 2% of the Growth Fund's total assets would be
of its net assets in warrants and stock invested in warrants that are not listed on
rights that are not listed on the New York the NYSE or American Stock Exchange or
Stock Exchange or American Stock more than 5% of the total assets of the
Exchange. (nf) Growth Fund, valued at the lower of cost or
current market value, would be invested in
warrants generally, whether or not so listed.
Warrants acquired by the Growth Fund in
units with or attached to debt securities shall
be deemed to be without value. (nf)
- -----------------------------------------------------------------------------------------------------------------------
Joint Account The Equity Opportunities Fund may not The Growth Fund may not participate on a
participate in any joint trading accounts. joint or joint-and-several basis in any
(F) securities trading account. The "bunching"
of orders for the sale or purchase of
marketable portfolio securities with other
accounts under the management of the
investment adviser or any subadviser to
save commissions or to average prices
among them is not deemed to result in a
joint securities trading account. (nf)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS
Multiple Class Structure
The Growth Fund currently offers four classes of shares: Class A, Class
B, Class C and Class X shares. The Equity Opportunities Fund currently offers
two classes of shares: Class A and Class B shares. The Class A and Class B
shares of the Equity Opportunities Fund are offered to the public under the same
sales charge arrangements as the Class A and Class B shares of the Growth Fund.
The Equity Opportunities Fund does not currently offer Class C and Class X
shares, but will issue such classes to the Class C and Class X shareholders of
the Growth Fund, respectively, on the closing date of the reorganization.
In the proposed reorganization, you will receive the corresponding class
of shares of the Equity Opportunities Fund in exchange for your shares in the
Growth 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 and Class C shares of the Equity Opportunities Fund, the length
of time you hold shares in the Equity Opportunities Fund will be added to the
length of time you hold shares in the Growth Fund. If you acquire Class B and
Class C 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 Growth Fund.
The shares of the various classes are offered under the following
arrangements:
Class A Shares (currently offered by both funds)
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 (currently offered by both funds)
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 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 (currently offered by the Growth 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.
23
<PAGE>
o Class C shares do not convert to any other class of shares of the
fund.
Class X Shares (currently offered by the Growth Fund only)
o Are offered primarily to institutional investors such as pension and
profit sharing plans, other employee benefit trusts, investment
advisers, endowments, foundations and corporations.
o Are not subject to sales charges at any time.
o There are no distribution fees applicable to Class X Shares.
Distribution Plans
Phoenix Equity Planning Corporation serves as the distributor of shares
for both the Equity Opportunities Fund and the Growth 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
Equity Opportunities 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, Phoenix Equity Planning Corporation is reimbursed monthly for actual
expenses of Phoenix Equity Planning Corporation up to 0.75% of the average daily
value of the net assets of Class B and Class C shares. In addition, Phoenix
Equity Planning Corporation is paid 0.25% annually of the average daily net
assets of each class of 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 $553,186 with respect to the Equity Opportunities Fund.
The Trust has also adopted distribution plans pursuant to Rule 12b-1 on
behalf of the Class B and Class C shares of the Growth Fund, (the "Trust Class B
Plan" and "Trust Class C Plan," and collectively, the "Trust Plans"). Under the
Trust Class B Plan and the Trust Class C Plan, the Growth 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
Growth Fund's Class B and Class C shares. In addition, the Growth 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 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 and 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 $151,199 with respect to the Growth Fund. As a result of the
Reorganization, the unreimbursed expenses incurred by Phoenix Equity Planning
Corporation in selling Class B shares of the Growth Fund will be subject to
reimbursement under the Acquiring Trust Class B Plan.
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES
Both the Equity Opportunities Fund and the Growth 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 Equity Opportunities Fund distributes net investment income
semi-annually, and distributes net realized capital gains, if any, at least
annually. The Growth Fund distributes net investment income annually, and
distributes
24
<PAGE>
net realized capital gains, if any, at least annually. All dividends and
distributions with respect to the shares of the Equity Opportunities Fund and
the Growth 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 Equity Opportunities Fund and the
Growth Fund in effect on the record date.
The Equity Opportunities Fund and the Growth Fund currently offer
shareholders identical exchange privileges. Shareholders of the Equity
Opportunities Fund and the Growth 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 Equity Opportunities Fund and the Growth Fund may be
redeemed at a redemption price equal to the net asset value of the shares as
next determined following the receipt of a redemption order and any other
required documentation in proper form. In the case of Class B shares redemptions
for the Equity Opportunities Fund or Class B and Class C shares redemptions for
the Growth Fund, investors will be subject to the applicable determined deferred
sales charges, if any, for such shares. Payment of redemption proceeds for
redeemed Equity Opportunities Fund and Growth Fund shares are made within seven
days after receipt of a redemption request in proper form and documentation.
Because both the Equity Opportunities Fund and the Growth Fund offer the
same shareholder services, after the closing the same services will continue to
be available to the shareholders of the Growth Fund but in their capacity as
shareholders of the Equity Opportunities Fund.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The following is a summary of certain provisions of the Declarations of
Trust of the Equity Opportunities Fund and the Growth Fund.
Form of Organization
The Equity Opportunities 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
Equity Opportunities Fund are governed by its Declaration of Trust and by
Massachusetts law. The Growth Fund is a series of the Phoenix-Seneca Funds, an
unincorporated voluntary association organized under the laws of the State of
Delaware as a business trust, pursuant to an Agreement and Declaration of Trust
dated December __, 1995, as amended. The operations of the Growth Fund are
governed by its Agreement and Declaration of Trust and by Delaware law. Both the
Phoenix Strategic Equity Series Fund and the Phoenix-Seneca Funds 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.
Shares
Each Declaration of Trust authorizes the Trustees to create an
unlimited number of series in each trust. Within each series, the Trustees may
create an unlimited number of classes, each with an unlimited number of full and
fractional shares. The Phoenix Strategic Equity Series Fund currently has three
series outstanding: the Phoenix-Engemann Small Cap Fund, the Phoenix-Seneca
Equity Opportunities Fund and the Phoenix-Seneca Strategic Theme Fund. The
Phoenix-Seneca Funds trust currently has four series outstanding: the
Phoenix-Seneca Bond Fund, the Phoenix-Seneca Growth Fund, the Phoenix-Seneca
Mid-Cap "EDGE" Fund, and the Phoenix-Seneca Real Estate Securities Fund. In
addition to the currently existing series, each trust may organize other series
in the future.
The Equity Opportunities Fund currently offers Class A and Class B
shares. The Growth Fund offers Class A, Class B, Class C and Class X shares.
When issued, the shares are fully paid and non-assessable, have no preference,
preemptive or similar rights unless designated by the Trustees, and are freely
transferable. The assets
25
<PAGE>
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 Equity Opportunities 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 a shareholder
meeting.
The Trustees or President of the Growth Fund may call shareholder
meetings as necessary. To the extent required by the 1940 Act, meetings held for
the purpose of voting on the removal of any trustee shall be called by trustees
upon written request by shareholders holding at least ten percent of the
outstanding shares entitled to vote. Generally, one-third of the shares entitled
to vote constitutes a quorum at a shareholder meeting.
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 Equity Opportunities Fund and the Growth Fund limit shareholder
liability.
The Equity Opportunities Fund's Declaration of Trust provides that
shareholders shall not be subject to any personal liability whatsoever 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.
The Growth Fund's Declaration of Trust specifies that a shareholder
shall be indemnified for claims relating to the shareholder's status as a
shareholder, and not because of the shareholder's acts or omissions. Such
indemnification will come out of the assets of the class of shares held by the
shareholder from which the claim arose.
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. Under the Declaration of Trust of the Equity
Opportunities 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
trustees to cover potential liabilities and will generally indemnify a trustee
against such claims. The trust may also advance payments to a trustee in
connection with indemnification.
Under the Declaration of Trust of the Growth Fund, the trust will
indemnify a trustee against liabilities, unless the trustee is liable because of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
trustee's duties. The trust may purchase insurance for a trustee to provide
indemnification and also may advance money to the trustee for the expenses of
proceedings.
Voting Requirements
Each shareholder of the Equity Opportunities 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.
26
<PAGE>
Each shareholder of the Growth Fund shall be entitled to one vote for
each dollar of net asset value (determined as of the applicable record date) of
each share owned by the shareholder (the number of shares owned times net asset
value per share) on any matter on which such shareholder is entitled to vote.
Each fractional dollar amount shall be entitled to a proportionate fractional
vote.
Liquidation or Dissolution
In the event of the liquidation or dissolution of either fund, the
Trustees shall distribute the assets of the trust to the shareholders, according
to their respective rights, after accounting for the liabilities of the trust.
FISCAL YEAR
The Equity Opportunities Fund operates on a fiscal year which ends April
30. The Growth Fund operates on a fiscal year which ends September 30.
MANAGEMENT AND OTHER SERVICE PROVIDERS
Responsibility for the overall supervision of the Equity Opportunities
Fund rests with the Phoenix Strategic Equity Series Fund's Board of Trustees.
Responsibility for the overall supervision of the Growth Fund rests with the
Phoenix-Seneca Fund's Board of Trustees. Phoenix Investment Counsel serves as
investment adviser to both funds. Seneca Capital Management serves as investment
subadviser to both funds.
Investment and trading decisions for each fund are made by a team of
managers and analysts. The team leaders for each fund are primarily responsible
for the day-to-day decisions related to that fund. The team leader of any one
fund may be on another fund team. The team leaders for the Equity Opportunities
Fund are Gail P. Seneca, Richard D. Little and Ronald K. Jacks. The team leaders
for the Growth Fund are Gail P. Seneca and Richard D. Little.
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. 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.
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. Mr. Jacks has been a Portfolio Manager with Seneca or
GMG/Seneca since July 1990.
Phoenix Equity Planning Corporation serves as administrative agent of
the Equity Opportunities Fund and the Growth Fund and, as such, performs
administrative, bookkeeping and pricing functions. Phoenix Equity Planning
Corporation also acts as transfer agent for the Equity Opportunities Fund and
the Growth Fund.
State Street Bank and Trust Company serves as custodian of each fund.
PricewaterhouseCoopers LLP serve as independent accountants for both the
Equity Opportunities Fund and the Growth Fund.
27
<PAGE>
VOTING INFORMATION
Quorum and Voting Requirements
This Prospectus/Proxy Statement is being furnished to the shareholders
of the Growth Fund in connection with the solicitation by the Board of Trustees
of Phoenix-Seneca Funds of proxies to be used at the meeting.
Shareholders of record of the Growth Fund at the close of business on
February 29, 2000 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 X, Class A,
Class B and Class C shares, respectively, of the Growth Fund. Shareholders are
entitled to one vote for each dollar of net asset value (determined as of the
record date) of each share owned by such shareholder (number of shares owned
times net asset value per share) and each fractional dollar amount shall be
entitled to a proportionate fractional vote. Shareholders of the Growth Fund
will vote together as a single class on the reorganization proposal. The holders
of thirty-three and one-third percent (33-1/3%) of the shares entitled to vote
shall constitute a quorum for the meeting. A quorum being present, the approval
of the reorganization proposal requires the vote of a majority of the shares
entitled to vote of the Growth Fund. For purposes of determining the presence of
a quorum for transacting business at the meeting and for determining whether
sufficient votes have been received for approval of the proposal to be acted
upon at the meeting, abstentions and broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present at the meeting,
but which have not been voted. For this reason, abstentions and broker non-
votes will assist the Growth 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.
The meeting may be adjourned from time to time by the vote of a majority
of the shares represented at the meeting, whether or not a quorum is present. If
the meeting is adjourned to another time or place, notice need not be given of
the adjourned meeting at which the adjournment is taken, unless a new record
date of the adjourned meeting is fixed or unless the adjournment is for more
than sixty (60) days from the date set for the original meeting, in which case
the Trustees shall set a new record date. Notice of any such adjourned meeting
shall be given to each Shareholder of record entitled to vote at the adjourned
meeting in accordance with the provisions of the By-Laws of Phoenix-Seneca Fund.
At any adjourned meeting, the Trust may transact any business which might have
been transacted at the original meeting.
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
Growth Fund is a condition of the consummation of the reorganization. If the
reorganization is not approved, the Growth Fund will continue as a
28
<PAGE>
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 Growth 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 Growth 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 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 recorded properly.
29
<PAGE>
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 Growth 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 Growth 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 _________, 2000,
the Trustees and officers of the Trust owned as a group less than 1% of the
outstanding voting securities of the Growth Fund. If the reorganization were
consummated as of __________, 2000, the Trustees and officers of the Trust would
own less than 1% of the outstanding voting securities of the combined Equity
Opportunities Fund based on their holdings and total shares outstanding as of
___________, 2000. Based on holdings and total shares outstanding as of
__________, 2000, and assuming consummation of the reorganization, no person
would own beneficially or of record 5% or more of the outstanding shares of the
Growth Fund or the combined Equity Opportunities 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 Equity Opportunities Fund, and the
Acquiring Trust is included in the Equity Opportunities Fund's Prospectus
accompanying this document and is incorporated by reference herein. Further
information about the Equity Opportunities Fund and the Acquiring Trust is
included in the Statement of Additional Information for the Equity Opportunities
Fund, dated August 27, 1999, which has been filed with the SEC and is
incorporated by reference herein. A copy of the Equity Opportunities 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 Growth Fund is included in the current
Prospectus of the Growth Fund dated January 28, 2000. A copy of the Growth
Fund's Prospectus has been filed with the SEC, and is incorporated by reference
herein. Further information about the Growth Fund is included in the Statement
of Additional Information for the Growth Fund dated January 28, 2000, which also
has been filed with the SEC and is incorporated by reference herein. A copy of
the Growth 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.
30
<PAGE>
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 Equity Opportunities Fund's Performance for the
Year Ended April 30, 1999
The Equity Opportunities Fund seeks long-term capital appreciation by
investing primarily in stocks of dynamic, rapidly growing companies and focusing
on strong relative earnings growth. The Equity Opportunities 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 Equity
Opportunities Fund returned 17.08% and Class B shares returned 16.18%, far
surpassing the negative (3.77)% return of the Equity Opportunities Fund's
benchmark, the Russell 2000 Growth Index. All performance figures assume
reinvestment of distributions and exclude the effect of sales charges.
This has been an extremely volatile time for the market, spurred by the
recent global liquidity crises. 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. The
Equity Opportunities Fund benefited from good stock picking and the 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.
It seems the ".com" craze has reached new heights. As of April 30, 1999,
the market capitalization of America Online exceeded that of IBM. The value of
Priceline.com, which sells airline tickets online, was higher than the market
valuation of most U.S. airlines. eBay, an online auctioneer with a three-year
history, was worth 11 times the value of 250-year-old Sothebey's. The Equity
Opportunities Fund's portfolio management team does not know of a valuation
metric or analytic framework, which can explain these outcomes.
The Equity Opportunities Fund's portfolio management team expects 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.
The recent market turbulence will probably plague investors throughout
1999. Periods of euphoria are likely to alternate with periods of despair. The
Equity Opportunities Fund's portfolio management team believes that investors
who persevere will 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.
31
<PAGE>
Phoenix-Seneca 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>
32
<PAGE>
Phoenix-Seneca Equity Opportunities Fund
TEN LARGEST HOLDINGS AT APRIL 30, 1999 (AS A PERCENTAGE OF TOTAL NET ASSETS)
<TABLE>
<S> <C> <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>
33
<PAGE>
Legal Matters
Certain legal matters in connection with the issuance of the shares of
the Equity Opportunities Fund will be passed upon by Goodwin, Procter & Hoar
LLP.
Additional Financial Information
The table set forth below presents certain financial information for
the Equity Opportunities Fund. The financial highlights for the year ended April
30, 1999 are derived from the Equity Opportunities 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 Equity
Opportunities Fund for prior periods are contained in the Equity Opportunities
Fund's Prospectus, and the financial statements for the Equity Opportunities
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.
34
<PAGE>
EQUITY OPPORTUNITIES FUND
Financial Highlights
(Selected data for Shares outstanding throughout the indicated Period)
<TABLE>
<CAPTION>
Year Ended April 30, 1999
-------------------------
Class A Class B
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 8.04 $ 7.80
Income from investment operations
Net investment income (loss) (0.02)(2) (0.08)(2)
Net realized and unrealized gain (loss) 1.33 1.28
------------- ------------
Total from investment operations 1.31 1.20
------------- ------------
Less distributions
Dividends from net investment income -- --
Dividends from net realized gains (0.63) (0.63)
In excess of accumulated net realized gains -- --
------------- ------------
Total distributions (0.63) (0.63)
------------- ------------
Change in net asset value 0.68 0.57
------------- ------------
Net asset value, end of period $ 8.72 $ 8.37
============= ============
Total return(1) 17.08% 16.18%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 201,789 $ 2,677
Ratio to average net assets of:
Expenses 1.24%(3) 1.99%(3)
Net investment income (loss) (0.21)% (0.97)%
Portfolio turnover rate 143% 143%
</TABLE>
- -------------------
(1) Maximum sales charge is not reflected in total return calculation.
(2) Computed using average shares outstanding.
(3) 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.
<TABLE>
<CAPTION>
Six Months Ended October 31, 1999 (Unaudited)
---------------------------------------------
Class A Class B
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 8.72 $ 8.37
Income from investment operations(5)
Net investment income (loss) (0.01)(4) (0.05)(4)
Net realized and unrealized gain (loss) 1.21 1.17
-------- ------
Total from investment operations 1.20 1.12
-------- ------
Less distributions
Dividends from net investment income -- --
Dividends from net realized gains (0.36) (0.36)
In excess of net investment income -- --
Tax return of capital -- --
Total distributions (0.36) (0.36)
Change in net asset value 0.84 0.76
-------- ------
Net asset value, end of period $ 9.56 $ 9.13
======== ======
Total return(1) 14.20%(3) 13.84%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $220,832 $3,083
Ratio to average net assets of:
Operating expenses 1.23%(2) 1.98%(2)
Net investment income (loss) (0.32)%(2) (1.06)%(2)
Portfolio turnover 67%(3) 67%(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) 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.
35
<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 Growth Fund's
shareholders arise, however, the proxies will vote thereon according to their
best judgment in the interests of the Growth Fund and the shareholders of the
Growth Fund.
36
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 17th day of November, 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 Equity Opportunities Fund, a
portfolio series thereof (the "Acquiring Fund") and THE PHOENIX-SENECA FUNDS
(the "Phoenix-Seneca Trust"), a Delaware business trust with its principal place
of business at 909 Montgomery Street, San Francisco, California 94133, on behalf
of the Phoenix-Seneca Growth 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 Phoenix-Seneca 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, Class B, Class C and Class X
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 Phoenix-Seneca 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 Phoenix-Seneca 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").
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").
<PAGE>
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 Phoenix-Seneca 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 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 Phoenix-Seneca Trust or provide
evidence satisfactory to the Phoenix-Seneca 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.
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES
4.1 The Phoenix-Seneca Trust represents and warrants to the Strategic
Equity Series Trust as follows:
(a) The Phoenix-Seneca Trust is a voluntary association with
transferable shares of the type commonly referred to as a Delaware business
trust duly organized and validly existing under the laws of the State of
Delaware.
(b) The Phoenix-Seneca 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 Phoenix-Seneca 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 September 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 September 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 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. 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).
3
<PAGE>
(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 Phoenix-Seneca Trust, and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes a valid
and binding obligation of the Phoenix-Seneca 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
Phoenix-Seneca 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.
(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 Phoenix-Seneca 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.
4
<PAGE>
(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 Phoenix-Seneca Trust will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4 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 Phoenix-Seneca 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.
5
<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Phoenix-Seneca 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
Phoenix-Seneca 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 Phoenix-Seneca 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
Phoenix-Seneca 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.
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 Phoenix-Seneca 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 Phoenix-Seneca 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 Phoenix-Seneca 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 Phoenix-Seneca 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 Phoenix-Seneca 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.
6
<PAGE>
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 Phoenix-Seneca 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 Phoenix-Seneca 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 Phoenix-Seneca 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 Phoenix-Seneca Trust to permit
consummation, 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 Phoenix-Seneca 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
Phoenix-Seneca 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 Phoenix-Seneca Trust.
Notwithstanding anything herein to the contrary, neither the Strategic Equity
Series Trust nor the Phoenix-Seneca 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).
7
<PAGE>
9. BROKERAGE FEES AND EXPENSES
9.1 The Strategic Equity Series Trust and the Phoenix-Seneca 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 Phoenix-Seneca 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
Phoenix-Seneca 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
Phoenix-Seneca Trust and the Strategic Equity Series Trust; provided, however,
that following the meeting of the Acquired Fund Shareholders called by the
Phoenix-Seneca 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.
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
8
<PAGE>
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 Phoenix-Seneca
Trust hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents, or employees of the Phoenix-Seneca Trust personally,
but shall bind only the trust property of the Phoenix-Seneca Trust, as provided
in the Declaration of Trust of the Phoenix-Seneca Trust. The execution and
delivery by such officers of the Phoenix-Seneca 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 Phoenix-Seneca Trust. The
Phoenix-Seneca 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 Phoenix-Seneca 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 such series, the Acquiring Fund.
With respect to any obligation of the Strategic Equity Series Trust arising
hereunder, the Phoenix-Seneca 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 Subject to the foregoing limitations on liability, the Acquiring
Fund agrees to indemnify and hold harmless the Trustees of the Phoenix-Seneca
Trust who are not "interested persons" of the adviser or distributor of the
Acquired Fund (the "Independent Trustees") from and against any and all claims,
costs, expenses (including reasonable attorneys' fees), losses and liabilities
of any sort or kind (collectively "Liability")which may be asserted against them
or for which the Independent Trustees may become liable arising out of or
attributable to the transactions contemplated by this Agreement, provided that
any Independent Trustee seeking the benefit of this indemnification shall not
have materially contributed to the creation of such Liability by acting in a
manner contrary to his or her fiduciary duties as a trustee under the 1940 Act.
14.8 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.
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 Equity
Opportunities Fund
ATTEST: By:____________________________________________
___________________________ Name: Philip R. McLoughlin
G. Jeffrey Bohne Title: President
Secretary
THE PHOENIX-SENECA FUNDS, on behalf of the
Phoenix-Seneca Growth Fund
ATTEST: By:____________________________________________
___________________________ Name: Gail P. Seneca
Thomas N. Steenburg Title: President
Secretary
10
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
PHOENIX-SENECA GROWTH FUND
a series of
Phoenix-Seneca Funds
909 Montgomery Street
San Francisco, California 94133
(800) 243-1574
By and in Exchange for Shares of
PHOENIX-SENECA EQUITY OPPORTUNITIES 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 Growth Fund, a series of Phoenix-Seneca Funds,
to the Phoenix Equity Opportunities Fund, a portfolio series of Phoenix
Strategic Equity Series Fund, in exchange for shares of the corresponding class
of the Equity Opportunities 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-Seneca Funds
dated January 28, 2000;
(3) the Annual Report of Phoenix Strategic Equity Series Fund for the
year ended April 30, 1999;
(4) The Semi-Annual Report of the Phoenix Strategic Equity Series
Fund for the six-month period ended October 31, 1999
(5) the Annual Report of Phoenix-Seneca Funds for the year ended
September 30, 1999:
(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 _________, 2000. 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 _______, 2000.
2
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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-Seneca Funds dated January 28, 2000 B-
Annual Report of Phoenix Strategic Equity Series Fund for the year ended
April 30, 1999 B-
Semi-Annual Report of the Phoenix Strategic Equity Series Fund for the
six-month period ended October 31, 1999 B-
Annual Report of Phoenix-Seneca Funds for the year ended September 30, 1999 B-
Pro Forma Financial Statements B-
</TABLE>
3
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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
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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)
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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.
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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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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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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
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$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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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
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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
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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
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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.
18
<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
19
<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>
PHOENIX-SENECA FUNDS
PART B
PHOENIX-SENECA BOND FUND
PHOENIX-SENECA GROWTH FUND
PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND
PHOENIX-SENECA REAL ESTATE SECURITIES FUND
(each a "Fund" and collectively, the "Funds")
Statement of Additional Information
January 28, 2000
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current prospectus of the
Phoenix-Seneca Funds (the "Trust"), dated January 28, 2000, 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, Enfield, Connecticut
06083-2200.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The Trust ........................................ 1
Investment Objectives and Policies ............... 1
Investment Restrictions .......................... 12
Calculation of the Funds' Performance ............ 15
Advisory Services ................................ 17
The Distributor .................................. 19
Distribution Plans ............................... 20
Net Asset Value .................................. 21
How To Buy Shares ................................ 22
Alternative Purchase Arrangements ................ 22
Investor Account Services ........................ 25
How To Redeem Shares ............................. 26
Dividends, Distributions and Tax Status .......... 28
Portfolio Brokerage .............................. 30
Portfolio Turnover ............................... 31
Management of the Trust .......................... 31
Other Information ................................ 38
Appendix ......................................... 40
Glossary ......................................... 41
</TABLE>
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PXP 2069B (1/99)
<PAGE>
THE TRUST
The Trust is an open-end management company which was organized under
Delaware law in 1995 as a business trust. The Trust consists of four separate
Funds: the Phoenix-Seneca Bond Fund; the Phoenix-Seneca Growth Fund; the
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund; and the Phoenix-Seneca Real Estate
Securities Fund. Each Fund offers four Classes of Shares: Class X, Class A,
Class B and Class C. Class X Shares are offered to institutional investors, such
as pension and profit sharing plans, employee benefit trusts, endowments,
foundations, and corporations, and others who purchase in certain minimum
amounts. The three additional Classes of Shares may be purchased at a price
equal to their net asset value per share, plus a sales charge which, at the
election of the purchaser, may be imposed (i) at the time of purchase (Class A)
or (ii) on a contingent deferred basis (Class B and Class C).
The Trust (formerly called the "Seneca Funds") was renamed the
Phoenix-Seneca Funds in connection with the effectiveness of new investment
advisory agreements with Phoenix Investment Counsel, Inc. ("PIC") and Seneca
Capital Management LLC ("Seneca"). At the same time, the Seneca Bond Fund was
renamed the Phoenix-Seneca Bond Fund, the Seneca Growth Fund was renamed the
Phoenix-Seneca Growth Fund, the Seneca Mid-Cap "EDGE"(SM) Fund was renamed the
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and the Seneca Real Estate Securities
Fund was renamed the Phoenix-Seneca Real Estate Securities Fund.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described in the prospectus. This Statement of Additional Information should be
read in conjunction with the prospectus. Additional information concerning the
characteristics of certain securities in which the Funds may invest and certain
practices in which they may engage is set forth below. The Appendix to this
Statement of Additional Information contains a description of the quality
categories of corporate bonds in which the Funds may invest, and a Glossary
describing some of the Funds' investments.
Repurchase Agreements
Each Fund may enter into repurchase agreements with banks, broker-dealers
or other financial institutions in order to generate additional current income.
Under a repurchase agreement, a Fund acquires a security from a seller subject
to resale to the seller at an agreed upon price and date. The resale price
reflects an agreed upon interest rate effective for the time period the security
is held by the Fund. The repurchase price may be higher than the purchase price,
the difference being income to the Fund, or the purchase and repurchase price
may be the same, with interest payable to the Fund at a stated rate together
with the repurchase price on repurchase. In either case, the income to the Fund
is unrelated to the interest rate on the security. Typically, repurchase
agreements are in effect for one week or less, but may be in effect for longer
periods of time. Repurchase agreements of more than one week's duration are
subject to each Fund's limitation on investments in illiquid securities.
Repurchase agreements are considered by the Securities and Exchange
Commission (the "SEC") to be loans by the purchaser collateralized by the
underlying securities. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Funds will generally enter into repurchase agreements
only with domestic banks with total assets in excess of one billion dollars,
primary dealers in U.S. Government securities reporting to the Federal Reserve
Bank of New York or broker-dealers approved by the Trustees of the Trust. The
Subadviser will monitor the value of the underlying securities throughout the
term of the agreement to attempt to ensure that their market value always equals
or exceeds the agreed-upon repurchase price to be paid to a Fund. Each Fund will
maintain a segregated account with its custodian, or a subcustodian for the
securities and other collateral, if any, acquired under a repurchase agreement
for the term of the agreement.
In addition to the risk of the seller's default or a decline in value of
the underlying security (see "Investment Practices and Risk
Considerations--Repurchase Agreements" in the prospectus), a Fund also might
incur disposition costs in connection with liquidating the underlying
securities. If the seller becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a court may determine
that the underlying security is collateral for a loan by a Fund not within the
control of that Fund and therefore subject to sale by the seller's trustee in
bankruptcy. Finally, it is possible that a Fund may not be able to perfect its
interest in the underlying security and may be deemed an unsecured creditor of
the seller.
Corporate Debt Securities
A Fund's investments in debt securities of domestic or foreign corporate
issuers are limited to bonds, debentures, notes and other similar corporate debt
instruments, including convertible securities that meet the Fund's minimum
ratings criteria or if unrated are, in the Subadviser's opinion, comparable in
quality to corporate debt securities that meet those criteria. The rate of
return or return of principal on some debt obligations may be linked or indexed
to the level of exchange rates between the U.S. Dollar and a foreign currency or
currencies or to the value of commodities, such as gold.
Convertible Securities. A convertible security is a bond, debenture, note,
or other security that entitles the holder to acquire common stock or other
equity securities of the same or a different issuer. It generally entitles the
holder to receive interest paid or accrued until the security matures or is
redeemed, converted, or exchanged. Before conversion, convertible securities
have characteristics similar to nonconvertible debt securities. Convertible
securities rank senior to common stock in a corporation's
1
<PAGE>
capital structure and, therefore, generally entail less risk than the
corporation's common stock, although the extent to which this is true depends in
large measure on the degree to which the convertible security sells above its
value as a fixed-income security.
A convertible security may be subject to redemption or conversion at the
option of the issuer at a predetermined price. If a convertible security held by
a Fund is called for redemption, the Fund could be required to permit the issuer
to redeem the security and convert it to the underlying common stock. The
Phoenix-Seneca Bond Fund generally would invest in convertible securities for
their favorable price characteristics and total return potential and would
normally not exercise an option to convert. The Phoenix-Seneca Growth Fund and
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund might be more willing to convert such
securities to common stock.
Below-Investment Grade Securities. Investments in below-investment grade
securities (see Appendix for an explanation of the various ratings) generally
provide greater income (leading to the name "high-yield" securities) and
opportunity for capital appreciation than investments in higher quality
securities, but they also typically entail greater price volatility and
principal and income risk. These securities are regarded as predominantly
speculative as to the issuer's continuing ability to meet principal and interest
payment obligations. The markets for these securities are relatively new and
many of the outstanding high-yield securities have not endured a major business
recession. A long-term track record on default rates, such as that for
investment-grade corporate bonds, does not exist for these securities. Analysis
of the creditworthiness of issuers of lower-quality debt securities may be more
complex than for issuers of higher-quality debt securities.
High-yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment-grade securities.
The prices of high-yield securities have been found to be less sensitive to
interest-rate changes than higher-quality investments, but more sensitive to
adverse economic developments or individual corporate developments. A projection
of an economic downturn or of a period of rising interests rates, for example,
could cause a decline in high-yield securities prices because the advent of a
recession could lessen the ability of a highly-leveraged company to make
principal and interest payments. If an issuer of high-yield securities defaults,
in addition to risking payment of all or a portion of interest and principal,
the Funds may incur additional expenses to seek recovery. Market prices of
high-yield securities structured as zero-coupon or pay-in-kind securities are
affected to a greater extent by interest rate changes, and therefore tend to be
more volatile than securities that pay interest periodically and in cash.
The secondary market on which high-yield securities are traded may be less
liquid than the market for higher- grade securities. Less liquidity could
adversely affect the price at which a Fund could sell a high-yield security and
could adversely affect the daily net asset value of the Fund's shares. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high-yield securities,
especially in a thinly-traded market. When secondary markets for these
securities are less liquid than the market for higher-grade securities, it may
be more difficult to value the high-yield securities because the valuation may
require more research and judgment may play a greater role in valuation because
of the lack of reliable, objective data.
Delayed Delivery Transactions
Each Fund may purchase securities on a when-issued or forward commitment
basis. These transactions are also know as delayed delivery transactions. (The
phrase "delayed delivery" is not intended to include purchases where a delay in
delivery involves only a brief period required by the selling party solely to
locate appropriate certificates and prepare them for submission for clearance
and settlement in the customary way.) Delayed delivery transactions involve a
commitment by a Fund to purchase or sell securities at a future date (ordinarily
up to 90 days later). The price of the underlying securities (usually expressed
in terms of yield) and the date when the securities will be delivered and paid
for (the settlement date) are fixed at the time the transaction is negotiated.
When-issued purchases and forward commitments are negotiated directly with the
selling party.
When-issued purchases and forward commitments enable a Fund to lock in what
is believed to be an attractive price or yield on a particular security for a
period of time, regardless of future changes in interest rates. For example, in
periods of rising interest rates and falling bond prices, a Fund might sell debt
securities it owns on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising prices, a Fund
might sell securities it owns and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher yields. A Fund will not enter into such transactions for the
purpose of leverage.
The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value will be reflected in the
Fund's net asset value starting on the date of the agreement to purchase the
securities, and the Fund will be subject to the rights and risks of ownership of
the securities on that date. A Fund will not earn interest on securities it has
committed to purchase until they are paid for and received.
When a Fund makes a forward commitment to sell securities it owns, the
proceeds to be received upon settlement will be included in the Fund's assets.
Fluctuations in the market value of the underlying securities will not be
reflected in the Fund's net asset value as long as the commitment to sell
remains in effect. Settlement of when-issued purchases and forward commitment
transactions generally takes place up to 90 days after the date of the
transaction, but a Fund may agree to a longer settlement period.
2
<PAGE>
A Fund will make commitments to purchase securities on a when-issued basis
or to purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into. A Fund
also may sell securities it has committed to purchase before those securities
are delivered to the Fund on the settlement date. The Fund may realize a capital
gain or loss in connection with these transactions.
When a Fund purchases securities on a when-issued or forward-commitment
basis, the Custodian will maintain in a segregated account securities having a
value (determined daily) at least equal to the amount of the Fund's purchase
commitments. These procedures are designed to ensure that each Fund will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases and forward commitments.
Mortgage-Related and Other Asset-Backed Securities
Mortgage Pass-Through Securities. These are interests in pools of mortgage
loans, assembled and issued by various governmental, government-related, and
private organizations. Unlike other forms of debt securities, which normally
provide for periodic payment of interest in fixed amounts with principal
payments at maturity or specified call dates, these securities provide a monthly
payment consisting of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential or commercial mortgage loans, net of any fees
paid to the issuer or guarantor of such securities. Additional payments are
caused by repayments of principal resulting from the sale of the underlying
property, refinancing or foreclosure, net of fees or costs. "Modified
pass-through" securities (such as securities issued by the Government National
Mortgage Association ("GNMA")) entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of Federal Housing Administration insured or
Veterans Administration guaranteed mortgages.
Government-related guarantors whose obligations are not backed by the full
faith and credit of the United States Government include the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. FHLMC is a government-sponsored corporation formerly owned
by the twelve Federal Home Loan Banks and now owned entirely by private
stockholders. FHLMC issues Participation Certificates ("Pcs") that represent
interests in conventional mortgages from FHLMC's national portfolio. FNMA and
FHLMC guarantee the timely payment of interest and ultimate collection of
principal on securities they issue, but their guarantees are not backed by the
full faith and credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments for such
securities. However, timely payment of interest and principal of these pools may
be supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets a Fund's investment quality standards. There can be no assurance
that the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements. Funds may buy mortgage-related
securities without insurance or guarantees if, through an examination of the
loan experience and practices of the originator/servicers and poolers, the
Subadviser determines that the securities meet the Funds' quality standards.
Securities issued by certain private organizations may not be readily
marketable.
Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Funds'
industry concentration restrictions, set forth below under "Investment
Restrictions," by virtue of the exclusion from the test available to all U.S.
Government securities. The Funds will take the position that privately-issued
mortgage-related securities do not represent interests in any particular
"industry" or group of industries. The assets underlying such securities may be
represented by a portfolio of first lien residential mortgages (including both
whole mortgage loans and mortgage participation interests) or portfolios of
mortgage pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC.
Mortgage loans underlying a mortgage-related security may in turn be insured or
guaranteed by the Federal Housing Administration or the
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Department of Veterans Affairs. In the case of private issue mortgage-related
securities whose underlying assets are neither U.S. Government securities nor
U.S. Government-insured mortgages, to the extent that real properties securing
such assets may be located in the same geographical region, the security may be
subject to a greater risk of default than other comparable securities in the
event of adverse economic, political or business developments that may affect
such region and, ultimately, the ability of residential homeowners to make
payments of principal and interest on the underlying mortgages.
Collateralized Mortgage Obligations (CMOs). A CMO is similar to a bond in
that interest and prepaid principal is paid, in most cases, semiannually. CMOs
may be collateralized by whole mortgage loans or by portfolios of mortgage
pass-through securities guaranteed by entities such as GNMA, FHLMC, or FNMA, and
their income streams.
CMOs are typically structured in multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes typically receive principal only after the first class
has been retired. An investor may be partially guarded against a sooner than
desired return of principal because of the sequential payments.
FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having
different maturity dates and are secured by the pledge of a pool of conventional
mortgage loans purchased by FHLMC. Unlike FHLMC Pcs, payments of principal and
interest on the CMOs are made semiannually rather than monthly. The amount of
principal payable on each semiannual payment date is determined in accordance
with FHLMC's mandatory sinking fund schedule. Sinking fund payments in the CMOs
are allocated to the retirement of the individual classes of bonds in the order
of their stated maturities. Payments of principal on the mortgage loans in the
collateral pool in excess of the amount of FHLMC's minimum sinking fund
obligation for any payment date are paid to the holders of the CMOs as
additional sinking-fund payments. Because of the "pass-through" nature of all
principal payments received on the collateral pool in excess of FHLMC's minimum
sinking fund requirement, the rate at which principal of the CMOs is actually
repaid is likely to be such that each class of bonds will be retired in advance
of its scheduled maturity date. If collection of principal (including
prepayments) on the mortgage loans during any semiannual payment period is not
sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking
fund payment date, FHLMC agrees to make up the deficiency from its general
funds.
CMO Residuals. CMO residuals are derivative mortgage securities issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans. As described above, the cash flow generated
by the mortgage assets underlying a series of CMOs is applied first to make
required payments of principal and interest on the CMOs and second to pay the
related administrative expenses of the issuer. The "residual" in a CMO structure
generally represents the interest in any excess cash flow remaining after making
the foregoing payments. Each payment of such excess cash flow to a holder of the
related CMO residual represents income and/or a return of capital. The amount of
residual cash flow resulting from a CMO will depend on, among other things, the
characteristics of the mortgage assets, the coupon rate of each class of CMO,
prevailing interest rates, the amount of administrative expenses and, in
particular, the prepayment experience on the mortgage assets. In addition, if a
series of a CMO includes a class that bears interest at an adjustable rate, the
yield to maturity on the related CMO residual will also be extremely sensitive
to changes in the level of the index upon which interest rate adjustments are
based. As described below with respect to stripped mortgage-backed securities,
in certain circumstances a Fund may fail to recoup fully its initial investment
in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. CMO residuals may be subject to certain restrictions on
transferability, may be deemed "illiquid," and may be subject to a Fund's
limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities. They may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans. SMBS are usually structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of SMBS will have one
class receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class security is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and
a rapid rate of principal payments may have a material adverse effect on a
Fund's yield to maturity from these securities. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, a Fund may
fail to recoup fully its initial investment in these securities even if the
security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.
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A Fund may invest in other mortgage-related securities with features
similar to those described above, to the extent consistent with the Fund's
investment objectives and policies.
Other Asset-Backed Securities. Through trusts and other special purpose
entities, various types of securities based on financial assets other than
mortgage loans are increasingly available, in both pass-through structures
similar to mortgage pass-through securities described above and in other
structures more like CMOs. As with mortgage-related securities, these
asset-backed securities are often backed by a pool of financial assets
representing the obligations of a number of different parties. They often
include credit- enhancement features similar to mortgage-related securities.
Financial assets on which these securities are based include automobile
receivables; credit card receivables; loans to finance boats, recreational
vehicles, and mobile homes; computer, copier, railcar, and medical equipment
leases; and trade, healthcare, and franchise receivables. In general, the
obligations supporting these asset-backed securities are of shorter maturities
than mortgage loans and are less likely to experience substantial prepayments.
However, obligations such as credit card receivables are generally unsecured and
the obligors are often entitled to protection under a number of state and
federal consumer credit laws granting, among other things, rights to set off
certain amounts owed on the credit cards, thus reducing the balance due. Other
obligations that are secured, such as automobile receivables, may present
issuers with difficulties in perfecting and executing on the security interests,
particularly where the issuer allows the servicers of the receivables to retain
possession of the underlying obligations, thus increasing the risk that
recoveries on defaulted obligations may not be adequate to support payments on
the securities.
The Subadviser expects additional assets will be "securitized" in the
future. A Fund may invest in any such instruments or variations on them to the
extent consistent with the Fund's investment objectives and policies.
Foreign Securities
Each of the Funds may invest in U.S. dollar- or foreign
currency-denominated corporate debt securities of foreign issuers (including
preferred or preference stock), certain foreign bank obligations and U.S.
dollar- or foreign currency-denominated obligations of foreign governments or
their subdivisions, agencies and instrumentalities, international agencies and
supranational entities. Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund may each invest up to 20% of its total assets directly in common
stocks issued by foreign companies or in securities represented by ADRs. Each
Fund will limit its investment in securities denominated in foreign currencies
to no more than 20% of the Fund's total assets.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which may
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
ADRs are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer, and
are publicly traded on exchanges or over-the-counter in the United States. ADRs
may be issued as sponsored or unsponsored programs. In sponsored programs, an
issuer has made arrangements to have its securities trade in the form of ADRs.
In unsponsored programs, the issuer may not be directly involved in the creation
of the program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program.
Each of the Funds also may purchase and sell foreign currency options and
foreign currency futures contracts and related options and enter into forward
foreign currency exchange contracts in order to protect against uncertainty in
the level of future foreign exchange rates in the purchase and sale of
securities. The Funds may also use foreign currency options and foreign currency
forward contracts to increase exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one country to another.
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts may be bought or sold to
protect a Fund against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar or to increase
exposure to a particular foreign currency. Open positions in such forward
contracts are covered by the segregation with the Trust's custodian of high
quality short-term investments and are marked to market daily. Although such
contracts are intended to minimize the risk of loss due to a decline in the
value of the currencies being hedged against, at the same time, they tend to
limit any potential gain which might result should the value of such currencies
increase.
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Options and Futures
The Funds may, as described in the Prospectus, purchase and sell (write)
both put options and call options on securities, securities indexes, and foreign
currencies, and enter into interest rate, foreign currency and index futures
contracts and purchase and sell options on such futures contracts ("futures
options"). The Funds also may enter into swap agreements with respect to foreign
currencies, interest rates and securities indices. If other types of options or
futures options are traded in the future, a Fund may also use those instruments,
provided that the Trustees determine that their use is consistent with the
Fund's investment objective, and provided that their use is consistent with
restrictions applicable to options and futures contracts currently eligible for
use by the Trust.
Options
The purpose of writing covered put and call options generally is to hedge
against fluctuations in the market value of a Fund's portfolio securities. Each
Fund may purchase or sell call and put options on securities indices for a
similar purpose. Such a hedge is limited to the degree that the extent of the
price change of the underlying security is less than the difference between the
option premium received by the Fund and the option strike price. To the extent
the underlying security's price change exceeds this amount, written put and call
options will not provide an effective hedge.
Writing Call Options. Each Fund may write (sell) covered call options on
securities ("calls") when the Subadviser considers such sales appropriate. When
a Fund writes a call, it receives a premium and grants the purchaser the right
to buy the underlying security at any time during the call period (usually
between three and nine months) at a fixed exercise price regardless of market
price changes during the call period. If the call is exercised, the Fund forgoes
any gain but is not subject to any loss on any change in the market price of the
underlying security relative to the exercise price. A Fund will write such
options subject to any applicable limitations or restrictions imposed by law.
A written call option is covered if the Fund owns the security underlying
the option. A written call option may also be covered by purchasing an
offsetting option or any other option which, by virtue of its exercise price or
otherwise, reduces the Fund's net exposure on its written option position. In
addition, the Fund may cover such options with any assets, including equity
securities and non-investment grade debt so long as the assets are liquid,
unencumbered and marked to market daily ("liquid assets"), in a segregated
account in amounts sufficient to ensure that it is able to meet its obligations
under the written call should it be exercised. This method does not reduce the
potential loss to the Fund should the value of the underlying security increase
and the option be exercised.
Purchasing Call Options. Each Fund may purchase a call option when the
Subadviser believes the value of the underlying security will rise or to effect
a "closing purchase transaction" as to a call option the Fund has written
(sold). A Fund will realize a profit (or loss) from a closing purchase
transaction if the amount paid to purchase a call is less (or more) than the
amount received from the sale thereof.
Writing Put Options. A put option written by a Fund obligates the Fund to
purchase the specified security at a specified price if the option is exercised
at any time before the expiration date. A written put option may be covered with
liquid assets in a segregated account. While this may help ensure that a Fund
will have sufficient assets to meet its obligations under the option contract
should it be exercised, it will not reduce the potential loss to the Fund should
the value of the underlying security decrease and the option be exercised.
Purchasing Put Options. A Fund may purchase a put option when the
Subadviser believes the value of the underlying security will decline. A Fund
may purchase put options on securities in its portfolio in order to hedge
against a decline in the value of such securities ("protective puts") or to
effect closing purchase transactions as to puts it has written. A Fund will
realize a profit (or loss) from a closing purchase transaction if the amount
paid to purchase a put is less (or more) than the amount received from the sale
thereof.
Options on Securities Indices. Unlike a stock option, which gives the
holder the right to purchase or sell a specified stock at a specified price, an
option on a securities index gives the holder the right to receive a cash
"exercise settlement amount" equal to (i) the difference between the exercise
price of the option and the value of the underlying securities index on the
exercise date multiplied by (ii) a fixed "index multiplier." Like an option on a
specific security, when a Fund purchases a put or a call option on an index, it
places the entire amount of the premium paid at risk, for if, at the expiration
date, the value of the index has decreased below the exercise price (in the case
of a call) or increased above the exercise price (in the case of a put), the
option will expire worthless.
A securities index fluctuates with changes in the market values of the
stocks included in the index. For example, some securities index options are
based on a broad market index such as the S&P 500. Others are based on a
narrower market index such as the Standard & Poor's 100 Stock Index. Indices may
also be based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on securities
indices are currently traded on the Chicago Board Options Exchange, the New York
Stock Exchange ("NYSE") and the American Stock Exchange.
Funds may purchase put options on securities indices to hedge against an
anticipated decline in stock market prices that might adversely affect the value
of a Fund's portfolio securities. If a Fund purchases such a put option, the
amount of the payment it
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would receive upon exercising the option would depend on the extent of any
decline in the level of the securities index below the exercise price. Such
payments would tend to offset a decline in the value of the Fund's portfolio
securities. However, if the level of the securities index increases and remains
above the exercise price while the put option is outstanding, a Fund will not be
able to profitably exercise the option and will lose the amount of the premium
and any transaction costs. Such loss may be partially or wholly offset by an
increase in the value of a Fund's portfolio securities.
A Fund may purchase call options on securities indices in order to
participate in an anticipated increase in stock market prices or to offset
anticipated price increases on securities that it intends to buy in the future.
If a Fund purchases a call option on a securities index, the amount of the
payment it would receive upon exercising the option would depend on the extent
of any increase in the level of the securities index above the exercise price.
Such payments would in effect allow the Fund to benefit from stock market
appreciation even though it may not have had sufficient cash to purchase the
underlying stocks. Such payments may also offset increases in the prices of
stocks that the Fund intends to purchase. If, however, the level of the
securities index declines and remains below the exercise price while the call
option is outstanding, a Fund will not be able to exercise the option profitably
and will lose the amount of the premium and transaction costs. Such loss may be
partially or wholly offset by a reduction in the price a Fund pays to buy
additional securities for its portfolio.
Each of the Funds may write (sell) covered call or put options on a
securities index. Such options may be covered by purchasing an offsetting option
which, by virtue of its exercise price or otherwise, reduces the Fund's net
exposure on its written option position or by owning securities whose price
changes are expected to be similar to those of the underlying index or by having
an absolute and immediate right to acquire such securities without additional
cash consideration or for additional cash consideration (held in a segregated
account by its custodian) upon conversion or exchange of other securities in
their respective portfolios. In addition, the Fund may cover such options by
maintaining liquid assets with a value equal to the exercise price in a
segregated account with the Custodian or by using the other methods described
above.
The extent to which options on securities indices will provide a Fund with
an effective hedge against interest rate or stock market risk will depend on the
extent to which the stocks comprising the indices correlate with the composition
of the Fund's portfolio. Moreover, the ability to hedge effectively depends upon
the ability to predict movements in interest rates or the stock market. Some
options on securities indices may not have a broad and liquid secondary market,
in which case options purchased by the Fund may not be closed out and the Fund
could lose more than its option premium when the option expires.
The purchase and sale of option contracts is a highly specialized activity
that involves investment techniques and risks different from those ordinarily
associated with investment companies. Transaction costs relating to options
transactions may tend to be higher than the costs of transactions in securities.
In addition, if a Fund were to write a substantial number of option contracts
that are exercised, the portfolio turnover rate of that Fund could increase.
Foreign Currency Options. A Fund may buy or sell put and call options on
foreign currencies either on exchanges or in the over-the-counter market. A call
option on a foreign currency gives the purchaser of the option the right to buy
a foreign currency at the exercise price until the option expires. A put option
gives the option-holder a similar right to sell the underlying currency.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of a Fund to reduce foreign currency risk
using such options. Over-the-counter options differ from exchange-traded options
in that they are two-party contracts with price and other terms negotiated
between buyer and seller, and generally do not have as much market liquidity as
exchange-traded options.
Futures Transactions
Each Fund may purchase and sell futures contracts for hedging purposes and
in an attempt to increase total return. A futures contract is an agreement
between two parties to buy and sell a security for a set price at a future time.
Each Fund may also enter into index-based futures contracts and interest rate
futures contracts. Futures contracts on indices provide for a final cash
settlement on the expiration date based on changes in the relevant index. All
futures contracts are traded on designated "contract markets" licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC") which,
through their clearing corporations, guarantee performance of the contracts.
Generally, while market interest rates increase, the value of outstanding
debt securities declines (and vice versa). If a Fund holds long-term debt
securities and the Subadviser anticipates a rise in long-term interest rates, it
could, in lieu of disposing of its portfolio securities, enter into futures
contracts for the sale of similar long-term securities. If rates increased and
the value of a Fund's portfolio securities declined, the value of that Fund's
futures contract would increase, thereby preventing net asset value from
declining as much as it otherwise would have. If the Subadviser expects
long-term interest rates to decline, a Fund might enter into futures contracts
for the purchase of long-term securities, so that it could offset anticipated
increases in the cost of such securities it intends to purchase while continuing
to hold higher-yielding short-term securities or waiting or the long-term market
to stabilize. Similar techniques may be used by the Funds to hedge stock market
risk.
Each Fund also may purchase and sell listed put and call options on futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option
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is a call and a short position if the option is a put), at a specified exercise
price at any time during the option period. When an option on a futures contract
is exercised, settlement is effected by the payment of cash representing the
difference between the current market price of the futures contract and the
exercise price of the option. The risk of loss to a Fund purchasing an option on
a futures contract is limited to the premium paid for the option.
A Fund may purchase put options on futures contracts in lieu of, and for
the same purpose as, its sale of a futures contract: to hedge a long position in
the underlying futures contract. The purchase of call options on futures
contracts is intended to serve the same purpose as the actual purchase of the
futures contract.
A Fund would write a call option on a futures contract in order to hedge
against a decline in the prices of the securities underlying the futures
contracts. If the price of the futures contract at expiration is below the
exercise price, the applicable Fund would retain the option premium, which would
offset, in part, any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the
purchase of the futures contract, except that, if market price declines, a Fund
would pay more than the market price for the underlying securities. The net cost
to a Fund will be reduced, however, by the premium received on the sale of the
put, less any transaction costs.
Each Fund may engage in "straddle" transactions, which involve the purchase
or sale of combinations of call and put options on the same underlying
securities or futures contracts.
In purchasing and selling futures contracts and related options, each Fund
intends to comply with rules and interpretations of the CFTC and of the SEC.
Limitations on the Use of Futures Contracts and Futures Options
Each Fund will engage in futures and related options transactions only for
bona fide hedging purposes in accordance with CFTC regulations or in an attempt
to increase total return to the extent permitted by such regulations. In hedging
transactions, a Fund will seek to invest in futures contracts and futures
options the prices of which are substantially related to price fluctuations in
securities held by the Fund or which it expects to purchase. Except as stated
below, a Fund's futures transactions will be entered into for traditional
hedging purposes--that is, futures contracts will be sold to protect against a
decline in the price of securities that the Fund owns, or futures contracts will
be purchased to protect the Fund against an increase in the price of securities
it intends to purchase. As evidence of this hedging intent, the Fund expects
that on 75% or more of the occasions on which it takes a long futures (or
option) position (involving the purchase of futures contracts), a Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities in the cash market at the time when the futures (or option)
position is closed out. However, in particular cases, when it is economically
advantageous for a Fund to do so, a long futures position may be terminated (or
an option may expire) without the corresponding purchase of securities. As an
alternative to compliance with the bona fide hedging definition, a CFTC
regulation permits a Fund to elect to comply with a different test, under which
the sum of the amounts of initial margin deposits and premiums on its futures
positions entered into for the purpose of seeking to increase total return (net
of the amount the positions were "in the money" at the time of purchase) would
not exceed 5% of that Fund's net assets, after taking into account unrealized
gains and losses on such positions. A Fund will engage in transactions in
futures contracts and related options only to the extent such transactions are
consistent with the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), for maintaining its qualification as a regulated
investment company for Federal income tax purposes (see "Dividends,
Distributions, and Tax Status").
A Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures contracts, to make margin
deposits, which will be held by the Fund's custodian (or a subcustodian) for the
benefit of the merchant through whom a Fund engages in such futures and options
transactions. In the case of futures contracts or options thereon requiring the
Fund to purchase securities, the Fund must segregate liquid assets in an account
maintained by the Custodian to cover such contracts and options that is marked
to market daily.
Special Considerations and Risks Related to Options and Futures Transactions
Exchange markets in options on certain securities are a relatively new and
untested concept. It is impossible to predict the amount of trading interest
that may exist in such options, and there can be no assurance that viable
exchange markets will develop or continue.
The exchanges will not continue indefinitely to introduce new expirations
to replace expiring options on particular issues because trading interest in
many issues of longer duration tends to center on the most recently auctioned
issues. The expirations introduced at the commencement of options trading on a
particular issue will be allowed to run out, with the possible addition of a
limited number of new expirations as the original expirations expire. Options
trading on each issue of securities with longer durations will thus be phased
out as new options are listed on more recent issues, and a full range of
expirations will not ordinarily be available for every issue on which options
are traded.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation ("OCC") has the
authority to permit other, generally comparable, securities to be delivered in
fulfillment of option exercise
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obligations. It may also adjust the exercise prices of the affected options by
setting different prices at which otherwise ineligible securities may be
delivered. As an alternative to permitting such substitute deliveries, the OCC
may impose special exercise settlement procedures.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent the markets for
underlying securities close before the options markets, significant price and
rate movements can take place in the options markets that cannot be reflected in
the underlying markets. In addition, to the extent that the options markets
close before the markets for the underlying securities, price and rate movements
can take place in the underlying markets that cannot be reflected in the options
markets.
Prior to exercise or expiration, an option position can be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on an exchange for call or put options of the same series.
Similarly, positions in futures may be closed out only on an exchange which
provides a secondary market for such futures. There can be no assurance that a
liquid secondary market will exist for any particular call or put option or
futures contract at any specific time. Thus, it may not be possible to close an
option or futures position. In the event of adverse price movements, a Fund
would continue to be required to make daily payments of maintenance margin for
futures contracts or options on futures contracts position written by that Fund.
A Fund may have to sell portfolio securities at a time when it may be
disadvantageous to do so if it has insufficient cash to meet the daily
maintenance margin requirements. In addition, a Fund may be required to take or
make delivery of the instruments underlying futures contracts it holds. The
inability to close options and futures positions also could have an adverse
impact on a Fund's ability to effectively hedge its portfolios.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security (whether or not
covered) that may be written by a single investor, whether 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 applicable trading limits and it may impose other
sanctions or restrictions. The Trust and other clients advised by the Subadviser
and its affiliates may be deemed to constitute a group for these purposes. In
light of these limits, the Trustees may determine at any time to restrict or
terminate the Funds' transactions in options. The Subadviser does not believe
that these trading and position limits will have any adverse investment
techniques for hedging the Trust's portfolios.
Over-the-counter ("OTC") options are purchased from or sold to securities
dealers, financial institutions or other parties ("Counterparties") through
direct agreement with the counterparty. In contrast to exchange-listed options,
which generally have standardized terms and performance mechanics, all the terms
of an OTC option, including such terms as method of settlement, term, exercise
price, premium, guarantees and security, are set by negotiation of the parties.
Unless the parties provide for it, there is no central clearing or guaranty
function in the OTC option market. As a result, if the counterparty fails to
make delivery of the security or other instrument underlying an OTC option it
has entered into with a Fund or fails to make a cash settlement payment due in
accordance with the terms of that option, the Fund will lose any premium it paid
for the option as well as any anticipated benefit of the transaction.
Accordingly, the Subadviser must assess the creditworthiness of each such
counterparty or any guarantor or credit enhancement of the counterparty's credit
to determine the likelihood that the terms of the OTC option will be satisfied.
The staff of the SEC currently takes the position that OTC options purchased by
a Fund, and portfolio securities "covering" the amount of a Fund's obligation
pursuant to an OTC option sold by it (the cost of the sell-back plus the
in-the-money amount, if any) are illiquid, and are subject to each Fund's
limitation on investing no more than 15% of its assets in illiquid securities.
However, for options written with "primary dealers" in U.S. Government
securities pursuant to an agreement requiring a closing transaction at a formula
price, the amount considered to be illiquid may be calculated by reference to a
formula price.
The loss from investing in futures transactions is potentially unlimited.
Gains and losses on investments in options and futures depend on the
Subadviser's ability to predict correctly the direction of stock prices,
interest rates and other economic factors. In addition, utilization of futures
in hedging transactions may fail where there is an imperfect correlation in
movements in the price of futures contracts and movements in the price of the
securities which are the subject of the hedge. If the price of the futures
contract moves more or less than the price of the security, a Fund will
experience a gain or loss that will not be completely offset by movements in the
price of the securities which are the subject of the hedge. There is also a risk
of imperfect correlation where the securities underlying futures contracts have
different maturities than the portfolio securities being hedged. Transactions in
options on futures contracts involve similar risks.
Swap Agreements
The Funds may enter into interest rate, index and currency exchange rate
swap agreements in attempts to obtain a particular desired return at a lower
cost to the Fund than if the Fund had invested directly in an instrument that
yielded that desired return. Swap agreements are two-party contracts entered
into primarily by institutional investors for periods ranging from a few weeks
to more than one year. In a standard "swap" transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped"
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between the parties are calculated with respect to a "notional amount," i.e.,
the return on or increase in value of a particular dollar amount invested at a
particular interest rate, in a particular foreign currency, or in a "basket" of
securities representing a particular index. The "notional amount" of the swap
agreement is only a fictive basis on which to calculate the obligations the
parties to a swap agreement have agreed to exchange. A Fund's obligations (or
rights) under a swap agreement will generally be equal only to the amount to be
paid or received under the agreement based on the relative values of the
positions held by each party to the agreement (the "net amount"). A Fund's
obligations under a swap agreement will be accrued daily (offset against any
amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of liquid assets to avoid leveraging of the Fund's portfolio. A Fund
will not enter into a swap agreement with any single party if the net amount
owed or to be received under existing contracts with that party would exceed 5%
of the Fund's assets.
Whether a Fund's use of swap agreements enhance the Fund's total return
will depend on the Subadviser's ability correctly to predict whether certain
types of investments are likely to produce greater returns than other
investments. Because they are two-party contracts and may have terms of greater
than seven days, swap agreements may be considered to be illiquid. Moreover, a
Fund bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The Subadviser will cause a Fund to enter into swap agreements
only with counterparties that would be eligible for consideration as repurchase
agreement counterparties under the Funds' repurchase agreement guidelines.
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit
the Funds' ability to use swap agreements. The swaps market is a relatively new
market and is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect a
Fund's ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations of the CFTC. To
qualify for this exemption, a swap agreement must be entered into by "eligible
participants," which include the following, provided the participants' total
assets exceed established levels: a bank or trust company, savings association
or credit union, insurance company, investment company subject to regulation
under the Investment Company Act of 1940 (the "1940 Act"), commodity pool,
corporation, partnership, proprietorship, organization, trust or other entity,
employee benefit plan, governmental entity, broker-dealer, futures commission
merchant, natural person, or regulated foreign person. To be eligible, natural
persons and most other entities must have total assets exceeding $10 million;
commodity pools and employees benefit plans must have assets exceeding $5
million. In addition, an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are standardized as to their material economic terms. Second, the
creditworthiness of parties with actual or potential obligations under the swap
agreement must be a material consideration in entering into or determining the
terms of the swap agreement, including pricing, cost or credit enhancement
terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility.
Foreign Currency Exchange-Related Securities
Foreign currency warrants. Foreign currency warrants such as Currency
Exchange Warrants ("CEWs") are warrants that entitle the holder to receive from
the issuer an amount of cash (generally, for warrants issued in the United
States, in U.S. Dollars) that is calculated pursuant to a predetermined formula
and based on the exchange rate between a specified foreign currency and the U.S.
Dollar as of the exercise date of the warrant. Foreign currency warrants
generally are exercisable upon their issuance and expire as of a specified date
and time. Foreign currency warrants have been issued in connection with U.S.
Dollar-denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk that, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may be used to reduce the
foreign exchange risk assumed by purchasers of a security by, for example,
providing for a supplemental payment in the event the U.S. Dollar depreciates
against the value of a major foreign currency such as the Japanese Yen or German
Deutschemark. The formula used to determine the amount payable upon exercise of
a foreign currency warrant may make the warrant worthless unless the applicable
foreign currency exchange rate moves in a particular direction (e.g., unless the
U.S. Dollar appreciates or depreciates against the particular foreign currency
to which the warrant is linked or indexed). Foreign currency warrants are
severable from the debt obligations with which they may be offered, and may be
listed on exchanges. Foreign currency warrants may be exercisable only in
certain minimum amounts, and an investor wishing to exercise warrants who
possesses less than the minimum number required for exercise may be required
either to sell the warrants or to purchase additional warrants, thereby
incurring additional transaction costs. Upon exercise of warrants, there may be
a delay between the time the holder gives instructions to exercise and the time
the exchange rate relating to exercise is determined, thereby affecting both the
market and cash settlement values of the warrants being exercised. The
expiration date of the warrants may be accelerated if the warrants should be
delisted from an exchange or if their trading should be suspended permanently,
which would result in the loss of any remaining "time value" of the warrants
(i.e., the difference between the current market value and the exercise value of
the warrants), and, if the warrants were "out-of-the-money," in a total loss of
the purchase price of the warrants. Warrants are generally unsecured obligations
of their issuers and are not standardized foreign currency options issued by the
OCC. Unlike foreign currency options issued by OCC, the terms of foreign
exchange warrants generally will not be amended in the event of governmental or
regulatory
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actions affecting exchange rates or in the event of the imposition of other
regulatory controls affecting the international currency markets. The initial
public offering price of foreign currency warrants is generally considerably in
excess of the price that a commercial user of foreign currencies might pay in
the interbank market for a comparable option involving significantly larger
amounts of foreign currencies. Foreign currency warrants are subject to
significant foreign exchange risk, including risks arising from complex
political or economic factors.
Principal exchange rate linked securities. Principal exchange rate linked
securities (or "PERLS") are debt obligations the principal on which is payable
at maturity in an amount that may vary based on the exchange rate between the
U.S. Dollar and a particular foreign currency at or about that time. The return
on "standard" principal exchange rate linked securities is enhanced if the
foreign currency to which the security is linked appreciates against the U.S.
Dollar, and is adversely affected by increases in the foreign exchange value of
the U.S. Dollar; "reverse" PERLS are like the "standard" securities, except that
their return is enhanced by increases in the value of the U.S. Dollar and
adversely impacted by increases in the value of foreign currency. Interest
payments on the securities are generally made in U.S. Dollars at rates that
reflect the degree of foreign currency risk assumed or given up by the purchaser
of the notes (i.e., at relatively higher interest rates if the purchaser has
assumed some of the foreign exchange risk, or relatively lower interest rates if
the issuer has assumed some of the foreign exchange risk, based on the
expectations of the current market). PERLS may in limited cases be subject to
acceleration of maturity (generally, not without the consent of the holders of
the securities), which may have an adverse impact on the value of the principal
payment to be made at maturity.
Performance indexed paper. Performance indexed paper (or "PIPs") is U.S.
Dollar-denominated commercial paper the yield of which is linked to certain
foreign exchange rate movements. The yield to the investor on performance
indexed paper is established at maturity as a function of spot exchange rates
between the U.S. Dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is below,
and a potential maximum rate of return that is above, market yields on U.S.
Dollar-denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of the
spot exchange rate two business days prior to maturity.
Warrants to Purchase Securities
The Funds may invest in or acquire warrants to purchase equity or fixed
income securities. Bonds with warrants attached to purchase equity securities
have many characteristics of convertible bonds and their prices may, to some
degree, reflect the performance of the underlying stock. Bonds also may be
issued with warrants attached to purchase additional fixed income securities at
the same coupon rate. A decline in interest rates would permit a Fund to buy
additional bonds at the favorable rate or to sell the warrants at a profit. If
interest rates rise, the warrants would generally expire with no value.
A Fund will not invest more than 5% of its net assets, valued at the lower
of cost or market, in warrants to purchase securities. Included within that
amount, but not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on the New York Stock Exchange or American Stock Exchange. Warrants
acquired in units or attached to securities will be deemed to be without value
for purposes of this restriction.
Participation Interests
The Phoenix-Seneca Bond Fund may purchase from banks participation
interests in all or part of specific holdings of debt obligations. Each
participation interest is backed by an irrevocable letter of credit or guarantee
of the selling bank that the Subadviser has determined meets the prescribed
quality standards of each Fund. Thus, even if the credit of the issuer of the
debt obligation does not meet the quality standards of the Fund, the credit of
the selling bank will.
Restricted and Illiquid Securities
Each Fund may invest up to 15% of its total assets in "illiquid
investments," including "restricted securities" (i.e., securities that would be
required to be registered prior to distribution to the public), securities that
are not readily marketable, repurchase agreements maturing in more than seven
days and privately issued stripped mortgage-backed securities.
Certain "restricted" securities may be resold to qualified institutional
buyers without restriction pursuant to Rule 144A under the Securities Act of
1933. If a sufficient dealer or institutional trading market exists for such a
security, it may not be considered "illiquid." The Trustees have adopted
guidelines and delegated to the Subadviser the daily function of determining and
monitoring the liquidity of restricted securities and determining whether a Rule
144A security restricted security should be considered "illiquid." The Trustees,
however, retain oversight and are ultimately responsible for the determinations.
Please see the non-fundamental investment restrictions for further limitations
regarding the Funds' investments in restricted and illiquid securities.
Short Sales
The Funds may sell securities short as part of their overall portfolio
management strategies involving the use of derivative instruments and to offset
potential declines in long positions in similar securities. A short sale is a
transaction in which a Fund sells a security it does not own or have the right
to acquire (or that it owns but does not wish to deliver) in anticipation that
the market price of that security will decline.
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When a Fund makes a short sale, the broker-dealer through which the short
sale is made must borrow the security sold short and deliver it to the party
purchasing the security. The Fund is required to make a margin deposit in
connection with such short sales; the Fund may have to pay a fee to borrow
particular securities and will often be obligated to pay over any dividends and
accrued interest on borrowed securities.
If the price of the security sold short increases between the time of the
short sale and the time the Fund covers its short position, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital gain.
Any gain will be decreased, and any loss increased, by the transaction costs
described above. The successful use of short selling may be adversely affected
by imperfect correlation between movements in the price of the security sold
short and the securities being hedged.
To the extent a Fund sells securities short, it will provide collateral to
the broker-dealer and (except in the case of short sales "against the box") will
maintain additional asset coverage in the form of liquid assets with its
custodian in a segregated account in an amount at least equal to the difference
between the current market value of the securities sold short and any amounts
required to be deposited as collateral with the selling broker (not including
the proceeds of the short sale). The Funds do not intend to enter into short
sales (other than short sales "against the box") if immediately after such sales
the aggregate of the value of all collateral plus the amount in such segregated
account exceeds one- third of the value of the Fund's net assets. This
percentage may be varied by action of the Trustees. A short sale is "against the
box" to the extent the Fund contemporaneously owns, or has the right to obtain
at no added cost, securities identical to those sold short.
Loans of Portfolio Securities
Each Fund may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to financial
institutions, such as broker-dealers, and must be collateralized continuously
with cash, cash equivalents, irrevocable letters of credit, or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities lent. For the duration of a loan, the Fund would
receive the equivalent of the interest or dividends paid by the issuer on the
securities lent and would also receive compensation from the investment of the
collateral. The Fund would not have the right to vote any securities having
voting rights during the existence of the loan, but the Fund could call the loan
in anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter affecting
the investment. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
considered by the Subadviser to be qualified, and when, in the judgment of the
Subadviser, the consideration that can be earned currently from securities loans
of this type justifies the attendant risk. The value of the securities lent may
not exceed one-third of the value of the total assets of the Fund.
A Fund may pay reasonable negotiated fees to the Custodian in connection
with loaned securities as long as such fees are pursuant to a contract approved
by the Trustees.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment restrictions
which may not be changed without approval of a majority of the applicable Fund's
outstanding voting securities. Under the 1940 Act, and as used in the prospectus
and this Statement of Additional Information, a "majority of the outstanding
voting securities" requires the approval of the lesser of (1) the holders of 67%
or more of the shares of a Fund represented at a meeting of the holders if more
than 50% of the outstanding shares of the Fund are present in person or by proxy
or (2) the holders of more than 50% of the outstanding shares of the Fund.
A Fund may not:
(1) Issue senior securities, except as permitted by paragraphs 3, 6, and 7
below. For purposes of this restriction, the issuance of shares of beneficial
interest in multiple classes or series, the purchase or sale of options, futures
contracts, forward commitments and reverse repurchase agreements entered into in
accordance with the Fund's investment policies or within the meaning of
paragraph 3 below, are not deemed to be senior securities.
(2) Purchase securities on margin (but the Funds may obtain such short-term
credits as may be necessary for the clearance of transactions); provided that
the deposit or payment of initial or variation margin in connection with options
or futures contracts is not considered the purchase of securities on margin.
(3) Borrow money, except that a Fund may borrow from banks or enter into
reverse repurchase agreements or dollar rolls up to one-third of the value of
its total assets (calculated when the loan is made) to take advantage of
investment opportunities and may pledge up to one-third of the value of its
total assets to secure such borrowings. Each Fund is also authorized to borrow
an additional 5% of its total assets without regard to the foregoing limitations
for temporary purposes such as the clearance of transactions and share
redemptions. For purposes of this investment restriction, short sales, the
purchase or sale of securities on a "when-issued," delayed delivery or forward
commitment basis, the purchase or sale of options, futures contracts, and
options on futures contracts, securities or indices and collateral arrangements
with respect thereto shall not constitute borrowing.
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(4) Act as an underwriter with respect to the securities of other issuers,
except to the extent that in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter for purposes of the 1933
Act; provided, however, that the Fund may invest all or part of its investable
assets in an open-end investment company with substantially the same investment
objectives, policies and restrictions as the Fund.
(5) Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities that are
secured by real estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired by the
Fund as a result of the ownership of securities.
(6) Invest in commodities, except that the Fund may purchase and sell
options on securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such futures, forward
foreign currency exchange contracts (including, foreign currency warrants,
principal exchange rated linked securities, and performance indexed paper),
forward commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment policies,
subject to restrictions as may be set forth elsewhere in the prospectus or this
Statement of Additional Information.
(7) Make loans, except that the Fund may (1) lend portfolio securities in
accordance with the Fund's investment policies up to one-third of the Fund's
total assets taken at market value, (2) enter into repurchase agreements, and
(3) purchase all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities.
(8) For each Fund other than the Phoenix-Seneca Real Estate Securities
Fund, purchase the securities of issuers conducting their principal activity in
a single industry if, immediately after such purchase, the value of its
investments in such industry would exceed 25% of its total assets taken at
market value at the time of such investment (except investments in obligations
of the U.S. Government or any of its agencies, instrumentalities or
authorities); provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with substantially the same
investment objectives, policies and restrictions as the Fund.
(9) For each Fund other than the Phoenix-Seneca Real Estate Securities
Fund, as to 75% of its total assets, purchase securities of an issuer (other
than the U.S. Government, its agencies, instrumentalities or authorities or
repurchase agreements collateralized by U.S. Government securities and other
investment companies), if:
(1) such purchase would cause more than 5% of the Fund's total assets
taken at market value to be invested in the securities of such issuer;
or
(2) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund;
provided, however, that a Fund may, subject to restrictions imposed by
the 1940 Act and applicable state laws, invest all or part of its
investable assets in an open-end investment company with substantially
the same investment objectives, policies and restrictions as the Fund.
Because it is a "non-diversified" fund within the meaning of the 1940
Act, Phoenix-Seneca Real Estate Securities Fund will not be limited in
the proportion of its assets it may invest in the securities of any
single issuer.
For purposes of the above fundamental investment restrictions, the
Subadviser generally classifies issuers by industry in accordance with
classifications set forth in the Standard & Poor's Bond Guide. In the absence of
such classification or if the Subadviser determines in good faith based on its
own information that the economic characteristics affecting a particular issuer
make it more appropriate to be engaged in a different industry, the Subadviser
may classify an issuer according to its own sources.
The Trust has undertaken with a state securities commission that it will
interpret the provisions of investment restriction number (5) to prohibit
investment by the Funds in real estate limited partnerships that are not
publicly traded. To the extent that undertaking is no longer required by the
state securities commission, the Trust may interpret that restriction
differently.
The following restrictions are designated as non-fundamental and may be
changed by the Trustees without the approval of shareholders.
A Fund may not:
(1) Pledge, mortgage or hypothecate its assets, except to secure permitted
borrowings and then only if such pledging, mortgaging or hypothecating does not
exceed one-third of the Fund's total assets taken at market value. Collateral
arrangements with respect to margin, option and other risk management and
when-issued and forward commitment transactions are not deemed to be pledges or
other encumbrances for purposes of this restriction.
(2) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of marketable
portfolio securities with other accounts under the management of the investment
adviser or any subadviser to save commissions or to average prices among them is
not deemed to result in a joint securities trading account.
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(3) Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or principals or officers of the investment
adviser, any subadviser or any investment management subsidiary of the
investment adviser individually owns beneficially more than 0.5% and together
own beneficially more than 5% of the securities of such issuer.
(4) Purchase a security of other investment companies, except when the
purchase is part of a plan of merger, consolidation, reorganization or
acquisition or except where such purchase would not result in (i) more than 10%
of the Fund's assets being invested in securities of other investment companies,
(ii) more than 3% of the total outstanding voting securities of any one such
investment company being held by the Fund or (iii) more than 5% of the Fund's
assets being invested in any one such investment company; provided, however,
that the Fund may invest all of its investable assets in an open-end investment
company with substantially the same investment objectives, policies and
restrictions as the Fund.
(5) Invest in securities that are illiquid if, as a result, more than 15%
of its net assets would consist of such securities, including repurchase
agreements maturing in more than seven days, securities that are not readily
marketable, and restricted securities not eligible for resale pursuant to Rule
144A under the 1933 Act; provided, however, that the Fund may invest all or part
of its investable assets in an open-end investment company with substantially
the same investment objectives, policies and restrictions as the Fund.
(6) Purchase warrants of any issuer, if, as a result of such purchase, more
than 2% of the value of the Fund's total assets would be invested in warrants
that are not listed on the NYSE or American Stock Exchange or more than 5% of
the total assets of the Fund, valued at the lower of cost or current market
value, would be invested in warrants generally, whether or not so listed.
Warrants acquired by the Fund in units with or attached to debt securities shall
be deemed to be without value.
(7) Purchase interests in oil, gas, or other mineral exploration programs
or mineral leases; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas or
other minerals.
(8) Invest for the purpose of exercising control over or management of any
company; provided that the Fund may do so where it is deemed advisable to
protect or enhance the value of an existing investment; and provided further,
that the Fund may invest all or part of its investable assets in an open-end
investment company with substantially the same investment objectives, policies
and restrictions as the Fund.
(9) Write (sell) options that are not "covered" as described elsewhere in
this Statement of Additional Information or write puts on securities if the
aggregate value of the obligations underlying the puts exceeds 50% of the Fund's
net assets.
(10) Buy and sell puts and calls on securities, stock index futures or
options on stock index futures or financial futures or options on financial
futures if (i) the aggregate premiums paid on all such options which are held at
any time exceed 20% of the Fund's aggregate net assets and (ii) the aggregate
margin deposits required on all such futures or options thereon held at any time
exceed 5% of the Fund's total assets.
(11) Purchase puts, calls, straddles, spreads, or any combination thereof
if by reason thereof, the value of its aggregate investment in such classes of
securities (other than protective puts) will exceed 5% of its net assets.
(12) Make short sales of securities or maintain a short position, unless at
all times when a short position is open, the Fund owns an equal amount of the
securities or securities convertible into or exchangeable for, without payment
of any further consideration, securities of the same issue as, and equal in
amount to, the securities sold short.
Each Fund may, notwithstanding any other fundamental or non-fundamental
investment restriction or policy, invest all of its assets in the securities of
a single open-end investment company with substantially the same fundamental
investment objectives, restrictions and policies as the Fund.
Except as to the 300% asset coverage required by fundamental restriction
number (3), if a percentage restriction on investment or utilization of assets
as set forth above is adhered to at the time an investment is made, a later
change in percentage resulting from changes in the values of a Fund's assets
will not be considered a violation of the restriction. Notwithstanding the
foregoing, if a Fund's investment in illiquid securities exceeds 15% of its net
assets, whether through a change in values, net assets, or otherwise, the Fund
will take appropriate steps to protect liquidity, including the orderly
liquidation of illiquid securities in a manner consistent with the realization
of the maximum value of those assets.
Pursuant to a restriction imposed by a state securities commission, the
investment adviser waives its fee on all assets of any Fund invested in shares
of other open-end investment management companies pursuant to investment
restriction (4), above.
In order to permit the sale of shares of the Funds in certain states, the
Trustees may, in their sole discretion, adopt restrictions on investment policy
more restrictive than those described above. Should the Trustees determine that
any such more restrictive policy is no longer in the best interest of a Fund and
its shareholders, the Fund may cease offering shares in the state involved and
the Trustees may revoke such restrictive policy. Moreover, if the states
involved shall no longer require any such restrictive policy, the Trustees may,
in their sole discretion, revoke such policy.
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CALCULATION OF THE FUNDS' PERFORMANCE
Total Return
The average annual total return on Shares of each Class of each Fund is
determined for a particular period by calculating the actual dollar amount of
the investment return on a $1,000 investment in Shares of that Class of the Fund
made at the net asset value of such Shares at the beginning of the period, and
then calculating the annual compounded rate of return that would produce that
amount. Total return for a period of one year is equal to the actual return of
Shares of that Class of the Fund during that period. The following formula
describes the calculation:
n
ERV = P(1+T)
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment
made at the beginning of the indicated period.
This calculation assumes that (i) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period and
(ii) all recurring fees are included for applicable periods.
Each Fund may illustrate in advertisements and sales literature the average
annual total return and cumulative total return for several time periods
throughout the Fund's life based on an assumed initial investment of $1,000. Any
such cumulative total return for a Fund will assume the reinvestment of all
income dividends and capital gains distributions for the indicated periods and
will include all recurring fees.
The average annual total returns for the one year period ended September
30, 1999 were as follows:
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Phoenix-Seneca Bond Fund 3.51% (2.41)% (2.18)% 1.66%
Phoenix-Seneca Growth Fund 32.19% 25.62% 26.31% 30.20%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 33.02% 25.99% 27.05% 31.07%
Phoenix-Seneca Real Estate Securities Fund (6.66)% (12.34)% (12.06)% 8.58%
</TABLE>
The average annual total returns for the period from commencement of
investment operations through September 30, 1999 were as follows:
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Phoenix-Seneca Bond Fund 7.92% (1.51)% (1.48)% 1.56%
Phoenix-Seneca Growth Fund 29.42% 26.90% 6.95% 9.96%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 23.54% 21.35% 0.73% 3.87%
Phoenix-Seneca Real Estate Securities Fund 4.33% 1.74% (18.51)% (15.96)%
</TABLE>
Yield
The 30-day yield quotation as to a Class of Shares of the Phoenix-Seneca
Bond Fund and the Phoenix-Seneca Real Estate Securities Fund may be computed by
dividing the net investment income for the period as to shares of that class by
the net asset value of each share of that Class on the last day of the period,
according to the following formula:
6
YIELD = 2[(a-b + 1) -1]
---
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued for the period.
c = the average daily number of shares of the Class outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share of the Class (net asset value
per share) on the last day of the period.
15
<PAGE>
The yields for the 30-day period ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
Class X Shares Class A Shares Class B Shares Class C Shares
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Phoenix-Seneca Bond Fund 6.76% 6.22% 5.75% 5.77%
Phoenix-Seneca Real Estate Securities Fund 5.83% 4.73% 4.20% 4.31%
</TABLE>
Return for a Fund is not fixed or guaranteed and will fluctuate from time
to time, unlike bank deposits or other investments which pay a fixed yield or
return for a stated period of time, and do not provide a basis for determining
future returns. Return is a function of portfolio quality, composition, maturity
and market conditions as well as the expenses allocated to each Class of each
Fund. The return of a Class may not be comparable to other investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate return.
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of a Fund may be illustrated and/or compared
with that of other mutual funds with similar investment objectives, and to stock
or other relevant indices. For example, total return of a Fund's Classes may be
compared to averages or rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service that monitors mutual fund performance; the
Lehman Brothers Government/ Corporate Index, an unmanaged index of consisting of
a mixture of government and corporate bonds rated within "investment grade"
categories by S&P or Moody's; the Morgan Stanley Europe, Australia, Far East
Index ("EAFE"), an unmanaged index of international stock markets, the S&P
Mid-Cap Index, an unmanaged index of common stocks; the S&P 500 Index, an
unmanaged index of common stocks; the Russell 2000 Index (the "Russell 2000"),
an unmanaged index of common stocks; the Russell 3000 Index (the "Russell
3000"), an unmanaged index of common stocks; or the Dow Jones Industrial
Average, an unmanaged index of common stocks of 30 industrial companies listed
on the NYSE. The performance of the Phoenix-Seneca Real Estate Securities Fund
may be compared to the Wilshire Real Estate Securities Index, an unmanaged index
consisting of publicly-traded REITs and real estate operating companies.
The S&P 500 Index is an unmanaged index of 500 common stocks traded on the
NYSE, American Stock Exchange and the Nasdaq National Market. The S&P 500
represents approximately 70% of the total domestic U.S. equity market
capitalization. The S&P Mid-Cap Index is an unmanaged index of common stocks of
400 companies with mid-size market capitalizations--$300 million to $5 billion.
The S&P 500 and the S&P Mid-Cap Indices are market value-weighted indices
(shares outstanding times stock price) in which each company's influence on the
respective index is directly proportional to its market value. The companies in
the S&P 500 Index and the S&P Mid-Cap Index are selected from four major
industry sectors: industrials, utilities, financials and transportation. The 500
companies chosen for the S&P 500 Index are not the 500 largest companies in
terms of market value. Rather, the companies chosen by S&P for inclusion in the
S&P 500 tend to be leaders in important industries within the U.S. economy. The
Russell 2000 is an unmanaged index of 2000 common stocks of small capitalization
companies. The Russell 2000 is composed of the 2000 smallest companies with
respect to capitalization in the Russell 3000 and represents approximately 70%
of the Russell 3000 total market capitalization. The Russell 3000 is an
unmanaged index of 3000 common stocks of large United States companies with
market capitalizations ranging from approximately $60 million to $80 billion.
The Russell 3000 represents approximately 98% of the United States equity
market. The Wilshire Real Estate Securities Index is an unmanaged,
market-capitalization-weighted index consisting of publicly-traded REITs and
real estate operating companies. It excludes healthcare and other
"special-purpose" REITs. It is rebalanced monthly and reconstituted quarterly.
In addition, the performance of the Classes of a Fund may be compared to
alternative investment or savings vehicles and/or to indexes or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial publications,
such as Changing Times, Forbes, Fortune, Money, Barrons, Business Week,
Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's
Investment Adviser, The Wall Street Journal, The New York Times, Consumer
Reports, Registered Representative, Financial Planning, Financial Services
Weekly, Financial World, U.S. News and World Report, Standard & Poor's The
Outlook, and Personal Investor may also be cited (if a Fund is listed in such a
publication) or used for comparison, as well as performance listings and
rankings from various other sources, including Bloomberg Financial Systems,
CDA/Wiesenberger Investment Companies Service, Donoghue's Mutual Fund Almanac,
Investment Company Data, Inc., Johnson's Charts, Kanon Bloch Carre & Co.,
Micropal, Inc., Morningstar, Inc., Schabacker Investment Management and Towers
Data Systems.
In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Funds. The Trust may also
present, from time to time, historical information depicting the value of a
hypothetical account in one or more Classes of a Fund since the Fund's
inception.
In presenting investment results, the Trust may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
and when to invest; and (c) his need to analyze his time frame for future
capital needs to determine how to invest. The investor controls these three
factors, all of which affect the use of investments in building assets. The
Adviser's and Administrator's agreement to limit each Fund's operating expenses
will increase investment performance.
16
<PAGE>
ADVISORY SERVICES
Investment Adviser
Overall responsibility for the management and supervision of the Trust and
the Funds rests with the Trustees of Phoenix-Seneca Funds (the "Trustees").
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser for the
Phoenix-Seneca Funds pursuant to an Investment Advisory Agreement. PIC's
services under its Investment Advisory Agreement and PEPCO's services under its
Administration Agreement with the Trust are subject to the direction of the
Trustees. The Funds' Subadviser is Seneca Capital Management, LLC ("Seneca").
Its principal offices are located at 909 Montgomery Street, San Francisco,
California 94133. Seneca's services under the Subadvisory Agreement are subject
to the direction of both the Trustees and PIC.
PIC is located at 56 Prospect Street, Hartford, Connecticut 06115-0480. PIC
was originally organized in 1932 as John P. Chase, Inc. As of December 31, 1999,
PIC had approximately $25.7 billion in assets under management. All of the
outstanding stock of PIC is owned by Phoenix Equity Planning Corporation
("PEPCO" or "Equity Planning") which acts as Distributor and Financial Agent for
the Trust and is a subsidiary of Phoenix Investment Partners, Ltd. ("PXP").
Phoenix Home Life is a majority shareholder of PXP. Phoenix Home Life is in the
business of writing ordinary and group life and health insurance and annuities.
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
Phoenix Home Life is located at One American Row, Hartford, Connecticut, 06115.
The principal office of Equity Planning is located at 100 Bright Meadow
Boulevard, Enfield, Connecticut, 06082.
Phoenix Investment Partners, Ltd. is a publicly traded independent
registered advisory firm and has served investors for over 70 years. It manages
approximately $64.6 billion in assets (as of December 31, 1999) 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.
Pursuant to the Investment Advisory Agreement, the Adviser: (a) supervises
and assists in the management of the assets of each Fund, furnishes each Fund
with research, statistical and advisory services and provides regular reports to
the Trustees; (b) provides advice and assistance with the operations of the
Trust, compliance support, preparation of the Trust's registration statements,
proxy materials and other documents and advice and assistance of the Adviser's
General Counsel; and (c) furnishes office facilities, personnel necessary to
provide advisory services to the Funds, personnel to serve without salaries as
officers or agents of the Trust and compensation and expenses of any Trustees
who are also full-time employees of the Adviser or any of its affiliates.
Pursuant to the Subadvisory Agreement, PIC has delegated to Seneca the
responsibility for making investment decisions for the Funds and selecting
brokers and dealers to execute transactions for each Fund.
Under a Subadvisory Agreement with PIC and the Trust, Seneca's duties to
each Fund include: (1) supervising and managing the investments of that Fund and
directing the purchase and sale of its investments; and (2) ensuring that
investments follow the investment objective, strategies, and policies of that
Fund and comply with government regulations. Seneca has approximately 40
full-time employees and acts as investment adviser or manager for approximately
$9.2 billion of institutional and private investment accounts as of December 31,
1999.
In managing the assets of the Funds, the Subadviser furnishes continuously
an investment program for each Fund consistent with the investment objectives
and policies of that Fund. More specifically, the Subadviser determines from
time to time what securities shall be purchased for the Fund, what securities
shall be held or sold by the Fund and what portion of the Fund's assets shall be
held uninvested as cash, subject always to the provisions of the Trust's
Agreement and Declaration of Trust, By-Laws and its registration statement under
the 1940 Act and under the 1933 Act covering the Trust's shares, as filed with
the SEC, and to the investment objectives, policies and restrictions of the
Fund, as each of the same shall be from time to time in effect, and subject,
further, to such policies and instructions as the Trustees of the Trust may from
time to time establish. To carry out such determinations, the Subadviser places
orders for the investment and reinvestment of each Fund's assets (see "Portfolio
Brokerage").
For its investment advisory services under the Investment Advisory
Agreement, the Adviser receives a fee, payable monthly, from Phoenix-Seneca
Growth Fund equal to 0.70% per annum of such Fund's average daily net assets,
from Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund equal to 0.80% per annum of such
Fund's average daily net assets, from Phoenix-Seneca Bond Fund equal to 0.50%
per annum of such Fund's average daily net assets, and from Phoenix-Seneca Real
Estate Securities Fund equal to 0.85% per annum of such Fund's average daily net
assets. The Adviser pays the Subadviser a fee of 0.35% for the Phoenix-Seneca
Growth Fund, 0.40% for the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, 0.25% for the
Phoenix-Seneca Bond Fund, and 0.425% for the Phoenix-Seneca Real Estate
Securities Fund, respectively, of such Fund's average daily net assets.
For the fiscal year ended September 30, 1999, PIC earned investment
management fees of $164,083, $443,317, $142,594, and $181,649 for services to
Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities Fund, respectively.
For the fiscal year ended September 30, 1999, PIC reimbursed $99,399, $49,249,
$51,919 and $63,940 for the Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth
Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate
Securities Fund, respectively.
17
<PAGE>
For the fiscal year ended September 30, 1998, PIC and Seneca earned
investment management fees of $69,747, $307,240, $100,384 and $242,177 for
services to Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca
Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities Fund,
respectively. For the fiscal year ended September 30, 1998, PIC, and Seneca in
its former capacity of investment adviser, reimbursed $12,142, $8,845, $36,648
and $8,695 for the Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund,
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities
Fund, respectively.
For the fiscal year ended September 30, 1997, Seneca and the former
investment manager, GMG/Seneca Capital Management, L.P. ("GMG/Seneca"), earned
investment management fees of $200,056, $89,157, $34,294 and $164,147 for
services rendered to Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund, Phoenix-Seneca Bond Fund and Phoenix-Seneca Real Estate
Securities Fund, respectively. For the fiscal year ended September 30, 1997,
Seneca and GMG/Seneca reimbursed $5,174 for the Phoenix-Seneca Growth Fund,
$135,798 for the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, $126,387 for the
Phoenix-Seneca Bond Fund and $16,628 for the Phoenix-Seneca Real Estate
Securities Fund.
The Adviser and the Administrator have voluntarily agreed to reimburse the
Funds' operating expenses through January 31, 2001 to prevent total operating
expenses from exceeding, on an annualized basis, the following:
<TABLE>
<CAPTION>
Fund Class X Class A Class B Class C
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Bond Fund 0.90% 1.15% 1.90% 1.90%
Growth Fund 1.25% 1.85% 2.60% 2.60%
Mid-Cap "EDGE"(SM) Fund 1.15% 1.40% 2.15% 2.15%
Real Estate Securities Fund 2.35% 3.05% 3.80% 3.80%
</TABLE>
The Adviser and the Administrator may discontinue or modify any such waivers or
reimbursements it may provide in the future at its discretion.
Under the Investment Advisory Agreement, PIC is not liable to the Trust or
any shareholder for any error of judgment or mistake of law or any loss suffered
by the Trust or any shareholder in connection with the Investment Advisory
Agreement, except a loss resulting from PIC's willful misfeasance, bad faith,
gross negligence or reckless disregard of duty. Under the Subadvisory Agreement,
Seneca is not liable for actions taken in its best professional judgment, in
good faith and believed by it to be authorized, provided such actions are not in
breach of the Funds' investment objectives, policies and restrictions or the
result of willful misfeasance, bad faith, gross negligence or breach of duty or
obligations.
The Investment Advisory Agreement may be modified or amended only with the
approval of the holders of a majority of the applicable Fund's outstanding
shares and by a vote of the majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) (the "Independent Trustees"). The
Subadvisory Agreement may be amended at any time by written agreement among the
Subadviser, the Adviser and the Trust, except that any changes to the duties of
and fees payable to the Subadviser will also be subject to the approval of the
Trustees and a majority of the applicable Fund's outstanding shares. Unless
terminated, the Investment Advisory Agreement and the Subadvisory Agreement
continue in full force and effect until June 30, 2000, and for successive
periods of one year thereafter, but only as long as each such continuance is
approved annually by a majority vote of the Trustees or by a vote of the holders
of a majority of the outstanding shares of the applicable Fund, but in either
event it also must be approved by a vote of a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Investment Advisory Agreement and the Subadvisory Agreement may be
terminated without penalty by any party upon 60 days' written notice and
automatically terminates in the event of its assignment. In the event of
termination, or at the request of PIC, the Trust and the Funds will eliminate
all reference to "Phoenix" from their names. Upon such request, PIC has agreed
to submit the question of continuing the Investment Advisory Agreement to a vote
of the shareholders of the Trust. In the event of termination, or at the request
of Seneca, the Trust and the Funds will eliminate all references to "Seneca"
from their names. Upon such request, Seneca has agreed to submit the question of
continuing the Subadvisory Agreement to a vote of the shareholders of the Trust.
Gail P. Seneca, President and Trustee of the Trust, Sandra J. Monticelli,
Treasurer of the Trust, Robert A. Driessen, Vice President and Assistant
Secretary of the Trust, and Thomas N. Steenburg, Secretary of the Trust, are
each an "affiliated person" of the Trust (as defined in the 1940 Act). Gail P.
Seneca, as President, Chief Executive and Investment Officer and owner of more
than 5% of the equity of Seneca, Robert A. Driessen, as Chief Compliance
Officer, and Sandra J. Monticelli, as Chief Operating Officer of Seneca, are
each an "affiliated person" of Seneca. Thomas N. Steenburg, as Senior Vice
President of PIC is an "affiliated person" of PIC, Robert A. Driessen, as Vice
President, Compliance, of PIC, is an "affiliated person" of PIC.
In the management of the Trust and their other accounts, the Subadviser
allocates investment opportunities to all accounts for which they are, in the
Subadviser's judgment, appropriate, subject to the availability of cash in any
particular account and the final decision of the individual or individuals in
charge of such accounts. Where market supply is inadequate for a distribution to
all such accounts, securities are generally allocated in proportion to net
assets. In some cases this procedure may have an adverse effect on the price or
volume of the security as far as the Funds are concerned. See also "Portfolio
Brokerage."
18
<PAGE>
In an attempt to avoid any potential conflict with portfolio transactions
for the Funds, the Adviser, Subadviser and the Trust, on behalf of each Fund,
have adopted restrictions on personal securities trading by personnel of the
Adviser, Subadviser and their affiliates. These restrictions include:
pre-clearance of all personal securities transactions and a prohibition on
purchasing initial public offerings of securities.
Each Fund bears all expenses of its own operation (subject to the expense
limitations described above), which expenses include: (i) fees and expenses of
any investment adviser or administrator of the Fund; (ii) organization expenses
of the Trust; (iii) fees and expenses incurred by the Fund in connection with
membership in investment company organizations; (iv) brokers' commissions; (v)
payment for portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses; (vii) interest, insurance premiums, taxes or
governmental fees; (viii) fees and expenses of the transfer agent of the Funds;
(ix) the cost of preparing stock certificates or any other expenses, including,
without limitation, clerical expenses of issue, redemption or repurchase of
shares of the Fund; (x) the expenses of and fees for registering or qualifying
shares of the Funds for sale and of maintaining the registration of the Funds;
(xi) a portion of the fees and expenses of Trustees who are not affiliated with
the Adviser or Subadviser; (xii) the cost of preparing and distributing reports
and notices to existing shareholders, the SEC and other regulatory authorities;
(xiii) fees or disbursements of custodians of the Funds' assets, including
expenses incurred in the performance of any obligations enumerated by the
Agreement and Declaration of Trust or By-Laws of the Trust insofar as they
govern agreements with any such custodian; (xiv) costs in connection with annual
or special meetings of shareholders, including proxy material preparation,
printing and mailing; (xv) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Funds'
business; and (xvi) distribution fees and service fees applicable to each class
of shares.
The Funds' Investment Advisory and Subadvisory Agreements each provide that
the Adviser and Subadviser may render similar services to others so long as the
services provided thereunder are not impaired thereby.
THE DISTRIBUTOR
PEPCO also acts as the Distributor for the Funds and as such will conduct a
continuous offering pursuant to a "best efforts" arrangement requiring it to
take and pay for only such securities as may be sold to the public. PEPCO is an
indirect wholly-owned subsidiary of Phoenix Home Life and an affiliate of the
Adviser and Subadviser. Shares of the Funds may be purchased through investment
dealers who have sales agreements with the Distributor.
For its services under the Underwriting Agreement, PEPCO 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,
PEPCO may receive payments from the Trust pursuant to the Distribution Plans
described below. For the fiscal years ended September 30, 1998 and 1999,
purchasers of shares of the Funds paid aggregate sales charges of $14,891 and
$145,925, respectively, of which the distributor received net commissions of
$1,566 and $23,685 for its services, respectively, the balance being paid to
dealers. For the fiscal year ended September 30, 1999, the distributor received
net commissions of $16,238 for Class A Shares and deferred sales charges of
$7,447 for Class B and 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 appropriate Class of outstanding voting securities of
the Funds, or by vote of a majority of the Funds' Trustees who are not parties
to the Underwriting Agreement or "interested persons" of any party 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.
Dealers Consessions
Dealers with whom the Distributor has entered into sales agreements receive
a discount or commission as set forth below.
<TABLE>
<CAPTION>
Dealer Discount
Sales Charge Sales Charge or Agency Fee
Amount of Transaction as Percentage as Percentage as Percentage of
at Offering Price of Offering Price of Amount Invested Offering Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 4.50% 4.71% 4.00%
$100,000 but under $250,000 3.50% 3.63% 3.00%
$250,000 but under $500,000 3.00% 3.09% 2.75%
$500,000 but under $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None
</TABLE>
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 due to a 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.
19
<PAGE>
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of the
Funds and/or for providing other shareholder services. 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 Funds
through distribution fees, service fees or transfer agent fees or in some cases,
the Distributor may pay certain fees from its own profits and resources. From
its own profits and resources, the Distributor does intend to: (a) sponsor
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. 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
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 cost 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 each Fund, at the following incremental annual rates.
<TABLE>
<S> <C>
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%
</TABLE>
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 Panning 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 Funds are
expected to be slightly less than the amount that would be found through direct
application of the table illustrated above. For administrative services during
the fiscal year ended September 30, 1999, PEPCO received $258,753.
DISTRIBUTION PLANS
The Funds have adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each Class of Shares of the Funds other than Class X (the "Class A
Plan," the "Class B Plan," the "Class C Plan" and collectively the "Plans"). The
Plans require the Funds to pay the Distributor for furnishing shareholder
services and to permit the Funds to reimburse the Distributor for expenses
incurred in connection with activities intended to promote the sale of shares of
each Class of Shares of the Funds.
Pursuant to the Plans, the Funds pay the Distributor 0.25% annually of the
average daily net assets of the Funds' Class A, Class B and Class C Shares for
furnishing shareholder services and reimburse the Distributor monthly for actual
distribution related expenses of the Distributor up to 0.75% annually of the
average daily net assets of the Funds' Class B and Class C Shares. Expenditures
under the Plans for sale and promotion consist of: (i) commissions to sales
personnel for selling shares of the Funds (including underwriting commissions
and finance charges related to the payment of commissions); (ii) compensation,
sales incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into agreements with the Distributor in the form of the Dealer Agreement for
Phoenix Funds for services rendered in connection with the sale and distribution
of shares of the Funds; (iv) payment of expenses incurred in sales and
promotional activities, including advertising expenditures related to the Funds;
(v) the costs of preparing and distributing promotional materials; (vi) the cost
of printing the Funds' Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Trust determine are reasonably calculated to result in the
sale of shares of the Funds.
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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 re-allowed 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.
Expenses not reimbursed during any year, because of the limitations on
reimbursements, may be carried over and paid in future years when actual
expenses are less than the respective limits under each Plan. 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.
For the fiscal year ended September 30, 1999 the Funds paid Rule 12b-1 Fees
in the amount of $148,159, of which the Distributor received $121,864, W.S.
Griffith & Co., an affiliate, received $1,637 and unaffiliated broker-dealers
received $24,658. The Rule 12b-1 payments were used for compensation to dealers,
$235,030; and printing and mailing of prospectuses to other than current
shareholders, $14,630. 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 Funds under the Class B
Plan. Those expenses may be carried over and paid in future years. At September
30, 1999, the end of the last Plan year, the Distributor had incurred
unreimbursed expenses under the Class B Plan of $151,199 (equal to 0.13% of the
Funds' net assets) which have been carried over into the present Class B Plan
year.
On a quarterly basis, the Funds' 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 Funds' 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 that Class 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 the Plan Trustees or a majority of the
outstanding shares of the relevant Class of the Funds.
The National Association of Securities Dealers, Inc. ("NASD"), regard
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.
NET ASSET VALUE
Under the 1940 Act, the Trustees are responsible for determining in good
faith the fair value of securities of the Funds. The net asset value per share
of each class of each Fund is determined once daily, Monday through Friday as of
the close of trading on the NYSE (normally 4:00 P.M. New York City time) on each
day the Trust is "open for business" (as defined in the Prospectus). A Fund need
not determine its net asset value on any day during which its shares were not
tendered for redemption and the Trust did not receive any order to purchase or
sell shares of that Fund. In accordance with procedures approved by the
Trustees, the net asset value per share of each class of each Fund is calculated
by determining the value of the net assets attributable to each class of that
Fund and dividing by the number of outstanding shares of that class. The NYSE is
not open for trading on weekends or on the following observed national holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The public offering price per share of a class of a Fund is the net asset
value per share of that class of that Fund next determined after receipt of an
order. Orders for shares that have been received by the Trust or the Transfer
Agent before the close of regular trading of the NYSE are confirmed at the
offering price effective at the close of regular trading of the NYSE on that
day, while
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orders received subsequent to the close of regular trading of the NYSE will be
confirmed at the offering price effective at the close of regular trading of the
NYSE on the next day on which the net asset value is calculated.
Bonds and other fixed-income securities (other than short-term obligations
but including listed issues) in a Fund's portfolio are valued on the basis of
valuations furnished by a pricing service that uses both dealer-supplied
valuations and electronic data processing techniques that take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, when such valuations are believed
to reflect the fair value of such securities.
In determining the net asset value, unlisted securities for which market
quotations are available are valued at the last reported sales price or, if no
sales are reported or such pricing is not provided, the mean between the most
recent bid and asked prices. Securities, options on securities, futures
contracts and options thereon that are listed or admitted to trading on a
national exchange, are valued at their last sale on such exchange prior to the
time of determining net asset value; or if no sales are reported on such
exchange on that day, at the mean between the most recent bid and asked price.
Securities listed on more than one exchange shall be valued on the exchange the
security is most extensively traded. Quotations of foreign securities in foreign
currency will be converted to U.S. Dollar equivalents using foreign exchange
quotations received from independent dealers. Short-term investments having a
maturity of 60 days or less will be valued at amortized cost, when the Trustees
determine that amortized cost is their fair market value. Certain debt
securities for which daily market quotations are not available may be valued,
pursuant to guidelines established by the Trustees, with reference to fixed
income securities whose prices are more readily obtainable and whose durations
are comparable to the securities being valued. Subject to the foregoing, other
securities for which market quotations are not readily available will be valued
at fair value as determined in good faith by the Trustees.
For purposes of determining the net asset value of the Funds' shares,
options transactions will be treated as follows: When a Fund sells an option, an
amount equal to the premium received by that Fund will be included in that
Fund's accounts as an asset and a deferred liability will be created in the
amount of the option. The amount of the liability will be marked to the market
to reflect the current market value of the option. If the option expires or if
that Fund enters into a closing purchase transaction, that Fund will realize a
gain (or a loss if the cost of the closing purchase exceeds the premium
received), and the related liability will be extinguished. If a call option
contract sold by a Fund is exercised, that Fund will realize the gain or loss
from the sale of the underlying security and the sale proceeds will be increased
by the premium originally received.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25 for Class A, Class B and Class C Shares. 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. The minimum initial investment for Class X Shares is
$250,000, and the minimum subsequent investment for Class X Shares is $10,000.
Completed applications for the purchase of shares should be mailed to:
Phoenix-Seneca 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"). Each Fund also offers one Class of Shares (Class X
Shares) that may be purchased by certain institutional investors at a price
equal to their net asset value per share. Orders received by dealers prior to
the close of trading on the New York Stock Exchange are confirmed at the
offering price effective at that time, provided the order is received by the
Distributor prior to its close of business.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Funds, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Trust,
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 and services fees on Class A Shares
purchased at the same time.
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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 service fees relating to each Class of
Shares will be borne exclusively by that class. See "Dividends, Distributions
and Tax Status."
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 service fees at an annual rate of 0.25% of the
Trust'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.
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
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 service 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 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, Class B Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares in
a shareholder's account will be considered to be held in a separate sub-account.
Each time any Class B Shares in the shareholder's Trust account (other than
those in the sub-account) convert to Class A, a pro rata portion of the Class B
Shares in the sub-account will also convert to Class A Shares.
Class C Shares
Class C Shares are purchased without an initial sales charge but are
subject to a deferred sales charge if redeemed within one year of purchase. The
deferred sales charge may be waived in connection with certain qualifying
redemptions. Shares issued in conjunction with the automatic reinvestment of
income distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to ongoing distribution and services fees of
up to 1.00% of the Funds' aggregate average daily net assets attributable to
Class C Shares.
Class X Shares
Class X Shares are offered without any sales charges to institutional
investors, such as pension and profit sharing plans, other employee benefit
trusts, investment advisers, endowments, foundations and corporations, and
others who purchase the minimum amounts.
Class A Shares--Reduced Initial Sales Charges
Investors choosing Class A Shares may be entitled to reduced sales charges.
The 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) any trustee, director or officer of the Phoenix Funds,
Phoenix-Engemann Funds, Phoenix-Seneca Funds or any other mutual fund advised,
subadvised or distributed by the Adviser, Distributor or any corporate affiliate
of either or both the Adviser and Distributor (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
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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 Funds, or Phoenix-Seneca Funds
if, in connection with the purchase 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 Funds,
Phoenix-Engemann Funds, or Phoenix-Seneca Funds purchase and that a sales charge
was paid; (16) any deferred compensation plan established for the benefit of any
Phoenix Fund, Phoenix-Engemann Funds, or Phoenix-Seneca Funds 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 advisors
and financial planners who charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their clients;
(18) retirement plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under sections
401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi trusts" that buy
shares for their own accounts, in each case if those purchases are made through
a broker or agent or other financial intermediary that has made special
arrangements with the Distributor for such purchases; (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); or (21)
investors who purchase shares through mutual fund supermarkets and other
sponsors or similar strategic arrangements provided that such investors owned
shares purchased through such supermarkets or strategic arrangements on July 1,
1998, and continue to own such shares.
Combination Purchase Privilege. Your purchase of any class of shares of the
Phoenix-Seneca Funds 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.
Letter of Intent. If you sign a Letter of Intent, your purchase of any
class of shares of the Phoenix-Seneca Funds or any other Affiliated Phoenix Fund
(other than Phoenix Money Market Fund Series Class A Shares), if made by the
same person within a thirteen month period, will be added together to determine
whether you are entitled to an immediate reduction in sales charges. Sales
charges are reduced based on the overall amount you indicate that you will buy
under the Letter of Intent. The Letter of Intent is a mutually non-binding
arrangement between you and the Distributor. Since the Distributor doesn't know
whether you will ultimately fulfill the Letter of Intent, shares worth 5% of the
amount of each purchase will be set aside until you fulfill the Letter of
Intent. When you buy enough shares to fulfill the Letter of Intent, these shares
will no longer be restricted. If, on the other hand, you do not satisfy the
Letter of Intent, or otherwise wish to sell any restricted shares, you will be
given the choice of either buying enough shares to fulfill the Letter of Intent
or paying the difference between any sales charge you previously paid and the
otherwise applicable sales charge based on the intended aggregate purchases
described in the Letter of Intent. You will be given 20 days to make this
decision. If you do not exercise either election, the Distributor will
automatically redeem the number of your restricted shares needed to make up the
deficiency in sales charges received. 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 the
Phoenix-Seneca Funds 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
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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--How To Obtain Reduced Deferred 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 701/2 under any retirement
plan qualified under Code Sections 401, 408 or 403(b) or resulting from the
tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using
an approved participant tracking system for participant hardships, death,
disability or normal retirement, and loans which are subsequently repaid; (e)
from the Merrill Lynch Daily K Plan ("Plan") invested in Class B Shares, on
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 and C
Shares of the Phoenix-Seneca Funds or any other Affiliated Phoenix Fund; (g)
based on any direct rollover transfer of shares from an established
Phoenix-Seneca Fund or any other Affiliated Phoenix Fund qualified plan into a
Phoenix-Seneca Fund or any other Affiliated Phoenix Fund IRA by participants
terminating from the qualified plan; and (h) based on the systematic withdrawal
program (Class B Shares only). If, as described in condition (a) above, an
account is transferred to an account registered in the name of a deceased's
estate, the CDSC will be waived on any redemption from the estate account
occurring within one year of the death. If the Class B or C Shares are not
redeemed within one year of the death, they will remain subject to the
applicable CDSC.
Conversion Feature--Class B Shares
Class B Shares will automatically convert to Class A Shares of the same
Fund eight years after they are 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 and service 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 and service fees for an indefinite period. Even if the Funds were
unable to obtain such assurances, it might continue to make distributions if
doing so would assist in complying with its general practice of distributing
sufficient income to reduce or eliminate federal taxes otherwise payable by the
Funds.
INVESTOR ACCOUNT SERVICES
The Funds offer accumulation plans, withdrawal plans and reinvestment and
exchange privileges as described in the Funds' current Prospectus. Certain
privileges may not be available in connection with all classes. In most cases,
changes to account services may be accomplished over the phone. Inquiries
regarding policies and procedures relating to shareholder account services
should be directed to Shareholder Services at (800) 243-1574.
Exchanges. Under certain circumstances, shares of any Phoenix-Seneca Fund
may be exchanged for shares of the same Class of another Phoenix-Seneca Fund or
any other Affiliated Phoenix Fund on the basis of the relative net asset values
per share at the time of the exchange. Exchanges are subject to the minimum
initial investment requirement of the designated Fund, Series, or Portfolio,
except if made in connection with the systematic exchange privilege described
below. 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 "Dividends, Distributions and Tax
Status").
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, semi-annual or annual basis or may cancel this privilege at
any time. If you maintain an account balance of at least $5,000, or $2,000 for
tax qualified retirement benefit plans (calculated on the basis of the net asset
value of the shares held in a single account), you may direct that shares be
automatically exchanged at predetermined intervals for shares of the same class
of another 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
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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 the Transfer Agent. 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 Series worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. Participants
in the Program redeeming Class C Shares will be subject to any applicable
contingent deferred sales charge. The purchase of shares while participating in
the withdrawal program will ordinarily be disadvantageous to the Class A 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 a Fund to dispose of its securities or to determine fairly the value of its
net assets or during any other period permitted by order of the Securities and
Exchange Commission for the protection of investors. Furthermore, the Transfer
Agent will not mail redemption proceeds until checks received for shares
purchased have cleared, which may take up to 15 days or more. Redemptions by
Class B and C shareholders will be subject to the applicable deferred sales
charge, if any.
26
<PAGE>
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.
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 30 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.
Telephone Redemptions
Shareholders may redeem up to $50,000 worth of their shares by telephone.
See the Funds' current Prospectus for additional information.
By Check (Phoenix-Seneca Bond Fund Only)
Any shareholder of this Fund may elect to redeem shares held in his account
by check. Checks will be sent to an investor upon receipt by the Transfer Agent
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 account is $500 or more.
When a check is presented to the Transfer Agent for payment, a sufficient
number of full and fractional shares in the shareholder's 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 the Transfer Agent 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 the Transfer
Agent's rules governing checking accounts. A shareholder should make sure that
there are sufficient shares in his account to cover the amount of any check
drawn. If insufficient shares are in the account and the check is presented to
the Transfer Agent 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 the
Transfer Agent.
Redemption in Kind
To the extent consistent with state and federal law, the Funds may make
payment of the redemption price either in cash or in kind. However, the Funds
have 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 selling 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.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund within the Trust is separate for investment and accounting
purposes and is treated as a separate entity for federal income tax purposes.
27
<PAGE>
A regulated investment company qualifying under Subchapter M of the Code is
not subject to federal income tax on distributed amounts to the extent that it
distributes annually its taxable and, if any, tax-exempt net investment income
and net realized capital gains in accordance with the timing requirements of the
Code. For each taxable year, each Fund intends to qualify as a regulated
investment company under Subchapter M of the Code. If in any taxable year a Fund
does not qualify as a regulated investment company, all of its taxable income
will be taxed at corporate rates.
Qualification of a Fund for treatment as a regulated investment company
under the Code requires, among other things, that (a) at least 90% of a Fund's
annual gross income, without offset for losses from the sale or other
disposition of stock or securities or other transactions, be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (b) the Fund distribute at least annually to
its shareholders as dividends at least 90% of its taxable and tax-exempt net
investment income, the excess of net short-term capital gain over net long-term
capital loss earned in each year and any other net income (except for the
excess, if any, of net long-term capital gain over net short-term capital loss,
which need not be distributed in order for the Fund to be treated as a regulated
investment company but such amount is taxed to the Fund if it is not
distributed); and (c) the Fund diversify its assets so that, at the close of
each quarter of its taxable year, (i) at least 50% of the fair market value of
its total (gross) assets is comprised of cash, cash items, U.S. Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to no more than 5% of the fair
market value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer and (ii) no more than 25% of the fair market value of
its total assets is invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged in the
same, similar, or related trades or businesses.
Each Fund is subject to a 4% nondeductible federal excise tax on amounts
required to be but not distributed, as determined under a prescribed formula.
The formula requires that a Fund distribute (or be deemed to have distributed)
to shareholders during a calendar year at least 98% of the Fund's ordinary
income (not including tax-exempt interest) for the calendar year, at least 98%
of the excess of its capital gains over the capital losses realized during the
one-year period ending October 31 during such year, as well as any income or
gain (as so computed) from the prior calendar year that was not distributed for
such year and on which the Fund paid no federal income tax. Each Fund has
distribution policies that should generally enable it to avoid liability for
this tax.
Net investment income for each Fund is the Fund's investment income less
its expenses. Dividends from taxable net investment income and the excess, if
any, of net short-term capital gain over net long-term capital loss of a Fund
are treated under the Code as ordinary income, and dividends from net long-term
capital gain in excess of net short-term capital loss ("capital gain
dividends") are treated under the Code as long-term capital gain, for federal
income tax purposes. These dividends are paid after taking into account, and
reducing the distribution to the extent of, any available capital loss
carryforwards. Distributions from a Fund's current or accumulated earnings and
profits, as computed for Federal income tax purposes, will be treated as
described above whether taken in shares or in cash. Certain distributions
received in January may be treated as if paid by a Fund and received by a
shareholder on December 31 of the prior year.
Dividends, including capital gain dividends, paid by a Fund shortly after a
shareholder's purchase of shares have the effect of reducing the net asset value
per share of his shares by the amount per share of the dividend distribution.
Although such dividends are, in effect, a partial return of the shareholder's
purchase price to the shareholder, they may be characterized as ordinary income
or capital gain as described above.
Equity options (including options on stock and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by a Fund are subject to tax the character of which will be determined
under Section 1234 of the Code. In general, no loss is recognized by a Fund upon
payment of a premium in connection with the purchase of a put or call option.
The character of any gain or loss recognized (i.e., long-term or short-term)
will generally depend, in the case of a lapse or sale of such option, on the
Fund's holding period for such option, and in the case of an exercise of a put
option, on the Fund's holding period for the underlying security. The purchase
of a put option may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying stock or security
or a substantially identical stock or security in the Fund's portfolio. The
exercise of a call option purchased by a Fund is not a taxable transaction for
the Fund. If a Fund writes a put or call option, no gain is recognized upon its
receipt of a premium. If such option lapses or is closed out, any gain or loss
is treated as a short-term capital gain or loss. If a call option is exercised,
whether the gain or loss is long-term or short-term depends on the holding
period of the underlying stock or security. The exercise of a put option written
by a Fund is not a taxable transaction for the Fund.
All futures contracts and foreign currency contracts entered into by a Fund
and all listed nonequity options written or purchased by a Fund (including
options on debt securities, options on futures contracts, options on securities
indices and options on broad-based stock indices) are governed by Section 1256
of the Code. Absent a tax election to the contrary, gain or loss attributable to
the lapse, exercise or closing out of any such position are treated as 60%
long-term and 40% short-term capital gain or loss, and on the last trading day
of a Fund's taxable year, all outstanding Section 1256 positions are marked to
market (i.e., treated
28
<PAGE>
as if such positions were closed out at their closing price on such day), and
any resulting gain or loss recognized as 60% is long-term and 40% short-term
capital gain or loss. Under certain circumstances, entry into a futures contract
to sell a security may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying security or a
substantially identical security in a Fund's portfolio.
Because options, futures and currency activities of a Fund may increase the
amount of gains from the sale of securities or investments held or treated as
held for less than three months, the Funds may limit these transactions in order
to comply with the 30% limitation described above.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security not
governed by Section 1256 and at least one futures or currency contract or listed
nonequity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such debt security are treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. Each Fund will monitor these transactions and may
make certain tax elections in order to mitigate the operation of these rules and
prevent disqualification of the Fund as a regulated investment company for
federal income tax purposes.
These special tax rules applicable to options, futures and currency
transactions could affect the amount, timing and character of a Fund's income or
loss and hence of its distributions to shareholders by causing holding period
adjustments, converting short-term capital losses into long-term capital
losses, and accelerating a Fund's income or deferring its losses.
A Fund's investment in zero coupon securities or other securities having
original issue discount (or market discount, if the Fund elects to include
market discount in income currently) will generally cause it to realize income
prior to the receipt of cash payments with respect to these securities. The mark
to market rules described above may also require a Fund to recognize gains
without a concurrent receipt of cash. In such case, a Fund will not be able to
purchase additional income producing securities with the cash generated by the
sale of such securities but will be required to use such cash to make such
required distributions, and its current portfolio income may ultimately be
reduced accordingly. In order to distribute this income or gains, maintain its
qualification as a regulated investment company, and avoid federal income or
excise taxes, the Fund may be required to liquidate portfolio securities that it
might otherwise have continued to hold.
The Funds may be subject to foreign withholding or other foreign taxes with
respect to income (possibly including, in some cases, capital gains) derived
from foreign securities. These taxes may be reduced or eliminated under the
terms of applicable tax treaties. However, the Funds will not be eligible to
pass through to shareholders any foreign tax credits or deductions for foreign
taxes paid by the Funds that are not thus reduced or eliminated. Certain foreign
exchange gains and losses realized by the Funds with respect to such securities
or related currency transactions will generally be treated as ordinary income
and losses. Certain uses of foreign currency and investments by the Funds in
certain "passive foreign investment companies" may be limited in order to avoid
adverse tax consequences for the Funds (or an election, if available, may be
made with respect to such investments).
Different tax treatment, including a penalty on certain distributions,
excess contributions or other transactions is accorded to accounts maintained as
IRAs or other retirement plans. Investors should consult their tax advisers for
more information.
Redemptions, including exchanges, of shares may give rise to recognized
gains or losses, except as to those investors subject to tax provisions that do
not require them to recognize such gains or losses. All or a portion of a loss
realized upon the redemption of shares may be disallowed under "wash sale" rules
to the extent shares are purchased (including shares acquired by means of
reinvested dividends) within a 61-day period beginning 30 days before and ending
30 days after such redemption. Any loss realized upon a shareholder's sale,
redemption or other disposition of shares with a tax holding period of six
months or less will be treated as a long-term capital loss to the extent of any
distribution of long-term capital gains with respect to such shares.
The Trust is organized as a Delaware business trust, and neither the Trust
nor the Funds are subject to any corporate excise or franchise tax in the State
of Delaware, nor are they liable for Delaware income taxes provided that each
Fund qualifies as a regulated investment company for federal income tax purposes
and satisfies certain income source requirements of Delaware law.
The foregoing discussion of U.S. federal income tax law does not address
the special tax rules applicable to certain classes of investors, such as
insurance companies. Each shareholder who is not a U.S. person should consider
the U.S. and foreign tax consequences of ownership of shares of the Funds,
including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under an applicable income
tax treaty) on Fund distributions treated as ordinary dividends.
This discussion of the federal income tax treatment of the Funds and their
distributions is based on the federal income tax law in effect as of the date of
this Statement of Additional Information. Shareholders should consult their tax
advisers about the
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<PAGE>
application of the provisions of tax law described in this statement of
additional information and about the possible application of state, local and
foreign taxes in light of their particular tax situations.
PORTFOLIO BROKERAGE
It is the general policy of the Trust not to employ any broker in the
purchase or sale of securities for a Fund's portfolio unless the Trust believes
that the broker will obtain the best results for the Fund, taking into
consideration such relevant factors as price, the ability of the broker to
effect the transaction and the broker's facilities, reliability and financial
responsibility. Commission rates, being a component of price, are considered
together with such factors. The Trust is not obligated to deal with any broker
or group of brokers in the execution of transactions in portfolio securities.
In selecting brokers to effect transactions on securities exchanges, the
Trust considers the factors set forth in the first paragraph under this heading
and any investment products or services provided by such brokers, subject to the
criteria of Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Section 28(e) specifies that a person with investment
discretion shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay a
higher commission than the lowest rate available. To obtain the benefit of
Section 28(e), the person so exercising investment discretion must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided viewed in terms of either
that particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion." Accordingly, if the
Trust determines in good faith that the amount of commissions charged by a
broker is reasonable in relation to the value of the brokerage and research
products and services provided by such broker, the Trust may pay commissions to
such broker in an amount greater than the amount another firm might charge.
Research products and services provided to the Trust include research reports on
particular industries and companies, economic surveys and analyses,
recommendations as to specific securities and other products or services (e.g.,
quotation equipment and computer related costs and expenses) providing lawful
and appropriate assistance to the Subadviser and its affiliates in the
performance their decision-making responsibilities.
Each year, the Subadviser will consider the amount and nature of the
research products and services provided by other brokers as well as the extent
to which such products and services are relied upon, and attempt to allocate a
portion of the brokerage business of their clients, such as the Trust, on the
basis of such considerations. In addition, brokers sometimes suggest a level of
business they would like to receive in return for the various services they
provide. Actual brokerage business received by any broker may be less than the
suggested allocations, but can (and often does) exceed the suggestions, because
total brokerage is allocated on the basis of all the considerations described
above. In no instance is a broker excluded from receiving business because it
has not been identified as providing research services. As permitted by Section
28(e), the investment information received from other brokers may be used by the
Investment Adviser (and its affiliates) in servicing all its accounts and not
all such information may be used by the Subadviser, in its capacity as the
Subadviser, in connection with the Trust. Nonetheless, the Trust believes that
such investment information provides the Trust with benefits by supplementing
the research otherwise available to the Trust.
In certain instances there may be securities that are suitable for a Fund's
portfolio as well as for that of another Fund or one or more of the other
clients of the Subadviser. Investment decisions for a Fund and for the
Subadviser's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security in a particular
transaction as far as a Fund is concerned. The Trust believes that over time its
ability to participate in volume transactions will produce better executions for
the Funds. When appropriate, orders for the account of the Funds are combined
with orders for other investment companies or other clients advised by the
Subadviser, including accounts (such as investment limited partnerships) in
which the Investment Adviser or affiliated or associated persons of the
Subadviser are investors or have a financial interest, in order to obtain a more
favorable commission rate. When the same security is purchased for a Fund and
one or more other funds or other clients on the same day, each party pays the
average price and commissions paid are allocated in direct proportion to the
number of shares purchased.
The Adviser may use its broker/dealer affiliates, or other firms that sell
shares of the Funds, to buy and sell securities for the Funds, provided they
have the execution capability and that their commission rates are comparable to
those of other unaffiliated broker/dealers. Directors of PXP Securities Corp. or
its affiliates receive indirect benefits from the Funds as a result of its usual
and customary brokerage commissions that PXP Securities Corp. may receive for
acting as broker to the Funds in the purchase and sale of portfolio securities.
The investment advisory agreement does not provide for a reduction of the
advisory fee by any portion of the brokerage fees generated by portfolio
transactions of the Funds that PXP Securities Corp. may receive.
For the fiscal years ended September 30, 1997, 1998 and 1999, the Funds
paid brokerage commissions of $212,930, $214,000, and $260,147, respectively.
In the fiscal year ended September 30, 1999, no brokerage commissions were paid
to the Distributor for this transaction.
30
<PAGE>
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
the Trust's Prospectus.
MANAGEMENT OF THE TRUST
The Trustees have responsibility for management of the business of the
Trust. The officers of the Trust are responsible for its day to day operation.
Set forth below is certain information concerning the Trustees and officers.
Trustees and Officers
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
-------------- ------- --- --------------------------------------------
<S> <C> <C> <C>
Mary Ann Cusenza,** 909 Montgomery Street 42 Ms. Cusenza has been a Trustee of the Trust since
Trustee San Francisco, CA 94133 February 1996. She is currently a private investor. From
October 1996 to May 1998, she was Vice President and
Chief Financial Officer of Tularik Inc., a biotechnology
company. She joined Apple Computer, Inc. in 1985 and
was a Vice President and Treasurer of Apple Computer,
Inc. from 1992 until February 1996.
Harry Dalzell-Payne 330 East 39th Street 70 Mr. Dalzell-Payne has been a Trustee of the Trust since
Trustee Apartment 29G 1998. He has served as a Trustee/Director of the Phoenix
New York, NY 10016 Funds since 1983 and of Phoenix-Aberdeen Series Fund
and Phoenix Duff & Phelps Institutional Mutual Funds
since 1996. He has also served as a Director of Duff &
Phelps Utilities Tax Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. since 1995.
Previously, he served as Director of Farragut Mortgage
Co., Inc. from 1991 to 1994. Formerly, he was a Major
General of the British Army.
Norman W. Douglass 72 Spring Lane 66 Mr. Douglass has been a Trustee of the Trust since 1998.
Trustee West Hartford, CT 06107 He is a seasoned investment manager with over 38 years
of investment experience. Most recently he was
Investment Advisor at Crossroads Investment Advisors,
L.P., from 1994 to 1998. From 1967 to 1993, he was an
investment manager with Phoenix Home Life Mutual
Insurance Company, where he was head of fixed income
operations for fifteen years.
Paul E. Erdman,** 909 Montgomery Street 66 Mr. Erdman has been a Trustee of the Trust since
Trustee San Francisco, CA 94133 February 1996. He is an economist and novelist, and,
since 1979, has served on the Board of Advisors of The
University of Georgetown School of Foreign Service.
Melinda Ellis Evers,** 909 Montgomery Street 38 Ms. Evers has been a Trustee of the Trust since February
Trustee San Francisco, CA 94133 1996. She is a founder and Vice President of Ellis
Partners, Inc., a real estate investment firm, established
in 1993.
Paul B. Fay, Jr. 909 Montgomery Street 80 Mr. Fay has been a Trustee of the Trust since 1999. He
Trustee San Francisco, CA 94133 is President of the Fay Improvement Company (since
1975). He has been a Director of First American
Financial Corporation since 1969, Vestaur Securities,
Inc. since 1972 and Compensation Resource Group,
Inc., since 1985. Mr. Fay has serves as a Trustee of the
Odell Foundation for the past 25 years.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
-------------- ------- --- --------------------------------------------
<S> <C> <C> <C>
Philip R. McLoughlin 56 Prospect Street 53 He also holds or has held the following positions:
Trustee Hartford, CT 06115 Chairman (1997-present), Director (1995-present), Vice
Chairman (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 Utilties Tax-Free Income Inc.
(1995-present) and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present). Director (1983-present)
and Chairman (1995-present), Phoenix Investment
Counsel, Inc. Director (1984-present) and President
(1990-present), Phoenix Equity Planning Corporation.
Director, Phoenix Realty Group, Inc. (1994-present),
Phoenix Realty Advisors, Inc. (1987-present), Phoenix
Realty Investors, Inc. (1994-present), Phoenix Realty
Securities, Inc. (1994-present), PXRE Corporation
(Delaware) (1985-present), and World Trust Fund
(1991-present). Director and Executive Vice President,
Phoenix Life and Annuity Company (1996-present).
Director and Executive Vice President, PHL Variable
Insurance Company (1995-present). Director, Phoenix
Charter Oak Trust Company (1996-present). Director
and Vice President, PM Holdings, Inc. (1985-present).
Director (1992-present) and President (1992-1994),
W.S. Griffith & Co., Inc. Director, PHL Associates, Inc.
(1995-present).
Gail P. Seneca,* 909 Montgomery Street 46 Ms. Seneca has been President and a Trustee of the Trust
President and Trustee San Francisco, CA 94133 since February 1996. Since January 1998, she has
served as Vice President of National Securities &
Research Corporation, an affiliate of PIC and PEPCO.
Since July 1, 1996, she has been President and Chief
Executive and Investment Officer of Seneca. Since
November 1989, she has been Chief Executive and
Investment Officer and a managing general partner of
GMG/Seneca.
Robert A. Driessen 56 Prospect Street 52 Mr. Driessen has been Vice President and Assistant
Vice President Hartford, CT 06115 Secretary of the Trust since 1999. He also holds or has
held the following positions: Vice President,
Compliance, Phoenix Investment Partners, Ltd. (since
1999); Vice President, Phoenix Funds, Phoenix-
Aberdeen Series Fund, Phoenix-Duff & Phelps
Institutional Mutual Funds (since 1999); Vice President,
Risk Management Liaison, Bank of America (1996-
1999); Vice President, Securities Compliance, The
Prudential Insurance Company of America (1993-
1996); Branch Chief/Financial Analyst, Securities and
Exchange Commission, Division of Investment
Management (1972-1993).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
-------------- ------- --- --------------------------------------------
<S> <C> <C> <C>
Sandra J. Monticelli,* 909 Montgomery Street 40 Ms. Monticelli has been Treasurer of the Trust since
Treasurer San Francisco, CA 94133 February 1996. She also served as a Trustee of the Trust
from February 1996 to February 1998. From September
1994 to present, she has been Chief Administrative
Officer of GMG/Seneca, and, since July 1, 1996, Chief
Operating Officer of Seneca. From 1989 to 1994, she was
Director of Finance for the San Francisco Newspaper
Agency.
Thomas N. Steenburg,* 55 East Monroe Street 50 Mr. Steenburg has been Secretary of the Trust since March,
Secretary Chicago, IL 60603 1998. He also holds or has held the following positions:
Senior Vice President (since 1999), Vice President and
Counsel (1995-1999) of Phoenix Investment Partners, Ltd;
Chairman and Chief Executive Officer (2000-present),
Executive Vice President (1999), Vice President and
Counsel (1996-1999), Duff & Phelps Investment
Management Co.; Secretary (since 1997), General Counsel
and Compliance Officer (1997-1999) of Seneca; Vice
President, Secretary and Counsel of PIC, National
Securities & Research Corporation since 1995, PEPCO
since November 1995, and Roger Engemann & Associates,
Inc. since March 1998; Vice President--Compliance of
Phoenix-Aberdeen International Advisers, LLC since May
1996; Assistant Secretary, Phoenix Funds since November
1995, Phoenix Duff & Phelps Institutional Mutual Funds
since February 1996 and Phoenix-Aberdeen Series Fund
since August 1996; and Counsel, Phoenix Home Life
Mutual Insurance Company from October 1991 through
November 1995.
</TABLE>
---------------
* "Interested persons" within the meaning of the 1940 Act.
** Member of the Trust's Audit Committee.
Compensation of Trustees and Officers
The Funds pay no compensation to its officers or Trustees affiliated with
the Adviser or Subadviser. Each Trustee of the Trust who is not an "interested
person" of the Trust ("Independent Trustee") receives a quarterly retainer of
$2,500 and a fee of $2,500 for each regular, quarterly meeting of the Board of
Trustees attended and is reimbursed for expenses incurred in connection with
such attendance.
33
<PAGE>
The following table sets forth the compensation paid to the Trustees during the
fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement Benefits from Trust and
Compensation Accrued as Part Fund Complex
Name of Trustee from the Trust of Trust's Expenses (14 Funds)
- ---------------------- ---------------- --------------------- ---------------
<S> <C> <C> <C>
Gail P. Seneca $ 0 -- $ 0
Mary Ann Cusenza $20,000 -- $20,000
Harry Dalzell-Payne $20,000 -- $73,750
Norman W. Douglass $20,000 -- $20,000
Melinda Ellis Evers $20,000 -- $20,000
Paul E. Erdman $20,000 -- $20,000
Paul B. Fay, Jr. $ 5,000 -- $ 5,000
Philip R. McLoughlin $ 0 -- $ 0
</TABLE>
For services to the Funds and expenses during the last fiscal year, the
Trustees received an aggregate of $105,000.
Officers and Trustees of the Trust who are also principals in and employees
of PIC or Seneca may receive indirect compensation by reason of investment
advisory fees paid by the Trust to PIC in its capacity as the Adviser.
Principal Shareholders
The following table sets forth information as of January 14, 2000 with
respect to each person who owns of record or is known by the Trust to own of
record or beneficially 5% or more of any class of the Trust's outstanding equity
securities:
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Bank of New York Cust FBO Growth Fund Class A Shares 502,978.2910 27.70%
Amer Fed of Mus & Employer Pen Fund -
Amivest Corp Dis Inv Mngr
1 Wall St., Fl. 2
New York, NY 10005-2501
Bank of New York Cust Annuity FU of Growth Fund Class A Shares 139,463.4060 7.68%
Local One IATSE
Amivest Corp. Disc Invt Mgr 717
Master Tr/Cust Dept
ATTN: W. Biempi
1 Wall St., 7th Flr.
New York, NY 10005-2500
BT Alex Brown, Inc. Mid-Cap "EDGE"(SM) Class X Shares 80,500.9900 13.05%
FBO 761-00796-21
P.O. Box 1346
Baltimore, MD 21203-1346
BT Alex Brown, Inc. Real Estate Securities Class X Shares 102,436.1910 6.49%
FBO 761-00939-11
P.O. Box 1346
Baltimore, MD 21203-1346
BT Alex Brown, Inc. Real Estate Securities Class X Shares 82,238.7750 5.40%
FBO 761-00591-10
P.O. Box 1346
Baltimore, MD 21203-1346
DB Alex Brown, LLC Bond Fund Class X Shares 175,742.0870 5.11%
FBO 761-01048-17
P.O. Box 1346
Baltimore, MD 21203-1346
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Securities Bond Fund Class A Shares 16,688.3250 5.17%
Corp., Inc. Bond Fund Class C Shares 7,099.7910 6.26%
P.O. Box 2052 Mid-Cap "EDGE"(SM) Fund Class B Shares 25,224.6510 17.18%
Jersey City, NJ 07303-2052 Real Estate Securities Class C Shares 3,561.0290 16.54%
First National Bank of Onaga Cus' Real Estate Securities Class A Shares 12,842.3990 13.04%
FBO Darrell D Vore IRA
P.O. Box 420
301 Leonard St. P.O. Box 420
Onaga, KS 66521-420
MLPF&S for the sole benefit of its customers Bond Fund Class B Shares 13,561.1790 5.20%
ATTN: Fund Administration Bond Fund Class C Shares 6,089.7610 5.37%
4800 Deer Lake Dr., E., 3rd Flr. Growth Fund Class B Shares 47,952.0620 13.20%
Jacksonville, FL 32246-6484 Growth Fund Class C Shares 26,725.9680 8.76%
Mid-Cap "EDGE"(SM) Class A Shares 253,588.0310 35.84%
Mid-Cap "EDGE"(SM) Class B Shares 28,682.8550 19.47%
Mid-Cap "EDGE"(SM) Class C Shares 61,192.7220 39.44%
Susan R. Mintz Real Estate Securities Class A Shares 19,123.5930 19.41%
3000 Saint Charles Ave., Apt. 415
New Orleans, LA 70115-4473
NFSC FEBO #APW-777242 Bond Fund Class C Shares 9,100.1920 8.02%
John S. Hinmon
Harriet H. Hinmon
P.O. Box 838
Edwards, CO 81632-0838
NFSC FEBO #179-684260 Growth Fund Class A Shares 99,983.2440 5.51%
Amalg Bank of NY Cust
UFCW LCL 50 Pension Plan
Amivest Corp. Disc. Invt. Mngr.
11-15 Union Sq.
New York, NY 10459-2792
Pacific Bank Cust Real Estate Securities Class X Shares 355,714.6580 22.55%
Blair Walker Stratford, TTEE
Blair Walker Stratford 1994 Family Trust
ATTN: Ginger Bradley
100 Montgomery St.
San Francisco, CA 94104-4397
Pacific Bank Cust Real Estate Securities Class X Shares 316,903.8560 20.09%
Walker Security Investments, LLC
ATTN: Ginger Bradley
100 Montgomery St.
San Francisco, CA 94104-4397
PaineWebber for the Benefit of Bond Fund Class C Shares 34,285.6520 30.23%
Youth Tennis Foundation of
North California
Pier 23
San Francisco, CA 94111-1136
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Phoenix Equity Planning Corp. Bond Fund Class C Shares 10,253.9320 9.04%
ATTN: Corporate Accounting Dept. Real Estate Securities Class B Shares 8,621.1660 65.35%
c/o Gene Charon, Controller Real Estate Securities Class C Shares 8,621.5660 40.05%
100 Bright Meadow Blvd.
Enfield, CT 06082-1957
Phoenix Home Life Bond Fund Class X Shares 1,568,253.7770 45.64%
ATTN: Pam Levesque
56 Prospect St.
Hartford, CT 06103-2818
Resources Trust Company TTEE Real Estate Securities Class C Shares 3,838.8780 17.83%
FBO Harvey H. Bohman IRA
P.O. Box 5900
Denver, CO 80217-5900
Resources Trust Company TTEE Real Estate Securities Class C Shares 2,128.3370 9.89%
FBO Fred O'Dell IRA
P.O. Box 5900
Denver, CO 80217-5900
Resources Trust Company TTEE Real Estate Securities Class C Shares 1,748.0990 8.12%
FBO Bertha Vasquez IRA
P.O. Box 5900
Denver, CO 80217-5900
Resources Trust Company TTEE Real Estate Securities Class C Shares 1,429.7080 6.64%
FBO Gail B. Nestlerode IRA
P.O. Box 5900
Denver, CO 80217-5900
Charles Schwab & Co., Inc. Bond Fund Class X Shares 343,557.6220 10.00%
Reinvest Account Growth Fund Class X Shares 115,629.0890 6.35%
ATTN: Mutual Fund Dept. Mid-Cap "EDGE"(SM) Class X Shares 45,820.7970 7.43%
101 Montgomery St.
San Francisco, CA 94104-4122
Charles Schwab & Co., Inc. Mid-Cap "EDGE"(SM) Class A Shares 45,646.4100 6.45%
Special Custody Acct. for the Exclusive Real Estate Securities Class A Shares 25,109.2880 25.49%
Benefit of our Customers
ATTN: Mutual Fund Operations
101 Montgomery St.
San Francisco, CA 94104-4122
State Street Bank & Trust Co. Bond Fund Class A Shares 33,406.8290 10.34%
Custodian for the IRA rollover of
Eugene J. Glaser
784 Park Ave #15C
New York, NY 10021-3553
State Street Bank & Trust Co. Bond Fund Class B Shares 36,182.5320 13.87%
Custodian for the IRA of
Harold C. Patterson
6298 Breckenridge Road
Lake Worth, FL 33467-6821
State Street Bank & Trust Co. Real Estate Securities Class A Shares 7,010.7160 7.12%
Custodian for the IRA of
Nancy W. Silberman
270 Euclid Ave.
Winnetka, IL 60093-3605
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Robert A. Swanson, TTEE Growth Fund Class X Shares 188,040.2390 10.33%
Robert A. Swanson Charitable Remainder
Trust
c/o K & E Management Ltd.
400 S. El Camino Real, Ste. 1289
San Mateo, CA 94402-1704
Robert A. Swanson Tr Growth Fund Class X Shares 92,070.8660 5.06%
1993 Annuity Trust
C/O K & E Management LTD
400 S FL Camino Real Estate 1288
San Mateo, CA 94402-1703
</TABLE>
As of January 14, 2000, the Trustees and officers of the Trust as a group
owned less than 1% of the Funds outstanding shares.
OTHER INFORMATION
Capital Stock and Organization
As a Delaware business trust, the Trust's operations are governed by its
Agreement and Declaration of Trust dated December 18, 1995 (the "Declaration of
Trust"). A copy of the Trust's Certificate of Trust, also dated December 18,
1995, is on file with the Office of the Secretary of State of the State of
Delaware. Upon the initial purchase of shares, the shareholder agrees to be
bound by the Trust's Declaration of Trust, as amended from time to time.
Generally, Delaware business trust shareholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware
Business Trust Act (the "Delaware Act") provides that a shareholder of a
Delaware business trust shall be entitled to the same limitation of liability
extended to shareholders of private for-profit corporations. The Trust's
Declaration of Trust expressly provides that the Trust has been organized under
the Delaware Act and that the Declaration of Trust is to be governed by Delaware
law. It is nevertheless possible that a Delaware business trust, such as the
Trust, might become a party to an action in another state whose courts refused
to apply Delaware law, in which case the Trust's shareholders could be subject
to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides that notice of such disclaimer may be given in each agreement,
obligation and instrument entered into or executed by the Trust or its Trustees,
(ii) provides for the indemnification out of Trust property of any shareholders
held personally liable for any obligations of the Trust or any series of the
Trust and (iii) provides that the Trust shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. Thus, the risk of a Trust shareholder
incurring financial loss beyond his or her investment because of shareholder
liability is limited to circumstances in which all of the following factors are
present: (1) a court refused to apply Delaware law; (2) the liability arose
under tort law or, if not, no contractual limitation of liability was in effect;
and (3) the Trust itself would be unable to meet its obligations. In the light
of Delaware law, the nature of the Trust's business and the nature of its
assets, the risk of personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Trust shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Trust. The Declaration of Trust does not authorize the Trust to indemnify
any Trustee or officer against any liability to which he or she would otherwise
be subject by reason of or for willful misfeasance, bad faith, gross negligence
or reckless disregard of such person's duties.
Under the Declaration of Trust, the Trust is not required to hold annual
meetings to elect Trustees or for other purposes. It is not anticipated that the
Trust will hold shareholders' meetings unless required by law or the Declaration
of Trust. The Trust will be required to hold a meeting to elect Trustees to fill
any existing vacancies on the Board if, at any time, fewer than a majority of
the Trustees have been elected by the shareholders of the Trust. The Board is
required to call a meeting for the purpose of considering the removal of persons
serving as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
Shares of the Trust do not entitle their holders to cumulative voting
rights, so that the holders of more than 50% of the outstanding shares of the
Trust may elect all of the Trustees, in which case the holders of the remaining
shares would not be able to elect any Trustees. As determined by the Trustees,
shareholders are entitled to one vote for each dollar of net asset value (number
of shares held times the net asset value of the applicable class of the
applicable Fund).
37
<PAGE>
Pursuant to the Declaration of Trust, the Trustees may create additional
funds by establishing additional series of shares in the Trust. The
establishment of additional series would not affect the interests of current
shareholders in the existing four Funds. As of the date of this Statement of
Additional Information, the Trustees have not determined to establish another
series of shares in the Trust.
Pursuant to the Declaration of Trust, the Trustees may establish and issue
multiple Classes of Shares for each Fund. As of the date of this Statement of
Additional Information, the Trustees have authorized the issuance of four
Classes of Shares for each series, designated Class X, Class A, Class B and
Class C Shares.
Each share of each class of a Fund is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund
which are attributable to such class as are declared in the discretion of the
Trustees. In the event of the liquidation or dissolution of the Trust, shares of
each class of each Fund are entitled to receive their proportionate share of the
assets which are attributable to such class of such Fund and which are available
for distribution as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive, conversion or subscription
rights. All shares, when issued, will be fully paid and non-assessable by the
Trust.
Subject to shareholder approval (if then required), the Trustees may
authorize each Fund to invest all or part of its investable assets in a single
open-end investment company that has substantially the same investment
objectives, policies and restrictions as the Fund. As of the date of this
Statement of Additional Information, the Trustees do not have any plan to
authorize any Fund to so invest its assets.
"Phoenix-Seneca Funds" is the designation of the Trust for the time being
under the Declaration of Trust, and all persons dealing with a Fund must look
solely to the property of that Fund for the enforcement of any claims against
that Fund as neither the Trustees, officers, agents nor shareholders assume any
personal liability for obligations entered into on behalf of a Fund or the
Trust. No Fund is liable for the obligations of any other Fund. Since the Funds
use combined prospectuses, however, it is possible that one Fund might become
liable for a misstatement or omission in its prospectus regarding the other Fund
with which its disclosure is combined. The Trustees have considered this factor
in approving the use of the combined prospectuses.
Custodian
The Custodian for the Trust is Investors Fiduciary Trust Company at 801
Pennsylvania Street, Kansas City, Missouri, 64105. In this capacity, the
Custodian holds the assets of the Trust.
Transfer Agent
Phoenix Equity Planning Corporation acts as transfer agent for the Trust
and may enter into agreements with subagents to perform certain functions
including: processing purchases, transfers and redemptions of shares; dividend
disbursing agent; maintaining records and handling correspondence with respect
to shareholder accounts. PEPCO has retained State Street as subagent and PEPCO
will pay State Street's fee.
Independent Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts
02110, are the independent accountants for the Trust. Professional services
performed by PricewaterhouseCoopers LLP include audits of the financial
statements of the Trust, consultation on financial, accounting and reporting
matters, review and consultation regarding various filings with the SEC and
attendance at the meetings of the Audit Committee and Trustees.
Financial Statements
The Funds' financial statements for the fiscal years ended September 30,
1999 included in the Funds' 1999 Annual Report are incorporated herein by
reference.
38
<PAGE>
APPENDIX
DESCRIPTION OF CERTAIN BOND RATINGS
Moody's Investors Service, Inc.
Aaa--Bonds that 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 that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group the comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations 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 that 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 that 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.
Moody's also provides credit ratings for preferred stocks. Preferred stock
occupies a junior position to bonds within a particular capital structure and
that these securities are rated within the universe of preferred stocks.
aaa--An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa--An issue that is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance that earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
a--An issue that is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protections are, nevertheless,
expected to be maintained at adequate levels.
baa--An issue that is rated "baa" is considered to be a medium grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG 2 are of high quality, with margins of protection ample although
not so large as in the preceding group. A short term issue having a demand
feature (i.e. payment relying on external liquidity and usually payable on
demand rather than fixed maturity dates) is differentiated by Moody's with the
use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax-exempt commercial paper. These
are promissory obligations (1) not having an original maturity in excess of nine
months, and (2) backed by commercial banks. Notes bearing the designation P-1
have a superior capacity for repayment. Notes bearing the designation P-2 have a
strong capacity for repayment.
Standard & Poor's Corporation
AAA--Bonds rated AAA have the higher rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A--Bonds rated A have a very strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
39
<PAGE>
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. The designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added for those issues determined to possess overwhelming
safety characteristics. An "SP-2" designation indicates a satisfactory capacity
to pay principal and interest.
Commercial paper rated A-2 or better by S&P is described as having a very
strong degree of safety regarding timeliness and capacity to repay.
Additionally, as a precondition for receiving an S&P commercial paper rating, a
bank credit line and/or liquid assets must be present to cover the amount of
commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity for
repayment of short-term promissory obligations.
GLOSSARY
Commercial Paper: Short-term promissory notes of large corporations with
excellent credit ratings issued to finance their current operations.
Certificates of Deposit: Negotiable certificates representing a commercial
bank's obligations to repay funds deposited with it, earning specified rates of
interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a draft which
has been drawn on it by a customer. These obligations are backed by large banks
and usually are backed by goods in international trade.
Time Deposits: Non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and other
business organizations in order to finance their long-term credit needs.
40
<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
Semiannual Report
October 31, 1999
ENGEMANN
Phoenix-Engemann
Small Cap Fund
SENECA
Phoenix-Seneca
Strategic Theme Fund
Phoenix-Seneca
Opportunities Fund
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
MESSAGE FROM THE PRESIDENT
DEAR SHAREHOLDER:
We are pleased to provide this semiannual financial summary for the Phoenix
Strategic Equity Series for the six months ended October 31, 1999.
If you have any questions, please call your financial advisor or a customer
service representative at 1-800-243-1574 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-Engemann Small Cap Fund........................................... 3
Phoenix-Seneca Strategic Theme Fund....................................... 9
Phoenix-Seneca Equity Opportunities Fund.................................. 16
Notes to Financial Statements............................................. 21
</TABLE>
2
<PAGE>
PHOENIX-ENGEMANN SMALL CAP FUND
INVESTMENTS AT OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -------------
<S> <C> <C>
COMMON STOCKS--90.9%
AIR FREIGHT--1.3%
Expeditors International of Washington,
Inc..................................... 90,000 $ 3,363,750
BIOTECHNOLOGY--1.4%
Coulter Pharmaceutical, Inc.(b)......... 72,000 1,224,000
IDEC Pharmaceuticals Corp.(b)........... 10,000 1,161,875
Pharmacyclics, Inc.(b).................. 30,000 1,061,250
------------
3,447,125
------------
BROADCASTING (TELEVISION, RADIO & CABLE)--2.6%
Cumulus Media, Inc.(b).................. 80,000 2,870,000
Insight Communications Co., Inc.(b)..... 34,500 815,062
Salem Communications Corp.(b)........... 65,000 1,616,875
Spanish Broadcasting System, Inc.
Class A(b).............................. 45,000 1,198,125
------------
6,500,062
------------
COMMUNICATIONS EQUIPMENT--3.2%
Advanced Fibre Communications,
Inc.(b)................................. 76,000 1,662,500
Netro Corp.(b).......................... 64,500 1,471,406
Ortel Corp.(b).......................... 150,000 4,968,750
------------
8,102,656
------------
COMPUTERS (NETWORKING)--10.0%
Agile Software Corp.(b)................. 24,000 2,352,000
Akamai Technologies, Inc.(b)............ 3,000 435,562
Bluestone Software, Inc.(b)............. 24,000 885,000
Commerce One, Inc.(b)................... 30,000 5,137,500
ITXC Corp.(b)........................... 36,000 1,629,000
Intertrust Technologies Corp.(b)........ 12,000 654,000
Interwoven, Inc.(b)..................... 28,000 2,194,500
Keynote Systems, Inc.(b)................ 40,500 1,837,687
NetZero, Inc.(b)........................ 73,300 1,507,231
Women.com Networks, Inc.(b)............. 455,930 8,206,740
------------
24,839,220
------------
COMPUTERS (SOFTWARE & SERVICES)--17.3%
Abacus Direct Corp.(b).................. 73,000 10,694,500
BEA Systems, Inc.(b).................... 120,000 5,475,000
Concentric Network Corp.(b)............. 54,000 1,383,750
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)--CONTINUED
E.piphany, Inc.(b)...................... 18,000 $ 1,548,000
Edwards (J.D.) & Co.(b)................. 140,000 3,351,250
Inktomi Corp.(b)........................ 6,400 649,200
Legato Systems, Inc.(b)................. 69,400 3,730,250
New Era of Networks, Inc.(b)............ 55,000 1,784,062
Peregrine Systems, Inc.(b).............. 150,000 6,581,250
Sapient Corp.(b)........................ 45,000 5,754,375
Verio, Inc.(b).......................... 60,000 2,238,750
------------
43,190,387
------------
CONSUMER FINANCE--3.2%
Metris Companies, Inc................... 230,000 7,920,625
ELECTRICAL EQUIPMENT--4.0%
Advanced Energy Industries, Inc.(b)..... 103,000 4,235,875
Flextronics International Ltd.(b)....... 80,000 5,680,000
------------
9,915,875
------------
ELECTRONICS (COMPONENT DISTRIBUTORS)--0.8%
NETsilicon, Inc.(b)..................... 165,000 2,103,750
ELECTRONICS (INSTRUMENTATION)--0.9%
Meade Instruments Corp.(b).............. 85,000 2,167,500
ELECTRONICS (SEMICONDUCTORS)--12.7%
Applied Micro Circuits Corp.(b)......... 108,000 8,403,750
Conexant Systems, Inc.(b)............... 70,000 6,536,250
Micrel, Inc.(b)......................... 134,000 7,286,250
SDL, Inc.(b)............................ 22,800 2,811,525
TriQuint Semiconductor, Inc.(b)......... 35,750 2,860,000
Vitesse Semiconductor Corp.(b).......... 80,000 3,670,000
------------
31,567,775
------------
EQUIPMENT (SEMICONDUCTOR)--0.7%
Cymer, Inc.(b).......................... 44,000 1,625,250
FINANCIAL (DIVERSIFIED)--1.7%
Federal Agricultural Mortgage Corp.
Class C(b).............................. 176,000 3,234,000
Pinnacle Holdings, Inc.(b).............. 45,000 1,080,000
------------
4,314,000
------------
</TABLE>
See Notes to Financial Statements 3
<PAGE>
Phoenix-Engemann Small Cap Fund
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--0.5%
Championship Auto Racing Teams,
Inc.(b)................................. 51,000 $ 1,169,813
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--0.5%
Inhale Therapeutic Systems(b)........... 40,000 1,102,500
ViroPharma, Inc.(b)..................... 9,000 187,875
------------
1,290,375
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.6%
ArthroCare Corp.(b)..................... 21,000 1,522,500
INVESTMENT MANAGEMENT--1.4%
Gabelli Asset Management, Inc.
Class A(b).............................. 241,500 3,607,406
OIL & GAS (EXPLORATION & PRODUCTION)--0.7%
Pinnacle Oil International, Inc.(b)..... 115,000 1,635,156
POWER PRODUCERS (INDEPENDENT)--0.1%
Plug Power, Inc.(b)..................... 22,500 360,000
RAILROADS--1.5%
Kansas City Southern Industries, Inc.... 80,000 3,795,000
RESTAURANTS--1.7%
Cheesecake Factory, Inc. (The)(b)....... 139,000 4,256,875
RETAIL (BUILDING SUPPLIES)--0.4%
Fastenal Co............................. 28,000 1,015,000
RETAIL (COMPUTERS & ELECTRONICS)--0.4%
REX Stores Corp.(b)..................... 33,000 944,625
RETAIL (DISCOUNTERS)--1.5%
99 Cents Only Stores(b)................. 124,275 3,712,716
RETAIL (FOOD CHAINS)--2.4%
Smart & Final, Inc.(b).................. 303,832 2,772,467
Whole Foods Market, Inc.(b)............. 95,000 3,230,000
------------
6,002,467
------------
RETAIL (SPECIALTY)--7.2%
Cost Plus, Inc.(b)...................... 270,000 9,855,000
Linens 'n Things, Inc.(b)............... 58,000 2,305,500
Lithia Motors, Inc. Class A(b).......... 75,000 1,495,313
Sonic Automotive, Inc.(b)............... 100,000 1,043,750
eToys, Inc.(b).......................... 23,000 1,374,250
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
RETAIL (SPECIALTY)--CONTINUED
uBid, Inc.(b)........................... 48,000 $ 1,758,000
------------
17,831,813
------------
RETAIL (SPECIALTY-APPAREL)--0.8%
Children's Place Retail Stores, Inc.
(The)(b)................................ 75,000 1,954,688
SERVICES (ADVERTISING/MARKETING)--0.3%
MyPoints.com, Inc.(b)................... 60,000 810,000
SERVICES (COMMERCIAL & CONSUMER)--4.1%
Charles River Associates, Inc.(b)....... 45,000 1,136,250
Corporate Executive Board Co.
(The)(b)................................ 60,000 2,265,000
MIPS Technologies, Inc. Class A(b)...... 103,650 2,992,894
NCO Group, Inc.(b)...................... 92,000 3,898,500
------------
10,292,644
------------
SERVICES (COMPUTER SYSTEMS)--3.4%
CyberSource Corp.(b).................... 49,000 3,111,500
Whittman-Hart, Inc.(b).................. 140,000 5,381,250
------------
8,492,750
------------
SERVICES (DATA PROCESSING)--0.6%
Predictive Systems, Inc.(b)............. 19,500 848,250
ZapMe! Corp.(b)......................... 90,000 675,000
------------
1,523,250
------------
TELECOMMUNICATIONS (LONG DISTANCE)--1.3%
WinStar Communications, Inc.(b)......... 82,000 3,182,625
TELEPHONE--0.9%
Allied Riser Communications Corp.(b).... 36,000 650,250
Network Plus Corp.(b)................... 121,000 1,497,375
------------
2,147,625
------------
TEXTILES (APPAREL)--0.8%
bebe Stores, Inc.(b).................... 72,500 1,912,188
- - --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $136,297,347) 226,517,491
- - --------------------------------------------------------------------------------
</TABLE>
4 See Notes to Financial Statements
<PAGE>
Phoenix-Engemann Small Cap Fund
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
FOREIGN COMMON STOCKS--4.0%
<S> <C> <C>
COMMUNICATIONS EQUIPMENT--1.5%
Research in Motion Ltd. (Canada)(b)..... 120,000 $ 3,724,251
INSURANCE (LIFE/HEALTH)--0.4%
London Pacific Group Ltd. Sponsored ADR
(United Kingdom)........................ 49,000 986,125
OIL & GAS (EXPLORATION & PRODUCTION)--1.9%
Encal Energy Ltd. (Canada)(b)........... 1,000,000 4,589,027
SERVICES (DATA PROCESSING)--0.2%
Trintech Group PLC Sponsored ADR
(Germany)(b)............................ 30,000 528,750
- - --------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $6,535,786) 9,828,153
- - --------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--94.9%
(IDENTIFIED COST $142,833,133) 236,345,644
- - --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ----------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.8%
COMMERCIAL PAPER--4.2%
Coca Cola Co. 5.27%, 11/1/99............ A-1+ $ 6,365 $ 6,365,000
Koch Industries, Inc. 5.34%, 11/1/99.... A-1+ 4,055 4,055,000
------------
10,420,000
------------
FEDERAL AGENCY SECURITIES--0.6%
FMC Discount Note 5.16%, 11/1/99........ 1,635 1,635,000
- - ---------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $12,055,000) 12,055,000
- - ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS--99.7%
(IDENTIFIED COST $154,888,133) 248,400,644(a)
Cash and receivables, less liabilities--0.3% 794,198
------------
NET ASSETS--100.0% $249,194,842
============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $98,360,705 and gross
depreciation of $5,818,804 for federal income tax purposes. At October 31,
1999, the aggregate cost of securities for federal income tax purposes was
$155,858,743.
(b) Non-income producing.
See Notes to Financial Statements
5
<PAGE>
Phoenix-Engemann Small Cap Fund
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $154,888,133) $ 248,400,644
Cash 303,105
Receivables
Fund shares sold 2,773,743
Investment securities sold 1,764,672
Prepaid expenses 4,528
--------------
Total assets 253,246,692
--------------
LIABILITIES
Payables
Investment securities purchased 3,253,262
Fund shares repurchased 295,676
Transfer agent fee 142,263
Investment advisory fee 138,213
Distribution fee 104,913
Financial agent fee 18,786
Trustees' fee 5,390
Accrued expenses 93,347
--------------
Total liabilities 4,051,850
--------------
NET ASSETS $ 249,194,842
==============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 183,661,374
Undistributed net investment loss (1,725,752)
Accumulated net realized loss (26,253,291)
Net unrealized appreciation 93,512,511
--------------
NET ASSETS $ 249,194,842
==============
CLASS A
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $146,949,687) 7,255,402
Net asset value per share $20.25
Offering price per share $20.25/(1-4.75%) $21.26
CLASS B
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $102,245,155) 5,226,263
Net asset value and offering price per share $19.56
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 147,458
Dividends 48,227
--------------
Total investment income 195,685
--------------
EXPENSES
Investment advisory fee 791,025
Distribution fee, Class A 151,332
Distribution fee, Class B 449,372
Financial agent 104,364
Transfer agent 327,572
Printing 37,619
Professional 19,804
Registration 16,683
Custodian 9,653
Trustees 8,689
Miscellaneous 5,324
--------------
Total expenses 1,921,437
--------------
NET INVESTMENT LOSS (1,725,752)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (944,423)
Net realized gain on foreign currency transactions 668
Net change in unrealized appreciation (depreciation) on
investments 58,716,695
--------------
NET GAIN ON INVESTMENTS 57,772,940
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 56,047,188
==============
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix-Engemann Small Cap Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
10/31/99 Year Ended
(Unaudited) 4/30/99
------------ -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (1,725,752) $ (3,189,899)
Net realized gain (loss) (943,755) (24,983,780)
Net change in unrealized appreciation
(depreciation) 58,716,695 6,208,917
------------ -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 56,047,188 (21,964,762)
------------ -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A -- (5,773,229)
Net realized gains, Class B -- (4,219,826)
------------ -------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS -- (9,993,055)
------------ -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares
(16,115,590 and 18,013,110 shares,
respectively) 273,409,835 273,064,204
Net asset value of shares issued from
reinvestment of distributions
(0 and 360,829 shares, respectively) -- 5,383,573
Cost of shares repurchased (16,569,477
and 22,385,155 shares, respectively) (280,818,977) (343,459,404)
------------ -------------
Total (7,409,142) (65,011,627)
------------ -------------
CLASS B
Proceeds from sales of shares (498,510
and 987,925 shares, respectively) 8,340,399 14,507,598
Net asset value of shares issued from
reinvestment of distributions
(0 and 243,730 shares, respectively) -- 3,536,528
Cost of shares repurchased (1,127,028
and 4,075,435 shares, respectively) (18,445,649) (61,757,518)
------------ -------------
Total (10,105,250) (43,713,392)
------------ -------------
INCREASE (DECREASE) IN NET ASSETS FROM
SHARE TRANSACTIONS (17,514,392) (108,725,019)
------------ -------------
NET INCREASE (DECREASE) IN NET ASSETS 38,532,796 (140,682,836)
NET ASSETS
Beginning of period 210,662,046 351,344,882
------------ -------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
($1,725,752) AND $0, RESPECTIVELY] $249,194,842 $ 210,662,046
============ =============
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix-Engemann Small Cap Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED APRIL 30 INCEPTION
10/31/99 --------------------------------- 10/16/95 TO
(UNAUDITED) 1999 1998 1997 4/30/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.74 $ 17.37 $ 14.13 $ 16.74 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.11)(5) (0.14)(5) (0.08)(5) (0.05)(5) (0.04)(1)(5)
Net realized and unrealized gain
(loss) 4.62 (0.88) 6.80 (2.53) 6.79
------ ------- ------- ------- ------
TOTAL FROM INVESTMENT
OPERATIONS 4.51 (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 4.51 (1.63) 3.24 (2.61) 6.74
------ ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $20.25 $ 15.74 $ 17.37 $ 14.13 $16.74
====== ======= ======= ======= ======
Total return(2) 28.72 %(4) (5.66)% 52.33 % (15.43)% 67.48 %(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $146,950 $121,313 $203,560 $155,089 $98,372
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.50 %(3) 1.46 %(6) 1.31 % 1.37 % 1.50 %(3)
Net investment income (loss) (1.31)%(3) (0.95)% (0.48)% (0.28)% (0.53)%(3)
Portfolio turnover 53 %(4) 276 % 498 % 325 % 103 %(4)
</TABLE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED APRIL 30 INCEPTION
10/31/99 ------------------------------- 10/16/95 TO
(UNAUDITED) 1999 1998 1997 4/30/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.26 $16.99 $ 13.98 $16.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.17)(5) (0.25)(5) (0.21)(5) (0.17)(5) (0.09)(1)(5)
Net realized and unrealized gain
(loss) 4.47 (0.87) 6.70 (2.50) 6.77
------ ------ ------- ------ ------
TOTAL FROM INVESTMENT
OPERATIONS 4.30 (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 4.30 (1.73) 3.01 (2.70) 6.68
------ ------ ------- ------ ------
NET ASSET VALUE, END OF PERIOD $19.56 $15.26 $ 16.99 $13.98 $16.68
====== ====== ======= ====== ======
Total return(2) 28.24 %(4) (6.39)% 51.16 % (16.03)% 66.80 %(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $102,245 $89,349 $147,785 $97,647 $45,168
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.24 %(3) 2.21 %(6) 2.06 % 2.12 % 2.26 %(3)
Net investment income (loss) (2.06)%(3) (1.70)% (1.22)% (1.03)% (1.44)%(3)
Portfolio turnover 53 %(4) 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.
See Notes to Financial Statements
<PAGE>
PHOENIX-SENECA STRATEGIC THEME FUND
INVESTMENTS AT OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
--------- -------------
<S> <C> <C>
COMMON STOCKS--85.0%
ALUMINUM--3.4%
Alcoa, Inc.............................. 119,850 $ 7,280,887
BROADCASTING (TELEVISION, RADIO & CABLE)--6.2%
AMFM, Inc.(b)........................... 57,500 4,025,000
EchoStar Communications Corp.(b)........ 152,200 9,417,375
------------
13,442,375
------------
CHEMICALS--3.2%
Dow Chemical Co......................... 59,000 6,976,750
COMMUNICATIONS EQUIPMENT--9.0%
General Motors Corp. Class H(b)......... 146,000 10,630,625
Motorola, Inc........................... 89,000 8,671,937
------------
19,302,562
------------
COMPUTERS (HARDWARE)--6.5%
Extreme Networks, Inc.(b)............... 30,700 2,465,594
Sun Microsystems, Inc.(b)............... 109,600 11,597,050
------------
14,062,644
------------
COMPUTERS (SOFTWARE & SERVICES)--4.3%
Microsoft Corp.(b)...................... 100,600 9,311,787
ELECTRICAL EQUIPMENT--2.7%
General Electric Co..................... 43,300 5,869,856
ELECTRONICS (SEMICONDUCTORS)--11.3%
Intel Corp.............................. 54,400 4,212,600
LSI Logic Corp.(b)...................... 150,950 8,028,653
Texas Instruments, Inc.................. 135,000 12,116,250
------------
24,357,503
------------
EQUIPMENT (SEMICONDUCTOR)--7.3%
Applied Materials, Inc.(b).............. 119,100 10,696,669
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)--CONTINUED
Teradyne, Inc.(b)....................... 129,200 $ 4,974,200
------------
15,670,869
------------
FINANCIAL (DIVERSIFIED)--6.1%
Citigroup, Inc.......................... 89,550 4,846,894
Morgan Stanley Dean Witter & Co......... 75,300 8,306,531
------------
13,153,425
------------
HEALTH CARE (DIVERSIFIED)--1.8%
Johnson & Johnson....................... 37,000 3,875,750
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--2.3%
VISX, Inc.(b)........................... 79,500 4,973,719
OIL & GAS (DRILLING & EQUIPMENT)--6.7%
Baker Hughes, Inc....................... 260,200 7,269,337
Halliburton Co.......................... 193,000 7,273,687
------------
14,543,024
------------
RETAIL (COMPUTERS & ELECTRONICS)--5.3%
Best Buy Co., Inc.(b)................... 31,160 1,731,328
Tandy Corp.............................. 155,000 9,755,313
------------
11,486,641
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--5.4%
Nextel Communications, Inc.(b).......... 46,500 4,007,719
Sprint Corp. (PCS Group)(b)............. 92,000 7,630,250
------------
11,637,969
------------
TELECOMMUNICATIONS (LONG DISTANCE)--3.5%
MCI WorldCom, Inc.(b)................... 87,240 7,486,283
- - ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $152,539,053) 183,432,044
- - ------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Phoenix-Seneca Strategic Theme Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
FOREIGN COMMON STOCKS--9.2%
<S> <C> <C>
COMMUNICATIONS EQUIPMENT--9.2%
Nokia Oyj Sponsored ADR (Finland)....... 92,900 $ 10,735,756
Nortel Networks Corp. (Canada).......... 147,000 9,104,813
- - ------------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $15,144,613) 19,840,569
- - ------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--94.2%
(IDENTIFIED COST $167,683,666) 203,272,613
- - ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ------- ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--3.4%
COMMERCIAL PAPER--3.4%
Koch Industries, Inc. 5.34%, 11/1/99.... A-1+ $3,245 $ 3,245,000
Albertson's, Inc. 5.30%, 11/2/99........ A-1 1,500 1,499,779
Gannett Co., Inc. 5.30%, 11/5/99........ A-1 1,575 1,574,072
Private Export Funding Corp. 5.28%,
11/9/99................................. A-1+ 1,000 998,827
- - -----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $7,317,678) 7,317,678
- - -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS--97.6%
(IDENTIFIED COST $175,001,344) 210,590,291(a)
Cash and receivables, less liabilities--2.4% 5,119,651
------------
NET ASSETS--100.0% $215,709,942
============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $40,289,866 and gross
depreciation of $5,089,260 for federal income tax purposes. At October 31,
1999, the aggregate cost of securities for federal income tax purposes was
$175,389,685.
(b) Non-income producing.
10
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Strategic Theme Fund
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $175,001,344) $ 210,590,291
Cash 1,622
Receivables
Investment securities sold 7,716,073
Fund shares sold 170,369
Dividends and interest 20,475
Prepaid expenses 2,630
--------------
Total assets 218,501,460
--------------
LIABILITIES
Payables
Investment securities purchased 2,408,992
Fund shares repurchased 55,840
Investment advisory fee 129,545
Distribution fee 99,395
Transfer agent fee 30,643
Financial agent fee 20,848
Trustees' fee 4,481
Accrued expenses 41,774
--------------
Total liabilities 2,791,518
--------------
NET ASSETS $ 215,709,942
==============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 149,181,334
Undistributed net investment loss (945,236)
Accumulated net realized gain 31,884,897
Net unrealized appreciation 35,588,947
--------------
NET ASSETS $ 215,709,942
==============
CLASS A
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $122,198,546) 6,634,775
Net asset value per share $18.42
Offering price per share $18.42/(1-4.75%) $19.34
CLASS B
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $92,047,015) 5,165,204
Net asset value per share and offering per share $17.82
CLASS C
Shares of beneficial interest outstanding,
$0.0001 par value, unlimited authorization
(Net Assets $1,464,381) 82,170
Net asset value per share and offering per share $17.82
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 445,358
Interest 270,826
--------------
Total investment income 716,184
--------------
EXPENSES
Investment advisory fee 759,686
Distribution fee, Class A 142,901
Distribution fee, Class B 436,497
Distribution fee, Class C 4,814
Financial agent fee 104,205
Transfer agent 136,846
Registration 22,685
Printing 19,857
Professional 15,049
Custodian 9,084
Trustees 8,571
Miscellaneous 3,913
--------------
Total expenses 1,664,108
Custodian fees paid indirectly (2,688)
--------------
Net expenses 1,661,420
--------------
NET INVESTMENT LOSS (945,236)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 32,263,878
Net change in unrealized appreciation (depreciation) on
investments (12,116,802)
--------------
NET GAIN ON INVESTMENTS 20,147,076
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 19,201,840
==============
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Phoenix-Seneca Strategic Theme Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
10/31/99 Year Ended
(Unaudited) 4/30/99
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (945,236) $ (1,592,337)
Net realized gain (loss) 32,263,878 18,354,872
Net change in unrealized appreciation
(depreciation) (12,116,802) 38,225,117
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 19,201,840 54,987,652
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (9,383,652) (6,923,924)
Net realized gains, Class B (7,340,312) (5,772,230)
Net realized gains, Class C (103,337) (28,108)
------------ ------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (16,827,301) (12,724,262)
------------ ------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares
(1,478,273 and 3,919,529 shares,
respectively) 27,016,064 64,808,215
Net asset value of shares issued from
reinvestment of distributions
(510,078 and 419,976 shares,
respectively) 8,982,584 6,560,032
Cost of shares repurchased (1,272,801
and 4,982,395 shares, respectively) (23,340,769) (76,814,571)
------------ ------------
Total 12,657,879 (5,446,324)
------------ ------------
CLASS B
Proceeds from sales of shares (424,048
and 819,204 shares, respectively) 7,538,687 13,391,640
Net asset value of shares issued from
reinvestment of distributions
(378,552 and 329,762 shares,
respectively) 6,454,296 5,028,874
Cost of shares repurchased (410,260
and 1,286,009 shares, respectively) (7,350,883) (18,585,029)
------------ ------------
Total 6,642,100 (164,515)
------------ ------------
CLASS C
Proceeds from sales of shares (43,077
and 36,724 shares, respectively) 772,709 589,799
Net asset value of shares issued from
reinvestment of distributions
(5,562 and 1,354 shares,
respectively) 94,887 20,648
Cost of shares repurchased (4,877 and
19,484 shares, respectively) (83,057) (266,095)
------------ ------------
Total 784,539 344,352
------------ ------------
CLASS M
Cost of shares repurchased (0 and
16,288 shares, respectively) -- (223,551)
------------ ------------
Total -- (223,551)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
SHARE TRANSACTIONS 20,084,518 (5,490,038)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 22,459,057 36,773,352
NET ASSETS
Beginning of period 193,250,885 156,477,533
------------ ------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
($945,236) AND $0, RESPECTIVELY] $215,709,942 $193,250,885
============ ============
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Strategic Theme Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED APRIL 30 FROM INCEPTION
10/31/99 ------------------------------------------- 10/16/95 TO
(UNAUDITED) 1999 1998 1997 4/30/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 18.22 $ 13.70 $ 12.03 $ 12.37 $ 10.00
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.06)(5) (0.11)(5) (0.04)(5) 0.06(5) 0.00(1)(5)
Net realized and unrealized gain
(loss) 1.80 6.03 4.03 (0.38) 2.39
--------- --------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.74 5.92 3.99 (0.32) 2.39
--------- --------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- (0.01) --
Dividends from net realized gains (1.54) (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 (1.54) (1.40) (2.32) (0.02) (0.02)
--------- --------- -------- -------- --------
Change in net asset value 0.20 4.52 1.67 (0.34) 2.37
--------- --------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 18.42 $ 18.22 $ 13.70 $ 12.03 $ 12.37
========= ========= ======== ======== ========
Total return(2) 9.95 %(4) 44.91 % 36.22 % (2.57)% 23.89 %(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $122,199 $107,871 $89,884 $77,827 $33,393
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.31 %(3)(7) 1.38 %(7) 1.33 % 1.40 % 1.40 %(3)
Net investment income (loss) (0.60)%(3) (0.72)% (0.26)% 0.49 % (0.09)%(3)
Portfolio turnover 110 %(4) 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) 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 13
<PAGE>
Phoenix-Seneca Strategic Theme Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED APRIL 30 FROM INCEPTION
10/31/99 ----------------------------------------- 10/16/95 TO
(UNAUDITED) 1999 1998 1997 4/30/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.75 $ 13.46 $ 11.91 $ 12.33 $ 10.00
INCOME FROM INVESTMENT OPERATIONS(6)
Net investment income (loss) (0.12)(5) (0.22)(5) (0.14)(5) (0.03)(5) (0.06)(1)(5)
Net realized and unrealized gain
(loss) 1.73 5.91 3.98 (0.38) 2.40
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.61 5.69 3.84(5) (0.41) 2.34
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains (1.54) (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 (1.54) (1.40) (2.29) (0.01) (0.01)
-------- -------- -------- -------- --------
Change in net asset value 0.07 4.29 1.55 (0.42) 2.33
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 17.82 $ 17.75 $ 13.46 $ 11.91 $ 12.33
======== ======== ======== ======== ========
Total return(2) 9.47 %(4) 43.98 % 35.18 % (3.31)% 23.41 %(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $92,047 $84,698 $66,107 $49,843 $11,920
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.06 %(3)(7) 2.13 %(7) 2.08 % 2.15 % 2.16 %(3)
Net investment income (loss) (1.35)%(3) (1.48)% (1.02)% (0.23)% (1.06)%(3)
Portfolio turnover 110 %(4) 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) 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.
14 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Strategic Theme Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS C
------------------------------------------
SIX MONTHS FROM
ENDED YEAR INCEPTION
10/31/99 ENDED 11/3/97 TO
(UNAUDITED) 4/30/99 4/30/98
<S> <C> <C> <C>
Net asset value, beginning of period $17.75 $13.47 $14.93
INCOME FROM INVESTMENT OPERATIONS(5)
Net investment income (loss) (0.12)(4) (0.22)(4) (0.05)(4)
Net realized and unrealized gain
(loss) 1.73 5.90 0.88
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.61 5.68 0.83
------ ------ ------
LESS DISTRIBUTIONS
Dividends from net realized gains (1.54) (1.40) (2.29)
------ ------ ------
TOTAL DISTRIBUTIONS (1.54) (1.40) (2.29)
------ ------ ------
Change in net asset value 0.07 4.28 (1.46)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $17.82 $17.75 $13.47
====== ====== ======
Total return(1) 9.47 %(3) 43.87 % 7.92 %(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,464 $682 $267
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.06 %(2)(6) 2.13 %(6) 2.08 %(2)
Net investment income (loss) (1.36)%(2) (1.47)% (0.87)%(2)
Portfolio turnover 110 %(3) 205 % 618 %(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.
See Notes to Financial Statements 15
<PAGE>
PHOENIX-SENECA EQUITY OPPORTUNITIES FUND
INVESTMENTS AT OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C>
COMMON STOCKS--82.5%
ALUMINUM--1.8%
Alcoa, Inc.............................. 67,800 $ 4,118,850
BANKS (MAJOR REGIONAL)--2.9%
Mellon Financial Corp................... 178,630 6,598,146
BROADCASTING (TELEVISION, RADIO & CABLE)--3.5%
AMFM, Inc.(b)........................... 112,110 7,847,700
CHEMICALS -- 2.0%
Dow Chemical Co......................... 37,380 4,420,185
COMMUNICATIONS EQUIPMENT--7.0%
General Motors Corp. Class H(b)......... 99,220 7,224,456
Motorola, Inc........................... 82,510 8,039,568
Sycamore Networks, Inc.(b).............. 2,330 500,950
------------
15,764,974
------------
COMPUTERS (HARDWARE)--2.6%
Sun Microsystems, Inc.(b)............... 54,130 5,727,631
COMPUTERS (NETWORKING)--3.1%
Cisco Systems, Inc.(b).................. 79,476 5,881,224
Internap Network Services Corp.(b)...... 11,410 1,053,999
------------
6,935,223
------------
COMPUTERS (SOFTWARE & SERVICES)--3.9%
Microsoft Corp.(b)...................... 94,400 8,737,900
ELECTRICAL EQUIPMENT--4.2%
General Electric Co..................... 70,000 9,489,375
ELECTRONICS (SEMICONDUCTORS)--1.3%
Intel Corp.............................. 37,600 2,911,650
FINANCIAL (DIVERSIFIED)--8.1%
Citigroup, Inc.......................... 172,605 9,342,246
Morgan Stanley Dean Witter & Co......... 79,690 8,790,803
------------
18,133,049
------------
FOODS--2.0%
General Mills, Inc...................... 52,050 4,538,109
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C>
HEALTH CARE (DIVERSIFIED)--6.6%
Bristol-Myers Squibb Co................. 110,000 $ 8,449,375
Johnson & Johnson....................... 60,960 6,385,560
------------
14,834,935
------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--2.9%
Merck & Co., Inc........................ 82,840 6,590,957
HOUSEHOLD PRODUCTS (NON-DURABLE)--2.5%
Procter & Gamble Co. (The).............. 52,430 5,498,596
OIL & GAS (DRILLING & EQUIPMENT)--5.0%
Baker Hughes, Inc....................... 176,620 4,934,321
Halliburton Co.......................... 165,410 6,233,889
------------
11,168,210
------------
OIL (INTERNATIONAL INTEGRATED)--2.9%
Texaco, Inc............................. 104,640 6,422,280
RETAIL (BUILDING SUPPLIES)--1.2%
Lowe's Companies, Inc................... 47,560 2,615,800
RETAIL (COMPUTERS & ELECTRONICS)--3.6%
Tandy Corp.............................. 128,010 8,056,629
RETAIL (GENERAL MERCHANDISE)--2.6%
Wal-Mart Stores, Inc.................... 100,100 5,718,213
RETAIL (SPECIALTY-APPAREL)--2.2%
TJX Companies, Inc. (The)............... 177,950 4,826,894
SERVICES (ADVERTISING/MARKETING)--4.1%
Outdoor Systems, Inc.(b)................ 217,360 9,210,630
TELECOMMUNICATIONS (LONG DISTANCE)--3.6%
MCI WorldCom, Inc.(b)................... 95,030 8,154,762
TELEPHONE--2.9%
Bell Atlantic Corp...................... 98,640 6,405,435
- - --------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $140,768,613) 184,726,133
- - --------------------------------------------------------------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Equity Opportunities Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
FOREIGN COMMON STOCKS--11.1%
<S> <C> <C>
COMMUNICATIONS EQUIPMENT--8.0%
Nokia Oyj Sponsored ADR (Finland)....... 75,340 $ 8,706,479
Nortel Networks Corp. (Canada).......... 149,220 9,242,314
------------
17,948,793
------------
ELECTRONICS (SEMICONDUCTORS)--3.1%
STMicroelectronics NV (Netherlands)..... 76,400 6,942,850
- - --------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $19,270,683) 24,891,643
- - --------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--93.6%
(IDENTIFIED COST $160,039,296) 209,617,776
- - --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
------ ------ ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--4.3%
COMMERCIAL PAPER--4.3%
General Electric Capital Corp. 5.25%,
11/1/99................................. A-1+ $3,565 $ 3,565,000
Enterprise Funding Corp. 5.30%,
11/2/99................................. A-1 3,000 2,999,558
Merrill Lynch & Co., Inc. 5.33%,
11/3/99................................. A-1+ 3,140 3,139,070
- - ------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $9,703,628) 9,703,628
- - ------------------------------------------------------------------------
TOTAL INVESTMENTS--97.9%
(IDENTIFIED COST $169,742,924) 219,321,404(a)
Cash and receivables, less liabilities--2.1% 4,593,343
------------
NET ASSETS--100.0% $223,914,747
============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $52,558,227 and gross
depreciation of $3,245,748 for federal income tax purposes. At October 31,
1999, the aggregate cost of securities for federal income tax purposes was
$170,008,925.
(b) Non-income producing.
See Notes to Financial Statements
17
<PAGE>
Phoenix-Seneca Equity Opportunities Fund
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $169,742,924) $ 219,321,404
Cash 5,777
Receivables
Investment securities sold 4,798,059
Dividends and interest 166,085
Fund shares sold 149
Prepaid expenses 3,553
--------------
Total assets 224,295,027
--------------
LIABILITIES
Payables
Investment securities purchased 39,905
Fund shares repurchased 42,460
Investment advisory fee 124,983
Distribution fee 46,468
Transfer agent fee 37,735
Financial agent fee 18,225
Trustees' fee 5,390
Accrued expenses 65,114
--------------
Total liabilities 380,280
--------------
NET ASSETS $ 223,914,747
==============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest 151,463,293
Undistributed net investment loss (343,592)
Accumulated net realized gain 23,216,566
Net unrealized appreciation 49,578,480
--------------
NET ASSETS $ 223,914,747
==============
CLASS A
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $220,832,264) 23,103,652
Net asset value per share $9.56
Offering price per share $9.56/(1-4.75%) $10.04
CLASS B
Shares of beneficial interest outstanding, $0.0001
par value, unlimited authorization
(Net Assets $3,082,483) 337,793
Net asset value and offering price per share $9.13
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 784,479
Interest 176,940
--------------
Total investment income 961,419
--------------
EXPENSES
Investment advisory fee 733,444
Distribution fee, Class A 258,456
Distribution fee, Class B 13,952
Financial agent fee 104,353
Transfer agent 124,128
Printing 19,773
Professional 16,188
Registration 15,296
Trustees 8,688
Custodian 6,907
Miscellaneous 3,826
--------------
Total expenses 1,305,011
--------------
NET INVESTMENT LOSS (343,592)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 23,495,759
Net change in unrealized appreciation (depreciation) on
investments 4,991,778
--------------
NET GAIN ON INVESTMENTS 28,487,537
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 28,143,945
==============
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Equity Opportunities Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
10/31/99 Year Ended
(Unaudited) 4/30/99
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (343,592) $ (414,880)
Net realized gain (loss) 23,495,759 8,800,896
Net change in unrealized appreciation
(depreciation) 4,991,778 22,526,413
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 28,143,945 30,912,429
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (8,212,238) (14,338,287)
Net realized gains, Class B (116,465) (184,555)
------------ ------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (8,328,703) (14,522,842)
------------ ------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (152,954
and 776,243 shares, respectively) 1,403,922 6,205,793
Net asset value of shares issued from
reinvestment of distributions
(693,792 and 1,318,749 shares,
respectively) 6,056,802 10,444,800
Cost of shares repurchased (887,538
and 3,121,846 shares, respectively) (7,981,804) (25,370,488)
------------ ------------
Total (521,080) (8,719,895)
------------ ------------
CLASS B
Proceeds from sales of shares (42,968
and 113,886 shares, respectively) 375,318 896,049
Net asset value of shares issued from
reinvestment of distributions
(11,931 and 20,248 shares,
respectively) 99,504 154,289
Cost of shares repurchased (36,972 and
77,292 shares, respectively) (320,018) (601,028)
------------ ------------
Total 154,804 449,310
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
SHARE TRANSACTIONS (366,276) (8,270,585)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 19,448,966 8,119,002
NET ASSETS
Beginning of period 204,465,781 196,346,779
------------ ------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME (LOSS) OF
($343,592) AND $0, RESPECTIVELY] $223,914,747 $204,465,781
============ ============
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Phoenix-Seneca Equity Opportunities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED APRIL 30,
10/31/99 --------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.72 $ 8.04 $ 6.89 $ 8.81 $ 7.40
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.01)(4) (0.02)(4) (0.04)(4) (0.03)(4) (0.04)(4)
Net realized and unrealized gain
(loss) 1.21 1.33 2.82 (0.90) 2.34
--------- --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 1.20 1.31 2.78 (0.93) 2.30
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains (0.36) (0.63) (1.63) (0.94) (0.89)
In excess of net realized gains -- -- -- (0.05) --
--------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.36) (0.63) (1.63) (0.99) (0.89)
--------- --------- --------- --------- ---------
Change in net asset value 0.84 0.68 1.15 (1.92) 1.41
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.56 $ 8.72 $ 8.04 $ 6.89 $ 8.81
========= ========= ========= ========= =========
Total return(1) 14.20 %(3) 17.08 % 44.66 % (12.19)% 32.86 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $220,832 $201,789 $194,296 $163,396 $213,600
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.23 %(2) 1.24 %(5) 1.18 % 1.23 % 1.25 %
Net investment income (loss) (0.32)%(2) (0.21)% (0.55)% (0.39)% (0.53)%
Portfolio turnover 67 %(3) 143 % 371 % 412 % 302 %
<CAPTION>
1995
<S> <C>
Net asset value, beginning of period $ 7.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.04
Net realized and unrealized gain
(loss) 0.58
---------
TOTAL FROM INVESTMENT OPERATIONS 0.62
---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05)
Dividends from net realized gains (0.48)
In excess of net realized gains --
---------
TOTAL DISTRIBUTIONS (0.53)
---------
Change in net asset value 0.09
---------
NET ASSET VALUE, END OF PERIOD $ 7.40
=========
Total return(1) 9.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $179,666
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.32%
Net investment income (loss) 0.60%
Portfolio turnover 358%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS FROM
ENDED YEAR ENDED APRIL 30, INCEPTION
10/31/99 ------------------------------------------------------ 7/19/94 TO
(UNAUDITED) 1999 1998 1997 1996 4/30/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.37 $ 7.80 $ 6.77 $ 8.73 $ 7.39 $ 7.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.05)(4) (0.08)(4) (0.10)(4) (0.09)(4) (0.10)(4) 0.00
Net realized and unrealized gain
(loss) 1.17 1.28 2.76 (0.88) 2.33 0.59
------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 1.12 1.20 2.66 (0.97) 2.23 0.59
------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- -- --
Dividends from net realized gains (0.36) (0.63) (1.63) (0.94) (0.89) (0.48)
In excess of net realized gains -- -- -- (0.05) -- --
------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS (0.36) (0.63) (1.63) (0.99) (0.89) (0.48)
------- ------- ------- ------- ------- ------
Change in net asset value 0.76 0.57 1.03 (1.96) 1.34 0.11
------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 9.13 $ 8.37 $ 7.80 $ 6.77 $ 8.73 $ 7.39
======= ======= ======= ======= ======= ======
Total return(1) 13.84 %(3) 16.18 % 43.58 % (12.79)% 31.92 % 8.69 %(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 3,083 $ 2,677 $ 2,051 $ 1,666 $ 1,348 $ 525
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.98 %(2) 1.99 %(5) 1.93 % 1.98 % 2.06 % 2.15 %(2)
Net investment income (loss) (1.06)%(2) (0.97)% (1.30)% (1.15)% (1.18)% (0.06)%(2)
Portfolio turnover 67 %(3) 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.
20
See Notes to Financial Statements
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 (UNAUDITED)
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 t
e 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.
21
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 (UNAUDITED) (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
As compensation for its services to the Trust, the Adviser, Phoenix Investment
Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home Life Mutual
Insurance Company ("PHL"), is entitled to a fee based upon the following annual
rates as a percentage of the average daily net assets of each 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 and Strategic Theme 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 $18,608 for Class A shares and deferred
sales charges of $307,244 for Class B shares and $590 for Class C shares, for
the six months ended October 31, 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 six months ended October 31, 1999, $825,868 was earned
by the Distributor, $567,456 was earned by unaffiliated participants and $64,000
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 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 six months ended October 31, 1999,
transfer agent fees were $588,546 of which PEPCO retained $258,347 which is net
of the fees paid to State Street.
At October 31, 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....... 173 $ 1,654
Equity Opportunities Fund--Class B....... 26,519 242,118
</TABLE>
22
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 (UNAUDITED) (CONTINUED)
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities (excluding short-term securities and
options) for the six months ended October 31, 1999, aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Small Cap Fund................... $110,288,918 $141,631,185
Strategic Theme Fund............. 213,296,543 216,406,453
Equity Opportunities Fund........ 135,875,796 152,926,575
</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.
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.
23
<PAGE>
RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
A special meeting of Shareholders of the Phoenix-Seneca Strategic Theme Fund of
the Phoenix Strategic Equity Series Fund was held on August 6, 1999 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 10,849,409 shares outstanding and
63.11% 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 6,382,737 203,929 260,143
</TABLE>
24
<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
William R. Moyer, 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
Michael Kearney, 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)
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
Enfeild CT 06083-2200
[LOGO] PHOENIX
INVESTMENT PARTNERS
PRSRT STD
U.S. Postage
PAID
ANDREWS
ASSOCIATES
PXP 679 (11/99)
<PAGE>
[LOGO] Phoenix Investment Partners
SEPTEMBER 30, 1999
-SENECA-
Annual Report
Phoenix-Seneca
Bond Fund
Phoenix-Seneca
Growth Fund
Phoenix-Seneca
Mid-Cap "EDGE" -SM- Fund
Phoenix-Seneca
Real Estate Securities Fund
PHOENIX
INVESTMENT PARTNERS
[LOGO]
<PAGE>
PRESIDENT'S MESSAGE
THE Y2K FACTOR
[PHOTO]
Analysis, testing and remediation of critical computer systems throughout 1998
and 1999 appear to have been extremely thorough for large companies, and, in
particular, for the financial services industry. We will undoubtedly encounter
some glitches, but major systems for securities settlement, portfolio
accounting, and bank operations appear sound. Even governmental bureaucracies
have made huge strides toward full readiness. Outside the U.S., significant
difficulties may occur in less- developed nations, but the volume of financial
transactions there is too small to pose a systemic structural threat to world
financial systems.
More likely than major computer operating failures are "accidents" caused by
non-systemic, all-too-human attempts to cope with uncertainty. Inventory
stockpiling, cash hoarding, and delivery problems are among the obvious
potential problems. All of these will be short-lived, given the inherent
ingenuity of the U.S. entrepreneurial system and the lubricant of extra cash the
Fed has promised to inject into the system.
The Federal Reserve's plan to inject $200 billion in liquidity into the
banking system in preparation for any year-end distortions could provide a real
boon to the markets. So, too, may "flight to safety" inflows to the U.S., which
clearly leads the world in Y2K readiness. And, we believe the sheer relief when
the dreaded turn of the year is behind us will almost certainly improve market
sentiment.
On the following pages, your portfolio managers discuss factors that affected
your fund's performance over the last fiscal year and share their outlook for
the short term. We hope you find their comments helpful and informative. If you
have any questions, please call your financial advisor or contact us at
www.phoenixinvestments.com or 1-800-243-1574.
/s/ Gail P. Seneca
Gail P. Seneca
OCTOBER 7, 1999
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Phoenix-Seneca Bond Fund.................................... 3
Phoenix-Seneca Growth Fund.................................. 14
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund...................... 23
Phoenix-Seneca Real Estate Securities Fund.................. 32
Notes to Financial Statements............................... 41
</TABLE>
2
<PAGE>
PHOENIX-SENECA BOND FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, GAIL P. SENECA, PH.D.,
AND CHARLES DICKE, CFA
Q: WHAT IS THE INVESTMENT OBJECTIVE OF THE FUND?
A: The Phoenix-Seneca Bond Fund seeks high total return through both current
income and capital appreciation. Its value-driven process focuses on issue
selection, sector selection, measured interest rate anticipation, and trading
opportunities. It is suitable for investors looking for a fund that seeks a
balance between enhancing portfolio returns over market cycles and minimizing
risk and volatility.
Q: HOW DID THE FUND PERFORM OVER THE LAST 12-MONTH REPORTING PERIOD?
A: For the 12 months ended September 30, 1999, Class A shares returned 2.46%,
Class B shares returned 1.67%, Class C shares returned 1.66%, and Class X shares
returned 3.51% compared with a loss of (0.37%) for the Lehman Brothers Aggregate
Bond Index(1). All performance figures assume reinvestment of distributions and
exclude the effect of sales charges.
Q: CAN YOU PROVIDE A BRIEF OVERVIEW OF THE MARKETS FOR THE LAST 12 MONTHS?
A: U.S. bond yields, which have been fairly volatile during the reporting
period, were particularly so during the third quarter of the year as market
expectations of Federal Reserve action gyrated from optimism to pessimism. The
yield on the 30-year U.S. Treasury reached a high of 6.28% on August 12, fell to
a low of 5.86% on August 25, and closed the quarter with a yield of 6.05%. For
the year, total returns on bonds, as measured by the broad market index, the
Lehman Brothers Aggregate Bond Index, are in negative territory, reflecting the
large rise in interest rate levels since 1998.
Corporate bond performance has been particularly weak as large supplies of
new issuance forced yields higher and prices lower. Limited liquidity due to Y2K
fears also hurt corporate issues. High-yield corporate bonds were especially
affected. However, our view remains positive on this sector. Market technicals,
the main driver behind the recent negative performance, should turn as we begin
the new year.
Q: WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
A: Rising rates have been the market's greatest enemy this year. The Fed is on
alert to inflation signals, and while it is true that inflation risks are higher
when labor is tight, it is also true that disinflationary forces remain very
strong. Unused manufacturing capacity is abundant worldwide. Technology
advances, particularly the Internet, are profoundly disinflationary. And, global
competition is driving price discounting in markets as diverse as
telecommunications and toys. Inflation may rebound moderately, but we doubt it
will gain traction in this intensely competitive environment.
With the good probability, in our opinion, that inflation will not increase
significantly, bonds today appear to be fairly valued. We believe that bonds
will provide much improved returns in the coming year.
OCTOBER 19, 1999
(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.
3
<PAGE>
Phoenix-Seneca Bond Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 9/30/99 DATE
------- ---------- ---------
<S> <C> <C> <C>
Class X Shares at NAV(2) 3.51% 7.92% 3/7/96
Class A Shares at NAV(2) 2.46 2.40 7/1/98
Class A Shares at POP(3) (2.41) (1.51) 7/1/98
Class B Shares at NAV(2) 1.67 1.57 7/1/98
Class B Shares with CDSC(4) (2.18) (1.48) 7/1/98
Class C Shares at NAV(2) 1.66 1.56 7/1/98
Class C Shares with CDSC(4) 1.66 1.56 7/1/98
Lehman Brothers Aggregate Bond
Index(7) (0.37) 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 6.14% for Class X (since 3/7/96) and 0.55% for Class
A, Class B and Class C (since 7/1/98).
(6) This chart illustrates NAV returns on Class X shares. Returns on Class A,
Class B and Class 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'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 9/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX-SENECA BOND LEHMAN BROTHERS AGGREGATE
FUND CLASS X AT NAV(6) BOND INDEX(7)
<S> <C> <C>
3/96 $10,000 $10,000
96 $10,413 $10,146
97 $11,586 $11,132
98 $12,679 $12,413
99 $13,124 $12,367
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
3/7/96 (inception of the Fund) in Class X shares and reflects no sales charge.
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 9/30/99
As a percentage of bond holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Corporate 67%
Agency Mortgage-Backed 11
Non-Agency Mortgage-Backed 6
Foreign Corporate 6
Asset-Backed 4
U.S. Government 3
Agency Non Mortgage-Backed 3
</TABLE>
4
<PAGE>
Phoenix-Seneca Bond Fund
TEN LARGEST HOLDINGS AT SEPTEMBER 30, 1999 (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<C> <S> <C>
1. Sprint Spectrum L.P. 3.6%
CORPORATE BOND
2. Fannie Mae 7%, 10/15/29 2.9%
AGENCY MORTGAGE-BACKED SECURITY
3. GMAC Commercial Mortgage Securities, Inc. 2.8%
NON-AGENCY MORTGAGE-BACKED SECURITY
4. U.S. Government Securities 2.7%
U.S. TREASURY BONDS & NOTES
5. Fannie Mae 6.50%, 8/15/04 2.7%
AGENCY NON MORTGAGE-BACKED SECURITY
6. Freddie Mac 6%, 10/15/27 2.6%
AGENCY MORTGAGE-BACKED SECURITY
7. Olympic Automobile Receivables Trust 96-D, A5 2.5%
ASSET-BACKED SECURITY
8. Fannie Mae 6.50%, 8/1/29 2.4%
AGENCY MORTGAGE-BACKED SECURITY
9. Microsoft Corp. Series A Cv. Pfd. 2.4%
CONVERTIBLE PREFERRED STOCK
10. Fox/Liberty Networks LLC 2.3%
CORPORATE BOND
</TABLE>
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--2.7%
U.S. TREASURY BONDS--1.1%
U.S. Treasury Bonds 5.25%, 11/15/28..... Aaa $ 510 $ 441,633
U.S. TREASURY NOTES--1.6%
U.S. Treasury Notes 4.75%, 2/15/04...... Aaa 450 431,438
U.S. Treasury Notes 6.50%, 10/15/06..... Aaa 200 204,505
-----------
635,943
-----------
- ----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $1,087,835) 1,077,576
- ----------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED SECURITIES--10.8%
Fannie Mae 8.75%, 5/25/17............... Aaa 12 12,443
Fannie Mae 6.50%, 12/1/28............... Aaa 384 367,908
Fannie Mae 6.50%, 8/1/29................ Aaa 1,009 967,022
Fannie Mae W.I. 7%, 10/15/29............ Aaa 1,150 1,129,875
Fannie Mae Strip I.O. 3.156%,
10/25/23(c)............................. Aaa 222 5,896
Freddie Mac 8.75%, 12/15/20............. Aaa 5 5,509
Freddie Mac 7%, 7/15/23................. Aaa 769 731,790
Freddie Mac 6%, 10/15/27................ Aaa 1,125 1,045,102
GNMA 7%, 2/15/26........................ Aaa 16 16,197
- ----------------------------------------------------------------------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $4,338,864) 4,281,742
- ----------------------------------------------------------------------------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
AGENCY NON MORTGAGE-BACKED
SECURITIES--2.7%
Fannie Mae 6.50%, 8/15/04............... Aaa $1,050 $ 1,055,104
- ----------------------------------------------------------------------------
TOTAL AGENCY NON MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $1,059,912) 1,055,104
- ----------------------------------------------------------------------------
ASSET-BACKED SECURITIES--3.8%
Olympic Automobile Receivables Trust
96-B, CTFS 6.90%, 2/15/04............... Aaa 76 76,847
Olympic Automobile Receivables Trust
96-C, A5 7%, 3/15/04.................... Aaa 400 403,955
Olympic Automobile Receivables Trust
96-D, A5 6.25%, 11/15/04(e)............. Aaa 1,000 1,000,195
Standard Credit Card Master Trust 1
93-2, A 5.95%, 9/7/03................... Aaa 40 39,066
- ----------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $1,523,019) 1,520,063
- ----------------------------------------------------------------------------
CORPORATE BONDS--64.8%
AIR FREIGHT--1.2%
Federal Express Corp. Series 98-1A
6.72%, 1/15/22.......................... Aa 499 467,031
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
AIRLINES--2.5%
Alaska Airlines, Inc. Series A 9.50%,
4/12/10................................. Baa $ 114 $ 120,779
Alaska Airlines, Inc. Series D 9.50%,
4/12/12................................. Baa 452 482,945
Delta Air Lines, Inc. Series B2 10.06%,
1/2/16.................................. Baa 65 73,976
United Airlines, Inc. Series 91-B
10.11%, 2/19/06......................... Baa 18 19,239
United Airlines, Inc. Series 91-E 9.76%,
5/27/06................................. Baa 86 92,181
United Airlines, Inc. Series 95-A1
9.02%, 4/19/12.......................... Baa 181 189,344
-----------
978,464
-----------
BANKS (MAJOR REGIONAL)--2.4%
First Republic Bancorp 7.75%, 9/15/12... BB(d) 300 269,262
Wells Fargo Capital I 7.96%, 12/15/26... Aa 700 681,534
-----------
950,796
-----------
BANKS (MONEY CENTER)--1.0%
BankAmerica Corp. Institutional Series A
144A 8.07%, 12/31/26(b)................. Aa 400 392,072
BROADCASTING (TELEVISION, RADIO & CABLE)--5.5%
Chancellor Media Corp. 9.375%,
10/1/04................................. B 75 76,875
Falcon Holding Group L.P. 8.375%,
4/15/10................................. B 500 495,000
Fox/Liberty Networks LLC 0%,
8/15/07(c).............................. Ba 1,180 929,250
Jacor Communications, Inc. 10.125%,
6/15/06................................. B 100 107,500
Jones Intercable, Inc. 9.625%,
3/15/02................................. Baa 300 316,500
SFX Broadcasting Corp. Series B 10.75%,
5/15/06................................. B 56 61,180
Turner Broadcasting System, Inc. 8.40%,
2/1/24.................................. Baa 200 201,987
-----------
2,188,292
-----------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
CONSUMER (JEWELRY, NOVELTIES & GIFTS)--0.1%
Finlay Fine Jewelry Corp. 8.375%,
5/1/08.................................. Ba $ 40 $ 38,650
ELECTRONICS (SEMICONDUCTORS)--1.9%
SCG Holdings & Semiconductor Co. 144A
12%, 8/1/09(b).......................... B 750 768,750
ENTERTAINMENT--2.8%
AMC Entertainment, Inc. 9.50%,
3/15/09................................. B 100 83,500
Royal Caribbean Cruises Ltd. 7.50%,
10/15/27................................ Baa 100 90,527
Time Warner, Inc. 9.125%, 1/15/13....... Baa 65 73,448
Time Warner, Inc. 6.85%, 1/15/26........ Baa 620 623,100
United Artists Theatre Circuit, Inc.
Series 95-A 9.30%, 7/1/15............... B 327 222,211
-----------
1,092,786
-----------
FINANCIAL (DIVERSIFIED)--1.3%
Countrywide Capital I 8%, 12/15/26...... A 200 185,028
Dollar Financial Group, Inc. Series A
10.875%, 11/15/06....................... B 75 74,625
Market Hub Partners Finance, Inc. 8.25%,
3/1/08.................................. Ba 250 243,125
-----------
502,778
-----------
HEALTH CARE (HOSPITAL MANAGEMENT)--1.0%
Universal Health Services, Inc. 8.75%,
8/15/05................................. Ba 400 414,048
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.7%
Dade International, Inc. Series B
11.125%, 5/1/06......................... B 260 275,600
HEALTH CARE (SPECIALIZED SERVICES)--1.2%
HEALTHSOUTH Corp. 9.50%, 4/1/01(e)...... Ba 500 484,881
HOMEBUILDING--2.8%
Lennar Corp. 7.625%, 3/1/09............. Ba 800 740,000
Toll Corp. 8%, 5/1/09................... Ba 400 381,500
-----------
1,121,500
-----------
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
INVESTMENT BANKING/BROKERAGE--2.1%
Donaldson, Lufkin & Jenrette, Inc.
6.875%, 11/1/05......................... A $ 50 $ 48,958
Donaldson, Lufkin & Jenrette, Inc.
6.50%, 6/1/08........................... A 200 187,278
Lehman Brothers Holdings, Inc. Series F
7%, 5/15/03............................. A 500 497,500
Lehman Brothers Holdings, Inc. 8.80%,
3/1/15.................................. A 80 83,417
-----------
817,153
-----------
LODGING-HOTELS--1.4%
Hammons (John Q.) Hotels, Inc. 8.875%,
2/15/04................................. B 530 479,650
Hammons (John Q.) Hotels, Inc. 9.75%,
10/1/05................................. B 100 92,000
-----------
571,650
-----------
MACHINERY (DIVERSIFIED)--1.3%
Better Minerals & Aggregates 144A 13%,
9/15/09(b).............................. B 500 501,250
MANUFACTURING (DIVERSIFIED)--0.0%
Hawk Corp. 10.25%, 12/1/03.............. Ba 10 10,150
MANUFACTURING (SPECIALIZED)--1.3%
Advanced Glassfiber Yarns 9.875%,
1/15/09................................. B 300 275,250
BGF Industries, Inc. Series B 10.25%,
1/15/09................................. B 300 258,750
-----------
534,000
-----------
OFFICE EQUIPMENT & SUPPLIES--1.9%
CEX Holdings, Inc. Series B 9.625%,
6/1/08.................................. B 700 752,500
OIL & GAS (REFINING & MARKETING)--0.8%
El Paso Tenneco RACERS 97-C-1-2 144A
9.14%, 12/31/01(b)...................... NR 300 316,500
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS--0.1%
Container Corporation of America Series
A 11.25%, 5/1/04........................ B $ 40 $ 41,400
PHOTOGRAPHY/IMAGING--0.4%
Imax Corp. 7.875%, 12/1/05.............. Ba 150 139,875
PUBLISHING (NEWSPAPERS)--0.8%
Garden State Newspapers, Inc. Series B
8.75%, 10/1/09.......................... B 325 299,000
RAILROADS--1.5%
Railworks Corp. 11.5%, 4/15/09.......... B 600 600,000
REITS--4.5%
ERP Operating L.P. 7.57%, 8/15/26....... A 170 166,495
Evans Withycomb Residential, Inc. 7.50%,
4/15/04................................. A 100 101,496
First Industrial L.P. 7.15%, 5/15/27.... Baa 500 494,309
Property Trust of America 6.875%,
2/15/08................................. Baa 5 4,779
Regency Centers L.P. 7.4%, 4/1/04....... Baa 500 488,750
Security Capital Pacific Trust 7.375%,
10/15/06................................ Baa 100 94,552
Security Capital Pacific Trust 7.90%,
2/15/16................................. Baa 200 185,760
Washington Real Estate Investment Trust
7.125%, 8/13/03......................... Baa 110 109,252
Weingarten Realty Investors Series A
6.88%, 6/25/27.......................... A 150 144,050
-----------
1,789,443
-----------
RESTAURANTS--1.5%
CKE Restaurants, Inc. 4.25%, 3/15/04.... B 500 325,000
Foodmaker, Inc. Series B 9.75%,
11/1/03................................. BB(d) 250 255,625
-----------
580,625
-----------
RETAIL (DISCOUNTERS)--0.9%
AMES Department Stores 10%, 4/15/06..... B 350 340,375
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
RETAIL (FOOD CHAINS)--2.9%
Kroger Co. 6%, 7/1/00(c)................ Baa $ 275 $ 274,422
Meyer (Fred), Inc. Series 94-A2 8.64%,
7/2/12.................................. BBB(d) 100 105,500
Stater Brothers Holdings, Inc. 144A
10.75%, 08/15/06(b)..................... B 750 767,812
-----------
1,147,734
-----------
RETAIL (GENERAL MERCHANDISE)--3.3%
K Mart Funding Corp. Series F 8.80%,
7/1/10.................................. Ba 500 487,604
Wal-Mart Stores, Inc. Series A-2 8.85%,
1/2/15.................................. Aa 750 838,500
-----------
1,326,104
-----------
SERVICES (ADVERTISING/MARKETING)--0.9%
Outdoor Systems, Inc. 8.875%, 6/15/07... B 350 357,875
SERVICES (COMMERCIAL & CONSUMER)--5.6%
Coinmach Laundry Corp. Series D 11.75%,
11/15/05................................ B 255 274,762
Group Maintenance America Corp. 9.75%,
1/15/09................................. B 300 288,000
Loomis Fargo & Co. 10%, 1/15/04......... B 300 297,000
Protection One Alarm Monitoring, Inc.
7.375%, 8/15/05......................... Ba 500 392,500
SC International Services, Inc. 9.25%,
9/1/07.................................. B 190 187,625
United Rentals, Inc. Series B 9.50%,
6/1/08.................................. B 250 247,500
United Rentals, Inc. Series B 8.80%,
8/15/08................................. B 500 475,000
Williams Scotsman, Inc. 9.875%,
6/1/07.................................. B 50 47,625
-----------
2,210,012
-----------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--3.7%
Orion Network Systems 0%, 1/15/07(c).... B $ 90 $ 41,850
Sprint Spectrum L.P. 0%, 8/15/06(c)..... Baa 1,530 1,415,250
-----------
1,457,100
-----------
TELECOMMUNICATIONS (LONG DISTANCE)--0.5%
Qwest Communications International Corp.
0%, 10/15/07(c)......................... Ba 275 213,469
TEXTILES (APPAREL)--2.2%
Levi Strauss & Co. 144A 7%,
11/1/06(b).............................. Ba 1,000 861,250
WASTE MANAGEMENT--1.8%
Waste Management, Inc. 6.125%,
7/15/01(c)(e)........................... Ba 750 719,435
WATER UTILITIES--1.0%
Marlin Water Trust 144A 7.09%,
12/15/01(b)............................. Baa 405 400,950
- ----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $26,637,442) 25,663,498
- ----------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES--6.5%
DLJ Commercial Mortgage Corp. 98-CG1,
A1A 6.11%, 12/10/07..................... AAA(d) 924 894,405
GE Capital Mortgage Services, Inc.
94-21, B1 6.50% 8/25/09................. A 29 28,531
GMAC Commercial Mortgage Securities,
Inc. 98-C2, A2 6.42%, 8/15/08........... Aaa 1,178 1,116,367
Lehman ABS Corp. 94-C2, A 144A 8.145%,
11/2/07(b).............................. BBB(d) 70 68,450
Morgan Stanley Capital I, 98-WF1, A2
6.55%, 12/15/07(c)...................... NR 485 466,572
- ----------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $2,601,623) 2,574,325
- ----------------------------------------------------------------------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
FOREIGN CORPORATE BONDS--5.6%
FRANCE--1.5%
Societe General Real Estate LLC Series A
144A 7.64%, 12/29/49(b)(c).............. A $ 650 $ 600,927
MEXICO--2.4%
Pemex Finance Ltd. 144A 6.30%,
5/15/10(b).............................. Aaa 500 475,000
Pemex Finance Ltd. 144A 9.15%,
11/15/18(b)............................. Baa 500 468,750
-----------
943,750
-----------
UNITED KINGDOM--1.7%
Abbey National PLC 7.35%, 10/29/49(c)... Aa 100 95,711
Credit Suisse Group 144A 7.90%,
5/29/49(b)(c)........................... A 350 333,375
Terra Nova (U.K.) Holdings 7.20%,
8/15/07................................. Baa 250 240,100
-----------
669,186
-----------
- ----------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $2,373,514) 2,213,863
- ----------------------------------------------------------------------------
<CAPTION>
SHARES
------
<S> <C> <C>
PREFERRED STOCKS--0.7%
BANKS (MAJOR REGIONAL)--0.7%
First Republic Bank Series A 144A
10.50%(b)............................... 300 296,250
- ----------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $300,000) 296,250
- ----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS--2.7%
COMPUTERS (SOFTWARE & SERVICES)--2.3%
Microsoft Corp. Series A Cv. Pfd.
2.75%................................... 9,250 931,359
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
REITS--0.2%
Equity Office Properties Trust Series B
Cv. Pfd. 144A 5.25%(b).................. 2,000 $ 77,750
SERVICES (COMMERCIAL & CONSUMER)--0.2%
United Rentals, Inc. Cv. Pfd. 144A
6.50%(b)................................ 2,000 72,750
- ----------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $1,030,000) 1,081,859
- ----------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--100.3%
(IDENTIFIED COST $40,952,209) 39,764,280
- ----------------------------------------------------------------------------
<CAPTION>
PAR
VALUE
(000)
------
SHORT-TERM OBLIGATIONS--4.7%
<S> <C> <C>
FEDERAL AGENCY SECURITIES--4.3%
FMC 5.20%, 10/1/99...................... $1,700 1,700,000
REPURCHASE AGREEMENT--0.4%
State Street Bank & Trust Co. repurchase
agreement 4.25% dated 9/30/99 due
10/1/99, repurchase price $158,019
collateralized by U.S. Treasury Bond
7.875%, 11/15/07, market value
$162,469................................ 158 158,000
- ----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,858,000) 1,858,000
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS--105.0%
(IDENTIFIED COST $42,810,209) 41,622,280(a)
Cash and receivables, less liabilities--(5.0%) (2,000,405)
-----------------
NET ASSETS--100.0% $ 39,621,875
=================
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $326,554 and gross
depreciation of $1,514,483 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $42,810,209.
(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 September 30,
1999, these securities amounted to a value of $6,401,836 or 16.2% of net
assets.
(c) Variable or step coupon security; interest rate shown reflects the rate
currently in affect.
(d) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(e) All or a portion segregated as collateral.
See Notes to Financial Statements
9
<PAGE>
Phoenix-Seneca Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $42,810,209) $41,622,280
Cash 712
Receivables
Investment securities sold 1,109,570
Interest 639,535
Fund shares sold 75,201
Receivable from adviser 34,766
Deferred organization expenses 13,527
Prepaid expenses 1,057
-----------
Total assets 43,496,648
-----------
LIABILITIES
Payables
Investment securities purchased 3,792,714
Fund shares repurchased 1,159
Transfer agent fee 12,352
Financial agent fee 6,475
Distribution fee 5,810
Trustees' fee 776
Accrued expenses 55,487
-----------
Total liabilities 3,874,773
-----------
NET ASSETS $39,621,875
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of
beneficial interest $40,317,078
Undistributed net investment income 211,548
Accumulated net realized gain 281,178
Net unrealized depreciation (1,187,929)
-----------
NET ASSETS $39,621,875
===========
CLASS X
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $34,852,599) 3,368,711
Net asset value and offering price
per share $10.35
CLASS A
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $2,732,094) 265,475
Net asset value per share $10.29
Offering price per share
$10.29/(1-4.75%) $10.80
CLASS B
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $1,593,343) 155,212
Net asset value and offering price
per share $10.27
CLASS C
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $443,839) 43,236
Net asset value and offering price
per share $10.27
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 2,467,528
Dividends 45,110
-----------
Total investment income 2,512,638
-----------
EXPENSES
Investment advisory fee 164,083
Distribution fee, Class A 2,715
Distribution fee, Class B 8,348
Distribution fee, Class C 4,007
Financial agent fee 63,648
Transfer agent 78,647
Registration 47,193
Trustees 25,636
Professional 21,422
Printing 17,498
Custodian 15,114
Amortization of deferred
organization expenses 10,658
Miscellaneous 18,310
-----------
Total expenses 477,279
Less expenses borne by
investment adviser (99,399)
Custodian fees paid indirectly (1,778)
-----------
Net expenses 376,102
-----------
NET INVESTMENT INCOME 2,136,536
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 286,567
Net change in unrealized
appreciation (depreciation) on
investments (1,374,017)
-----------
NET LOSS ON INVESTMENTS (1,087,450)
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,049,086
===========
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 2,136,536 $ 815,720
Net realized gain (loss) 286,567 272,954
Net change in unrealized appreciation (depreciation) (1,374,017) (52,850)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 1,049,086 1,035,824
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (1,783,876) (816,277)
Net investment income, Class A (62,282) (4,720)
Net investment income, Class B (41,217) (2,101)
Net investment income, Class C (19,340) (3,926)
Net realized gains, Class X (237,256) (157,929)
Net realized gains, Class A (6,691) --
Net realized gains, Class B (3,366) --
Net realized gains, Class C (4,337) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (2,158,365) (984,953)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (936,038 and 1,869,631
shares, respectively) 9,870,220 20,104,967
Net asset value of shares issued from reinvestment of
distributions
(188,148 and 89,132 shares, respectively) 1,984,360 952,261
Cost of shares repurchased (232,292 and 334,511 shares,
respectively) (2,442,507) (3,582,416)
----------- -----------
Total 9,412,073 17,474,812
----------- -----------
CLASS A
Proceeds from sales of shares (302,053 and 48,090 shares,
respectively) 3,154,123 515,460
Net asset value of shares issued from reinvestment of
distributions
(5,398 and 388 shares, respectively) 56,422 4,147
Cost of shares repurchased (74,593 and 15,861 shares,
respectively) (783,486) (168,344)
----------- -----------
Total 2,427,059 351,263
----------- -----------
CLASS B
Proceeds from sales of shares (167,067 and 23,658 shares,
respectively) 1,753,608 253,821
Net asset value of shares issued from reinvestment of
distributions
(1,944 and 135 shares, respectively) 20,300 1,443
Cost of shares repurchased (35,679 and 1,913 shares,
respectively) (375,271) (20,509)
----------- -----------
Total 1,398,637 234,755
----------- -----------
CLASS C
Proceeds from sales of shares (50,510 and 40,951 shares,
respectively) 529,791 439,691
Net asset value of shares issued from reinvestment of
distributions
(1,056 and 183 shares, respectively) 11,082 1,951
Cost of shares repurchased (49,464 and 0 shares,
respectively) (522,992) --
----------- -----------
Total 17,881 441,642
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 13,255,650 18,502,472
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 12,146,371 18,553,343
NET ASSETS
Beginning of period 27,475,504 8,922,161
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$211,548 AND ($11,789), RESPECTIVELY] $39,621,875 $27,475,504
=========== ===========
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Phoenix-Seneca Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
--------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30, INCEPTION
------------------------------- 3/7/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.68 $ 10.47 $ 10.09 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.69(1)(6) 0.56 0.62(1) 0.31(1)
Net realized and unrealized gain
(loss) (0.31) 0.40 0.47 0.08
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 0.38 0.96 1.09 0.39
------- ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.62) (0.57) (0.69) (0.30)
Dividends from net realized gains (0.09) (0.18) (0.02) --
------- ------- ------- ------
TOTAL DISTRIBUTIONS (0.71) (0.75) (0.71) (0.30)
------- ------- ------- ------
Change in net asset value (0.33) 0.21 0.38 0.09
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 10.68 $ 10.47 $10.09
======= ======= ======= ======
Total return(2) 3.51% 9.44% 11.26% 4.02%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $34,853 $26,455 $ 8,922 $3,927
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.06%(5)(7) 1.66% 1.53%(5) 0.56%(3)(5)
Net investment income (loss) 6.60% 5.92% 6.31% 7.54%(3)
Portfolio turnover 95% 112% 99.68% 52.82%(4)
</TABLE>
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $0.69, $0.47 and $(0.05) for the years ended
September 30, 1999 and September 30, 1997 and the period ended September
30, 1996, respectively.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(3) Annualized.
(4) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.13% and
3.41% and 9.31% for the years ended September 30, 1999 and September 30,
1997 and the period ended September 30, 1996, respectively.
(6) Computed using average shares outstanding.
(7) For the year ended September 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.
12
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.68 $10.79 $10.67 $10.79
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.59(1)(10) 0.13(1)(10) 0.52(2)(10) 0.11(2)(10)
Net realized and
unrealized gain
(loss) (0.33) (0.07) (0.33) (0.08)
------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS 0.26 0.06 0.19 0.03
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.56) (0.17) (0.50) (0.15)
Dividends from net
realized gains (0.09) -- (0.09) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.65) (0.17) (0.59) (0.15)
------ ------ ------ ------
Change in net asset value (0.39) (0.11) (0.40) (0.12)
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $10.29 $10.68 $10.27 $10.67
====== ====== ====== ======
Total return(4) 2.46% 0.53%(6) 1.67% 0.28%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $2,732 $ 348 $1,593 $ 234
RATIO TO AVERAGE NET
ASSETS OF:
Operating expenses 1.88%(7)(11) 2.45%(5)(7) 2.62%(8)(11) 3.20%(5)(8)
Net investment income
(loss) 5.80% 5.17%(5) 5.09% 4.42%(5)
Portfolio turnover 95% 112%(6) 95% 112%(6)
<CAPTION>
CLASS C
---------------------------
FROM
YEAR INCEPTION
ENDED 7/1/98 TO
9/30/99 9/30/98
<S> <C> <C>
Net asset value,
beginning of period $10.67 $10.79
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.49(3)(10) 0.10(3)(10)
Net realized and
unrealized gain
(loss) (0.30) (0.07)
------ ------
TOTAL FROM
INVESTMENT
OPERATIONS 0.19 0.03
------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.50) (0.15)
Dividends from net
realized gains (0.09) --
------ ------
TOTAL DISTRIBUTIONS (0.59) (0.15)
------ ------
Change in net asset value (0.40) (0.12)
------ ------
NET ASSET VALUE, END OF
PERIOD $10.27 $10.67
====== ======
Total return(4) 1.66% 0.28%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $ 444 $ 439
RATIO TO AVERAGE NET
ASSETS OF:
Operating expenses 2.91%(9)(11) 3.20%(5)(9)
Net investment income
(loss) 4.71% 4.27%(5)
Portfolio turnover 95% 112%(6)
</TABLE>
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $0.36 and $(0.03) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(2) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $0.21 and $(0.21) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(3) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(0.20) and $(0.08) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(4) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(5) Annualized.
(6) Not annualized.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 4.08% and
8.99% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 5.67% and
15.79% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(9) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 9.50% and
11.22% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(10) Computed using average shares outstanding.
(11) For the year ended September 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
13
<PAGE>
PHOENIX-SENECA GROWTH FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, GAIL P. SENECA, PH.D.,
AND RICHARD D. LITTLE, CFA
Q: WHAT IS THE INVESTMENT OBJECTIVE OF THE FUND?
A: The Phoenix-Seneca Growth Fund seeks capital appreciation by investing in
stocks across all market capitalizations. The Fund takes a growth-
with-controlled-risk approach, combining the growth potential of mid-cap stocks
with the appreciation potential of well-established, large-cap stocks. The Fund
is suitable for investors who seek capital appreciation through a conservative,
disciplined approach.
Q: CAN YOU PROVIDE A BRIEF OVERVIEW OF THE MARKET?
A: In this year's volatile and spotty market, growth stocks, led by the largest
technology companies, have been the clear winners. This year's growth stock
advantage continues a two-year trend, during which "growth" has outperformed
"value" by a wide margin. As a result, today's growth stocks sport their highest
valuations ever.
We believe these valuations are sustainable. The corporate fundamentals of
"growth" stocks today are excellent. Real returns on equity are at all-time
highs, meaning that companies are leveraging their capital effectively. Revenue
and earnings growth of the largest technology companies is in double-digit
territory, a remarkable achievement for multibillion-dollar enterprises.
Research and development spending and current capital spending are robust,
suggesting investment for future growth.
The moderation of the boom/bust cycle in the overall economy should also
help sustain generous growth stock valuations. Due largely to technology
improvements, inventory-led booms and busts have been notably absent for the
last 10 years. Instead, the economy oscillates modestly, pausing only for short
and shallow recessions. In this more tempered business cycle, it is difficult
for cyclical companies to gain relative advantage. In contrast, growth stocks
prosper.
Q: HOW DID THE PORTFOLIO PERFORM IN THIS ENVIRONMENT?
A: Our growth-oriented portfolio performed very well. Class A shares returned
31.89%, Class B shares earned 30.31%, Class C shares were up 30.20%, and
Class X shares earned 32.19% for the fiscal year ended September 30, 1999,
compared with a return of 27.73% for the S&P 500 Index(1). All performance
figures assume reinvestment of distributions and exclude the effect of sales
charges.
Q: WHAT IS YOUR NEAR-TERM OUTLOOK?
A: Difficult liquidity conditions in the market will probably persist in the
near term, and as the media embraces the "Y2K" drama, investors may react
rashly. We expect market action in the next few months to rival the volatility
that has plagued us all year.
Amid this turmoil, however, we believe very favorable fundamental conditions
remain intact. Corporate earnings quality is strengthening, with fewer
write-offs and stronger operating earnings. And, despite well-advertised
inflation threats, actual inflation readings should remain subdued. The Federal
Reserve could raise rates yet again, but the bulk of the interest rate rise is
very likely behind us, in our opinion.
OCTOBER 19, 1999
(1) 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.
14
<PAGE>
Phoenix-Seneca Growth Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 9/30/99 DATE
------- ----------- ---------
<S> <C> <C> <C>
Class X Shares at NAV(2) 32.19% 29.42% 3/8/96
Class A Shares at NAV(2) 31.89 28.65 3/8/96
Class A Shares at POP(3) 25.62 26.90 3/8/96
Class B Shares at NAV(2) 30.31 10.09 7/1/98
Class B Shares with CDSC(4) 26.31 6.95 7/1/98
Class C Shares at NAV(2) 30.20 9.96 7/1/98
Class C Shares with CDSC(4) 30.20 9.96 7/1/98
S&P 500 Index(7) 27.73 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 24.05% for Class X and Class A (since 3/8/96) and
10.81% for Class B and Class C (since 7/1/98).
(6) This chart illustrates NAV returns on Class X shares and POP returns on
Class A shares. Returns on Class B and Class C shares will vary due to
differing sales charges.
(7) The S&P 500 Index is an unmanaged, commonly used measure of stock market
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 9/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX-SENECA GROWTH PHOENIX-SENECA GROWTH S&P
Fund Class X at Fund Class A at 500
NAV(6) POP(6) Index(7)
<S> <C> <C> <C>
3/8/1996 $10,000 $9,525 $10,000
9/30/1996 $13,740 $12,983 $10,992
9/30/1997 $17,486 $16,424 $15,462
9/30/1998 $18,968 $17,726 $16,876
9/30/1999 $25,074 $23,378 $21,556
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
3/8/96 (inception of the Fund) in Class X and A shares. The total return for
Class X shares reflects no sales charge. The total return for Class A shares
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 9/30/99
As a percentage of equity holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 32%
Consumer Cyclicals 13
Financials 11
Energy 10
Capital Goods 8
Consumer Staples 8
Communication Service 7
Other 11
</TABLE>
15
<PAGE>
Phoenix-Seneca Growth Fund
TEN LARGEST HOLDINGS AT SEPTEMBER 30, 1999 (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<C> <S> <C>
1. Tyco International Ltd. 4.2%
DIVERSIFIED MANUFACTURING AND SERVICES COMPANY
2. Microsoft Corp. 4.2%
WORLD'S LEADING COMPUTER SOFTWARE COMPANY
3. Sun Microsystems, Inc. 4.1%
SUPPLIER OF ENTERPRISE NETWORK COMPUTING PRODUCTS
4. Outdoor Systems, Inc. 3.8%
OPERATES MALL AND TRANSIT ADVERTISING DISPLAYS
5. Citigroup, Inc. 3.7%
DIVERSIFIED FINANCIAL SERVICES HOLDING COMPANY
6. Nortel Networks Corp. (Canada) 3.7%
TELECOMMUNICATIONS EQUIPMENT MANUFACTURER
7. General Electric Co. 3.6%
DIVERSIFIED MANUFACTURING AND FINANCIAL SERVICES PROVIDER
8. Bristol-Myers Squibb Co. 3.5%
COMPREHENSIVE HEALTH-CARE COMPANY
9. Morgan Stanley Dean Witter & Co. 3.5%
PROVIDES A BROAD RANGE OF CREDIT AND INVESTMENT PRODUCTS TO
INDIVIDUALS
10. Motorola, Inc. 3.5%
GLOBAL PROVIDER OF INTEGRATED COMMUNICATIONS PRODUCTS
</TABLE>
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
COMMON STOCKS--85.8%
ALUMINUM--3.5%
Alcoa, Inc.............................. 40,660 $ 2,523,461
BANKS (MAJOR REGIONAL)--3.0%
Mellon Bank Corp........................ 64,410 2,173,838
BROADCASTING (TELEVISION, RADIO & CABLE)--3.3%
AMFM, Inc.(b)........................... 39,590 2,410,041
CHEMICALS--2.1%
Dow Chemical Co......................... 13,210 1,500,986
COMMUNICATIONS EQUIPMENT--6.2%
General Motors Corp. Class H(b)......... 34,540 1,977,415
Motorola, Inc........................... 28,770 2,531,760
-----------
4,509,175
-----------
COMPUTERS (HARDWARE)--6.0%
International Business Machines Corp.... 11,590 1,406,736
Sun Microsystems, Inc.(b)............... 32,000 2,976,000
-----------
4,382,736
-----------
COMPUTERS (NETWORKING)--3.0%
Cisco Systems, Inc.(b).................. 29,140 1,997,911
Internap Network Services Corp.(b)...... 4,040 180,285
-----------
2,178,196
-----------
COMPUTERS (SOFTWARE & SERVICES)--4.2%
Microsoft Corp.(b)...................... 33,740 3,055,579
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
ELECTRICAL EQUIPMENT--3.6%
General Electric Co..................... 22,060 $ 2,615,489
ELECTRONICS (SEMICONDUCTORS)--1.3%
Intel Corp.............................. 13,200 980,925
FINANCIAL (DIVERSIFIED)--7.2%
Citigroup, Inc.......................... 61,930 2,724,920
Morgan Stanley Dean Witter & Co......... 28,450 2,537,384
-----------
5,262,304
-----------
FOODS--1.8%
General Mills, Inc...................... 16,480 1,336,940
HEALTH CARE (DIVERSIFIED)--5.9%
Bristol-Myers Squibb Co................. 37,940 2,560,950
Johnson & Johnson....................... 18,940 1,740,113
-----------
4,301,063
-----------
HOUSEHOLD FURNISHINGS & APPLIANCES--1.2%
Whirlpool Corp.......................... 13,990 913,722
HOUSEHOLD PRODUCTS (NON-DURABLE)--2.4%
Procter & Gamble Co. (The).............. 18,540 1,738,125
MANUFACTURING (DIVERSIFIED)--4.2%
Tyco International Ltd.................. 29,610 3,057,233
OIL & GAS (DRILLING & EQUIPMENT)--6.4%
Baker Hughes, Inc....................... 74,100 2,148,900
Halliburton Co.......................... 60,870 2,495,670
-----------
4,644,570
-----------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Growth Fund
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
OIL (INTERNATIONAL INTEGRATED)--3.1%
Texaco, Inc............................. 36,350 $ 2,294,594
RETAIL (COMPUTERS & ELECTRONICS)--3.1%
Tandy Corp.............................. 43,750 2,261,328
RETAIL (GENERAL MERCHANDISE)--1.9%
Wal-Mart Stores, Inc.................... 29,900 1,422,119
RETAIL (SPECIALTY-APPAREL)--2.4%
TJX Companies, Inc. (The)............... 62,290 1,748,013
SERVICES (ADVERTISING/MARKETING)--3.8%
Outdoor Systems, Inc.(b)................ 76,590 2,738,093
TELECOMMUNICATIONS (LONG DISTANCE)--3.2%
MCI WorldCom, Inc.(b)................... 32,950 2,368,281
TELEPHONE--3.0%
Bell Atlantic Corp...................... 32,190 2,166,789
- - ------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $52,029,496) 62,583,600
- - ------------------------------------------------------------------
FOREIGN COMMON STOCKS--9.7%
COMMUNICATIONS EQUIPMENT--6.9%
Nokia Oyj Sponsored ADR (Finland)....... 25,850 2,321,653
Nortel Networks Corp. (Canada).......... 52,730 2,689,230
-----------
5,010,883
-----------
ELECTRONICS (SEMICONDUCTORS)--2.8%
STMicroelectronics N.V. (Netherlands)... 27,300 2,020,200
- - ------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $6,778,972) 7,031,083
- - ------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--95.5%
(IDENTIFIED COST $58,808,468) 69,614,683
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
------- -----------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--7.6%
REPURCHASE AGREEMENT--7.6%
State Street Bank & Trust Co. repurchase
agreement, 4.25%, dated 9/30/99 due
10/1/99, repurchase price $5,545,655
collateralized by U.S. Treasury Note
5.50%, 3/31/00, market value
$5,657,063.............................. $ 5,545 $ 5,545,000
- - ------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $5,545,000) 5,545,000
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS--103.1%
(IDENTIFIED COST $64,353,468) $ 75,159,683(a)
Cash and receivables, less liabilities--(3.1%) (2,236,353)
-------------
NET ASSETS--100.0% 72,923,330
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $12,536,684 and gross
depreciation of $1,844,747 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $64,467,746.
(b) Non-income producing.
See Notes to Financial Statements
17
<PAGE>
Phoenix-Seneca Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $64,353,468) $75,159,683
Cash 898
Receivables
Fund shares sold 158,602
Dividends and interest 35,815
Deferred organization expenses 13,527
Prepaid expenses 3,669
-----------
Total assets 75,372,194
-----------
LIABILITIES
Payables
Investment securities purchased 2,292,003
Fund shares repurchased 7,910
Distribution fee 32,748
Transfer agent fee 13,453
Investment advisory fee 13,450
Financial agent fee 5,852
Trustees' fee 856
Accrued expenses 82,592
-----------
Total liabilities 2,448,864
-----------
NET ASSETS $72,923,330
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest $55,020,063
Accumulated net realized gain 7,097,052
Net unrealized appreciation 10,806,215
-----------
NET ASSETS $72,923,330
===========
CLASS X
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$35,694,595) 1,791,537
Net asset value and offering price per share $19.92
CLASS A
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$31,000,738) 1,584,310
Net asset value per share $19.57
Offering price per share $19.57/(1-4.75%) $20.55
CLASS B
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$4,394,693) 227,897
Net asset value and offering price per share $19.28
CLASS C
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$1,833,304) 95,222
Net asset value and offering price per share $19.25
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 465,256
Interest 141,205
-----------
Total investment income 606,461
-----------
EXPENSES
Investment advisory fee 443,317
Distribution fee, Class A 66,526
Distribution fee, Class B 24,197
Distribution fee, Class C 9,293
Financial agent fee 85,097
Transfer agent 88,614
Registration 53,567
Printing 40,695
Trustees 25,716
Professional 23,412
Custodian 12,443
Amortization of deferred
organization expenses 10,658
Miscellaneous 23,541
-----------
Total expenses 907,076
Less expenses borne by
investment adviser (49,249)
-----------
Net expenses 857,827
-----------
NET INVESTMENT LOSS (251,366)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 7,420,446
Net change in unrealized
appreciation (depreciation) on
investments 8,897,166
-----------
NET GAIN ON INVESTMENTS 16,317,612
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $16,066,246
===========
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (251,366) $ (23,589)
Net realized gain (loss) 7,420,446 5,786,850
Net change in unrealized appreciation (depreciation) 8,897,166 (3,716,413)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 16,066,246 2,046,848
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X -- (28,234)
Net realized gains, Class X (2,678,808) (2,638,126)
Net realized gains, Class A (2,257,410) (456,891)
Net realized gains, Class B (125,950) --
Net realized gains, Class C (32,675) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (5,094,843) (3,123,251)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (191,178 and 285,390 shares,
respectively) 3,657,324 4,884,932
Net asset value of shares issued from reinvestment of
distributions
(152,656 and 175,598 shares, respectively) 2,665,381 2,655,713
Cost of shares repurchased (417,927 and 669,955 shares,
respectively) (7,626,080) (11,501,669)
----------- -----------
Total (1,303,375) (3,961,024)
----------- -----------
CLASS A
Proceeds from sales of shares (713,052 and 903,203 shares,
respectively) 12,978,542 16,095,224
Net asset value of shares issued from reinvestment of
distributions
(130,999 and 30,397 shares, respectively) 2,250,565 454,436
Cost of shares repurchased (329,410 and 233,349 shares,
respectively) (5,879,689) (3,581,463)
----------- -----------
Total 9,349,418 12,968,197
----------- -----------
CLASS B
Proceeds from sales of shares (209,861 and 32,039 shares,
respectively) 3,860,313 544,661
Net asset value of shares issued from reinvestment of
distributions
(5,386 and 0 shares, respectively) 92,053 --
Cost of shares repurchased (19,389 and 0 shares,
respectively) (368,688) --
----------- -----------
Total 3,583,678 544,661
----------- -----------
CLASS C
Proceeds from sales of shares (88,996 and 7,802 shares,
respectively) 1,633,483 139,674
Net asset value of shares issued from reinvestment of
distributions
(1,890 and 0 shares, respectively) 32,392 --
Cost of shares repurchased (3,466 and 0 shares,
respectively) (65,089) --
----------- -----------
Total 1,600,786 139,674
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 13,230,507 9,691,508
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 24,201,910 8,615,105
NET ASSETS
Beginning of period 48,721,420 40,106,315
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $72,923,330 $48,721,420
=========== ===========
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Phoenix-Seneca Growth Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
----------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
------------------------------------ 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.46 $ 16.43 $ 13.74 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.04)(1) 0.00(1) 0.03(2) 0.03(2)
Net realized and unrealized gain (loss) 5.11 1.28 3.50 3.71
------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 5.07 1.28 3.53 3.74
------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.02) (0.07) --
Dividends from net realized gains (1.61) (1.23) (0.77) --
------- ------- -------- -------
TOTAL DISTRIBUTIONS (1.61) (1.25) (0.84) --
------- ------- -------- -------
Change in net asset value 3.46 0.03 2.69 3.74
------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 19.92 $ 16.46 $ 16.43 $ 13.74
======= ======= ======== =======
Total return(3) 32.19 % 8.48% 27.27% 37.40%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $35,695 $30,713 $34,093 $12,920
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.16 % 1.14% 1.52%(6) 0.81%(4)(6)
Net investment income (loss) (0.20)% 0.02% 0.31% 0.76%(4)
Portfolio turnover 169 % 166% 145.69% 87.66%(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the investment adviser. If the
investment adviser had not waived fees and reimbursed expenses, net
investment income (loss) per share would have been $0.03 and $(0.09) for the
year ended September 30, 1997 and the period ended September 30, 1996,
respectively.
(3) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.52% and
3.49% for the year ended September 30, 1997 and the period ended
September 30, 1996, respectively.
20 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Growth Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
---------------------------------- 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.23 $ 16.28 $13.63 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.09)(1) (0.06)(1) (0.08)(2) --(2)
Net realized and unrealized gain 5.04 1.24 3.50 3.63
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.95 1.18 3.42 3.63
------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.61) (1.23) (0.77) --
------- ------- ------ ------
TOTAL DISTRIBUTIONS (1.61) (1.23) (0.77) --
------- ------- ------ ------
Change in net asset value 3.34 (0.05) 2.65 3.63
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 19.57 $ 16.23 $16.28 $13.63
======= ======= ====== ======
Total return(3) 31.89 % 7.93 % 26.51 % 36.30%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $31,001 $17,364 $6,013 $466
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.44 % 1.55 % 2.48 %(6) 1.46%(4)(6)
Net investment income (loss) (0.49)% (0.36)% (0.62)% 0.16%(4)
Portfolio turnover 169 % 166 % 145.69 % 87.66%(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the investment adviser. If the
investment adviser had not waived fees and reimbursed expenses, net
investment income (loss) per share would have been $(0.09) and $(0.34) for
the year ended September 30, 1997 and the period ended September 30, 1996,
respectively.
(3) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.63% and
14.01% for the year ended September 30, 1997 and the period ended
September 30, 1996, respectively.
See Notes to Financial Statements 21
<PAGE>
Phoenix-Seneca Growth Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.19 $18.71 $16.18 $18.71
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.31)(1)(8) (0.04)(1)(8) (0.32)(2)(8) (0.06)(2)(8)
Net realized and unrealized gain (loss) 5.01 (2.48) 5.00 (2.47)
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.70 (2.52) 4.68 (2.53)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.61) -- (1.61) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.61) -- (1.61) --
------ ------ ------ ------
Change in net asset value 3.09 (2.52) 3.07 (2.53)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $19.28 $16.19 $19.25 $16.18
====== ====== ====== ======
Total return(3) 30.31 % (13.47)%(5) 30.20 % (13.52)%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $4,395 $519 $1,833 $126
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.60 %(6) 2.60 %(4)(6) 2.60 %(7) 2.60%(4)(7)
Net investment income (loss) (1.66)% (1.12)%(4) (1.66)% (1.39)%(4)
Portfolio turnover 169 % 166 %(5) 169 % 166 %(5)
</TABLE>
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(0.47) and $(0.36) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(2) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(0.90) and $(0.79) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(3) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 3.46% and
12.48% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 5.67% and
20.24% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) Computed using average shares outstanding.
22 See Notes to Financial Statements
<PAGE>
PHOENIX-SENECA MID-CAP "EDGE"-SM- FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, GAIL P. SENECA, PH.D., AND
RICHARD D. LITTLE, CFA
Q: WHAT IS THE INVESTMENT OBJECTIVE OF THE FUND?
A: The Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund seeks capital appreciation by
investing in rapidly growing companies with the potential for accelerating
revenues and increasing profits.
Q: HOW DID THE FUND PERFORM OVER THE LAST 12 MONTHS?
A: For the fiscal year ended September 30, 1999, Class A shares returned 32.27%,
Class B shares earned 31.05%, Class C shares were up 31.07%, and Class X shares
rose 33.02%. These returns compare with a return of 25.49% for the S&P 400
MidCap Index(1). All performance figures assume reinvestment of distributions
and exclude the effect of sales charges.
Q: WHAT FACTORS LED TO YOUR STRONG PERFORMANCE RELATIVE TO THE BENCHMARK?
A: Good stock selection and the outperformance of "growth" sectors, such as
technology, helped the portfolio's performance. The best performing stocks
included Xilinx, a producer of programmable semiconductors, RF Micro Devices, a
developer of power boosters that extend battery life and improve cell phone
range, and VERITAS Software, a maker of computer storage management products. We
also benefited from limited exposure to the financial services and health-care
sectors, which continued to underperform.
Q: WHAT IS YOUR NEAR-TERM OUTLOOK?
A: Difficult liquidity conditions in the market will probably persist in the
near term, and as the media embraces the "Y2K" drama, investors may react
rashly. We expect market action in the next few months to rival the volatility
that has plagued us all year.
Amid this turmoil, however, we believe very favorable fundamental conditions
remain intact. Corporate earnings quality is strengthening, with fewer
write-offs and stronger operating earnings. And, despite well-advertised
inflation threats, actual inflation readings should remain subdued. The Federal
Reserve could raise rates yet again, but the bulk of the interest rate rise is
very likely behind us, in our opinion.
OCTOBER 19, 1999
(1) THE S&P 400 MIDCAP INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF MID-CAP
STOCK TOTAL RETURN PERFORMANCE. THE INDEX IS NOT AVAILABLE FOR DIRECT
INVESTMENT.
23
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 9/30/99 DATE
------- ---------- ---------
<S> <C> <C> <C>
Class X Shares at NAV(2) 33.02% 23.54% 3/8/96
Class A Shares at NAV(2) 32.27 23.02 3/8/96
Class A Shares at POP(3) 25.99 21.35 3/8/96
Class B Shares at NAV(2) 31.05 3.92 7/1/98
Class B Shares with CDSC(4) 27.05 0.73 7/1/98
Class C Shares at NAV(2) 31.07 3.87 7/1/98
Class C Shares with CDSC(4) 31.07 3.87 7/1/98
S&P 400 MidCap Index(7) 25.49 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 17.54% for Class X and Class A (since 3/8/96) and
4.53% for Class B and Class C (since 7/1/98).
(6) This chart illustrates NAV returns on Class X shares and POP returns on
Class A shares. Returns on Class B and Class C shares will vary due to
differing sales charges.
(7) The S&P 400 MidCap Index is an unmanaged, commonly used measure of mid-cap
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 9/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX-SENECA MID-CAP PHOENIX-SENECA MID-CAP S&P 400
<S> <C> <C> <C>
"EDGE"-SM- Fund Class "EDGE"-SM- Fund Class MidCap
X at NAV(6) A at POP(6) Index(7)
3/96 $10,000 $9,525 $10,000
96 $14,970 $14,221 $10,876
97 $16,676 $15,820 $15,129
98 $15,972 $15,070 $14,176
99 $21,246 $19,933 $17,791
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
3/8/96 (inception of the Fund) in Class X and A shares. The total return for
Class X shares reflects no sales charge. The total return for Class A shares
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 9/30/99
As a percentage of equity holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Technology 44%
Consumer Cyclicals 22
Energy 8
Capital Goods 7
Financials 7
Basic Materials 6
Consumer Staples 6
</TABLE>
24
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
TEN LARGEST HOLDINGS AT SEPTEMBER 30, 1999 (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<C> <S> <C>
1. Comverse Technology, Inc. 4.7%
MANUFACTURES SPECIAL PURPOSE COMPUTER AND TELECOMMUNICATIONS
SYSTEMS
2. Tandy Corp. 4.5%
CONSUMER ELECTRONICS RETAILER
3. VERITAS Software Corp. 4.5%
SUPPLIER OF DATA STORAGE MANAGEMENT SOLUTIONS
4. Xilinx, Inc. 3.9%
DESIGNS AND SELLS PROGRAMMABLE LOGIC DEVICES
5. Weatherford International, Inc. 3.9%
OIL AND GAS EQUIPMENT SUPPLIER
6. KLA-Tencor Corp. 3.8%
SEMICONDUCTOR MANUFACTURER
7. UnionBanCal Corp. 3.8%
PACIFIC REGIONAL BANK
8. PMC-Sierra, Inc. 3.7%
MANUFACTURER OF SEMICONDUCTORS AND INTEGRATED CIRCUITS
9. Nabors Industries, Inc. 3.5%
OIL AND GAS LAND DRILLING CONTRACTOR
10. SPX Corp. 3.5%
PROVIDES SERVICE TOOLS TO THE MOTOR VEHICLE INDUSTRY
</TABLE>
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
COMMON STOCKS--95.0%
AUTO PARTS & EQUIPMENT--2.3%
Lear Corp.(b)................. 13,100 $ 460,956
BANKS (MAJOR REGIONAL)--2.7%
Comerica, Inc................. 10,505 531,816
BANKS (REGIONAL)--3.8%
UnionBanCal Corp.............. 20,500 743,125
BROADCASTING (TELEVISION, RADIO & CABLE)--6.1%
AMFM, Inc.(b)................. 10,660 648,927
EchoStar Communications
Corp.(b)...................... 6,240 566,670
-----------
1,215,597
-----------
CHEMICALS (SPECIALTY)--1.5%
Hercules, Inc................. 10,310 295,124
COMMUNICATIONS EQUIPMENT--7.0%
American Tower Corp. Class
A(b).......................... 23,850 466,566
Comverse Technology,
Inc.(b)....................... 9,795 923,791
-----------
1,390,357
-----------
COMPUTERS (HARDWARE)--4.2%
Copper Mountain Networks,
Inc.(b)....................... 4,460 390,807
Paradyne Networks, Inc.(b).... 15,770 441,560
-----------
832,367
-----------
COMPUTERS (SOFTWARE & SERVICES)--4.5%
VERITAS Software Corp.(b)..... 11,690 887,709
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
ELECTRICAL EQUIPMENT--4.7%
SPX Corp.(b).................. 7,540 $ 684,255
Universal Electronics,
Inc.(b)....................... 10,750 248,594
-----------
932,849
-----------
ELECTRONICS (SEMICONDUCTORS)--19.2%
Applied Micro Circuits
Corp.(b)...................... 9,520 542,640
LSI Logic Corp.(b)............ 10,100 520,150
PMC-Sierra, Inc.(b)........... 7,940 734,450
RF Micro Devices, Inc.(b)..... 14,520 664,290
SDL, Inc.(b).................. 7,250 553,266
Xilinx, Inc.(b)............... 11,790 772,613
-----------
3,787,409
-----------
EQUIPMENT (SEMICONDUCTOR)--3.8%
KLA-Tencor Corp.(b)........... 11,530 749,450
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--0.5%
Park Place Entertainment
Corp.(b)...................... 7,600 95,000
MANUFACTURING (DIVERSIFIED)--2.0%
Yankee Candle Co., Inc.
(The)(b)...................... 20,650 398,803
OIL & GAS (DRILLING & EQUIPMENT)--7.4%
Nabors Industries, Inc.(b).... 27,590 689,750
Weatherford International,
Inc.(b)....................... 23,880 764,160
-----------
1,453,910
-----------
PAPER & FOREST PRODUCTS--4.7%
Mead Corp. (The).............. 12,250 421,094
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
PAPER & FOREST PRODUCTS--CONTINUED
Smurfit-Stone Container
Corp.(b)...................... 23,300 $ 503,863
-----------
924,957
-----------
RETAIL (COMPUTERS & ELECTRONICS)--6.8%
Best Buy Co., Inc.(b)......... 7,430 461,124
Tandy Corp.................... 17,200 889,025
-----------
1,350,149
-----------
RETAIL (SPECIALTY-APPAREL)--5.8%
Abercrombie & Fitch Co. Class
A(b).......................... 16,910 575,997
TJX Companies, Inc. (The)..... 20,290 569,388
-----------
1,145,385
-----------
SERVICES (ADVERTISING/MARKETING)--3.2%
Outdoor Systems, Inc.(b)...... 17,485 625,089
SERVICES (COMMERCIAL & CONSUMER)--2.1%
Crown Castle International
Corp.(b)...................... 22,220 415,931
SERVICES (DATA PROCESSING)--2.7%
Concord EFS, Inc.(b).......... 25,890 533,981
- - ---------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $16,579,214) 18,769,964
- - ---------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--95.0%
(IDENTIFIED COST $16,579,214) 18,769,964
- - ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
------- ------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--10.4%
REPURCHASE AGREEMENT--10.4%
State Street Bank & Trust Co.
repurchase agreement, 4.25%,
dated 9/30/99 due 10/1/99,
repurchase price $2,052,242
collateralized by U.S.
Treasury Note 5.50%, 3/31/00,
market value $2,097,619....... $ 2,052 $ 2,052,000
- - ---------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $2,052,000) 2,052,000
- - ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
TOTAL INVESTMENTS--105.4%
(IDENTIFIED COST $18,631,214) 20,821,964(a)
Cash and receivables, less
liabilities--(5.4%) (1,074,280)
-----------
NET ASSETS--100.0% $19,747,684
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $3,283,643 and gross
depreciation of $1,093,324 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $18,631,645.
(b) Non-income producing.
26
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $18,631,214) $20,821,964
Cash 14,621
Receivables
Fund shares sold 112,218
Investment securities sold 42,843
Dividends and interest 8,604
Receivable from adviser 7,917
Deferred organization expenses 13,527
Prepaid expenses 1,132
-----------
Total assets 21,022,826
-----------
LIABILITIES
Payables
Investment securities purchased 1,177,527
Fund shares repurchased 1,037
Transfer agent fee 13,298
Distribution fee 10,031
Financial agent fee 5,352
Trustees' fee 913
Accrued expenses 66,984
-----------
Total liabilities 1,275,142
-----------
NET ASSETS $19,747,684
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest 15,537,102
Accumulated net realized gain 2,019,832
Net unrealized appreciation 2,190,750
-----------
NET ASSETS $19,747,684
===========
CLASS X
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$10,640,039) 598,363
Net asset value and offering price per share $17.78
CLASS A
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$6,456,794) 366,822
Net asset value per share $17.60
Offering price per share $17.60/(1-4.75%) $18.48
CLASS B
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$1,675,972) 96,280
Net asset value and offering price per share $17.41
CLASS C
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$974,879) 56,027
Net asset value and offering price per share $17.40
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 66,889
Interest 56,334
----------
Total investment income 123,223
----------
EXPENSES
Investment advisory fee 142,594
Distribution fee, Class A 13,633
Distribution fee, Class B 8,493
Distribution fee, Class C 4,918
Financial agent fee 54,410
Transfer agent 85,382
Registration 44,456
Printing 29,112
Trustees 25,773
Professional 16,744
Amortization of deferred organization
expenses 10,658
Custodian 9,906
Miscellaneous 4,879
----------
Total expenses 450,958
Less expenses borne by investment
adviser (51,919)
----------
Net expenses 399,039
----------
NET INVESTMENT LOSS (275,816)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 2,299,388
Net change in unrealized appreciation
(depreciation) on investments 2,415,950
----------
NET GAIN ON INVESTMENTS 4,715,338
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $4,439,522
==========
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (275,816) $ (201,569)
Net realized gain (loss) 2,299,388 895,515
Net change in unrealized appreciation (depreciation) 2,415,950 (1,612,591)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 4,439,522 (918,645)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class X (355,856) (1,092,044)
Net realized gains, Class A (166,088) (289,481)
Net realized gains, Class B (11,063) --
Net realized gains, Class C (9,446) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (542,453) (1,381,525)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (143,563 and 135,008 shares,
respectively) 2,478,919 2,127,609
Net asset value of shares issued from reinvestment of
distributions
(21,703 and 84,041 shares, respectively) 354,621 1,090,132
Cost of shares repurchased (214,035 and 142,018 shares,
respectively) (3,757,537) (2,045,120)
----------- -----------
Total (923,997) 1,172,621
----------- -----------
CLASS A
Proceeds from sales of shares (228,931 and 159,888 shares,
respectively) 3,836,768 2,538,940
Net asset value of shares issued from reinvestment of
distributions
(10,097 and 22,073 shares, respectively) 163,976 286,061
Cost of shares repurchased (138,776 and 62,130 shares,
respectively) (2,331,488) (947,854)
----------- -----------
Total 1,669,256 1,877,147
----------- -----------
CLASS B
Proceeds from sales of shares (86,897 and 10,599 shares,
respectively) 1,460,274 169,635
Net asset value of shares issued from reinvestment of
distributions
(684 and 0 shares, respectively) 11,062 --
Cost of shares repurchased (1,900 and 0 shares,
respectively) (31,603) --
----------- -----------
Total 1,439,733 169,635
----------- -----------
CLASS C
Proceeds from sales of shares (49,078 and 7,538 shares,
respectively) 821,159 125,992
Net asset value of shares issued from reinvestment of
distributions
(402 and 0 shares, respectively) 6,510 --
Cost of shares repurchased (991 and 0 shares,
respectively) (16,970) --
----------- -----------
Total 810,699 125,992
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 2,995,691 3,345,395
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 6,892,760 1,045,225
NET ASSETS
Beginning of period 12,854,924 11,809,699
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $19,747,684 $12,854,924
=========== ===========
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
-----------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
-------------------------------------------- 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.81 $ 16.47 $ 14.97 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.21)(1) (0.23)(1)(2) (0.17)(2) 0.01(2)
Net realized and unrealized gain
(loss) 4.72 (0.58) 1.84 4.96
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.51 (0.81) 1.67 4.97
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (0.07) --
Dividends from net realized gains (0.54) (1.85) (0.10) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) (1.85) (0.17) --
------- ------- ------- -------
Change in net asset value 3.97 (2.66) 1.50 4.97
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.78 $ 13.81 $ 16.47 $ 14.97
======= ======= ======= =======
Total return(3) 33.02 % (4.22) % 11.39 % 49.70%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $10,640 $ 8,940 $ 9,390 $ 7,428
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.96 % 2.10 %(6) 1.74 %(6) 0.90%(4)(6)
Net investment income (loss) (1.27)% (1.49)% (0.97) % 0.27%(4)
Portfolio turnover 192 % 206 % 283.60 % 72.34%(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the investment adviser. If the
investment adviser had not waived fees and reimbursed expenses, net
investment income (loss) per share would have been $(0.27), $(0.33) and
$(0.19) for the years ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
(3) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.38%,
2.77% and 5.73% for the years ended September 30, 1998 and 1997 and the
period ended September 30, 1996, respectively.
See Notes to Financial Statements 29
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
-------------------------------------------- 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.75 $ 16.49 $ 14.94 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.31)(1) (0.30)(1)(2) (0.25)(2) (0.01)(2)
Net realized and unrealized gain
(loss) 4.70 (0.59) 1.90 4.95
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.39 (0.89) 1.65 4.94
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.54) (1.85) (0.10) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) (1.85) (0.10) --
------- ------- ------- -------
Change in net asset value 3.85 (2.74) 1.55 4.94
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.60 $ 13.75 $ 16.49 $ 14.94
======= ======= ======= =======
Total return(3) 32.27 % (4.74) % 11.25 % 49.30 %(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 6,457 $ 3,666 $ 2,419 $ 1,355
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.51 % 2.70 %(6) 2.37 %(6) 1.55 %(4)(6)
Net investment income (loss) (1.81) % (1.95) % (1.60) % (0.46) %(4)
Portfolio turnover 192 % 206 % 283.60 % 72.34 %(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the investment adviser. If the
investment adviser had not waived fees and reimbursed expenses, net
investment income (loss) per share would have been $(0.31), $(0.55) and
$(0.20) for the years ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
(3) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.74%,
4.32% and 9.73% for the years ended September 30, 1998 and 1997 and the
period ended September 30, 1996, respectively.
30 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.73 $ 17.15 $ 13.72 $ 17.15
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.47)(1)(2) (0.09)(1)(2) (0.47)(1)(3) (0.09)(1)(3)
Net realized and unrealized gain
(loss) 4.69 (3.33) 4.69 (3.34)
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.22 (3.42) 4.22 (3.43)
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.54) -- (0.54) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) -- (0.54) --
------- ------- ------- -------
Change in net asset value 3.68 (3.42) 3.68 (3.43)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.41 $ 13.73 $ 17.40 $ 13.72
======= ======= ======= =======
Total return(4) 31.05 % (19.94)%(6) 31.07 % (20.00)%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,676 $145 $975 $103
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 3.45 %(7) 3.45 %(5)(7) 3.45 %(8) 3.45 %(5)(8)
Net investment income (loss) (2.78)% (2.45)%(5) (2.78)% (2.44)%(5)
Portfolio turnover 192 % 206 %(6) 192 % 206 %(6)
</TABLE>
(1) Computed using average shares outstanding.
(2) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(0.96) and $(0.69) for the periods ended September
30, 1999 and September 30, 1998, respectively.
(3) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(1.40) and $(0.77) for the periods ended September
30, 1999 and September 30, 1998, respectively.
(4) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(5) Annualized.
(6) Not annualized.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 6.33% and
20.80% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 9.03% and
21.14% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
See Notes to Financial Statements 31
<PAGE>
PHOENIX-SENECA REAL ESTATE SECURITIES FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, GAIL P. SENECA, PH.D.,
AND DAVID SHAPIRO, J.D.
Q: WHAT IS THE INVESTMENT OBJECTIVE OF THE FUND?
A: The Phoenix-Seneca Real Estate Securities Fund seeks high total return, both
current income and capital appreciation, through investments in Real Estate
Investment Trusts (REITs) and real estate-related securities. Investors should
note that real estate investing involves certain risks, such as refinancing,
economic impact on the industry, changes in property values, dependency on
management skills, and risks similar to those of small-company investing.
Q: HOW DID THE FUND PERFORM OVER THE LAST 12 MONTHS?
A: For the fiscal year ended September 30, 1999, Class A shares returned
(7.97)%, Class B shares returned (8.59)%, Class C shares returned (8.58)%, and
Class X shares returned (6.66)% compared with a return of (4.73)% for the
Wilshire REIT Index(1). All performance figures assume reinvestment of
distributions and exclude the effect of sales charges.
Q: HOW IS THE PORTFOLIO CURRENTLY POSITIONED?
A: With the underlying economy strong, we look for the fundamentals of real
estate to remain positive. Our investment strategy is a two-pronged approach.
Instead of focusing on the various real estate sectors to maximize returns, we
will seek to own companies with strong management and dominant market positions,
such as Equity Residential, Spieker Properties, and value stocks with solid
market niches and savvy management, such as Essex, Pacific Gulf, and Macerich.
While real estate fundamentals at the operating level remain excellent, the
public markets for real estate company stocks have been in a steady decline. We
believe this disconnect between the public and private market for real estate is
an opportunity to focus on the arbitrage opportunities. Accordingly, we will
look to own quality companies that are selling at substantial discounts to their
net asset value.
OCTOBER 19, 1999
(1) THE WILSHIRE REIT INDEX IS AN UNMANAGED, COMMONLY USED MEASURE OF TOTAL
RETURN PERFORMANCE OF PUBLICLY TRADED REAL ESTATE EQUITY. THE INDEX IS
COMPRISED OF COMPANIES WHOSE CHARTER IS THE EQUITY OWNERSHIP AND OPERATION
OF COMMERCIAL REAL ESTATE. THE INDEX IS NOT AVAILABLE FOR DIRECT INVESTMENT
AND IS CALCULATED MONTHLY RATHER THAN DAILY.
32
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
AVERAGE ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/99
<TABLE>
<CAPTION>
INCEPTION INCEPTION
1 YEAR TO 9/30/99 DATE
-------- ----------- ---------
<S> <C> <C> <C>
Class X Shares at NAV(2) (6.66)% 4.33% 3/12/96
Class A Shares at NAV(2) (7.97) 3.14 3/12/96
Class A Shares at POP(3) (12.34) 1.74 3/12/96
Class B Shares at NAV(2) (8.59) (15.96) 7/1/98
Class B Shares with CDSC(4) (12.06) (18.51) 7/1/98
Class C Shares at NAV(2) (8.58) (15.96) 7/1/98
Class C Shares with CDSC(4) (8.58) (15.96) 7/1/98
Wilshire REIT Index(7) (4.73) 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 7.52% for Class X and Class A (since 3/29/96) and
(12.07)% for Class B and Class C (since 6/30/98).
(6) This chart illustrates NAV returns on Class X shares and POP returns on
Class A shares. Returns on Class B and Class C shares will vary due to
differing sales charges.
(7) The Wilshire REIT Index is an unmanaged, commonly used measure of total
return performance of publicly traded real estate equity. 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 9/30
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX-SENECA REAL ESTATE PHOENIX-SENECA REAL ESTATE WILSHIRE
SECURITIES FUND CLASS X AT SECURITIES FUND CLASS A AT REIT
NAV(6) POP(3) INDEX(7)
<S> <C> <C> <C>
3/96 $10,000 $9,525 $10,000
96 $11,261 $10,669 $11,111
97 $15,252 $14,353 $15,800
98 $12,456 $11,551 $13,538
99 $11,626 $10,631 $12,897
</TABLE>
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
3/12/96 (inception of the Fund) in Class X and A shares. The total return for
Class X shares reflects no sales charge. The total return for Class A shares
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 9/30/99
As a percentage of equity holdings
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Office 26%
Apartments 21
Regional Malls 12
Diversified 11
Lodging/Resorts 8
Industrial 8
Manufactured Homes 7
Other 7
</TABLE>
33
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
TEN LARGEST HOLDINGS AT SEPTEMBER 30, 1999 (AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<C> <S> <C>
1. Equity Residential Properties Trust 6.4%
APARTMENT REIT
2. Essex Property Trust, Inc. 6.3%
APARTMENT REIT
3. Equity Office Properties Trust 5.6%
OFFICE REIT
4. Macerich Co. (The) 4.8%
REGIONAL MALL REIT
5. Mack-Cali Realty Corp. 4.7%
OFFICE REIT
6. Urban Shopping Centers, Inc. 4.7%
REGIONAL MALL REIT
7. Pacific Gulf Properties, Inc. 4.4%
DIVERSIFIED REIT
8. Manufactured Home Communities, Inc. 4.2%
MANUFACTURED HOMES REIT
9. Spieker Properties, Inc. 4.1%
OFFICE REIT
10. Cornerstone Properties, Inc. 4.0%
OFFICE REIT
</TABLE>
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
COMMON STOCKS--92.3%
REAL ESTATE INVESTMENT TRUSTS--90.5%
DIVERSIFIED--7.9%
Crescent Real Estate Equities Co........ 26,000 $ 468,000
Entertainment Properties Trust.......... 12,000 175,500
Pacific Gulf Properties, Inc............ 41,290 823,219
-----------
1,466,719
-----------
INDUSTRIAL/OFFICE--34.2%
INDUSTRIAL--7.0%
Bedford Property Investors, Inc......... 41,600 702,000
First Industrial Realty Trust, Inc...... 24,500 606,375
-----------
1,308,375
-----------
MIXED--2.5%
TriNet Corporate Realty Trust, Inc...... 19,500 464,344
MORTGAGE BACKED--2.7%
Northstar Financial Corp.(b)(c)......... 35,000 507,500
OFFICE--22.0%
Cornerstone Properties, Inc............. 48,500 739,625
Equity Office Properties Trust.......... 45,100 1,048,575
Mack-Cali Realty Corp................... 32,800 879,450
Prentiss Properties Trust............... 30,400 674,500
Spieker Properties, Inc................. 22,000 763,125
-----------
4,105,275
-----------
- - ------------------------------------------------------------------
TOTAL INDUSTRIAL/ OFFICE 6,385,494
- - ------------------------------------------------------------------
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
LODGING/RESORTS--8.0%
FelCor Lodging Trust, Inc............... 37,275 $ 652,312
MeriStar Hospitality Corp............... 27,374 417,454
Starwood Hotel & Resorts Worldwide,
Inc..................................... 16,000 357,000
Sunstone Hotel Investors, Inc........... 7,510 65,713
-----------
1,492,479
-----------
RESIDENTIAL--27.4%
APARTMENTS--20.3%
Archstone Communities Trust............. 32,996 637,235
Avalonbay Communities, Inc.............. 15,750 533,531
Berkshire Realty Co., Inc............... 21,200 254,400
Equity Residential Properties Trust..... 28,200 1,194,975
Essex Property Trust, Inc............... 33,450 1,168,659
-----------
3,788,800
-----------
MANUFACTURED HOMES--7.1%
Chateau Communities, Inc................ 20,700 538,200
Manufactured Home Communities, Inc...... 33,200 776,050
-----------
1,314,250
-----------
- - ------------------------------------------------------------------
TOTAL RESIDENTIAL 5,103,050
- - ------------------------------------------------------------------
RETAIL--13.0%
REGIONAL MALLS--11.9%
Macerich Co. (The)...................... 38,400 888,000
Simon Property Group, Inc............... 20,415 458,062
Urban Shopping Centers, Inc............. 30,000 870,000
-----------
2,216,062
-----------
</TABLE>
34 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
STRIP CENTERS--1.1%
Developers Diversified Realty Corp...... 15,200 $ 212,800
- - ------------------------------------------------------------------
TOTAL RETAIL 2,428,862
- - ------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $20,311,794) 16,876,604
- - ------------------------------------------------------------------
REAL ESTATE OPERATING COMPANIES--1.8%
DIVERSIFIED--0.2%
Catellus Development Corp.(b)........... 2,400 28,200
INDUSTRIAL/OFFICE--0.8%
Capital Trust Class A(b)................ 31,500 155,531
LODGING/RESORTS--0.8%
Wyndham International, Inc. Class
A(b).................................... 58,538 153,662
- - ------------------------------------------------------------------
TOTAL REAL ESTATE OPERATING COMPANIES
(IDENTIFIED COST $1,663,782) 337,393
- - ------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $21,975,576) 17,213,997
- - ------------------------------------------------------------------
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS--6.1%
REAL ESTATE INVESTMENT TRUSTS--6.1%
DIVERSIFIED--2.9%
Glenborough Realty Trust, Inc. Series A
Cv. Pfd. 7.75%.......................... 32,550 $ 535,041
INDUSTRIAL/OFFICE--3.2%
MIXED--3.2%
Reckson Associates Realty Corp. Series A
Cv. Pfd. 7.625%......................... 30,000 605,625
- - ------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $1,470,254) 1,140,666
- - ------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $1,470,254) 1,140,666
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS--98.4%
(IDENTIFIED COST $23,445,830) 18,354,663(a)
Cash and receivables, less liabilities--1.6% 307,360
-----------
NET ASSETS--100.0% $18,662,023
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $312,920 and gross
depreciation of $5,404,087 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $23,445,830.
(b) Non-income producing.
(c) Private Placement.
See Notes to Financial Statements
35
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $23,445,830) $18,354,663
Receivables
Dividends and interest 206,542
Investment securities sold 178,563
Deferred organization expenses 13,527
Prepaid expenses 2,149
-----------
Total assets 18,755,444
-----------
LIABILITIES
Payables
Custodian 8,309
Fund shares repurchased 12,372
Transfer agent fee 12,008
Investment advisory fee 7,839
Financial agent fee 5,199
Distribution fee 1,681
Trustees' fee 913
Accrued expenses 45,100
-----------
Total liabilities 93,421
-----------
NET ASSETS $18,662,023
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest $24,193,732
Undistributed net investment income 223,188
Accumulated net realized loss (663,730)
Net unrealized depreciation (5,091,167)
-----------
NET ASSETS $18,662,023
===========
CLASS X
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$17,346,011) 1,789,967
Net asset value and offering price per share $9.69
CLASS A
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$918,535) 96,249
Net asset value per share $9.54
Offering price per share $9.54/(1-4.75%) $10.02
CLASS B
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$197,438) 20,676
Net asset value and offering price per share $9.55
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $200,039) 20,955
Net asset value and offering price per share $9.55
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 1,304,610
Interest 13,214
-----------
Total investment income 1,317,824
-----------
EXPENSES
Investment advisory fee 181,649
Distribution fee, Class A 2,743
Distribution fee, Class B 1,715
Distribution fee, Class C 1,571
Financial agent fee 55,598
Transfer agent 77,424
Registration 36,379
Trustees 25,773
Professional 17,224
Printing 14,720
Amortization of deferred
organization expenses 10,658
Custodian 5,358
Miscellaneous 10,670
-----------
Total expenses 441,482
Less expenses borne by
investment adviser (63,940)
-----------
Net expenses 377,542
-----------
NET INVESTMENT INCOME 940,282
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on securities (655,001)
Net change in unrealized
appreciation (depreciation) on
investments (1,715,439)
-----------
NET LOSS ON INVESTMENTS (2,370,440)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(1,430,158)
===========
</TABLE>
36 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 940,282 $ 1,139,214
Net realized gain (loss) (655,001) 551,625
Net change in unrealized appreciation (depreciation) (1,715,439) (7,262,351)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (1,430,158) (5,571,512)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (837,674) (927,830)
Net investment income, Class A (38,060) (63,404)
Net investment income, Class B (4,962) (523)
Net investment income, Class C (3,646) (508)
Net realized gains, Class X (499,713) (1,123,456)
Net realized gains, Class A (30,097) (124,174)
Net realized gains, Class B (4,310) --
Net realized gains, Class C (2,368) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,420,830) (2,239,895)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (210,923 and 190,605 shares,
respectively) 2,123,311 2,502,892
Net asset value of shares issued from reinvestment of
distributions
(132,293 and 153,188 shares, respectively) 1,320,535 2,018,886
Cost of shares repurchased (515,264 and 297,712 shares,
respectively) (5,249,668) (3,754,823)
----------- -----------
Total (1,805,822) 766,955
----------- -----------
CLASS A
Proceeds from sales of shares (21,611 and 31,969 shares,
respectively) 225,249 436,921
Net asset value of shares issued from reinvestment of
distributions
(6,494 and 13,501 shares, respectively) 64,196 179,472
Cost of shares repurchased (55,264 and 138,471 shares,
respectively) (559,210) (1,815,501)
----------- -----------
Total (269,765) (1,199,108)
----------- -----------
CLASS B
Proceeds from sales of shares (11,520 and 8,978 shares,
respectively) 120,191 113,001
Net asset value of shares issued from reinvestment of
distributions
(933 and 47 shares, respectively) 9,271 523
Cost of shares repurchased (0 and 802 shares,
respectively) -- (9,281)
----------- -----------
Total 129,462 104,243
----------- -----------
CLASS C
Proceeds from sales of shares (12,513 and 7,932 shares,
respectively) 124,671 100,250
Net asset value of shares issued from reinvestment of
distributions
(589 and 46 shares, respectively) 5,859 506
Cost of shares repurchased (125 and 0 shares,
respectively) (1,280) --
----------- -----------
Total 129,250 100,756
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (1,816,875) (227,154)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (4,667,863) (8,038,561)
NET ASSETS
Beginning of period 23,329,886 31,368,447
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$223,188 AND $169,785, RESPECTIVELY] $18,662,023 $23,329,886
=========== ===========
</TABLE>
See Notes to Financial Statements 37
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
-------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30, INCEPTION
--------------------------------------- 3/12/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.11 $ 14.71 $ 11.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.47(6) 0.54 0.13(1) 0.13(1)
Net realized and unrealized gain
(loss) (1.20) (3.10) 3.77 1.10
------- ------- ------- --------
TOTAL FROM INVESTMENT
OPERATIONS (0.73) (2.56) 3.90 1.23
------- ------- ------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.44) (0.46) (0.28) (0.13)
Dividends from net realized gains (0.25) (0.58) (0.01) --
------- ------- ------- --------
TOTAL DISTRIBUTIONS (0.69) (1.04) (0.29) (0.13)
------- ------- ------- --------
Change in net asset value (1.42) (3.60) 3.61 1.10
------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 11.11 $ 14.71 $ 11.10
======= ======= ======= ========
Total return(2) (6.66)% (18.33)% 35.44% 12.39%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $17,346 $21,794 $28,193 $ 1,073
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.66 % 1.47 % 1.99%(5) 1.00%(3)(5)
Net investment income (loss) 4.50 % 4.14 % 2.38% 4.39%(3)
Portfolio turnover 5 % 53 % 75.68% 30.70%(4)
</TABLE>
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $0.13 and $(1.45) for the year ended September 30,
1997 and the period ended September 30, 1996, respectively.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(3) Annualized.
(4) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.99% and
53.04% for the year ended September 30, 1997 and the period ended September
30, 1996, respectively.
(6) Computed using average shares outstanding.
38
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30, INCEPTION
--------------------------------------------- 3/12/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.00 $ 14.68 $ 11.08 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.32(1)(6) 0.35 0.03(1) 0.13(1)
Net realized and unrealized gain
(loss) (1.19) (3.08) 3.78 1.08
------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS (0.87) (2.73) 3.81 1.21
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.34) (0.37) (0.20) (0.13)
Dividends from net realized gains (0.25) (0.58) (0.01) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.59) (0.95) (0.21) (0.13)
------- ------- ------- -------
Change in net asset value (1.46) (3.68) 3.60 1.08
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.54 $ 11.00 $ 14.68 $ 11.08
======= ======= ======= =======
Total return(2) (7.97)% (19.52)% 34.54% 12.22%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $ 919 $ 1,357 $ 3,176 $ 222
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 3.05 %(5) 2.76 % 2.91%(5) 1.65%(3)(5)
Net investment income (loss) 3.13 % 2.45 % 1.37% 4.61%(3)
Portfolio turnover 5 % 53 % 75.68% 30.70%(4)
</TABLE>
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $0.20, $(0.04) and $(1.96) for the years ended
September 30, 1999 and 1997 and the period ended September 30, 1996,
respectively.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(3) Annualized.
(4) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 4.27%,
3.79% and 73.01% for the years ended September 30, 1999 and 1997 and the
period ended September 30, 1996, respectively.
(6) Computed using average shares outstanding.
See Notes to Financial Statements
39
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $11.01 $12.58 $11.01 $12.58
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.29(1)(8) 0.07(1) 0.29(2)(8) 0.07(2)
Net realized and unrealized gain (1.22) (1.58) (1.22) (1.58)
------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.93) (1.51) (0.93) (1.51)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.28) (0.06) (0.28) (0.06)
Dividends from net realized gains (0.25) -- (0.25) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.53) (0.06) (0.53) (0.06)
------ ------ ------ ------
Change in net asset value (1.46) (1.57) (1.46) (1.57)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.55 $11.01 $ 9.55 $11.01
====== ====== ====== ======
Total return(3) (8.59)% (11.97)%(5) (8.58)% (11.97)%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $197 $91 $200 $88
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 3.80 %(6) 3.80 %(4)(6) 3.80 %(7) 3.80 %(4)(7)
Net investment income (loss) 2.79 % 2.50 %(4) 2.80 % 2.44 %(4)
Portfolio turnover 5 % 53 %(5) 5 % 53 %(5)
</TABLE>
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(1.23) and $(0.46) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(2) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the investment adviser. If the investment adviser had
not waived fees and reimbursed expenses, net investment income (loss) per
share would have been $(1.39) and $(0.48) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(3) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the investment adviser.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 18.50%
and 22.08% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 19.95%
and 22.93% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) Computed using average shares outstanding.
40
See Notes to Financial Statements
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix-Seneca Funds (the "Trust") is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. Shares of the Trust are
divided into four series, each a "Fund" and collectively the "Funds" as follows:
Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap
"EDGE"-SM- Fund and Phoenix-Seneca Real Estate Securities Fund (formerly Seneca
Bond Fund, Seneca Growth Fund, Seneca Mid-Cap "EDGE"-SM- Fund and Seneca Real
Estate Securities Fund, respectively). Each Fund has distinct investment
objectives. Bond Fund seeks to generate a high level of current income and
capital appreciation. Growth Fund seeks to achieve long-term capital
appreciation. Mid-Cap "EDGE"-SM- Fund seeks to achieve long-term capital
appreciation by investing primarily in a diversified portfolio of equity
securities of companies with market capitalizations between $500 million and $5
billion. Real Estate Securities Fund seeks to emphasize capital appreciation and
income equally by investing primarily in marketable securities of
publicly-traded real estate investment trusts (REITS) and companies that invest
in, operate, develop and/or manage real estate located in the United States.
Each Fund offers Class X (formerly Seneca Institutional), Class A (formerly
Seneca Administrative), Class B and Class C shares. Class X shares are sold
without a sales charge. 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 Class A, Class B and Class C shares bear distribution
expenses and have exclusive voting rights with respect to their distribution
plans. Investment income and realized and unrealized gains/losses are allocated
among the classes on the basis of net assets of each class. Expenses that relate
to the distribution of shares or services provided to a particular class are
allocated 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 mean between the most recent high bid and the most recent
low asked quotations. Debt securities are valued on the basis of broker
quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers and various relationships between securities
in determining value. Short-term investments having a remaining maturity of 60
days or less are valued at amortized cost which approximates market. All other
securities and assets are valued at their fair value as determined in good faith
by or under the direction of the Trustees.
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. The Trust amortizes premiums and discounts using the effective interest
method. 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 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, market
discount, organization costs, 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
41
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
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:
Each 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 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. OPTIONS:
Each 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.
Each Fund may purchase options which are included in the Funds' 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.
H. ORGANIZATION EXPENSE:
In 1996, the Trust incurred organizational expenses which are amortized on a
straight line basis over a period of sixty months from the commencement of
operations. If any of the initial shares are redeemed before the end of the
amortization period, the proceeds of the redemption will be reduced by the pro
rata share of unamortized organization expenses.
I. EXPENSES:
Trust expenses not directly attributable to a specific Fund are allocated
evenly among all funds. Fund expenses that are not related to the distribution
of shares of a particular class or to services provided specifically to a
particular class are allocated among the classes on the basis of relative
average daily net assets of each class.
J. REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction where a Fund acquires a security for
cash and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date. Each Fund, through its custodian,
takes possession of securities collateralizing the repurchase agreement. The
collateral is marked-to-market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund in the event of default
by the seller. If the seller defaults and the value of the collateral declines,
or if the seller enters insolvency proceedings, realization of collateral may be
delayed or limited.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
Phoenix Investment Counsel, Inc, ("PIC" or the "Adviser") serves as investment
adviser to the Phoenix-Seneca Funds and Seneca Capital Management LLC ("Seneca"
or the "Subadviser") serves as investment subadviser. All of the outstanding
stock of PIC and a majority of the equity interests of Seneca are owned by
Phoenix Investment Partners Ltd. ("PXP"), an indirect, majority-owned subsidiary
of Phoenix Home Life Mutual Insurance Company ("PHL"). As compensation for
services
42
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
to the Trust, the adviser receives a fee based upon the following annual rates
as a percentage of the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Adviser
Fee
--------
<S> <C>
Bond Fund.................................... 0.50%
Growth Fund.................................. 0.70%
Mid-Cap "EDGE"-SM- Fund...................... 0.80%
Real Estate Securities Fund.................. 0.85%
</TABLE>
The Adviser pays the Subadviser a fee equal to one half of the Adviser fee.
Phoenix Equity Planning Corporation ("PEPCO"), a direct subsidiary of PXP,
serves as Administrator of the Trust. PEPCO received a fee for administration
services through December 31, 1998 at an annual rate of 0.08% of average daily
net assets of each Fund up to $125 million, 0.06% of average daily net assets of
$125 million to $250 million and 0.04% of average daily net assets greater than
$250 million; a minimum fee applied. Effective January 1, 1999, 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 the 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.
The Adviser voluntarily agreed to waive or reimburse each Fund's operating
expenses until July 1, 2000, to the extent that such expenses exceed the
following percentages of average annual net assets:
<TABLE>
<CAPTION>
Class X Class A Class B Class C
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bond Fund.................. 0.90% 1.15% 1.90% 1.90%
Growth Fund................ 1.25% 1.85% 2.60% 2.60%
Mid-Cap "EDGE"-SM- Fund.... 2.10% 2.70% 3.45% 3.45%
Real Estate Securities
Fund....................... 2.35% 3.05% 3.80% 3.80%
</TABLE>
Prior to July 1, 1999, the Adviser voluntarily agreed to waive or reimburse
the Bond Fund's operating expenses until July 1, 2000, to the extent that such
expenses exceeded the following percentages of average annual net assets: 1.85%
for Class X, 2.45% for Class A and 3.20% for Class B and Class C.
PEPCO serves as the national distributor of the Trust's shares and has advised
the Trust that it retained net selling commissions of $16,238 for Class A shares
for the year ended September 30, 1999. Deferred sales charges retained by PEPCO
for the year ended September 30, 1999 were $6,758 for Class B shares and $689
for Class C shares. In addition, each Fund pays PEPCO a distribution fee at an
annual rate of 0.25% for Class A shares and 1.00% for Class B and C shares
applied to the average daily net assets of each Fund. The distributor has
advised the Trust that of the total amount expensed for the year ended
September 30, 1999, $121,864 was retained by the Distributor, $24,658 was paid
out to unaffiliated Participants and $1,637 was paid to W.S. Griffith, an
indirect subsidiary of PHL.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended September 30, 1999, transfer
agent fees were $330,067 of which PEPCO retained $425 which is net of fees paid
to State Street.
At September 30, 1999, PHL and affiliates held Phoenix-Seneca Fund shares
which aggregated the following:
<TABLE>
<CAPTION>
Aggregate
Net Asset
Shares Value
--------- -----------
<S> <C> <C>
Bond Fund--Class X.................. 1,496,147 $15,485,121
Bond Fund--Class A.................. 9,878 101,646
Bond Fund--Class B.................. 9,816 100,810
Bond Fund--Class C.................. 9,815 100,800
Growth Fund--Class B................ 829 15,982
Growth Fund--Class C................ 5,931 114,177
Mid-Cap "EDGE"-SM- Fund--Class B.... 6,062 105,532
Mid-Cap "EDGE"-SM- Fund--Class C.... 6,062 105,479
Real Estate Securities
Fund--Class B....................... 8,345 79,697
Real Estate Securities
Fund--Class C....................... 8,346 79,700
</TABLE>
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended September 30, 1999
(excluding U.S. Government and agency securities and short-term securities)
aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Bond Fund........................ $ 26,311,365 $ 16,449,029
Growth Fund...................... 108,894,225 101,158,985
Mid-Cap "EDGE"-SM- Fund.......... 34,069,753 31,673,766
Real Estate Securities Fund...... 1,130,983 3,044,370
</TABLE>
Purchases and sales of long-term U.S. Government and agency securities during
the year ended September 30, 1999, aggregated $18,227,311 and $13,990,110,
respectively, for the Bond Fund.
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.
43
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
5. OTHER
As of September 30, 1999, the Funds had shareholders who each individually
owned more than 10% of total net assets, none of whom are affiliated with PHL or
PXP as follows. In addition, affiliate holdings are presented in the table
located within Note 2.
<TABLE>
<CAPTION>
Number of % of Total
shareholders net assets
------------ ------------
<S> <C> <C>
Growth Fund....................... 1 12.1 %
Real Estate Securities Fund....... 2 33.8 %
</TABLE>
6. CAPITAL LOSS CARRYOVERS
At September 30, 1999, the Real Estate Securities Fund had a capital loss
carryover of $24,701, expiring in 2007, which may be used to offset future
capital gains.
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended September 30, 1999 the Real Estate Securities Fund deferred
capital losses of $639,028.
7. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Funds have recorded
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of each 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 September 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 beneficial
income gain (loss) interest
-------------- ------------ -------------
<S> <C> <C> <C>
Bond Fund................... $ (6,484) $ 17,363 $(10,879)
Growth Fund................. 251,366 (252,922) 1,556
Mid-Cap "EDGE"-SM- Fund..... 275,816 (277,372) 1,556
Real Estate Securities
Fund........................ (2,537) 980 1,557
</TABLE>
TAX INFORMATION NOTICE (UNAUDITED)
For the fiscal year ended September 30, 1999, the Funds distributed long-term
capital gain dividends as follows:
<TABLE>
<S> <C>
Bond Fund...................................... $ 182,516
Growth Fund.................................... 1,530,633
Mid-Cap "EDGE"-SM- Fund........................ 542,452
Real Estate Securities Fund.................... 535,508
</TABLE>
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective Prospectus which includes information
concerning the sales charge, the Trust's record and other pertinent information.
44
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Trustees and Shareholders of
Phoenix-Seneca Funds
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-Seneca Bond Fund, the Phoenix-Seneca Growth Fund, the Phoenix-Seneca
Mid-Cap "EDGE"-SM- Fund and the Phoenix-Seneca Real Estate Securities Fund
(constituting the Phoenix-Seneca Funds, hereafter referred to as the "Funds") at
September 30, 1999, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for 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 Funds' 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 September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial highlights of the Funds, formerly the
Seneca Funds, for the periods ended September 30, 1997 were audited by other
independent accountants whose report dated November 5, 1997 expressed an
unqualified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 16, 1999
45
<PAGE>
RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
A special meeting of Shareholders of the Phoenix-Seneca Funds was held on
May 19, 1999 to approve the following matters:
1. Fix the number of trustees at eight and elect such number as detailed
below.
2. Ratification of the selection of PricewaterhouseCoopers LLP as the
Trust's independent auditors for the fiscal year ending September 30,
1999.
On the record date for this meeting there were 94,344,980 shares outstanding and
70.86% of the shares outstanding and entitled to vote were present by proxy.
NUMBER OF VOTES
<TABLE>
<CAPTION>
FOR WITHHELD
---------- --------
<S> <C> <C> <C>
1. Election of Trustees
Mary Ann Cusenza 94,209,124 135,856
Harry Dalzell-Payne 94,209,124 135,856
Norman W. Douglass 94,204,170 140,810
Paul E. Erdman 94,205,742 139,238
Melinda Ellis Evers 94,209,124 135,856
Paul B. Fay, Jr. 94,156,852 188,128
Philip R. McLoughlin 94,158,662 186,318
Gail P. Seneca 94,207,552 137,428
FOR AGAINST ABSTAIN
---------- ---------- -------
2. PricewaterhouseCoopers LLP
94,125,711 87,193 132,076
</TABLE>
46
<PAGE>
PHOENIX-SENECA FUNDS
909 Montgomery Street
San Francisco, California 94133
TRUSTEES AND OFFICERS
Mary Ann Cusenza, Trustee
Harry Dalzell-Payne, Trustee
Norman W. Douglass, Trustee
Paul E. Erdman, Trustee
Melinda Ellis Evers, Trustee
Paul B. Fay, Jr., Trustee
Philip R. McLoughlin, Trustee
Gail P. Seneca, President and Trustee
Thomas N. Steenburg, Secretary
Sandra J. Monticelli, Treasurer
INVESTMENT ADVISER
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
SUBADVISER
Seneca Capital Management LLC
909 Montgomery Street
San Francisco, California 94133
PRINCIPAL UNDERWRITER
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
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO CONTACT US
<TABLE>
<S> <C>
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
</TABLE>
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
[LOGO] PHOENIX Permit No. 444
INVESTMENT PARTNERS
PXP 1140 (11/99)
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
Phoenix-Seneca Equity Opportunities Fund / Phoenix-Seneca Growth Fund
Pro Forma Combining Statement of Assets and Liabilities
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
================ =============== ============ ================
Phoenix Phoenix-Seneca Pro Forma
Equity Growth Adjustments Combining
Opportunities Fund Portfolios
================ =============== ============ ================
<S> <C> <C> <C> <C>
ASSETS
Investment securities at value
(Identified cost $169,742,924,
$61,436,091 and $231,179,015) $ 219,321,404 $ 77,431,638 $ 296,753,042
Cash 5,777 731 12,999 (b) 19,507
Receivables -
Investment securities sold 4,798,059 131,380 4,929,439
Fund shares sold 149 166,159 166,308
Dividends and interest 166,085 57,312 223,397
Receivable from adviser - - - -
Prepaid expenses 3,553 2,978 6,531
Deferred organization costs - 12,999 (12,999)(b) -
--------------- ------------ ---------- --------------
Total assets 224,295,027 77,803,197 - 302,098,224
--------------- ------------ ---------- --------------
LIABILITIES
Payables
Investment securities purchased 39,905 2,643,879 2,683,784
Fund shares repurchased 42,460 355,606 398,066
Investment advisory fee 124,983 37,020 162,003
Distribution fee 46,468 11,120 57,588
Transfer agent fee 37,735 13,395 51,130
Financial agent fee 18,225 8,451 26,676
Trustees' fee 5,390 2,837 8,227
Accrued expenses 65,114 92,634 157,748
--------------- ------------ ---------- --------------
Total liabilities 380,280 3,164,942 - 3,545,222
--------------- ------------ ---------- --------------
NET ASSETS $ 223,914,747 $ 74,638,255 - $ 298,553,002
=============== ============ ========== ==============
CLASS A
Shares of beneficial interest outstanding 23,103,652 1,425,095 (12,855,801)(a) 11,672,946
Net assets $ 220,832,264 $ 30,709,557 $ 251,541,821
Net asset value per share $ 9.56 $ 21.55 $ 21.55
Offering price per share NAV/(1- 4.75%) $ 10.04 $ 22.62 $ 22.62
CLASS B
Shares of beneficial interest outstanding 337,793 241,370 (192,519)(a) 386,644
Net assets 3,082,483 $ 5,121,486 8,203,969
Net asset value and offering price per share $ 9.13 $ 21.22 $ 21.22
CLASS C
Shares of beneficial interest outstanding 112,728 112,728
Net assets $ 2,388,084 $ 2,388,084
Net asset value and offering price per share $ 21.18 $ 21.18
CLASS X
Shares of beneficial interest outstanding 1,659,335 1,659,335
Net assets $ 36,419,128 $ 36,419,128
Net asset value and offering price per share 21.95 9.56
</TABLE>
(a) Adjustment reflects effect of reverse stock split in Equity
Opportunities Fund. See Note 2.
(b) Adjustment reflects write-off of deferred organization costs.
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix-Seneca Equity Opportunities Fund / Phoenix-Seneca Growth Fund
Pro Forma Co Combining Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
VALUE
============= ============== =========== ===================================== ============== ================= =============
Phoenix Phoenix-seneca Pro Forma Phoenix Phoenix-Seneca Pro Forma
Equity Growth Combining DESCRIPTION Equity Growth Combining
Opportunities Fund Portfolios Opportunities Fund Portfolios
============= ============== =========== ===================================== ============== ================= =============
<S> <C> <C> <C> <C> <C> <C>
Shares COMMON STOCKS --84.3%
67,800 24,190 91,990 Alcoa, Inc. $ 4,118,850 $ 1,469,543 $ 5,588,393
112,110 36,590 148,700 AMFM, Inc. 7,847,700 2,561,300 10,409,000
176,620 74,100 250,720 Baker Hughes, Inc. 4,934,321 2,070,169 7,004,490
98,640 34,590 133,230 Bell Atlantic Corp. 6,405,435 2,246,188 8,651,623
110,000 32,940 142,940 Bristol-Myers Squibb Co. 8,449,375 2,530,204 10,979,579
79,476 29,140 108,616 Cisco Systems, Inc. 5,881,224 2,156,360 8,037,584
172,605 61,530 234,135 Citigroup, Inc. 9,342,246 3,330,311 12,672,557
37,380 13,210 50,590 Dow Chemical Co. 4,420,185 1,562,083 5,982,268
70,000 20,060 90,060 General Electric Co. 9,489,375 2,719,384 12,208,759
52,050 16,480 68,530 General Mills, Inc. 4,538,109 1,436,850 5,974,959
99,220 31,540 130,760 General Motors Corp. Class H 7,224,456 2,296,506 9,520,962
165,410 60,870 226,280 Halliburton Co. 6,233,889 2,294,038 8,527,927
37,600 15,700 53,300 Intel Corp. 2,911,650 1,215,769 4,127,419
11,410 4,040 15,450 Internap Network Services Corp. 1,053,999 373,195 1,427,194
60,960 22,480 83,440 Johnson & Johnson 6,385,560 2,354,780 8,740,340
47,560 28,890 76,450 Lowe's Companies, Inc. 2,615,800 1,588,950 4,204,750
95,030 32,950 127,980 MCI WorldCom, Inc. 8,154,762 2,827,522 10,982,284
82,840 28,960 111,800 Merk & Co., Inc. 6,590,957 2,304,130 8,895,087
178,630 64,410 243,040 Mellon Financial Corp. 6,598,146 2,379,144 8,977,290
94,400 33,740 128,140 Microsoft Corp. 8,737,900 3,123,059 11,860,959
79,690 25,950 105,640 Morgan Stanley Dean Witter & Co. 8,790,803 2,862,609 11,653,412
82,510 27,770 110,280 Motorola, Inc. 8,039,568 2,705,839 10,745,407
10,000 10,000 Nextel Communications, Inc. - 861,875 861,875
217,360 76,590 293,950 Outdoor Systems, Inc. 9,210,630 3,245,501 12,456,131
52,430 18,540 70,970 Procter & Gamble Co, (The) 5,498,596 1,944,383 7,442,979
54,130 19,610 73,740 Sun Microsystems, Inc. 5,727,631 2,074,983 7,802,614
2,330 790 3,120 Sycamore Networks, Inc. 500,950 169,850 670,800
128,010 47,100 175,110 Tandy Corp. 8,056,629 2,964,356 11,020,985
104,640 36,350 140,990 Texaco, Inc. 6,422,280 2,230,981 8,653,261
177,950 62,290 240,240 TJX Companies, Inc. (The) 4,826,894 1,689,616 6,516,510
37,430 37,430 Tyco International Ltd. 1,494,861 1,494,861
100,100 34,200 134,300 Wal-Mart Stores, Inc. 5,718,213 1,953,675 7,671,888
------------ ------------ -------------
TOTAL COMMON STOCKS 184,726,133 67,038,014 251,764,147
------------ ------------ -------------
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix-Seneca Equity Opportunities Fund / Phoenix-Seneca Growth Fund
Pro Forma Combining Schedule of Investments
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
VALUE
============= ============== =========== ===================================== ============== ================= =============
Phoenix Phoenix-seneca Pro Forma Phoenix Phoenix-Seneca Pro Forma
Equity Growth Combining DESCRIPTION Equity Growth Combining
Opportunities Fund Portfolios Opportunities Fund Portfolios
============= ============== =========== ===================================== ============== ================= =============
<S> <C> <C> <C> <C> <C> <C>
Shares FOREIGN COMMON STOCKS --11.2%
75,340 23,350 98,690 Nokia Oyj Sponsored ADR (Finland) 8,706,479 2,698,384 11,404,863
149,220 52,730 201,950 Nortel Networks Corp. (Canada) 9,242,314 3,265,965 12,508,279
76,400 26,600 103,000 STMicroelectronics NV (Netherlands) 6,942,850 2,417,275 9,360,125
------------- ------------ -------------
TOTAL FOREIGN COMMON STOCKS 24,891,643 8,381,624 33,273,267
------------- ------------ -------------
TOTAL LONG-TERM INVESTMENTS --95.5% 209,617,776 75,419,638 285,037,414
PAR ------------- ------------ -------------
VALUE
($000) SHORT-TERM OBLIGATIONS --3.9%
-------- Commercial Paper --3.2%
3,565 - 3,565 General Electric Capital Corp. 5.25%,
11/1/99 3,565,000 - 3,565,000
3,000 - 3,000 Enterprise Funding Corp. 5.30%, 11/2/99 2,999,558 - 2,999,558
3,140 - 3,140 Merrill Lynch & Co., Inc. 5.33%, 11/3/99 3,139,070 - 3,139,070
------------- ------------ -------------
9,703,628 - 9,703,628
------------- ------------ -------------
REPURCHASE AGREEMENT --0.7%
State Street Bank & Trust Co.
repurchase agreement 4.25%, dated
10/29/99 due 11/1/99, repurchase price
$2,012,713 collateralized by
U.S. Treasury Bond
- 2,012 2,012 10.75%, 5/15/03, market value $2,054,110 - 2,012,000 2,012,000
------------- ------------ -------------
TOTAL SHORT-TERM OBLIGATIONS 9,703,628 2,012,000 11,715,628
------------- ------------ -------------
TOTAL INVESTMENTS --99.4%
(Identified cost $169,742,924,
$61,436,091 and $231,179,015) 219,321,404 77,431,638 296,753,042
Cash and receivables,
less liabilities--0.6% 4,593,343 (2,793,383) 1,799,960
------------- ------------ -------------
NET ASSETS--100.0% $ 223,914,747 $ 74,638,255 $ 298,553,002
============= ============ =============
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix-Seneca Equity Opportunities Fund / Phoenix-Seneca Growth Fund
Pro Forma Combining Statement of Operations
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
============= ================ =============== =============
Phoenix Phoenix-Seneca Pro Forma
Equity Growth Adjustments Combining
Opportunities Fund Portfolios
============= ================ =============== =============
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,539,492 $ 465,256 $ $ 2,004,748
Interest 376,951 141,205 518,156
Foreign Taxes Withheld - - -
------------ -------------- --------- ------------
Total investment income 1,916,443 606,461 2,522,904
------------ -------------- --------- ------------
EXPENSES
Investment advisory fee 1,418,390 455,273 1,873,663
Distribution fee - Class A 499,978 66,526 566,504
Distribution fee - Class B 26,358 24,197 50,555
Distribution fee - Class C - 9,293 9,293
Financial agent fee 196,847 85,097 (86,570) (a) 195,374
Transfer agent 257,510 88,614 (62,935) (a) 283,189
Registration 22,306 53,567 (15,000) (a) 60,873
Printing 61,089 40,695 (35,000) (a) 66,784
Professional 30,049 23,412 (25,000) (a) 28,461
Custodian 9,564 12,443 - 22,007
Trustees 10,200 25,716 (22,000) (a) 13,916
Amortization of deferred organization expenses - 10,658 (10,658) (a) -
Miscellaneous 4,745 23,541 (5,000) (a) 23,286
------------ -------------- --------- ------------
Total expenses 2,537,036 919,032 (262,163) 3,193,905
Custodian fees paid indirectly (2,422) - - (2,422)
Less expenses borne by investment advisor - (49,249) 49,249 (b) -
------------ -------------- --------- ------------
Net expenses 2,534,614 869,783 (212,914) 3,191,483
------------ -------------- --------- ------------
NET INVESTMENT INCOME (LOSS) (618,171) (263,322) 212,914 (668,579)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on securities 32,175,665 7,420,446 - 39,596,111
Net change in unrealized appreciation (depreciation)
on investments 35,104,560 8,897,166 - 44,001,726
Net gain on investments 67,280,225 16,317,612 - 83,597,837
------------ -------------- --------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 66,662,054 $ 16,054,290 $ 212,914 $ 82,929,258
============ ============== ========= ============
</TABLE>
Adjustments:
(a) Adjustment reflects expected savings when the two funds
become one.
(b) Reimbursement no longer needed.
See Notes to Pro Forma Financial Statements.
<PAGE>
Phoenix-Seneca Equity Opportunities Fund/Phoenix-Seneca Growth 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-Seneca Equity Opportunities
Fund ("Equity Opportunities") and Phoenix-Seneca Growth Fund ("Growth") 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 Growth in exchange for shares of the respective class of
Equity Opportunities. Phoenix Investment Counsel, Inc. ("PIC" or the "Adviser")
will bear all costs and expenses of the reorganization.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of the funds incorporated by reference in the Statement of
Additional Information.
2. Shares of Beneficial Interest
Immediately prior to the closing date, the Equity Opportunities Fund will effect
a reverse stock split to adjust the net asset value per share of each respective
class to match that of the Growth Fund. The Pro Forma net asset value per share
reflects the effect of the reverse stock split. Therefore, the pro forma data
reflects an exchange ratio of approximately one for one for the respective class
of Equity Opportunities issued for Growth Fund. The Pro Forma Statement of
Assets & Liabilities reflects the combined Pro Forma shares outstanding.
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 Equity Opportunities 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.
(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
<PAGE>
Counsel, Inc. effective June 1, 1998, filed via EDGAR as Exhibit 5.3
0with 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.(i)
(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).
(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
C-2
<PAGE>
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.(ii)
(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 Growth Fund.(ii)
(17)(b) Prospectus of Phoenix-Seneca Equity Opportunities Fund dated August 27,
1999.(ii)
- ----------------
(i) Filed as an exhibit to the Registrant's Registration Statement on Form
N-14, Registration No. 333-87209, (filed September 16, 1999) and
incorporated herein by reference.
(ii) 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 15th day of February 2000.
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 Growth Fund
(17)(b) Prospectus of Phoenix-Seneca Equity Opportunities Growth Fund, dated
August 27, 1999.
C-6
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 Equity Opportunities Fund (currently known as
Phoenix-Seneca Equity Opportunities Fund, a series of Phoenix Strategic Equity
Series Fund) appearing in the April 30, 1999 Annual Report to Shareholders, and
of our report dated November 16, 1999, relating to the financial statements and
financial highlights of Phoenix-Seneca Growth Fund (a series of Phoenix-Seneca
Funds) appearing in the September 30, 1999 Annual Report to Shareholders, which
financial statements and financial highlights are also incorporated by reference
into the Registration Statement. We also consent to the reference to us under
the heading "Management and Other Service Providers" in such Combined
Prospectus/Proxy Statement. We further consent to the reference to us under
"Additional Information - Independent Accountants" in the Statement of
Additional Information of Phoenix Equity Opportunities Fund dated August 27,
1999 and under the heading "Other Information - Independent Accountants" in the
Statement of Additional Information of Phoenix-Seneca Growth Fund dated January
28, 1999 which are incorporated by reference into the Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 4, 2000
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
__________, 2000
The undersigned shareholder of the Phoenix-Seneca Growth Fund, revoking any and
all previous proxies heretofore given for shares of the Phoenix-Seneca Growth
Fund held by the undersigned, does hereby appoint Sandra J. Monticelli, and
Ronald K. Jacks, 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 the Phoenix-Seneca Growth Fund to be held on the 28th day
of April, 2000, at 10:00 a.m., local time, at the offices of Phoenix Equity
Planning Corporation, 101 Munson Street, Greenfield, Massachusetts, and any
adjournments thereof and to represent and direct shares of each class of the
Phoenix-Seneca Growth 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 November 17, 1999, and the transactions it
contemplates, including (a) the transfer of all or substantially all of
the assets of the Phoenix-Seneca Growth Fund to the Phoenix-Seneca
Equity Opportunities Fund in exchange solely for shares of the
corresponding class of the Equity Opportunities Fund and the assumption
by the Equity Opportunities Fund of all the liabilities of the Growth
Fund and (b) the distribution of the shares of the Equity Opportunities
Fund so received to shareholders of the Growth 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 THE
PHOENIX-SENECA FUNDS, WHICH RECOMMENDS A VOTE FOR THE PROPOSAL.
Dated: _____________________, 2000
Name
-----------------------------
Signature of Shareholder
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)
