As filed with the Securities and Exchange Commission on Registration
Nos. 33-19423 811-5436
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 16 [x]
and/or
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 18
(Check appropriate box or boxes.)
Phoenix Multi-Portfolio Fund
(Exact Name of Registrant as Specified in Articles of Incorporation)
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
c/o Phoenix Equity Planning
Planning Corporation -- Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
Philip R. McLoughlin
Phoenix Multi-Portfolio Fund
c/o Phoenix Home Life Mutual Insurance Co.
One American Row
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on pursuant to paragraph (a)(i)
[x] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective
amendment.
Declaration Pursuant to Rule 24f-2
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
A Rule 24f-2 Notice for the fiscal year ended on November 30, 1994 was filed
by Registrant with the Commission on January 27, 1995.
<PAGE>
The following pages from Post-Effective Amendment No. 15 to the Registration
Statement on Form N1-A, filed with the Securities and Exchange Commission on
March 24, 1995 are incorporated herein by reference thereto:
Part A
Version B Cross Reference Pages to Items Required by Rule 495(a)
Version B Prospectus Pages 1 through 20
Part B
Version B Statement of Additional Information Pages 1 through 32 and November
30, 1994 Annual Report for Phoenix Endowment Equity Portfolio and Phoenix
Endowment Fixed-Income Portfolio.
i
<PAGE>
This registration statement contains two prospectuses and two Statements of
Additional Information. These are identified as Versions A and B of each.
PHOENIX MULTI-PORTFOLIO FUND
Cross Reference Sheet
Pursuant to Rule 495(a) Version A
PART A
<TABLE>
<CAPTION>
Form N-1A Item No. Prospectus Caption
- --------------------------------------------- -----------------------------------------------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Introduction
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Introduction; Investment Objectives and Policies;
Investment Techniques; Portfolio Turnover; Description of
Shares
5. Management of the Fund Introduction; Management of the Fund
6. Capital Stock and Other Securities Introduction; Description of Shares; Dividends,
Distributions and Taxes
7. Purchase of Securities Being Offered National Distributor and Distribution Plans; How to Buy
Shares
8. Redemption or Repurchase How to Buy Shares
9. Legal Proceedings Not applicable
</TABLE>
PART B
<TABLE>
<CAPTION>
Form N-1A Item No. Statement of Additional Information Caption
- --------------------------------------------- -----------------------------------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not applicable
13. Investment Objectives and Policies Investment Objectives and Policies; Investment
Restrictions; Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Trustees and Officers
Holders of Securities
16. Investment Advisory and Other The Investment Advisers; The National Distributor
Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities See "Description of Shares" in Prospectus
19. Purchase, Redemption and Pricing of Determination of Net Asset Value; How to Buy Shares;
Securities Being Offered Shareholder Services; Reinvestment Privilege; Exchange
Privilege; How to Redeem Shares
20. Tax Status Taxes
21. Underwriters The National Distributor; How to Buy Shares; Alternative
Purchase Arrangements
22. Calculations of Yield Quotations of Not applicable
Money Market Funds
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
ii
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
101 Munson Street
Greenfield, Massachusetts 01301
Prospectus
, 1995
Phoenix Multi-Portfolio Fund (the "Fund") is an open-end management
investment company whose shares are offered in seven series, five of which
are offered for investment as described below. Each series represents an
investment in a separate portfolio with its own investment objectives and
policies. There can be no assurance that any portfolio will achieve its
objectives.
Phoenix Tax-Exempt Bond Portfolio (the "Bond Portfolio") seeks as its
investment objective the production of as high a level of current income
exempt from federal income taxation as is consistent with preservation of
capital. It intends under normal conditions to invest at least 80% of its net
assets in municipal securities, the income of which is fully exempt from
federal income taxation.
Phoenix Capital Appreciation Portfolio (the "Capital Appreciation
Portfolio") seeks as its investment objective long-term appreciation of
capital. It intends to invest primarily in the common stocks of companies
considered to have such appreciation potential. It may invest up to one third
of its assets in foreign securities, although it does not presently intend to
do so.
Phoenix International Portfolio (the "International Portfolio") seeks as
its investment objective a high total return consistent with reasonable risk.
It intends to invest primarily in an internationally diversified portfolio of
equity securities. It intends to reduce its risk by engaging in hedging
transactions involving options, futures contracts and foreign currency
transactions (see "Investment Techniques" on page 17). The International
Portfolio provides a means for investors to invest a portion of their assets
outside the United States.
Phoenix Real Estate Securities Portfolio (the "Real Estate Portfolio")
seeks as its investment objective capital appreciation and income with
approximately equal emphasis. It intends under normal circumstances to invest
in marketable securities of publicly traded real estate investment trusts
(REITs) and companies that operate, develop, manage and/or invest in real
estate located primarily in the United States.
Phoenix Emerging Markets Bond Portfolio (the "Emerging Markets Portfolio")
seeks as its primary investment objective high current income. The secondary
objective of the Emerging Markets Portfolio is long term capital
appreciation. It intends to invest primarily in high-yield (high risk) debt
securities issued by governments and corporations in certain foreign
countries known as "emerging markets." These debt securities are commonly
referred to as "junk bonds" and are considered speculative with regard to the
payment of interest and return of principal. Debt securities issued by
foreign issuers also entail greater risks of default and price volatility
than higher rated securities and may present problems of liquidation and
valuation. Investors should carefully consider these risks before investing.
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the
Fund, the Adviser or the Distributor. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any state in which or to any person to whom it is unlawful
to make such offer.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS/EXCHANGES: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
(continued from previous page)
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Investors should read and
retain this Prospectus for future reference. Additional information about the
Fund is contained in a Statement of Additional Information, dated , 1995,
which has been filed with the Securities and Exchange Commission (the
"Commission") and is available at no charge by calling (800) 243-4361. The
Statement of Additional Information is incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board or any other agency and involve
investment risk, including possible loss of principal.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION 3
FUND EXPENSES 5
FINANCIAL HIGHLIGHTS 7
PERFORMANCE INFORMATION 9
INVESTMENT OBJECTIVES AND POLICIES 10
Tax Exempt Bond Portfolio 10
Capital Appreciation Portfolio 12
International Portfolio 13
Emerging Markets Bond Portfolio 15
Real Estate Portfolio 17
INVESTMENT TECHNIQUES 19
INVESTMENT RESTRICTIONS 25
PORTFOLIO TURNOVER 25
MANAGEMENT OF THE FUND 26
NATIONAL DISTRIBUTOR AND DISTRIBUTION PLANS 28
DESCRIPTION OF SHARES 29
HOW TO BUY SHARES 30
INVESTOR ACCOUNTS AND SERVICES AVAILABLE 35
NET ASSET VALUE 38
HOW TO REDEEM SHARES 39
DIVIDENDS, DISTRIBUTIONS AND TAXES 41
ADDITIONAL INFORMATION 43
APPENDIX 43
</TABLE>
2
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of
Phoenix Multi-Portfolio Fund (the "Fund"). The Fund is an open-end management
investment company established in 1987 as a Massachusetts business trust.
Shares of the Fund are divided into seven series or "Portfolios", five of
which are available for investment as described below. Each Portfolio has a
different investment objective and is designed to meet different investment
needs. This Prospectus offers shares of the Phoenix Tax-Exempt Bond Portfolio
(the "Bond Portfolio"), the Phoenix Capital Appreciation Portfolio (the
"Capital Appreciation Portfolio"), the Phoenix International Portfolio (the
"International Portfolio"), the Phoenix Real Estate Securities Portfolio (the
"Real Estate Portfolio") and the Phoenix Emerging Markets Bond Portfolio (the
"Emerging Markets Portfolio"), five of the portfolios currently offered by
the Fund (each a "Portfolio", and, together, the "Portfolios").
The Investment Advisers
The investment adviser for the Bond Portfolio, Capital Appreciation
Portfolio, International Portfolio and Emerging Markets Portfolio is Phoenix
Investment Counsel, Inc. ("PIC" or the "Adviser"). The investment adviser for
the Real Estate Portfolio is Phoenix Realty Securities, Inc. ("PRS" or the
"Adviser"). PIC and PRS are wholly-owned indirect subsidiaries of Phoenix
Home Life Mutual Insurance Company ("Phoenix Home Life"). PRS delegates
certain investment decisions and research functions to ABKB/LaSalle
Securities Limited Partnership ("ABKB") for which ABKB is paid a fee by PRS.
ABKB is not affiliated with PRS, PIC or Phoenix Home Life.
See "Management of the Fund" for a description of the Investment Advisory
Contracts and fees and each investment adviser's undertaking to reimburse the
Fund for certain expenses.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as National Distributor of the Fund's shares. See "National
Distributor" and "Distribution Plans" and the Statement of Additional
Information. Equity Planning also acts as financial agent of the Fund and as
such receives a quarterly fee based on the average of the aggregate daily net
asset values of the Fund at an annual rate of $300 per $1 million. Equity
Planning also serves as the Fund's transfer agent.
The Fund has adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). Pursuant to the distribution
plan adopted for Class A Shares, the Fund shall reimburse the National
Distributor up to a maximum annual rate of 0.25% of the Fund's average daily
Class A Share net assets of a Portfolio for distribution expenditures
incurred in connection with the sale and promotion of Class A Shares of a
Portfolio and for furnishing shareholder services. Pursuant to the
distribution plan adopted for Class B Shares of a Portfolio, the Fund shall
reimburse the Distributor up to a maximum annual rate of 1.00% of the Fund's
average daily Class B Share net assets of a Portfolio for distribution
expenditures incurred in connection with the sale and promotion of Class B
Shares of a Portfolio and for furnishing shareholder services. See
"Distribution Plans."
Purchase of Shares
Each Portfolio is authorized to offer two classes of shares on a
continuous basis which may be purchased at a price equal to their net asset
value per share, plus a sales charge which, at the election of the purchaser,
may be imposed (i) at the time of purchase (the "Class A Shares") or (ii) at
the time of redemption if the shares have not been held for at least five
years (the "Class B Shares").
Class A Shares of each Portfolio are offered to the public at the next
determined net asset value after receipt of the order (see "Net Asset Value")
plus a maximum sales charge of 4.75% of the offering price (4.99% of the
amount invested) on single purchases of less than $50,000. The sales charge
for Class A Shares is reduced on a graduated scale on single purchases of
$50,000 or more and subject to other conditions stated below. See "How to Buy
Shares" and "How to Obtain Reduced Sales Charges on Class A Shares".
Class B Shares of each Portfolio are offered to the public at the next
determined net asset value after receipt of an order, with no sales charge.
Class B Shares are subject to a sales charge if they are redeemed within five
years of purchase. See "How to Buy Shares" and "Deferred Sales Charge
Alternative--Class B Shares".
Each share of a Portfolio, whether Class A or Class B, represents an
identical interest in the investment portfolio of the Portfolio and has the
same rights, except that Class B
3
<PAGE>
Shares bear the cost of the higher distribution fees and certain other
expenses resulting from the deferred sales charge arrangements, which cause
the Class B Shares to have a higher expense ratio and to receive lower
dividends than Class A Shares. Class B Shares 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 this Prospectus. The purpose of
the conversion feature is to relieve the holders of Class B Shares that have
been outstanding for a period of time sufficient for the Distributor to have
been compensated for distribution expenses, from most of the burden of such
distribution-related expenses. See "How to Buy Shares."
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investment program designated "Investo-Matic") and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment
amounts are available under certain circumstances. See "How to Buy Shares."
Redemption Price
Class A Shares may be redeemed at any time at the net asset value per
share next computed after receipt of a redemption request by Equity Planning,
the Fund's transfer agent. Class B shareholders redeeming shares within five
years of the date of purchase will normally be assessed a contingent deferred
sales charge. See "How to Redeem Shares."
Risk Factors
There can be no assurance that any Portfolio will achieve its investment
objectives. In addition, special risks may be presented by the particular
types of securities in which a Portfolio may invest. For example, although
the Real Estate Portfolio does not invest directly in real property, it does
invest primarily in securities concentrated in and directly related to the
real estate industry and may therefore be subject to certain risks associated
with the ownership of real estate and with the real estate industry in
general. The Real Estate Portfolio is non-diversified and as such there is no
restriction on the percentage of its assets that may be invested in the
securities of any one issuer. Accordingly, its value is potentially more
susceptible to adverse developments affecting a single issuer.
The Emerging Markets Portfolio can invest entirely in high yield/high risk
bonds (commonly referred to as "junk bonds"). It invests in lower quality
securities of issuers which may have defaulted in the past on certain of
their financial obligations. It is also non-diversified and as such there is
no restriction on the percentage of its assets that may be invested in
securities of one issuer. Accordingly, its share price can fluctuate in
response to political events and currency and interest rate fluctuations. Its
value is potentially more susceptible to adverse developments affecting a
single issuer.
To the extent that a Portfolio such as the Emerging Markets Portfolio
invests in lower-rated securities, such an investment is speculative and
involves risks not associated with investment in higher rated securities,
including overall greater risk of non-payment of interest and principal and
potentially greater sensitivity to general economic conditions and changes in
interest rates. Although the portfolio turnover rate cannot be accurately
predicted, it is anticipated that the annual turnover rate of the Capital
Appreciation Portfolio may be as high as 450%. Because of PIC's strict "sell"
discipline, the portfolio's annual turnover rate may be substantially higher
than that of other investment companies with similar investment objectives. A
high rate of turnover involves a correspondingly greater amount of brokerage
commissions and other costs which are paid directly by the Portfolio. It may
also result in the realization of capital gains, which are taxable to the
shareholders. The risks of each Portfolio should be reviewed and are set
forth in more detail in the "Risk Considerations" sections of this
Prospectus.
4
<PAGE>
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder
will incur. The expenses and fees set forth in the table (except for the Real
Estate and Emerging Markets Portfolios Class A Shares and Class B Shares) are
for fiscal year ended November 30, 1994. For Class B Shares, expenses and
fees for the fiscal year ended November 30, 1994 have been restated to
reflect a full year of operations.
<TABLE>
<CAPTION>
Capital Capital
Bond Bond Appreciation Appreciation International
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- -------------- ----------- -------------- --------------
(Class A (Class B (Class A (Class B (Class A
Shares) Shares) Shares) Shares) Shares)
<S> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load Imposed
on Purchases (as
percentage of offering
price) 4.75% None 4.75% None 4.75%
Maximum Sales Load Imposed
on Reinvested
Dividends None None None None None
Deferred Sales Load 5% during the 5% during the
first year, first year,
decreasing 1% decreasing 1%
annually to 2% annually to 2%
during the during the
4th & 5th 4th & 5th
years; years;
dropping dropping
from 2% to 0% from 2% to 0%
after the after the
None 5th year None 5th year None
Redemption Fee None (a) None None (a) None None (a)
Exchange Fee None None None None None
Annual Fund Operating
Expenses
(as a percentage of
average net assets for
the year ended November
30, 1994)
Management Fees
Advisory Fees (b) 0.45% 0.45% 0.75% 0.75% 0.75%
Administrative Fees (c) 0.03% 0.03% 0.03% 0.03% 0.03%
Rule 12b-1 Fees (d) 0.25% 1.00% 0.25% 1.00% 0.25%
Other Operating Expenses 0.22% 0.22% 0.33% 0.33% 0.44%
Expense Reimbursement None None None None None
--------- ---------- --------- -------------- ------------
Total Operating Expenses 0.95% 1.70% 1.36% 2.11% 1.47%
======= ============== ========= ============== ============
</TABLE>
<TABLE>
<CAPTION>
Emerging
Real Estate Markets Emerging
International Portfolio Real Estate Portfolio Markets
Portfolio (e) Portfolio (e) (e) Portfolio (e)
------------- ------------ ------------- ------------ ---------------
(Class B (Class A (Class B (Class A (Class B
Shares) Shares) Shares) Shares) Shares)
[Pro-Forma] [Pro-Forma] [Pro-Forma] [Pro-Forma]
<S> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as percentage of
offering price) None 4.75% None 4.75% None
Maximum Sales Load
Imposed on Reinvested
Dividends None None None None None
Deferred Sales Load 5% during the 5% during the
first year, first year,
decreasing 1% decreasing 1% 5% during the
annually to annually to first year,
2% 2% decreasing 1%
during the during the annually to 2%
4th & 5th 4th & 5th during the
years; years; 4th & 5th
dropping dropping years; dropping
from 2% to 0% from 2% to 0% from 2% to 0%
after the after the after the
5th year None 5th year None 5th year
Redemption Fee None None (a) None None (a) None
Exchange Fee None None None None None
Annual Fund Operating
Expenses
(as a percentage of
average net assets for
the year ended
November 30, 1994)
Management Fees
Advisory Fees (b) 0.75% 0.75% 0.75% % %
Administrative Fees (c) 0.03% 0.03% 0.03% 0.03% 0.03%
Rule 12b-1 Fees (d) 1.00% 0.25% 1.00% 0.25% 1.00%
Other Operating Expenses 0.44% 0.68% 0.68%
Expense Reimbursement None (0.41)(f) (0.41)(g) ( )(h) ( )(i)
------------- ------------ ------------- ------------ ---------------
Total Operating Expenses 2.22% 1.30% 2.05% % %
============= ============ ============= ============ ===============
</TABLE>
5
<PAGE>
(a) The Trustees may, at their option, impose a redemption fee not in
excess of 1% of net asset value. No redemption fee is presently contemplated
and shareholders will be given reasonable notice of any change in this
intention.
(b) On February 1, 1994, the investment advisory fees changed to reflect a
new fee structure, which had been approved by shareholders. Accordingly, the
expense information included in the table has been restated to reflect
current fees.
(c) On January 1, 1994, the administrative fees were reduced from 0.04% of
average net assets. The expense information included in the table has been
restated accordingly.
(d) "Rule 12b-1 Fees" represent an asset-based sales charge that, for a
long-term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
(e) The inclusion of the Real Estate Portfolio and the Emerging Markets
Portfolio as portfolios of the Fund were approved by the Trustees on November
16, 1994 and February 16, 1995, respectively. Accordingly, expenses for those
Portfolios have been projected for the fiscal period ending November 30,
1995.
(f) Phoenix Realty Securities, Inc. has agreed to reimburse the Real
Estate Securities Portfolio's operating expenses related to Class A Shares
for the amount, if any, by which such operating expenses for the fiscal year
ended November 30, 1995 exceed 1.30% of the average net assets.
(g) Phoenix Realty Securities, Inc. has agreed to reimburse the Real
Estate Securities Portfolio's operating expenses related to Class B Shares
for the amount, if any, by which such operating expenses for the fiscal year
ended November 30, 1995 exceed 2.05% of the average net assets.
(h) Phoenix Investments Counsel, Inc. has agreed to reimburse the Emerging
Markets Portfolio's operating expenses related to Class A Shares for the
amount, if any, by which such operating expenses for the fiscal year ended
November 30, 1995 exceed % of the average net assets.
(i) Phoenix Investments Counsel, Inc. has agreed to reimburse the Emerging
Markets Portfolio's operating expenses related to Class B Shares for the
amount, if any, by which such operating expenses for the fiscal year ended
November 30, 1995 exceed % of the average net assets.
<TABLE>
<CAPTION>
Example* 1 year 3 years 5 years 10 years
- ------------------------------------------------------ -------- --------- --------- ------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return
and (2) redemption at the end of each time period.
Bond Portfolio (Class A Shares) $57 $76 $ 97 $158
Bond Portfolio (Class B Shares) 67 83 112 181
Capital Appreciation Portfolio (Class A Shares) 61 89 119 204
Capital Appreciation Portfolio (Class B Shares) 71 96 134 225
International Portfolio (Class A Shares) 62 92 124 215
International Portfolio (Class B Shares) 73 99 139 237
Real Estate Portfolio (Class A Shares) $60 $87 $115 $197
Real Estate Portfolio (Class B Shares) $71 $94 $130 $219
Emerging Markets Portfolio (Class A Shares)
Emerging Markets Portfolio (Class B Shares)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
An investor would pay the following expenses on the
same $1,000 investment assuming no redemption at the
end of each time period:
Bond Portfolio (Class A Shares) $57 $76 $ 97 $158
Bond Portfolio (Class B Shares) 17 53 92 181
Capital Appreciation Portfolio (Class A Shares) 61 89 119 204
Capital Appreciation Portfolio (Class B Shares) 21 66 114 225
International Portfolio (Class A Shares) 62 92 124 215
International Portfolio (Class B Shares) 23 69 119 237
Real Estate Portfolio (Class A Shares) $60 $87 $115 $197
Real Estate Portfolio (Class B Shares) $21 $64 $110 $219
Emerging Markets Portfolio (Class A Shares)
Emerging Markets Portfolio (Class B Shares)
</TABLE>
*The purpose of the table above is to help the investor understand the
various costs and expenses that the investor will bear, directly or
indirectly. The example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. For
more complete descriptions of various costs and expenses, see "Fund and its
Management of the Fund," "Distribution Plans" and "How To Buy Shares."
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth certain financial information about the
Portfolios available as of November 30, 1994 for the respective fiscal years
of the Fund. The financial information has been audited by Price Waterhouse
LLP, independent accountants. Their opinion and the Financial Statements and
notes thereto are incorporated by reference in the Statement of Additional
Information. The Statement of Additional Information and the Fund's most
recent Annual Report (which contains a discussion of the Fund's performance)
are available at no charge upon request by calling (800) 243-4361.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
TAX-EXEMPT BOND PORTFOLIO
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------------------------------ ----------
Year Ended November 30, 1994
-----------------------------------------------------------
From
Inception From
7/15/88 Inception
to 3/16/94 to
1994 1993 1992 1991 1990 1989 11/30/88 11/30/94
------- ------- ------ ------ ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.58 $ 11.10 $ 10.66 $ 10.37 $ 10.68 $ 10.18 $ 10.00 $11.21
Income from
investment
operations
Net investment
income 0.65 0.60(1) 0.66(1) 0.65(1) 0.65(1) 0.68(1) 0.24(1) 0.39
Net realized and
unrealized gain
(loss) (1.49) 0.76 0.57 0.29 -- 0.52 0.18 (1.09)
------- ------- ------ ------ ------ ------ -------- ----------
Total from
investment
operations (0.84) 1.36 1.23 0.94 0.65 1.20 0.42 (0.70)
------- ------- ------ ------ ------ ------ -------- ----------
Less distributions
Dividends from net
investment income (0.65) (0.60) (0.66) (0.65) (0.65) (0.68) (0.24) (0.39)
Dividends from net
realized gains -- (0.28) (0.13) -- (0.31) (0.02) -- --
------- ------- ------ ------ ------ ------ -------- ----------
Total distributions (0.65) (0.88) (0.79) (0.65) (0.96) (0.70) (0.24) (0.39)
------- ------- ------ ------ ------ ------ -------- ----------
Change in net asset
value (1.49) 0.48 0.44 0.29 (0.31) 0.50 0.18 (1.09)
------- ------- ------ ------ ------ ------ -------- ----------
Net asset value, end
of period $10.09 $11.58 $11.10 $10.66 $10.37 $10.68 $10.18 $10.12
======= ======= ====== ====== ====== ====== ======== ==========
Total return(2) -7.55% 12.79% 11.92% 9.32% 6.49% 12.13% 11.06%(3) -6.42%(4)
Ratios/supplemental
data:
Net assets, end of
period (thousands) $141,623 $171,272 $35,625 $27,093 $20,240 $17,590 $12,226 $1,147
Ratio to average net
assets of:
Operating expenses 0.96% 0.75% 0.78% 0.94% 1.00% 1.00% 1.00%(3) 1.54%(3)
Net investment
income 5.65% 5.33% 5.92% 6.17% 6.29% 6.55% 6.26%(3) 5.07%(3)
Portfolio turnover 54% 62% 145% 99% 130% 161% 33%(3) 54%
</TABLE>
(1) Includes reimbursement of operating expenses in 1993, 1992, 1991, 1990,
1989, and 1988 by investment adviser of $0.03, $0.04, $0.02, $0.02, $0.09
and $0.05 respectively. If the adviser had not reimbursed a portion of
these expenses, the ratios of operating expenses to average net assets in
1993, 1992 and 1991 would have been 1.02%, 1.13%, 1.15% respectively.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) Annualized.
(4) Not annualized.
7
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
International Portfolio
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------- ----------
Year Ended November 30,
-------------------------------------------------
From
Inception From
11/1/89 Inception
to 7/15/94 to
1994 1993 1992 1991 1990 11/30/89 11/30/94
------- ------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.16 $ 8.96 $ 10.90 $ 10.27 $ 10.44 $10.00 $12.80
Income from investment
operations
Net investment income (loss) (0.01) -- 0.11 0.15 0.15(1) 0.02(1) (0.01)
Net realized and unrealized
gain (loss) 1.48 2.20 (1.10) 0.69 (0.22) 0.42 (0.19)
------- ------- ------ ------ ------ ------ ----------
Total from investment
operations 1.47 2.20 (0.99) 0.84 (0.07) 0.44 (0.20)
------- ------- ------ ------ ------ ------ ----------
Less distributions
Dividends from net investment
income -- -- (0.12) (0.21) (0.10) -- --
Dividends from net realized
gains -- -- (0.64) -- -- -- --
Distribution in excess of
accumulated net investment
income -- -- (0.19) -- -- -- --
------- ------- ------ ------ ------ ------ ----------
Total distributions -- -- (0.95) (0.21) (0.10) -- --
------- ------- ------ ------ ------ ------ ----------
Change in net asset value 1.47 2.20 (1.94) 0.63 (0.17) 0.44 (0.20)
------- ------- ------ ------ ------ ------ ----------
Net asset value, end of period $ 12.63 $ 11.16 $ 8.96 $ 10.90 $ 10.27 $10.44 $12.60
======= ======= ====== ====== ====== ====== ==========
Total return(2) 13.17% 24.55% (9.91)% 8.26% (0.75)% 53.53%(3) -1.56%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $167,918 $91,196 $26,188 $21,427 $16,583 $1,593 $1,991
Ratio to average net assets of:
Operating expenses 1.47% 1.78% 1.97% 2.09% 1.50% 1.50%(3) 1.93%(3)
Net investment (loss) income 0.20% (0.04)% 0.85% 1.29% 1.48% 3.24%(3) 0.36%(3)
Portfolio turnover 186% 191% 82% 128% 99% -- 186%(3)
</TABLE>
(1) Net of reimbursement by investment adviser of $0.06 and $3.54
respectively.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) Annualized
(4) Not Annualized.
Capital Appreciation Portfolio
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------- ------ ----------
Year Ended November 30,
-------------------------------------------------
From
Inception From
11/1/89 Inception
to 7/15/94 to
1994 1993 1992 1991 1990 11/30/89 11/30/94
------- ------- ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 18.70 $ 17.95 $ 16.61 $ 11.95 $ 10.29 $10.00 $17.68
Income from investment
operations
Net investment income (loss) 0.11 0.11 0.15 0.19 0.18(1) 0.03(1) (0.01)
Net realized and unrealized
gain 0.10 1.44 2.41 4.64 1.59 0.26 0.30
------- ------- ------ ------ ------ ------ ----------
Total from investment
operations 0.21 1.55 2.56 4.83 1.77 0.29 0.29
------- ------- ------ ------ ------ ------ ----------
Less distributions
Dividends from net investment
income (0.10) (0.13) (0.21) (0.17) (0.11) -- --
Dividends from net realized
gains (0.78) (0.67) (1.01) -- -- -- --
------- ------- ------ ------ ------ ------ ----------
Total distributions (0.88) (0.80) (1.22) (0.17) (0.11) -- --
------- ------- ------ ------ ------ ------ ----------
Change in net asset value (0.67) 0.75 1.34 4.66 1.66 0.29 0.29
------- ------- ------ ------ ------ ------ ----------
Net asset value, end of period $ 18.03 $ 18.70 $ 17.95 $ 16.61 $ 11.95 $10.29 $17.97
======= ======= ====== ====== ====== ====== ==========
Total return(2) 1.03% 8.94% 16.44% 40.78% 17.26% 35.28%(3) 1.64%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $419,760 $426,027 $234,472 $119,870 $15,840 $1,568 $1,519
Ratio to average net assets of:
Operating expenses 1.36% 1.34% 1.40% 1.24% 1.50% 1.50%(3) 2.05%(3)
Net investment income 0.59% 0.64% 0.93% 1.94% 2.22% 4.68%(3) (0.23)%(3)
Portfolio turnover 227% 174% 287% 458% 454% 5.28%(3) 227%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.01 and $0.23 respectively.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) Annualized.
(4) Not Annualized.
8
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Both
yield and total return figures are computed separately for Class A and Class
B Shares of each Portfolio in accordance with formulas specified by the
Securities and Exchange Commission, are based on historical earnings and are
not intended to indicate future performance.
The yield of each Portfolio will be computed by dividing the Portfolio's
net investment income over a 30-day period by an average value of invested
assets (using the average number of shares entitled to receive dividends and
the maximum offering price per share at the end of the period), all in
accordance with applicable regulatory requirements. Such amount will be
compounded for six months and then annualized for a twelve-month period to
derive the Portfolio's yield.
The Fund may also quote a "tax-equivalent yield" determined by dividing
the tax-exempt portion of quoted yield by 1 minus the stated income tax rate
and adding the result to the portion of the yield that is not tax-exempt.
Standardized quotations of average annual total return for Class A and
Class B Shares of each Portfolio will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in either Class
A or Class B Shares of each Portfolio over a period of 1, 5 and 10 years (or
up to the life of the class of shares). Standardized total return quotations
reflect the deduction of a proportional share of each Class's expenses of
such Portfolio (on an annual basis), deduction of the maximum initial sales
load in the case of Class A Shares and the maximum contingent deferred sales
charge applicable to a complete redemption of the investment in the case of
Class B Shares, and assume that all dividends and distributions on Class A
and Class B Shares are reinvested when paid. It is expected that the
performance of Class A Shares will be better than that of Class B Shares as a
result of lower distribution fees, and certain incrementally lower expenses
paid by Class A Shares. The Fund may also quote supplementally a rate of
total return over different periods of time by means of aggregate, average,
and year-by-year or other types of total return figures.
Advertisements, sales literature and other communications may contain
information about the Fund or Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund
to respond quickly to changing market and economic conditions. From time to
time, the Fund may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital
components; or cite separately as a return figure the equity or bond portion
of a Fund's portfolio; or compare the Fund's equity or bond return figure to
well-known indices of market performance, including, but not limited to: the
Standard & Poor's 500 Index (the "S&P 500"), Dow Jones Industrial Average,
First Boston High Yield Index and Salomon Brothers Corporate and Government
Bond Indices.
The Fund may also advertise performance relative to certain performance
rankings and indices compiled by independent organizations. The Fund may
include the ranking of these performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar,
Inc. Additionally, the Fund may compare its performance results to other
investment or savings vehicles (such as certificates of deposit) and may
refer to results published in various publications such as Changing Times,
Forbes, Fortune, Money, Barrons, Business Week and Investor's Daily,
Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment
Adviser, The Wall Street Journal, The New York Times, Consumer Reports,
Registered Representative, Financial Planning, Financial Services Weekly,
Financial World, U.S. News and World Report, Standard and Poor's The Outlook,
Personal Investor and Realty Stock Review. The Fund may from time to time
illustrate the benefits of tax deferral by comparing taxable investments to
investments made through tax-deferred retirement plans. The total return may
also be used to compare the performance of the Fund against certain widely
acknowledged outside standards or indices for stock and bond market
performance, such as the S&P 500, Dow Jones Industrial Average, Europe
Australia Far East Index (EAFE), Consumer's Price Index, Shearson Lehman
Corporate Index, Shearson Lehman T-Bond Index, Russell 2000, Wilshire Real
Estate Securities Index, NAREIT Combined Index, NAREIT Equity Index, NCREIF
Property Index and the National Real Estate Index. The S&P 500 is a commonly
quoted market value-weighted and unmanaged index showing the changes in the
aggregate market value of 500 common stocks
9
<PAGE>
relative to the base period 1941-43. The S&P 500 is composed almost entirely
of common stocks of companies listed on the New York Stock Exchange, although
the common stocks of a few companies listed on the American Stock Exchange or
traded over the counter are included. The 500 companies represented include
400 industrial, 60 transportation and 40 financial services concerns. The S&P
500 represents about 80% of the market value of all issues traded on the New
York Stock Exchange. The NCREIF Index is produced by the National Council of
Real Estate Investment Fiduciaries (NCREIF) and measures the historical
performance of income-producing properties owned by commingled funds on
behalf of qualified pension and profit-sharing trusts, or owned directly by
these trusts and managed on a separate account basis. Properties in the
NCREIF Index are unleveraged and the figures represent gross returns before
management fees. The National Real Estate Index is published by Ernst & Young
and Liquidity Fund. The National Real Estate Index is a transaction-based
data service that reports property prices, rental rates and capitalization
rates in the largest real estate markets in the United States. The NAREIT
Combined Index and NAREIT Equity Index are published by the National
Association of Real Estate Investment Trusts (NAREIT). The NAREIT Combined
Index is comprised of all publicly-traded equity, mortgage or hybrid REITs.
The NAREIT Equity Index is comprised of all publicly-traded Equity REITs. The
Wilshire Securities Index measures the investment characteristics of publicly
traded real estate securities such as REITs, real estate operating companies
and partnerships.
Performance information for the Fund reflects only the performance of a
hypothetical investment in Class A or Class B Shares of a Portfolio during
the particular time period in which the calculations are based. Performance
information should be considered in light of a particular Portfolio's
investment objectives and policies, characteristics and quality of the
Portfolio, and the market conditions during the given time period, and should
not be considered as a representation of what may be achieved in the future.
For a description of the methods used to determine total return for each
Portfolio, see the Statement of Additional Information.
The Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Portfolio and a comparison
of that performance to a securities market index.
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio has a different investment objective and is designed to
meet different investment needs. The differences in objectives and policies
among the five Portfolios can be expected to affect the investment return of
each Portfolio and the degree of market and financial risk to which each
Portfolio is subject. The investment objective of each Portfolio is deemed to
be a fundamental policy which may not be changed without the approval of a
vote of a majority of the outstanding shares of that Portfolio. Except as
noted below, a Portfolio's investment policies are not deemed to be
fundamental and, therefore, may be changed without shareholder approval.
Since certain risks are inherent in the ownership of any security, there can
be no assurance that a Portfolio will achieve its investment objective.
Tax-Exempt Bond Portfolio
The investment objective of the Bond Portfolio is the production of as
high a level of current income exempt from federal income taxation as is
consistent with preservation of capital.
The Bond Portfolio will attempt to achieve its objective by investing at
least 80% of its net assets in municipal securities, the income of which is
fully exempt from federal income taxation. As used in this Prospectus, the
term "municipal securities" means obligations, including municipal bonds and
notes and tax-exempt commercial paper, issued by or on behalf of states,
territories and possessions of the United States, the District of Columbia
and their political subdivisions, agencies and instrumentalities, the
interest from which is, in the opinion of counsel to the issuers of such
securities, exempt from federal income taxation. In addition, municipal
securities include certain types of industrial development bonds which have
been or may be issued by or on behalf of public authorities to finance
privately operated facilities.
The Tax Reform Act of 1986 made significant changes in the federal tax
status of certain obligations which were previously fully federally
tax-exempt. As a result, three categories of such obligations issued after
August 7, 1986 now exist: (1) "public purpose" bonds, the income of which
remains fully exempt from federal income taxation, (2) qualified "private
activity" industrial development bonds, the income of which, while exempt
from
10
<PAGE>
federal income taxation under section 103 of the Internal Revenue Code, is
included in the calculation of the federal alternative minimum tax, and (3)
"private activity" (private purpose) bonds, the income of which is not exempt
from federal income taxation. Under normal market conditions, and as a matter
of fundamental policy, the Bond Portfolio will invest at least 65% of its
total assets in municipal bonds, the income of which is fully exempt from
federal income taxation, and at least 80% of its net assets in municipal
bonds and other municipal securities, the income of which is fully exempt
from federal income taxation. The Bond Portfolio will not invest in "private
activity" (private purpose) bonds, but may invest up to 20% of its net assets
in qualified "private activity" industrial development bonds and taxable
fixed income obligations.
The Bond Portfolio invests in municipal securities only if, at the date of
the investment, they are rated within the four highest grades as determined
by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or by
Standard & Poor's Corporation ("S&P") (AAA, AA, A or BBB) or, if not rated or
rated under a different system, are judged by PIC to be of equivalent quality
to municipal securities so rated. (See the Appendix for a description of
these ratings.) Purchasing unrated municipal securities, which may be less
liquid than comparable rated municipal securities, may involve somewhat
greater risk and consequently the Bond Portfolio may not invest more than 20%
of its total assets in unrated municipal securities. The Bond Portfolio may
also engage in certain options transactions, and enter into futures contracts
and related options for hedging purposes, invest in repurchase agreements and
lend portfolio securities. See "Risk Considerations" below and "Investment
Techniques".
Up to 20% of the Bond Portfolio's assets under normal conditions, and up
to 100% of its assets for temporary defensive purposes, may be invested in
the following types of taxable fixed income obligations: (1) obligations
issued or guaranteed by the U.S. Government, its agencies, authorities or
instrumentalities; (2) corporate debt securities which at the date of the
investment are rated Aa or higher by Moody's or AA or higher by S&P; (3)
commercial paper which at the date of the investment is rated P-1 by Moody's
or A-1 by S&P or, if not rated, is issued by a company which at the date of
the investment has an outstanding debt issue rated Aa or higher by Moody's or
AA or higher by S&P; (4) certificates of deposit issued by U.S. banks which
at the date of the investment have capital surplus and undivided profits in
excess of $100,000,000 as of the date of their most recently published
financial statements; and (5) repurchase agreements with respect to any of
the foregoing obligations with commercial banks, brokers and dealers
considered by the Trust to be credit-worthy. Under normal conditions,
however, at least 80% of the net assets of the Bond Portfolio will be
invested in municipal securities, the income of which is fully exempt from
federal income taxation.
Yields on municipal securities vary depending on a number of factors,
including the general condition of the financial markets and of the municipal
securities market, the size of a particular offering, the maturity of the
obligation and the credit rating of the issuer. Like other interest-bearing
securities, the value of municipal securities changes as interest rates
fluctuate. Normally, increases in interest rates cause a decrease in the
market value of interest-bearing securities and decreases in rates cause an
increase in such market value. Although subject to greater price fluctuation
due to changes in interest rates, tax laws and other general market factors,
municipal securities with longer maturities generally produce higher current
yields than municipal securities with shorter maturities. Lower-rated
municipal securities generally produce higher yields than higher-rated
municipal securities since the ability of the issuer of a lower-rated
municipal security to pay interest and principal is perceived as entailing a
greater degree of risk and therefore must reflect a commensurately greater
return. Maturities and ratings, as well as market conditions, are given due
weight by PIC in determining whether, in its judgment, particular municipal
securities will provide a high level of current income and/or potential for
capital appreciation.
Tax-Free versus Taxable Yield
Before investing in the Bond Portfolio, an investor may want to determine
which investment--tax free or taxable--will provide a higher after-tax
return. First determine the taxable equivalent yield by simply dividing the
yield from the tax-free investment by [1 minus your marginal tax rate]. For
example, if your marginal tax rate is 28% and you want to know what a taxable
investment would have to yield to equal a 7% tax-free investment, the
computation would be:
7% [divided by] (1 - .28 tax rate), or 7% [divided by] .72 = 9.72% Taxable
Yield.
In this example, an investor's after-tax yield will be higher from the 7%
tax-free investment if taxable yields are below 9.72%, and, conversely, an
investor will get a higher yield from
11
<PAGE>
the taxable investment when taxable rates exceed this figure. (The foregoing
analysis assumes that the investor is not subject to the alternative minimum
tax.)
Risk Considerations
The risk inherent in investing in the Bond Portfolio is that risk common
to any security, that the value of its shares will fluctuate in response to
changes in economic conditions, interest rates and the market's perception of
the underlying portfolio securities held by the Portfolio. However, municipal
securities rated in the lowest investment grade category (BBB by Standard &
Poor's or Baa by Moody's) and unrated municipal securities of equivalent
quality have speculative characteristics and changes in economic conditions
or other circumstances are more likely to weaken the issuer's capacity to
make principal and interest payments. In addition, the Fund does not have a
policy requiring the sale of a municipal security whose rating drops below
investment grade.
The Bond Portfolio's ability to achieve its objective depends partially on
the prompt payment by issuers of the interest on and principal of the
municipal securities held by the Portfolio. A moratorium, default or other
nonpayment of interest or principal when due on any municipal security could,
in addition to affecting the market value and liquidity of that particular
security, affect the market value and liquidity of other municipal securities
held by the Portfolio. In addition, the market for municipal securities is
often thin and can be temporarily affected by large purchases and sales,
including those by the Portfolio. Accordingly, while the Portfolio may from
time to time invest more than 25% of its total assets in a particular segment
of the municipal securities market, such as "public purpose" bonds issued for
like public purposes, it will attempt to minimize risk by diversifying its
investments broadly, by investing no more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government) and by
investing no more than 25% of its total assets in the municipal securities
issued by any one state or territory. Each political subdivision, agency or
instrumentality and each multi-state agency of which a state is a member will
be regarded as a separate issuer for the purpose of determining the
diversification of the Portfolio.
Capital Appreciation Portfolio
The Capital Appreciation Portfolio's investment objective is to seek
long-term appreciation of capital. Since income is not an objective, any
income generated by the investment of the Portfolio's assets will be
incidental to its objective.
The Capital Appreciation Portfolio will invest primarily in the common
stock of companies considered by PIC to have appreciation potential. Up to
one third of the assets of the Capital Appreciation Portfolio may be invested
in foreign securities perceived to have such potential. See "International
Portfolio", including "Risk Considerations", below for relevant information
about investing in foreign securities. Unlike the International Portfolio,
whose assets will be invested for a combination of growth and income, the
Capital Appreciation Portfolio will invest in foreign securities with the
objective of capital appreciation.
Since no one class or type of security at all times necessarily affords
the greatest promise for capital appreciation, the Capital Appreciation
Portfolio may invest any amount or proportion of its assets in any class or
type of security as described in this prospectus and believed by the Adviser
to offer potential for capital appreciation over both the intermediate and
the long term. Normally its investments will consist largely of common
stocks. However, the Capital Appreciation Portfolio may also invest in
preferred stocks, bonds, convertible preferred stocks and convertible
debentures if, in the judgment of PIC, such investment will further its
investment objective. The Portfolio may invest up to 10% of its total assets
in bonds considered to be less than investment grade (such bonds are commonly
referred to as "junk bonds") but which are not in default at the time of
investment, and rated C by Moody's (or CC by Standard & Poor's) or higher
(see Appendix), which may subject the Portfolio to risks attendant to such
bonds. The Capital Appreciation Portfolio may also engage in certain options
transactions, and enter into futures contracts and related options for
hedging purposes, invest in repurchase agreements and lend portfolio
securities. See "Investment Techniques". Each security held in the Portfolio
will be continuously monitored to ascertain whether it continues to
contribute to the attainment of the Portfolio's basic investment objective of
long-term appreciation of capital.
While PIC intends that, under normal conditions, the Portfolio will invest
at least 65% of its total assets in the common stock of companies with
appreciation potential, for temporary defensive purposes (as when market
conditions for growth stocks are adverse), other types of investments that
appear advantageous on the basis of combined considerations of risk and the
protection of capital values may be made in fixed income securities with or
without warrants or conversion features. In an effort to protect its
12
<PAGE>
assets against major market declines and for other temporary defensive
purposes, the Capital Appreciation Portfolio may actively pursue a policy
whereby it will retain cash or invest part or all of its assets in cash
equivalents.
Diversification is an important consideration in selecting the Capital
Appreciation Portfolio's investments, and the Portfolio will comply with the
diversification requirements of the Investment Company Act of 1940 and
Subchapter M of the Internal Revenue Code of 1986. (See "Investment
Restrictions" on page 25.) Thus the Portfolio's assets will be invested so
that no more than 5% of the value of its total assets will be in the
securities of any one issuer, other than the U.S. Government and, under
certain circumstances, foreign governments (see the Statement of Additional
Information), and the amount invested will not represent more than 10% of the
issuer's outstanding voting securities. Within these limitations, however,
greater emphasis will be placed upon careful selection of securities believed
to have good potential for appreciation than upon wide diversification.
Risk Considerations
Investments in common stocks for capital appreciation are subject to the
risks of changing economic and market conditions which may affect the
profitability and financial condition of the companies in whose securities
the Portfolio is invested and PIC's ability to anticipate those changes.
Since investments normally will consist primarily of securities considered
to have appreciation potential, the assets of the Capital Appreciation
Portfolio may be considered to be subject to greater risks than would be
involved if the Portfolio invested in securities which do not have such
potential.
Since the Portfolio may invest up to 10% of its total assets in bonds
considered to be less than investment grade, commonly referred to as "junk
bonds", the Portfolio may be exposed to greater risks than if it did not
invest in such bonds. With lower rated bonds, there is a greater possibility
that an adverse change in the financial condition of the issuer may affect
its ability to pay principal and interest. Bond prices fluctuate inversely to
interest rates. Generally, when interest rates rise, it may be expected that
the value of bonds may decrease. In addition, to the extent that the
Portfolio holds any such bonds, it may be negatively affected by adverse
economic developments, increased volatility or a lack of liquidity. See the
Statement of Additional Information.
As set forth above, the Capital Appreciation Portfolio may invest up to
one third of its assets in foreign securities.
Investing in foreign securities involves different risks from those
involved in investing in securities of U.S. issuers. See "International
Portfolio--Risk Considerations" below.
International Portfolio
The International Portfolio seeks as its investment objective a high total
return consistent with reasonable risk. It intends to achieve its objective
by investing primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. See
"Investment Techniques". Investments may be made for capital growth or for
income or any combination thereof for the purpose of achieving a high overall
return.
There is no limitation on the percentage or amount of the International
Portfolio's assets which may be invested in growth or income, and therefore
at any particular time the investment emphasis may be placed solely or
primarily on growth of capital or on income. In determining whether the
International Portfolio will be invested for capital growth or income, PIC
will analyze the international equity and fixed income markets and seek to
assess the degree of risk and level of return that can be expected from each
market. The International Portfolio will invest primarily in non-United
States issuers, and under normal circumstances more than 80% of the
International Portfolio's total assets will be invested in non-United States
issuers located in not less than three foreign countries.
In pursuing its objective, the International Portfolio will invest
primarily in common stocks of established non-United States companies
believed to have potential for capital growth, income or both. However, there
is no requirement that the International Portfolio invest exclusively in
common stocks or other equity securities. The International Portfolio may
invest in any other type of security including, but not limited to,
convertible securities, preferred stocks, bonds, notes and other debt
securities of companies (including Euro-currency instruments and securities)
or obligations of domestic or foreign governments and their political
subdivisions, and in foreign currency transactions. The Portfolio may invest
up to 10% of its total assets in bonds considered to be less than investment
grade (but which are not in default at the time of investment), which may
subject the Portfolio to risks attendant
13
<PAGE>
to such bonds. When PIC believes that the total return potential in debt
securities equals or exceeds the potential return on equity securities, the
Portfolio may substantially increase its holdings in debt securities. The
International Portfolio may establish and maintain reserves of up to 100% of
its assets for temporary defensive purposes under abnormal market or economic
conditions. The International Portfolio's reserves may be invested in
domestic as well as foreign short-term money market instruments including,
but not limited to, government obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements. The International Portfolio may also
engage in certain options transactions, and enter into futures contracts and
related options for hedging purposes, invest in repurchase agreements and
lend portfolio securities. See "Investment Techniques".
The International Portfolio may invest in the securities of other
investment companies subject to the limitations contained in the 1940 Act
(see "Investment Restrictions" in the Statement of Additional Information).
In certain countries, investments may only be made by investing in other
investment companies that, in turn, are authorized to invest in the
securities that are issued in such countries. Shareholders should recognize
that the Fund's purchase of the securities of such other investment companies
results in the layering of expenses such that shareholders indirectly bear a
proportionate part of the expenses for such investment companies including
operating costs, and investment advisory and administrative fees.
The International Portfolio makes investments in various countries. Under
normal circumstances, business activities in a number of different foreign
countries will be represented in the International Portfolio's investments.
The International Portfolio may, from time to time, have more than 25% of its
assets invested in any major industrial or developed country which in the
view of PIC poses no unique investment risk. The International Portfolio may
purchase securities of companies, wherever organized, which have their
principal activities and interests outside the United States. Under
exceptional economic or market conditions abroad, the International Portfolio
may, for temporary defensive purposes, invest all or a major portion or its
assets in U.S. government obligations or securities of companies incorporated
in and having their principal activities in the United States. The
International Portfolio may also invest its reserves in domestic short-term
money-market instruments as described above.
In determining the appropriate distribution of investments among various
countries and geographic regions, PIC ordinarily will consider the following
factors: prospects for relative economic growth among foreign countries;
expected levels of inflation; relative price levels of the various capital
markets; government policies influencing business conditions; the outlook for
currency relationships and the range of individual investment opportunities
available to the international investor.
Shareholders should be aware that the International Portfolio may make
investments in developing countries, which involve exposure to economic
structures that are generally less diverse and mature than in the United
States, and to political systems which may be less stable. A developing
country can be considered to be a country which is in the initial stages of
its industrialization cycle. In the past, markets of developing countries
have been more volatile than the markets of developed countries; however,
such markets often have provided higher rates of return to investors. PIC
believes that these characteristics can be expected to continue in the
future.
Generally, the Portfolio will not trade in securities for short-term
profits but, when circumstances warrant, securities may be sold without
regard to the length of time held.
Risk Considerations
There are substantial and different risks involved which should be
carefully considered by any investor considering foreign investments. For
example, there is generally less publicly available information about foreign
companies than is available about companies in the United States. Foreign
companies are generally not subject to uniform audit and financial reporting
standards, practices and requirements comparable to those in the United
States.
Foreign securities involve currency risks. The U.S. dollar value of a
foreign security tends to decrease when the value of the dollar rises against
the foreign currency in which the security is denominated and tends to
increase when the value of the dollar falls against such currency.
Fluctuations in exchange rates may also affect the earning power and asset
value of the foreign entity issuing the security. Dividend and interest
payments may be returned to the country of origin, based on the exchange rate
at
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the time of disbursement, and restrictions on capital flows may be imposed.
Losses and other expenses may be incurred in converting between various
currencies in connection with purchases and sales of foreign securities.
Foreign stock markets are generally not as developed or efficient as those
in the United States. In most foreign markets volume and liquidity are less
than in the United States and, at times, volatility of price can be greater
than that in the United States. Fixed commissions on foreign stock exchanges
are generally higher than the negotiated commissions on United States
exchanges. There is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the United States.
There is also the possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitations on
the removal of funds or other assets, political or social instability, or
diplomatic developments which could adversely affect investments, assets or
securities transactions of the International Portfolio in some foreign
countries. The International Portfolio is not aware of any investment or
exchange control regulations which might substantially impair the operations
of the Portfolio as described, although this could change at any time.
For many foreign securities, there are U.S. dollar-denominated American
Depository Receipts ("ADRs"), which are traded in the United States on
exchanges or over the counter and are sponsored and issued by domestic banks.
ADRs represent the right to receive securities of foreign issuers deposited
in a domestic bank or a correspondent bank. ADRs do not eliminate all the
risk inherent in investing in the securities of foreign issuers. However, by
investing in ADRs rather than directly in foreign issuers' stock, the
International Portfolio can avoid currency risks during the settlement period
for either purchases or sales. In general, there is a large, liquid market in
the United States for many ADRs. The information available for ADRs is
subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, which standards are
more uniform and more exacting than those to which many foreign issuers may
be subject. The International Portfolio may also invest in European
Depository Receipts ("EDRs"), which are receipts evidencing an arrangement
with a European bank similar to that for ADRs and are designed for use in the
European securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
The dividends and interest payable on certain of the International
Portfolio's foreign securities may be subject to foreign withholding taxes,
thus reducing the net amount available for distribution to the International
Portfolio's shareholders. Investors should understand that the expense ratio
of the International Portfolio can be expected to be higher than those of
investment companies investing in domestic securities since the costs of
operation are higher. There can be no assurance that the International
Portfolio's investment policy will be successful or that its investment
objective will be attained.
Since the International Portfolio may invest up to 10% of its total assets
in bonds considered to be less than investment grade, commonly referred to as
"junk bonds", it may be exposed to greater risks than if it did not invest in
such bonds. With lower rated bonds, there is a greater possibility that an
adverse change in the financial condition of the issuer may affect its
ability to pay principal and interest. Bond prices fluctuate inversely to
interest rates. Generally, when interest rates rise, it may be expected that
the value of bonds may decrease. In addition, to the extent that the
Portfolio holds any such bonds, it may be negatively affected by adverse
economic developments, increased volatility or a lack of liquidity. See the
Statement of Additional Information.
Emerging Markets Bond Portfolio
The Emerging Markets Portfolio has a primary investment objective of high
current income and a secondary objective of long term capital appreciation.
In seeking high current income and, secondarily, long-term capital
appreciation, the Emerging Markets Portfolio normally invests at least 65% of
its total assets in debt securities issued by governments, government-
related entities and corporations in emerging markets, or the return from
which is derived principally from emerging markets. The Adviser considers
"emerging markets" to include any country that is defined as an emerging or
developing economy by an International Bank for Reconstruction and
Development (i.e., the World Bank), the International Finance Corporation or
the United Nations or its authorities.
Although the Portfolio may invest in any emerging market, the Adviser may
weight its investments toward countries in a region such as Latin America. In
addition to Latin America,
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the Adviser may pursue investment opportunities in Asia, Africa, the Middle
East and the developing countries of Europe, primarily Eastern Europe. The
Portfolio will deem an issuer to be located in an emerging market if:
[ ] the issuer is organized under the laws of an emerging market country;
[ ] the issuer's principal securities trading market is in an emerging market
country; or
[ ] at least 50% of the issuer's non-current assets, capitalization, gross
revenue or profit in any one of the two most recent fiscal years has been
derived from emerging market country activities.
Under normal conditions at least 50% of the Portfolio's assets will be
invested in sovereign debt securities issued or guaranteed by governments,
government-related entities and central banks based in emerging markets
(including participations in and assignments of portions of loans between
governments and financial institutions); government-owned, controlled or
sponsored entities located in emerging markets; entities organized and
operated for the purpose of restructuring investment characteristics of
instruments issued by government or government-related entities in emerging
markets; and debt obligations issued by organizations such as the Asian
Development Bank and the Inter-American Development Bank.
The Portfolio may also purchase debt securities issued by commercial banks
and companies in emerging markets. Debt instruments held by the Portfolio may
be fixed or floating rate issues and may take the form of bonds, notes,
bills, debentures, convertible securities, warrants, bank obligations,
short-term paper, loan participations, loan assignments, and trust interests.
The Portfolio may purchase "Brady Bonds," which are debt securities issued
under the Brady Plan to enable debtor countries to restructure their
outstanding bank loans. Most "Brady Bonds" have their principal collaterized
by zero coupon U.S. Treasury bonds.
To reduce currency risk, the Portfolio will invest at least 65% of its
assets in U.S. dollar-denominated debt securities.
While the Portfolio is not "diversified", it will invest in a minimum of
three countries at any one time and will not commit more than 40% of its
assets to issuers in a single country.
The Portfolio will be investing predominantly in debt securities that are
rated below investment grade, or unrated but equivalent to those rated below
investment grade by internationally recognized rating agencies such as S&P or
Moody's. Debt securities rated below BBB by S&P or below Baa by Moody's are
considered to be below investment-grade. These types of high yield/high risk
debt obligations (commonly referred to as "junk bonds") are predominantly
speculative with respect to the capacity to pay interest and repayment of
principal and generally involve a greater risk of default and more volatility
in price than securities in higher rating categories, such as
investment-grade U.S. bonds. On occasion, the Portfolio may invest up to 5%
of its net assets in non-performing securities whose quality is comparable to
securities rated as low as D by S&P or C by Moody's. A large portion of the
Portfolio's bond holdings may trade at substantial discounts from face value.
Under normal conditions, the Portfolio may invest up to 35% of its total
assets in securities other than emerging markets debt obligations such as
debt securities and money market instruments issued by corporations and
governments based in developed markets. However, for temporary defensive
purposes, the Portfolio may invest without limit in U.S. debt securities,
including short-term money market securities.
The Portfolio may invest up to 10% of its total assets in shares of
closed-end investment companies that invest primarily in emerging market debt
securities and to the extent that it does so, shareholders will incur certain
duplicative fees and expenses, including investment advisory fees. See
International Portfolio.
Risk Considerations
The risks of investing in foreign countries and companies is outlined in
detail in the International Portfolio "Risk Considerations" section above.
The risks outlined are greater with respect to emerging markets securities
than they are with respect to developed countries securities.
The Portfolio may invest up to 35% of its assets in securities denominated
in currencies of foreign countries. Accordingly, changes in the value of
these currencies will result in corresponding changes in the U.S. dollar
value of the Portfolio's assets denominated in those currencies. Some foreign
countries may have managed currencies, which are not free floating against
the U.S. dollar. In addition, there is risk that certain foreign countries
may restrict the free conversion of their currencies into other currencies.
Further, it generally will not be possible to reduce the Portfolio's emerging
market currency risk through hedging. Any devaluations in the
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currencies in which the Portfolio's securities are denominated may decrease
the Portfolio's net asset value.
Certain emerging markets may require governmental approval for the release
of investment income, capital or the proceeds of sales of securities to
foreign investors such as the Portfolio. In addition, if a deterioration
occurs in an emerging market's balance of payments or for other reasons, a
country could impose temporary restrictions on the release of foreign
capital. Such delays could impact the Portfolio's performance as could any
restrictions on investments.
Throughout the last decade many emerging markets have experienced high
rates of inflation, creating a negative interest rate environment and
devaluing outstanding financial assets. Increases in inflation could have an
adverse effect on the Portfolio's non-dollar denominated securities and on
the issuers of debt obligations generally.
The Portfolio may invest in debt securities which are rated below
investment-grade (hereinafter referred to as "lower rated securities") or
which are unrated. These debt instruments generally offer a higher current
yield than that available from higher grade issues, but typically involve
greater risk. Lower rated and unrated securities are especially subject to
adverse changes in general economic conditions, to changes in the financial
condition of their issuers, and to price fluctuation in response to changes
in interest rates. During periods of economic downturn or rising interest
rates, issuers of these instruments may experience financial problems that
could adversely affect their ability to make payments of principal and
interest and increase the possibility of default. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may also
decrease the value and liquidity of these securities especially in a market
characterized by limited trading. Perceived credit quality can change
suddenly and unexpectedly, and may not fully reflect the actual risk posed
nor do credit ratings assigned to lower rated securities necessarily
accurately reflect the true risks of investment. Lower rated securities are
also subject to risks associated with payment expectations and are subject to
the impact of new and proposed laws.
Investment in foreign debt can involve a high degree of risk. Holders of
sovereign debt may be requested to participate in the rescheduling of such
debt and to extend further loans to governmental entities. There is no
bankruptcy proceeding by which defaulted sovereign debt may be collected.
Securities traded in emerging markets may be subject to risks due to the
inexperience of financial intermediaries, the lack of modern technology and
the lack of sufficient capital to expand business operations. Additionally,
certain countries may own property, the claims on which have not been
entirely settled. There can be no assurance that the Portfolio's investments
would not be expropriated, nationalized or otherwise confiscated. Finally,
any change in the leadership or policies of these countries, may adversely
affect existing investment opportunities.
Real Estate Portfolio
The Real Estate Portfolio seeks as its investment objective capital
appreciation and income with approximately equal emphasis. It intends under
normal circumstances to invest in marketable securities of publicly traded
real estate investment trusts (REITs) and companies that are principally
engaged in the real estate industry. Under normal circumstances, the
Portfolio intends to invest at least 75% of the value of its assets in these
securities.
The Portfolio's investment objective is a fundamental policy which may not
be changed without shareholder approval. Policies and limitations are
considered at the time of purchase and the sale of instruments is not
required in the event of a change in circumstances. There can be no assurance
that the Portfolio will achieve its objective.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. Generally,
REITs can be classified as equity REITs, mortgage REITs or hybrid REITs.
Equity REITs invest the majority of their assets directly in real property
and derive income primarily from the collection of rents. Equity REITs can
also realize capital gains by selling properties that have appreciated in
value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Hybrid
REITs combine the characteristics of both equity REITs and mortgage REITs.
The Portfolio intends to emphasize investment in equity REITs.
In determining whether an issuer is "principally engaged" in the real
estate industry, PRS seeks companies which derive at least 50% of their gross
revenues or net profits from the ownership, development, construction,
financing, management or sale of commercial, industrial or residential real
estate. The equity securities of real estate companies
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considered for purchase by the Portfolio will consist of shares of beneficial
interest, marketable common stock, rights or warrants to purchase common
stock, and securities with common stock characteristics such as preferred
stock and debt securities convertible into common stock.
The Portfolio may also invest up to 25% of its total assets in (a)
marketable debt securities of companies principally engaged in the real
estate industry, (b) mortgage-backed securities such as mortgage pass-through
certificates, real estate mortgage investment conduit ("REMIC") certificates
and collateralized mortgage obligations ("CMOs") (see "Investment
Techniques"); or (c) short-term investments.
The Portfolio invests in debt securities only if, at the date of
investment, they are rated within the four highest grades as determined by
Moody's Investors Services, Inc. (Aaa, Aa, A or Baa) or by Standard & Poor's
Corporation (AAA, AA, A or BBB) or, if not rated or rated under a different
system, are judged by PRS to be of equivalent quality to debt securities so
rated. (See Appendix for a description of these ratings.) Securities rated
Baa or BBB are medium grade investment obligations that may have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments in the case of such obligations than is the case for higher grade
securities. The Portfolio may, but is not obligated to, dispose of debt
securities whose credit quality falls below investment grade. Unrated debt
securities may be less liquid than comparable rated debt securities and may
involve somewhat greater risk than rated debt securities.
For temporary defensive purposes (as when market conditions in real estate
securities are extremely adverse such that PRS believes there are
extraordinary risks associated with investment therein), the Portfolio may
invest up to 100% of its total assets in short-term investments such as money
market instruments consisting of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; repurchase agreements;
certificates of deposit and bankers' acceptances issued by banks or savings
and loan associations having net assets of at least $500 million as of the
end of their most recent fiscal year; high-grade commercial paper rated, at
time of purchase, in the top two categories by a national rating agency or
determined to be of comparable quality by PRS or ABKB at the time of
purchase; and other long- and short-term instruments which are rated A or
higher by S&P or Moody's at the time of purchase.
Risk Considerations
The Real Estate Portfolio is non-diversified under the federal securities
laws. As a non-diversified portfolio, there is no restriction under the 1940
Act on the percentage of assets that may be invested at any time in the
securities of any one issuer. To the extent that the Real Estate Portfolio is
not fully diversified, it may be more susceptible to adverse economic,
political or regulatory developments affecting a single issuer than would be
the case if it were more broadly diversified. In addition, investments by the
Real Estate Portfolio in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
Although the Real Estate Portfolio does not invest directly in real
estate, it does invest primarily in real estate securities and accordingly
concentrates its investment in the real estate industry. Accordingly, the
value of shares of the Real Estate Portfolio will fluctuate in response to
changes in economic conditions within the real estate industry. Risks
associated with the direct ownership of real estate and with the real estate
industry in general include, among other things, possible declines in the
value of real estate; risks related to general and local economic conditions;
possible lack of availability of mortgage funds; over-building; extended
vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from flood,
earthquakes or other natural disasters; limitations on and variations in
rents; dependency on property management skill; the appeal of properties to
tenants; and, changes in interest rates. The Real Estate Portfolio may also
invest in mortgage-backed securities as described above. The risks associated
with such securities are described in the section "Mortgage-Backed
Securities."
Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry
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in general. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected
by the quality of any credit extended. REITs are dependent upon management
skills, are not diversified, and are subject to the risks of financing
projects. As the Portfolio may invest in new or unseasoned REIT issuers, it
may be difficult or impossible for PRS or ABKB to necessarily ascertain the
value of each of such REIT's underlying assets, management capabilities and
growth prospects. In addition, REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, and the possibilities of
failing to qualify for the exemption from tax or distributed income under the
Internal Revenue Code of 1986, as amended (the "Code") and failing to
maintain their exemptions from the 1940 Act. REITs whose underlying assets
include long-term health care properties, such as nursing, retirement and
assisted living homes, may be impacted by federal regulations concerning the
health care industry. The Portfolio will indirectly bear its proportionate
share of any expenses paid by REITs in which it invests in addition to the
expenses paid by the Portfolio itself.
REITs (especially mortgage REITs) are subject to interest rate risks. When
interest rates decline, the value of a REITs' investment in fixed rate
obligations usually rises. Conversely, when interest rates rise, the value of
a REIT's investment in fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT's investment in such loans will gradually
align themselves to reflect changes in market interest rates, causing the
value of such investments to fluctuate less dramatically in response to
interest rate fluctuations than would investments in fixed rate obligations.
In addition, investing in REITs involves risks similar to those associated
with investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited volume and
may be more subject to abrupt or erratic price movements than larger
capitalization stocks included in the S&P 500 Index.
The Portfolio commenced operations on March 1, 1995 based upon an initial
capitalization of $5 million provided by Phoenix Home Life. The ability of
the Portfolio to raise additional capital for investment purposes may
directly effect the spectrum of portfolio holdings and performance. While
many of the officers and directors of PRS are experienced real estate
professionals, based upon its relatively recent formation and involvement
with real estate securities, PRS does not have an operating history of
investing in the types of real estate securities expected to be held within
the Real Estate Portfolio. Even though PRS is an affiliate of PIC, PRS has no
prior experience as an investment adviser.
INVESTMENT TECHNIQUES
In furtherance of their objectives, all Portfolios may write covered call
options, purchase call and put options on securities, and engage in
transactions in financial futures contracts and related options for hedging
purposes. These instruments are derivative securities or "derivatives." All
Portfolios may invest in repurchase agreements. In addition, the Capital
Appreciation, International and Emerging Markets Portfolios may write secured
put options and enter into option transactions on foreign currency. The
investment techniques that can be utilized by the Portfolios and the related
risks are summarized below and described in more detail in the Statement of
Additional Information.
Writing (Selling) Call and Put Options. A call option on a security or a
foreign currency gives the purchaser of the option, in return for the premium
paid to the writer (seller), the right to buy the underlying security or
foreign currency at the exercise price at any time during the option period.
Upon exercise by the purchaser, the writer of a call option has the
obligation to sell the underlying security or foreign currency at the
exercise price. A call option on a securities index is similar to a call
option on an individual security, except that the value of the option depends
on the weighted value of the group of securities comprising the index and all
settlements are made in cash. A call option may be terminated by the writer
(seller) by entering into a closing purchase transaction in which it
purchases an option of the same series as the option previously written.
A put option on a security or foreign currency gives the purchaser of the
option, in return for the premium paid to the writer (seller), the right to
sell the underlying security or foreign currency at the exercise price at any
time during the option period. Upon exercise by the purchaser, the writer of
a put option has the obligation to purchase the underlying security or
foreign currency at the exercise price. A put option on a securities index is
similar to a put option on an individual security, except that the value of
the option depends on the weighted value of the group of securities
comprising the index and all settlements are made in cash.
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The Capital Appreciation, Bond, International Emerging Markets Portfolios
may write exchange-traded call options on its securities. Call options may be
written on portfolio securities and on securities indices, and in addition,
in the case of the Capital Appreciation, International and Emerging Markets
Portfolios, on foreign currencies. These Portfolios, may write call and put
options on an exchange or over the counter. Call options on portfolio
securities will be covered since the Portfolio utilizing this investment
technique will own the underlying securities or other securities that are
acceptable for a segregated account at all times during the option period.
Segregated accounts will contain only cash, U.S. Government securities or
other liquid high quality debt obligations. Call options on securities
indices will be written only to hedge in an economically appropriate way
portfolio securities which are not otherwise hedged with options or financial
futures contracts and will be "covered" by identifying the specific portfolio
securities being hedged. Call options on foreign currencies and put options
on securities and foreign currencies will be covered by securities acceptable
for a segregated account. No Portfolio utilizing this investment technique
may write options on more than 50% of its total assets. Management presently
intends to cease writing options if and as long as 25% of such total assets
are subject to outstanding options contracts or if required under regulations
of state securities administrators.
A Portfolio utilizing this investment technique will write call and put
options in order to obtain a return on its investments from the premiums
received and will retain the premiums whether or not the options are
exercised. Any decline in the market value of portfolio securities or foreign
currencies will be offset to the extent of the premiums received (net of
transaction costs). If an option is exercised, the premium received on the
option will effectively increase the exercise price or reduce the difference
between the exercise price and market value.
During the option period, the writer of a call option gives up the
opportunity for appreciation in the market value of the underlying security
or currency above the exercise price. It retains the risk of loss should the
price of the underlying security or foreign currency decline. Writing call
options also involves risks relating to a Portfolio's ability to close out
options it has written.
During the option period, the writer of a put option has assumed the risk
that the price of the underlying security or foreign currency will decline
below the exercise price. However, the writer of the put option has retained
the opportunity for any appreciation above the exercise price should the
market price of the underlying security or foreign currency increase. Writing
put options also involves risks relating to a Portfolio's ability to close
out options it has written.
Purchasing Call and Put Options, Warrants and Stock Rights. The Bond
Portfolio may invest up to 5% of its total assets in exchange-traded call and
put options on securities and, if appropriate, securities indices. The
Capital Appreciation, International and Emerging Markets Portfolios each may
invest up to an aggregate of 5% of its total assets in exchange-traded or
over-the-counter call and put options on securities and securities indices
and foreign currencies. Purchases of such options by any Portfolio may be
made for the purpose of hedging against changes in the market value of the
underlying securities or foreign currencies. A Portfolio utilizing this
investment technique will invest in call and put options whenever, in the
opinion of the Adviser, a hedging transaction is consistent with the
investment objectives of a Portfolio. A Portfolio utilizing this investment
technique may sell a call option or a put option which it has previously
purchased prior to the purchase (in the case of a call) or the sale (in the
case of a put) of the underlying security or foreign currency. Any such sale
would result in a net gain or loss depending on whether the amount received
on the sale is more or less than the premium and other transaction costs paid
on the call or put which is sold. Purchasing a call or put option involves
the risk that a Portfolio may lose the premium it paid plus transaction
costs.
Warrants and stock rights are almost identical to call options in their
nature, use and effect except that they are issued by the issuer of the
underlying security, rather than an option writer, and they generally have
longer expiration dates than call options. The Capital Appreciation,
International and Emerging Markets Portfolios may each invest up to 5% of its
net assets in warrants and stock rights, but no more than 2% of its net
assets in warrants and stock rights not listed on the New York Stock Exchange
or the American Stock Exchange. The Bond Portfolio will not invest in
warrants and stock rights except where they are acquired in units or attached
to other securities.
Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They are transacted directly with dealers and
not with a clearing corporation, and there is a risk of non-performance by
the dealer. However, the premium is paid in advance by the dealer.
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OTC options are available for a greater variety of securities and foreign
currencies, and in a wider range of expiration dates and exercise prices than
exchange-traded options. Since there is no exchange, pricing is normally done
by reference to information from a market maker, which information is
carefully monitored or caused to be monitored by PIC and verified in
appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options,
there can be no assurance that a continuous liquid secondary market will
exist for any particular option at any specific time. Consequently, the
Capital Appreciation, International or Emerging Markets Portfolios may be
able to realize the value of an OTC option it has purchased only by
exercising it or entering into a closing sale transaction with the dealer
that issued it. Similarly, when a Portfolio writes an OTC option, it
generally can close out that option prior to its expiration only by entering
into a closing purchase transaction with the dealer to which such Portfolio
originally wrote the option. If a covered call option writer cannot effect a
closing transaction, it cannot sell the underlying security or foreign
currency until the option expires or the option is exercised. Therefore, the
writer of a covered OTC call option may not be able to sell an underlying
security even though it might otherwise be advantageous to do so. Likewise,
the writer of a secured OTC put option may be unable to sell the securities
pledged to secure the put for other investment purposes while it is obligated
as a put writer. Similarly, a purchaser of an OTC put or call option might
also find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Fund understands the position of the staff of the Securities and
Exchange Commission (the "SEC") to be that purchased OTC options and the
assets used as "cover" for written OTC options are illiquid securities. The
Fund has adopted procedures for engaging in OTC options transactions for the
purpose of reducing any potential adverse effect of such transactions upon
the liquidity of the Portfolio. A brief description of these procedures and
related limitations appears under "Investment Objectives and Policies--Over-
the-Counter Options" in the Statement of Additional Information.
Financial Futures and Related Options. The Bond, Capital Appreciation,
International and Emerging Markets Portfolios may enter into financial
futures contracts and related options as a hedge against anticipated changes
in the market value of their portfolio securities or securities which they
intend to purchase or in the exchange rate of foreign currencies. Hedging is
the initiation of an offsetting position in the futures market which is
intended to minimize the risk associated with a position's underlying
securities in the cash market. Investment techniques related to financial
futures and options are summarized below and are described more fully in the
Statement of Additional Information.
Financial futures contracts consist of interest rate futures contracts,
foreign currency futures contracts and securities index futures contracts. An
interest rate futures contract obligates the seller of the contract to
deliver, and the purchaser to take delivery of, the interest rate securities
called for in the contract at a specified future time and at a specified
price. A foreign currency futures contract obligates the seller of the
contract to deliver, and the purchaser to take delivery of, the foreign
currency called for in the contract at a specified future time and at a
specified price. See "Foreign Currency Transactions". A securities index
assigns relative values to the securities included in the index, and the
index fluctuates with changes in the market values of the securities so
included. A securities index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the
index value at the close of the last trading day of the contract and the
price at which the futures contract is originally struck. An option on a
financial futures contract gives the purchaser the right to assume a position
in the contract (a long position if the option is a call and a short position
if the option is a put) at a specified exercise price at any time during the
period of the option.
The Bond, Capital Appreciation, International and Emerging Markets
Portfolios may purchase and sell financial futures contracts which are traded
on a recognized exchange or board of trade and may purchase exchange- or
board-traded put and call options on financial futures contracts. The Capital
Appreciation, International and Emerging Markets Portfolios may enter into
financial futures contracts on foreign currencies.
The Bond, Capital Appreciation, International and Emerging Markets
Portfolios will engage in transactions in financial futures contracts and
related options only for hedging purposes and not for speculation. In
addition, the Portfolios
21
<PAGE>
will not purchase or sell any financial futures contract or related option
if, immediately thereafter, the sum of the cash or U.S. Treasury bills
committed with respect to the Portfolio's existing futures and related
options positions and the premiums paid for related options would exceed 5%
of the market value of the Portfolio's total assets. At the time of purchase
of a futures contract or a call option on a futures contract, an amount of
cash, U. S. Government securities or other appropriate high-grade debt
obligations equal to the market value of the futures contract minus the
Portfolio's initial margin deposit with respect thereto, will be deposited in
a segregated account with the Fund's custodian bank to collateralize fully
the position and thereby ensure that it is not leveraged. The extent to which
a Portfolio may enter into financial futures contracts and related options
may also be limited by requirements of the Internal Revenue Code for
qualification as a regulated investment company.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that PIC could be
incorrect in its expectations as to the direction or extent of various
interest rate movements or foreign currency exchange rates, in which case a
Portfolio's return might have been greater had hedging not taken place. There
is also the risk that a liquid secondary market may not exist, and the loss
from investing in futures contracts is potentially unlimited because the
Portfolio may be unable to close its position. The risk in purchasing an
option on a financial futures contract is that a Portfolio will lose the
premium it paid. Also, there may be circumstances when the purchase of an
option on a financial futures contract would result in a loss to a Portfolio
while the purchase or sale of the contract would not have resulted in a loss.
Repurchase Agreements. Portfolios may invest in repurchase agreements,
either for temporary defensive purposes necessitated by adverse market
conditions or to generate income from its excess cash balances, provided that
no more than 10% of a Portfolio's total assets may be invested in the
aggregate in repurchase agreements having maturities of more than seven days
and in all other illiquid securities. A repurchase agreement is an agreement
under which the Portfolio acquires a money market instrument (generally a
security issued by the U.S. Government or an agency thereof, a banker's
acceptance or a certificate of deposit) from a commercial bank, a broker or a
dealer, subject to resale to the seller at an agreed upon price and date
(normally the next business day). The resale price reflects an agreed upon
interest rate effective for the period the instrument is held by the
Portfolio and is unrelated to the interest rate on the underlying instrument.
A repurchase agreement acquired by a Portfolio will always be fully
collateralized by the underlying instrument, which will be marked to market
every business day. The underlying instrument will be held for the Fund's
account by the Fund's custodian bank until repurchased. Investors in the Bond
Portfolio should be aware that investments in repurchase agreements do not
generate income exempt from federal income taxation.
The use of repurchase agreements involves certain risks such as default by
or the insolvency of the other party to the repurchase agreement. Repurchase
agreements will be entered into only with commercial banks, brokers and
dealers considered by the Fund to be creditworthy.
Lending Portfolio Securities. In order to increase the return on its
investment, the Bond, Capital Appreciation, International and Emerging
Markets Portfolios may each lend its portfolio securities to broker-dealers
and other financial institutions in amounts up to 25% of the market or other
fair value of its total assets. Loans of portfolio securities will always be
fully collateralized and will be made only to borrowers considered by PIC to
be credit-worthy. Lending portfolio securities involves risk of delay in the
recovery of the loaned securities and in some cases the loss of rights in the
collateral should the borrower fail financially. See the Statement of
Additional Information.
Variable and Floating Rate Securities. The Bond Portfolio may invest in
municipal securities which bear rates of interest that are adjusted
periodically according to a formula intended to minimize fluctuations in the
values of the instruments. These municipal securities are referred to as
variable or floating rate instruments. See the Statement of Additional
Information.
When-Issued Securities. The Bond and Emerging Markets Portfolios may
commit to purchase new issues of securities on a when-issued or forward
delivery basis, for payment and delivery at a later date. The price and yield
are generally fixed on the commitment to purchase date. During the period
between purchase and settlement, the Portfolio does not earn interest. Upon
settlement, the security's market value may be more or less than the purchase
price.
22
<PAGE>
Foreign Currency Transactions. The value of the assets of the Capital
Appreciation, International and Emerging Markets Portfolios as measured in
United States dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the
Portfolios may incur costs in connection with conversions between various
currencies. Each Portfolio will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or through forward contracts to
purchase or sell foreign currencies. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers. At the time of the
purchase of a forward foreign currency exchange contract, an amount of cash,
U.S. Government securities or other appropriate high-grade debt obligations
equal to the market value of the contract, minus the Portfolio's initial
margin deposit with respect thereto, will be deposited in a segregated
account with the Fund's custodian bank to collateralize fully the position
and thereby ensure that it is not leveraged.
When a Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the
United States dollar cost or proceeds, as the case may be. By entering into a
forward contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in the underlying security transaction, a
Portfolio is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the United States dollar and such foreign currency. However, this tends to
limit potential gains which might result from a positive change in such
currency relationships. A Portfolio utilizing this investment technique may
also hedge its foreign currency exchange rate risk by engaging in currency
financial futures and options transactions.
When the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the United States dollar, it
may enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of a Portfolio's portfolio securities
denominated in such foreign currency. The forecasting of short-term currency
market movement is extremely difficult and whether such a short-term hedging
strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary
for a Portfolio utilizing this investment technique to purchase additional
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver when a decision is made to sell the
security and make delivery of the foreign currency in settlement of a forward
contract. Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Portfolio is
obligated to deliver.
If the Portfolio utilizing this investment technique retains the portfolio
security and engages in an offsetting transaction, the Portfolio will incur a
gain or a loss (as described below) to the extent that there has been
movement in forward contract prices. If the Portfolio engages in an
offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between the Portfolio's entering into a forward contract for the sale of a
foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, the Portfolio would realize gains to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Portfolio would suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase. The Portfolio
will have to convert its holdings of foreign currencies into United States
dollars from time to time. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies.
Mortgage-Backed Securities. The Real Estate Portfolio may also invest up
to 25% of its total assets in mortgage-backed securities such as mortgage
pass-through certificates,
23
<PAGE>
real estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs"). CMOs are derivative securities
or "derivatives" and are hybrid instruments with characteristics of both
mortgage-backed and mortgage pass-through securities. Similar to a bond,
interest and pre-paid principal on a CMO are paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by Government National Mortgage Association (GNMA), the Federal
National Mortgage Association, or Federal National Mortgage Association. CMOs
are structured into multiple classes, with each class bearing a different
stated maturity. Monthly payments of principal, including prepayments, are
first returned to investors holding the shortest maturity class; investors
holding the longer maturity classes receive principal only after the first
class has been retired. REMICs are similar to CMOs and are fixed pools of
mortgages with multiple classes of interests held by investors.
The Portfolio may also invest in pass through securities that are derived
from mortgages. A pass-through security is formed when mortgages are pooled
together and undivided interests in the pool or pools are sold. The cash flow
from the mortgages is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee).
The Portfolio may purchase pass-through securities at a premium or at a
discount. The values of pass-through securities in which the Portfolio may
invest will fluctuate with changes in interest rates. The value of such
securities varies inversely with interest rates, except that when interest
rates decline, the value of pass-through securities may not increase as much
as other debt securities because of the prepayment feature. Changes in the
value of such securities will not affect interest income from those
obligations but will be reflected in the Portfolio's net asset value.
A particular risk associated with pass-through securities involves the
volatility of prices in response to changes in interest rates, or prepayment
risk. Prepayment rates are important because of their effect on the yield and
price of securities. Prepayments occur when the holder of an individual
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. As a result of the pass-through of prepayments of principal on
the underlying securities, mortgage-backed securities are often subject to
more rapid prepayment of principal than their stated maturity would indicate.
Although the pattern of prepayments is estimated and reflected in the price
paid for pass-through securities at the time of purchase, the actual
prepayment behavior of mortgages cannot be known at that time. Therefore, it
is not possible to predict accurately the realized yield or average life of a
particular issue of pass-through securities. Prepayments that occur faster
than estimated adversely affect yields for pass-throughs purchased at a
premium (that is, a price in excess of principal amount) and may cause a loss
of principal because the premium may not have been fully amortized at the
time the obligation is repaid. The opposite is true for pass- throughs
purchased at a discount. Furthermore, the proceeds from prepayments usually
are reinvested at current market rates, which may be higher than, but are
usually are lower than, the rates earned on the original pass-through
securities. Prepayments on a pool of mortgage loans are influenced by a
variety of economic, geographic, social and other factors, including changes
in mortgagors' housing needs, job transfers, unemployment, mortgagors' net
equity in the mortgaged properties and servicing decisions. Generally,
however, prepayments on fixed rate mortgage loans will increase during a
period of falling interest rates and decrease during a period of rising
interest rates. Mortgage-backed securities may decrease in value as a result
of increases in interest rates and may benefit less than other fixed income
securities or decline in value from declining interest rates because of risk
of prepayment.
Brady Bonds
The Emerging Markets Portfolio may invest in Brady Bonds, which are
securities created through the exchange of commercial bank loans to public
and private entities in emerging markets for new bonds under a debt
restructuring plan (the "Brady Plan".) Brady Plan debt restructurings have
been implemented in Mexico, Uruguay, Venezuela, Brazil, Dominican Republic,
Costa Rica, Argentina, Nigeria and the Philippines, among other countries.
The interest and repayment of principal of Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies
(primarily the dollar) and are actively traded in over-the-counter secondary
markets. Dollar-denominated collateralized Brady Bonds, which may be fixed-
or floating-rate bonds, are generally, but may not be, collateralized in
full as to principal by U.S. Treasury zero coupon bonds having the same
maturity as the bonds.
24
<PAGE>
In light of the uncollateralized component of Brady Bonds and the history
of defaults of countries issuing Brady Bonds with respect to commercial bank
loans by public and private entities, investments in Brady Bonds may be
speculative.
Loan Participations and Assignments
The Emerging Markets Portfolio may also invest in fixed- or floating-rate
loans arranged through private negotiations between an issuer of emerging
market debt instruments and one or more financial institutions ("lenders").
Generally, investments in loans would be in the form of loan participations
and assignments of loan portfolios from third parties.
When investing in a loan participation, the Portfolio will typically have
the right to receive payments from the lender to the extent that the lender
receives payments from the borrower. In addition, the Portfolio will be able
to enforce its rights through the lender, and not directly against the
borrower. As a result, in a loan participation the Portfolio assumes credit
risk with respect to both the borrower and the lender.
When the Portfolio purchases loan assignments from lenders, it will
acquire direct rights against the borrower, but these rights and the
Portfolio's obligations may differ from, and be more limited than, those held
by the assigning lender. Loan participations and assignments may be illiquid.
INVESTMENT RESTRICTIONS
The investment restrictions to which each Portfolio is subject, together
with the investment objectives of the Portfolio, are fundamental policies of
the Fund which may not be changed as to any Portfolio without the approval of
such Portfolio's shareholders. Among the more significant restrictions, each
Portfolio (other than the Real Estate Portfolio) may not (i) invest more than
5% of its total assets in securities issued or guaranteed by any one issuer
(except the U.S. Government and its agencies or instrumentalities; and, in
the case of each of the Capital Appreciation and International Portfolios,
any foreign government, its agencies and instrumentalities) or (ii) purchase
more than 10% of the outstanding voting securities or more than 10% of the
securities of any class of any one issuer. In addition no Portfolio may (i)
purchase a restricted security or a security for which market quotations are
not readily available or a repurchase agreement having a maturity longer than
seven days if as a result of such purchase more than 10% of the Portfolio's
total assets would be invested in such securities; or (ii) borrow in excess
of 10% of the market or other fair value of its total assets or pledge its
assets to an extent greater than 15% of the market or other fair value of its
total assets (any borrowings are to be from banks and undertaken only as a
temporary measure for administrative purposes).
The Bond Portfolio will not purchase securities while temporary bank
borrowings in excess of 5% of its net assets are outstanding. No such
restriction exists with respect to the other Portfolios. Any investment gains
made with monies borrowed in excess of interest paid will cause the net asset
value of the Portfolio's shares to rise faster than would otherwise be the
case. On the other hand, the risk of leveraging is that if the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the monies borrowed) to the Portfolio, the
net asset value of the Portfolio will decrease faster than would otherwise be
the case.
Within certain limitations (see the Statement of Additional Information)
each Portfolio may invest up to 10% of its total assets in shares of other
investment companies provided that immediately after any such investment not
more than 3% of the voting stock of another investment company would be owned
by the Portfolio. The International Portfolio presently intends to invest in
other investment companies within such limitations. As a shareholder in
another investment company a Portfolio will bear its ratable share of the
investment company's expenses, including management fees, and will remain
subject to payment of the advisory fee to the Adviser with respect to assets
so invested.
The Portfolios' investment restrictions are fully described in the
Statement of Additional Information.
PORTFOLIO TURNOVER
Each Portfolio pays brokerage commissions for purchases and sales of
portfolio securities. A high rate of portfolio turnover involves a
correspondingly greater amount of brokerage commissions and other costs which
must be borne directly by a Portfolio 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.
The rate of portfolio turnover is not a limiting factor when the Adviser
deems portfolio changes appropriate. Although the portfolio turnover rate of
all of the Portfolios cannot be accurately predicted, it is anticipated that
the annual turnover
25
<PAGE>
rate of the Capital Appreciation Portfolio, Bond Portfolio and International
Portfolio will not exceed 450%, 200% and 200% respectively. The portfolio
turnover rate for the Capital Appreciation Portfolio may be substantially
higher than that of other investment companies with similar investment
objectives because of the Adviser's strict sell discipline. If a security
underperforms the Adviser's expectations it is generally sold. It is
anticipated that the annual turnover rate of the Real Estate and Emerging
Markets Portfolios will not exceed 75% and 200% respectively. Portfolio
turnover rate is calculated by dividing the lesser of purchases and sales of
portfolio securities during the fiscal year by the monthly average of the
value of the Portfolio's securities (excluding short-term securities). The
turnover rate may vary greatly from year to year and may be affected by cash
requirements for redemptions of shares of a Portfolio and by compliance with
provisions of the Code relieving investment companies which distribute
substantially all of their net income from federal income taxation on the
amounts distributed. The 1993 and 1994 rates of portfolio turnover are set
forth under "Financial Highlights".
MANAGEMENT OF THE FUND
The Fund is a mutual fund, technically known as an open- end management
investment company. The Board of Trustees supervises the business affairs and
investments of the Fund, which is managed or caused to be managed on a daily
basis by the Fund's investment advisers. The Fund was organized as a
Massachusetts business trust on October 15, 1987. The Fund is authorized to
offer shares in series or "Portfolios" and is currently offering shares of
seven Portfolios, five of which are described in this prospectus. Two classes
of shares are offered by the Portfolios described in this prospectus.
The Advisers
The investment adviser to the Bond, Capital Appreciation, International
and Emerging Markets Portfolios is Phoenix Investment Counsel, Inc. (PIC),
which is located at One American Row, Hartford, Connecticut 06115-2520. PIC
was originally organized in 1932 as John P. Chase, Inc. In addition to the
Fund, PIC also serves as investment adviser to Phoenix Series Fund, Phoenix
Total Return Fund, Inc. and The Phoenix Edge Series Fund and as sub-adviser
to the Cambridge Series Trust, Chubb America Fund, Inc., SunAmerica Series
Trust and American Skandia Trust.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning" or "Distributor"), an indirect subsidiary of
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") of Hartford,
Connecticut. Phoenix Home Life is in the business of writing ordinary and
group life and health insurance and annuities. The principal office of
Phoenix Home Life is located at One American Row, Hartford, Connecticut
06115-2520. Equity Planning, the National Distributor of the Fund's shares,
also acts as financial agent of the Fund. Equity Planning is registered as a
broker-dealer in fifty states. The principal office of Equity Planning is
located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200.
The investment adviser to the Real Estate Portfolio is Phoenix Realty
Securities, Inc., which is located at One American Row, Hartford, Connecticut
06115-2520. PRS was formed in 1994 as an indirect subsidiary of Phoenix Home
Life. ABKB/LaSalle Securities Limited Partnership (ABKB), a subsidiary of
LaSalle Partners, serves as sub-adviser to the Real Estate Portfolio. ABKB's
principal place of business is located at 100 East Pratt Street, Baltimore,
Maryland 21202. ABKB has been a registered investment adviser since 1979 and
has approximately $2.6 billion under management, including $411 million of
real estate securities, as of June 30, 1994.
The investment advisers furnish investment programs for each Portfolio
under their management and manage the investment and reinvestment of the
assets of each Portfolio under their management subject at all times to the
supervision of the Trustees. PRS and ABKB shall periodically assess the
investment program of the Real Estate Portfolio and, under PRS' direction,
ABKB shall effectuate investment and reinvestment decisions. The investment
advisers are responsible for monitoring the services provided to the Fund.
The investment advisers, at their expense, furnish to the Fund adequate
office space and facilities and certain administrative services, including
the services of any member of their staffs who serves as an officer of the
Fund.
The Investment Advisory Agreements have been approved by the Trustees. The
Investment Advisory Agreements between the Fund and the Advisers have been
approved by relevant Shareholders.
For managing, or directing the management of the investments of the Bond,
Capital Appreciation, International and Emerging
26
<PAGE>
Markets Portfolios, PIC is entitled to a fee, payable monthly, at the
following annual rates:
<TABLE>
<CAPTION>
1st $1-2 $2+
Portfolio $1 Billion Billion Billion
<S> <C> <C> <C>
Bond .45% .40% .35%
Capital Appreciation .75% .70% .65%
International .75% .70% .65%
Emerging Markets % % %
</TABLE>
For managing, or directing the management of the investments of the Real
Estate Portfolio, PRS is entitled to a monthly fee at the annual rate of
0.75% of the average aggregate daily net asset values of the Portfolio 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 implementing portfolio
transactions, and providing research and other services to the Portfolio, PRS
pays a monthly subadvisory fee to ABKB from PRS' management fees at the
annual rate of 0.45% of the average aggregate daily net asset values of the
Portfolio up to $1 billion; 0.35% of such value between $1 billion and $2
billion; and 0.30% of such value in excess of $2 billion. The total advisory
fee of 0.75% of the aggregate net assets of the Portfolios is greater than
that for most mutual funds; however, the Trustees have determined that it is
similar to fees charged by other mutual funds whose investment objectives are
similar to those of the Portfolios.
For its services to the Bond, Capital Appreciation and International
Portfolios of the Fund during the fiscal year ended November 30, 1994, PIC
received a fee of $5,163,870. Based upon the inception dates of the Real
Estate and Emerging Markets Portfolios, the Advisers did not receive any fees
during the fiscal year ended November 30, 1994.
The Investment Advisory Agreements with the Fund provide that each
investment adviser will reimburse the Fund for the amount, if any, by which
the total operating expenses of any Portfolio (including each investment
adviser's compensation, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level
of expenses which such Portfolio is permitted to bear under the most
restrictive expense limitation (which has not been waived) imposed on mutual
funds by any state in which shares of the Portfolio are then qualified for
sale. Currently the most restrictive limitation is: 2.5% of the first $30
million of the average net assets of a Portfolio; 2% of the next $70 million
and 1.5% of the amount over $100 million. In addition, as of February 29,
1992, PIC voluntarily agreed to assume total operating and management
expenses of the Bond Portfolio (including PIC's compensation but excluding
interest, taxes, brokerage fees and commissions and extraordinary expenses)
until November 30, 1993 to the extent that such expenses exceeded 0.75% of
the average of the aggregate daily net asset values. The expense
reimbursement for the benefit of the Bond Portfolio was discontinued as of
December 1, 1993.
The Portfolio Managers
Bond Portfolio
Mr. James D. Wehr has served as portfolio manager of the Phoenix
Tax-Exempt Bond Portfolio since 1988 and as such is primarily responsible for
the day-to-day management of the portfolio. Mr. Wehr has also served as a
Vice President of PIC since 1991, and as a Vice President of National
Securities & Research Corporation since May 1993. Mr. Wehr became the
Portfolio Manager of Phoenix California Tax-Exempt Bond Portfolio on July 31,
1993. Mr. Wehr is also Managing Director, Public Fixed Income, Phoenix Home
Life Mutual Insurance Company.
Capital Appreciation Portfolio
Mr. John T. Wilson has served as portfolio manager of the Phoenix Capital
Appreciation Portfolio since January 1995 and as co-manager of the Portfolio
since January 1994, and as such is primarily responsible for the day-to-day
management of the portfolio. Mr. Wilson has also served as co-manager of the
Phoenix Worldwide Opportunities Fund since April, 1994. Mr. Wilson has been
portfolio manager of the Growth Series of The Phoenix Edge Series Fund since
January, 1992 and has been Portfolio Manager, Common Stock, Phoenix Home Life
Mutual Insurance Company since 1990. From 1988 to 1990 Mr. Wilson attended
Duke University Business School.
International Portfolio
Ms. Jeanne H. Dorey has served as portfolio manager of the Phoenix
International Portfolio since February, 1993 and as such is primarily
responsible for the day-to-day management of the portfolio. Ms. Dorey is also
the Portfolio Manager of the International Series of The Phoenix Edge Series
Fund, which is also advised by PIC. Ms. Dorey has served as a Vice President
of PIC since April, 1993, and as a Vice President of Phoenix Worldwide
Opportunities Fund and National Securities & Research Corporation since May,
1993. Ms. Dorey is also
27
<PAGE>
Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance Company.
From 1990 to 1992, Ms. Dorey was an Investment Analyst and Portfolio Manager
with Pioneer Group, Inc. From 1989 to 1990, Ms. Dorey was an Investment
Analyst and Portfolio Manager with Bank of Boston.
Emerging Markets Portfolio
Mr. Curtiss O. Barrows and Mr. Peter S. Lannigan are the co-managers of
the Emerging Markets Portfolio and as such, Mr. Barrows and Mr. Lannigan are
primarily responsible for the day-to-day management of the portfolio. Mr.
Barrows is also portfolio manager of the High Yield Series of the Phoenix
Series Fund and the Bond Series of The Phoenix Edge Series Fund and is a Vice
President of PIC. Mr. Barrows is also Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company and a Vice President of National
Securities & Research Corporation.
Mr. Lannigan has served as co-manager of the portfolio since April, 1995
and has been Director, Public Fixed Income, Phoenix Home Life Insurance
Company since 1993. From 1989 to 1993 Mr. Lannigan was Associate Director of
the Bond Rating Group, Standard & Poor's Corp.
Real Estate Portfolio
Barbara Rubin, President of PRS and William K. Morrill, Jr., Managing
Director of ABKB share primary responsibility for managing the assets of the
Real Estate Portfolio. Barbara Rubin has over 19 years real estate experience
and has been associated with Phoenix Home Life for the past 13 years. William
Morrill has over 15 years of investment experience and has been a portfolio
manager with ABKB since 1985.
The Financial Agent
Equity Planning also acts as financial agent of the Fund and, as such,
performs bookkeeping and pricing services and certain other administrative
functions for the Fund. Effective as of January 1, 1994, Equity Planning
receives a quarterly fee based on the average of the aggregate daily net
asset values of the Fund at an annual rate of $300 per $1 million, which is
expected to equal approximately the cost to Equity Planning of providing such
services. For its services during the Fund's fiscal year ended November 30,
1994, Equity Planning received $231,177, or 0.03% of average net assets.
The Custodians and Transfer Agent
The custodian of the assets of the Bond Portfolio, Capital Appreciation
Portfolio, Real Estate Portfolio and Emerging Markets Portfolio is State
Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, 02101.
The custodian of the assets of the International Portfolio is Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109. The Fund has
authorized the Custodians to appoint one or more subcustodians for the assets
of the Fund held outside the United States. The securities and other assets
of each Portfolio of the Fund are held by each Custodian or any subcustodian
separate from the securities and assets of each other Portfolio.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Fund (the "Transfer Agent")
for which it is paid $14.95 for each designated shareholder account. The
Transfer Agent is authorized to engage sub-agents to perform certain
shareholder servicing functions from time to time for which such agents shall
be paid a fee by the Transfer Agent.
Brokerage Commissions
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Fund. Pursuant to the
terms of the Sub-Advisory Agreement between PRS and ABKB, ABKB is responsible
for decisions to buy and sell securities for the Real Estate Portfolio, for
broker selection, and for the negotiation of brokerage commission rates under
standards established and periodically reviewed by the Trustees.
NATIONAL DISTRIBUTOR AND DISTRIBUTION PLANS
The offices of Equity Planning, the National Distributor of the Fund's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of
the Trust and a director and officer of Equity Planning. G. Jeffrey Bohne,
James M. Dolan, Nancy G. Curtiss, William R. Moyer, and Leonard J. Saltiel
are officers of the Fund and officers of Equity Planning.
Equity Planning and the Fund have entered into distribution agreements
under which Equity Planning has agreed to use its
28
<PAGE>
best efforts to find purchasers for Fund shares sold subject to an initial
sales charge and those sold subject to a contingent deferred sales charge.
The Fund has granted Equity Planning the exclusive right to purchase from the
Fund and resell, as principal, shares needed to fill unconditional orders for
Fund shares. Equity Planning may sell Fund shares through its registered
representatives or through securities dealers with whom it has sales
agreements. Equity Planning may also sell Fund shares pursuant to sales
agreements entered into with banks or bank-affiliated securities brokers who,
acting as agent for their customers, place orders for Fund shares with Equity
Planning. Although the Glass-Steagall Act prohibits banks and bank affiliates
from engaging in the business of underwriting, distributing or selling
securities (including mutual fund shares), banking regulators have not
indicated that such institutions are prohibited from purchasing mutual fund
shares upon the order and for the account of their customers. If, because of
changes in law or regulations, or because of new interpretations of existing
law, it is determined that agency transactions of banks or bank-affiliated
securities brokers are not permitted under the Glass-Steagall Act, the
Trustees will consider what action, if any, is appropriate. It is not
anticipated that termination of sales agreements with banks or
bank-affiliated securities brokers would result in a loss to their customers
or a change in the net asset value per share of a Portfolio of the Fund.
The sale of Fund shares through a securities broker affiliated with a
particular bank is not expected to preclude the Fund from borrowing from such
bank or from availing itself of custodial or transfer agency services offered
by such bank.
Distribution Plans
The Trustees adopted a distribution plan on behalf of the Class A Shares
of the Bond Portfolio on February 24, 1988 and on behalf of the Class A
Shares of the Capital Appreciation Portfolio and the International Portfolio
on August 23, 1989, pursuant to Rule 12b-1 under the 1940 Act. The Trustees
adopted a distribution plan on behalf of the Real Estate Portfolio on
November 16, 1994 and a distribution plan for the Emerging Markets Portfolio
on February 15, 1995. Each of these Class A Share Plans have been approved by
the shareholders of each Portfolio and authorize the payment to Equity
Planning of amounts not exceeding 0.25% annually of the average daily net
assets of each respective Portfolio for each year elapsed after the inception
of such Plans. Under a separate plan adopted by the Trustees (including a
majority of the Independent Trustees) and ratified by the initial sole
shareholder of Class B Shares of each Portfolio, the Fund is authorized to
pay up to 1.00% annually of the average daily net assets representing Class B
Shares of each Portfolio to Equity Planning. Although under no contractual
obligation to do so, the Fund intends to make such payments to Equity
Planning (i) as commissions for shares of the Portfolios sold, all or any
part of which commissions will be paid by the Equity Planning upon receipt
from the Fund to others (who may be other dealers or registered
representatives of Equity Planning), (ii) to enable Equity Planning to pay to
such others maintenance or other fees in respect of the Portfolio shares sold
by them and remaining outstanding on the Fund's books during the period in
respect of which the fee is paid (the "Service Fee") and (iii) to enable
Equity Planning to pay to bank affiliated securities brokers maintenance or
other fees in respect of shares of the Portfolios purchased by their
customers and remaining outstanding on the Fund's books during the period in
respect of which the fee is paid. The portion of the above fees paid by the
Fund to Equity Planning as "Service Fees" shall not exceed 0.25% annually of
the average daily net assets of the class to which such fee relates.
Payments, less the portion thereof paid by Equity Planning to others, may be
used by Equity Planning for its expenses of distribution of shares of the
Portfolios. If expenses of distribution of shares of a Portfolio or a Class
of a Portfolio exceed payments and any sales charges retained by Equity
Planning, the Fund is not required to reimburse Equity Planning for excess
expenses; if payments and any sales charges retained by Equity Planning
exceed expenses of distribution of shares of the Portfolios, Equity Planning
may realize a profit.
The Class A Share and Class B Share Rule 12b-1 plans (collectively the
"Plans") each require that at least quarterly the Trustees review a written
report with respect to the amounts expended under the Plans and the purposes
for which such expenditures were made. While the Plans are in effect, the
Fund will be required to commit the selection and nomination of candidates
for Trustees who are not interested persons of the Fund to the discretion of
other Trustees who are not interested persons.
DESCRIPTION OF SHARES
The capitalization of the Fund consists solely of an unlimited number of
shares of beneficial interest. The Trust currently offers shares in different
series or "Portfolios" and different classes of those Portfolios. Holders of
shares of a Portfolio are entitled to one
29
<PAGE>
full vote for each full share owned and a fractional vote for any fractional
share. Shares of a Portfolio participate equally in dividends and
distributions paid with respect to such Portfolio and in such Portfolio's net
assets on liquidation, except that Class B Shares of any Portfolio which bear
higher distribution fees and, certain incrementally higher expenses
associated with the deferred sales arrangement, pay correspondingly lower
dividends per share than Class A Shares of the same Portfolio. Shareholders
of all Portfolios vote on the election of Trustees. On matters affecting an
individual Portfolio (such as approval of an investment advisory agreement or
a change in fundamental investment policies) and on matters affecting an
individual class (such as approval of matters relating to a Plan of
Distribution for a particular class of shares), a separate vote of that
Portfolio or Class is required. Shares of a Portfolio are fully paid and non-
assessable when issued and are transferable and redeemable. Shares have no
preemptive or conversion rights.
The assets received by the Fund for the issue or sale of shares of a
Portfolio and any class thereof and all income, earnings, profits and
proceeds thereof, subject only to the rights of creditors, are allocated to
such Portfolio and class respectively, subject only to the rights of
creditors, and constitute the underlying assets of such Portfolio or class.
Any underlying assets of a Portfolio are required to be segregated on the
books of account and are to be charged with the expenses in respect to such
Portfolio and with a share of the general expenses of the Fund. Any general
expenses of the Fund not readily identifiable as belonging to a particular
Portfolio or class will be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a business trust such as the Fund may be personally liable
for debts or claims against the Fund. The Declaration of Trust provides that
shareholders will not be subject to any personal liability for the acts or
obligations of the Fund and that every written agreement, undertaking or
obligation made or issued by the Fund shall contain a provision to that
effect. The Declaration of Trust provides for indemnification out of the
Trust property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability, which is
considered remote, is limited to circumstances in which the Fund itself would
be unable to meet its obligations.
HOW TO BUY SHARES
The Fund currently issues two classes of shares for each Portfolio. Class
A Shares are sold to investors choosing the initial sales charge alternative.
Class B Shares are sold to investors choosing the deferred sales charge
alternative. The minimum initial investment is $500, and the minimum
subsequent investment is $25. Both the minimum initial and subsequent
investment amounts are $25 for investments pursuant to the "Investo-Matic"
plan, a bank draft investing program administered by Equity Planning, or
pursuant to the Systematic Exchange Privilege (see Statement of Additional
Information).
Each class of shares of a Portfolio represents an interest in the same
portfolio of investments of the Fund, has the same rights, and is identical
to the other in all respects, except that Class B Shares bear the expenses of
the deferred sales arrangement and any expenses (including the higher
distribution services fee and any incremental transfer agency costs)
resulting from such sales arrangement. Each class has exclusive voting rights
with respect to provisions of the Rule 12b-1 distribution plan pursuant to
which its distribution services fee is paid and each class has different
exchange privileges. Only the Class B Shares are subject to a conversion
feature. The net income attributable to Class B Shares and the dividends paid
on Class B Shares will be reduced by the amount of the higher distribution
services fee and incremental expenses associated with such distribution
services fee; likewise, the net asset value of the Class B Shares will be
reduced by such amount to the extent the Fund has undistributed net income.
Subsequent investments for the purchase of full and fractional shares in
amounts of $25 or more may be made through an investment dealer or by sending
a check to Phoenix Funds, c/o Equity Planning, P. O. Box 2200, Enfield, CT
06083-2200. Share certificates representing any number of full shares will be
issued only on request, and subject to certain conditions. A fee may be
incurred by the shareholder for a lost or stolen share certificate. Sales
personnel of broker/dealers distributing the Fund's shares may receive
different compensation for sales of Class A and Class B Shares.
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange
privileges. Certain privileges may not be available in connection with Class
B Shares. Under certain circumstances,
30
<PAGE>
shares of the Fund or shares of any other Phoenix Fund (except Phoenix Asset
Reserve Class A Shares held less than 6 months and Class A Shares of the
Phoenix Money Market Series of the Phoenix Series Fund), may be exchanged for
shares of the same class on the basis of the relative net asset values per
share at the time of the exchange. Exchanges are subject to the minimum
initial investment requirement of the designated Fund, except if made in
connection with the Systematic Exchange privilege. Shareholders may exchange
shares held in book-entry form for an equivalent number (value) of the same
class of shares from any other Phoenix Fund. On Class B Share exchanges, the
contingent deferred sales charge schedule of the original shares purchased
continues to apply.
Alternative Sales Arrangements
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Fund, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the
Fund, the accumulated continuing distribution service fee and contingent
deferred sales charges on Class B Shares prior to conversion would be less
than the initial sales charge and accumulated distribution fee on Class A
Shares purchased at the same time, and to what extent such differential would
be offset by the higher yield of Class A Shares. In this regard, Class A
Shares will normally be more beneficial to the investor who qualifies for
certain reduced initial sales charges. For this reason, the Underwriter
intends to limit sales of Class B Shares sold to any shareholder to a maximum
total value of $250,000. Class B Shares sold to unallocated qualified
employer sponsored plans will be limited to a total value of $1,000,000.
Class B Shares sold to allocated qualified employer sponsored plans,
including 401(k) plans, will be limited to a maximum total value of $250,000
for each participant provided such plans utilize an approved participant
tracking system. In addition, Class B Shares will not be sold to any
qualified employee benefit plan, endowment fund or foundation if, on the date
of the initial investment, the plan, fund or foundation has assets of
$10,000,000 or more or at least 200 participant employees. Class B Shares
will also not be sold to investors who have reached the age of 85 because of
such persons' expected distribution requirements.
Class A Shares are subject to a lower distribution fee and, accordingly,
pay correspondingly higher dividends per share. However, because initial
sales charges are deducted at the time of purchase, Class A investors would
not have all their funds invested initially and, therefore, would initially
own fewer shares. Investors not qualifying for reduced initial sales charges
who expect to maintain their investment for an extended period of time might
consider purchasing Class A Shares because the accumulated continuing
distribution charges on Class B Shares may exceed the initial sales charge on
Class A Shares during the life of the investment. Again, however, such
investors must weigh this consideration against the fact that, because of
such initial sales charge, not all their funds will be invested initially.
However, other investors might determine that it would be more advantageous
to purchase Class B Shares to have all their funds invested initially,
although remaining subject to higher continuing distribution charges and, for
a five-year period, being subject to a contingent deferred sales charge.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge, as set forth below. Offering prices become effective at the
close of the general trading session of the New York Stock Exchange. Orders
received by dealers prior to such time are confirmed at the offering price
effective at that time, provided the order is received by the Distributor
prior to its close of business.
The sales charge varies with the size of the purchase and reduced charges
apply to the aggregate of purchases of the Fund made at one time by "any
person," which term includes an individual, an individual and his/her spouse
and their children under the age of 21, or a trustee or other fiduciary
purchasing shares for a single trust, estate or fiduciary account although
more than one beneficiary is involved.
Class A Shares of the Fund are offered to the public at the net asset
value next computed after the purchase order is received by Equity Planning
plus a maximum sales charge of 4.75% of the offering price (4.99% of the
amount invested) on single purchases of less than $50,000. The sales charge
is reduced on a graduated scale on single purchases on $50,000 or more as
shown below.
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<PAGE>
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Discount
as Percentage as Percentage or Agency Fee
Amount of of Offering of Amount as Percentage of
Transaction Price Invested Offering Price*
- ------------------------ ---------------- ---------------- ---------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under
$100,000 4.50% 4.71% 4.00%
$100,000 but under
$250,000 3.50% 3.63% 3.00%
$250,000 but under
$500,000 3.00% 3.09% 2.75%
$500,000 but under
$1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None**
</TABLE>
* Equity Planning will sponsor sales contests, training and educational
meetings and provide to all qualifying dealers, from its own profits and
resources, additional compensation in the form of trips, merchandise or
expense reimbursement. Brokers and dealers other than Equity Planning may
also make customary additional charges for their services in effecting
purchases, if they notify the Fund of their intention to do so.
** In connection with Class A Share purchases of $1,000,000 or more (or
subsequent purchases in any amount), Equity Planning may pay broker-dealers,
from its own profits and resources, a percentage of the net asset value of
any shares sold as set forth below:
<TABLE>
<CAPTION>
Purchase Amount Payment to Broker-Dealer
- ------------------------------ ------------------------------
<S> <C>
$1,000,000 to $2,000,000 0.75 of 1%
$2,000,001 to $4,000,000 0.50 of 1%
$4,000,001 or more 0.25 of 1%
</TABLE>
If part or all of such an investment is subsequently redeemed within one year
of the investment date, the broker-dealer will refund to the Distributor a
pro rata portion of any amounts paid with respect to the investment.
How To Obtain Reduced Sales Charges on Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares
to: (1) any Phoenix Fund trustee, director or officer; (2) any director or
officer, or to any full-time employee or sales representative (who has acted
as such for at least 90 days), of the Adviser or of Equity Planning; (3)
registered representatives and employees of securities dealers with whom
Equity Planning has sales agreements; (4) any qualified retirement plan
exclusively for persons described above; (5) any officer, director or
employee or a corporate affiliate of the Adviser or Equity Planning; (6) any
spouse, child, parent, grandparent, brother or sister of any person named in
(1), (2), (3) or (5) above; (7) employee benefit plans for employees of the
Adviser, Equity Planing and/or their corporate affiliates; (8) any employee
or agent who retires from Phoenix Home Life or Equity Planning; (9) any
account held in the name of a qualified employee benefit plan, endowment fund
or foundation if, on the date of the initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 200 participant
employees; (10) any person with a direct rollover transfer of shares from an
established Phoenix Fund qualified plan; (11) any Phoenix Home Life separate
account which funds group annuity contracts offered to qualified employee
benefits plans; (12) any state, county, city, instrumentality, department,
authority or agency prohibited by law from paying a sales charge; (13) any
fully matriculated student in any U.S. service academy; (14) any unallocated
accounts held by a third party administrator, registered investment adviser,
trust company, or bank trust department which exercises discretionary
authority and holds the account in a fiduciary, agency, custodial or similar
capacity, if in the aggregate such accounts equal or exceed $1,000,000; (15)
any person who is investing redemption proceeds from investment companies
other than the Phoenix Funds if, in connection with the purchase or
redemption of the redeemed shares, the investor paid a sales charge provided
such investor supplies verification that the redemption occurred within 90
days of the Phoenix Fund purchase and that a sales charge was paid; or (16)
any accounts established by financial institutions, broker/dealers or
registered investment advisers that charge an account management fee or
transaction fee, provided such entity has entered into an agreement for such
program with the Distributor; provided that sales made to persons listed in
(1) through (15) above are made upon the written assurance that the purchase
is made for investment purposes and that such shares will not be resold
except to the Fund.
Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to any sales charges. The Fund
receives the entire net asset value of its Class A Shares sold to investors.
The Distributor's commission is the sales charge shown above less any
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<PAGE>
applicable discount or commission "re-allowed" to selected dealers and
agents. The Distributor will re-allow discounts to selected dealers and
agents in the amounts indicated in the table above. In this regard, the
Distributor may elect to re-allow the entire sales charge to selected
dealers and agents for all sales with respect to which orders are placed with
the Distributor. A selected dealer who receives re-allowance in excess of 90%
of such a sales charge may be deemed to be an "underwriter" under the
Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Fund or shares of any other Phoenix Fund
(including Class B Shares), if made at a single time by a single purchaser,
will be combined for the purpose of determining whether the total dollar
amount of such purchases entitles the purchaser to a reduced sales charge on
any purchases of Class A Shares. Each purchase of Class A Shares will then be
made at the public offering price, as described in the then current
Prospectus relating to such shares, which at the time of such purchase is
applicable to a single transaction of the total dollar amount of all such
purchases. The term "single purchaser" includes an individual, or an
individual, his spouse and their children under the age of majority
purchasing for his or their own account (including an IRA account) including
his or their own trust, commonly known as a living trust; a trustee or other
fiduciary purchasing for a single trust, estate or single fiduciary account,
although more than one beneficiary is involved; multiple trusts or 403(b)
plans for the same employer; multiple accounts (up to 200) under a qualified
employee benefit plan or administered by a third party administrator; or
trust companies, bank trust departments, registered investment advisers, and
similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial or similar capacity,
provided all shares are held in record in the name, or nominee name, of the
entity placing the order.
Letter of Intent. Class A Shares or shares of any other Phoenix Fund
(including Class B Shares) may be purchased by a "single purchaser" (as
defined above) within a period of thirteen months pursuant to a Letter of
Intent, in the form provided by Equity Planning, stating the investor's
intention to invest in such shares during such period an amount which,
together with the value (at their maximum offering prices on the date of the
Letter) of the shares of the Fund or shares of any other Phoenix Fund then
owned by such investor, equals a specified dollar amount. Each purchase of
shares made pursuant to a Letter of Intent will be made at the public
offering price, as described in the then current Prospectus relating to such
shares, which at the time of purchase is applicable to a single transaction
of the total dollar amount specified in the Letter of Intent.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Fund or Equity Planning to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete his
investment is held in escrow in the form of shares (valued at the purchase
price thereof) registered in the investor's name until he completes his
investment, at which time escrowed shares are deposited to his account. If
the investor does not complete his investment and does not within 20 days
after written request by Equity Planning or his dealer pay the difference
between the sales charge on the dollar amount specified in his Letter of
Intent and the sales charge on the dollar amount of actual purchases, the
difference will be realized through the redemption of an appropriate number
of the escrowed shares and any remaining escrowed shares will be deposited to
his account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the Fund, or any other Phoenix Fund, made over
time. Reduced sales charges are offered to investors whose shares, in the
aggregate, are valued (i.e., the dollar amount of such purchases plus the
then current value (at the public offering price as described in the then
current prospectus relating to such shares) of shares of all Phoenix Funds
owned) in excess of the threshold amounts described in the section entitled
"Initial Sales Charge Alternative--Class A Shares". To use this option, the
investor must supply sufficient account information to Equity Planning to
permit verification that one or more purchases qualify for a reduced sales
charge.
Associations. A group or association may be treated as a "single
purchaser" and qualify for reduced initial sales charges under the
Combination Privilege and Right of Accumulation if the group or association
(1) has been in existence for at least six months; (2) has a legitimate
purpose
33
<PAGE>
other than to purchase mutual fund shares at a reduced sales charge; (3)
facilitates solicitation of the membership by the investment dealer, thus
assisting in effecting economies of sales effort; and (4) is not a group
whose sole organizational nexus is that the members are credit card holders
of a company, policyholders of an insurance company, customers of a bank or a
broker-dealer or clients of an investment adviser.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge
at the time of purchase. The Class B Shares are subject to a sales charge if
redeemed within five years of purchase.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used in whole or in part by the Distributor to defray its
expenses related to providing distribution-related services to the Fund in
connection with the sale of the Class B Shares, such as the payment of
compensation to selected dealers and agents for selling Class B Shares. The
combination of the contingent deferred sales charge and the distribution fee
facilitates the ability of the Fund to sell the Class B Shares without a
sales charge being deducted at the time of purchase.
Contingent Deferred Sales Charge. Class B Shares which are redeemed within
five years of purchase will be subject to a contingent deferred sales charge
at the rates set forth below charged as a percentage of the dollar amount
subject thereto. The charge will be assessed on an amount equal to the lesser
of the current market value or the cost of the shares being redeemed.
Accordingly, no sales charge will be imposed on increases in net asset value
above the initial purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains distributions.
The Distributor intends to pay investment dealers a sales commission of 4%
of the sale price of Class B Shares sold by such dealers, subject to future
amendment or termination. The Distributor will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by
shareholders on the redemption of shares to finance the commission plus
interest and related marketing expenses.
The amount of the contingent deferred sales charges, if any, will vary
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment for
the purchases of shares, all payments during a month will be aggregated and
deemed to have been made on the last day of the previous month.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge as
a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ------------------------- ------------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 2%
Sixth 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable to
a redemption, the calculation will be determined in a manner that minimizes
the rate being charged. Therefore, it will be assumed that any Class A Shares
are being redeemed first; any Class B Shares held for over 5 years or
acquired pursuant to reinvestment of dividends or distributions are redeemed
next, any Class B Shares held longest during the five-year period are
redeemed next, unless the shareholder directs otherwise. The charge will not
be applied to dollar amounts representing an increase in the net asset value
since the time of purchase.
To provide an example, assume an investor purchased 100 Shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired
10 additional Class B Shares through dividend reinvestment. If, at such time
the investor makes his first redemption of 50 Class B Shares (proceeds of
$600), 10 Class B Shares will not be subject to charge because they were
acquired through dividend reinvestment. With respect to the remaining 40
Class B Shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4% (the
applicable rate in the second year after purchase), or $16.00.
The contingent deferred sales charge is waived on redemptions of shares
(a) if redemption is made within one year of death (i) of the sole
shareholder on an individual account, (ii) of a joint
34
<PAGE>
tenant where the surviving joint tenant is the deceased's spouse, or (iii) of
the beneficiary of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to
Minors Act (UTMA) or other custodial account; (b) if redemption is made
within one year of disability, as defined in Section 72(m)(7) of the Code;
(c) in connection with the mandatory distributions upon reaching age 70-1/2
under any retirement plan qualified under Sections 401, 408 or 403(b) of the
Code or any redemption resulting from the tax-free return of an excess
contribution to an IRA; (d) in connection with redemptions by 401(k) plans
using an approved participant tracking system for: participant hardships,
death, disability or normal retirement, and loans which are subsequently
repaid; (e) in connection with the exercise of certain exchange privileges
among the Class B Shares of the Fund and Class B Shares of other Phoenix
Funds; (f) in connection with any direct rollover transfer of shares from an
established Phoenix Fund qualified plan into a Phoenix Fund IRA by
participants terminating from the qualified plan; and (g) in accordance with
the terms specified under the Systematic Withdrawal Program. If, upon the
occurrence of a death as outlined above, the account is transferred to an
account registered in the name of the deceased's estate, the contingent
deferred sales charge will be waived on any redemption from the estate
account occurring within one year of the death. If the Class B Shares are not
redeemed within one year of the death, they will remain subject to the
applicable contingent deferred sales charge when redeemed.
Class B Shares of the Fund will automatically convert to Class A Shares of
the same Portfolio without a sales charge at the relative net asset values of
each of the classes after eight years from the acquisition of the Class B
Shares, and as a result, will thereafter be subject to the lower distribution
fee under the Class A Plan. Such conversion will be on the basis of the
relative net asset value of the two classes without the imposition of any
sales load, fee or other charge. The purpose of the conversion feature is to
relieve the holders of Class B Shares that have been outstanding for a period
of time sufficient for the National Distributor to have been compensated for
distribution-related expenses.
For purposes of conversion to Class A Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Fund account
(other than those in the sub-account) are converted to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also be
converted to Class A Shares.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service ("IRS") to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B Shares
does not result in any dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that the conversion of shares does not
constitute a taxable event under federal income tax law. The Fund has not
sought opinions of counsel as to these matters but has or shall apply to the
IRS for such a ruling. While a ruling similar to the one sought by the Fund
as to preferential dividends has been issued previously by the IRS with
respect to Phoenix Multi-Sector Fixed Income Fund, Inc., complete assurance
canot be given when or whether the Fund will receive a favorable ruling.
While an adverse determination by the IRS is not expected, the Fund may be
required to reassess the alternative purchase arrangement structure if the
IRS does not rule favorably. In addition, were the IRS not to rule favorably,
the Fund might make additional distributions if doing so would assist in
complying with the Fund's general practice of distributing sufficient income
to reduce or eliminate U.S. federal taxes. The conversion of Class B Shares
to Class A Shares may be suspended if such an opinion or ruling is no longer
available. In that event, no further conversions of Class B Shares would
occur, and shares might continue to be subject to the higher distribution fee
for an indefinite period which may extend beyond the period ending six years
after the end of the month in which affected Class B Shares were purchased.
INVESTOR ACCOUNTS
AND SERVICES AVAILABLE
An account will be opened for the investor after the investor makes an
initial investment. Shares purchased will be held in the shareholder's
account by the Transfer Agent which will forward a statement each time there
is a change in the number of shares in the account. At any time, a
shareholder may request that a certificate be issued, subject to certain
conditions, representing any number of full shares held in his or her
account.
The Fund mails periodic reports to its shareholders. In order to reduce
the volume of mail, to the extent possible, only one copy
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of most Fund reports will be mailed to households for multiple accounts with
the same surname at the same household address. Please contact Equity
Planning to request additional copies of shareholder reports.
Shareholder inquiries should be directed to the Fund at (800) 243-1574.
Bank Draft Investing Program (Investo-Matic Plan)
By completing the Investo-Matic Section of the New Account Application, a
shareholder may authorize the bank named in the form to draw $25 or more from
his/her personal checking account on or about the 15th day of the month, to
be used to purchase additional shares for his/her account. The amount the
shareholder designates will be made available, in form payable to the order
of Equity Planning, by the bank on the date the bank draws on his/her account
and will be used to purchase shares at the applicable offering price. The
shareholder or his or her registered representative may, by telephone or
written notice, cancel or change the dollar amount being invested pursuant to
the Investo-Matic Plan unless the shareholder has notified the Fund or
Transfer Agent that his or her registered representative shall not have this
authority.
Distribution Option
The Fund currently declares all income dividends and all capital gain
distributions, if any, payable in shares of the Fund at net asset value or,
at the option of the shareholder, in cash. A shareholder may elect to: (1)
receive both dividends and capital gain distributions in additional shares;
or (2) receive dividends in cash and capital gain distributions in additional
shares; or (3) receive both dividends and capital gain distributions in cash.
If a shareholder elects to receive dividends and/or distributions in cash and
the check cannot be delivered or remains uncashed by the shareholder due to
an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed that the proceeds are
undeliverable. Additional shares will be purchased for the shareholder's
account at the then current net asset value. Shareholders who maintain an
account balance of at least $5,000, or $2,000 for tax qualified retirement
benefit plans (calculated on the basis of the net asset value of the shares
held in a single account), may direct that any dividends and distributions
paid with respect to shares in that account be automatically reinvested in a
single account of one of the other Phoenix Funds at net asset value.
Shareholders should obtain a current prospectus and consider the objectives
and policies of each such Fund carefully before directing dividends and
distributions to the other Fund. Reinvestment election forms and prospectuses
are available from Equity Planning. Distributions may also be mailed to a
second payee and/or address. Dividends and capital gain distributions
received in shares are taxable to the shareholder and credited to the
shareholder's account in full and fractional shares and are computed at the
closing net asset value on the next business day after the record date. A
distribution option may be changed at any time by notifying Customer Service
by telephone at 800-243-1574 or sending a letter signed by the registered
owner(s) of the account. Requests for directing distributions to an alternate
payee must be made in writing with a signature guarantee of the registered
owner(s). To be effective with respect to a particular dividend or
distribution, notification of the new distribution option must be received by
the Transfer Agent at least three days prior to the record date of such
dividend or distribution. If all shares in the shareholder's account are
repurchased or redeemed or transferred between the record date and the
payment date of a dividend or distribution, he/she will receive cash for the
dividend or distribution regardless of the distribution option selected.
Systematic Withdrawal Program
The Systematic Withdrawal Program allows shareholders to periodically
redeem a portion of their shares on a predetermined monthly or quarterly,
semiannual or annual basis. The designated payment is made on or about the
20th day of the month. Shares are tendered for redemption by the Transfer
Agent, as agent for the shareowner, on or about the 15th of the month at the
closing net asset value on the date of redemption. The Systematic Withdrawal
Program also provides for redemptions to be tendered on or about the 10th,
15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to the shareholder's bank account. In addition to the
limitations stated below, withdrawals may not be less than $25 and minimum
account balance requirements shall continue to apply.
Class A shareholders participating in the Systematic Withdrawal Program
must own shares of the Fund worth $5,000 or more, as determined by the
then-current net asset value per share.
To participate in the Systematic Withdrawal Program, Class B shareholders
must initially own shares of the Fund worth
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$20,000 or more and elect to have all dividends reinvested in additional
Class B Shares of the Fund. Through the Program, Class B shareholders may not
withdraw more than 1% of their aggregate net investments (purchases, at
initial value to date net of non-Program redemptions) each month or more than
3% of their aggregate net investments each quarter. A Shareholder's
participation in the Program will terminate automatically if redemptions made
outside the Program, when deducted from the shareholder's aggregate net
investments, result in an account value of less than $15,000. Class B Share
withdrawals in accordance with the Systematic Withdrawal Program will be
exempt from otherwise applicable contingent deferred sales charges.
The purchase of shares while participating in the withdrawal program will
ordinarily be disadvantageous to the Class A Share investor since a sales
charge will be paid by the investor on the purchase of Class A Shares at the
same time other shares are being redeemed. For this reason, investors in
Class A Shares may not participate in an automatic investment program while
participating in the Systematic Withdrawal Program.
Class B shareholders redeeming more shares than the percentage permitted
under the Program shall be subject to any applicable contingent deferred
sales charge. Accordingly, the purchase of Class B Shares will generally not
be suitable for an investor who anticipates withdrawing sums in excess of the
above limits.
Tax-Sheltered Retirement Plans
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Write or call
Equity Planning (800) 243-4361 for further information about the plans.
Exchange Privileges
Shareholders may exchange Class A or Class B Shares held in book-entry
form for shares of the same class of other Phoenix Funds (except Phoenix
Asset Reserve Class A shares held less than 6 months and Class A Shares of
the Phoenix Money Market Series), provided the following conditions are met:
(1) the shares that will be acquired in the exchange (the "Acquired Shares")
are available for sale in the shareholder's state of residence; (2) the
Acquired Shares are the same class as the shares to be surrendered (the
"Exchanged Shares"); (3) the Acquired Shares will be registered to the same
shareholder account as the Exchanged Shares; (4) the account value of the
Fund whose shares are to be acquired must equal or exceed the minimum initial
investment amount required by that Fund after the exchange is implemented;
and (5) if a shareholder has elected not to utilize the Telephone Exchange
Privilege (see below), a properly executed exchange request must be received
by Equity Planning.
Subject to the above requirements for an exchange, a shareholder or
his/her registered representative may, by telephone or written notice, elect
to have Class A or Class B Shares of the Fund exchanged for the same class of
shares of another Phoenix Fund automatically on a monthly, quarterly,
semi-annual or annual basis or may cancel the privilege ("Systematic
Exchange").
Shareholders who maintain an account balance in the Fund of at least
$5,000, or $2,000 for tax qualified retirement benefit plans (calculated on
the basis of the net asset value of the shares held in a single account), may
direct that shares of the Fund be automatically exchanged at predetermined
intervals for shares of the same class of another Phoenix Fund. If the
shareholder is participating in the Self Security program offered by Phoenix
Home Life, it is not necessary to maintain the above account balances in
order to use the Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of
a month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Fund's net asset value per share next
computed following receipt of a properly executed exchange request, without
sales charge. On exchanges of Class B Shares offered by other Phoenix Funds,
the contingent deferred sales charge schedule of the original shares
purchased continues to apply.
The exchange of shares from one fund to another is treated as sale of the
Exchanged Shares and a purchase of the Acquired Shares for Federal income tax
purposes. The shareholder may, therefore, realize a taxable gain or loss. See
"Dividends, Distributions and Taxes" for information concerning the Federal
income tax treatment of a disposition of shares.
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It is the policy of the Fund to discourage and prevent frequent trading by
shareholders among the Fund and other Phoenix Funds in response to market
fluctuations. The Fund reserves the right to refuse exchange purchases by any
person or broker/dealer if, in the Fund's or Adviser's opinion, the exchange
would adversely affect the Fund's ability to invest according to its
investment objectives and policies, or otherwise adversely affect the Fund
and its shareholders. The Fund reserves the right to terminate or modify its
exchange privileges at any time upon giving prominent notice to shareholders
at least 60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the prospectus of the fund
into which the exchange is to be made before any exchange requests are made.
Telephone Exchanges
Telephone Exchange privileges are only available in states where the
shares to be acquired may be legally sold. (See the Statement of Additional
Information.) Unless a shareholder elects in writing not to participate in
the Telephone Exchange Privilege, shares for which certificates have not been
issued may be exchanged by calling (800) 367-5877 provided that the exchange
is made between accounts with identical registrations. Under the Telephone
Exchange Privilege, telephone exchange orders may also be entered on behalf
of the shareholder by his or her legal representative.
The Fund, and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both accounts, the Transfer Agent will require
address verification and will record telephone instructions on tape. All
exchanges will be confirmed in writing with the shareholder. To the extent
that procedures reasonably designed to prevent unauthorized telephone
exchanges are not followed, the Fund and/or the Transfer Agent may be liable
for following telephone instructions for exchange transactions that prove to
be fraudulent. Broker/Dealers other than Equity Planning have agreed to bear
the risk of any loss resulting from any unauthorized telephone exchange
instructions from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instruction entered by
an unauthorized third party that the Fund and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Exchange Privilege may be
modified or terminated at any time on 60 days' notice to shareholders. In
addition, during times of drastic economic or market changes, the Telephone
Exchange Privilege may be difficult to exercise or may be suspended
temporarily. In such event an exchange may be effected by following the
procedure outlined for tendering shares represented by certificate(s).
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates,
in order to exchange shares the shareholder must submit a written request to
Equity Planning, 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200, ATTN: Phoenix Funds. If the shares are being
exchanged between accounts that are not registered identically, the signature
on such request must be guaranteed by an eligible guarantor institution as
defined by the Fund's transfer agent in accordance with its signature
guarantee procedures. Currently such procedures generally permit guarantees
by banks, broker/dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. Any outstanding certificate or certificates for the tendered
shares must be duly endorsed and submitted.
Purchase and withdrawal plans and reinvestment and exchange privileges are
described more fully in the Statement of Additional Information. For further
information, call Equity Planning at (800) 243-1574.
NET ASSET VALUE
The net asset value per share of each Portfolio is determined as of the
close of regular trading of the New York Stock Exchange (the "Exchange") on
days when the Exchange is open for trading.
Net asset value per share of a Portfolio is determined by dividing the
value of the Portfolio's net assets--the value of its assets less its
liabilities--by the total number of its outstanding shares. Assets and
liabilities are determined in accordance with generally accepted accounting
principles and applicable rules and regulations of the Securities and
Exchange Commission. The total liability allocated to a class, plus that
class's distribution fee and any other expenses allocated solely to that
class, are deducted from the proportionate interest of such class in the
assets of the Portfolio, and the resulting amount of each is divided by the
number of shares of that class outstanding to produce the net asset value per
share.
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In determining the value of a Portfolio's assets, the securities for which
market quotations are readily available are valued at market value. Debt
securities (other than short-term obligations) including those for which
market quotations are not readily available are normally valued on the basis
of valuations provided by a pricing service approved by the Trustees when
such prices are believed to reflect the fair value of such securities.
Securities listed or traded on a national securities exchange are valued at
the last sale price or, if there has been no recent sale, at the last bid
price. Securities which are primarily traded on foreign securities exchanges
are generally valued at the preceding closing values of such securities on
their respective exchanges. See the Statement of Additional Information--"Net
Asset Value" relating to the valuation of foreign securities. A security that
is listed or traded on more than one exchange is valued at the quotation on
the exchange determined to be the primary market for such security by the
Trustees or their delegates. Securities traded in the over-the-counter market
are valued at the last bid price. Short-term obligations maturing in less
than sixty days are valued at amortized cost, which the Board has determined
approximates market. Equity options are valued at the last sale price unless
the bid price is higher or the asked price is lower, in which event such bid
or asked price is used. Exchange-traded fixed income options are valued at
the last sale price unless there is no sale price, in which event current
prices provided by market makers are used. Over-the-counter traded fixed
income options are valued based upon current prices provided by market
makers. Financial futures are valued at the settlement price established each
day by the board of trade or exchange on which they are traded. 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 does not take place
for the International and Emerging Markets Portfolios, contemporaneously with
the determination of the prices of the majority of the portfolio securities
of those Portfolios. For purposes of determining the net asset value of the
International and Emerging Markets Portfolios, all assets and liabilities
initially expressed in foreign currency values will be converted into United
States dollar values at the mean between the bid and offered quotations of
such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the
instrument would be valued using fair value considerations by the Trustees or
their delegates. If at any time a Portfolio has other investments, such
investments are valued at the fair value thereof as determined in good faith
by the Trustees although the actual calculations may be made by persons
acting pursuant to the direction of the Trustees.
HOW TO REDEEM SHARES
Shareholders have the right to have the Fund buy back shares at the net
asset value next determined after receipt of a redemption request and any
other required documentation in proper form (see "Net Asset Value"). In the
case of Class B Share redemptions, investors will be subject to the
applicable deferred sales charge, if any, for such shares (see "Deferred
Sales Charge Alternative--Class B Shares", above). To redeem, any outstanding
share certificates in proper form for transfer must be received by Equity
Planning, 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, CT 06083-2200. To
be in proper form to redeem shares, the signature of the shareholder(s) on
the certificate or stock power must be signed exactly as registered,
including any fiduciary title, on a written instruction letter, certificate,
or accompanying stock power, such signatures being guaranteed by an eligible
guarantor institution as determined in accordance with the standards and
procedures established by the Transfer Agent (please contact the Fund at
(800) 243-1574 with any questions regarding eligible guarantors).
If no certificate has been issued, the Transfer Agent requires a written
request with signature guarantee. The Transfer Agent may waive the signature
guarantee requirement in the case of shares registered in the names of
individuals singly, jointly, or as custodian under the Uniform Gifts to
Minors Act, if the proceeds do not exceed $50,000, and the proceeds are
payable to the registered owner(s) at the address of record. Such requests
must be signed by each person in whose name the account is registered. In
addition, a shareholder may sell shares back to the Fund through securities
dealers who may charge customary commissions for their services. The
redemption price in such case will be the price as of the close of the
general trading session of the New York Stock Exchange on that day, provided
the order is received by the dealer prior thereto, and is transmitted to the
Distributor prior to the close of its business. No charge is made by the Fund
on redemptions,
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but shares tendered through investment dealers may be subject to a service
charge by such dealers. Payment for shares redeemed is made within seven
days; provided, however, that redemption proceeds will not be disbursed until
each check used for purchase of shares has been cleared for payment by the
investor's bank, which may take up to 15 days after receipt of the check.
Additional documentation may be required for redemptions by corporations,
partnership or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRAs or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Fund at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
Telephone Redemptions
Unless a shareholder elects in writing not to participate in the Telephone
Redemption privilege, shares for which certificates have not been issued may
be redeemed by telephoning (800) 367-5877 and telephone redemptions will also
be accepted on behalf of the shareholder from his or her registered
representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, the telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
shareholder. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Fund and/or the Transfer Agent may be liable for following
telephone instructions for exchange transactions that prove to be fraudulent.
Broker/dealers other than Equity Planning have agreed to bear the risk of any
loss resulting from any unauthorized telephone redemption instruction from
the firm or its registered representatives. However, the shareholder would
bear the risk of loss resulting from instructions entered by an unauthorized
third party that the Fund and/or the Transfer Agent reasonably believe to be
genuine. The Telephone Redemption Privilege may be modified or terminated at
any time on 60 days' notice to shareholders. In addition, during times of
drastic economic or market changes, the Telephone Redemption Privilege may be
difficult to exercise and a shareholder should submit a written redemption
request, as described above.
If the amount of the redemption is over $500, the proceeds will be wired
to the shareholder's designated U.S. commercial bank account. If the amount
of the redemption is less than $500, the proceeds will be sent by check to
the address of record on the shareholder's account.
Telephone redemption requests must be received by the Transfer Agent by
the close of trading on the New York Stock Exchange on any day when the
Transfer Agent is open for business. Requests made after that time or on a
day when the Transfer Agent is not open for business cannot be accepted by
the Transfer Agent. The proceeds of a telephone redemption will normally be
sent on the first business day following receipt of the redemption request.
However, with respect to the telephone redemption of shares purchased by
check, such requests will only be effected after the Fund has assured itself
that good payment has been collected for the purchase of shares, which may
take up to 15 days. This expedited redemption privilege is not available to
HR-10, IRA and 403(b)(7) Plans.
Reinvestment Privilege
Shareholders have a one time privilege of using redemption proceeds to
purchase Class A Shares of any Phoenix Fund with no sales charge (at the net
asset value next determined after the request for purchase is made). For
Federal income tax purposes, a redemption and purchase will be treated as a
sale and purchase of shares. Special rules may apply in computing the amount
of gain or loss in these situations. (See "Dividends, Distributions and
Taxes" for information on the Federal income tax treatment of a disposition
of shares.) A written request for this privilege must be received by the
Distributor within 90 days of the redemption, accompanied by payment for the
shares (not in excess of the redemption value). Class B Shareholders who have
had the contingent deferred sales charge waived through participation in the
Systematic Withdrawal Program are not eligible.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any
shareholder whose account has a value, due to redemptions, of less than $200.
Before the Fund redeems these shares, the shareholder will be given notice
that
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the value of the shares in the account is less than the minimum amount and
will be allowed 30 days to make an additional investment in an amount which
will increase the value of the account to at least $200.
A shareholder should contact his/her broker/dealer if he/she wishes to
transfer shares from an existing broker/dealer street name account to a
street name account with another broker/dealer. The Fund has no specific
procedures governing such account transfers.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
All dividends and distributions with respect to the shares of any class of
a Portfolio will be payable in shares of such class of Portfolio at net asset
value or, at the option of the shareholder, in cash.
The net income of the Bond Portfolio will be declared as dividends daily.
Dividends will be invested or distributed in cash monthly after the payment
date with checks or confirmations mailed to shareholders on the second
business day. The net income of the Bond Portfolio for Saturdays, Sundays and
other days on which the New York Stock Exchange is closed will be declared as
dividends on the next business day. The Bond Portfolio will distribute net
realized capital gains, if any, to its shareholders on an annual basis.
The Real Estate Portfolio will distribute its net investment income to its
shareholders quarterly and net realized capital gains, if any, to its
shareholders annually.
The Capital Appreciation Portfolio and the International Portfolio each
will distribute its net investment income to its shareholders semi-annually
and net realized capital gains, if any, to its shareholders at least
annually.
The Emerging Markets Portfolio will distribute its net investment income
to its shareholders monthly and net realized capital gains, if any, to its
shareholders annually.
Each Portfolio is treated as a separate entity for Federal income tax
purposes. Each Portfolio intends to qualify and elect to be treated as a
regulated investment company under the provisions of Subchapter M of the
Code. The Portfolios so qualified for the most recent fiscal year. (To remain
qualified, each Portfolio will be required to satisfy various income,
distribution and diversification requirements.) As such, each Portfolio will
not be subject to federal income tax liability on its net investment income
and net capital gains that are currently distributed (or are deemed to be
distributed) to its shareholders. Each Portfolio also intends to make timely
distributions, if necessary, sufficient in amount to avoid the non-deductible
4% excise tax imposed on a regulated investment company to the extent that it
fails to distribute, with respect to each calendar year, at least 98% of its
ordinary income for such calendar year and 98% of its net capital gains for
the one-year period ending on October 31 of such calendar year (or for the
fiscal year, if the Portfolio so elects).
The Bond Portfolio expects that under normal conditions at least 80% of
its net assets will be invested in state, municipal and other obligations,
the interest on which is excluded from gross income for Federal income tax
purposes, and that substantially all of its dividends therefore will be
exempt interest dividends which will be treated by its shareholders as
excludable from federal gross income. Such dividends may be fully (for
corporations) or partially includable in a shareholder's alternative minimum
taxable income. Dividends received by shareholders of the Capital
Appreciation Portfolio and the International and Emerging Markets Portfolios
and any non-exempt dividends received by shareholders of the Bond Portfolio,
as well as any short-term capital gain distributions, whether received by
shareholders in shares or in cash, will be taxable to them as ordinary income
for Federal income tax purposes. Certain distributions of the Capital
Appreciation Portfolio (and, possibly, the International Portfolio) may
qualify for the corporate dividends-received deduction.
Although the Real Estate Portfolio may be a non-diversified portfolio, the
Fund intends to comply with the diversification and other requirements of the
Code applicable to "regulated investment companies" so that it will not be
subject to U.S. federal income tax on income and capital gain distributions
to shareholders. Accordingly, the Real Estate Portfolio will not purchase
securities if, as a result, more than 25% of its total assets would be
invested in the securities of a single issuer or, with respect to 50% of its
total assets, more than 5% of such assets would be invested in the securities
of a single issuer.
In addition, if the Real Estate Portfolio has rental income or income from
the disposition of real property acquired as a result of a default on
securities the Real Estate Portfolio owns, the receipt of such income may
adversely affect its ability to
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retain its tax status as a regulated investment company. See "Taxes" in the
Statement of Additional Information.
Distributions which are designated by the Portfolios as long- term capital
gains, whether received in shares or in cash, will be taxable to shareholders
as long-term capital gains (regardless of how long the distributee has been a
shareholder) and will not be eligible for the corporate dividends-received
deduction. Each Portfolio will be taxed on its undistributed net capital
gain, if any, at regular corporate income tax rates, and, to the extent of
the amount of such capital gain designated by the Portfolio in a notice
mailed to shareholders not later than 60 days after the close of the year,
will be treated as having been distributed to shareholders. Consequently, any
undistributed net capital gain so designated (although not actually received
by the shareholders) will be taxed to shareholders as capital gain, and
shareholders will be entitled to claim their proportionate share of the
Federal income taxes paid by the Portfolio on such gains as a credit against
their own Federal income taxes.
The International and Emerging Markets Portfolios intend to qualify for,
and make the election permitted under, Section 853 of the Code. Accordingly,
shareholders will be able to claim a credit or deduction on their income tax
returns for, and will be required to include in income, their pro rata share
of the income taxes paid by these Portfolios to foreign countries.
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Bond Portfolio will not be deductible for Federal
income tax purposes to the extent of the portion of the interest expense
allocable to exempt interest dividends. Also, any loss from the sale of
shares in the Bond Portfolio held for 6 months or less may be non-
deductible, in whole or in part.
An individual's miscellaneous itemized deductions, including his or her
investment expenses, are deductible only to the extent that they exceed 2% of
the individual's adjusted gross income. Under current law, such limitation
does not apply to expenses incurred in connection with an investment in a
publicly-offered mutual fund, such as the Portfolios.
Written notices will be sent to shareholders following the end of each
calendar year regarding the tax status of all distributions made (or deemed
to have been made) during each taxable year, including the exempt portion (if
applicable), the amount qualifying for the dividends-received deduction (if
applicable) and the amount designated as capital gains dividends,
undistributed capital gains (if any), foreign tax credits (if applicable),
and cumulative return of capital (if any). The Portfolios may be required to
withhold Federal income tax at a rate of 31% on reportable dividends,
distributions and redemption payments paid to certain noncorporate
shareholders. Generally, shareholders subject to such backup withholding will
be those for whom a taxpayer identification number and certain required
certifications are not filed with the Portfolio or who, to the Portfolio's
knowledge, have furnished an incorrect number. Under existing provisions of
the Code, non-resident alien individuals, foreign partnerships and foreign
corporations may be subject to Federal income tax withholding at the
applicable rate on income, dividends and distributions (other than
exempt-interest dividends and certain capital gain dividends). Under
applicable treaty law, residents of treaty countries may qualify for a
reduced rate of withholding or a withholding exemption.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Portfolios and their shareholders. In
addition to the Federal income tax consequences described above, which are
applicable to any investment in the Portfolios, there may be foreign, state
or local tax considerations, and estate tax considerations, applicable to the
circumstances of a particular investor. In particular, dividends declared by
the Bond Portfolio may be subject to state and local taxes even though exempt
for Federal income tax purposes. Additional information about taxes is set
forth in the Statement of Additional Information. Also, legislation may be
enacted in the future that could affect the tax consequences described above.
Shareholders are therefore urged to consult their tax advisers with respect
to the effects of this investment on their own tax situations.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Fund may be required to withhold 31% of
all reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds for any account which does not
have a taxpayer identification number or social security number and certain
required certifications.
The Fund reserves the right to refuse to open an account for any person
failing to provide a taxpayer identification number along with the required
certifications.
42
<PAGE>
The Fund sends to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing federal income tax returns.
Investors are urged to consult their attorney or tax adviser regarding
specific questions as to Federal, foreign, state or local taxes.
ADDITIONAL INFORMATION
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semi-Annual Report to Shareholders
should be directed to Equity Planning at (800) 243-4361 or 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
APPENDIX
A-1 and P-1 Commercial Paper Ratings
The Trust will only invest in commercial paper which at the date of
investment is rated A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Services, Inc., or, if not rated, is issued or guaranteed by
companies which at the date of investment have an outstanding debt issue
rated AA or higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has
the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long- term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and
cash flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a
strong position within the industry. The reliability and quality of
management are unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's
in assigning ratings are the following: (1) evaluation of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationship which exists with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations.
Moody's Investors Service, Inc., Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa---Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they compromise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
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<PAGE>
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Standard and Poor's Corporation's Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
44
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
Account Type Give Social Security Number or Tax
Identification Number of:
<TABLE>
<CAPTION>
<S> <C>
Individual Individual
Joint (or Joint Tenant) Owner who will be paying tax
Uniform Gifts to Minors Minor
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business (also provide owner's name)
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
Broker/Nominee Broker/Nominee
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the
application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
(bullet) A corporation
(bullet) Financial institution
(bullet) Section 501(a) exempt organization (IRA, Corporate
Retirement Plan, 403(b), Keogh)
(bullet) United States or any agency or instrumentality thereof
(bullet) A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof
(bullet) International organization or any agency or instrumentality
thereof
(bullet) Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
(bullet) Real estate investment trust
(bullet) Common trust fund operated by a bank under section 584(a)
(bullet) An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
(bullet) Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to
reasonable cause and not willful neglect. If you fail to report
interest, dividend or patronage dividend income on your federal
income tax return, you will be treated as negligent and subject to an
IRS 5% penalty tax on any resulting underpayment of tax unless there
is clear and convincing evidence to the contrary. If you falsify
information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to a
backup withholding, you may be subject to an IRS $500 penalty and
certain criminal penalties including fines and imprisonment.
This Prospectus sets forth concisely the information about the Phoenix
Multi-Portfolio Fund (the "Fund") which you should know before investing.
Please read it carefully and retain it for future reference.
The Trust has filed with the Securities and Exchange Commission a Statement
of Additional Information about the Fund, dated , 1995. The Statement
contains more detailed information about the Fund and is incorporated into
this Prospectus by reference. You may obtain a free copy of the Statement by
writing the Trust c/o Phoenix Equity Planning Corporation, 100 Bright Meadow,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Fund is contained in the Annual Report
to Shareholders for the year ended November 30, 1994 and is incorporated into
the Statement of Additional Information by reference.
Painting: "Ten Dollar Bills" by Victor Dubreuil.
Courtesy of Berry-Hill Galleries, Inc., New York.
(Recycled) Printed on recycled paper using soybean ink
45
<PAGE>
Phoenix Funds
Phoenix Multi-Portfolio
Fund Prospectus
, 1995
Tax-Exempt Bond Portfolio
Capital Appreciation Portfolio
International Portfolio
Real Estate Securities Portfolio
Emerging Markets Bond Portfolio
[PICTURE OF TEN DOLLAR BILLS]
[LOGO] Phoenix Investments
Phoenix Multi-Portfolio Fund
P.O. Box 2200
Enfield, CT 06083-2200
[LOGO] Phoenix Investments
PEP 467 ( /95)
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
, 1995
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Multi-Portfolio Fund (the "Fund"), dated , 1995, and should be
read in conjunction with it. The Fund's Prospectus may be obtained by calling
Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or
by writing to Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, CT 06083-2200.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUND 2
INVESTMENT OBJECTIVES AND POLICIES (10) 2
INVESTMENT RESTRICTIONS (25) 15
PERFORMANCE (9) 17
PERFORMANCE COMPARISONS 19
PORTFOLIO TURNOVER (25) 19
TRUSTEES AND OFFICERS 20
THE INVESTMENT ADVISERS (24) 27
PORTFOLIO TRANSACTIONS (26) 29
DETERMINATION OF NET ASSET VALUE (37) 30
HOW TO BUY SHARES 30
ALTERNATIVE PURCHASE ARRANGEMENTS 31
SHAREHOLDER SERVICES 33
INVEST-BY-PHONE 34
HOW TO REDEEM SHARES (37) 36
TAXES (39) 39
TAX SHELTERED RETIREMENT PLANS 42
THE NATIONAL DISTRIBUTOR (26) 42
PLANS OF DISTRIBUTION (26) 43
ADDITIONAL INFORMATION 44
FINANCIAL STATEMENTS 44
</TABLE>
Customer Service--(800) 243-1574
Marketing--(800) 243-4361
Telephone Orders/Exchanges--(800) 367-5877
Telecommunication Device (TTY)--(800) 243-1926
*Numbers in parentheses are cross-references to related sections of the
Prospectus.
PEP468 (/95)
1
<PAGE>
THE FUND
Phoenix Multi-Portfolio Fund ("the "Fund") is an open-end management
investment company which was organized under Massachusetts law in 1987 as a
Massachusetts Business Trust.
The Fund's Prospectus describes the investment objectives of the Phoenix
Tax-Exempt Bond Portfolio (the "Bond Portfolio"), the Phoenix Capital
Appreciation Portfolio (the "Capital Appreciation Portfolio") the Phoenix
International Portfolio (the "International Portfolio") the Phoenix Emerging
Markets Bond Portfolio (the "Emerging Markets Portfolio") and the Phoenix
Real Estate Securities Portfolio (the "Real Estate Portfolio") (each, a
"Portfolio" and, together, the "Portfolios"), five of the Portfolios
currently offered by the Fund, and summarizes the investment policies and
investment techniques each Portfolio will employ in seeking to achieve its
investment objective. The following discussion supplements the description of
the Portfolios' investment policies and investment techniques in the
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is deemed to be a fundamental
policy and may not be changed without the approval of the shareholders of
that Portfolio. Investment restrictions described in this Statement of
Additional Information are fundamental policies of the Fund and may not be
changed as to any Portfolio without the approval of such Portfolio's
shareholders.
Municipal Securities
As described more fully in the Prospectus, the Bond Portfolio intends
under normal conditions to invest at least 80% of its net assets in municipal
securities. As used in the Prospectus and this Statement of Additional
Information, the term "municipal securities" means obligations, including
municipal bonds and notes and tax exempt commercial paper, issued by or on
behalf of states, territories and possessions of the United States, the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest from which is, in the opinion of counsel to
the issuers of such securities, exempt from federal income tax. To the extent
that an investment in municipal securities does not run counter to any of the
investment policies of the Bond Portfolio or any of the investment
restrictions to which the Bond Portfolio is subject, the Bond Portfolio may
invest in any combination of the various types of municipal securities
described below which, in the judgment of Phoenix Investment Counsel, Inc.,
("PIC"), the investment adviser to the Bond, Capital Appreciation and
International Portfolios will contribute to the attainment of the Bond
Portfolio's investment objective. Such combination of municipal securities
may vary from time to time. The two principal classes of municipal securities
are municipal bonds and municipal notes.
Municipal Bonds. Municipal bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have two
principal classifications: general obligation bonds and revenue bonds.
Another type of municipal bond is referred to as an industrial development
bond. These three are discussed below.
General Obligation Bonds. Issuers of general obligation bonds include
states, counties, cities, towns, and regional districts. The proceeds of
these obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. The basic security behind general obligation bonds is the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. The taxes that can be levied for the payment of
debt service may be limited or unlimited as to the rate or amount of special
assessments.
Revenue Bonds. The principal security for a revenue bond is generally the
net revenues derived from a particular facility, group of facilities, or, in
some cases, the proceeds of a special excise or other specific revenue
source. Revenue bonds are issued to finance a wide variety of capital
projects including: electric, gas, water and sewer systems; highways,
bridges, and tunnels; port and airport facilities; colleges and universities;
and hospitals. Although the principal security
2
<PAGE>
behind these bonds may vary, many provide additional security in the form of
a debt service reserve fund whose money may be used to make principal and
interest payments on the issuer's obligations. Housing finance authorities
have a wide range of security, including partially or fully insured
mortgages, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Some authorities provide
further security in the form of a state's ability (without obligation) to
make up deficiencies in the debt service reserve fund.
Industrial Development Bonds. Industrial development bonds, which are
considered municipal bonds if the interest paid is exempt from federal income
tax, are issued by or on behalf of public authorities to raise money to
finance various privately operated facilities for business and manufacturing,
housing, sports and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports and parking.
The payment of the principal and interest on such bonds is dependent solely
on the ability of the facility's user to meet its financial obligations and
the pledge, if any, of real and personal property so financed as security for
such payment.
Municipal Notes. Municipal notes generally are used to provide for
short-term working capital needs and generally have maturities of one year or
less. Municipal notes include:
Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use and
business taxes, and are payable from these specific future taxes.
Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as federal revenues
available under federal revenue sharing programs.
Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases,
the long-term bonds then provide the money for the repayment of the notes.
Construction Loan Notes. Construction loan notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing
Administration under "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association).
Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by state
and local governments or their agencies to finance seasonal working capital
needs or as short-term financing in anticipation of longer-term financing.
In addition, other types of municipal securities similar to the
above-described municipal bonds and municipal notes are, or may become,
available.
For the purpose of the Fund's investment restrictions set forth in this
Statement of Additional Information, the identification of the "issuer" of a
municipal security which is not a general obligation bond is made by PIC on
the basis of the characteristics of the obligation, the most significant of
which is the source of funds for the payment of principal and interest on
such security.
Risks Relating to Municipal Securities
There can be no assurance that the Bond Portfolio will achieve its
investment objective. Yields on municipal securities are dependent on a
variety of factors, including the general conditions of the money market and
the municipal bond market, the size of a particular offering, the maturity of
the obligations and the rating of the issue. Municipal securities with longer
maturities tend to produce higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations
with shorter maturities and lower yields. The market prices of municipal
securities usually vary, depending upon available yields. An increase in
interest rates will generally reduce the value of portfolio investments, and
a decline in interest rates will generally increase the value of portfolio
investments. The ability of the Portfolio to achieve its investment objective
is also dependent on
3
<PAGE>
the continuing ability of the issuers of municipal securities in which the
Portfolio invests to meet their obligations for the payment of interest and
principal when due. The ratings of Moody's and Standard & Poor's represent
their opinions as to the quality of municipal securities which they undertake
to rate. Ratings are not absolute standards of quality; consequently,
municipal securities with the same maturity, coupon, and rating may have
different yields. There are variations in municipal securities, both within a
particular classification and between classifications, depending on numerous
factors. It should also be pointed out that, unlike other types of
investments, municipal securities have traditionally not been subject to
regulation by, or registration with, the Securities and Exchange Commission,
although there have been proposals which would provide for such regulation in
the future.
The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of
creditors, which proceedings could result in material and adverse changes in
the rights of holders of their obligations.
Lawsuits challenging the validity under state constitutions of present
systems of financing public education have been initiated or adjusted in a
number of states, and legislation has been introduced to effect changes in
public school financing in some states. In other instances there have been
lawsuits challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which could ultimately
affect the validity of those municipal securities or the tax-free nature of
the interest thereon.
Variable and Floating Rate Securities
Some municipal securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize fluctuation in values
of floating rate instruments. Variable rate instruments are those whose terms
provide for automatic establishment of a new interest rate on set dates.
Floating rate instruments are those whose terms provide for automatic
adjustment of their interest rates whenever some specified interest rate
changes. Variable rate and floating rate instruments will be referred to
collectively as "Variable Rate Securities." The interest rate on Variable
Rate Securities is ordinarily determined by reference to, or is a percentage
of, a bank's prime rate, the 90-day U.S. Treasury Bill rate, the rate of
return on commercial paper or bank certificates of deposit, an index of
short-term, tax-exempt rates, or some objective standard. Generally, the
changes in the interest rate on Variable Rate Securities reduce the
fluctuation in the market value of such securities. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than for fixed-rate obligations.
Variable Rate Demand Securities are Variable Rate Securities which have
demand features entitling the purchaser to resell the securities to the
issuer at an amount approximately equal to amortized cost or the principal
amount thereof plus accrued interest, which may be more or less than the
price the Bond Portfolio paid for them. The interest rate on Variable Rate
Demand Securities also varies either according to some objective standard,
such as an index of short-term, tax-exempt rates, or according to rates set
by or on behalf of the issuer.
Taxable Securities
The Capital Appreciation Portfolio and the International Portfolio are
expected to invest primarily in securities the income from which (either in
the form of dividends or interest) is taxable as ordinary income.
The Bond Portfolio may also invest a portion of its net assets (up to 20%
under normal conditions and more under extraordinary circumstances, as
described in the Prospectus) in taxable securities.
Interest earned on investments in taxable securities may be taxable to
shareholders as ordinary income. Investors should be aware that investments
in taxable securities by the Bond Portfolio are restricted to:
U.S. Government Securities--obligations issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities (collectively
referred to as "U.S. Government" issues). Some of these securities are
supported by the full faith
4
<PAGE>
and credit of the U.S. Government; others are supported by the right of the
issuer to borrow from the U.S. Treasury; and the remainder are supported only
by the credit of the instrumentality.
Bank Obligations--certificates of deposit, bankers' acceptances, and
other short-term obligations of U.S. banks which at the date of the
investment have capital, surplus and undivided profits in excess of
$100,000,000 as of the date of their most recently published financial
statements.
Commercial Paper--commercial paper which at the date of the investment is
rated P-l by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Corporation or, if not rated, is issued by a company which at the date of the
investment has an outstanding debt issue rated Aa or higher by Moody's or AA
or higher by Standard & Poor's.
Corporate Debt Securities--corporate debt securities which at the date of
the investment are rated Aa or higher by Moody's or AA or higher by Standard
& Poor's.
Repurchase Agreements--repurchase agreements with respect to any of the
foregoing, as described on page of the Fund's Prospectus.
The Bond Portfolio also has the right to hold cash reserves as the Adviser
deems necessary. For example, a Portfolio may invest in money market
securities or hold cash pending investment of proceeds from sales of its
shares or from the sale of portfolio securities and/or in anticipation of
redemptions.
Ratings
If the rating of a security purchased by a Portfolio is subsequently
reduced below the minimum rating required for purchase or a security
purchased by the Portfolio ceases to be rated, neither event will require the
sale of the security. However, PIC and/or Phoenix Realty Securities, Inc.
("PRS"), as applicable, will consider any such event in determining whether
the Portfolio should continue to hold the security. To the extent that
ratings established by Moody's or Standard & Poor's may change as a result of
changes in such organizations or their rating systems, the Portfolios will
invest in securities which are deemed by the Portfolio's adviser to be of
comparable quality to securities whose current ratings render them eligible
for purchase by the Portfolio.
Risks of High Yield Bonds
The Capital Appreciation and International Portfolios may invest up to 10%
of their total assets in bonds considered to be less than investment grade,
commonly known as "junk" bonds. The Emerging Markets Portfolio may invest up
to 100% of its total assets in these bonds. The Capital Appreciation and
International Portfolios did not invest in any bonds considered less than
investment grade for the fiscal year ended November 30, 1994.
While management will seek to minimize risk through diversification and
continual evaluation of current developments in interest rates and economic
conditions, the market prices of lower-rated securities generally fluctuate
more than those of higher rated securities. Using credit ratings helps to
evaluate the safety of principal and interest payments but does not assess
market risk. Fluctuations in the market value of portfolio securities
subsequent to acquisition by the Portfolios will not normally affect cash
income from such securities but will be reflected in the Portfolio's net
asset value. Additionally, with lower-rated securities, there is a greater
possibility that an adverse change in the financial condition of the issuer,
particularly a highly-leveraged issuer, may affect its ability to make
payments of income and principal and increase the expenses of the Portfolio
seeking recovery from the issuer. Also, to the extent that the Portfolio
invests in securities in the lower rating categories, the achievement of its
goals will be more dependent on management's ability than would be the case
if it were only investing in securities in the higher rating categories.
Lower-rated securities may be thinly traded and therefore harder to value and
more susceptible to adverse publicity concerning the issuer.
Writing and Purchasing Options on Securities and Securities Indices
The Bond, Capital Appreciation, and International and Emerging Markets
Portfolios may engage in option transactions as described more fully in the
Prospectus.
5
<PAGE>
Call options on securities and securities indices written by the
Portfolios normally will have expiration dates between three and nine months
from the date written. The exercise price of a call option written by a
Portfolio utilizing this investment technique may be below, equal to or above
the current market value of the underlying security or securities index at
the time the option is written.
During the option period, a Portfolio utilizing this investment technique
may be assigned an exercise notice by the broker-dealer through which the
call option was sold, requiring the Portfolio 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 Portfolio effects a closing
purchase transaction. A closing purchase transaction cannot be effected with
respect to an option once the Portfolio has received an exercise notice.
A multiplier for an index option performs a function similar to the unit
of trading for an option on an individual security. It determines the total
dollar value per contract of each point between the exercise price of the
option and the current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on different
indices may have different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices,
Computer/Business Equipment Index, Major Market Index, Amex Market Value
Index, Computer Technology Index, Oil and Gas Index, NYSE Options Index,
Gaming/Hotel Index, Telephone Index, Transportation Index, Technology Index,
and Gold/ Silver Index. The Capital Appreciation and International Portfolios
may write call options and purchase call and put options on these and any
other indices traded on a recognized exchange.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option written by a Portfolio, to prevent an
underlying security from being called, or to enable the Portfolio to write
another call option with either a different exercise price or expiration date
or both. A Portfolio 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 Portfolio expires unexercised, the
Portfolio will realize a gain in the amount of the premium on the option less
the commission paid.
The option activities of a Portfolio may increase its portfolio turnover
rate and the amount of brokerage commissions paid. A Portfolio 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 on Securities and Securities Indices
The Bond, Capital Appreciation, International and Emerging Markets
Portfolios may write call options only if they are covered and remain covered
for as long as the Portfolio is obligated as a writer. Thus, if a Portfolio
utilizing this investment technique writes a call option on an individual
security, the Portfolio must own the underlying security or other securities
that are acceptable for a segregated account at all times during the option
period. The Portfolios 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 Portfolio will be "covered" by identifying
the specific portfolio securities being hedged.
To secure the obligation to deliver the underlying security, the writer of
a covered call option on an individual security is required to deposit the
underlying security or other assets in a segregated account in accordance
with clearing corporation and exchange rules. In the case of an index call
option written by a Portfolio, the Portfolio will be required to deposit
qualified securities. A "qualified security" is a security against which the
Portfolio has not written a call option and which has not been hedged by the
Portfolio by the sale of a financial futures contract. If at the close of
business on any day the market value of the qualified securities falls below
100% of the current index value times the multiplier times the number of
contracts, the Portfolio will deposit an amount
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of cash, U.S. Government Securities or other liquid high quality debt
obligations equal in value to the difference. In addition, when a Portfolio
writes a call on an index which is "in-the-money" at the time the call is
written, the Portfolio will segregate with the Fund's custodian bank cash,
U.S. Government securities or other liquid high quality debt obligations
equal in value to the amount by which the call is "in-the-money" times the
multiplier times the number of contracts. Any amount otherwise segregated may
be applied to the Portfolio's other obligations to segregate assets in the
event that the market value of the qualified securities falls below 100% of
the current index value times the multiplier times the number of contracts.
Each Portfolio utilizing this investment technique may invest up to 5% of
its total assets in exchange-traded call and put options on securities and
securities indices. A Portfolio 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 Portfolio's qualifying as a regulated investment
company under the Internal Revenue Code of 1986, other restrictions on the
Portfolio's ability to enter into option transactions may apply from time to
time. See "Taxes".
Risks Relating to Options on Securities
During the option period, the writer of a call option has, in return for
the premium received on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the
price of the underlying security decline. The writer has no control over the
time within the option period when it may be required to fulfill its
obligation as a writer of the option.
The risk of purchasing a call option or a put option is that the Portfolio
utilizing this investment technique may lose the premium it paid plus
transaction costs, if the Portfolio does not exercise the option and is
unable to close out the position prior to expiration of the option.
An option position may be closed out on an exchange only if the exchange
provides a secondary market for an option of the same series. Although the
Portfolios utilizing this investment technique will write and purchase
options only when PIC believes that a liquid secondary market will exist for
options of the same series, there can be no assurance that a liquid secondary
market will exist for a particular option at a particular time and that any
Portfolio, if it so desires, can close out its position by effecting a
closing transaction. If the writer of a covered call option is unable to
effect a closing purchase transaction, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, a covered
call writer may not be able to sell the underlying security at a time when it
might otherwise be advantageous to do so.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities; (iv)
inadequacy of the facilities of an exchange or the clearing corporation to
handle trading volume; and (v) a decision by one or more exchanges to
discontinue the trading of options in general or of particular options or
impose restrictions on orders.
Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single
investor acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written
on one or more accounts or through one or more brokers). An exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. PIC believes that the
position limits established by the exchanges will not have any adverse impact
upon the Portfolios.
Over-the-Counter Options
As indicated in the Prospectus (see "Investment
Techniques--Over-the-Counter Options"), the Capital Appreciation Portfolio
and International and Emerging Markets Portfolios may deal in
over-the-counter options ("OTC options"). PIC understands the position of the
staff of the Securities and Exchange Commission (the "SEC") to be that
purchased OTC options and the assets
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used in "cover" for written OTC options are illiquid securities. As indicated
in the Prospectus, the Fund has adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of a Portfolio. A brief description of such
procedures is set forth below.
The Capital Appreciation, International and Emerging Markets Portfolios
will engage in OTC options transactions only with dealers that meet certain
credit and other criteria. The Fund and PIC believe that the approved dealers
present minimal credit risks to the Fund and, therefore, should be able to
enter into closing transactions if necessary. A Portfolio currently will not
engage in OTC options transactions if the amount invested by the Portfolio in
OTC options, plus a "liquidity charge" related to OTC options written by the
Portfolio (as described below) plus the amount invested by the Portfolio in
other illiquid securities, would exceed 10% of the Portfolio's total assets.
The "liquidity charge" referred to above is computed as described below.
The Fund anticipates entering into agreements with dealers to which the
Fund sells OTC options. Under these agreements the Fund would have the
absolute right to repurchase the OTC options from the dealer at any time at a
price no greater than a price established under the agreements (the
"Repurchase Price"). The "liquidity charge" referred to above for a specific
OTC option transaction will be the Repurchase Price related to the OTC option
less the intrinsic value of the OTC option. The intrinsic value of an OTC
call option for such purposes will be the amount by which the current market
value of the underlying security exceeds the exercise price. In the case of
an OTC put option, intrinsic value will be the amount by which the exercise
price exceeds the current market value of the underlying security. If there
is no such agreement requiring a dealer to allow the Fund to repurchase a
specific OTC option written by the Fund, the "liquidity charge" will be the
current market value of the assets serving as "cover" for such OTC option.
Risks of Options on Securities Indices
Because the value of an index option depends upon movements in the level
of the index rather than movements in the price of a particular security,
whether a Portfolio utilizing this investment technique will realize a gain
or loss on the purchase or sale of an option on an index depends upon
movements in the level of prices in the market generally or in an industry or
market segment (depending on the index option in question) rather than upon
movements in the price of an individual security. Accordingly, successful use
by a Portfolio of options on indices will be subject to PIC'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 Portfolio utilizing
this investment technique would not be able to close out options which it had
written or purchased and, if restrictions on exercise were imposed, might be
unable to exercise an option it purchased, which would result in substantial
losses to the Portfolio. However, it is the Fund's policy to write or
purchase options only on indices which include a sufficient number of
securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance
and, unlike call writing on portfolio securities, cannot provide in advance
for its potential settlement obligation by holding the underlying securities.
Consequently, the Portfolios will write call options only on indices which
meet the interim described above.
Price movements in securities held by a Portfolio utilizing this
investment technique will not correlate perfectly with movements in the level
of the index and, therefore, the Portfolio bears the risk that the price of
the securities held by the Portfolio might not increase as much as the level
of the index. In this event, the Portfolio would bear a loss on the call
which would not be completely offset by movements in the prices of the
securities held by the Portfolio. It is also possible that the index might
rise when the value of the securities held by the Portfolio does not. If this
occurred, the Portfolio would experience a loss on the call which would not
be offset by an increase in the value of its portfolio and might also
experience a loss in the market value of its portfolio securities.
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Unless a Portfolio utilizing this investment technique has other liquid
assets which are sufficient to satisfy the exercise of a call on an index,
the Portfolio will be required to liquidate securities in order to satisfy
the exercise. Because an exercise must be settled within hours after
receiving the notice of exercise, if the Portfolio fails to anticipate an
exercise, it may have to borrow from a bank (in an amount not exceeding 10%
of the Portfolio's total assets) pending settlement of the sale of securities
in its portfolio and pay interest on such borrowing.
When a Portfolio has written a call on an index, there is also a risk that
the market may decline between the time the Portfolio has the call exercised
against it, at a price which is fixed as of the closing level of the index on
the date of exercise, and the time the Portfolio is able to sell its
securities. As with options on its securities, the Portfolio will not learn
that a call has been exercised until the day following the exercise date but,
unlike a call on a security where the Portfolio would be able to deliver the
underlying security in settlement, the Portfolio may have to sell some of its
securities in order to make settlement in cash, and the price of such
securities may decline before they can be sold.
If a Portfolio exercises a put option on an index which it has purchased
before final determination of the closing index value for that day, it runs
the risk that the level of the underlying index may change before closing. If
this change causes the exercised option to fall "out-of-the-money" the
Portfolio will be required to pay the difference between the closing index
value and the exercise price of the option (multiplied by the applicable
multiplier) to the assigned writer. Although the Portfolio may be able to
minimize this risk by withholding exercise instructions until just before the
daily cutoff time or by selling rather than exercising an option when the
index level is close to the exercise price, it may not be possible to
eliminate this risk entirely because the cutoff times for index options may
be earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
Financial Futures Contracts and Related Options
The Bond, Capital Appreciation, International and Emerging Markets
Portfolios may use financial futures contracts and related options to hedge
against changes in the market value of their portfolio securities or
securities which they intend to purchase. The Capital Appreciation,
International and Emerging Markets Portfolios may use foreign currency
futures contracts to hedge against changes in the value of foreign
currencies. (See "Foreign Currency Transactions" below.) Hedging is
accomplished when an investor takes a position in the futures market opposite
to the investor's cash market position. There are two types of hedges--long
(or buying) and short (or selling) hedges. Historically, prices in the
futures market have tended to move in concert with (although in inverse
relation to) cash market prices, and prices in the futures market have
maintained a fairly predictable relationship to prices in the cash market.
Thus, a decline in the market value of securities or the value of foreign
currencies may be protected against to a considerable extent by gains
realized on futures contracts sales. Similarly, it is possible to protect
against an increase in the market price of securities which the Portfolio
utilizing this investment technique may wish to purchase in the future by
purchasing futures contracts.
The Bond, Capital Appreciation, International and Emerging Markets
Portfolios may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange-
or board-traded put and call options on financial futures contracts as a
hedge against anticipated changes in the market value of its portfolio
securities or securities which it intends to purchase. Financial futures
contracts consist of interest rate futures contracts, securities index
futures contracts and foreign currency futures contracts. A public market
presently exists in interest rate futures contracts covering long-term U.S.
Treasury bonds, U.S. Treasury notes, three-month U.S. Treasury bills and GNMA
certificates. Securities index futures contracts are currently traded with
respect to the Standard & Poor's 500 Composite Stock Price Index and such
other broad-based stock market indices as the New York Stock Exchange
Composite Stock Index and the Value Line Composite Stock Price Index. A
clearing corporation associated with the exchange or board of trade on which
a financial futures contract trades assumes responsibility for the completion
of transactions and also guarantees that open futures contracts will be
performed.
In contrast to the situation in which a Portfolio purchases or sells a
security, no security is delivered or received by the Portfolio upon the
purchase or sale of a financial futures contract (although an obligation to
deliver or receive the underlying security in
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the future is created by such a contract). Initially, when it enters into a
financial futures contract, a Portfolio utilizing this investment technique
will be required to deposit in a segregated account with the Fund's custodian
bank with respect to such Portfolio an amount of cash or U.S. Treasury bills.
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, however.
Subsequent payments, called variation margin, will be made to and from the
account on a daily basis as the price of the futures contract fluctuates.
This process is known as marking to market.
The writer of an option on a futures contract is required to deposit
margin pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
margin account. This amount will be equal to the amount by which the market
price of the futures contract at the time of exercise exceeds, in the case of
a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction. A futures
contract sale is closed out by effecting a futures contract purchase for the
same aggregate amount of securities and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller immediately would be
paid the difference and would realize a gain. If the offsetting purchase
price exceeds the sale price, the seller immediately would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed
out by effecting a futures contract sale for the same securities and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss.
The Portfolios utilizing this investment technique will pay commissions on
financial futures contracts and related options transactions. These
commissions may be higher than those which would apply to purchases and sales
of securities directly, and will be in addition to those paid for direct
purchases and sales of securities.
Limitations on Futures Contracts and Related Options
The Portfolios utilizing this investment technique may not engage in
transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of portfolio securities or securities which it intends to
purchase or foreign currencies. A Portfolio utilizing this investment
technique may not purchase or sell financial futures contracts or related
options if, immediately thereafter, the sum of the amount of initial margin
deposits on the Portfolio's existing futures and related options positions
and the premiums paid for related options would exceed 5% of the market value
of the Portfolio'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, an amount of cash, U.S.
Government securities or other appropriate high-grade debt obligations equal
to the market value of the futures contract minus the Portfolio's initial
margin deposit with respect thereto will be deposited in a segregated account
with the Fund's custodian bank with respect to such Portfolio to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which a Portfolio may enter into financial futures contracts
and related options also may be limited by the requirements of the Internal
Revenue Code of 1986 for qualification as a regulated investment company. See
"Taxes".
Risks Relating to Futures Contracts and Related Options
Positions in futures contracts and related options may be closed out on an
exchange if the exchange provides a secondary market for such contracts or
options. A Portfolio utilizing this investment technique will enter into a
futures or futures related option position only if there appears to be a
liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular option or futures contract at
any specific time. Thus, it may not be possible to close out a futures or
related option position. In the case of a futures position, in the event of
adverse price movements the Portfolio would continue to be required
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to make daily margin payments. In this situation, if the Portfolio has
insufficient cash to meet daily margin requirements it may have to sell
portfolio securities to meet its margin obligations at a time when it may be
disadvantageous to do so. In addition, the Portfolio may be required to take
or make delivery of the securities underlying the futures contracts it holds.
The inability to close out futures positions also could have an adverse
impact on the Portfolio's ability to hedge its positions effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in market prices, it can also limit a hedger's opportunity to
benefit fully from favorable market movement. In addition, investing in
futures contracts and options on futures contracts will cause a Portfolio to
incur additional brokerage commissions and may cause an increase in a
Portfolio's turnover rate.
The successful use of futures contracts and related options depends on the
ability of the Adviser to forecast correctly the direction and extent of
market movements within a given time frame. To the extent market prices
remain stable during the period a futures contract or option is held by a
Portfolio or such prices move in a direction opposite to that anticipated,
the Portfolio may realize a loss on the hedging transaction which is not
offset by an increase in the value of its portfolio securities. As a result,
the Portfolio's total return for the period may be less than if it had not
engaged in the hedging transaction.
Utilization of futures contracts by a Portfolio involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities or currencies which are being
hedged. If the price of the futures contract moves more or less than the
price of the securities or currency being hedged, the Portfolio will
experience a gain or loss which will not be completely offset by movements in
the price of the securities or currency. It is possible that, where a
Portfolio has sold futures contracts to hedge against decline in the market,
the market may advance and the value of securities held in the Portfolio or
the currencies in which its foreign securities are denominated may decline.
If this occurred, the Portfolio would lose money on the futures contract and
would also experience a decline in value in its portfolio securities. Where
futures are purchased to hedge against a possible increase in the prices of
securities or foreign currencies before the Portfolio is able to invest its
cash (or cash equivalents) in securities (or options) in an orderly fashion,
it is possible that the market may decline; if the Portfolio then determines
not to invest in securities (or options) at that time because of concern as
to possible further market decline or for other reasons, the Portfolio will
realize a loss on the futures that would not be offset by a reduction in the
price of the securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contracts through offsetting
transactions rather than to meet margin deposit requirements. In such cases,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities or
currencies rather than to engage in closing transactions because such action
would reduce the liquidity of the futures market. In addition, because, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the underlying
securities market, increased participation by speculators in the futures
market could cause temporary price distortions. Because of the possibility of
price distortions in the futures market and of the imperfect correlation
between movements in the prices of securities or foreign currencies and
movements in the prices of futures contracts, a correct forecast of market
trends may still not result in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for a
Portfolio because the maximum amount at risk is the premium paid for the
options plus transaction costs. However, there may be circumstances when the
purchase of an option on a futures contract would result in a loss to the
Portfolio (i.e., the loss of the premium paid) while the purchase or sale of
the futures contract would not have resulted in loss, such as when there is
no movement in the price of the underlying securities.
Repurchase Agreements
Repurchase agreements, as described in the Fund's Prospectus, will be
entered into only with commercial banks, brokers and dealers considered by
the Fund to be credit-worthy. The Trustees of the Fund will monitor each
Portfolio's repurchase agreement transactions periodically and, with the
Fund's investment advisers will consider standards which the Fund's
investment advisers
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will use in reviewing the creditworthiness of any party to a repurchase
agreement with a Portfolio. No more than an aggregate of 10% of a Portfolio's
net assets, at the time of investment, will be invested in repurchase
agreements having maturities longer than seven days and other investments
subject to legal or contractual restrictions on resale, or for which there
are not readily available market quotations.
The use of repurchase agreements involves certain risks. For example, if
the seller under a repurchase agreement defaults on its obligation to
repurchase the underlying instrument at a time when the value of the
instrument has declined, a Portfolio may incur a loss upon its disposition.
If the seller becomes insolvent and subject to liquidation or reorganization
under bankruptcy or other laws, a bankruptcy court may determine that the
underlying instrument is collateral for a loan by the Portfolio and therefore
is subject to sale by the trustee in bankruptcy. Finally, it is possible that
the Portfolio may not be able to substantiate its interest in the underlying
instrument. While the Trustees of the Fund acknowledge these risks, it is
expected that they can be controlled through careful structuring of
repurchase agreement transactions to meet requirements for treatment as a
purchase and sale under the bankruptcy laws and through monitoring procedures
designed to assure the creditworthiness of counter-parties to such
transactions.
Lending Portfolio Securities
The Portfolios may lend portfolio securities to broker-dealers and other
financial institutions in amounts up to 25% of the market or other fair value
for its total assets, provided that such loans are callable at any time by
the Portfolio utilizing this investment technique and are at all times
secured by collateral held by the Portfolio at least equal to the market
value, determined daily, of the loaned securities. The Portfolio utilizing
this investment technique will continue to receive any income on the loaned
securities, and at the same time will earn interest on cash collateral (which
will be invested in short-term debt obligations) or a securities lending fee
in the case of collateral in the form of U.S. Government securities. A loan
may be terminated at any time by either the Portfolio or the borrower. Upon
termination of a loan, the borrower will be required to return the securities
to the Portfolio, and any gain or loss in the market price during the period
of the loan would accrue to the Portfolio. If the borrower fails to maintain
the requisite amount of collateral, the loan will automatically terminate,
and the Portfolio may use the collateral to replace the loaned securities
while holding the borrower liable for any excess of the replacement cost over
the amount of the collateral.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, in order to exercise such rights if
the matters involved would have a material effect on the Portfolio's
investment in the securities which are the subject of the loan. The Portfolio
may pay reasonable finders, administrative and custodial fees in connection
with loans of its portfolio securities.
As with any extension of credit, there are risks of delay in recovery of
the loaned securities and in some cases loss of rights in the collateral
should the borrower of the securities fail financially. However, loans of
portfolio securities will be made only to firms considered by the Fund to be
creditworthy and when PIC believes the consideration to be earned justifies
the attendant risks.
When-Issued Securities
New issues of municipal securities are often offered on a when-issued
basis, that is, delivery and payment for the securities normally takes place
15 to 45 days or more after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on the
securities are each fixed at the time the buyer enters into the commitment.
The Bond Portfolio will generally make a commitment to purchase such
securities with the intention of actually acquiring the securities. However,
the Portfolio may sell these securities before the settlement date if it is
deemed advisable as a matter of investment strategy. When the Bond Portfolio
purchases securities on a when-issued basis, cash or liquid high quality debt
securities equal in value to commitments for the when-issued securities will
be deposited in a segregated account with the Fund's custodian bank. Such
segregated securities either will mature or, if necessary, be sold on or
before the settlement date.
Securities purchased on a when-issued basis and the securities held in the
Bond Portfolio are subject to changes in market value based upon the public
perception of the creditworthiness of the issuer and changes in the level of
interest rates which will
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generally result in similar changes in value; i.e., both experiencing
appreciation when interest rates decline and depreciation when interest rates
rise. Therefore, to the extent the Bond Portfolio remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be greater fluctuations in its net asset value than if it
merely set aside cash to pay for when-issued securities. In addition, there
will be a greater potential for the realization of capital gains, which are
not exempt from federal income taxation. When the time comes to pay for
when-issued securities, the Bond Portfolio will meet its obligations from
then available cash flow, the sale of securities or, although it would not
normally expect to do so, from the sale of the when-issued securities
themselves (which may have a value greater or less than the payment
obligation). The policies described in this paragraph are not fundamental and
may be changed by the Bond Portfolio upon notice to its shareholders.
Foreign Currency Transactions
The Capital Appreciation, International and Emerging Market Portfolios
(each a "Foreign Currency Portfolio") each may engage in foreign currency
transactions, although the Capital Appreciation Portfolio has no present
intention of doing so. The following is a description of these transactions.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days ("Term")
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded directly between
currency traders (usually large commercial banks) and their customers.
None of the Portfolios 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 Portfolio 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.
PIC 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 Portfolio. The Fund's custodian banks will segregate cash or liquid high
quality debt securities in an amount not less than the value of a Foreign
Currency Portfolio's total assets committed to forward foreign currency
exchange contracts entered into for the purchase of a foreign currency. If
the value of the securities segregated declines, additional cash or
securities will be added so that the segregated amount is not less than the
amount of the Foreign Currency Portfolio's commitments with respect to such
contracts. Generally, neither Foreign Currency Portfolio enters 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 Foreign Currency Portfolio against an
adverse movement in the value of a foreign currency, it does not limit the
gain which might result from a favorable movement in the value of such
currency. For example, if a Foreign Currency Portfolio were holding
securities denominated in an appreciating foreign currency and had purchased
a foreign currency put to hedge against a decline in the value of the
currency, it would not have to exercise its put. Similarly, if a Foreign
Currency Portfolio had entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call
to hedge against a rise in the value of the currency but instead the currency
had depreciated in value between the date of purchase and the settlement
date, the Foreign Currency Portfolio 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 Foreign Currency Portfolio
may use foreign currency futures contracts and options on such futures
contracts. Through the purchase or sale of such contracts, a Foreign Currency
Portfolio may be able to achieve many of the same objectives attainable
through the use of foreign currency forward contracts, but more effectively
and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and are traded on boards of
trade and commodities exchanges. It is anticipated that such contracts may
provide greater liquidity and lower cost than forward foreign currency
exchange contracts.
Regulatory Restrictions. To the extent required to comply with Securities
and Exchange Commission Release No. IC-10666, when purchasing a futures
contract or writing a put option, each Foreign Currency Portfolio will
maintain in a segregated account cash or liquid high-grade debt securities
equal to the value of such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid "commodity pool operator" status,
a Foreign Currency Portfolio will not enter into a futures contract or
purchase an option thereon if immediately thereafter the initial margin
deposits for futures contracts (including foreign currency and all other
futures contracts) held by the Foreign Currency Portfolio plus premiums paid
by it for open options on futures would exceed 5% of the Foreign Currency
Portfolio's total assets. Neither Foreign Currency Portfolio 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 Portfolio 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.
Real Estate Investment Trusts
As described in the Prospectus, the Real Estate Portfolio intends under
normal conditions to invest in real estate investment trusts ("REITs"). REITs
pool investors' funds for investment primarily in income-producing commercial
real estate or real estate related loans. A REIT is not taxed on income
distributed to shareholders if it complies with several requirements relating
to its organization, ownership, assets, and income and a requirement that it
distribute to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year.
REITs can generally be classified as follows:
--Equity REITs, which invest the majority of their assets directly in real
property and derive their income primarily from rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
--Mortgage REITs, which invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments.
--Hybrid REITs, which combine the characteristics of both equity REITs and
mortgage REITs.
REITs are like closed-end investment companies in that they are essentially
holding companies which rely on professional managers to supervise their
investments. A shareholder in the Real Estate Portfolio should realize that
by investing in REITs indirectly through the Portfolio, he will bear not only
his proportionate share of the expenses of the Portfolio, but also,
indirectly, similar expenses of underlying REITs.
Debt Securities
Up to 25% of the Real Estate Portfolio's total assets may be invested in
debt securities (which include for purposes of this investment policy
convertible debt securities which PRS or ABKB believes have attractive equity
characteristics). The Real Estate Portfolio may invest in debt securities
rated BBB or better by Standard & Poor's Corporation ("S&P") or Baa or better
by Moody's
14
<PAGE>
Investor Service, Inc. ("Moody's") or, if not rated, are judged to be of
comparable quality as determined by PRS or ABKB. In choosing debt securities
for purchase by the Portfolio, PRS will employ the same analytical and
valuation techniques utilized in managing the equity portion of the Real
Estate Portfolio's holdings (see "Investment Advisory and Other Services")
and will invest in debt securities only of companies that satisfy PRS' or
ABKB's investment criteria.
The value of the Real Estate Portfolio's investments in debt securities
will change as interest rates fluctuate. When interest rates decline, the
values of such securities generally can be expected to increase and when
interest rates rise, the values of such securities can generally be expected
to decrease. The lower-rated and comparable unrated debt securities described
above are subject to greater risks of loss of income and principal than are
higher-rated fixed income securities. The market value of lower-rated
securities generally tends to reflect the market's perception of the
creditworthiness of the issuer and short-term market developments to a
greater extent than is the case with more highly rated securities, which
reflect primarily functions in general levels of interest rates.
Risks of Investment in Real Estate Securities
Selecting REITs requires an evaluation of the merits of each type of asset
a particular REIT owns, as well as regional and local economics. Due to the
proliferation of REITs in recent years and the relative lack of
sophistication of certain REIT managers, the quality of REIT assets has
varied significantly. The Real Estate Portfolio will not invest in real
estate directly, but only in securities issued by real estate companies.
However, the Portfolio may be subject to risks similar to those associated
with the direct ownership of real estate because of its policy of
concentrating in the securities of companies in the real estate industry.
These include declines in the value of real estate, risks related to general
and local economic conditions, dependence on management skill, cash flow
dependence, possible lack of availability of long-term mortgage funds,
over-building, extended vacancies of properties, decreased occupancy rates
and increased competition, increases in property taxes and operating
expenses, changes in neighborhood values and the appeal of the properties to
tenants and changes in interest rates.
In addition to these risks, equity REITs may be affected by changes in the
value of the underlying properties owned by the trusts, while mortgage REITs
may be affected by the quality of any credit extended. Further, equity and
mortgage REITs are dependent upon management skills and generally are not
diversified. Equity and mortgage REITs are also subject to potential defaults
by borrowers, self-liquidation, and the possibility of failing to qualify for
tax-free status of income under the Code and failing to maintain exemption
from the Investment Company Act of 1940. In the event of a default by a
borrower or lessee, the REIT may experience delays in enforcing its rights as
a mortgagee or lessor and may incur substantial costs associated with
protecting its investments. In addition, investment in REITs could cause the
Portfolio to possibly fail to qualify as a regulated investment company.
INVESTMENT RESTRICTIONS
The following information supplements the information included in the
Prospectus with respect to the investment restrictions to which the
Portfolios of the Fund are subject. The investment restrictions described
below are fundamental policies and may not be changed as to any Portfolio
without the approval of the lesser of (i) a majority of the Portfolio's
outstanding shares or (ii) 67% of the Portfolio's shares represented at a
meeting of Fund shareholders at which the holders of 50% or more of the
Portfolio's outstanding shares are present. No Portfolio of the Fund may:
(1) Make short sales of securities, unless at the time of sale the
Portfolio owns an equal amount of such securities.
(2) Purchase securities on margin, except that the Portfolio may obtain
such short-term credits as may be necessary for the clearance of
purchases and sales of securities. The deposit or payment by the
Portfolio of initial or maintenance margin in connection with
financial futures contracts or related options transactions is not
considered the purchase of a security on margin.
15
<PAGE>
(3) Write, purchase or sell puts, calls or combinations thereof, except
that the Portfolios may (a) write exchange-traded covered call
options on portfolio securities and enter into closing purchase
transactions with respect to such options, and Portfolios, other than
the Bond Portfolio, may write exchange-traded covered call options on
foreign currencies and secured put options on securities and foreign
currencies and write covered call and secured put options on
securities and foreign currencies traded over the counter, and enter
into closing purchase transactions with respect to such options, (b)
purchase exchange-traded call options and put options, and such
Portfolios, other than the Bond Portfolio, may purchase call and put
options traded over the counter, provided that the premiums on all
outstanding call and put options do not exceed 5% of its total
assets, and enter into closing sale transactions with respect to such
options, and (c) engage in financial futures contracts and related
options transactions, provided that the sum of the initial margin
deposits on such Portfolio's existing futures and related options
positions and the premiums paid for related options would not exceed
5% of its total assets.
(4) Borrow in excess of 10% of the market or other fair value of its
total assets, or pledge its assets to an extent greater than 15% of
the market or other fair value of its total assets. Any such
borrowings shall be from banks and shall be undertaken only as a
temporary measure for administrative purposes. Deposits in escrow in
connection with the writing of covered call options, secured put
options, or the purchase or sale of financial futures contracts and
related options are not deemed to be a pledge or other encumbrance.
The Bond Portfolio will not purchase securities while temporary bank
borrowings in excess of 5% of its net assets are outstanding.
(5) Underwrite the securities of other issuers, except to the extent that
in connection with the disposition of its portfolio securities, a
Portfolio may be deemed to be an underwriter. The Capital
Appreciation (with respect to up to one third of its assets),
International and Emerging Markets Portfolios may buy and sell
securities outside the United States which are not registered with
the SEC or marketable in the United States.
(6) Concentrate its assets in the securities of issuers which conduct
their principal business activities in the same industry, except that
the Real Estate Portfolio may so concentrate its assets and the Bond
Portfolio may invest more than 25% of its assets in a particular
segment of the municipal securities market. This restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
(7) Make any investment in real estate, real estate limited partnerships,
commodities or commodities contracts, except that a Portfolio may (a)
purchase or sell readily marketable securities which are secured by
interests in real estate, including real estate investment and
mortgage investment trusts, and (b) engage in financial futures
contracts and related options transactions, provided that the sum of
the initial margin deposits on the Portfolio's futures and related
options positions and the premiums paid for related options would not
exceed 5% of the Portfolio's total assets, and (c) the Capital
Appreciation, International and Emerging Markets Portfolios may enter
into foreign currency transactions.
(8) Make loans, except that the Portfolio may (a) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors, whether publicly distributed or not, (b)
invest in repurchase agreements, provided that an aggregate of no
more than 10% of the Portfolio's net assets (taken at market value)
may be invested in repurchase agreements having maturities of more
than seven days and all other illiquid securities, and (c) loan its
portfolio securities in amounts up to one third of the market or
other fair value of its total assets, subject to restrictions
described more fully above.
(9) Purchase securities of other investment companies, except that the
Portfolio may make such a purchase (a) in the open market involving
no commission or profit to a sponsor or dealer (other than the
customary broker's commission), provided that immediately thereafter
(i) not more than 10% of the Portfolio's total assets would be
invested in such securities and (ii) not more than 3% of the voting
stock of another investment company would be owned by the Portfolio,
or (b) as part of a merger, consolidation, or acquisition of assets.
(10) Invest more than 5% of its total assets in the securities of any one
issuer (except the U.S. Government and, in the case of the Capital
Appreciation, International and Emerging Markets Portfolios any
foreign government, its agencies and
16
<PAGE>
instrumentalities) or purchase more than 10% of the outstanding
voting securities or more than 10% of the securities of any class of
any one issuer; however, the foregoing limitations do not apply to
the Real Estate Portfolio and Emerging Markets Portfolio. With
respect to 75% of its assets, a Portfolio which may invest in foreign
securities will limit its investments in the securities of any one
foreign government, its agencies and instrumentalities, to 5% of the
Portfolio's total assets.
(11) Invest in securities of any issuer if any officer or Trustee of the
Fund or any officer or director of the Adviser owns more than 1/2 of
1% of the outstanding securities of such issuer and all such persons
own in the aggregate more than 5% of the securities of such issuer.
(12) Invest in the aggregate more than 5% of its total assets in the
securities of any issuers (other than real estate investment trusts)
which have (with predecessors) a record of less than three years of
continuous operations.
(13) Invest in warrants or rights except where acquired in units or
attached to other securities. The Capital Appreciation, Real Estate,
International and Emerging Markets Portfolios each may invest up to
5% of its total assets in warrants or rights which are not in units
or attached to other securities.
(14) Purchase restricted securities (including repurchase agreements
having maturities of more than seven days) or securities for which
market value quotations are not readily available if as a result of
such purchase more than 10% of the Portfolio's total assets would be
invested in the aggregate in such securities.
(15) Invest in interests in oil, gas, or other mineral exploration or
development programs.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the value or costs of the Portfolio's
assets will not be considered violative of the restriction except as provided
in (11) above.
PERFORMANCE
Performance information for each Portfolio (and Class of Portfolio) may
appear in advertisements, sales literature, or reports to shareholders or
prospective shareholders. Performance information in advertisements and sales
literature may be expressed as the "yield" of the Bond Portfolio and as
"average annual total return" and "total return" of any of the Portfolios.
Quotations of the yield for the Bond Portfolio will be based on all
investment income per share earned during a particular 30-day period
(including dividends and interest), less expenses (including pro rata Trust
expenses and expenses applicable to each particular Portfolio or Class of
Portfolio) accrued during the period ("net investment income"), and are
computed by dividing net investment income by the value of a share of the
Portfolio or Class on the last day of the period, according to the following
formula:
YIELD = 2[(a-b) + 1)(6)-1]
-----
cd
where a = dividends and interest earned during the period by the Portfolio.
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the net asset value per share on the last day of the period.
For the thirty day period ended November 30, 1994, the yield for the Bond
Portfolio Class A shares and Class B shares was 5.69% and 5.13% respectively.
A Portfolio's average annual total return quotation is computed in
accordance with a standardized method prescribed by rules of the Securities
and Exchange Commission. The average annual total return for the Portfolio
for a specific period is found by first taking a hypothetical $1,000
investment ("initial investment") in the Portfolio's shares on the first day
of the period, adjusting
17
<PAGE>
to deduct the maximum sales charge, and computing the "redeemable value" of
that investment at the end of the period. The redeemable value is then
divided by the initial investment, and this quotient is taken to the Nth root
(N representing the number of years in the period) and 1 is subtracted from
the result, which is then expressed as a percentage. The calculation assumes
that all income and capital gains dividends paid by the Portfolio have been
reinvested at net asset value on the reinvestment dates during the period.
Calculation of a Portfolio's total return is not subject to a standardized
formula. Total return performance for a specific period is calculated by
first taking an investment ("initial investment") in the Portfolio's shares
on the first day of the period, either adjusting or not adjusting to deduct
the maximum sales charge, and computing the "redeemable value" of that
investment at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the redeemable value
and dividing the remainder by the initial investment and expressing the
result as a percentage. The calculation assumes that all income and capital
gains dividends by the Portfolio have been reinvested at net asset value on
the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period.
Total return calculations that do not include the effect of the sales charge
would be reduced if such charge were included.
The manner in which total return will be calculated for public use is
described above. The following table summarizes the calculation of total
return for each Portfolio, where applicable, through November 30, 1994.
The following table illustrates average annual total return for each
Portfolio for the 1, 5 and 10 year periods ended November 30, 1994.
AVERAGE ANNUAL TOTAL RETURN AS OF NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PERIODS ENDED
---------------------------------------------------
PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION*
- ---------------------- ----------- ---------- ----------------------
<S> <C> <C> <C>
Bond
Class A -11.96% 5.29% 6.69%
Class B N/A N/A -10.93%
Capital
Appreciation
(Class A) -3.76% 15.05% 15.43%
(Class B) N/A N/A -3.36%
International
Class A 7.76% 5.39% 6.19%
Class B N/A N/A N/A
Real Estate
Class A N/A N/A N/A
Class B N/A N/A N/A
Emerging Markets
Class A N/A N/A N/A
Class B N/A N/A N/A
</TABLE>
* The Bond, Capital Appreciation, and International Portfolios commenced
operations on July 16, 1988, November 1, 1989 and November 1, 1989,
respectively. Bond Portfolio Class B commenced operations on February 10,
1994. Capital Appreciation and International Portfolios Class B commenced
operations on July 20, 1994. The Real Estate and Emerging Markets Portfolios
commenced operations on March 1, 1995 and , 1995 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
18
<PAGE>
and policies, characteristics and quality of the portfolio, and the market
condition during the given time period, and should not be considered as a
representation of what may be achieved in the future.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, for both classes of shares of
the Fund, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such
data will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate
rate of return calculations.
PERFORMANCE COMPARISONS
Each Portfolio or Class of Portfolio may from time to time include in
advertisements containing total return the ranking of those performance
figures relative to such figures for groups of mutual funds having similar
investment objectives as categorized by ranking services such as Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Weisenberger
Financial Services, Inc., and rating services such as Morningstar, Inc.
Additionally, a Portfolio may compare its performance results to other
investment or savings vehicles (such as certificates of deposit) and may
refer to results published in various publications such as Changing Times,
Forbes, Fortune, Money, Barrons, Business Week, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street
Journal, New York Times, Consumer Reports, Registered Representative,
Financial Planning, Financial Services Weekly, Financial World, U.S. News and
World Report, Standard and Poor's The Outlook, Investor's Daily and Personal
Investor. The total return may be used to compare the performance of the
Portfolios against certain widely acknowledged outside standards or indices
for stock and bond market performance, such as the Standard & Poor's 500
Stock Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia
Far East Index (EAFE), Consumer Price Index, Shearson Lehman Corporate Index
and Shearson Lehman T-Bond Index. The S&P 500 is a commonly quoted market
value-weighted and unmanaged index showing the changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500
is composed almost entirely of common stocks of companies listed on the New
York Stock Exchange, although the common stocks of a few companies listed on
the American Stock Exchange or traded over-the-counter are included. The 500
companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange.
PORTFOLIO TURNOVER
The Portfolios 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 Portfolio 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 Portfolios will pay more
in brokerage commissions than would be the case if they had lower portfolio
turnover rates.
The portfolio turnover rates for the Bond, Capital Appreciation and
International Portfolios for the fiscal year ended November 30, 1994 were
54%, 227%, and 186%, respectively. It is presently anticipated that the
portfolio turnover rate for the Real Estate and Emerging Markets Portfolios
for the fiscal year ended November 30, 1995 will not exceed 75% and %
respectively. The rate of portfolio turnover is not a limiting factor when
the Adviser deems changes appropriate. Although the portfolio turnover rate
of a Portfolio cannot be accurately predicted, it is anticipated that the
annual turnover rate of the Capital Appreciation Portfolio, Bond Portfolio
and International Portfolio will not exceed 475%, 200% and 200%,
respectively. Portfolio turnover rate is calculated by dividing the lesser of
purchases and sales of portfolio securities during the fiscal year by the
monthly average of the value of the Portfolio's securities (excluding
short-term securities). The turnover rate may vary greatly from year to year
and may be affected by cash requirements for redemptions of shares of a
Portfolio and by compliance with provisions of the Internal Revenue Code
relieving investment companies which distribute substantially all of their
net income from Federal income tax on the amounts distributed.
19
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and Officers of the Fund and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the
address of each Trustee and executive officer is One American Row, Hartford,
Connecticut, 06115. On December 30, 1993, the shareholder elected to fix the
number of trustees at ten and to elect such number of trustees. On February
15, 1995, the Trustees voted to increase the number of Trustees from ten to
eleven and to appoint Lowell P. Weicker, Jr. to fill the vacancy caused by
the increase.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
<S> <C> <C>
C. Duane Blinn Trustee Partner in the law firm of Day, Berry & Howard.
Day, Berry & Howard Director/Trustee, Phoenix Funds (1980-present).
CityPlace Director/Trustee, the National Affiliated Investment Companies
Hartford, CT 06103 (until 1993).
Robert Chesek Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Director/Trustee, the National Affiliated
Wethersfield, CT 06109 Investment Companies (until 1993). Vice President, Common
Stock, Phoenix Home Life Mutual Insurance Company (1980-1994).
E. Virgil Conway Trustee Trustee/Director, Consolidated Edison Company of New York,
9 Rittenhouse Road Inc. (1970-present), Pace University (1978-present), Atlantic
Bronxville, NY 10708 Mutual Insurance Company (1974-present), HRE Properties
(1989-present), Greater New York Councils, Boy Scouts of
America (1985-present), Union Pacific Corp. (1978-present),
Atlantic Reinsurance Company (1986-present), Blackrock Fund
for Fannie Mae Mortgage Securities (Advisory Director)
(1989-present), Centennial Insurance Company, Josiah Macy,
Jr., Foundation, and The Harlem Youth Development Foundation.
Advisory Director, Fund Directions (1993-present). Board
Member, Metropolitan Transportation Authority (1992-present).
Chairman, Audit Committee of the City of New York
(1981-present). Chairman, Financial Accounting Standard,
Advisory Council (1992-present). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Director/Trustee, Phoenix Funds (1993-present). Director,
Accuhealth (1994-present), Trism, Inc. (1994-present), Realty
Foundation of New York (1972-present) and the New York Housing
Partnership Development Corp. (1981-present). Former Director,
New York Chamber of Commerce and Industry (1974-1990).
20
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
Harry Dalzell-Payne Trustee Director/Trustee, Phoenix Funds (1983-present). Director,
330 East 39th Street Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee, the
Apartment 29G National Affiliated Investment Companies (1983-1993).
New York, NY 10016 Consultant, The Levett Group Holding, Inc. (1989-1990).
Independent real estate market consultant (1982-1990).
Formerly a Major General of the British Army.
Leroy Keith, Jr. Trustee Director/Trustee, Phoenix Funds (1980-present). Director
Chairman and Chief Equifax Corp. (1991-present), and Keystone International Fund,
Executive Officer Inc. (1989-present). Trustee, Keystone Liquid Trust, Keystone
Keith Ventures Tax Exempt Trust, Keystone Tax Free Fund, Master Reserves Tax
1729 Wood Nymph Trail Free Trust, and Master Reserves Trust. Director/Trustee, the
Lookout Mountain, GA 30750 National Affiliated Investment Companies (until 1993).
Director, Blue Cross/Blue Shield (1989-1993) and First Union
Bank of Georgia (1989-1993). President, Morehouse College
(1987-1994).
*Philip R. McLoughlin Trustee and Director (1994-present) and Executive Vice President,
President Investments, Phoenix Home Life Mutual Insurance Company
(1987-present). Director/Trustee and President, Phoenix Funds
(1989-present). Director, Phoenix Investment Counsel, Inc.
(1983-present). Director (1984-present) and President
(1990-present), Phoenix Equity Planning Corporation. Director,
Phoenix Realty Group, Inc. (1994-present), Phoenix Realty
Advisors, Inc. (1987-present), Phoenix Realty Investors, Inc.
(1994-present), Phoenix Realty Securities, Inc. (1994-
present), Phoenix Re Corporation (Delaware (1985-present),
and World Trust Fund (1991-present). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Director, Chairman and Chief Executive Officer, National
Securities & Research Corporation (1993-present) and Director
and President, Phoenix Securities Group, Inc., Inc.
(1993-present). Director (1992-present) and President,
(1992-1994) W.S. Griffith & Co., Inc. (1992-present) and
Director (1992-present) and President (1992-1994) Townsend
Financial Advisers, Inc. Director and Vice President, PM
Holdings, Inc. (1985-present).
21
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
James M. Oates Trustee Director/Trustee, Phoenix Funds (1987-present) Director,
Managing Director Govett Worldwide Opportunity Funds, Inc. (1991-present), and
The Wydown Group Stifel Financial Corporation (1986-present). Director/Trustee,
50 Congress Street the National Affiliated Investment Companies (until 1993).
Suite 1000 Director and President (1984-1994) and Chief Executive Officer
Boston, MA 02109 (1986-1994), Neworld Bank. Director, Savings Bank Life
Insurance Company (1988-1994).
Philip R. Reynolds Trustee Director/Trustee, Phoenix Funds (1984-present). Director,
43 Montclair Drive Vestaur Securities, Inc. (1972-present). Trustee and
West Hartford, CT 06107 Treasurer, J Walton Bissell Foundation, Inc. (1988-present).
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
Herbert Roth, Jr. Trustee Director/Trustee, Phoenix Funds (1980-present). Director,
134 Lake Street Boston Edison Company (1978-present), Phoenix Home Life Mutual
P.O. Box 909 Insurance Company (1972-present), Landauer, Inc. (medical
Sherborn, MA 01770 services) (1970-present), Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), Key Energy Group (oil rig
service) (1988-1994), and Mark IV Industries (diversified
manufacturer) (1985-present). Director/ Trustee, the National
Affiliated Investment Companies (until 1993).
Richard E. Segerson Trustee Director/Trustee, Phoenix Funds, (1993-present). Consultant,
102 Valley Road Tootal Group (1989-1991). Vice President and General Manager,
New Canaan, CT 06840 Coats & Clark, Inc. (previously Tootal American, Inc.)
(1991-1993). Director/Trustee, the National Affiliated
Investment Companies (1984-1993).
Lowell P. Weicker, Jr. Trustee Trustee/Director, the Phoenix Funds (1995-present). Chairman,
Dresing Lierman Weicker Dresing, Lierman, Weicker (1995-present). Governor of the
6931 Arlington Road State of Connecticut (1991-1995). President and Chief
Suite 501 Executive Officer, Research! America (1989-1990).
Bethesda, MD 20814
David L. Albrycht Vice President Portfolio Manager, Phoenix Home Life Mutual Insurance Company
(1990-present). Vice President, Phoenix Asset Reserve
(1993-present) and Phoenix Multi-Sector Fixed Income Fund,
Inc. (1994-present).
22
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
Curtiss O. Barrows Vice President Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company (1991-present). Vice President, Phoenix
Series Fund (1985-present), National Securities & Research
Corporation (1993-present), The Phoenix Edge Series Fund
(1986- present) and Phoenix Investment Counsel, Inc.
(1991-present). Various other positions with Phoenix Home Life
Mutual Insurance Company (1985-1991).
James M. Dolan Vice President Vice President and Compliance Officer (1994-present), and
100 Bright Meadow Blvd. Assistant Secretary (1981-present), Phoenix Equity Planning
P.O. Box 2200 Corporation. Vice President, Phoenix Funds, (1989-present).
Enfield, CT 06083-2200 Vice President (1991-present), Assistant Clerk and Assistant
Secretary (1982-present), Phoenix Investment Counsel, Inc.
Vice President and chief Compliance Officer (1994-present),
Phoenix Realty Advisors, Inc. and Chief Compliance Officer
(1995-present), Phoenix Realty Securities, Inc. Vice
President, the National Affiliated Investment Companies (until
1993). Various other positions with Phoenix Equity Planning
Corporation (1978-1994).
Jeanne H. Dorey Vice President Portfolio Manager, International, Phoenix Home Life Mutual
Insurance Company. Vice President, Phoenix Worldwide
Opportunities Fund (1993-present), National Securities &
Research Corporation (1993-present), The Phoenix Edge Series
Fund (1993-present) and Phoenix Investment Counsel, Inc.
(1993-present).
Catherine Dudley Vice President Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company (1988-present). Vice President, Phoenix
Series Fund (1989-present), Phoenix Investment Counsel, Inc.
(1991-present), and National Securities & Research Corporation
(1993-present). Investment Officer, The Phoenix Edge Series
Fund (1989-present).
Peter S. Lannigan Vice President Director, Public Fixed Income, Phoenix Home Life Mutual
Insurance Company (1993-present). Associate Director, Bond
Rating Group, Standard & Poor's Corp. (1989-1993).
23
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
Thomas S. Melvin, Jr. Vice President Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company (1991-present). Vice President, Phoenix
Investment Counsel, Inc. (1994-present) and National
Securities & Research Corporation (1994-present).
William R. Moyer Vice President Vice President, Investment Products Finance, Phoenix Home Life
100 Bright Meadow Blvd. Mutual Insurance Company (1990-present). Senior Vice
P.O. Box 2200 President, Finance (1990-present), and Treasurer
Enfield, CT 06083-2200 (1994-present), Phoenix Equity Planning Corporation, and
Phoenix Investment Counsel, Inc. Vice President, Phoenix Funds
(1990-present). Vice President, the National Affiliated
Investment Companies (until 1993). Senior Vice President,
Finance, Phoenix Securities Group, Inc. (1993-present). Senior
Vice President, Finance (1993-present), and Treasurer
(1994-present), National Securities & Research Corporation.
Senior Vice President and Chief Financial Officer
(1993-present) and Treasurer (1994-present), W.S. Griffith &
Co., Inc. and Townsend Financial Advisers, Inc. Senior
Manager, Price Waterhouse (1983-1990).
Scott C. Noble Vice President, Phoenix Realty Group, Inc. (1995-present). Senior
President Vice President, Real Estate, Phoenix Home Life Mutual
Insurance Company (1993-present). Director and Executive Vice
President, Phoenix Real Estate Securities, Inc.
(1993-present). Vice President, Phoenix Multi-Portfolio Fund
(1994-present) and The Phoenix Edge Series Fund
(1995-present). Director (1991-present) and President
(1993-present), Phoenix Founders, Inc. Director and President
Phoenix Realty Group, Inc. (1994-present). Director, Phoenix
Realty Advisors, Inc. (1991-present). Director, President and
Chief Executive Officer (1994-present), Phoenix Realty
Investors, Inc. Various other positions with Phoenix Home Life
Insurance Company (1991-1993).
24
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
Barbara Rubin Vice Vice President, Real Estate, Phoenix Home Life Mutual
President Insurance Company (1992-present). Vice President, Phoenix
Multi-Portfolio Fund (1994-present) and The Phoenix Edge
Series Fund (1995-present). Second Vice President, Real
Estate, Phoenix Home Life Mutual Insurance Company
(1986-1992). Vice President (1991-present) 238 Columbus Bld.
Inc. Director (1988-present) and Vice President (1993-
present), Phoenix Founders, Inc. Vice President (1993-
present) Phoenix Real Estate Securities, Inc. Director and
President (1987-present) Phoenix Realty Advisors, Inc.
Executive Vice President (1994-present) Phoenix Realty
Securities, Inc.
Leonard J. Saltiel Vice Vice President, Investment Operations, Phoenix Home Life
President Mutual Insurance Company (1994-present). Senior Vice
President, Phoenix Equity Planning Corporation (1994-present).
Vice President, Phoenix Funds (1994-present) and National
Securities & Research Corporation. Various positions with Home
Life Insurance Company and Phoenix Home Life Mutual Insurance
Company (1987-1994).
James D. Wehr Vice President Managing Director, Public Fixed Income, Phoenix Home Life
Mutual Insurance Company, (1991- present). Vice President,
Phoenix California Tax Exempt Bonds, Inc. (1993-present),
Phoenix Multi- Portfolio Fund (1988-present), Phoenix Series
Fund (1990-present), The Phoenix Edge Series Fund
(1991-present), Phoenix Investment Counsel, Inc.
(1991-present) and National Securities & Research Corporation
(1993-present). Various positions with Phoenix Home Life
Mutual Insurance Company (1981-1991).
25
<PAGE>
Positions Held Principal Occupations
Name and Address With the Fund During the Past 5 Years
- -------------------------------- ----------------- --------------------------------------------------------------
John T. Wilson Vice President Portfolio Manager, Common Stock, Phoenix Home Life Mutual Life
and Portfolio Insurance Company (1990-present). Portfolio Manager, The
Manager Phoenix Edge Series Fund-Growth Series (1992-present)
Co-Portfolio Manager, Phoenix Worldwide Opportunities Fund
(1994-present), Co-Manager, Phoenix Multi-Portfolio Fund-
Capital Appreciation Portfolio (1994-1995) and Portfolio
Manager, Phoenix Multi-Portfolio Fund-Capital Appreciation
Portfolio (1995-present). Vice President, Phoenix
Multi-Portfolio Fund (1994-present), The Phoenix Edge Series
Fund (1994-present) and Phoenix Worldwide Opportunities Fund
(1994-present).
G. Jeffrey Bohne Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations, Phoenix Equity Planning Corporation
(1993-present). Secretary, the Phoenix Funds (1993-present).
Clerk, Phoenix Total Return Fund, Inc. (1994-present). Vice
President, Home Life of New York Insurance Company (1984-
1992).
Nancy G. Curtiss Treasurer Second Vice President and Treasurer, Fund Accounting, Phoenix
Home Life Mutual Insurance Company (1994-present). Treasurer,
Phoenix Funds (1994-present). Vice President, Fund Accounting,
Phoenix Equity Planning Corporation (1994-present). Various
positions with Phoenix Home Life Insurance Company
(1987-1994).
</TABLE>
*Indicates that the Trustee is an "interested person" of the Trust within the
meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
For services rendered to the Fund for the fiscal year ended November 30,
1994, the Trustees receive aggregate remuneration of $46,593. 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 $30,000 and a fee of $2,000 per
joint meeting of the Boards. Each Trustee who serves on the Audit Committee
receives a retainer at the annual rate of $2,000 and a fee of $2,000 per
joint Audit Committee meeting attended. Each Trustee who serves on the
Nominating Committee receives a retainer at the annual rate of $1,000 and a
fee of $1,000 per joint Nominating Committee meeting attended. Each Trustee
who serves on the Executive Committee and who is not an interested person of
the Fund receives a retainer at the annual rate of $1,000 and $1,000 per
joint Executive Committee meeting attended. For services to the Fund only,
each Trustee who is not a full-time employee of the Adviser or any of its
affiliates receives a retainer at the annual rate of $3,000 and a fee of $200
per meeting attended; each Trustee who serves on the Audit Committee receives
a retainer at the annual rate of $200 and a fee of $200 per Audit Committee
26
<PAGE>
meeting attended; each Trustee who serves on the Nominating Committee
receives a retainer at the annual rate of $100 and a fee of $1,000 per
Nominating Committee meeting attended and 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 $100 and $1,000 per joint Executive
Committee meeting attended. Officers and interested Trustees of the Fund are
compensated for their services by the Adviser and receive no compensation
from the Fund.
On November 30, 1994, the Trustees and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
THE INVESTMENT ADVISERS
The offices of Phoenix Investment Counsel, Inc., (PIC) and Phoenix Realty
Securities, Inc. (PRS) are located at One American Row, Hartford, Connecticut
06115-2520. PIC was organized in 1932 as John P. Chase, Inc. In addition to
the Fund, the PIC also serves as investment adviser to The Phoenix Edge
Series Fund, Phoenix Series Fund and Phoenix Total Return Fund, Inc., and as
subadviser to American Skandia Trust, Chubb America Fund, Inc., Cambridge
Series Trust, and SunAmerica Series Trust among others. PRS was formed on
August 25, 1994 and has no other account which it manages and no prior
operating history.
All of the outstanding stock of the PIC is owned by Phoenix Equity
Planning Corporation ("Equity Planning"), an indirect subsidiary of Phoenix
Home Life Mutual Insurance Company ("Phoenix Home Life") of Hartford,
Connecticut. All of the outstanding stock of PRS is owned by Phoenix Realty
Group, Inc. an indirect subsidiary of Phoenix Home Life. Phoenix Home Life is
in the business of writing ordinary and group life and health insurance and
annuities. It was founded in 1851 and at December 31, 1994 had total assets
of approximately $11.7 billion and net insurance in force of approximately
$111.6 billion. 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 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, 06083-2200.
James M. Dolan, Jeanne H. Dorey, Catherine Dudley, Thomas S. Melvin, Jr.,
William R. Moyer, and James D. Wehr, officers of the Fund, are officers of
PIC. Scott C. Noble and Barbara Rubin, officers of the Fund, are officers of
PRS. Mr. Philip R. McLoughlin, an officer and Trustee of the Fund, is a
director of PIC and PRS.
The investment advisory agreements provide that the Fund will bear all
costs and expenses (other than those specifically referred to as being borne
by the Adviser) incurred in the operation of the Fund. Such expenses include,
but shall not be limited to, all expenses incurred in the operation of the
Fund and any public offering of its shares, including, among others,
interest, taxes, brokerage fees and commissions, fees of Trustees who are not
employees of PIC or PRS or any of its affiliates, expenses of Trustees, and
shareholders' meetings, expenses of printing and mailing proxy soliciting
material, expenses of the insurance premiums for fidelity and other coverage,
expenses of the repurchase and redemption of shares, expenses of the issue
and sale of shares (to the extent not borne by Equity Planning under its
agreement with the Fund), expenses of printing and mailing share certificates
representing shares of the Fund, association membership dues, charges of
custodians, transfer agents, dividend disbursing agents and financial agents,
and bookkeeping, auditing and legal expenses. The Fund will also pay the fees
and bear the expense of registering and maintaining the registration of the
Fund and its shares with the Securities and Exchange Commission and
registering or qualifying its shares under state or other securities laws and
the expense of preparing and mailing prospectuses and reports to
shareholders. If authorized by the Trustees, the Fund will also pay for
extraordinary expenses and expenses of a non-recurring nature which may
include, but shall not be limited to, the reasonable cost of any
reorganization or acquisition of assets and the cost of legal proceedings to
which the Fund is a party.
Each Portfolio will pay expenses incurred in its own operation and will
also pay a portion of the Fund's general administration expenses allocated on
the basis of the asset values of the respective Portfolios.
For managing, or directing the management of the investments of each
Portfolio, PIC is entitled to a fee for the Bond Portfolio, payable monthly,
at the annual rate of 0.45% of the average of the aggregate daily net asset
values of the Portfolio up to $1 billion;
27
<PAGE>
0.40% of such value between $1 billion and $2 billion; and 0.35% of such
value in excess of $2 billion. PIC is entitled to a monthly fee for the
Capital Appreciation Portfolio at the annual rate of 0.75% of the average of
the aggregate daily net asset values of the Portfolio 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. PIC is entitled to a monthly fee for the International
Portfolio at the annual rate of 0.75% of the average of the aggregate daily
net asset values of the Portfolio 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 managing, or directing the management of the investments of the
Emerging Markets Portfolio, PIC is entitled to a monthly fee at the annual
rate of % of the average of the aggregate daily net asset values of the
Portfolio up to $1 billion; % of such value between $1 billion and $2
billion; and % of such value in excess of $2 billion. For managing or
directing the investments of the Real Estate Portfolio, PRS is entitled to a
fee payable monthly, at the annual rate of 0.75% of the average of the
aggregate daily net asset values of the Portfolio 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 its services to the Bond, Capital Appreciation and
International Portfolios of the Fund during the fiscal year ended November
30, 1994, PIC received a fee of $5,163,870. Based upon the inception dates of
the Real Estate and Emerging Markets Portfolios, the Advisers did not receive
any fees for those Portfolios during the fiscal year ended November 30, 1994.
The investment advisory agreements provide that the applicable adviser
will reimburse the Fund for the amount, if any, by which the total operating
and management expenses of any Portfolio (including the investment adviser's
compensation, but excluding interest, taxes, brokerage fees and commissions
and extraordinary expenses) for any fiscal year exceed the level of expenses
which such Portfolio is permitted to bear under the most restrictive expense
limitation (which is not waived) imposed on mutual funds by any state in
which shares of such Portfolio are then qualified for sale. Currently the
most restrictive state expense limitation provisions limit such expenses of
any Portfolio of the Fund to 2.5% of the first $30 million of average net
assets, 2% of the next $70 million of such net assets and 1.5% of such net
assets in excess of $100 million. Such reimbursement, if any, will be made by
the applicable adviser to the Fund within five days after the end of each
month. In addition, PIC has voluntarily agreed to assume total operating and
management expenses of the Bond Portfolio (including the Adviser's
compensation but excluding interest, taxes, brokerage fees and commissions
and extraordinary expenses) from February 29, 1992 until November 30, 1993 to
the extent that such expenses for such fiscal year exceeded 0.75% of the
average of the aggregate daily net asset values of the Bond Portfolio. For
the period from July 23, 1991 through February 28, 1992, PIC had agreed to
reimburse the Fund for the amount by which the Bond Portfolio operating
expenses exceeded 0.85% of the average net assets of the Bond Portfolio.
For the fiscal year ended November 30, 1992, PIC reimbursed ordinary
operating expenses of the Fund in the amount of $108,124; accordingly, the
fee of $1,756,845 to which PIC would otherwise have been entitled was reduced
to $1,648,721.
For the fiscal year ended November 30, 1993, PIC reimbursed ordinary
operating expenses of the Fund in the amount of $146,733; accordingly, the
fee of $3,134,728 to which PIC would otherwise have been entitled was reduced
to $2,987,995. Of these totals, PIC received fees from each Portfolio as
follows:
<TABLE>
<CAPTION>
1992 1993
------------ ------------
<S> <C> <C>
Capital Appreciation $1,411,474 $2,495,574
International 191,348 352,036
Bond 45,888 140,385
</TABLE>
The investment advisory agreements also provide that each adviser shall
not be liable to the Fund or to any shareholder of the Fund for any error of
judgment or mistake of law or for any loss suffered by the Fund or by any
shareholder of the Fund in connection with the matters to which the agreement
relates, except a loss resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard on the part of such adviser in the
performance of its duties thereunder.
In accordance with the Sub-Advisory Agreement between the Fund and ABKB,
ABKB is paid a monthly fee at the annual rate of 0.45% of the average
aggregate daily net asset values of the Portfolio up to $1 billion; 0.35% of
such value between $1 billion
28
<PAGE>
and $2 billion; and 0.30% of such value in excess of $2 billion. The
sub-advisory agreement relating to the Real Estate Portfolio provides, among
other things, that ABKB shall maintain certain records for the Portfolio,
effectuate the purchase and sale of securities for the Portfolio and provide
quarterly reports to the Trustees. In addition, ABKB provides investment
research, advice and analysis to PRS, including, without limitation, initial
and ongoing assessment of national, regional and specific real estate markets
and real estate related equities, and detailed analysis of real estate
investment trust assets considered for purchase and held by the Portfolio
with respect to, among other things, local market conditions, fair market
value, overall property condition, insurance coverages and deductibles,
tenant composition and vacancies, compliance matters relating to zoning,
handicap accessibility, environmental, and other applicable codes, and such
other matters as PRS shall from time to time request.
Provided it has been approved by a vote of the majority of the outstanding
shares of a Portfolio of the Fund which is subject to its terms and
conditions, each investment advisory agreement continues from year to year
with respect of such Portfolio so long as (1) such continuance is approved at
least annually by the Trustees or by a vote of the majority of the
outstanding shares of such Portfolio and (2) the terms and any renewal of the
agreement with respect to such Portfolio have been approved by the vote of a
majority of the Trustees who are not parties to the agreement or interested
persons, as that term is defined in the Investment Company Act of 1940, of
the Fund or the relevant adviser, cast in person at a meeting called for the
purpose of voting on such approval. On sixty days' written notice and without
penalty the agreement may be terminated as to the Fund or as to a Portfolio
by the Trustees or by the relevant adviser and may be terminated as to a
Portfolio by a vote of the majority of the outstanding shares of such
Portfolio. The Agreement automatically terminates upon its assignment (within
the meaning of the Investment Company Act). The agreement provides that upon
its termination, or at the request of the relevant adviser, the Fund will
eliminate all reference to Phoenix from its name, and will not thereafter
transact business in a name using the word Phoenix.
PORTFOLIO TRANSACTIONS
In effecting portfolio transactions for the Fund, each adviser adheres to
the Fund's policy of seeking best execution and price, determined as
described below, except to the extent it is permitted to pay higher brokerage
commissions for "brokerage and research services" as defined herein. The
determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Fund (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction is effected,
the ability to effect the transaction at all where a large block is involved,
availability of the broker to stand ready to execute possibly difficult
transactions in the future and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by each adviser
and the Subadviser in determining the overall reasonableness of brokerage
commissions paid by the Fund.
Each adviser may cause the Fund to pay a broker an amount of commission
for effecting a securities transaction in excess of the amount of commission
which another broker or dealer would have charged for effecting that
transaction if such adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker. As provided in Section 28(e) of
the Securities Exchange Act of 1934, "brokerage and research services"
include advising as to the value of securities, the advisability of investing
in, purchasing or selling securities, the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts, and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement). Brokerage and research services provided by brokers to the
Fund are considered to be in addition to and not in lieu of services required
to be performed by each adviser under its contract with the Fund and may
benefit both the Fund and other accounts of such adviser. Conversely,
brokerage and research services provided by brokers to other accounts of an
adviser may benefit the Fund.
If the securities in which a particular Portfolio of the Fund invests are
traded primarily in the over-the-counter market, where possible the Portfolio
will deal directly with the dealers who make a market in the securities
involved unless better prices and executions are available elsewhere. Such
securities may be purchased directly from the issuer. Bonds and money market
instruments are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes.
29
<PAGE>
As described in the Prospectus, some portfolio transactions are, subject
to the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. and subject to obtaining best prices and executions, effected
through dealers (excluding Equity Planning) who sell shares of the Fund.
For the fiscal years ended November 30, 1992, 1993 and 1994, brokerage
commissions paid by the Fund on Portfolio transactions totaled $1,249,401,
$1,318,229 and $3,679,752 respectively. Brokerage commissions of $3,626,709
paid during the fiscal year ended November 30, 1994, were paid on portfolio
transactions aggregating $1,830,940,130 executed by brokers who provided
research and other statistical and factual information.
Investment decisions for the Fund are made independently from those of the
other investment companies or accounts advised by either adviser. It may
frequently happen that the same security is held in the portfolio of more
than one fund. Simultaneous transactions are inevitable when several funds
are managed by the same investment adviser, particularly when the same
security is suited for the investment objectives of more than one fund. When
two or more funds advised by either adviser (or any subadviser) are
simultaneously engaged in the purchase or sale of the same security, the
transactions are allocated among the funds in a manner equitable to each
fund. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the Fund
is concerned. In other cases, however, it is believed that the ability of the
Fund to participate in volume transactions will produce better executions for
the Fund. It is the opinion of the Board of Trustees of the Fund that the
desirability of utilizing each adviser as investment adviser to the Fund
outweighs the disadvantages that may be said to exist from simultaneous
transactions.
DETERMINATION OF NET ASSET VALUE
As described under the caption "Net Asset Value" in the Prospectus,
current value for a Portfolio's investments is determined as follows: debt
securities (other than short-term obligations) for which market quotations
are not readily available are normally valued on the basis of valuations
provided by a pricing service approved by the Trustees when such prices are
believed to reflect the fair value of such securities; securities listed or
traded on a national securities exchange are valued at the last sale price
or, if there has been no recent sale, at the last bid price; securities
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values on their respective exchanges where primarily
traded; securities traded in the over the counter market are valued at the
last bid price; and short-term obligations maturing in less than sixty days
are valued at amortized cost, which approximates market. Equity options are
valued at the last sale price unless the bid price is higher or the asked
price is lower, in which event such bid or asked price is used. Exchange
traded fixed income options are valued at the last sale price unless there is
no sale price, in which event current prices provided by market makers are
used. Over-the-counter fixed income options are valued based upon current
prices provided by market makers. Financial futures are valued at the
settlement price established each day by the board of trade or exchange on
which they are traded. 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 does not take place for the International and Emerging Markets
Portfolios, contemporaneously with the determination of the prices of the
majority of the portfolio securities. For purposes of determining the net
asset value of the International and Emerging Markets Portfolios all assets
and liabilities initially expressed in foreign currency values will be
converted into United States dollar values at the mean between the bid and
offered quotations of such currencies against United States dollars as last
quoted by any recognized dealer. If an event were to occur after the value of
an investment was so established but before the net asset value per share was
determined which was likely to materially change the net asset value, then
the instrument would be valued using fair value considerations by the
Trustees or their delegates. If at any time the Portfolio has other
investments, such investments are valued at the fair value thereof, as
determined in good faith by the Trustees, although the actual calculations
may be made by persons acting pursuant to the direction of the Trustees.
HOW TO BUY SHARES
The Prospectus includes information as to the offering price of shares of
the Portfolios, the sales charge, if any, included in the offering price, and
the minimum initial and subsequent investments which may be made in a
Portfolio. Sales of shares are
30
<PAGE>
made through registered representatives of the National Distributor, Equity
Planning, or through securities dealers with whom Equity Planning has sales
agreements. Dealers purchase Class A shares at a discount from the applicable
offering price, the maximum discount on transactions of less than $50,000
being 4.25%. The balance of the sales charge is retained by Equity Planning.
Dealers receiving such discounts may be deemed "underwriters" within the
meaning of that term under the Securities Act of 1933. Sales of shares are
also made to customers of banks or bank-affiliated securities brokers with
whom Equity Planning has sales agreements. Customers purchase shares at the
applicable offering price. Out of the sales charge included in the offering
price the securities broker is allowed an agency fee equal to the dealer
discount on a like transaction through a dealer and the balance of the sales
charge is retained by Equity Planning. The discount from the applicable
offering price of agency fee is the same for all brokers or dealers.
Where customers of a securities dealer or broker with whom Equity Planning
has a sales agreement hold Class A shares of a Portfolio with an aggregate
value of $50,000 or more, Equity Planning may pay to such securities dealer
or securities broker from its own resources (which may include payments
received from the Trust under the Distribution Plan) a fee equal to 0.25% on
an annualized basis of the aggregate average daily net asset values of the
shares of the Portfolio held by customers of such securities dealer or
securities broker.
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Portfolio is authorized to offer two classes of shares. Shares may be
purchased from investment dealers at a price equal to their net asset value
per share, plus a sales charge which, at the election of the purchaser, may
be imposed either (i) at the time of the purchase (the "initial sales charge
alternative"), or (ii) on a contingent deferred basis (the "deferred sales
charge alternative"). Shares of all other Portfolios are sold subject to an
initial sales charge or at net asset value per share.
Class A Shares. An investor who pays an initial sales charge or purchases
at net asset value acquires Class A shares. Class A shares are subject to an
ongoing distribution fee at an annual rate of up to 0.25% of the Series'
aggregate average daily net assets attributable to Class A shares. Certain
purchases of Class A shares qualify for reduced initial sales charges.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B shares. Class B shares do not incur a sales
charge when they are purchased, but are subject to a sales charge if they are
redeemed within six years of purchase. The deferred sales charge may be
waived in connection with certain qualifying redemptions.
Class B shares are subject to an ongoing distribution fee at an annual
rate of up to 1.00% of the Portfolios' aggregate average daily net assets
attributable to Class B shares. Class B shares permit the investor's payment
to be invested in full from the time the investment is made. The higher
ongoing distribution fee paid by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends 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
eliminate the higher distribution fee after the Distributer has been
compensated for distribution expenses related to the Class B shares. See
"Conversion Feature" below.
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is more beneficial given such factors as the
amount of the purchase, the length of time the investor expects to hold the
shares, and whether the investor wishes to receive distributions in cash or
to reinvest them in additional shares. Investors should consider whether,
during the anticipated term of their investment in the Portfolio, the
accumulated continuing distribution fees and contingent deferred sales
charges on Class B shares prior to conversion would be less than the initial
sales charge and accumulated distribution fees on Class A shares purchased at
the same time, and the extent to which such differential would be offset by
the lower expenses attributable to Class A shares.
Class A shares are subject to a lower distribution fee and, accordingly,
pay correspondingly higher dividends. However, because initial sales charges
are deducted at the time of purchase, Class A investors do not have all their
funds invested initially and initially
31
<PAGE>
own fewer shares. Investors not qualifying for reduced initial sales charges
who expect to maintain their investment for an extended period of time should
consider purchasing Class A shares because the accumulated continuing
distribution charges on Class B shares may exceed the initial sales charge on
Class A shares during the term of the investment. However, such investors
must weigh this consideration against the fact that, because of the initial
Class A sales charges, not all of their funds will be invested initially.
The distribution expenses incurred by the Distributor in connection with
the sale of the shares will be paid, in the case of Class A shares, from the
proceeds of the initial sales charge and the ongoing distribution fees and,
in the case of Class B shares, from the proceeds of the ongoing distribution
fees and the contingent deferred sales charge imposed upon redemptions within
six years of purchase. Sales personnel of broker-dealers distributing a
Portfolio's shares may receive differing compensation for selling Class A or
Class B shares. The purpose and function of the contingent deferred sales
charge and ongoing distribution fees with respect to the Class B shares are
the same as those of the initial sale charge and ongoing distribution fees
with respect to the Class A shares.
Dividends paid by the Portfolio with respect to Class A and Class B shares
will be calculated in the same manner, at the same time and on the same day,
except that the higher distribution fees and any incremental transfer agency
costs relating to Class B shares will be borne exclusively by that Class and
will result in a lower dividend.
The Trustees of the Fund have determined that no conflict of interest will
exist between the Class A and Class B shares. The Trustees shall, pursuant to
their fiduciary duties under the Investment Company Act of 1940 and state
law, monitor the question of Class A and Class B shares and seek to ensure
that no such conflict arises.
Conversion Feature
Class B shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period
ending eight years after the end of the month in which the shares were
purchased. 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 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. The purpose of the conversion feature is to eliminate the
higher distribution fee after the Distributor has been compensated for
distribution expenses related to the Class B shares.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of the Class B
shares will be considered to be held in a separate sub-account. Each time any
Class B shares in the shareholder's account (other than those in the
sub-account) convert to Class A, an equal pro rata portion of the Class B
shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B shares
does not result in any dividends or distributions constituting "preferential
dividends" under the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) that the conversion of shares does not constitute a taxable event
under federal income tax law. The Fund plans to apply to the Internal Revenue
Service (the "IRS") for such a ruling. While rulings similar to the one
sought by the Fund as to preferential dividends have been issued previously
by the IRS, complete assurance cannot be given that the Fund will receive a
favorable ruling. While an adverse determination by the IRS is not expected,
the Fund may be required to reassess the alternative purchase arrangement
structure if the IRS does not rule favorably. In addition, were the IRS not
to rule favorably, the Fund might make additional distributions if doing so
would assist in complying with the Fund's general practice of distributing
sufficient income to reduce or eliminate U.S. federal taxes. The conversion
of Class B shares to Class A shares may be suspended if such an opinion or
ruling is no longer available. In that event, no further conversions of Class
B shares would occur, and shares might continue to be subject to the higher
distribution fee for an indefinite period which may extend beyond the period
ending eight years after the end of the month in which the shares were
purchased.
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Immediate Investment
In order to obtain immediate investment of funds, initial and subsequent
purchases of shares of a Portfolio may also be made by wiring Federal Funds
directly pursuant to the following instructions. (Federal Funds are monies
held in a bank account with a Federal Reserve Bank.)
(1) For initial investments, telephone the Trust at (800) 367-5877.
Certain information will be requested from you regarding the account, and an
account number will be assigned.
(2) Once an account number has been assigned, direct your bank to wire the
Federal Funds to State Street Bank and Trust Company, Custody & Shareholder
Services Division, Boston, Massachusetts 02105, attention of the appropriate
Portfolio of the Phoenix Multi-Portfolio Fund. Your bank must include the
account number and the name(s) in which your account is registered in its
wire and also request a telephone advice. Your bank may charge a fee to you
for transmitting funds by wire.
An order for shares of a Portfolio purchased with Federal Funds will be
accepted on the business day Federal Funds are wired provided the Federal
Funds are received by 4:00 p.m. on that day; otherwise, the order will not be
accepted until the next business day. Shareholders should bear in mind that
wire transfers may take two or more hours to complete.
Promptly after an initial purchase of shares made by wiring Federal Funds
directly, the shareholder should complete and mail to Equity Planning an
Account Application.
SHAREHOLDER SERVICES
Any shareholder desiring additional information concerning the Fund or any
services offered by the Fund may call Equity Planning at 1-800-243-1574.
Open Account
As a convenience to the shareholder, all shares of a Portfolio of the Fund
registered in the shareholder's name are automatically credited to an Open
Account maintained for the shareholder on the books of the Fund by its
sub-transfer agent, State Street Bank and Trust Company. An Open Account
offers the shareholder ready access to the following options and services:
Record of Share Transactions. Each time shares of a Portfolio are
credited to or withdrawn from a shareholder's Open Account the shareholder
will receive a statement showing the details of the transaction and the then
current balance of shares owned by the shareholder. Shortly after the end of
each calendar year the shareholder will receive information as to the Federal
tax status of dividends and any capital gain distribution paid by the
Portfolio during the year.
Safekeeping of Shares. All shares of a Portfolio acquired by the
shareholder will be credited to the shareholder's Open Account and share
certificates will not be issued unless requested. In no event will
certificates representing fractional shares be issued. Certificates
previously acquired may be surrendered to the transfer agent; the surrendered
certificates will be canceled and the shares represented thereby will
continue to be credited to the Open Account of the shareholder.
Investing by Mail. An Open Account provides a simple and convenient way
of setting up a flexible investment program for the accumulation of shares of
a Portfolio. At any time the shareholder may send to Phoenix Equity Planning
Corporation, 100 Bright Meadow Boulevard, Enfield, CT 06083, ATTN: Phoenix
Multi-Portfolio Fund, a check, payable to the order of Phoenix
Multi-Portfolio Fund, for $25 or more to be used to purchase additional
shares for his Open Account at the applicable offering price next determined
after the check is received. Information as to the shareholder's account
registration and account number should accompany each such investment.
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic section of the New Account Application, a shareholder may
authorize the bank (the "Bank") named in the Application to draw $25 or more
from the
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shareholder's personal checking account on or about the 15th day of the
month, to be used to purchase additional shares of a Portfolio for the
shareholder's Open Account. The amount the shareholder designates will be
made available, in form payable to the order of Equity Planning by the bank
on the date the Bank draws on the shareholder's account and will be used to
purchase shares at the applicable offering price.
The shareholder or his or her registered representative may, by telephone
or written notice, cancel or change the dollar amount being invested pursuant
to the Investo-Matic Plan unless the shareholder has notified the Fund or
transfer agent that his or her registered representative shall not have this
authority.
Distribution Option. Each Portfolio currently declares all income
dividends and all capital gain distributions payable in shares of the
Portfolio or, at the option of the shareholder, in cash. By exercising a
distribution option the shareholder may elect (1) to receive both dividends
and capital gain distributions in additional shares or (2) to receive
dividends in cash and capital gain distributions in additional shares or (3)
to receive both dividends and capital gains distributions in cash. If a
shareholder elects to receive dividends and/or distributions in cash and the
check cannot be delivered or remains uncashed by the shareholder for a period
of six months, the dividend or distribution will automatically be used to
purchase additional shares for the shareholder's account at the then current
net asset value. Shareholders who maintain an account balance of at least
$5,000 or $2,000 for tax qualified retirement benefit plans (calculated on
the basis of the net asset value of the shares held in a single account) may
direct that any dividends and distributions paid with respect to shares in
that account be automatically reinvested at net asset value in shares in a
single account of another Portfolio or one of the other Phoenix Funds.
Shareholders should obtain a current prospectus and consider the objectives
and policies of each Portfolio, Series or Fund carefully before directing
dividends and distributions to another Portfolio, Series or Fund. A
shareholder who elects to receive all distributions in cash may also elect to
have distribution checks mailed to another address or made payable to a payee
other than the shareholder. However, if the check cannot be delivered due to
invalid address information, the distribution option will be changed to share
reinvestment. Dividends and distributions received in shares are credited to
the shareholder's Open Account in full and fractional shares computed at the
closing net asset value on the business day following the record date. The
shareholder may change a distribution option at any time either by calling
800-243-1574 or by sending a letter signed by the registered owner(s) of the
shares in the shareholder's Open Account to Equity Planning, 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200, ATTN: Phoenix Funds.
Requests for directing distributions to an alternate payee must be made in
writing with the registered owner(s) signature(s) guaranteed. To be effective
with respect to a particular dividend or distribution, the new distribution
option must be received by the transfer agent three days prior to the record
date of such dividend or distribution. If all shares in the shareholder's
account are repurchased or redeemed or transferred between the record date
and the payment date for a dividend or distribution, the shareholder will
receive cash for the dividend or distribution regardless of the shareholder's
distribution option.
INVEST-BY-PHONE
This expedited investment service enables a shareholder to purchase shares
for the shareholder's account by requesting that funds be transferred from
the shareholder's bank account. Once a request is phoned in, Equity Planning
will initiate the purchase 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 State Street 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, the shareholder should complete an
Invest-by-Phone Application and attach a voided check if applicable. Upon
Equity Planning's acceptance of the authorization form (usually in about two
weeks), the shareholder may call toll free 800-367-5877 prior to 3:00 P.M.
(New York time) to place a purchase request. Instructions as to the
shareholder's account number and the 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
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following receipt of the verbal instructions. The Fund may delay the mailing
of a check for the proceeds of the redemption of shares of a Portfolio
purchased via the Invest-by-Phone Service until the Fund has assured itself
that good payment has been collected for the shares, which may take up to
fifteen days.
Phoenix Multi-Portfolio 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.
Exchange Privileges
Shareholders may exchange Class A or Class B Shares held in book-entry
form for shares of the same class of other Phoenix Funds (except Phoenix
Asset Reserve Class A shares held less than 6 months and Class A shares of
the Money Market Series of the Phoenix Series Fund), provided the following
conditions are met: (1) the shares that will be acquired in the exchange (the
"Acquired Shares") are available for sale in the shareholder's state of
residence; (2) the Acquired Shares are the same class as the shares to be
surrendered (the "Exchanged Shares"); (3) the Acquired Shares will be
registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the Fund whose shares are to be acquired must equal or
exceed the minimum initial investment amount required by that Fund after the
exchange is implemented; and (5) if a shareholder has elected not to utilize
the Telephone Exchange Privilege (see below), a properly executed exchange
request must be received by Equity Planning.
Subject to the above requirements for an exchange, a shareholder or
his/her registered representative may, by telephone or written notice, elect
to have Class A or Class B Shares of the Fund exchanged for the same class of
shares of another Phoenix Fund automatically on a monthly, quarterly,
semi-annual or annual basis or may cancel the privilege ("Systematic
Exchange").
Shareholders who maintain an account balance in the Fund of at least
$5,000, or $2,000 for tax qualified retirement benefit plans (calculated on
the basis of the net asset value of the shares held in a single account), may
direct that shares of the Fund be automatically exchanged at predetermined
intervals for shares of the same class of another Phoenix Fund. If the
shareholder is participating in the Self Security program offered by Phoenix
Home Life, it is not necessary to maintain the above account balances in
order to use the Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of
a month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Fund's net asset value per share next
computed following receipt of a properly executed exchange request, without
sales charge. On exchanges of Class B shares offered by other Phoenix Funds,
the contingent deferred sales charge schedule of the original shares
purchased continues to apply.
The exchange of shares from one fund to another is treated as sale of the
Exchanged Shares and a purchase of the Acquired Shares for Federal income tax
purposes. The shareholder may, therefore, realize a taxable gain or loss. See
"Dividends, Distributions and Taxes" for information concerning the Federal
income tax treatment of a disposition of shares.
It is the policy of the Fund to discourage and prevent frequent trading by
shareholders among the Fund and other Phoenix Funds in response to market
fluctuations. The Fund reserves the right to terminate or modify its exchange
privileges at any time upon giving prominent notice to shareholders at least
60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the prospectus of the fund
into which the exchange is to be made before any exchange requests are made.
Telephone Exchanges
Telephone Exchange privileges are only available in states where the
shares to be acquired may be legally sold. (See the Statement of Additional
Information.) Unless a shareholder elects in writing not to participate in
the Telephone Exchange Privilege, shares for which certificates have not been
issued may be exchanged by calling (800) 367-5877 provided that the exchange
is made between accounts with identical registrations. Under the Telephone
Exchange Privilege, telephone exchange orders may also be entered on behalf
of the shareholder by his or her legal representative.
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The Fund, and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both accounts, the Transfer Agent will require
address verification and will record telephone instructions on tape. All
exchanges will be confirmed in writing with the shareholder. To the extent
that procedures reasonably designed to prevent unauthorized telephone
exchanges are not followed, the Fund and/or the Transfer Agent may be liable
for following telephone instructions for exchange transactions that prove to
be fraudulent. Broker-dealers other than Equity Planning have agreed to bear
the risk of any loss resulting from any unauthorized telephone exchange
instructions from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instruction entered by
an unauthorized third party that the Fund and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Exchange Privilege may be
modified or terminated at any time on 60 days' notice to shareholders. In
addition, during times of drastic economic or market changes, the Telephone
Exchange Privilege may be difficult to exercise or may be suspended
temporarily. In such event an exchange may be effected by following the
procedure outlined for tendering shares represented by certificate(s).
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates,
in order to exchange shares the shareholder must submit a written request to
Equity Planning, 100 Bright Meadow Boulevard, Enfield, Connecticut
06083-2200, ATTN: Phoenix Funds. If the shares are being exchanged between
accounts that are not registered identically, the signature on such request
must be guaranteed by an eligible guarantor institution as defined by the
Transfer Agent in accordance with its signature guarantee procedures.
Currently such procedures generally permit guarantees by banks,
broker/dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. Any
outstanding certificate or certificates for the tendered shares must be duly
endorsed and submitted.
Purchase and withdrawal plans and reinvestment and exchange privileges are
described more fully in the Statement of Additional Information. For further
information, call Equity Planning at (800) 243-1574.
HOW TO REDEEM SHARES
Any holder of shares may require the Fund to redeem the shares at any
time. The redemption price is the net asset value next determined following
the receipt of a duly executed request for redemption of shares, together
with any outstanding certificate or certificates for such shares, duly
endorsed, less such amount not in excess of 1% of such net asset value as the
Trustees may determine. The Trustees do not presently intend to impose a
redemption charge and shareholders will be given 60 days' notice of any
change in this intention. However, Class B shares are subject to a contingent
deferred sales charge upon a redemption of shares within six years of the
date of purchase. Redemptions may be made in the following manner:
By Mail. Non-certificated shares registered on the books of the Fund may
be redeemed by submitting a written request for redemption to Equity
Planning, 100 Bright Meadow Boulevard, Enfield, CT 06083, ATTN: Phoenix
Funds. The redemption request must contain the name of the Portfolio, the
shareholder(s)' account name(s) and number, the number of shares to be
redeemed and the signature(s) of the registered shareholder(s). If the shares
are registered in the name of individuals, singly, jointly or as custodian
under the Uniform Gifts to Minors Act, and the proceeds of the redemption do
not exceed $50,000 and are to be paid to the registered owner(s) at the
address of record, the signature(s) on the redemption request need not be
guaranteed. Otherwise, the signature(s) must be guaranteed by an eligible
guarantor institution as defined by the Transfer Agent in accordance with its
signature guarantee procedures. Currently, such procedures generally permit
guarantees by banks, broker/dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. A signature notarized by a notary public is not acceptable.
Shares represented by certificates in the possession of the shareholder may
be redeemed by submitting a written request for redemption to Equity
Planning, 100 Bright Meadow Boulevard, Enfield, CT 06083, ATTN: Phoenix
Funds, together with the certificates, duly endorsed by all persons in whose
names the shares are registered, with signatures guaranteed, if required, in
the manner described above. Signature(s) also must be guaranteed on any
change of address request submitted in conjunction with a redemption request.
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Additional documentation may be required where shares are held by a
corporation, partnership, trustee or executor. Therefore, it is suggested
that shareholders holding shares registered in other than individual names
call 800-243-1574 prior to redemption to ensure that all necessary documents
accompany the redemption request.
By Telephone. Unless a shareholder elects in writing not to participate
in the Telephone Redemption Privilege, shares for which certificates have not
been issued may be redeemed by calling (800) 367-5877 and telephone
redemptions will also be accepted on behalf of the shareholder from his or
her registered representative as described in the Prospectus. Address and
bank account information will be verified, telephone redemption instructions
will be recorded on tape, and all redemptions will be confirmed in writing to
the shareholder. If there has been an address change within the past 60 days,
a telephone redemption will not be authorized. The Fund and the Transfer
Agent will employ reasonable procedures to confirm that telephone
instructions are genuine. To the extent that procedures reasonable designed
to prevent unauthorized telephone redemptions are not followed, the Fund
and/or the Transfer Agent may be liable for following telephone instructions
for redemption transactions that prove to be fraudulent. Broker/dealers other
than Equity Planning have agreed to bear the risk of any loss resulting from
any unauthorized telephone redemption instruction from the firm or its
registered representatives. However, the shareholder would bear the risk of
loss resulting from instructions entered by an unauthorized third party that
the Fund and/or the Transfer Agent reasonably believe to be genuine.
Telephone redemption requests must be received by Equity Planning by the
close of trading on the New York Stock Exchange on a day when Equity Planning
is open for business. Requests made after that time or on a day when Equity
Planning is not open for business cannot be accepted. The proceeds of a
redemption request received by telephone will normally be paid on the first
business day following receipt of the request. If the amount of the
redemption is $500 or more, the proceeds will be wired to the designated U.S.
commercial bank account. If the amount of the redemption is less than $500,
the proceeds will be sent by mail to the address of record on the
shareholder's account. However, with respect to the telephone redemption of
shares purchased by check, such requests will only be effected after the Fund
has assured itself that good payment has been collected for the purchase of
shares, which may take up to 15 days. The Telephone Redemption Privilege is
not available to HR-10, IRA and 403(b)(7) Plans.
By Check. (Bond Portfolio Only) Any Class A shareholders of the Bond
Portfolio may elect to redeem shares held in his Open Account by check.
Checks will be sent to an investor upon receipt by Equity Planning of a
completed application and signature card (attached to the application). If
the signature card accompanies an individual's initial account application,
the signature guarantee section of the form may be disregarded. However, the
Fund reserves the right to require that all signatures be guaranteed prior to
the establishment of a check writing service account. When an authorization
form is submitted after receipt of the initial account application, all
signatures must be guaranteed regardless of account value.
Checks may be drawn payable to any person in an amount of not less than
$500, provided that immediately after the payment of the redemption proceeds
the balance in the shareholder's Open Account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient
number of full and fractional shares in the shareholder's Open Account will
be redeemed to cover the amount of the check. The value of the 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.
The check writing procedure for redemption enables a shareholder to
receive income accruing on the shares to be redeemed until such time as the
check is presented to Equity Planning for payment. Inasmuch as canceled
checks are returned to shareholders monthly, no confirmation statement is
issued at the time of redemption.
Shareholders utilizing withdrawal checks will be subject to Equity
Planning rules governing checking accounts. A shareholder should make sure
that there are sufficient shares in his Open Account to cover the amount of
any check drawn. If insufficient
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shares are in the account and the check is presented to Equity Planning on a
banking day on which the Portfolio does not redeem shares (for example, a day
on which the New York Stock Exchange is closed), or if the check is presented
against redemption proceeds of an investment made by check which has not been
in the account for at least fifteen calendar days, the check may be returned
marked "Non-sufficient Funds" and no shares will be redeemed. A shareholder
may not close his account by a withdrawal check because the exact value of
the account will not be known until after the check is received by Equity
Planning.
The Fund also maintains a continuous offer to repurchase its shares and
shareholders may normally sell their shares through securities dealers, who
may charge customary commissions for their services. Unless made in
connection with an exchange of shares, a request for repurchase must be
placed with a securities dealer or placed by a securities broker acting as
agent for the customer and communicated by the dealer or broker to Equity
Planning. The repurchase price is the net asset value next determined
following the receipt of the request by Equity Planning, except that a
repurchase order placed through a dealer or by a broker before the close of
trading on the New York Stock Exchange on any day will be executed at the net
asset value determined as of such close provided the dealer or broker
communicates the order to Equity Planning prior to its close of business
(normally 4:00 P.M. New York City time) on such day and subsequently confirms
the order to Equity Planning in writing, time-stamping his confirmation with
the time of the dealer's or broker's receipt of the order. It is the
responsibility of dealers and brokers to communicate such orders. Dealers may
be liable to investors for failing to do so. The offer to repurchase may be
suspended at any time.
Payment for shares redeemed is normally made within seven days after
receipt of a duly executed request for redemption of shares, together with
any outstanding certificate or certificates for such shares, duly endorsed,
and, if required, a proper signature guarantee. Payment for shares
repurchased is normally made within seven days after receipt of the
repurchase order and a duly executed stock power or other instrument of
transfer, together with any outstanding certificate or certificates for such
shares and, if required, a proper signature guarantee. However, if the Fund
is requested to redeem or repurchase shares for which it has not yet received
good payment, the mailing of a check for the proceeds of the redemption or
repurchase may be delayed until the Fund has assured itself that good payment
has been collected, which may take up to fifteen days. Although the mailing
of a check for the proceeds of a redemption or repurchase may be delayed, the
redemption price or repurchase price will be determined in the manner
described above.
To the extent consistent with state and federal law, the Fund may make
payment of the redemption price either in cash or in kind. The Fund has
elected to pay in cash all requests for redemption by any shareholder of
record, but may limit such cash 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 of a Portfolio would be readily marketable
and valued at the same value assigned to them in computing the net asset
value per share of the Portfolio. A shareholder receiving such securities
would incur brokerage costs when he sold the securities.
The right of redemption may be suspended or the payment date postponed
when the New York Stock Exchange is closed for other than customary weekend
and holiday closings, or when trading on the New York Stock Exchange is
restricted, as determined by the Securities and Exchange Commission; for any
period when an emergency as defined by rule of the Commission exists; or
during any period when the Commission has, by order, permitted such
suspension. In case of a suspension of the right of redemption, the
shareholder may withdraw a request for redemption of shares prior to the next
determination of net asset value after the suspension has been terminated or
the shareholder will receive payment of the net asset value so determined.
A shareholder may receive more or less than the shareholder paid for his
or her shares, depending on the net asset value of the shares at the time
they are redeemed or repurchased.
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TAXES
Qualification as a Regulated Investment Company ("RIC")
As stated in the Prospectus, each Portfolio is treated as a separate
entity for federal income tax purposes. Each Portfolio has elected to qualify
and intends to remain qualified as a RIC under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In each taxable year a
Portfolio qualifies as a RIC, it (but not its shareholders) will be relieved
of federal income tax on that portion of its net investment income and net
capital gains that are currently distributed (or deemed distributed) to its
shareholders. To the extent that a Portfolio fails to distribute all of its
taxable income, it will be subject to corporate income tax (currently 35%) on
any retained ordinary investment income or short-term capital gains, and
corporate income tax (currently 35%) on any undistributed long-term capital
gains. Each Portfolio intends to make timely distributions, if necessary,
sufficient in amount to avoid the non-deductible 4% excise tax that is
imposed on a RIC to the extent that it fails to distribute, with respect to
each calendar year, at least 98% of its ordinary income for such calendar
year and 98% of its net capital gains as determined for a one-year period
ending on October 31 of such calendar year (or as determined on a fiscal year
basis, if the Portfolio so elects).
The Code sets forth numerous criteria that must be satisfied in order for
each Portfolio to qualify as a RIC. Among these requirements, each Portfolio
must meet the following tests for each taxable year: (1) at least 90% of the
Portfolio's gross income must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stocks or securities or foreign currencies (except to the extent provided in
regulations not yet issued), or other income (including gains from options,
futures or forward contracts) derived by the Portfolio with respect to its
business of investing in stock, securities or currencies; and (2) less than
30% of the Portfolio's gross income must be derived from gains realized on
the sale or other disposition of stock or securities (or other instruments)
held for less than three months.
In determining the Portfolio's gross income for purposes of the 30% test,
any gain realized by the Portfolio on a hedged position that is part of a
"designated hedge" will be offset by any decrease in value (whether realized
or not) of any offsetting position in the hedge during the period that the
hedge was outstanding. Thus, only the net gain (if any) from the hedge will
be included in the computation of the 30% test. At the present time, however,
it is not clear whether or to what extent such hedging exception will be
available to the Portfolios' contemplated hedging transactions. To the extent
that the hedging exception is not available, gains realized by the Portfolios
from actual dispositions of futures or forward contracts or options will be
included in the calculation of the 30% test if less than three months has
elapsed between the date such instruments are acquired and the date of their
sale. This provision may limit the Portfolios' ability to engage in such
transactions.
In the case of the International and Emerging Markets Portfolios, gains
from foreign currencies (i.e., gains from foreign currency options, foreign
currency futures and foreign currency forward contracts) are anticipated to
constitute qualifying income for purposes of the 90% test.
Section 988 of the Code provides special rules for foreign currency
transactions under which foreign currency gains or losses from forward
contracts, futures contracts that are not required to be marked-to-market and
unlisted options generally will be treated as ordinary income or loss.
In addition to meeting the 90% and 30% tests, in order to qualify as a RIC
each Portfolio will be required to distribute annually to its shareholders as
dividends (not including "capital gains dividends", discussed below) at least
90% of its ordinary investment income, short-term capital gains and tax
exempt income, with certain modifications. Each Portfolio intends to make
distributions to shareholders that will be sufficient to meet the 90%
distribution requirement.
Each Portfolio must also diversify its holdings so that, at the close of
each quarter of its taxable year, (i) at least 50% of the value of its total
assets consists of cash, cash items, U.S. Government Securities, and other
securities limited generally with respect to any one issuer to not more than
5% of the total assets of that Portfolio and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any issuer (other
than U.S.
39
<PAGE>
Government Securities). For purposes of these diversification tests, the
issuer of an option on a particular security is the issuer of the underlying
security. In the case of a stock index futures contract or option thereon,
the position taken by the Internal Revenue Service in a recent letter ruling
is that the issuers of the stocks underlying the index, in proportion to the
weighing of the stocks in the computation of the index, are treated as the
issuers of the instrument irrespective of whether the underlying index is
broad-based or narrow-based. In the case of a foreign currency option,
futures contract or forward contract, however, there is as yet no specific
guidance in the tax law concerning who will be treated as the issuer of such
instruments or how they will be valued for purposes of these diversification
tests.
Each Portfolio intends to comply with all of the foregoing criteria for
qualification as a RIC; however, there can be no assurance that the Portfolio
will so qualify and continue to maintain its status as a RIC. If a Portfolio
were unable for any reason to maintain its status as a RIC for any taxable
year, adverse tax consequences would ensue.
Taxation of Shareholders
The Bond Portfolio expects that under normal conditions, at least 80% of
its net assets will be invested in state, municipal and other obligations the
interest on which is excluded from gross income for federal income tax
purposes, and that substantially all of its dividends therefore will be
exempt interest dividends which will be treated by its shareholders as
excludable from federal gross income. (The character of tax-exempt interest
distributed by the Bond Portfolio will flow through as tax-exempt interest to
its shareholders provided that 50% or more of the value of its assets at the
end of each quarter of its taxable year is invested in obligations the
interest on which is excluded from gross income for federal income tax
purposes.) An exempt interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by the Bond Portfolio with respect to its
net federal excludable municipal security interest, and designated as an
exempt interest dividend in a written notice mailed to shareholders not later
than 60 days after the close of the taxable year. The percentage of total
dividends paid by the Bond Portfolio with respect to any taxable year which
qualify as exempt interest dividends will be the same for all shareholders
receiving dividends with respect to such year. If a shareholder receives an
exempt interest dividend with respect to any share and such share is held for
6 months or less, any loss on the sale or exchange of such share will not be
allowed to the extent of the exempt interest dividend amount.
Interest on certain "private activity bonds" issued after August 7, 1986,
although otherwise tax-exempt, is treated as a tax preference item for
alternative minimum tax purposes. Under regulations to be promulgated, the
Bond Portfolio's exempt interest dividends will be treated as a tax
preference item for purposes of computing the alternative minimum tax
liability of shareholders in such Portfolio to the extent attributable to
interest paid on "private activity" bonds. Corporate shareholders should also
be aware that the receipt of exempt interest dividends could subject them to
alternative minimum tax under the provisions of Code Section 56(f) (relating
generally to book income or adjusted current earnings in excess of taxable
income).
Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Bond Portfolio will not be deductible for federal
income tax purposes to the extent of the portion of the interest expense
relating to exempt interest dividends; that portion is determined by
multiplying the total amount of interest paid or accrued on the indebtedness
by a fraction, the numerator of which is the exempt interest dividends
received by a shareholder in the shareholder's taxable year and the
denominator of which is the sum of the exempt interest dividends and the
taxable distributions received by the shareholder.
Distributions by the Capital Appreciation, International, Real Estate and
Emerging Markets Portfolios from ordinary investment income and net
short-term capital gains will be taxed to the shareholders as ordinary
dividend income to the extent of the earnings and profits of the respective
Portfolios. Similarly, any portion of the Bond Portfolio's dividends which
does not qualify as exempt interest dividends and any short-term capital gain
distribution will be taxed to the Bond Portfolio shareholders as ordinary
income for federal income tax purposes. Ordinary income dividends received by
corporate shareholders will qualify for the 70% dividends-received deduction
to the extent the Portfolios designate such amounts as qualifying dividend
distributions; however, the portion that may be so designated is subject to
certain limitations. As a result of these limitations, it is not currently
anticipated that distributions by the Bond, International or Emerging Markets
Portfolios will be qualifying dividend distributions. Distributions by a
Portfolio that are designated as capital gain distributions will be taxed to
the shareholders as capital gains, and will not be eligible for the corporate
dividends-received deduction.
40
<PAGE>
Dividends declared by the Portfolios to shareholders of record in October,
November or December will be taxable to such shareholders in the year that
the dividend is declared, even if it is not paid until the following year (so
long as it is actually paid by the Portfolio prior to February 1). Also,
shareholders will be taxable on the amount of long-term capital gains
designated by a Portfolio by written notice mailed to shareholders within 60
days after the close of the year, even if such amounts are not actually
distributed to them. Shareholders will be entitled to claim a credit against
their own federal income tax liability for taxes paid by the Portfolio on
such undistributed gains, if any. If a shareholder receives a long-term
capital dividend with respect to any share and such share is held for less
than 6 months, any loss on sale or exchange of such share will be long-term
capital loss to the extent of long-term capital dividend payments.
Dividends (other than exempt interest dividends) and capital gain
distributions will be taxable to shareholders as described above whether
received in cash or in shares under a Portfolio's distribution reinvestment
plan. With respect to distributions received in cash or reinvested in shares
purchased on the open market, the amount of the distribution for tax purposes
will be the amount of cash distributed or allocated to the shareholder. With
respect to distributions made in shares issued by the Portfolio as a stock
dividend, the amount of the distribution will be the fair market value of the
shares on the payment date.
Shareholders should be aware that the price of shares of a Portfolio that
are purchased prior to a dividend or distribution by the Portfolio may
reflect the amount of the forthcoming dividend or distribution. Such dividend
or distribution, when made, would be taxable to shareholders under the
principles discussed above even though the dividend or distribution may
reduce the net asset value of shares below a shareholder's cost and thus
represent a return of a shareholder's investment in an economic sense.
Foreign Tax Credit
The International and Emerging Markets Portfolios may incur liability for
foreign income and withholding taxes on investment income. These Portfolios
intend to qualify for and make an election permitted under Section 853 of the
Code. The effect of such election is that the shareholders of such Portfolios
will be able to claim a credit or deduction on their U.S. federal income tax
returns for, and will be required to treat as part of the amounts distributed
to them, their pro rata share of the income taxes paid by the Portfolio to
foreign countries. (The election is not available unless stocks or securities
in foreign corporations represent more than 50% of the value of the total
assets of the Portfolio.) The shareholders may claim a deduction or credit by
reason of the Portfolio's election subject to the limitations imposed under
Section 904 of the Code. The deduction for foreign taxes paid may not be
claimed by individual shareholders who do not elect to itemize deductions on
their federal income tax returns although such shareholders may claim a
credit for foreign income taxes paid. In either case, shareholders will be
required to report taxable income in the amount of their respective pro rata
share of foreign taxes paid by the Portfolio. Although the International and
Emerging Markets Portfolios intend to meet the requirements of the Code to
"pass through" such taxes, there can be no assurance that they will be able
to do so in the future.
Sale or Exchange of Portfolio Shares
Gain or loss will be recognized by a shareholder upon the sale of his
shares in a Portfolio or upon an exchange of his shares in a Portfolio for
shares in another Portfolio. Provided that the shareholder is not a dealer in
such shares, such gain or loss will generally be treated as capital gain or
loss, measured by the difference between the adjusted basis of the shares and
the amount realized therefrom. Under current law, capital gains (whether
long-term or short-term) of individuals and corporations are fully includable
in income and are taxed at the regular federal income tax rates applicable to
the shareholder's ordinary income. Capital losses (whether long-term or
short-term) may offset capital gains plus (for non-corporate taxpayers only)
up to $3,000 per year of ordinary income.
Tax Information
Written notices will be sent to shareholders regarding the tax status of
all distributions made (or deemed to have been made) during each taxable
year, including the tax-exempt portion thereof (if applicable), the amount
qualifying for the dividends-received deduction (if applicable) and the
amount designated as capital gains dividends, undistributed capital gains (if
any), tax credits (if applicable), and cumulative return of capital (if any).
41
<PAGE>
Backup Withholding
The Portfolios may be required to withhold federal income tax at a rate of
31% on reportable dividends paid to certain noncorporate shareholders.
Generally, shareholders subject to such backup withholding will be those for
whom a taxpayer identification number and certain required certifications are
not filed with the Portfolios or who, to a Portfolio's knowledge, have
furnished an incorrect number.
Foreign Shareholders
Dividends paid by a Portfolio from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") will be subject to United States
withholding tax at a rate of 30% unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Foreign
shareholders are urged to consult their own tax advisors concerning the
applicability of the United States withholding tax and any foreign taxes.
Other Tax Consequences
In addition to the federal income tax consequences, described above,
applicable to an investment in a Portfolio, there may be state or local tax
considerations and estate tax considerations applicable to the circumstances
of a particular investor. In particular, distributions by the Bond Portfolio
may be subject to state and local taxation even though wholly or partially
exempt for federal income tax purposes. The foregoing discussion is based
upon the Code, judicial decisions and administrative regulations, rulings and
practices, all of which are subject to change and which, if changed, may be
applied retroactively to a Portfolio, its shareholders and/or its assets. No
rulings have been sought from the Internal Revenue Service with respect to
any of the tax matters discussed above.
The information included in the Prospectus with respect to taxes, in
conjunction with the foregoing, is a general and abbreviated summary of
applicable provisions of the Code and Treasury regulations now in effect as
currently interpreted by the courts and the Internal Revenue Service. The
Code and these Regulations, as well as the current interpretations thereof,
may be changed at any time by legislative, judicial, or administrative
action.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund and other Phoenix Funds may be offered in connection
with employer-sponsored 401(k) plans. Distributor and its affiliates may
provide administrative services to these plans and to their participants, in
addition to the services that Distributor and its affiliates provide to the
Phoenix Funds, and may receive compensation therefor. For information on the
terms and conditions applicable to employee participation in such plans,
including information on applicable plan administrative charges and expenses,
prospective investors should consult the plan documentation and employee
enrollment information which is available from participating employers.
THE NATIONAL DISTRIBUTOR
Equity Planning, a registered broker-dealer which is an indirect
subsidiary of Phoenix Home Life Mutual Insurance Company, serves as
Distributor of the Fund's shares.
The Fund and Equity Planning have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Fund shares and the Fund has granted to Equity Planning the
exclusive right to purchase from the Fund and resell, as principal, shares
needed to fill unconditional orders for Fund shares. Equity Planning may sell
Fund shares through its registered representatives or through securities
dealers with whom it has sales agreements. Equity Planning may also sell Fund
shares pursuant to sales agreements entered into with bank-affiliated
securities brokers who, acting as agent for their customers, place orders for
Fund shares with Equity Planning. Although the Glass-Steagall Act prohibits
banks and bank affiliates
42
<PAGE>
from engaging in the business of underwriting, distributing or selling
securities (including mutual fund shares), banking regulators have indicated
that such institutions are not prohibited from purchasing mutual fund shares
upon the order and for the account of their customers. If, because of changes
in law or regulations, or because of new interpretations of existing law, it
is determined that agency transactions of banks and bank affiliated
securities brokers are not permitted under the Glass-Steagall Act, the
Trustees will consider what action, if any, is appropriate. In addition,
state securities laws on this issue may differ from federal law, and banks
and bank affiliates may be required to register as securities dealers
pursuant to state law. It is not anticipated that termination of sales
agreements with banks and bank affiliated securities brokers would result in
a loss to their customers or a change in the net asset value per share of a
Portfolio of the Fund.
For its services under the distribution agreements, Equity Planning
receives sales charges on transactions in Fund shares (see "Purchase of
Shares" in the Prospectus) and retains such charges less the portion thereof
allowed to its registered representatives and to securities dealers and
securities brokers with whom it has sales agreements. In addition, Equity
Planning may receive payments from the Fund pursuant to the Distribution
Plans described below. For the fiscal years ended November 30, 1992, 1993 and
1994, Equity Planning's gross commissions on sales of Fund shares totalled
$1,087,045, $1,131,972 and $2,812,883, respectively. Of these amounts,
$546,752, $336,875 and $365,261, respectively, were paid to dealers with whom
Equity Planning had sales agreements.
Equity Planning also acts as Financial Agent of the Fund and as such
performs bookkeeping and pricing services and certain other administrative
functions for the Fund. As compensation, Equity Planning receives a quarterly
fee based on the average of the aggregate daily net asset values of the Fund
at an annual rate of $300 per $1 million, which is expected to equal
approximately the cost to Equity Planning of providing such services. For
services to the Fund during the fiscal years ended November 30, 1992, 1993
and 1994, the Financial Agent received fees of $97,806, $174,841 and
$231,177, respectively.
Equity Planning also acts as Transfer Agent of the Fund. As compensation,
Equity Planning receives a fee equivalent to $14.95 for each designated
shareholder account. Transfer Agent fees are also utilized to offset costs
and fees paid to subtransfer agents employed by Equity Planning. State Street
Bank and Trust Company serves as a subtransfer agent pursuant to a
Subtransfer Agency Agreement.
Philip R. McLoughlin, a Trustee and officer of the Fund, is a director and
officer of Equity Planning; and G. Jeffrey Bohne, Nancy G. Curtiss, James M.
Dolan, William R. Moyer and Leonard J. Saltiel, officers of the Fund, are
officers of Equity Planning.
PLANS OF DISTRIBUTION
To permit the use of assets of a Portfolio to encourage activities
primarily intended to result in the sale of shares of that Portfolio, the
Fund has adopted distribution plans for the Portfolios (the "Plan") pursuant
to Rule 12b-1 under the Investment Company Act of 1940. The Plan for shares
sold subject to an initial sales charge was adopted on behalf of the Bond
Portfolio on February 24, 1988, the Capital Appreciation Portfolio and the
International Portfolio on August 23, 1989, Real Estate Portfolio on November
16, 1994, and the Emerging Markets Portfolio on February 15, 1995 by the
Board of Trustees of the Fund, including a majority of the Trustees who are
not interested persons of the Fund and who have no direct or indirect
financial interest in the Plan or any agreement related thereto (the "Rule
12b-1 Trustees"). It has been approved by the shareholders of each Portfolio.
The Plan for Class B shares with respect to the Bond, Capital Appreciation
and International Portfolios was adopted by the Board of Trustees of the
Fund, including the Rule 12b-1 Trustees, on November 17, 1993. The Plans for
Class B Shares with respect to the Real Estate and Emerging Markets
Portfolios were adopted by the Board of Trustees, including the Rule 12b-1
Trustees, on November 16, 1994 and February 15, 1995, respectively.
The Class A and Class B Plans authorize the payment by the Fund to the
National Distributor of a Portfolio's shares of amounts not exceeding 0.25%
and 1.00% annually, respectively, of the Portfolio's average net assets for
each year elapsed after the inception of the Plan. Although under no
contractual obligation to do so, the Fund intends to make such payments to
the National Distributor
43
<PAGE>
(1) as commissions for Portfolio shares sold, all or any part of which
commissions will be paid by the National Distributor upon receipt from the
Fund to others who may be other dealers or registered representatives of the
National Distributor), (ii) to enable the National Distributor to pay to such
others maintenance or other fees in respect of a Portfolio's shares sold by
them and remaining outstanding on the Fund's books during the period in
respect of which the fee is paid and (iii) to enable the National Distributor
to pay to bank-affiliated securities brokers maintenance or other fees in
respect of a Portfolio's shares purchased by their customers and remaining
outstanding on the Fund's books during the period in respect of which the fee
is paid; provided, however, that payments under (ii) and (iii) are subject to
limits of 0.25% and 1.00% annually of the average daily net assets of the
Class A or Class B shares respectively to which the payments relate.
Payments, less the portion thereof paid by the National Distributor to
others, may be used by the National Distributor for its expenses of
distribution of a Portfolio's shares. If expenses of distribution of a
Portfolio's shares exceed payments and any sales charges retained by the
National Distributor, the Fund is not required to reimburse the National
Distributor for excess expenses; if payments and any sales charges retained
by the National Distributor exceed expenses of distribution of a Portfolio's
shares, the National Distributor may realize a profit.
Each Plan requires that at least quarterly the Trustees of the Fund review
a written report with respect to the amounts expended under the Plan and the
purposes for which such expenditures were made. While the Plan is in effect,
the Fund will be required to commit the selection and nomination of
candidates for Trustees who are not interested persons of the Fund to the
discretion of other Trustees who are not interested persons. Each Plan
continues in effect from year to year only provided such continuance is
approved annually in advance by votes of the majority of both (a) the Board
of Trustees of the Fund and (b) the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on the Plan and any agreements
related to the Plan. For the fiscal year ended November 30, 1994 the Fund
paid Rule 12b-1 Fees in the amount of $1,885,595, of which the National
Distributor received $366,941 and unaffiliated broker-dealers received
$1,518,654. The Rule 12b-1 payments were used for (1) compensating dealers
($1,518,654), (2) compensating sales personnel ($371,554) and (3)
compensating the National Distributor for marketing materials ($87,644). No
interested person of the Fund and no Trustee 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.
ADDITIONAL INFORMATION
The Fund's Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission which may be obtained from the
Commission's principal office at 450 Fifth Street, N.W. Washington, DC 20549,
upon payment of the fee prescribed by the rules and regulations promulgated
by the Commission.
FINANCIAL STATEMENTS
The Fund's financial statements and notes thereto for the fiscal year
ended November 30, 1994 and the report of Price Waterhouse LLP, independent
accountants, with respect thereto appear in the Fund's Annual Report to
Shareholders for the fiscal year ended November 30, 1994. The financial
statements, notes and report of independent accountants are incorporated
herein by reference to the Annual Report, copies of which must precede or
accompany this Statement of Additional Information.
44
<PAGE>
INVESTMENTS AT NOVEMBER 30, 1994
<TABLE>
<CAPTION>
STANDARD &
POOR'S/
MOODY'S BOND PAR
RATINGS VALUE
(Unaudited) (000) VALUE (a)
<S> <C> <C> <C>
MUNICIPAL TAX-EXEMPT BONDS--97.3%
Alabama--1.0%
Alabama Housing Finance Authority
6.50%, '17 NR/Aaa $ 1,500 $ 1,374,375
Alaska--0.7%
Valdez Marine Terminal Revenue 7%,
'25 AA-/A 1,125 1,068,750
Arizona--1.5%
Arizona Power Authority 5.25%, '17 AAA/Aaa 750 605,625
Pima County, Arizona 6.75%, '15 AAA/Aaa 1,000 1,052,500
Salt River Agricultural and Power
District Series D 6.25%, '27 AA/Aa 500 445,625
2,103,750
Arkansas--1.7%
Drew County 7.90%, '11 NR/Aaa 535 552,387
Jacksonville Housing 7.90%, '11 NR/Aaa 750 770,625
Lonoke County Residential Housing
7.90%, '11 NR/Aaa 756 758,647
Stuttgart Revenue 7.90%, '11 NR/Aaa 370 377,863
2,459,522
California--4.8%
California HFA Mortgage 7.75%, '17 AA-/Aa 355 361,212
Central Valley Fin. Auth.
California 6.20%, '20 BBB-/NR 1,600 1,354,000
Fresno Sewer Rev., Series A1 5.25%,
'19 AAA/Aaa 1,500 1,193,205
Sacramento Utility Rev.,
Series D 5.25%, '20 AAA/Aaa 5,000 3,927,400
6,835,817
Colorado--1.4%
Colorado HFA Home Mortgage 6%, '19 AA/Aa 2,280 1,943,700
Florida--6.8%
Florida State Board of Education
Capital Outlay 5.125%, '22 AA/Aa 1,040 794,300
Florida State Div. Bd. Rev., 2000-A
4.90%, '13 AAA/Aaa 3,000 2,332,500
Hillsborough County Utility 0%, '03 AAA/Aaa 2,500 1,418,750
Jacksonville Electric 5.30%, '08 AA/Aa 1,500 1,308,750
Jacksonville Electric 5.25%, '21 AA/Aa 2,000 1,600,000
Martin County Ind. Cogeneration
7.875%, '25 BBB-/Baa 1,500 1,481,250
Reedy Creek Utility Rev.,
Series 1 5%, '14 AAA/Aaa 1,000 792,500
9,728,050
Georgia--2.4%
Fulton County Water and Sewer
6.375%, '14 AAA/Aaa $ 1,000 $ 962,500
Fulton de Kalb Hospital 5.50%, '07 AAA/Aaa 1,000 903,750
Georgia State Electric Authority,
Series Z 5.50%, '20 A+/A 2,000 1,597,500
3,463,750
Hawaii--0.3%
Hawaii General Obligation 5.125%,
'08 AA/Aa 500 424,375
Illinois--11.6%
Chicago Board of Education 6%, '20 AAA/Aaa 500 434,375
Chicago City Gas Supply 10.25%, '15 AA-/Aa 710 730,413
Chicago O'Hare International
Airport 10.375%, '09 A+/NR 1,000 1,033,750
Chicago O'Hare International
Airport 8.85%, '18 BB/Baa 925 972,406
Chicago O'Hare International
Airport Series C Rev 5%, '18 AAA/Aaa 2,200 1,685,750
Chicago PCR (Peoples Light & Gas)
7.50%, '15 AA-/Aa 1,000 1,018,750
Chicago Public Building Commission
7.75%, '06 AAA/Aaa 750 818,437
Chicago Water Revenue 6%, '19 A+/A 1,375 1,185,938
Du Page Water 5.25%, '14 AA/Aa 1,000 813,750
Illinois Development Finance
Authority PCR 7.60%, '13 AA/Aa 2,000 2,082,500
Illinois Housing Development
Authority Residual Series A 7%,
'17 A+/Aa 920 874,000
Illinois Toll Highway Authority
6.375%, '15 A+/A 4,100 3,746,375
Metro Pier & Exposition (0%, '97)
6.50%, '07 AAA/Aaa 1,500 1,226,250
16,622,694
Indiana--2.7%
Indianapolis Public Imp. 0%, '03 NR/A 2,500 1,446,875
Indianapolis Public Imp. 0%, '05 NR/Aaa 1,765 895,737
Petersburg PC (Indianapolis Pwr &
Light) 9.625%, '12 AA/Aa 1,500 1,569,375
3,911,987
Kentucky--2.1%
Greater Kentucky Housing Assistance
7.125%, '24 AAA/Aaa 1,000 1,000,000
Kentucky Turnpike Authority 0%, '10 AAA/Aaa 3,300 1,171,500
Perry County Solid Waste Disposal
Rev. 7%, '24 NR/NR 1,000 896,250
3,067,750
<PAGE>
Louisiana--3.5%
East Baton Rouge Mtge. Rev. Series
B 5.20%, '10 NR/Aaa $ 985 $ 802,775
Louisiana Housing Finance Agency
Rev. 6.125%, '15 NR/Aaa 500 429,375
Louisiana Public Facs. Auth. Rev.
6.625%, '21 A+/A 1,500 1,396,875
St. Charles Parish Rev. 7.50%, '21 AAA/Aaa 1,250 1,301,562
St. Charles Parish Waste Disposal
Series A 7%, '22 AAA/Aaa 500 486,875
St. Mary Public Auth. 7.625%, '12 NR/Aaa 264 264,511
St. Tammany Public Auth. 7%, '02 NR/Aaa 282 280,785
4,962,758
Maryland--0.4%
Baltimore General Obligation 7%,
'09 AAA/Aaa 500 518,750
Massachusetts--5.9%
Massachusetts Bay Transportation
Authority Series B 6.20%, '16 A+/A 1,000 915,000
Massachusetts Cons Ln. 7.50%, '07 A+/Aaa 500 549,375
Massachusetts Cons Ln. 7.50%, '07 A+/Aaa 500 549,375
Massachusetts Indl. Fin. Agency 0%,
'05 A-/NR 1,100 499,125
Massachusetts Port Authority 6%,
'13 AA-/Aa 650 580,125
Massachusetts St. Health &
Education Rev., 5%, '13 AAA/Aaa 6,000 4,492,500
Massachusetts St. Water Resources
Authority 5.25%, '13 A/A 1,000 808,750
8,394,250
Michigan--2.3%
Monroe County Pollution Control
10.50%, '16 BBB/Baa 500 535,625
Western Townships Sewage Authority
8.20%, '18 BBB+/NR 1,500 1,580,625
Western Townships Sewage Authority
6.50%, '19 AAA/Aaa 1,200 1,114,500
3,230,750
Minnesota--0.8%
Southern Minnesota Power Agency,
Series A 4.75%, '16 A+/A 1,500 1,112,070
Mississippi--0.9%
Lowndes County Waste Disposal
6.80%, '22 A/A 1,450 1,343,063
Missouri--0.7%
Sikeston Electrical Rev. 6.25%, '12 AAA/Aaa 1,000 942,500
Nebraska--1.0%
Nebraska Higher Education 6.70%,
'02 NR/A $1,500 $ 1,494,375
Nevada--0.8%
Clark County School District Series
A 0%, '03 AAA/Aaa 2,000 1,165,000
New Hampshire--0.5%
New Hampshire Housing Authority 0%,
'14 A+/Aa 5,185 751,825
New Jersey--2.4%
Atlantic City Improvement Authority
8.875%, '10 NR/NR 1,000 1,115,000
Camden County Municipal Utility 0%,
'11 AAA/Aaa 3,000 971,250
New Jersey Economic Development
Authority
Series A 5.875%, '11 AAA/Aaa 1,500 1,376,250
3,462,500
New York--5.9%
Erie County Water Authority 0%, '17 AAA/Aaa 550 105,875
New York City Indl. Dev. Agency 6%,
'15 A/A 1,700 1,472,625
New York City University Dormitory
6.375%, '08 BBB/Baa 1,000 933,750
Niagara Falls 5.25%, '15 AAA/Aaa 1,500 1,222,500
Triborough Bridge & Tunnel 6.625%,
'12 A+/Aa 750 730,312
Triborough Bridge & Tunnel 4.75%,
'14 A+/Aa 2,250 1,684,688
Triborough Bridge & Tunnel 5%, '15 A+/Aa 1,000 770,000
Triborough Bridge & Tunnel 4.75%,
'19 A+/Aa 2,125 1,516,719
8,436,469
North Carolina--0.9%
North Carolina Municipal Power 6%,
'09 AAA/Aaa 1,385 1,286,319
Pennsylvania--10.7%
Pennsylvania Economic Dev., Series
D 7.05%, '10 BBB-/NR 5,000 4,637,500
Pennsylvania Finance Authority
6.60%, '09 A/NR 4,000 3,815,000
Pennsylvania Financial Development
6.40%, '09 NR/NR 5,000 4,368,750
Philadelphia Water 5%, '16 AAA/Aaa 2,500 1,928,125
Pittsburgh Series C Ambac Book 0%,
'04 AAA/Aaa 1,025 557,344
15,306,719
<PAGE>
South Carolina--3.4%
Piedmont Municipal Power Agency
7.25%, '22 A-/A $3,000 $ 3,052,500
South Carolina Public Service
Authority 6%, '31 A+/A 1,500 1,258,125
Spartanburg County Solid Waste Rev.
7.55%, '24 NR/NR 500 493,125
4,803,750
Texas--5.5%
Alliance Airport Authority 7%, '11 BB+/Baa 1,100 995,500
Austin Convention Center 8.25%, '14 NR/NR 1,000 1,117,500
Brazos River Authority 7.75%, '15 A/A 750 765,937
Brazos River Authority 7.625%, '19 A/A 1,000 1,013,750
Colorado River Water District
8.25%, '15 A/A 540 601,425
Harris County Gen. Oblig. Toll Road
Multimode 8.125%, '17 AAA/NR 700 770,875
Sabine River Authority (PCR) 7.75%,
'16 BBB/Baa 1,500 1,545,000
Texas Water Resources Finance
Agency 7.625%, '08 A/A 1,000 1,038,750
7,848,737
Utah--1.6%
Intermountain Power Agency Series B
7%, '21 AA/Aa 1,250 1,256,250
Intermountain Power Agency Series B
7.50%, '21 AA/Aa 1,000 1,031,250
2,287,500
Virginia--2.7%
Pittsylvania County VA Rev. Series
A 7.30%, '04 NR/NR 1,000 971,250
Pittsylvania County VA Rev. Series
A 7.45%, '09 NR/NR 3,000 2,880,000
3,851,250
Washington--1.9%
Grant County PUD #2 Utility 6.375%,
'23 A+/A 2,000 1,797,500
Washington State Gen. Oblig.
4.875%, '02 AA/Aa 1,000 907,500
2,705,000
West Virginia--0.7%
West Virginia Housing Development
Fund 6.625%, '20 AA/Aa $1,000 $ 922,500
Wisconsin--3.0%
Wisconsin Clean Water Rev. 6.875%,
'11 AA/Aa 750 752,813
Wisconsin Gen. Oblig. Series 5
4.85%, '06 AA/Aa 2,250 1,915,312
Wisconsin Housing & Development
Authority
Series A 6.85%, '12 A/A 1,300 1,243,125
Wisconsin Housing & Development
Authority 7.375%, '17 A+/Aa 420 416,325
4,327,575
Wyoming--0.6%
Wyoming Comm. Dev. Auth. Single
7.875%, '18 AA/Aa 800 809,000
Other Territories--4.2%
Guam Airport Authority 6.60%, '10 BBB/NR 1,000 926,250
Puerto Rico Commonwealth Aqueduct &
Sewer 7.875%, '17 A/Baa 500 523,750
Puerto Rico Commonwealth Highway
Rev. Series V 6.625%, '12 A/Baa 2,400 2,307,000
Puerto Rico Electric Power 5.90%,
'06 A-/Baa 1,160 1,077,350
Puerto Rico Public Bldgs. 5.75%,
'16 A/Baa 1,400 1,190,000
6,024,350
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $147,596,336) 138,991,530
TOTAL INVESTMENTS--97.3%
(Identified cost $147,596,336) 138,991,530(b)
Cash and receivables, less liabilities--2.7% 3,778,501
NET ASSETS--100.0% $142,770,031
</TABLE>
(a) See Security valuation under Note 1 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $1,552,419 and gross
depreciation of $10,167,376 for income tax purposes. At November 30, 1994 the
aggregate cost of securities for federal income tax purposes was
$147,606,487.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value
(Identified cost $147,596,336) $138,991,530
Receivables
Investment securities sold 13,442,684
Fund shares sold 242,857
Interest 3,080,961
Total assets 155,758,032
Liabilities
Payables
Custodian 4,192,748
Dividend distributions 110,542
Investment securities purchased 8,280,781
Fund shares repurchased 259,353
Investment advisory fee 52,723
Distribution fee 29,982
Financial agent fee 3,515
Trustees' fee 3,260
Transfer agent fee 13,154
Accrued expenses 41,943
Total liabilities 12,988,001
Net Assets $142,770,031
Net Assets Consist of:
Capital paid in on shares of beneficial interest $151,222,326
Distributions in excess of net investment income (25,574)
Accumulated net realized gains 178,085
Net unrealized depreciation of investment securities (8,604,806)
Net Assets $142,770,031
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $141,623,013) 14,041,924
Net asset value per share $10.09
Offering price per share
$10.09/(1-4.75%) $10.59
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,147,018) 113,332
Net asset value and offering price per share $ 10.12
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $ 10,578,579
Total investment income 10,578,579
Expenses
Investment advisory fee 735,312
Distribution fee--Class A 399,140
Distribution fee--Class B 5,198
Financial agent fee 49,476
Trustees' fee 15,030
Transfer agent fee 158,654
Custodian 17,186
Audit 52,934
Printing 9,100
Registration 90,173
Miscellaneous 3,125
Total expenses 1,535,328
Net investment income 9,043,251
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain from security transactions
(excluding short-term securities)
Proceeds from sales 92,936,948
Cost of securities sold 91,970,644
Net realized gain on securities 966,304
Net realized loss on futures contracts (204,969)
Net unrealized appreciation (depreciation) of
investment securities and futures contracts
Beginning of period 13,385,452
End of period (8,604,806)
Net change in unrealized depreciation (21,990,258)
Net realized and unrealized loss on investments (21,228,923)
Net decrease in net assets resulting from
operations $(12,185,672)
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
November 30, 1994 November 30, 1993
<S> <C> <C>
From Operations
Net investment income $ 9,043,251 $ 3,058,322
Net realized gain on securities 966,304 579,133
Net realized loss on futures contracts (204,969) (604,777)
Net change in unrealized (depreciation) appreciation (21,990,258) 2,666,560
Net (decrease) increase in net assets resulting from operations (12,185,672) 5,699,238
From Distributions to Shareholders
Class A--Net investment income ($0.65 and $0.60 per share, respectively) (9,567,249) (3,058,322)
Class B--Net investment income ($0.39 and $0.00 per share, respectively) (25,546) --
Class A--Net realized gains ($0.00 and $0.28 per share, respectively) -- (902,162)
Class B--Net realized gains ($0.00 and $0.00 per share, respectively) -- --
Decrease in net assets resulting from distributions to shareholders (9,592,795) (3,960,484)
From Shares of Beneficial Interest Transactions
Class A
Proceeds from sales of shares (2,018,969 and 3,511,774 shares, respectively) 22,461,848 39,819,747
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net investment income (509,004 and 188,429 shares,
respectively) 5,572,067 2,159,652
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net realized gains (0 and 61,434 shares, respectively) -- 668,407
Net asset value of shares issued in conjunction with the acquisition of National
Securities Tax Exempt Bonds, Inc. (0 and 9,411,560, respectively) -- 109,359,499
Cost of shares repurchased (3,280,044 and 1,588,477 shares, respectively) (35,987,636) (18,098,684)
Total (7,953,721) 133,908,621
Class B
Proceeds from sales of shares (111,801 and 0 shares, respectively) 1,214,042 --
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net investment income (1,531 and 0 shares, respectively) 16,245 --
Total 1,230,287 --
(Decrease) increase in net assets resulting from share transactions (6,723,434) 133,908,621
Net (decrease) increase in net assets (28,501,901) 135,647,375
Net Assets
Beginning of period 171,271,932 35,624,557
End of period (including distributions in excess of net investment income of
$25,574 and 0, respectively) $142,770,031 $171,271,932
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A Class B
From
Inception
Year Ended November 30, 3/16/94
1994 1993 1992 1991 1990 to 11/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.58 $11.10 $10.66 $10.37 $10.68 $11.21
Income from investment operations
Net investment income 0.65 0.60(1) 0.66(1) 0.65(1) 0.65(1) 0.39
Net realized and unrealized (loss) gain (1.49) 0.76 0.57 0.29 -- (1.09)
Total from investment operations (0.84) 1.36 1.23 0.94 0.65 (0.70)
Less distributions
Dividends from net investment income (0.65) (0.60) (0.66) (0.65) (0.65) (0.39)
Dividends from net realized gains -- (0.28) (0.13) -- (0.31) --
Total distributions (0.65) (0.88) (0.79) (0.65) (0.96) (0.39)
Change in net asset value (1.49) 0.48 0.44 0.29 (0.31) (1.09)
Net asset value, end of period $10.09 $11.58 $11.10 $10.66 $10.37 $10.12
Total return( (2)) -7.55% 12.79% 11.92% 9.32% 6.49% -6.42%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $141,623 $171,272 $35,625 $27,093 $20,240 $1,147
Ratio to average net assets of:
Operating expenses 0.96% 0.75% 0.78% 0.94% 1.00% 1.54%(3)
Net investment income 5.65% 5.33% 5.92% 6.17% 6.29% 5.07%(3)
Portfolio turnover 54% 62% 145% 99% 130% 54%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.03, $0.04, $0.02 and $0.02, respectively.
(2) Maximum sales charges are not reflected in the total return calculation.
(3) Annualized
(4) Not annualized
<PAGE>
INVESTMENTS AT NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES VALUE (a)
<S> <C> <C>
COMMON STOCKS--68.0%
Beverages--2.5%
Coca Cola Co. 205,000 $10,480,625
Building & Materials--1.7%
PPG Industries, Inc. 200,000 7,200,000
Computer Software & Services--3.8%
Adobe Systems, Inc. 150,000 4,950,000
Computer Associates International, Inc. 200,000 9,100,000
Novell, Inc. (c) 100,000 1,987,500
16,037,500
Entertainment & Leisure--6.2%
Tele Communications, Inc. (c) 300,000 7,087,500
Viacom, Inc. Class B (c) 265,000 10,202,500
Walt Disney Co. 200,000 8,725,000
26,015,000
Financial Services--1.8%
Federal National Mortgage Assoc. 110,000 $ 7,823,750
Food--2.0%
Campbell Soup Co. 200,000 8,600,000
Hospital Supply--8.6%
Abbott Labs 350,000 11,156,250
Johnson & Johnson 100,000 5,337,500
Medtronic, Inc. 196,800 10,430,400
St. Jude Medical, Inc. 233,500 9,310,813
36,234,963
Insurance--5.4%
American International Group, Inc. 100,000 9,162,500
Humana, Inc. (c) 200,000 4,475,000
US Healthcare, Inc. 200,000 8,950,000
22,587,500
<PAGE>
Lodging & Restaurants--0.8%
Marriott International, Inc. 126,600 $ 3,323,250
Office & Business Equipment--4.5%
Compaq Computer Corp. (c) 175,000 6,846,875
International Business Machines Corp. 125,000 8,843,750
Xerox Corp. 32,000 3,144,000
18,834,625
Oil--2.0%
Amoco Corp. 140,000 8,505,000
Pollution Control--4.4%
Browning-Ferris Industries, Inc. 300,000 8,100,000
WMX Technologies, Inc. 410,000 10,557,500
18,657,500
Publishing, Broadcasting & Printing--1.9%
Capital Cities/ABC, Inc. 100,000 8,175,000
Retail--11.1%
Dayton Hudson Corp. 130,000 10,611,250
Home Depot, Inc. 275,000 12,718,750
The Limited, Inc. 100,000 1,937,500
Price/Costco, Inc. (c) 85,000 1,306,875
Toys R Us (c) 235,000 8,606,875
Wal-Mart Stores, Inc. 500,000 11,562,500
46,743,750
Retail--Food--2.0%
Safeway, Inc. (c) 275,000 8,387,500
Telecommunications Equipment--4.8%
Cisco Systems, Inc. (c) 300,000 9,675,000
Northern Telecom Ltd. 330,000 10,560,000
20,235,000
Tobacco--2.4%
Philip Morris Companies, Inc. 170,000 10,157,500
Utility--Telephone--2.1%
Airtouch Communications, Inc. (c) 320,000 8,680,000
TOTAL COMMON STOCKS
(Identified cost $282,947,003) 286,678,463
FOREIGN COMMON STOCKS--12.6%
Computer Software & Services--1.3%
Cap Gemini Sogeti (France) (c) 160,000 5,489,600
Conglomerates--1.1%
Grupo Carso (Mexico) (c) 400,000 4,444,000
Entertainment & Leisure--1.3%
Bell Cablemedia PLC ADR (United Kingdom)
(c) 250,000 5,625,000
Oil--4.4%
Royal Dutch Petroleum Co. ADR
(Netherlands) 85,000 9,233,125
Total Compagnie Francaise des Petroles
ADR (France) 300,000 9,375,000
18,608,125
Telecommunications Equipment--4.5%
Ericsson L.M. Telephone Co.
Class B ADR (Sweden) 120,000 6,660,000
Nokia AB (Finland) 90,000 12,297,600
18,957,600
TOTAL FOREIGN COMMON STOCKS
(Identified cost $44,212,634) $ 53,124,325
TOTAL COMMON AND
FOREIGN COMMON STOCKS--80.6%
(Identified cost $327,159,637) 339,802,788
</TABLE>
<TABLE>
<CAPTION>
STANDARD
&POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--20.8%
Commercial Paper--8.9%
Unilever Capital Corp. 5.65%,
12-1-94 A-1+ $5,990 5,989,060
General Re Corp. 5.15%,
12-2-94 A-1+ 2,885 2,884,577
McDonald's Corp. 5.13%, 12-7-94 A-1+ 6,300 6,294,645
Exxon Imperial U.S., Inc. 5.33%,
12-15-94 A-1+ 5,000 4,989,644
Exxon Imperial U.S., Inc. 5.48%,
12-15-94 A-1+ 4,870 4,859,617
E.I. du Pont de Nemours 5.22%,
12-16-94 A-1+ 3,945 3,936,420
General Electric Capital Corp.
5.50%, 12-22-94 A-1+ 4,488 4,488,000
H.J. Heinz Co. 5.72%, 1-17-95 A-1+ 4,000 3,970,124
37,412,087
Federal Agency Securities--11.9%
Federal Home Loan Mortgage 4.89%,
12-2-94 4,805 4,804,331
Federal National Mortgage Assn. 5.46%, 12-5-94 5,000 4,996,975
Federal Home Loan Mortgage 5.22%,
12-9-94 5,220 5,213,944
Federal Home Loan Banks 4.95%, 12-13-94 7,745 7,732,182
Federal National Mortgage Assn. 5.10%, 12-14-94 3,880 3,872,848
Federal Farm Credit Bank 5.15%, 12-20-94 5,000 4,986,421
Federal Home Loan Banks 5.05%, 12-22-94 2,425 2,417,865
Federal National Mortgage Assn. 5.20%, 12-30-94 3,965 3,948,400
Tennessee Valley Authority 5.55%, 1-18-95 3,205 3,181,286
Federal Home Loan Banks 3.50%, 1-27-95 4,005 3,982,817
Student Loan Marketing Assn. 4.52%, 2-9-95 2,500 2,500,000
Federal Home Loan Mortgage 5.69%, 3-2-95 2,500 2,458,115
50,095,184
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $87,507,271) 87,507,271
TOTAL INVESTMENTS--101.4%
(Identified cost $414,666,908) 427,310,059(b)
Cash and receivables, less liabilities--(1.4%) (6,030,226)
NET ASSETS--100.0% $421,279,833
</TABLE>
(a) See Security valuation under Note 1 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized appreciation of
investment securities is comprised of gross appreciation of $19,838,883 and
gross depreciation of $7,195,732 for federal income tax purposes. At November
30, 1994 the aggregate cost of securities was the same for book and tax
purposes.
(c) Non-income producing.
ADR--American Depository Receipt
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value
(Identified cost $414,666,908) $427,310,059
Cash 10,227
Receivables
Investment securities sold 19,235,001
Trust shares sold 315,099
Dividends and interest 438,785
Total assets 447,309,171
Liabilities
Payables
Investment securities purchased 24,545,700
Trust shares repurchased 1,077,296
Investment advisory fee 264,210
Distribution fee 88,897
Financial agent fee 10,568
Transfer agent fee 42,567
Accrued expenses 100
Total liabilities 26,029,338
Net Assets $421,279,833
Net Assets Consist of:
Capital paid in on shares of beneficial interest $393,472,425
Undistributed net investment income 1,218,402
Accumulated net realized gains 13,945,855
Net unrealized appreciation of investment securities 12,643,151
Net Assets $421,279,833
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $419,760,449) 23,287,445
Net asset value per share $ 18.03
Offering price per share
$18.03/(1-4.75%) $ 18.93
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,519,384) 84,530
Net asset value and offering price per share $ 17.97
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 5,212,055
Interest 3,296,952
Other 17,322
Total investment income 8,526,329
Expenses
Investment advisory fee 3,277,801
Distribution fee--Class A 1,091,986
Distribution fee--Class B 2,459
Financial agent fee 134,830
Trustees' fee 16,533
Transfer agent fee 999,195
Amortization of organization costs 22,211
Custodian 99,374
Audit 57,054
Printing 63,186
Registration 135,475
Miscellaneous 57,253
Total expenses 5,957,357
Net investment income 2,568,972
Net Realized and Unrealized Gain (Loss) on Investments Net realized gain from
security transactions
(excluding short-term securities)
Proceeds from sales 790,783,208
Cost of securities sold 776,667,924
Net realized gain on securities 14,115,284
Net realized loss on foreign currency and foreign
currency transactions (1,683)
Net unrealized appreciation (depreciation) of investment
securities
Beginning of period 25,556,951
End of period 12,643,151
Net change in unrealized depreciation (12,913,800)
Net realized and unrealized gain on investments 1,199,801
Net increase in net assets resulting from operations $ 3,768,773
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
November 30, 1994 November 30, 1993
<S> <C> <C>
From Operations
Net investment income $ 2,568,972 $ 2,135,652
Net realized gain on securities 14,115,284 18,371,534
Net realized (loss) gain on foreign currency and foreign currency transactions (1,683) 3,975
Net change in unrealized (depreciation) appreciation (12,913,800) 5,978,617
Net increase in net assets resulting from operations 3,768,773 26,489,778
From Distributions to Shareholders
Class A--Net investment income ($0.10 and $0.13 per share, respectively) (2,337,637) (2,072,403)
Class A--Net realized gains ($0.78 and $0.67 per share, respectively) (18,023,297) (8,967,160)
Decrease in net assets resulting from distributions to shareholders (20,360,934) (11,039,563)
From Shares of Beneficial Interest Transactions
Class A
Proceeds from sales of shares (8,619,664 and 13,289,910 shares, respectively) 159,272,884 241,622,558
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net investment income (119,916 and 109,628 shares,
respectively) 2,167,889 1,926,085
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net realized gains (915,512 and 474,617 shares,
respectively) 16,718,334 8,367,495
Cost of shares repurchased (9,145,060 and 4,162,108 shares, respectively) (167,859,596) (75,810,753)
Total 10,299,511 176,105,385
Class B
Proceeds from sales of shares (89,426 and 0 shares, respectively) 1,634,651 --
Cost of shares repurchased (4,896 and 0 shares, respectively) (89,532) --
Total 1,545,119 --
Increase in net assets resulting from share transactions 11,844,630 176,105,385
Net (decrease) increase in net assets (4,747,531) 191,555,600
Net Assets
Beginning of period 426,027,364 234,471,764
End of period (including undistributed net investment income of $1,218,402 and
$908,505, respectively) $ 421,279,833 $426,027,364
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
Year Ended November 30, Class B
From
Inception
7/18/94 to
1994 1993 1992 1991 1990 11/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $18.70 $17.95 $16.61 $11.95 $10.29 $ 17.68
Income from investment operations
Net investment income (loss) 0.11 0.11 0.15 0.19 0.18(1) (0.01)
Net realized and unrealized gain 0.10 1.44 2.41 4.64 1.59 0.30
Total from investment operations 0.21 1.55 2.56 4.83 1.77 0.29
Less distributions
Dividends from net investment
income (0.10) (0.13) (0.21) (0.17) (0.11) --
Dividends from net realized gains (0.78) (0.67) (1.01) -- -- --
Total distributions (0.88) (0.80) (1.22) (0.17) (0.11) --
Change in net asset value (0.67) 0.75 1.34 4.66 1.66 0.29
Net asset value, end of period $18.03 $18.70 $17.95 $16.61 $11.95 $ 17.97
Total return(2) 1.03% 8.94% 16.44% 40.78% 17.26% 1.64%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $419,760 $426,027 $234,472 $119,870 $15,840 $1,519
Ratio to average net assets of:
Operating expenses 1.36% 1.34% 1.40% 1.24% 1.50% 2.05%(3)
Net investment income 0.59% 0.64% 0.93% 1.94% 2.22% (0.23)%(3)
Portfolio turnover 227% 174% 287% 458% 454% 227%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.01.
(2) Maximum sales charges are not reflected in the total return
calculation.
(3) Annualized
(4) Not annualized
<PAGE>
INVESTMENTS AT NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES VALUE (a)
<S> <C> <C>
EQUITIES AND EQUIVALENTS--80.1%
Argentina--0.8%
Quilmes (Beverages) 54,000 $ 1,428,300
Australia--1.1%
Woolworth's Ltd. (Retail) 881,000 1,861,935
Belgium--1.1%
Arbed SA (Metals & Mining) (c) 12,000 1,894,215
Chile--1.3%
Compania de Telefonos de Chile ADR
(Utility-Telephone) 25,000 2,150,000
China--1.0%
Huaneng Power International, Inc. ADR
(Utility-Electric) (c) 100,000 1,725,000
Finland--6.6%
Benefon OY (Electronics) (c) 7,170 1,841,559
Nokia AB (Telecommunications Equipment) 50,900 6,954,981
Outokumpu (Metals & Mining) (c) 37,000 685,748
Valmet (Machinery) (c) 85,500 1,695,313
11,177,601
France--6.4%
Ecco SA (Professional Services) 8,225 1,035,417
Ecco Travail Temporaire SA (Professional
Services) 13,080 737,083
Epeda-Bertrand Faure (Auto Parts) 4,180 673,668
Moulinex (Household Furniture &
Appliances) (c) 50,000 1,034,201
Peugeot SA (Auto & Trucks) (c) 13,000 1,902,039
Printemps (Retail) 10,956 1,952,869
Television Francaise (Publishing,
Broadcasting & Printing) 15,200 1,476,029
Total Compagnie Francaise des Petroles
(Oil) 34,000 2,127,446
10,938,752
Germany--4.1%
BMW (Auto & Truck) 3,200 1,538,658
Fresenius (Medical Technology) 4,950 2,332,824
Jungheinrich Pfd (Machinery) 6,300 1,344,096
Standard Application Software AG Vorzug
Pfd (Computer Software & Services) 3,300 1,767,482
6,983,060
Hong Kong--2.1%
Consolidated Electric Power Asia
(Utility-Electric) (c) 650,000 1,407,836
Hutchison Whampoa (Miscellaneous) (c) 285,000 1,135,062
Sun Hung Kai Properties Ltd. (Building &
Materials) 175,000 1,124,652
3,667,550
Indonesia--1.0%
International Bank of Indonesia
(Banks) 496,000 1,684,844
Japan--10.8%
Canon, Inc. (Office & Business Equipment) 57,000 $ 1,705,159
Daikin Manufacturing Co. (Auto & Truck
Parts) 75,000 1,622,084
Fanuc (Machinery) 36,000 1,677,265
Nichiei Company Ltd. (Financial Services) 16,500 933,835
Nippon Telephone & Telegraph (Utility-
Telephone) 190 1,612,988
Nippondenso (Auto & Truck Parts) 55,000 1,122,826
Nisshin Steel Co. (Metals & Mining) 350,000 1,690,807
Rohm Co. (Electronics) 51,000 2,139,028
Sharp (Electronics) 88,000 1,529,711
Sumitomo Metal Industries (Metals &
Mining) (c) 600,000 1,958,628
TDK Corp. (Electronics) 51,000 2,422,514
18,414,845
Korea--1.5%
Korea Growth Trust (Miscellaneous) (c) 28 1,036,000
Pohang Iron & Steel Ltd. ADR (Metals &
Mining) (c) 46,200 1,466,850
2,502,850
Malaysia--0.8%
Technology Resources Industries
(Utility-Telephone) (c) 412,000 1,402,128
Mexico--5.3%
Banacci C (Banks) 195,000 1,341,834
Cemex SA B (Building & Materials) 195,000 1,923,390
Grupo Carso (Conglomerates) (c) 165,000 1,833,920
Grupo Situr SA Series B (Lodging &
Restaurants) (c) 500,000 1,629,376
Grupo Televisa SA GDS (Entertainment &
Leisure) 40,000 1,810,000
Tolmex SA de CV ADR (Building &
Materials) 32,500 487,940
9,026,460
Netherlands--4.2%
Akzo N.V. (Chemical) 13,500 1,496,844
Hagemeyer N.V. (Conglomerates) 23,152 1,823,251
Randstad Holdings N.V. (Professional
Services) 39,380 1,983,890
Sphinx Kon CVA (Building
& Materials) 58,458 1,801,572
7,105,557
Peru--0.9%
CPT B PEN (Utility-Telephone) (c) 1,200,000 1,436,861
Philippines--0.7%
J.G. Summit Holdings
(Conglomerates) 2,050,000 747,821
Manila Electric Co. (Utility-Electric) 30,000 405,672
1,153,493
<PAGE>
Singapore--3.0%
City Developments Ltd. (Property
Development) 352,000 $ 1,863,515
United Overseas Bank Ltd. (Banks) 167,000 1,756,814
United Overseas Land Ltd. (Miscellaneous) 807,000 1,433,295
5,053,624
Sweden--8.4%
Arjo (Hospital Supply) 222,000 3,711,537
Allgon AB Class B (Telecommunications
Equipment) 71,000 1,252,969
Astra AB (Drugs) 133,350 3,591,860
Catena Corp. (Retail) (c) 136,000 1,181,981
Hennes & Mauritz (Retail) 55,300 2,876,348
Volvo AB (Auto & Trucks) 90,000 1,731,573
14,346,268
Switzerland--2.2%
Brown Boveri & Cie Bearer (Electrical
Equipment) 1,740 1,457,859
Brown Boveri & Cie Registered (Electrical
Equipment) 13,800 2,223,126
3,680,985
Thailand--3.5%
Advanced Information Service Ltd.
(Utility-Telephone) 42,000 640,384
Krung Thai Bank (Banks) 523,000 1,690,888
PTT Exploration & Production (Oil) 222,000 2,232,964
Thai Farmers Bank (Banks) 166,000 1,444,417
6,008,653
United Kingdom--13.3%
Astec (BSR) PLC (Electronics) 1,290,000 1,726,597
Bell Cablemedia PLC ADR (Entertainment &
Leisure) (c) 80,000 1,800,000
Blue Circle Industries PLC (Building &
Materials) 375,000 1,784,596
British Petroleum Co. (Oil) 267,857 1,779,986
Carlton Communications PLC (Publishing,
Broadcasting
& Printing) 134,000 1,839,668
East Midlands Electricity (Utility-
Electric) 146,080 1,751,679
House of Fraser PLC (Retail) 530,500 1,561,271
Next PLC (Retail) 460,000 1,821,853
Powergen (Utility-Electric) 221,800 1,888,842
Takare Private Placement (Hospital
Management & Services) 63,000 202,176
United Kingdom--continued
Takare (Hospital Management & Services) 659,000 $ 2,114,825
Vodafone Group PLC ADR (Utility-
Telephone) 65,000 2,112,500
WPP Group (Advertising) 1,226,000 2,187,915
22,571,908
TOTAL EQUITIES AND EQUIVALENTS
(Identified cost $130,740,784) 136,214,889
PAR
VALUE
(000)
SHORT-TERM OBLIGATIONS--16.9%
Commercial Paper--11.8%
Mobil Corp. 5.65%, 12-1-94 $ 660 660,000
E.I. du Pont de Nemours 5.50%,
12-2-94 552 551,916
Campbell Soup Co. 5.50%, 12-6-94 7,500 7,494,273
McDonald's Corp. 5.13%, 12-7-94 1,370 1,368,824
Wisconsin Electric Power Co. 5.125%,
12-8-94 3,000 2,997,010
Exxon Imperial U.S., Inc. 5.50%, 12-19-94 4,010 3,998,974
Abbott Laboratories 5.46%, 12-20-94 2,925 2,916,572
19,987,569
Federal Agency Securities--5.1%
Federal Home Loan Mortgage 5.45%, 12-2-94 2,680 2,679,594
Federal National Mortgage Assn. 5.10%,
12-14-94 6,000 5,988,951
8,668,545
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $28,656,114) 28,656,114
TOTAL INVESTMENTS--97.0%
(Identified cost $159,396,898) 164,871,003(b)
Cash and receivables, less liabilities--3.0% 5,037,893
NET ASSETS--100.0% $169,908,896
</TABLE>
(a) See Security valuation under Note 1 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $10,723,949 and gross
depreciation of $5,405,271 for federal income tax purposes. At November 30,
1994 the aggregate cost of securities for federal income tax purposes was
$159,552,325.
(c) Non-income producing.
ADR--American Depository Receipt.
<PAGE>
<TABLE>
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Equities
and Equivalents
<S> <C>
Advertising 1.6%
Auto & Trucks 6.3
Banks 5.8
Beverages 1.0
Building & Materials 5.2
Chemical 1.1
Computer Software & Services 1.3
Conglomerates 3.2
Drugs 2.6
Electrical Equipment & Electronics 9.8
Entertainment & Leisure 2.7
Financial Services 0.7
Hospital Management & Services 1.7
Hospital Supply 2.7
Household Furnishing & Appliances 0.8
Lodging & Restaurants 1.2
Machinery 3.5
Medical Technology 1.7
Metals & Mining 5.7
Miscellaneous 2.6
Office & Business Equipment 1.3
Oil 4.5
Professional Services 2.8
Property Development 1.4
Publishing, Broadcasting & Printing 2.4
Retail 8.3
Telecommunications Equipment 6.0
Utilities 12.1
100.0%
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value
(Identified cost $159,396,898) $164,871,003
Foreign currency at value
(Identified cost $177,759) 177,260
Cash 511,491
Receivables
Investment securities sold 8,958,336
Trust shares sold 202,436
Dividends and interest 374,569
Tax reclaim 132,951
Total assets 175,228,046
Liabilities
Payables
Investment securities purchased 4,843,631
Trust shares repurchased 266,846
Investment advisory fee 110,377
Distribution fee 37,957
Financial agent fee 4,415
Trustees' fee 1,774
Transfer agent fee 10,050
Accrued expenses 44,100
Total liabilities 5,319,150
Net Assets $169,908,896
Net Assets Consist of:
Capital paid in on shares of beneficial interest $153,784,877
Distributions in excess of net investment income (105,915)
Accumulated net realized gains 10,786,024
Net unrealized appreciation of investment securities,
foreign currency and foreign currency related
transactions 5,443,910
Net Assets $169,908,896
Class A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $167,918,070) 13,300,407
Net asset value per share $ 12.63
Offering price per share
$12.63/(1-4.75%) $ 13.26
Class B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,990,826) 158,058
Net asset value and offering price per share $ 12.60
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment income
Dividends $ 2,243,265
Interest 718,536
Foreign taxes witheld (392,516)
Total investment income 2,569,285
Expenses
Investment advisory fee 1,150,757
Distribution fee--Class A 382,510
Distribution fee--Class B 4,302
Financial agent fee 46,871
Trustees' fee 15,030
Transfer agent fee 259,102
Amortization of organization costs 16,460
Custodian 287,517
Audit 21,471
Printing 17,371
Registration 59,701
Miscellaneous 100
Total expenses 2,261,192
Net investment income 308,093
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain from security transactions
(excluding short-term securities):
Proceeds from sales 241,395,877
Cost of securities sold 230,139,423
Net realized gain on securities 11,256,454
Net realized loss on foreign currency and foreign
currency transactions (148,165)
Net realized loss on forward currency contracts (682,941)
Net unrealized appreciation of investment securities
Beginning of period 5,129,336
End of period 5,474,105
344,769
Net unrealized depreciation of foreign currency related
transactions (17,150)
Net change in unrealized appreciation of investment
securities, foreign currency and foreign currency
related transactions 327,619
Net realized and unrealized gain on investments 10,752,967
Net increase in net assets resulting from operations $ 11,061,060
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year
Ended Year
November 30, Ended
1994 November 30, 1993
<S> <C> <C>
From Operations
Net investment income (loss) $ 308,093 $ (19,252)
Net realized gain on securities 11,256,454 2,299,141
Net realized loss on foreign currency and
foreign currency transactions (148,165) (109,811)
Net realized loss on forward currency
contracts (682,941) (287,841)
Net change in unrealized appreciation of
investment securities, foreign currency and
foreign currency related transactions 327,619 7,471,274
Net increase in net assets resulting from
operations 11,061,060 9,353,511
From Shares of Beneficial Interest
Transactions
Class A
Proceeds from sales of shares (10,043,583
and 6,871,762 shares, respectively) 128,459,934 72,234,013
Cost of shares repurchased (4,917,095 and
1,619,547 shares, respectively) (62,878,186) (16,579,194)
Total 65,581,748 55,654,819
Class B
Proceeds from sales of shares (207,342 and 0
shares, respectively) 2,712,515 --
Cost of shares repurchased (49,284 and 0
shares, respectively) (642,543) --
Total 2,069,972 --
Increase in net assets resulting from share
transactions 67,651,720 55,654,819
Net increase in net assets 78,712,780 65,008,330
Net Assets
Beginning of period 91,196,116 26,187,786
End of period (including distributions in
excess of net investment income of $105,915
and $19,252, respectively) $169,908,896 $ 91,196,116
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A Class B
Year Ended November 30,
From
Inception
7/15/94 to
1994 1993 1992 1991 1990 11/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.16 $ 8.96 $10.90 $10.27 $10.44 $ 12.80
Income from investment
operations
Net investment income (loss) (0.01) -- 0.11 0.15 0.15(1) (0.01)
Net realized and unrealized
gain (loss) 1.48 2.20 (1.10) 0.69 (0.22) (0.19)
Total from investment
operations 1.47 2.20 (0.99) 0.84 (0.07) (0.20)
Less distributions
Dividends from net
investment income -- -- (0.12) (0.21) (0.10) --
Dividends from net realized
gains -- -- (0.64) -- -- --
Distribution in excess of
accumulated net investment
income -- -- (0.19) -- -- --
Total distributions -- -- (0.95) (0.21) (0.10) --
Change in net asset value 1.47 2.20 (1.94) 0.63 (0.17) (0.20)
Net asset value, end of
period $12.63 $11.16 $ 8.96 $10.90 $10.27 $ 12.60
Total return(2) 13.17% 24.55% -9.91% 8.26% -0.75% -1.56%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $167,918 $91,196 $26,188 $21,427 $16,583 $1,991
Ratio to average net assets
of:
Operating expenses 1.47% 1.78% 1.97% 2.09% 1.50% 1.93%(3)
Net investment income (loss) 0.20% (0.04)% 0.85% 1.29% 1.48% 0.36%(3)
Portfolio turnover 186% 191% 82% 128% 99% 186%
</TABLE>
(1) Net of reimbursement by investment adviser of $0.06.
(2) Maximum sales charges are not reflected in the total return calculation.
(3) Annualized
(4) Not annualized
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix Multi-Portfolio Fund ("the Trust") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Trustees are authorized to offer shares of
the Trust in different series or "Portfolios" and to issue an unlimited number
of shares of each Portfolio. To date, five Portfolios are offered for sale:
Tax-Exempt Bond Portfolio, Capital Appreciation Portfolio, International
Portfolio, Endowment Equity Portfolio and Endowment Fixed-Income Portfolio. The
Endowment Equity Portfolio and Endowment Fixed-Income Portfolio, with an
inception date of April 1, 1993, are reported separately from these financial
statements. The Trust, with the exception of the two Endowment Portfolios,
offers both Class A and Class B shares. Class A shares are sold with a front-end
sales charge of up to 4.75%. Class B shares are sold with a contingent deferred
sales charge which declines from 5% to zero depending on the period of time the
shares are held. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that each
class bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan. Income and expenses of each Portfolio are
borne pro rata by the holders of both classes of shares, except that each class
bears distribution expenses unique to that class. The following is a summary of
significant accounting policies consistently followed by the Trust in the
preparation of its Financial Statements. The policies are in conformity with
generally accepted accounting principles.
A. Security valuation:
The net asset value per share, which is calculated separately for each class of
each Portfolio, is determined no less frequently than once daily on each day in
which the New York Stock Exchange is open for trading. The net asset value per
share for each Class shall be determined each day as of the close of business of
the Exchange by dividing the value of the net assets of each Class--the value of
its assets less its liabilities--by the total number of its outstanding shares.
Assets and liabilities for each Portfolio are determined in accordance with
generally accepted accounting principles.
Investments in securities traded on an exchange or quoted on the
over-the-counter market are valued at the last transaction price reported on the
principal exchange or market on which the issue is traded, or, if no transaction
occurred during the day, at the last reported bid price. Tax-exempt securities
are valued by a pricing service approved by the Trustees, which utilizes
information with respect to market transactions in comparable securities,
quotations from dealers, and various relationships between securities in
determining value.
When market quotations are not readily available a security is valued at fair
value as determined in good faith by or under procedures established by the
Trustees. Short- term investments denominated in U.S. dollars are valued at
amortized cost which approximates market.
B. Investment transactions and related income:
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date or, in the case of certain
foreign securities, as soon as the Portfolios are notified. In determining the
net realized gains or losses on investments sold, cost of securities is
determined on the identified cost basis. The Trust does not amortize premiums
but does amortize discounts except for the Tax-Exempt Bond Portfolio which
amortizes both premiums and discounts for book purposes over the life of the
respective securities using the effective interest method.
C. 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 date of
settlement. 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 identify
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.
D. Futures contracts:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into a futures contract
the Portfolio is required to pledge to the broker an amount of cash and/or
securities equal to the "initial margin" requirements of the futures exchange on
which the contract is traded. Pursuant to the contract, the Portfolio agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
E. Forward currency contracts:
The Capital Appreciation Portfolio and the International Portfolio may enter
into forward currency contracts in con-
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND NOTES
TO FINANCIAL STATEMENTS (Continued)
junction 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.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked- to-market daily and the change in
market value is recorded by each Portfolio as an unrealized gain (or loss). When
the contract is closed, the Portfolio records a realized gain (or loss) equal to
the change in the value of the contract when it was opened and the value at the
time it was closed.
F. Repurchase Agreements
Uninvested cash balances of the Portfolios are invested daily in repurchase
agreements secured by U.S. Government obligations. Securities pledged as
collateral for repurchase agreements are held by the Portfolios' custodian bank
until maturities of the repurchase agreements. Provisions of the agreements
ensure that the market value of the collateral is sufficient in the event of
default; however, in the event of default or bankruptcy by the other party to
the agreement, realization and/or retention of the collateral may be subject to
legal proceedings.
G. Security lending:
The Trust (with the exception of the International Portfolio) loans securities
to qualified brokers through an agreement with State Street Bank & Trust (the
Custodian). Under the terms of the agreement, the Trust receives collateral with
a market value not less than 100% of the market value of loaned securities.
Collateral consists of cash, securities issued or guaranteed by the U.S.
Government or its agencies and the sovereign debt of foreign countries. Interest
earned on the collateral and premiums paid by the borrower are recorded as other
income by the Trust net of fees charged by the Custodian for its services in
connection with this securities lending program. Lending portfolio securities
involves a risk of delay in the recovery of the loaned securities or in the
foreclosure on collateral. At November 30, 1994, none of the Portfolios had
security loans outstanding.
H. Federal income taxes:
Each of the Portfolios is treated as a separate taxable entity. It is the policy
of each Portfolio in the Trust to comply with the requirements of the Internal
Revenue Code (IRC), applicable to regulated investment companies, and to
distribute all of its taxable and tax-exempt income and capital gains, if any,
to its shareholders; therefore no provision for related federal income taxes is
required. In addition, each Portfolio intends to distribute substantially all of
its calendar year (as defined in the IRC) ordinary taxable income, and any net
short-term and/or long-term capital gains; therefore each Portfolio will not be
liable for the excise tax on undistributed taxable income.
I. Distributions to shareholders:
Distributions are recorded by each Portfolio on the record date. Payments in
excess of net investment income or of accumulated net realized gains reported in
the financial statements are due primarily to book/tax differences. Payments due
to permanent differences have been charged to paid in capital. Payments due to
temporary differences have been charged to distributions in excess of net
investment income or realized gains.
J. Deferred organization expense:
Expenses incurred in connection with the organization of the Capital
Appreciation Portfolio and International Portfolio, and their registration with
the Securities and Exchange Commission and with various states are being
amortized over a sixty month period. The amortization of the expenses is based
on expected assets under management over the sixty month period and was
completed as of November 30, 1994.
K. Trust expenses:
Expenses incurred by the Trust with respect to any two or more Portfolios are
allocated in proportion to the net assets of each Portfolio, except where
allocation of direct expense to each Portfolio or an alternative allocation
method can be more fairly made.
NOTE 2. PURCHASE AND SALES OF SECURITIES
Purchases and sales of securities during the year ended November 30, 1994
(excluding U.S. Government securities, short-term securities, options written,
futures contracts and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Tax-Exempt Bond Portfolio $ 85,891,633 $ 92,936,948
International Portfolio 284,394,729 241,395,877
Capital Appreciation Portfolio 813,729,895 790,783,208
</TABLE>
There were no purchases or sales of U.S. Government securities in the
Tax-Exempt Bond Portfolio, International Portfolio and Capital Appreciation
Portfolio during the year ended November 30, 1994.
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Adviser, Phoenix Investment
Counsel, Inc., is entitled to a fee, payable within five days after the end of
each month. Effective January 1, 1994, the Trust pays the Adviser a fee based
upon the following annual rates as a percentage of the average aggregate daily
net asset values of each Portfolio:
<TABLE>
<CAPTION>
1st $1-2 $2+
$1 Billion Billion Billion
<S> <C> <C> <C>
Tax-Exempt Bond Portfolio 0.45% 0.40% 0.35%
International Portfolio 0.75% 0.70% 0.65%
Capital Appreciation Portfolio 0.75% 0.70% 0.65%
</TABLE>
Prior to January 1, 1994, the investment advisory agreement provided for a
fee payable at an annual rate of 0.50% of the average of the aggregate daily net
asset values of each Portfolio up to $500 million; 0.45% of such value between
$500 million and $1 billion; and 0.40% of such value in excess of $1 billion.
The International Portfolio and Capital Appreciation Portfolio paid an
additional fee to the Adviser at an annual rate of 0.25% of its average daily
net asset value.
The Investment Adviser has agreed to reimburse the Trust for the amount, if
any, by which the total operating and management expenses (including the
advisory fee, but excluding interest, taxes, brokerage fees and commissions and
extraordinary expenses) of any Portfolio for any fiscal year exceed the level of
expenses which such Portfolio is permitted to bear under the most restrictive
expense limitation imposed on mutual funds by any state in which shares of such
Portfolio are then qualified for sale.
The Investment Adviser's parent, Phoenix Equity Planning Corporation
(PEPCO), which serves as the National Distributor of the Trust's shares,
received gross selling commissions of $362,598 for Class A shares and $5,747 of
deferred sales charges from the redemption of Class B shares during the year
ended November 30, 1994. In addition, each Portfolio (except the Endowment
Portfolios) pays PEPCO a distribution fee based on an annual rate of 0.25% for
Class A shares and 1.00% for Class B shares applied to the average daily net
assets of each Portfolio. The distributor has advised the Trust that of the
total amount expensed for the year ended November 30, 1994, $366,941 was earned
by the Distributor and $1,518,654 was earned by unaffiliated Participants. As
Financial Agent to the Trust and to each Portfolio, PEPCO received an aggregate
of $231,177 for bookkeeping, pricing and other services rendered to each
Portfolio during the year. PEPCO, the Trust's Transfer Agent, has an agreement
with State Street Bank and Trust, whereby, effective June 1, 1994, State Street
received fees as a subcontractor for transfer agent work performed for the
Portfolios. Transfer agent fees for the year ended November 30, 1994 include
$424,179 related to State Street's services as subcontractor from June 1, 1994.
Prior to June 1, 1994 State Street Bank and Trust was the Transfer Agent, and
PEPCO had an agreement with State Street, whereby, effective December 1, 1988,
PEPCO received fees as a subcontractor for transfer agent work performed for the
Portfolios. Transfer agent fees for the year ended November 30, 1994 include
$258,110 related to PEPCO services as subcontractor and $424,180 as Transfer
Agent, net of subcontracting fees that are paid to State Street Bank and Trust.
At November 30, 1994, Phoenix Home Life Mutual Insurance Company and its
affiliates held Phoenix Multi- Portfolio Fund shares which aggregated the
following:
<TABLE>
<CAPTION>
Aggregate
Shares Net Asset Value
<S> <C> <C>
Tax-Exempt Bond Portfolio--Class
A 15,726 $ 158,673
International Portfolio--Class A 977,143 12,341,321
</TABLE>
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4. RECLASS OF CAPITAL ACCOUNTS
In accordance with recently approved accounting pronouncements, the Portfolios
of the Trust have recorded several reclassifications in the capital accounts.
These reclassifications have no impact on the net asset value of the Portfolios
and are designed generally to present undistributed income and realized gains on
a tax basis which is considered to be more informative to the shareholder. As of
December 1, 1993, the Portfolios recorded the following reclassifications:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gains (losses) interest
<S> <C> <C> <C>
Tax-Exempt Bond
Portfolio $81,640 $220,914 $(302,554)
Capital Appreciation
Portfolio 63,053 (57,874) (5,179)
International Portfolio 9,359 415,439 (424,798)
</TABLE>
As of November 30, 1994, the Portfolios recorded the following
reclassifications:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gains (losses) interest
<S> <C> <C> <C>
Tax-Exempt Bond
Portfolio $ 442,330 $(614,655) $172,325
Capital Appreciation
Portfolio 15,509 1,683 (17,192)
International Portfolio (404,115) 369,949 34,166
</TABLE>
TAX INFORMATION NOTICE (UNAUDITED)
For federal income tax purposes the following information is furnished with
respect to the distributions of the Trust:
The Capital Appreciation Portfolio distributed to Class A shareholders of record
June 22, 1994 and payable June 29, 1994 a long-term capital gains dividend of
$0.073. This amount will be reported on the 1994 U.S. Treasury Department Form
1099-DIV.
Shareholders will receive a 1994 U.S. Treasury Department Form 1099-DIV in
January of 1995. This form will reflect the total of all distributions which
are taxable for the calendar year 1994.
This report is not authorized for distribution to prospective investors in the
Phoenix Multi-Portfolio Fund unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Phoenix Multi-Portfolio Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Tax-Exempt Bond Portfolio, the Capital Appreciation Portfolio and the
International Portfolio (constituting separate series of the Multi-Portfolio
Fund, hereafter referred to as the "Fund") at November 30, 1994, the results of
each of their operations for the year then ended, the changes in each of their
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1994 by
correspondence with the custodians and brokers (and the application of
alternative auditing procedures where confirmations from brokers were not
received), provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
January 11, 1995
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
101 Munson Street
Greenfield, MA 01301
Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Leroy Keith, Jr.
Philip R. McLoughlin
James M. Oates
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Officers
Philip R. McLoughlin, President
David L. Albrycht, Vice President
James M. Dolan, Vice President
Jeanne H. Dorey, Vice President
Catherine Dudley, Vice President
Thomas S. Melvin, Jr., Vice President
William R. Moyer, Vice President
Scott C. Noble, Vice President
Barbara Rubin, Vice President
Leonard J. Saltiel, Vice President
James D. Wehr, Vice President
John T. Wilson, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
Phoenix Investment Counsel, Inc.
One American Row
Hartford, CT 06115-2520
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, MA 02101
Custodian (International Portfolio)
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Legal Counsel
Jorden, Burt, Berenson & Klingensmith
Suite 400 East
1025 Thomas Jefferson Street N.W.
Washington, D.C. 20007-0805
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
<TABLE>
<CAPTION>
<S> <C>
Included in Part A: Financial Highlights
Included in Part B: Financial Statements and Notes Thereto, and Report of
Independent Accountants are included in the Annual Report to Shareholders for the
year ended November 30, 1994, incorporated by reference.
Included in Part C: Consent of Independent Accountants
</TABLE>
(b) Exhibits:
<TABLE>
<CAPTION>
<S> <C>
1.1 Agreement and Declaration of Trust, filed with Registration Statement on December
31, 1987 and incorporated herein by reference.
1.2 Amendment to Declaration of Trust, filed with Post-Effective Amendment No. 2 on
September 1, 1989, and incorporated herein by reference.
1.3 Amendment to Declaration of Trust, filed with Post-Effective Amendment No. 8 on
April 8, 1993, and incorporated herein by reference.
1.4 Amendment to Declaration of Trust adding the Phoenix Real Estate Securities
Portfolio, filed with Post- Effective Amendment No. 14 on March 1, 1995, and
incorporated herein by reference.
1.5 Amendment to Declaration of Trust designating Classes of Shares, filed with
Post-Effective Amendment No. 14 on March 1, 1995, and incorporated herein by
reference.
1.6 Amendment to Declaration of Trust adding the Phoenix Emerging Markets Bond
Portfolio. [To be filed by amendment.]
2. Not applicable.
3. Not applicable.
4 Reference is made to Article III of Registrant's Agreement and Declaration of Trust,
as amended, and filed with those Registration Statements referred to in Exhibit 1,
above.
5. Form of Investment Advisory Agreement between the Registrant and Phoenix Investment
Counsel, Inc. covering the Phoenix Tax-Exempt Bond, Phoenix Capital Appreciation,
Phoenix International, Phoenix Endowment Equity and Phoenix Endowment Fixed Income
Portfolios, filed with Post-Effective Amendment No. 12 on April 1, 1994, and
incorporated herein by reference.
5.1 Form of Investment Advisory Agreement between Registrant and Phoenix Realty
Securities, Inc. covering the Phoenix Real Estate Securities Portfolio, filed with
Post-Effective Amendment No. 14 on March 1, 1995, and incorporated herein by
reference.
5.2 Form of Subadvisory Agreement among the Registrant, Phoenix Realty Securities, Inc.
and ABKB/LaSalle Partners Limited Partnership, filed with Post-Effective Amendment
No. 14 on March 1, 1995, and incorporated herein by reference.
6.1 Form of Distribution Agreement for Class A shares between the Registrant and Phoenix
Equity Planning Corporation, filed with Post-Effective Amendment No. 10 on December
13, 1993, and incorporated herein by reference.
6.1a Form of Distribution Agreement for Class B shares between Registrant and Phoenix
Equity Planning Corporation, filed with Post-Effective Amendment No. 10 on December
13, 1993, and incorporated herein by reference.
6.2 Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers,
filed with Post-Effective Amendment No. 10 on December 13, 1993, and incorporated
herein by reference.
C-1
<PAGE>
6.3 Form of Broker Agreement, filed with Pre-Effective Amendment No. 1 on May 19, 1988
and incorporated herein by reference.
7. Not applicable.
8.1 Custodian Contract between Registrant and State Street Bank and Trust Company, filed
with Pre-Effective Amendment No. 2 on July 7, 1988 and incorporated herein by
reference.
8.2 Schedule A to Custodian Contract between Registrant and State Street Bank and Trust
Company, filed with Post-Effective Amendment No. 3 on October 30, 1989 and
incorporated herein by reference.
8.3 Custodian Agreement between Registrant and Brown Brothers Harriman & Co. covering
the Phoenix International Portfolio, filed with Post-Effective Amendment No. 13 on
December 12, 1994 and incorporated herein by reference.
9.1 Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation, filed with Post-Effective Amendment No. 13 on December 12, 1994 and
incorporated herein by reference.
9.2 Transfer Agency and Service Agreement between Registrant and Phoenix Equity Planning
Corporation, filed with Post-Effective Amendment No. 13 on December 12, 1994 and
incorporated herein by reference.
9.3 Sub-Transfer Agency Agreement between Phoenix Equity Planning Corporation and State
Street Bank and Trust Company, filed with Post-Effective Amendment No. 13 on
December 12, 1994 and incorporated herein by reference.
10.1 Opinion and Consent of Counsel covering shares of the Phoenix Tax-Exempt Bond
Portfolio, filed with Pre-Effective Amendment No. 2 on July 7, 1988, and
incorporated herein by reference.
10.2 Opinion and Consent of Counsel covering shares of the Phoenix Capital Appreciation
Portfolio and the Phoenix International Portfolio, filed with Post-Effective
Amendment No. 3 on October 30, 1989 and incorporated herein by reference.
10.3 Opinion and Consent of Counsel covering shares of the Phoenix Endowment Equity
Portfolio and Endowment Fixed-Income Portfolio, filed with Post-Effective Amendment
No. 8 on April 8, 1993, and incorporated herein by reference.
10.4 Opinion and Consent of Counsel covering shares of the Phoenix Real Estate Securities
Portfolio, filed with Post-Effective Amendment No. 14 on March 1, 1995, and
incorporated herein by reference.
10.5 Opinion and Consent of Counsel covering shares of the Phoenix Emerging Markets Bond
Portfolio. [To be filed by amendment.]
11. Consent of Independent Accountants, filed herewith.
12. Not applicable.
13. Initial Capital Agreement, filed with Pre-Effective Amendment No. 2 July 7, 1988,
and incorporated herein by reference.
14.1 Custodial Agreement and supporting documentation and information relating to
Internal Revenue Code Section 403(b) (7) tax sheltered accounts, filed with
Post-Effective Amendment No. 3 on October 30, 1989, and incorporated herein by
reference.
14.2 Custodial Agreement and supporting documentation and information relating to
Individual Retirement Accounts ("IRAs"), filed with Post-Effective Amendment No. 3
on October 30, 1989, and incorporated herein by reference.
15.1 Class A Shares Distribution Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940, filed with Post-Effective Amendment No. 10 on December 13, 1993, and
incorporated herein by reference.
15.1a Class B Shares Distribution Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940, filed with Post-Effective Amendment No. 10 on December 13, 1993, and
incorporated herein by reference.
16. Not applicable.
C-2
<PAGE>
17. Not applicable.
18. Powers of attorney, filed with Post-Effective Amendment No. 13 on December 12, 1994
and incorporated herein by reference and filed with Post-Effective Amendment No. 9
on October 15, 1993 and incorporated herein by reference.
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities
The following information is given as of April 30, 1995.
<TABLE>
<CAPTION>
Number of
Title of Class Shareholder Accounts
- ---------------------------------- ----------------------
<S> <C> <C>
Shares of Beneficial Interest, Class A 4,587
$1 par value, of the Phoenix Class B 76
Tax-Exempt Bond Portfolio
Shares of Beneficial Interest, Class A 16,771
$1 par value of the Phoenix Class B 370
International Portfolio
Shares of Beneficial Interest, Class A 46,944
$1 par value, of the Phoenix Class B 445
Capital Appreciation Portfolio
Shares of Beneficial Interest, 10
$1 par value, of the Phoenix
Endowment Equity Portfolio
Shares of Beneficial Interest, 6
$1 par value, of the Phoenix
Endowment Fixed-Income Portfolio
Shares of Beneficial Interest, Class A 0
$1 par value, of the Real Estate Class B 0
Securities Portfolio
Shares of Beneficial Interest, Class A 0
$1 par value, of the Phoenix Class B 0
Emerging Markets Portfolio
</TABLE>
Item 27. Indemnification
Under the Agreement and Declaration of Trust establishing the Registrant
any present or former Trustee or officer of the Registrant and any person who
serves at the Registrant's request as a director, officer or trustee of
another organization in which the Registrant has any interest as a
shareholder, creditor or otherwise is indemnified against all liabilities
incurred in connection with the defense or disposition of any action, suit or
other proceeding in which he may be or may have been involved as a party or
otherwise by reason of being or having been such a Trustee, officer or
director, except with respect to any matter as to which he shall have been
finally adjudicated in any such action, suit or other proceeding not to have
acted in good faith in the reasonable belief that his action was in or not
opposed to the best interest of the Registrant and with respect to any
liability to the Registrant or its shareholders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or controlling
person, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of the Investment Advisers
Phoenix Investment Counsel, Inc.
Phoenix Investment Counsel, Inc., a registered investment adviser which
serves as an investment adviser to the Registrant, also serves as investment
adviser to other registered investment companies and as subadviser to other
registered investment companies.
C-3
<PAGE>
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or
officer of Phoenix Investment Counsel, Inc. is, or at any time during the
past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name Business and other connections
- --------------------------- ------------------------------------------------------------------------
<S> <C>
Robert W. Fiondella Chairman, President and Chief Executive Officer, Phoenix Home Life
Director Mutual Insurance Company. President, PM Holdings, Inc. Director, Phoenix
Equity Planning Corporation, Phoenix Securities Group, Inc., National
Securities & Research Corporation, PM Holdings, Inc., Townsend Financial
Advisers, Inc., Phoenix Realty Advisors, Inc., Phoenix Realty Investors,
Inc., Phoenix Realty Securities, Inc. and Phoenix Realty Group, Inc.
Martin J. Gavin Senior Vice President, Investment Products, Phoenix Home Life Mutual
Director and Insurance Company. Director and Executive Vice President, Phoenix Equity
Executive Vice President Planning Corporation, Phoenix Securities Group, Inc., and National
Securities & Research Corporation. Director, W.S. Griffith & Co., Inc.
and Townsend Financial Advisers, Inc. Director and Vice President, PM
Holdings, Inc. Executive Vice President, Phoenix Asset Reserve, Phoenix
California Tax-Exempt Bonds, Inc., Phoenix Equity Opportunities Fund,
Phoenix Income and Growth Fund, Phoenix Multi-Sector Fixed Income Fund,
Inc., and Phoenix Worldwide Opportunities Fund.
Michael E. Haylon Senior Vice President, Securities Investments, Phoenix Home Life Mutual
Director and Insurance Company. Vice President, Phoenix Series Fund, The Phoenix Edge
President Series Fund, and Phoenix Multi-Sector Fixed Income Fund, Inc. Director
and Executive Vice President, National Securities & Research
Corporation.
Philip R. McLoughlin Executive Vice President and Chief Investment Officer, and Director
Director and Chairman Phoenix Home Life Mutual Insurance Company. Director/Trustee of the
Phoenix Funds. Director and President, Phoenix Equity Planning
Corporation, and Phoenix Securities Group, Inc. Director, Chairman, and
Chief Executive Officer, National Securities & Research Corporation.
Director, Phoenix Re Corporation (Delaware), W.S. Griffith & Co., Inc.,
Townsend Financial Advisers, Inc., Phoenix Realty Group, Inc., Phoenix
Realty Advisors, Inc., Phoenix Realty Investors, Inc. and Phoenix Realty
Securities Inc. Director and Vice President, PM Holdings, Inc., World
Trust Fund.
Richard C. Shaw Senior Vice President, International and Corporate Development, Phoenix
Director and Home Life Mutual Insurance Company. Chairman, American Phoenix
Senior Vice President Corporation. President, Worldwide Phoenix, Limited. Director, American
Phoenix Investment Portfolios and National Securities & Research
Corporation. Executive Vice President, Offshore Investment Funds,
Phoenix Equity Planning Corporation. Director and President, Worldwide
Phoenix Offshore, Inc.
Dona D. Young Executive Vice President, Individual Sales & Marketing, and General
Director Counsel, Phoenix Home Life Mutual Insurance Company. Director, Executive
Vice President and General Counsel, Phoenix American Life Insurance
Company. Director and Vice President, PM Holdings, Inc. Director,
Phoenix Securities Group, Inc., 238 Columbus Blvd., Inc., American
Phoenix Life and Reassurance Company, PHL Variable Insurance Company,
Worldwide Phoenix Offshore, Inc., Phoenix Equity Planning Corporation,
Phoenix Realty Securities, Inc., Phoenix Realty Group, Inc., W.S.
Griffith & Co., Inc., and Townsend Financial Advisers, Inc.
William J. Newman Chief Investment Strategist, Phoenix Home Life Mutual Insurance Company.
Executive Vice President
Paul A. Atkins Vice President, Institutional Investment Sales, Phoenix Home Life Mutual
Senior Vice President Insurance Company.
C-4
<PAGE>
Name Business and other connections
--------------------------- ------------------------------------------------------------------------
William R. Moyer Vice President, Investment Products Finance, Phoenix Home Life Mutual
Senior Vice President, Insurance Company. Senior Vice President, Finance, and Treasurer,
Finance, and Treasurer Phoenix Equity Planning Corporation, and Phoenix Securities Group, Inc.
Senior Vice President, Finance, and Treasurer, National Securities &
Research Corporation. Senior Vice President, Chief Financial Officer and
Treasurer, W.S. Griffith & Co., Inc. and Townsend Financial Advisers,
Inc. Vice President, the Phoenix Funds.
David L. Albrycht Portfolio Manager, Phoenix Home Life Mutual Insurance Company. Vice
Vice President President, Phoenix Asset Reserve, Phoenix Multi-Portfolio Fund and
Phoenix Multi-Sector Fixed Income Fund, Inc.
Michael K. Arends Portfolio Manager, Phoenix Home Life Mutual Insurance Company. Vice
Vice President President, Phoenix Series Fund, Phoenix Equity Opportunities Fund and
National Securities & Research Corporation. Portfolio Manager, Kemper
Investment Portfolio Growth Fund (until 1994).
Patricia A. Bannan Vice President, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Series Fund and The Phoenix Edge Series
Fund. Executive Vice President, National Securities & Research
Corporation.
Holly S. Barrett
Vice President Regional Vice President, Phoenix Home Life Mutual Insurance Company.
Curtiss O. Barrows Portfolio Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Series Fund, The Phoenix Edge Series
Fund, and National Securities & Research Corporation.
Sandra L. Becker Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
Kathleen A. Bloomquist Second Vice President, Institutional Client Relations/Service, Phoenix
Vice President Home Life Mutual Insurance Company. Vice President, Worldwide Phoenix
Limited.
James C. Bly Regional Group Pension Manager, Phoenix Home Life Mutual Insurance
Vice President Company.
Nathaniel C. Brinn Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
Mary E. Canning Associate Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, Phoenix Series Fund and The Phoenix
Edge Series Fund.
Paul M. Chute Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
Nelson Correa Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
James M. Dolan Vice President and Compliance Officer, Phoenix Equity Planning
Vice President, Assistant Corporation. Vice President, the Phoenix Funds, and National Securities
Clerk & Research Corporation. Vice President and Chief Compliance Officer,
and Assistant Secretary Phoenix Realty Advisors, Inc. and Chief Compliance Officer, Phoenix
Realty Securities, Inc.
Jeanne H. Dorey Portfolio Manager, International, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, The Phoenix Edge Series Fund, Phoenix
Multi-Portfolio Fund, Phoenix Worldwide Opportunities Fund and National
Securities & Research Corporation.
Catherine Dudley Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Multi-Portfolio Fund, Phoenix Series
Fund, and National Securities & Research Corporation. Investment
Officer, The Phoenix Edge Series Fund.
John M. Hamlin Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company.
C-5
<PAGE>
Name Business and other connections
--------------------------- ------------------------------------------------------------------------
Jeanne T. Hanley Managing Director, Common Stock Research, Phoenix Home Life Mutual
Vice President Insurance Company, Vice President, The Phoenix Edge Series Fund, Phoenix
Series Fund and National Securities & Research Corporation.
Christopher J. Kelleher Portfolio Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Series Fund, The Phoenix Edge Series
Fund, and National Securities & Research Corporation.
Peter S. Lannigan Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Multi-Portfolio Fund. Associate
Director, Bond Rating Group, Standard & Poor's Corp. (until 1993).
Michael R. Matty Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Series Fund, National Securities &
Research Corporation.
John J. McDonald Associate Portfolio Manager, Phoenix Home Life Mutual Insurance Company.
Vice President Vice President, The Phoenix Edge Series Fund.
Thomas S. Melvin, Jr. Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Multi-Portfolio Fund, and National
Securities & Research Corporation.
Robert J. Milnamow Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Total Return Fund, Inc., The Phoenix
Edge Series Fund, Phoenix Equity Opportunities Fund, and National
Securities & Research Corporation.
Charles L. Olson Regional Marketing Manager, Phoenix Home Life Mutual Insurance Company.
Vice President
Lawrence D. Reitman Director, Corporate Portfolio, Phoenix Home Life Mutual Insurance
Vice President Company.
Amy L. Robinson Managing Director, Securities Administration, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, The Phoenix Edge Series Fund, Phoenix
Series Fund and National Securities & Research Corporation.
Christopher J. Saner Director, Corporate Portfolio, Phoenix Home Life Mutual Insurance
Vice President Company.
David M. Schans, C.L.U. Regional Group Pension Manager, Phoenix Home Life Mutual Insurance
Vice President Company.
Dorothy J. Skaret Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Series Fund, The Phoenix Edge Series
Fund, National Securities & Research Corporation and Phoenix Realty
Securities, Inc.
Rosemary T. Strekl Vice President, Private Placements, Phoenix Home Life Mutual Insurance
Vice President Company.
James D. Wehr Managing Director, Public Fixed Income, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, Phoenix Multi-Portfolio Fund, Phoenix
Series Fund, The Phoenix Edge Series Fund, Phoenix California Tax Exempt
Bonds, Inc., and National Securities & Research Corporation.
John T. Wilson Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Multi-Portfolio Fund, The Phoenix Edge
Series Fund, Phoenix Worldwide Opportunities Fund and National
Securities & Research Corporation.
Anthony J. Zeppetella Vice President, Portfolio Management, Phoenix Home Life Mutual Insurance
Vice President Company.
C-6
<PAGE>
Name Business and other connections
--------------------------- ------------------------------------------------------------------------
G. Jeffrey Bohne Vice President and General Manager, Phoenix Home Life Mutual Insurance
Clerk Company. Vice President, Transfer Agent Operations, Phoenix Equity
Planning Corporation. Secretary, the Phoenix Funds. Clerk, Phoenix Total
Return Fund, Inc.
Patricia O. McLaughlin Counsel, Phoenix Home Life Mutual Insurance Company. Secretary, National
Secretary and Assistant Securities & Research Corporation, W.S. Griffith & Co., Inc. and
Clerk Townsend Financial Advisers, Inc. Assistant Secretary, Phoenix Realty
Securities, Inc.
</TABLE>
Phoenix Realty Securities, Inc.
Phoenix Realty Securities, Inc., is a registered investment adviser which
serves as investment adviser to the Registrant's Real Estate Securities
Portfolio.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or
officer of Phoenix Realty Securities, Inc. is, or at any time during the past
two years has been, engaged for his or her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name Business and other connections
--------------------------- ------------------------------------------------------------------------
<S> <C>
Robert W. Fiondella Chairman, President and Chief Executive Officer, Phoenix Home Life
Director Mutual Insurance Company. Director, Phoenix Equity Planning Corporation,
Phoenix Securities Group, Inc., National Securities & Research
Corporation, Townsend Financial Advisers, Inc., Phoenix Realty Advisors,
Inc., Phoenix Realty Investors, Inc. and Phoenix Realty Group, Inc.
Director and President of PM Holdings, Inc.
Philip R. McLoughlin Executive Vice President, Investments, and Director, Phoenix Home Life
Director Mutual Insurance Company. Director/Trustee, President, Phoenix Funds.
Director and President, Phoenix Equity Planning Corporation, and Phoenix
Securities Group, Inc. Director, Chairman, and Chief Executive Officer,
National Securities & Research Corporation. Director and Vice President,
PM Holdings, Inc., Director, Phoenix Re Corporation (Delaware)., World
Trust Fund, W.S. Griffith & Co., Townsend Financial Advisers, Inc.,
Phoenix Realty Group, Inc., Phoenix Realty Advisors, Inc., Phoenix
Realty Investors, Inc. and Phoenix Investment Counsel, Inc.
Scott C. Noble Senior Vice President, Real Estate, Phoenix Home Life Mutual Insurance
Director and Chief Company. Director and Executive Vice President, Phoenix Real Estate
Executive Officer Securities, Inc. Vice President, Phoenix Multi-Portfolio Fund and The
Phoenix Edge Series Fund. Director and President, Phoenix Founders,
Inc., Phoenix Realty Advisors, Inc. and Phoenix Realty Group, Inc.
Director, President and Chief Executive Officer, Phoenix Realty
Investors, Inc.
Charles J. Paydos Executive Vice President and Director, Phoenix Home Life Mutual
Director Insurance Company. Director, Phoenix Equity Planning Corporation,
National Securities & Research Corporation, W. S. Griffith & Co., Inc.,
Townsend Financial Advisers, Inc., Phoenix Securities Group, Inc., and
Phoenix Realty Group, Inc. Director and Vice President, PM Holdings,
Inc.
David W. Searfoss Executive Vice President and Chief Financial Officer, Phoenix Home Life
Director and Treasurer Mutual Insurance Company. Director, Phoenix Equity Planning Corporation.
Director, Vice President and Treasurer, PM Holdings, Inc. Director and
Treasurer, Phoenix Realty Group, Inc. Treasurer, Phoenix Realty
Advisors, Inc. and Phoenix Realty Investors, Inc.
C-7
<PAGE>
Name Business and other connections
--------------------------- ------------------------------------------------------------------------
Dona D. Young Executive Vice President, Individual Sales & Marketing, and General
Director Counsel, Phoenix Home Life Mutual Insurance Company. Director, Executive
Vice President and General Counsel, Phoenix American Life Insurance
Company. Director and Vice President, PM Holdings, Inc. Director, 238
Columbus Blvd., Inc., American Phoenix Life and Reassurance Company, PHL
Variable Insurance Company, Worldwide Phoenix Offshore, Inc., Phoenix
Equity Planning Corporation, Phoenix Investment Counsel, Inc., Townsend
Financial Advisers, Inc., W.S. Griffith & Co., Inc., and Phoenix Realty
Group, Inc.
Barbara Rubin Vice President, Real Estate, Phoenix Home Life Mutual Insurance Company.
President Vice President, Phoenix Multi-Portfolio Fund and The Phoenix Edge Series
Fund. Director, Phoenix Home Life Federal Credit Union, VNA Health Care,
Inc. and Broad Park Development Corporation. Vice President, 238
Columbus Blvd., Inc., Director and Vice President, Phoenix Founders,
Inc. Vice President, Phoenix Real Estate Securities, Inc. Executive Vice
President, Phoenix Realty Group, Inc.
Steven R. Blomquist Managing Director, Real Estate, Phoenix Home Life Mutual Insurance
Senior Vice President Company. Senior Vice President, Phoenix Realty Group, Inc. Executive
Vice President, Phoenix Realty Investors, Inc. and
Douglas G. Denyer Director, Real Estate, Phoenix Home Life Mutual Insurance Company.
Senior Vice President Senior Vice President and Treasurer, Phoenix Realty Group, Inc. Senior
Vice President, Phoenix Realty Advisors, Inc.
George Heim Managing Director, Real Estate, Phoenix Home Life Mutual Insurance
Senior Vice President Company. Senior Vice President, Phoenix Realty Group, Inc.
Terence P. O'Day Managing Director, Real Estate, Phoenix Home Life Mutual Insurance
Senior Vice President Company. Senior Vice President, Phoenix Realty Advisors, Inc. and
Phoenix Realty Group, Inc.
James M. Dolan Vice President and Compliance Officer, Phoenix Equity Planning
Chief Compliance Officer Corporation and Phoenix Realty Advisors, Inc. Vice President, the
Phoenix Funds, and National Securities & Research Corporation.
Edward F. Kaeser, Jr. Director, Real Estate, Phoenix Home Life Mutual Insurance Company. Vice
Vice President President, Phoenix Realty Advisors, Inc. and Phoenix Realty Group, Inc.
Rodney E. Pelletier Director, Real Estate, Phoenix Home Life Mutual Insurance Company. Vice
Vice President President, Phoenix Realty Group, Inc.
Antonia G. Rhodus Director, Vice President, Phoenix Home Life Mutual Insurance Company.
Vice President Vice President, Phoenix Realty Group, Inc. and Phoenix Realty Advisors,
Inc.
Dorothy J. Skaret Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Series Fund, The Phoenix Edge Series
Fund, Phoenix Investment Counsel, Inc. and National Securities and
Research Corporation.
Stephen Swett Director, Real Estate, Phoenix Home Life Mutual Insurance Company. Vice
Vice President President, Phoenix Realty Group, Inc.
Keith D. Robbins Vice President and Investment Counsel, Phoenix Home Life Mutual
Secretary Insurance Company. Secretary, Phoenix Equity Planning Corporation, PM
Holdings, Inc., Phoenix Securities Group, Inc., Worldwide Phoenix
Offshore, Inc., Phoenix Realty Advisors, Inc., Phoenix Realty Investors,
Inc. and Phoenix Realty Group, Inc.
</TABLE>
The respective principal addresses of the companies or other entities
named above are as follows:
<TABLE>
<CAPTION>
<S> <C>
American Phoenix Corporation }302 West Main Street
}Avon, CT 06001
American Phoenix Investment Portfolios }13, rue Goethe
}L-2014 Luxembourg
C-8
<PAGE>
American Phoenix Life and Reassurance Company }One American Row
}Hartford, CT 06115
Kemper Financial Services }120 South LaSalle Street
}Chicago, IL 60603
National Securities & Research Corporation }One American Row
}Hartford, CT 06115
PHL Variable Insurance Company }One American Row
}Hartford, CT 06115
Phoenix America Life Insurance Company }One American Row
}Hartford, CT 06115
Phoenix Equity Planning Corporation }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
Phoenix Home Life Mutual Insurance Company }One American Row
}Hartford, CT 06115
Phoenix Realty Advisors, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Group, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Investors, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Securities, Inc. }One American Row
}Hartford, CT 06115
Phoenix Re Corporation (Delaware) }80 Maiden Lane
}New York, NY 01301
Phoenix Securities Group, Inc. }One American Row
}Hartford, CT 06115
PM Holdings, Inc. }One American Row
}Hartford, CT 06115
The Phoenix Funds }101 Munson Street
}Greenfield, MA 01301
Townsend Financial Advisers, Inc. }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
238 Columbus Blvd., Inc. }One American Row
}Hartford, CT 06115
W. S. Griffith & Co., Inc. }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
World Trust Fund }KREDIETRUST
}Societe Anonyme
}11, rue Aldringen
}L-2690 Luxembourg
}R.C. Luxembourg B 10.750
Worldwide Phoenix Limited }41 Cedar House
}Hamilton HM 12, Bermuda
C-9
<PAGE>
Worldwide Phoenix Offshore, Inc. }One American Row
}Hartford, CT 06115
</TABLE>
Item 29. Principal Underwriters
Phoenix Equity Planning Corporation ("Equity Planning"), which is located
at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200, serves as the principal underwriter of the Registrant's shares.
Equity Planning also acts as principal underwriter for the other Phoenix
Funds and for the variable contracts issued by the Phoenix Home Life Variable
Accumulation Account and Phoenix Home Life Variable Universal Life Account.
Directors and executive officers of Phoenix Equity Planning Corporation
are as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ---------------------------- ------------------------------- ---------------------------
<S> <C> <C>
Robert W. Fiondella Director None
One American Row
Hartford, CT 06115
Martin J. Gavin Director and None
100 Bright Meadow Blvd. Executive Vice President
P.O. Box 2200
Enfield, CT 06083-2200
Philip R. McLoughlin Director and Trustee and President
One American Row President
Hartford, CT 06115
Charles J. Paydos Director None
One American Row
Hartford, CT 06115
Dona D. Young Director None
One American Row
Hartford, CT 06115
Richard C. Shaw Executive Vice President, None
One American Row Offshore Investment Funds
Hartford, CT 06115
Leonard J. Saltiel Senior Vice President Vice President
100 Bright Meadow Blvd.
P.0. Box 2200
Enfield, CT 06083-2200
William R. Moyer Senior Vice President, Vice President
100 Bright Meadow Blvd. Finance and Treasurer
P.O. Box 2200
Enfield, CT 06083-2200
G. Jeffrey Bohne Vice President, Secretary
100 Bright Meadow Blvd. Transfer Agent Operations
P.O. Box 2200
Enfield, CT 06083-2200
Nancy G. Curtiss Vice President, Treasurer
100 Bright Meadow Blvd. Fund Accounting
P.O. Box 2200
Enfield, CT 06083-2200
Maris Lambergs Vice President, None
100 Bright Meadow Blvd. National Sales Manager
P.O. Box 2200
Enfield, CT 06083-2200
C-10
<PAGE>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ---------------------------- ------------------------------- ---------------------------
James M. Dolan Vice President and Vice President
100 Bright Meadow Blvd. Compliance Officer;
P.O. Box 2200 Assistant Secretary
Enfield, CT 06083-2200
Elizabeth R. Sadowinski Vice President, None
100 Bright Meadow Blvd. Field and Investor Services
P.O. Box 2200
Enfield, CT 06083-2200
Eugene A. Charon Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Keith D. Robbins Secretary None
</TABLE>
One American Row
Hartford, CT 06115
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder include Registrant's
investment advisers, Phoenix Investment Counsel, Inc. and Phoenix Realty
Securities, Inc.; Registrant's financial agent, transfer agent and principal
underwriter, Phoenix Equity Planning Corporation; Registrant's dividend
disbursing agent, State Street Bank and Trust Company; and Registrant's
custodians, State Street Bank and Trust Company and Brown Brothers Harriman &
Co. (custodian for the Phoenix International Portfolio). The address of the
Secretary of the Trust is 101 Munson Street, Greenfield, Massachusetts 01301;
the address of Phoenix Investment Counsel, Inc. and Phoenix Realty
Securities, Inc. is One American Row, Hartford, Connecticut 06115-2520; the
address of Phoenix Equity Planning Corporation is 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200; the address of the
dividend disbursing agent is P.0. Box 8301, Boston, Massachusetts 02266-8301,
Attention: Phoenix Funds; the address of custodian State Street Bank and
Trust Company is P.0. Box 351, Boston, Massachusetts 02101 and the address
for the custodian of the Phoenix International Portfolio is Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109.
Item 31. Management Services
The information required by this Item is included in the Statement of
Additional Information.
Item 32. Undertakings
The information called for by Item 5A of Form N-1A is contained in the
Fund's annual report to shareholders: accordingly, the Fund hereby undertakes
to furnish each person to whom a prospectus is delivered with a copy of the
Fund's latest annual report, upon request and without charge.
The Trust undertakes, if requested to do so by the holders of at least 10%
of the Trust's outstanding shares, to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or trustees and
to assist to communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, and State of Connecticut
on the 15th day of June, 1995.
PHOENIX MULTI-PORTFOLIO FUND
ATTEST: /s/ Patricia O. McLaughlin
Patricia O. McLaughlin
Assistant Secretary
By: /s/ Philip R. McLoughlin
Philip R. McLoughlin
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities indicated, on this 15th day of June, 1995.
<TABLE>
<CAPTION>
Signature Title
- ----------------------------- -------------------------
<S> <C>
-------------------- Trustee
C. Duane Blinn*
-------------------- Trustee
Robert Chesek*
-------------------- Trustee
E. Virgil Conway*
-------------------- Treasurer (principal
Nancy G. Curtiss** financial and
accounting officer)
-------------------- Trustee
Harry Dalzell-Payne*
-------------------- Trustee
Leroy Keith, Jr.*
/s/Philip R. McLoughlin Trustee and President
--------------------
Philip R. McLoughlin
-------------------- Trustee
James M. Oates*
-------------------- Trustee
Philip R. Reynolds*
-------------------- Trustee
Herbert Roth, Jr.*
-------------------- Trustee
Richard E. Segerson*
-------------------- Trustee
Lowell P. Weicker, Jr.
</TABLE>
*By /s/ Philip R. McLoughlin
-------------------------
*Philip R. McLoughlin pursuant to powers of attorney, copies of which
were filed with Post-Effective Amendment No. 9 under this registration
statement.
**Philip R. McLoughlin pursuant to a power of attorney, filed with Post-
Effective Amendment No. 13 under this registration statement.
S-1(c)
<PAGE>
Exhibit 11
Consent of Independent Accountant
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 16 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated January 11, 1995, relating to
the financial statements and financial highlights appearing in the November
30, 1994 Annual Report to Shareholders of the Tax-Exempt Bond Portfolio,
Capital Appreciation Portfolio and International Portfolio of The Phoenix
Multi-Portfolio Fund, which is also incorporated by reference into the
Registration Statement. We also consent to the reference to us under the
heading "Financial Highlights" in the Prospectus and under the heading
"Financial Statements" in the Statement of Additional Information.
[signature of PRICE WATERHOUSE LLP]
PRICE WATERHOUSE LLP
Boston Massachusetts
, 1995
