PHOENIX MULTI PORTFOLIO FUND
497, 1996-03-08
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                                                                      PROSPECTUS

               PHOENIX
               MULTI-PORTFOLIO FUND
               PROSPECTUS

                                                                   MARCH 8, 1996

                         Phoenix Tax-Exempt Bond Fund
                         Phoenix Capital Appreciation Fund
                         Phoenix International Fund
                         Phoenix Real Estate Securities Fund
                         Phoenix Emerging Markets Bond Fund

                                 P H O E N I X

[Phoenix Duff & Phelps logo] Phoenix Duff & Phelps
<PAGE>

                          PHOENIX MULTI-PORTFOLIO FUND
                               101 Munson Street
                        Greenfield, Massachusetts 01301

                                   PROSPECTUS
                                 March 8, 1996
                        
   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 18). 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." Debt securities issued by foreign 
issuers also entail greater risks of default, untimely interest and principal 
payments, and price volatility than higher rated securities and may present 
problems of liquidation and valuation. 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. Investors should carefully 
consider these risks before investing. 

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. No dealer, salesperson or 
any other person has been authorized to give any information or to make any 
representation, 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, Adviser or Distributor. This Prospectus 
does not constitute an offer to sell or a solicitation of an offer to buy any 
of the securities offered hereby in any state in which, or to any person to 
whom, it is unlawful to make such offer. Neither the delivery of this 
Prospectus nor any sale hereunder shall, under any circumstances, create any 
implication that information herein is correct at any time subsequent to its 
date. Investors should read and retain this Prospectus for future reference. 
Additional information about the Fund is contained in a Statement of 
Additional Information, dated March 8, 1996, which has been filed with the 
Securities and Exchange Commission (the "Commission") and is available upon 
request at no charge by calling (800) 243-4361 or by writing to Phoenix 
Equity Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200, 
Enfield, Connecticut 06083-2200. The Statement of Additional Information is 
incorporated herein by reference. 


   Shares of the Fund are not deposits or obligations of, or guaranteed or 
endorsed by, any bank, credit union, or affiliated entity and are not 
federally insured or otherwise protected by the Federal Deposit Insurance 
Corporation (FDIC), the Federal Reserve Board or any other agency and involve 
investment risk, including possible loss of principal. 

TABLE OF CONTENTS 

INTRODUCTION                                      3 
FUND EXPENSES                                     5 
FINANCIAL HIGHLIGHTS                              7 
PERFORMANCE INFORMATION                          10 
INVESTMENT OBJECTIVES AND POLICIES               11 
  Tax Exempt Bond Portfolio                      11 
  Capital Appreciation Portfolio                 12 
  International Portfolio                        13 
  Emerging Markets Bond Portfolio                15 
  Real Estate Portfolio                          16 
INVESTMENT TECHNIQUES AND RELATED RISKS          18 
INVESTMENT RESTRICTIONS                          22 
PORTFOLIO TURNOVER                               23 
MANAGEMENT OF THE FUND                           23 
DISTRIBUTION PLANS                               25 
HOW TO BUY SHARES                                26 
INVESTOR ACCOUNTS AND SERVICES AVAILABLE         31 
NET ASSET VALUE                                  33 
HOW TO REDEEM SHARES                             34 
DIVIDENDS, DISTRIBUTIONS AND TAXES               35 
ADDITIONAL INFORMATION                           36 
APPENDIX                                         37 

                                      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"). PIC is a subsidiary of 
Phoenix Duff & Phelps Corporation, and prior to November 1, 1995, was an 
indirect subsidiary of Phoenix Home Life Mutual Insurance Company ("Phoenix 
Home Life"). The investment adviser for the Real Estate Portfolio is Phoenix 
Realty Securities, Inc. ("PRS" or the "Adviser"). PRS is a wholly-owned 
indirect subsidiary of 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, management 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 "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, as amended, (the "1940 Act") for all classes 
of all Portfolios. Pursuant to the distribution plan adopted for Class A 
Shares, the Fund shall reimburse the 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 

   The Fund offers two classes of shares of each Portfolio 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"). 
Completed application for the purchase of shares should be mailed to the 
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, 
Boston, MA 02266-8301. 

   Class A Shares are offered to the public at the next determined net asset 
value after receipt of the order by State Street Bank and Trust Company, plus 
a maximum sales charge of 4.75% of the offering price (4.99% of the amount 
invested) on single purchases of less than $50,000. The sales charge for 
Class A Shares is reduced on a graduated scale on single purchases of $50,000 
or more and subject to other conditions stated below. See "How to Buy 
Shares," and "How to Obtain Reduced Sales Charges--Class A Shares" and "Net 
Asset Value". 

   Class B Shares are offered to the public at the next determined net asset 
value after receipt of an order by State Street Bank and Trust Company with 
no sales charge. Class B Shares are subject to a sales charge if they are 
redeemed within five years of purchase. See "How to Buy Shares" and "Deferred 
Sales Charge Alternative--Class B Shares". 

   Shares of each class represent an identical interest in the investment 
portfolio of the Portfolio and have the same rights except that Class B 
Shares bear the cost of the higher distribution fees which cause the Class B 
Shares to have a higher expense ratio and to receive lower dividends than 
Class A Shares. 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 of a Portfolio 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." 

                                      3 
<PAGE>
 
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") issued by governments and 
corporations in foreign countries. 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. Its share price can fluctuate widely 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 300%. Because of PIC's strict "sell" 
discipline, the portfolio's annual turnover rate will probably 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. See "Investment Objectives and 
Policies." 

                                      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 are based on fiscal 
year ended November 30, 1995. 

<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     4.75%           None            4.75%           None            4.75% 
  on Purchases (as 
  percentage of offering 
  price) 
Maximum Sales Load Imposed      None           None            None            None            None 
  on Reinvested 
  Dividends 
Deferred Sales Load             None     5% during the         None     5% during the          None 
  (as a percentage of                    first year,                    first year, 
  original purchase price                decreasing 1%                  decreasing 1% 
  or redemption proceeds,                annually to 2%                 annually to 2% 
  as applicable)                         during the                     during the 4th & 
                                         4th & 5th years;               5th years; 
                                         dropping from 2%               dropping from 2% 
                                         to 0% after the                to 0% after the 
                                         5th year                       5th year 
Redemption Fee                  None           None            None            None            None 
                                (a)                             (a)                             (a) 
Exchange Fee                    None           None            None            None            None 
Annual Fund Operating 
  Expenses 
  (as a percentage of 
  average net assets) 
Management Fees                0.45%           0.45%           0.75%          0.75%            0.75% 
12b-1 Fees (b)                 0.25%           1.00%           0.25%          1.00%            0.25% 
Other Operating Expenses       0.27%           0.27%           0.42%          0.42%            0.70% 
  (After Reimbursement) 
Total Fund Operating           0.97%           1.72%           1.42%          2.17%            1.70% 
Expenses
</TABLE>

<TABLE>
<CAPTION>
                                                    Real                        Emerging         Emerging 
                               International       Estate       Real Estate      Markets         Markets 
                                 Portfolio       Portfolio       Portfolio      Portfolio        Portfolio 
                               -------------     ---------      -----------     ---------        --------- 
                                  (Class B        (Class A        (Class B       (Class A         (Class B 
                                  Shares)         Shares)         Shares)         Shares)         Shares) 
<S>                           <C>                   <C>      <C>                   <C>       <C>
Shareholder Transaction 
  Expenses 
Maximum Sales Load Imposed           None           4.75%           None            4.75%           None 
  on Purchases (as 
  percentage of offering 
  price) 
Maximum Sales Load Imposed           None            None           None            None            None 
  on Reinvested 
  Dividends 
Deferred Sales Load           5% during the          None     5% during the         None     5% during the 
  (as a percentage of         first year,                     first year,                    first year, 
  original purchase price     decreasing 1%                   decreasing 1%                  decreasing 1% 
  or redemption proceeds,     annually to 2%                  annually to 2%                 annually to 2% 
  as applicable)              during the                      during the 4th &               during the 4th & 
                              4th & 5th                       5th years;                     5th years; 
                              years; dropping                 dropping from 2%               dropping from 2% 
                              from 2% to 0%                   to 0% after the                to 0% after the 
                              after the 5th                   5th year                       5th year 
                              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) 
Management Fees                     0.75%           0.75%           0.75%           0.75%           0.75% 
12b-1 Fees (b)                      1.00%           0.25%           1.00%           0.25%           1.00% 
Other Operating Expenses            0.70%           0.30%(c)        0.30%(c)        0.50%(d)        0.50%(d) 
  (After Reimbursement) 
Total Fund Operating                2.45%           1.30%           2.05%           1.50%           2.25% 
Expenses
</TABLE>

  (a) The Trustees may, at their option, impose a redemption fee for Class A 
Shares 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) "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. 

  (c) Phoenix Realty Securities, Inc. has agreed to reimburse the Real Estate 
Securities Portfolio's operating expenses related to Class A Shares and Class 
B Shares for the amount, if any, by which such operating expenses for the 
fiscal year ended November 30, 1996 exceed 1.30% and 2.05%, respectively, of 
the average net assets. Total operating expenses absent expense reimbursement 
equal approximately 2.95% and 3.70%, respectively of average net assets. 

  (d) Phoenix Investment Counsel, Inc. has agreed to reimburse the Emerging 
Markets Portfolio's operating expenses related to Class A Shares and Class B 
Shares for the amount, if any, by which such operating expenses for the 
fiscal year ended November 30, 1996 exceed 1.50% and 2.25%, respectively, of 
the average net assets. Total operating expenses absent expense reimbursement 
equal approximately 2.89% and 3.64%, respectively of average net assets. 

                                      5 
<PAGE>
 
<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 hypothetical 
  $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      $ 77      $ 99       $161 
 Bond Portfolio (Class B Shares)                                     67        84       113        183 
 Capital Appreciation Portfolio (Class A Shares)                     61        90       121        210 
 Capital Appreciation Portfolio (Class B Shares)                     72        98       136        231 
 International Portfolio (Class A Shares)                            64        99       135        239 
 International Portfolio (Class B Shares)                            75       106       151        260 
 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)                         62        93       125        218 
 Emerging Markets Portfolio (Class B Shares)                         73       100       140        240 
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      $ 77      $ 99       $161 
 Bond Portfolio (Class B Shares)                                     17        54        93        183 
 Capital Appreciation Portfolio (Class A Shares)                     61        90       121        210 
 Capital Appreciation Portfolio (Class B Shares)                     22        68       116        231 
 International Portfolio (Class A Shares)                            64        99       135        239 
 International Portfolio (Class B Shares)                            25        76       131        260 
 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)                         62        93       125        218 
 Emerging Markets Portfolio (Class B Shares)                         23        70       120        240 
</TABLE>

  *The purpose of the table above is to help the investor understand the 
various costs and expenses that the investor will bear, directly or 
indirectly. The Example should not be considered a representation of past or 
future expenses. Actual expenses may be greater or less than those shown. See 
"Management of the Fund," "Distribution Plans" and "How To Buy Shares." 

                                      6 
<PAGE>
 
FINANCIAL HIGHLIGHTS 

  The following tables set forth certain financial information for the
respective fiscal years of the Fund. This financial information has been audited
by Price Waterhouse LLP, independent accountants. Their opinion and the Trust's
Financial Statements and notes thereto are incorporated by reference in the
Statement of Additional Information. The Statement of Additional Information and
the Fund's most recent Annual Report (which contains a discussion of each
Portfolio'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 
                    -------------------------------------------------------------------------------------   ------------------- 
                                                                                                   FROM      YEAR       FROM 
                                                                                                INCEPTION   ENDED     INCEPTION 
                                                                                                 7/15/88   NOVEMBER     3/16/94 
                                       YEAR ENDED NOVEMBER 30,                                      TO        30,         TO 
                    1995      1994      1993        1992        1991       1990        1989      11/30/88    1995      11/30/94 
                   -------   -------  ---------   ---------   ---------  ---------   --------   ---------  --------    --------- 
<S>                <C>       <C>       <C>         <C>         <C>        <C>         <C>         <C>        <C>        <C>
Net asset value,                                                                                            
  beginning of                                                                                              
  period           $10.09    $11.58    $11.10      $10.66      $10.37     $10.68      $10.18      $10.00     $10.12     $11.21 
Income from                                                                                                 
  investment                                                                                                
  operations                                                                                                
 Net investment                                                                                             
  income             0.61      0.65      0.60((1))   0.66((1))   0.65((1))  0.65((1))   0.68((1))   0.24((1))  0.53       0.39 
 Net realized and                                                                                           
  unrealized gain                                                                                           
  (loss)             1.34     (1.49)     0.76        0.57        0.29       --          0.52        0.18       1.35      (1.09) 
                   ------    ------    --------    --------    --------  --------    --------     -------     ------    ------- 
  Total from                                                                                                
  investment                                                                                                
  operations         1.95     (0.84)     1.36        1.23        0.94       0.65        1.20        0.42       1.88      (0.70) 
                   ------    ------    --------    --------    --------  --------    --------     -------     ------    ------- 
Less                                                                                                        
  distributions                                                                                             
 Dividends from                                                                                             
  net investment                                                                                            
  income            (0.61)    (0.65)    (0.60)      (0.66)      (0.65)     (0.65)      (0.68)      (0.24)     (0.53)     (0.39) 
 Dividends from                                                                                             
  net realized                                                                                              
  gains             (0.03)     --       (0.28)      (0.13)       --        (0.31)      (0.02)       --        (0.03)      -- 
                   ------    ------    --------    --------    --------  --------    --------     -------     ------    ------- 
  Total                                                                                                     
  distributions     (0.64)    (0.65)    (0.88)      (0.79)      (0.65)     (0.96)      (0.70)      (0.24)     (0.56)     (0.39) 
                   ------    ------    --------    --------    --------  --------    --------     -------     ------    ------- 
Change in net                                                                                               
  asset value        1.31     (1.49)     0.48        0.44        0.29      (0.31)       0.50        0.18       1.32      (1.09) 
                   ------    ------    --------    --------    --------  --------    --------     -------     ------    ------- 
Net asset value,                                                                                            
  end of period    $11.40    $10.09    $11.58      $11.10      $10.66     $10.37      $10.68      $10.18     $11.44     $10.12 
                   ======    ======    ========    ========    ========  ========    ========     =======     ======    ======= 
Total return((2))   19.87%    -7.55%    12.79%      11.92%       9.32%      6.49%      12.13%      11.06%((3))19.07%     -6.42%((4))
Ratios/supplemental                                                                                           
  data:                                                                                                     
Net assets, end                                                                                             
  of period                                                                                                 
  (thousands)    $147,821  $141,623  $171,272     $35,625     $27,093    $20,240     $17,590     $12,226      $3,142    $1,147 
Ratio to average                                                                                            
  net assets of:                                                                                            
 Operating                                                                                                  
  expenses           0.97%     0.96%     0.75%       0.78%       0.94%      1.00%       1.00%       1.00%((3))  1.72%     1.54%((3))
 Net investment                                                                                             
  income             5.65%     5.65%     5.33%       5.92%       6.17%      6.29%       6.55%       6.26%((3))  4.90%     5.07%((3))
Portfolio                                                                                                   
  turnover             25%       54%       62%        145%         99%       130%     161.13%      33.44%((2))    25%       54% 
</TABLE>

((1)) Includes reimbursement of operating expenses by investment adviser of 
      $0.03, $0.04, $0.02, $0.02, $0.09 and $0.05, respectively. 
((2)) Maximum sales charges are 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 
                          -----------------------------------------------------------------    ---------------------- 
                                                                                     From         Year         From 
                                                                                  Inception       Ended     Inception 
                                                                                   11/1/89      November     7/15/94 
                                         Year Ended November 30,                      to           30,          to 
                           1995      1994      1993     1992     1991      1990    11/30/89       1995       11/30/94 
                          ------   --------  -------   -------  -------  -------  ---------    -----------  --------- 
<S>                     <C>         <C>       <C>      <C>      <C>       <C>       <C>          <C>          <C>
Net asset value,                                                                              
  beginning of period   $  12.63    $11.16    $ 8.96   $10.90   $10.27    $10.44    $10.00       $12.60       $12.80 
Income from investment                                                                        
  operations((5))                                                                                  
 Net investment income                                                                        
  (loss)                    0.03((1))(0.01)     --       0.11     0.15      0.15((6)) 0.02((6))   (0.07)((1))  (0.01) 
 Net realized and                                                                             
  unrealized gain                                                                           
  (loss)                    0.42      1.48      2.20    (1.10)    0.69     (0.22)     0.42         0.42        (0.19) 
                           -----    -------    -----    -----     -----    -----    -------     ----------    ------- 
  Total from                                                                                  
  investment operations     0.45      1.47      2.20    (0.99)    0.84     (0.07)     0.44         0.35        (0.20) 
                           -----    -------    -----    -----     -----    -----    -------     ----------    ------- 
Less distributions                                                                            
 Dividends from net                                                                           
  investment income        --         --        --      (0.12)   (0.21)    (0.10)     --           --           -- 
 Dividends from net                                                                           
  realized gains           (0.88)     --        --      (0.64)    --        --        --          (0.88)        -- 
 Distribution in                                                                              
  excess of accumulated                                                                       
  net investment income    --         --        --      (0.19)    --        --        --           --           -- 
                           -----    -------    -----    -----     -----    -----    -------     ----------    ------- 
  Total distributions      (0.88)     --        --      (0.95)   (0.21)    (0.10)     --          (0.88)        -- 
                           -----    -------    -----    -----     -----    -----    -------     ----------    ------- 
Change in net asset                                                                           
  value                    (0.43)     1.47      2.20    (1.94)    0.63     (0.17)     0.44        (0.53)       (0.20) 
                           -----    -------    -----    -----     -----    -----    -------     ----------    ------- 
Net asset value, end                                                                          
  of period             $  12.20    $12.63    $11.16   $ 8.96   $10.90    $10.27    $10.44       $12.07       $12.60 
                           =====    =======    =====    =====     =====    =====    =======     ==========    ======= 
Total return((2))           4.12%    13.17%    24.55%   -9.91%    8.26%    -0.75%    53.53%((3))   3.28%       -1.56%((4)) 
Ratios/supplemental                                                                           
  data:                                                                                       
Net assets, end of                                                                            
  period (thousands)    $129,352  $167,918   $91,196  $26,188  $21,427   $16,583    $1,593       $3,261       $1,991 
Ratio to average net                                                                          
  assets of:                                                                                  
 Operating expenses                                                                                             
                            1.70%     1.47%     1.78%    1.97%    2.09%     1.50%     1.50%((3))   2.50%        1.93%((3)) 
 Net investment income                                                                                          
  (loss)                    0.23%     0.20%    (0.04)%   0.85%    1.29%     1.48%     3.24%((3))  (0.61)%       0.36%((3)) 
Portfolio turnover           236%      186%      191%      82%     128%       99%     --            236%         186% 

                                                                                                 
((1)) Computed using average shares outstanding.                                                 
((2)) Maximum sales charges are not reflected in the total return calculation.   
((3)) Annualized 
((4)) Not annualized 
((5)) Distributions are made in accordance with the prospectus; however, class level per share income 
      from investment operations may vary from anticipated results depending on the time of share 
      purchases and redemptions. 
((6)) Net of reimbursement by Investment Adviser of $0.06 and $3.54, respectively.
</TABLE>

                        CAPITAL APPRECIATION PORTFOLIO 

<TABLE>
<CAPTION>

                                                          Class A                                      Class B 
                          -----------------------------------------------------------------   ----------------------- 
                                                                                     From          Year         From 
                                                                                  Inception        Ended     Inception 
                                                                                   11/1/89       November     7/18/94 
                                         Year Ended November 30,                      to            30,          to 
                           1995      1994      1993     1992     1991      1990    11/30/89        1995       11/30/94 
                          ------   --------  -------   -------  -------  -------  ---------     -----------  --------- 
<S>                       <C>       <C>       <C>      <C>      <C>       <C>       <C>           <C>          <C>
Net asset value,                                                                                
  beginning of period     $18.03    $18.70    $17.95   $16.61   $11.95    $10.29    $10.00        $17.97       $17.68 
Income from investment                                                                          
  operations((5))                                                                                    
 Net investment income                                                                          
  (loss)                    0.05((1))   0.11    0.11     0.15     0.19      0.18((6)) 0.03((6))    (0.12)((1))  (0.01) 
 Net realized and                                                                               
  unrealized gain           4.74      0.10      1.44     2.41     4.64      1.59      0.26          4.75         0.30 
                           -----    -------    -----    -----     -----    -----    -------      ----------    ------- 
  Total from                                                                                    
  investment operations     4.79      0.21      1.55     2.56     4.83      1.77      0.29          4.63         0.29 
                           -----    -------    -----    -----     -----    -----    -------      ----------    ------- 
Less distributions                                                                              
 Dividends from net                                                                             
  investment income        (0.06)    (0.10)    (0.13)   (0.21)   (0.17)    (0.11)     --           (0.02)        -- 
 Dividends from net                                                                             
  realized gains           (0.73)    (0.78)    (0.67)   (1.01)    --        --        --           (0.73)        -- 
                           -----    -------    -----    -----     -----    -----    -------      ----------    ------- 
  Total distributions      (0.79)    (0.88)    (0.80)   (1.22)   (0.17)    (0.11)     --           (0.75)        -- 
                           -----    -------    -----    -----     -----    -----    -------      ----------    ------- 
Change in net asset                                                                             
  value                     4.00     (0.67)     0.75     1.34     4.66      1.66      0.29          3.88         0.29 
                           -----    -------    -----    -----     -----    -----    -------      ----------    ------- 
Net asset value, end                                                                            
  of period               $22.03    $18.03    $18.70   $17.95   $16.61    $11.95    $10.29        $21.85       $17.97 
                           =====    =======    =====    =====     =====    =====    =======      ==========    ======= 
Total return((2))          27.87%     1.03%     8.94%   16.44%   40.78%    17.26%    35.28%((3))   26.92%        1.64%((4)) 
Ratios/supplemental                                                                             
  data:                                                                                         
Net assets, end of                                                                              
  period (thousands)    $487,674  $419,760  $426,027 $234,472 $119,870   $15,840    $1,568       $10,908       $1,519 
Ratio to average net                                                                            
  assets of:                                                                                    
 Operating expenses         1.42%     1.36%     1.34%    1.40%    1.24%     1.50%     1.50%((3))    2.18%        2.05%((3)) 
 Net investment income
  (loss)                    0.28%     0.59%     0.64%    0.93%    1.94%     2.22%     4.68%((3))   (0.58)%      (0.23)%((3)) 
Portfolio turnover           218%      227%      174%     287%     458%      454%     5.28%((3))     218%         227% 

                                                                                                
((1)) Computed using average shares outstanding.                                                
((2)) Maximum sales charges are not reflected in the total return calculation.   
((3)) Annualized 
((4)) Not annualized 
((5)) Distributions are made in accordance with the prospectus; however, class level per share income 
      from investment operations may vary from anticipated results depending on the time of share 
      purchases and redemptions. 
((6)) Includes reimbursement by Investment Adviser of $0.01 and $0.23, respectively.
</TABLE>

                                      8 
<PAGE>

                       REAL ESTATE SECURITIES PORTFOLIO 

<TABLE>
<CAPTION>
                                          CLASS A            CLASS B 
                                       ---------------   ---------------- 
                                       FROM INCEPTION    FROM INCEPTION 
                                         3/1/95 TO          3/1/95 TO 
                                          11/30/95          11/30/95 
                                       ---------------   ---------------- 
<S>                                       <C>                <C>
Net asset value, beginning of 
  period                                  $ 10.00            $10.00 
Income from investment operations 
 Net investment income                       0.43((1))((5))    0.36((1))((5)) 
 Net realized and unrealized gain            0.55              0.56 
                                       --------------    --------------- 
  Total from investment operations           0.98              0.92 
                                       --------------    --------------- 
Less distributions 
 Dividends from net investment 
  income                                    (0.26)            (0.24) 
  Total distributions                       (0.26)            (0.24) 
                                       --------------    --------------- 
Change in net asset value                    0.72              0.68 
                                       --------------    --------------- 
Net asset value, end of period            $ 10.72            $10.68 
                                       ==============    =============== 
Total return((2))                            9.87%((4))        9.21%((4)) 
Ratios/supplemental data: 
Net assets, end of period 
  (thousands)                             $13,842            $2,239 
Ratio to average net assets of: 
 Operating expenses                          1.30%((3))        2.05%((3)) 
 Net investment income                       5.79%((3))        5.03%((3)) 
Portfolio turnover                              9%((4))           9%((4)) 
</TABLE>

((1)) Includes reimbursement of operating expenses by investment adviser of 
      $0.12 and $0.12, respectively. 
((2)) Maximum sales charges are not reflected in the total return 
      calculation. 
((3)) Annualized 
((4)) Not annualized 
((5)) Computed using average shares outstanding. 

                       EMERGING MARKETS BOND PORTFOLIO 

<TABLE>
<CAPTION>
                                          CLASS A            CLASS B 
                                       ---------------   ---------------- 
                                       FROM INCEPTION    FROM INCEPTION 
                                         9/5/95 TO          9/5/95 TO 
                                          11/30/95          11/30/95 
                                       ---------------   ---------------- 
<S>                                       <C>                <C>
Net asset value, beginning of 
  period                                  $ 10.00            $10.00 
Income from investment operations 
 Net investment income                       0.25((1))((5))    0.22((1))((5)) 
 Net realized and unrealized gain            0.18              0.20 
                                       --------------    --------------- 
  Total from investment operations           0.43              0.42 
                                       --------------    --------------- 
Less distributions 
 Dividends from net investment 
  income                                    (0.25)            (0.24) 
                                       --------------    --------------- 
  Total distributions                       (0.25)            (0.24) 
                                       --------------    --------------- 
Change in net asset value                    0.18              0.18 
                                       --------------    --------------- 
Net asset value, end of period            $ 10.18            $10.18 
                                       ==============    =============== 
Total return((2))                            4.40%((4))        4.22%((4)) 
Ratios/supplemental data: 
Net assets, end of period 
  (thousands)                             $12,149            $  596 
Ratio to average net assets of: 
 Operating expenses                          1.50%((3))        2.25%((3)) 
 Net investment income                      10.48%((3))       10.29%((3)) 
Portfolio turnover                             38%((4))          38%((4)) 
</TABLE>

((1)) Includes reimbursement of operating expenses by investment adviser of 
      $0.03 and $0.03, respectively. 
((2)) Maximum sales charges are not reflected in the total return 
      calculation. 
((3)) Annualized 
((4)) Not annualized 
((5)) Computed using average shares outstanding. 

                                      9 
<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. In addition, the 
Fund may from time to time, publish material citing historical volatility for 
shares of the Fund. 

  The Fund may from time to time include advertisements containing total 
return and 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 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. 

  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 

                                      10 
<PAGE>

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. 

  Performance information for a Portfolio reflects only the performance of a 
hypothetical investment in Class A or Class B Shares of that 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. As used herein, the term "bonds" generally 
refers to municipal bonds and industrial development bonds as described 
above. 

   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 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 and Related Risks". 

   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 

                                      11 
<PAGE>
 
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% / (1 - .28 tax rate), or 7% / .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 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 

                                      12 
<PAGE>

contracts and related options for hedging purposes, invest in repurchase 
agreements and lend portfolio securities. See "Investment Techniques and 
Related Risks". 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 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 22.) 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 and Related Risks". 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 20% of its total assets in high yield high risk fixed income bonds 
(commonly referred to as "junk bonds") which are not in default at the time 
of investment. Lower rated and non-rated convertible securities are 
predominantly speculative with respect to the issuer's capacity to repay 
principal and pay interest. Investment in lower rated and non-rated 
convertible fixed-income securities normally involves a greater degree of 
market and credit risk than does investment in securities having higher 
ratings. The price of these fixed income securities will generally move in 
inverse proportion to interest rates. In addition, non-rated securities are 
often less marketable than rated securities. To the extent that the 

                                      13 
<PAGE>

Portfolio holds any lower rated or non-rated securities, it may be negatively 
affected by adverse economic developments, increased volatility and lack of 
liquidity. Such bonds may subject the Portfolio to risks attendant 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 and Related Risks". 

   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 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 

                                      14 
<PAGE>
 
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. However, the 
International Portfolio may also invest in ADRs which are not sponsored by 
domestic banks; these present the risks of foreign investments noted above. 
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 be 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, 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 

                                      15 
<PAGE>
 
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. 

The Emerging Markets Portfolio invested the following weighted average
percentages of assets as rated by Moody's or having a comparable rating 
according to Standard & Poor's Corporation, Duff & Phelps Credit Rating
Company, or Fitch Investor Services, during the fiscal year November 30, 1995:

Rating                  Moody's
- --------               --------- 
Baa                     2.30%
Ba                     16.31%
B                       9.39%
Unrated                 9.39%

*The unrated bonds are equivalent to Baa 6.68%, Ba 26.38% and B 31.7%.

   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 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 
                                      16 
<PAGE>
 
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 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 
and Related Risks"); 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 in general. 
Equity REITs may be affected by changes in the value 

                                      17 
<PAGE>
 
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 
                              AND RELATED RISKS 

  In addition to the investment policies described above, the Fund may utilize 
the following investment practices or techniques. 

  Securities and Index Options. All Portfolios (other than the Real Estate 
Portfolio) may enter into option transactions. These instruments are referred 
to as "derivatives" as their value is derived from the value of any 
underlying security or securities index. Securities and index options and the 
related risks are summarized below and are 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. 

  The Capital Appreciation, Bond, and 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. 

                                      18 
<PAGE>
 
  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. 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 

                                      19 
<PAGE>
 
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 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 

                                      20 
<PAGE>
 
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.

  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, 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 

                                      21 
<PAGE>
 
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. 

  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 

                                      22 
<PAGE>
 
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. Portfolio turnover rates for the fiscal 
years for each Portfolio are shown in the section "Financial Highlights". The 
portfolio turnover rate for the Capital Appreciation Portfolio will probably 
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. 
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. 

                            MANAGEMENT OF THE FUND 

  The Fund is a mutual fund technically known as an open- end management 
investment company. The Trustees of the Trust ("Trustees") are responsible 
for the overall supervision of the Fund and perform the various duties 
imposed on Trustees by the 1940 Act and Massachusetts business trust law. 

The Advisers 

   The investment adviser to the Bond, Capital Appreciation, International 
and Emerging Markets Portfolios is Phoenix Investment Counsel, Inc. (PIC), 
which is located at 56 Prospect Street, Hartford, Connecticut 06115-0480. All 
of the outstanding stock of PIC is owned by Phoenix Equity Planning 
Corporation ("Equity Planning" or "Distributor"), a subsidiary of Phoenix 
Duff & Phelps Corporation of Chicago, Illinois. Prior to November 1, 1995 PIC 
and Equity Planning were indirect, wholly-owned subsidiaries of Phoenix Home 
Life Mutual Insurance Company ("Phoenix Home Life") of Hartford, Connecticut. 
Phoenix Home Life is a majority shareholder of Phoenix Duff & Phelps 
Corporation. Phoenix Home Life is in the business of writing ordinary and 
group life and health insurance and annuities. Its principal offices are 
located at One American Row, Hartford, Connecticut 06115- 2520. In addition 
to the Fund, PIC also serves as investment adviser to Phoenix Series Fund, 
Phoenix Total Return Fund, Inc. and The Phoenix Edge Series Fund (all Series 
other than the Real Estate Securities Series) and as sub-adviser to the Chubb 
America Fund, Inc., SunAmerica Series Trust, JNL Series Trust and American 
Skandia Trust. PIC was originally organized in 1932 as John P. Chase, Inc. As 
of December 31, 1995, PIC had approximately $18.48 billion in assets under 
management. 

   The investment adviser to the Real Estate Portfolio is Phoenix Realty 
Securities, Inc., which is located at 38 Prospect Street, Hartford, 
Connecticut 06115. PRS was formed in 1994 as an indirect subsidiary of 
Phoenix Home Life. As of December 31, 1995, PRS had approximately $1.4 billion 
in assets under management. 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 $1.5 billion under 
management, as of December 31, 1995. 

   The investment advisers furnish investment programs for each Portfolio 
under their management and manage the investment and reinvestment of the 
assets of each Portfolio 

                                      23 
<PAGE>
 
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 Markets Portfolios, PIC is 
entitled to a fee, payable monthly, at the following annual rates: 

                               1st          $1-2         $2+ 
       Portfolio            $1 Billion     Billion     Billion 
Bond                           .45%          .40%        .35% 
Capital Appreciation           .75%          .70%        .65% 
International                  .75%          .70%        .65% 
Emerging Markets               .75%          .70%        .65% 

   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, International and
Emerging Markets Portfolios of the Fund during the fiscal year ended
November 30, 1995, PIC received a fee of $5,195,316. For the period from
inception, March 1, 1995 through the fiscal year ended November 30, 1995
the Adviser for the Real Estate Portfolio received a fee of $51,536. 

  PRS has agreed to reimburse the Real Estate Securities Portfolio's operating
expenses related to Class A Shares and Class B Shares for the amount, if any, by
which such operating expenses for the fiscal year ended November 30, 1995 exceed
1.30% and 2.05%, respectively, of the average net assets. PIC has agreed to
reimburse the Emerging Markets Portfolio's operating expenses related to Class A
Shares and Class B Shares for the amount, if any, by which such operating
expenses for the fiscal year ended November 30, 1996 exceed 1.50% and 2.25%,
respectively, of the average net assets.

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. Until November 1995 Mr. Wehr was also Managing Director, Public Fixed 
Income, Phoenix Home Life Mutual Insurance Company and held various positions 
with Phoenix Home Life since 1981. 

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. He is also a Vice President of PIC. From 1990 until November, 
1995 Mr. Wilson was Portfolio Manager, Common Stock, Phoenix Home Life Mutual 
Insurance Company and held various positions with Phoenix Home Life since 
1990. 

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. From 1993 until November, 1995 Ms. Dorey was 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. 

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 has also been a Vice President of National 
Securities & Research Corporation since 1993. Until November, 1995 Mr. 
Barrows was Portfolio Manager, Public Bonds, Phoenix Home Life Mutual 
Insurance Company and held various positions with Phoenix Home Life since 
1985. 

   Mr. Lannigan has served as co-manager of the portfolio since April, 1995 
and is a Vice President of PIC. From 1993 until November, 1995 Mr. Lannigan 
was Director, Public Fixed 

                                      24 
<PAGE>

Income, Phoenix Home Life Insurance Company. 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. 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. For its services during the Fund's fiscal year ended 
November 30, 1995, Equity Planning received $227,721, 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 $19.25 for each designated daily dividend shareholder 
account and $14.95 for each designated non-daily dividend shareholder account 
plus out-of-pocket expenses. 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. The 
Advisers (other than ABKB) may also select affiliated broker- dealers to 
execute transactions for the Fund, provided that the commissions, fees or 
other remuneration paid to such affiliated brokers is reasonable and fair as 
compared to that paid to non- affiliated brokers for comparable transactions. 

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. The Advisers 
(other than ABKB) may also select affiliated broker-dealers to execute 
transactions for the Fund, provided that the commissions, fees or other 
remuneration paid to such affiliated brokers is reasonable and fair as 
compared to that paid to non-affiliated brokers for comparable transactions. 

                              DISTRIBUTION PLANS 

  The offices of Equity Planning, the National Distributor of the Fund's 
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, 
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of 
the Fund and a director and officer of Equity Planning. Martin J. Gavin, a 
Director and officer of Equity Planning, is an officer of the Fund. Michael 
E. Haylon, a director of Equity Planning, is an officer of the Fund. G. 
Jeffrey Bohne, James M. Dolan, Nancy G. Curtiss, William R. Moyer, William J. 
Newman 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 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. 

  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 25 
of the Capital Appreciation Portfolio 

                                       25
<PAGE>

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 non-interested or 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. 

  In order to receive payments under the Plans, participants must meet such 
qualifications as are to be established in the sole discretion of the 
Distributor, such as services to the Fund's shareholders; or services 
providing the Fund with more efficient methods of offering shares to groups 
of clients, members or prospects of a participant; or services permitting 
bulking of purchases or sales, or transmissions of such purchases or sales by 
computerized tape or other electronic equipment; or other batch processing. 

  For the fiscal year ended November 30, 1995, the Fund paid $1,868,888 under
the Class A Plan and $115,162 under the Class B Plan. The fees were used to
compensate unaffiliated broker-dealers for servicing shareholder's accounts,
compensating sales personnel and reimbursing the Distributor for commission
expenses and expenses related to preparation of the marketing material. On a
quarterly basis, the Fund's Trustees review a report on expenditures under each
Plan and the purposes for which expenditures were made.

  The National Association of Securities Dealers ("NASD") regards certain 
distribution fees as asset-based sales charges subject to NASD sales load 
limits. The NASD's maximum sales charge rule may require the Trustees to 
suspend distribution fees or amend either or both Plans. 

                              HOW TO BUY SHARES 

  The minimum initial 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). 
Completed application for the purchase of shares should be mailed to Phoenix 
Funds, c/o State Street Bank and Trust, P.O. Box 8301, Boston, MA 02266-8301. 

  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 Portfolio has undistributed net 
income. 

  Subsequent investments for the purchase of full and fractional shares in 
amounts of $25 or more may be made through an investment dealer or by sending 
a check to Phoenix Funds, c/o State Street Bank and Trust, P.O. Box 8301, 
Boston, MA 02266- 8301. 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 

                                      26 
<PAGE>

in connection with Class B Shares. Under certain circumstances, shares of the 
Fund or shares of any other Phoenix Fund (except Phoenix Multi-Sector Short 
Term Bond Fund 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 Phoenix Fund, except if made 
in connection with the Systematic Exchange privilege. Shareholders may 
exchange shares held in book-entry form for an equivalent number (value) of 
the same class of shares from any other Phoenix Fund. On Class B share 
exchanges, the contingent deferred sales charge schedule of the original 
shares purchased is not taken and continues to apply. 

Alternative Sales Arrangements 

   The alternative purchase 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. The Distributor reserves the right to decline the sale 
of Class B Shares to allocated qualified employer sponsored plans not 
utilizing an approved participant tracking system. In addition, Class B 
Shares will not be sold to any qualified employee benefit plan, endowment 
fund or foundation if, on the date of the initial investment, the plan, fund 
or foundation has assets of $10,000,000 or more or at least 100 eligible 
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 services fee and, 
accordingly, pay correspondingly higher dividends per share. However, because 
initial sales charges are deducted at the time of purchase, such investors 
would not have all their funds invested initially and, therefore, would 
initially own fewer shares. Investors not qualifying for reduced initial 
sales charges who expect to maintain their investment for an extended period 
of time might consider purchasing Class A Shares because the accumulated 
continuing distribution charges on Class B Shares may exceed the initial 
sales charge on Class A Shares during the life of the investment. 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 State Street Bank 
and Trust Company prior to its close of business. 

   The sales charge varies with the size of the purchase and reduced charges 
apply to the aggregate of purchases of the Fund made at one time by "any 
person," which term includes an individual, an individual and his/her spouse 
and their children under the age of 21, or a trustee or other fiduciary 
purchasing shares for a single trust, estate or fiduciary account although 
more than one beneficiary is involved. 

   Class A Shares of the Fund are offered to the public at the net asset 
value next computed after the purchase order is received by State Street Bank 
and Trust Company plus a maximum sales charge of 4.75% of the offering price 
(4.99% of the amount invested) on single purchases of less than $50,000. The 
sales charge is reduced on a graduated scale on single purchases on $50,000 
or more as shown below. 
                         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* 
 ---------------------   --------------   --------------   ------------------ 
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** 

Equity Planning has agreed to pay broker/dealers with whom it has sales 
agreements, additional dealer discounts in connection with the aggregate 
purchases (net of redemptions) of any combination of Class A and Class B 
Shares of the Emerging Markets Portfolio and Class A and Class B Shares of 
any other Phoenix Fund designated by Equity Planning, as shown below, 
provided such purchases are made between October 16, 1995 and March 29, 1996. 
These additional fees 

                                      27 
<PAGE>

shall be paid exclusively from Equity Planning's own profits and resources 
and do not apply to the purchase of shares for which sales charges are not 
applicable. 

                          Additional Dealer Discount or Agency 
 Aggregate Purchases      Fee as Percentage of Offering Price 
- ---------------------     ------------------------------------- 
Up to $249,999                            0.50% 
$250,000 or more                          1.00% 

*Equity Planning will sponsor sales contests, training and educational 
meetings and provide to all qualifying dealers, from its own profits and 
resources, additional compensation in the form of trips, merchandise or 
expense reimbursement. Brokers and dealers other than Equity Planning may 
also make customary additional charges for their services in effecting 
purchases, if they notify the Fund of their intention to do so. Equity 
Planning shall also pay service and retention fees, from its own profits and 
resources, to qualified wholesalers in connection with the sale of shares of 
Phoenix Funds (exclusive of Class A Shares of Phoenix Money Market Series) by 
registered financial institutions and related third party marketers. 

** In connection with Class A Share purchases (and subsequent purchases in 
any amount) by accounts held in the name of qualified benefit plans with at 
least 100 eligible employees, Equity Planning may pay broker/dealers, from 
its own resources, an amount equal to 1% on the first $3 million of 
purchases, 0.50% on the next $3 million, plus 0.25% on the amount in excess 
of $6 million. 

In connection with Class A Share purchases of $1,000,000 or more (or 
subsequent purchases in any amount), excluding purchases by qualified 
employee benefit plans as described above, Equity Planning may pay 
broker-dealers, from its own profits and resources, a percentage of the net 
asset value of any shares sold as set forth below: 

      Purchase Amount          Payment to Broker-Dealer 
 --------------------------   --------------------------- 
$1,000,000 to $3,000,000                   1% 
$3,000,001 to $6,000,000                0.50 of 1% 
$6,000,001 or more                      0.25 of 1% 

Equity Planning has agreed to pay broker/dealers with whom it has sales 
agreements, an additional amount equal to 0.50% of the purchase price on 
purchases of $1,000,000 or more of any combination of Class A Shares of the 
Emerging Markets Portfolio and/or Class A Shares of any other Phoenix Fund 
designated by Equity Planning, provided such purchases are made between 
October 16, 1995 and March 29, 1996. This additional fee shall be paid 
exclusively from Equity Planning's own profits and resources. 

If part or all of such an investment including investments by qualified 
employee benefit plans is subsequently redeemed within one year of the 
investment date, the broker-dealer will refund to the Distributor a pro rata 
portion of any amounts paid with respect to the investment. 

How To Obtain Reduced Sales Charges--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 of a corporate affiliate of the Adviser or Equity Planning; (6) any 
spouse, child, parent, grandparent, brother or sister of any person named in 
(1), (2), (3) or (5) above; (7) employee benefit plans for employees of the 
Adviser, Equity 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 100 eligible 
employees; (10) any person with a direct rollover transfer of shares from an 
established Phoenix Fund qualified plan; (11) any Phoenix Home Life separate 
account which funds group annuity contracts offered to qualified employee 
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 
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 

                                      28 
<PAGE>
 
Distributor. A selected dealer who receives re-allowance in excess of 90% of 
such a sales charge may be deemed to be an "underwriter" under the Securities 
Act of 1933. 

   Combination Purchase Privilege. Purchases, either singly or in any 
combination, of shares of the Fund or shares of any other Phoenix Fund 
(including Class B Shares and excluding Class A Shares of the Money Market 
Series), 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 and excluding Class A Shares of the Money Market 
Series) 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 
Class A Shares of the Fund or the Class A or Class B Shares of any other 
Phoenix Fund then owned by such investor, equals a specified dollar amount. 
Each purchase of shares made pursuant to a Letter of Intent will be made at 
the public offering price, as described in the then current Prospectus 
relating to such shares, which at the time of purchase is applicable to a 
single transaction of the total dollar amount specified in the Letter of 
Intent. 

   An investor's Letter of Intent is not a binding commitment of the investor 
to purchase or a binding obligation of the Fund or Equity Planning to sell a 
specified dollar amount of shares qualifying for a reduced sales charge. 
Accordingly, out of his initial purchase (and subsequent purchases if 
necessary), 5% of the dollar amount of purchases required to complete his 
investment 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 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 

                                      29 
<PAGE>
 
current market value or the cost of the shares being redeemed. Accordingly, 
no sales charge will be imposed on increases in net asset value above the 
initial purchase price. In addition, no charge will be assessed on shares 
derived from reinvestment of dividends or capital gains distributions. 

   The Distributor intends to pay investment dealers a sales commission of 4% 
of the sale price of Class B Shares sold by such dealers, subject to future 
amendment or termination. The Distributor will retain all or a portion of the 
continuing distribution fee assessed to Class B shareholders and will receive 
the entire amount of the contingent deferred sales charge paid by 
shareholders on the redemption of shares to finance the 4% commission plus 
interest and related marketing expenses. 

   Equity Planning has agreed to pay broker/dealers with whom it has sales 
agreements, additional sales commissions in connection with the aggregate 
purchases (net of redemptions) of any combination of Class A and Class B 
Shares of the Emerging Markets Portfolio and Class A and Class B Shares of 
any other Phoenix Fund designated by Equity Planning, as shown below, 
provided such purchases are made between October 16, 1995 and March 29, 1996. 
These additional fees shall be paid exclusively from Equity Planning's own 
profits and resources and do not apply to the purchase of shares for which 
sales charges are not applicable. 

                               Additional Commissions 
 Aggregate Purchases       as Percentage of Offering Price 
- ---------------------      ------------------------------- 
Up to $249,999                          0.50% 
$250,000 or more                        1.00% 

   The amount of the contingent deferred sales charges, if any, will vary 
depending on the number of years from the time of payment for the purchase of 
Class B Shares until the time of redemption of such shares. Solely for 
purposes of determining the number of years from the time of any payment for 
the purchases of shares, all payments during a month will be aggregated and 
deemed to have been made on the last day of the previous month. 

                                  Contingent Deferred 
                                    Sales Charge as 
                                    a Percentage of 
                                     Dollar Amount 
Year Since Purchase                Subject to Charge 
- -------------------               ------------------- 
First                                      5% 
Second                                     4% 
Third                                      3% 
Fourth                                     2% 
Fifth                                      2% 
Sixth                                      0% 

   In determining whether a contingent deferred sales charge is applicable to 
a redemption, it will be assumed that any Class A Shares are being redeemed 
first; 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 in 1990, an investor purchased 100 Class B
Shares. In 1993, the investor purchased another 100 Class B Shares at $12
pershare. In 1995, the investor purchased 100 Class A Shares. Assume that
in 1996 the investor owns 225 Class B Shares (15 Class B Shares resulting 
from dividend reinvestment and distributions upon the Class B Shares purchased
in 1990 and 10 Class B Shares resulting from dividend reinvestment and
distributions upon the Class B Shares purchased in 1993) as well as 100
Class A Shares. If the investor wished to then redeem 300 shares and had
not specified a preference in redeeming shares: first, 100 Class A Shares
would be redeemed without charge. Second, 115 Class B Shares purchased in 1990
(including 15 shares issued as a result of dividend reinvestment and
distributions) would be redeemed next without charge. Finally, 85 Class B
Shares purchased in 1993 would be redeemed resulting in a deferred sales
charge of $27 [75 shares (85 shares minus 10 shares resulting from dividend
reinvestment) x $12 (original price or current NAV if less than original)
x 3% (applicable rate in the third year after purchase)].

   The contingent deferred sales charge is waived on redemptions of shares 
(a) if redemption is made within one year of death (i) of the sole 
shareholder on an individual account, (ii) of a joint tenant where the 
surviving joint tenant is the deceased's spouse, or (iii) of the beneficiary 
of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act 
(UTMA) or other custodial account; (b) if redemption is made within one year 
of disability, as defined in Section 72(m)(7) of the Code; (c) in connection 
with 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 
                                      30 
<PAGE>
 
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 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 

                                      31 
<PAGE>
 
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 $5,000 or more and elect to have 
all dividends reinvested in additional Class B Shares of the Fund. Through 
the Program, Class B shareholders may withdraw up to 1% of their aggregate 
net investments (purchases, at initial value to date net of non- Program 
redemptions) each month or up to 3% of their aggregate net investments each 
quarter without incurring otherwise applicable contingent deferred sales 
charges. 

   The purchase of shares while participating in the withdrawal program will 
ordinarily be disadvantageous to the Class A 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 
Multi-Sector Short Term Bond Fund 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 State Street Bank and Trust Company. 

   Subject to the above requirements for an exchange, a shareholder or 
his/her registered representative may, by telephone or written notice, elect 
to have Class A or Class B Shares of the Fund exchanged for the same class of 
shares of another Phoenix Fund automatically on a monthly, quarterly, 
semi-annual or annual basis or may cancel the privilege ("Systematic 
Exchange"). 

   Shareholders who maintain an account balance in the Fund of at least 
$5,000, or $2,000 for tax qualified retirement benefit plans (calculated on 
the basis of the net asset value of the shares held in a single account), may 
direct that shares of the Fund be automatically exchanged at predetermined 
intervals for shares of the same class of another Phoenix Fund. If the 
shareholder is participating in the Self Security program offered by Phoenix 
Home Life, it is not necessary to maintain the above account balances in 
order to use the Systematic Exchange privilege. 

   Such exchanges will be executed upon the close of business on the 10th of 
a month and if the 10th falls on a holiday or weekend, then at the close of 
business on the next succeeding business day. The minimum initial and 
subsequent amount that may be exchanged under the Systematic Exchange is $25. 
Systematic Exchange forms are available from Equity Planning. 

   Exchanges will be based upon each Series' net asset value per share next 
computed following receipt of a properly executed exchange request, without 
sales charge. On 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 
                                      32 
<PAGE>
 
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 Adviser to discourage and prevent frequent trading by
shareholders among the Fund and other Phoenix Funds in response to market
fluctuations. The Fund reserves the right to 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 
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, 
Boston, MA 02266-8301. If the shares are being exchanged between accounts 
that are not registered identically, the signature on such request must be 
guaranteed by an eligible guarantor institution as defined by the Fund's 
transfer agent in accordance with its signature guarantee procedures. 
Currently such procedures generally permit guarantees by banks, 
broker/dealers, credit unions, national securities exchanges, registered 
securities associations, clearing agencies and savings associations. Any 
outstanding certificate or certificates for the tendered shares must be duly 
endorsed and submitted. 

   Purchase and withdrawal plans and reinvestment and exchange privileges are 
described more fully in the Statement of Additional Information. For further 
information, call Equity Planning at (800) 243-1574. 

                               NET ASSET VALUE 

  The net asset value per share of each 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. 

  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 

                                      33 
<PAGE>
 
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 by Phoenix Funds, c/o State 
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301 (see "Net 
Asset Value"). In the case of Class B Share redemptions, investors will be 
subject to the applicable deferred sales charge, if any, for such shares (see 
"Deferred Sales Charge Alternative--Class B Shares", above). To redeem, any 
outstanding share certificates in proper form for transfer must be received 
by Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, 
Boston, MA 02266-8301. 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, 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 

                                      34 
<PAGE>
 
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 may use 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 180 days of the 
redemption, accompanied by payment for the shares (not in excess of the 
redemption value). Class B Shareholders who have had the contingent deferred 
sales charge waived through participation in the Systematic Withdrawal 
Program are not eligible. 

Redemption of Small Accounts 

   Due to the relatively high cost of maintaining small accounts, the Fund 
reserves the right to redeem, at net asset value, the shares of any 
shareholder whose account has a value, due to redemptions, of less than $200. 
Before the Fund redeems these shares, the shareholder will be given notice 
that the value of the shares in the account is less than the minimum amount 
and will be allowed 30 days to make an additional investment in an amount 
which will increase the value of the account to at least $200. 

   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 
                                      35 
<PAGE>
 
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 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. 

   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. 

                                      36 
<PAGE>

   Investors are urged to consult their attorney or tax adviser regarding 
specific questions as to Federal, foreign, state or local taxes. 

                            ADDITIONAL INFORMATION 

Organization of the Fund 

  The capitalization of the Fund consists solely of an unlimited number of
shares of beneficial interest. The Fund currently offers shares in different
series or "Portfolios" and different classes of those Portfolios. Holders of
shares of a Portfolio are entitled to one 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 (other than as described herein).

   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. 

Additional Inquiries 

   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. 

                                      37 
<PAGE>
 
   A--Bonds which are rated A possess many favorable investment attributes 
and are to be considered as upper medium grade obligations. Factors giving 
security to principal and interest are considered adequate but elements may 
be present which suggest a susceptibility to impairment sometime in the 
future. 

  Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

   Ba--Bonds which are rated Ba are judged to have speculative elements; 
their future cannot be considered as well assured. Often the protection of 
interest and principal payments may be very moderate and thereby not well 
safeguarded during both good and bad times over the future. Uncertainty of 
position characterizes bonds in this class. 

   B--Bonds which are rated B generally lack characteristics of the desirable 
investment. Assurance of interest and principal payments or of maintenance of 
other terms of the contract over any long period of time may be small. 

   Caa--Bonds which are rated Caa are of poor standing. Such issues may be in 
default or there may be present elements of danger with respect to principal 
or interest. 

   Ca--Bonds which are rated Ca represent obligations which are speculative 
in a high degree. Such issues are often in default or have other marked 
shortcomings. 

   C--Bonds which are rated C are the lowest rated class of bonds and issues 
so rated can be regarded as having extremely poor prospects of ever attaining 
any real investment standing. 

Standard and Poor's Corporation's Corporate Bond Ratings 

   AAA--This is the highest rating assigned by Standard & Poor's to a debt 
obligation and indicates an extremely strong capacity to pay principal and 
interest. 

   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. 

                                      38 
<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: 

                                Give Social Security Number or 
Account Type                    Tax Identification Number of: 
Individual                      Individual 
Joint (or Joint Tenant)         Owner who will be paying tax 
Uniform Gifts to Minors         Minor 
Legal Guardian                  Ward, Minor or Incompetent 
Sole Proprietor                 Owner of Business (also provide owner's name) 
Trust, Estate, Pension Plan     Trust, Estate, Pension Plan Trust 
  Trust                         (not personal TIN of fiduciary) 
Corporation, Partnership, 
  Other Organization            Corporation, Partnership, Other Organization 
Broker/Nominee                  Broker/Nominee 

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 March 8, 1996. 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, 1995 and is incorporated into 
the Statement of Additional Information by reference. 

[recycled logo] Printed on recycled paper using soybean ink 

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<PAGE>

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<PAGE>

Phoenix Multi-Portfolio Fund

P.O. Box 2200
Enfield, CT 06083-2200

                                                                 Bulk Rate Mail
                                                                  U.S. Postage
                                                                     PAID
                                                                Springfield, MA
                                                                 Permit No. 444

[Phoenix Duff & Phelps logo]   Phoenix Duff & Phelps

PDP 467 (3/96)

<PAGE>

                         PHOENIX MULTI-PORTFOLIO FUND 

                              101 Munson Street 
                       Greenfield, Massachusetts 01301 
                     Statement of Additional Information 
                                March 8, 1996 

   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 March 8, 1996, 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

THE FUND                                       1 
INVESTMENT OBJECTIVES AND POLICIES (11)        1 
INVESTMENT RESTRICTIONS (22)                  12 
PERFORMANCE (10)                              14 
PERFORMANCE COMPARISONS                       15 
PORTFOLIO TURNOVER (23)                       15 
TRUSTEES AND OFFICERS                         16 
THE INVESTMENT ADVISERS (23)                  21 
PORTFOLIO TRANSACTIONS (23)                   22 
DETERMINATION OF NET ASSET VALUE (33)         23 
HOW TO BUY SHARES                             24 
ALTERNATIVE PURCHASE ARRANGEMENTS             24 
SHAREHOLDER SERVICES                          26 
INVEST-BY-PHONE                               26 
HOW TO REDEEM SHARES (34)                     28 
TAXES (35)                                    30 
TAX SHELTERED RETIREMENT PLANS                33 
THE NATIONAL DISTRIBUTOR                      33 
PLANS OF DISTRIBUTION (35)                    33 
ADDITIONAL INFORMATION                        34 

*Numbers in parentheses are cross-references to related sections of the 
Prospectus. 

                       Customer Service--(800) 243-1574 
                          Marketing--(800) 243-4361 
                  Telephone Orders/Exchanges--(800) 367-5877 
                Telecommunication Device (TTY)--(800) 243-1926 
PEP468 (3/96) 

<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 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. 

                                      1 
<PAGE>
 
    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 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 

                                      2 
<PAGE>
 
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 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 

                                      3 
<PAGE>
 
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. 

   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 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. 

                                      4 
<PAGE>
 
   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 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. 

                                      5 
<PAGE>
 
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. 

   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. 

                                      6 
<PAGE>
 
   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 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 to make 
daily margin payments. In this situation, if the Portfolio has insufficient 
cash to meet daily margin requirements it may 

                                      7 
<PAGE>
 
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 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. 

                                      8 
<PAGE>
 
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 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 

                                      9 
<PAGE>
 
   amount is not less than the amount of the Foreign Currency Portfolio's 
   commitments with respect to such contracts. Generally, the Foreign 
   Currency Portfolios do not enter into forward contracts with terms longer 
   than one year. 

    Foreign Currency Options. A foreign currency option provides the option 
   buyer with the right to buy or sell a stated amount of foreign currency at 
   the exercise price at a specified date or during the option period. A call 
   option gives its owner the right, 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. 

    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. 

    Emerging Market Securities.The Emerging Markets Portfolio may invest in 
   countries or regions with relatively low gross national product per capita 
   compared to the world's major economies, and in countries or regions with 
   the potential for rapid economic growth (emerging markets). Emerging 
   markets will include any country: (i) having an "emerging stock market" as 
   defined by the International Finance Corporation; (ii) with 
   low-to-middle-income economies according to the International Bank for 
   Reconstruction and Development (the "World Bank"); (iii) listed in World 
   Bank publications as developing; or (iv) determined by the Adviser to be 
   an emerging market as defined above. The Emerging Markets Portfolio may 
   also invest in securities of: (i) companies the principal securities 
   trading market for which is an emerging market country; (ii) companies 
   organized under the laws of, and with a principal office in, an emerging 
   market country, or (iii) companies whose principal activities are located 
   in emerging market countries. 

    The risks of investing in foreign securities may be intensified in the 
   case of investments in emerging markets. Securities of many issuers in 
   emerging markets may be less liquid and more volatile than securities of 
   comparable domestic issuers. Emerging markets also have different 
   clearance and settlement procedures, and in certain markets there have 
   been times when settlements have been unable to keep pace with the volume 
   of securities transactions, making it difficult to conduct such 
   transactions. Delays in settlement could result in temporary periods when 
   a portion of the assets of the Portfolio is uninvested and no return is 
   earned thereon. The inability of the Portfolio to make intended security 
   purchases due to settlement problems could cause the Portfolio to miss 
   attractive investment opportunities. Inability to dispose of portfolio 
   securities due to settlement problems could result either in losses to the 
   Fund due to subsequent declines in value of the portfolio securities or, 
   if the Portfolio has entered into 

                                      10 
<PAGE>
 
   a contract to sell the security, in possible liability to the purchaser. 
   Securities prices in emerging markets can be significantly more volatile 
   than in the more developed nations of the world, reflecting the greater 
   uncertainties of investing in less established markets and economies. In 
   particular, countries with emerging markets may have relatively unstable 
   governments, present the risk of nationalization of businesses, 
   restrictions on foreign ownership, or prohibitions of repatriation of 
   assets, and may have less protection of property rights than more 
   developed countries. The economies of countries with emerging markets may 
   be predominantly based on only a few industries, may be highly vulnerable 
   to changes in local or global trade conditions, and may suffer from 
   extreme and volatile debt burdens or inflation rates. Local securities 
   markets may trade a small number of securities and may be unable to 
   respond effectively to increases in trading volume, potentially making 
   prompt liquidation of substantial holdings difficult or impossible at 
   times. Securities of issuers located in countries with emerging markets 
   may have limited marketability and may be subject to more abrupt or 
   erratic price movements. 

    Certain emerging markets may require governmental approval for the 
   repatriation of investment income, capital or the proceeds of sales of 
   securities by foreign investors. In addition, if a deterioration occurs in 
   an emerging market's balance of payments or for other reasons, a country 
   could impose temporary restrictions on foreign capital remittances. The 
   Portfolio could be adversely affected by delays in, or a refusal to grant, 
   any required governmental approval for repatriation of capital, as well as 
   by the application to the Portfolio any restrictions on investments. 

    Investments in certain foreign emerging market debt obligations may be 
   restricted or controlled to varying degrees. These restrictions or 
   controls may at times preclude investment in certain foreign emerging 
   market debt obligations and increase the expenses of the Portfolio. 

    Additional Risk Factors. As a result of its investments in foreign 
   securities, the Emerging Markets Portfolio may receive interest or 
   divident payments, or the proceeds of the sale or redemption of such 
   securities, in the foreign currencies in which such securities are 
   denominated. In that event, the Portfolio may convert such curencies into 
   dollars at the then current exchange rate. Under certain circumstances, 
   however, such as where the Adviser believes that the applicable rate is 
   unfavorable at the time the currencies are received or the Adviser 
   anticipates, for any other reason, that the exchange rate will improve, 
   the Portfolio may hold such currencies for an indefinite period of time. 

    In addition, the Portfolio may be required to receive delivery of the 
   foreign currency underlying forward foreign currency contracts it has 
   entered into. This could occur, for example, if an option written by the 
   Fund is exercised or the Fund is unable to close out a forward contract. 
   The Portfolio may hold foreign currency in anticipation of purchasing 
   foreign securities. The Portfolio may also elect to take delivery of the 
   currencies underlying options or forward contracts if, in the judgment of 
   the Adviser, it is in the best interest of the Portfolio to do so. In such 
   instances as well, the Portfolio may convert the foreign currencies to 
   dollars at the then current exchange rate, or may hold such currencies for 
   an indefinite period of time. 

    While the holding of currencies will permit the Portfolio to take 
   advantage of favorable movements in the applicable exchange rate, it also 
   exposes the Portfolio to risk of loss if such rates move in a direction 
   adverse to the Portfolio's position. Such losses could reduce any profits 
   or increase any losses sustained by the Portfolio from the sale or 
   redemption of securities, and could reduce the dollar value of interest or 
   dividend payments received. In addition, the holding of currencies could 
   adversely affect the Portfolio's profit or loss on currency options or 
   forward contracts, as well as its hedging strategies. 

    Derivative Investments. In order to seek to hedge various portfolio 
   positions, including to hedge against price movements in markets in which 
   the Fund anticipates increasing its exposure, the Fund may invest in 
   certain instruments which may be characterized as derivative investments. 
   These investments include various types of interest rate transactions, 
   options and futures. Such investments also may consist of indexed 
   securities, including inverse securities. The Fund has express limitations 
   on the percentage of its assets that may be committed to certain of such 
   investments. Other of such investments have no express quantitative 
   limitations, although they may be made solely for hedging purposes, not 
   for speculation, and may in some cases require limitations as to the type 
   of permissible counter-party to the transaction. Interest rate 
   transactions involve the risk of an imperfect correlation between the 
   index used in the hedging transactions and that pertaining to the 
   securities which are the subject of such transactions. Similarly, 
   utilization of options and futures transactions involves the risk of 
   imperfect correlation in movements in the price of options and futures and 
   movements in the price of the securities or interest rates which are the 
   subject of the hedge. Investments in indexed securities, including inverse 
   securities, subject the Fund to the risks associated with changes in the 
   particular indices, which may include reduced or eliminated interest 
   payments and losses of invested principal. 

Real Estate Investment Trusts 

   As described in the Prospectus, the Real Estate 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. 

                                      11 
<PAGE>
 
  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 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. 

                                      12 
<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 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. 

                                      13 
<PAGE>
 
   (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. 

   (16) Issue senior securities as defined in the Investment Company Act of 
        1940 except to the extent that it is permissible to (a) borrow money 
        from banks pursuant to the Trust's investment restrictions regarding 
        the borrowing of money, and (b) enter into transactions involving 
        forward foreign currency contracts and options thereon, as described 
        in the Trust's Prospectus and this Statement of Additional 
        Information. 

   If a percentage restriction on investment or utilization of assets as set 
forth is adhered to at the time an investment is made, a later change in the 
percentage resulting from a change in the value or costs of the 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, 1995, the yield for the Bond 
Portfolio Class A shares and Class B shares was 4.95% and 4.32% respectively;
and the Emerging Markets Portfolio was 11.36% and 10.75%. 

   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 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 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, 1995. 

                                      14 
<PAGE>

   The following table illustrates average annual total return for each 
Portfolio for the 1, 5 and 10 year periods ended November 30, 1995. 

AVERAGE ANNUAL TOTAL RETURN AS OF NOVEMBER 30, 1995 

                                     PERIODS ENDED 
                       ----------------------------------------- 
PORTFOLIO               1 YEAR     5 YEAR     SINCE INCEPTION* 
 -------------------   --------   --------   ------------------- 
Bond 
 Class A                14.21%      7.79%            8.39% 
 Class B                14.07%       N/A             4.28% 
Capital Appreciation 
 Class A                21.79%     17.01%           17.39% 
 Class B                21.92%       N/A            17.69% 
International 
 Class A                -0.83%      6.39%            5.85% 
 Class B                -1.51%       N/A            -1.53% 
Real Estate 
 Class A                  N/A        N/A             4.64% 
 Class B                  N/A        N/A             4.21% 
Emerging Markets 
 Class A                  N/A        N/A            -0.57% 
 Class B                  N/A        N/A            -0.77% 

* The Bond, Capital Appreciation, and International Portfolios commenced 
operations on July 15, 1988, November 1, 1989 and November 1, 1989, 
respectively. Bond Portfolio Class B commenced operations on February 16, 
1994. Capital Appreciation and International Portfolios Class B commenced 
operations on July 15, 1994. The Real Estate and Emerging Markets Portfolios 
commenced operations on March 1, 1995 and September 5, 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 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 

                                      15 
<PAGE>

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. 

                            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 56 Prospect Street, 
Hartford, Connecticut, 06115-0480. On December 30, 1993, the shareholders 
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. The elected and appointed Trustees are listed 
below. 

<TABLE>
<CAPTION>
                                 Positions Held                       Principal Occupation(s) 
Name, Address and Age             With the Fund                       During the Past 5 Years 
 -----------------------------   ---------------    ------------------------------------------------------------ 
<S>                              <C>                <C>
C. Duane Blinn (68)               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 
  Hartford, CT 06103                                Companies (until 1993). 
Robert Chesek (61)                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 (66)             Trustee           Trustee/Director, Consolidated Edison Company of New York, 
  9 Rittenhouse Road                                Inc. (1970-present), Pace University (1978-present), 
  Bronxville, NY 10708                              Atlantic Mutual Insurance Company (1974-present), HRE 
                                                    Properties (1989-present), Greater New York Councils, Boy 
                                                    Scouts of America (1985-present), Union Pacific Corp. 
                                                    (1978-present), Blackrock Fund for 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). Chairman, Metropolitan 
                                                    Transportation Authority (1992- present). Chairman, Audit 
                                                    Committee of the City of New York (1981- 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). Chairman, New York Housing Partnership 
                                                    Development Corp. (1981-present). 
Harry Dalzell-Payne (66)          Trustee           Director/Trustee, Phoenix Funds (1983-present). Director, 
  330 East 39th Street                              Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee, 
  Apartment 29G                                     the National Affiliated Investment Companies (1983-1993). 
  New York, NY 10016                                Formerly a Major General of the British Army. 
Leroy Keith, Jr. (57)             Trustee           Chairman and Chief Executive Officer, Carson Products 
  Chairman and Chief                                Company (1995-present). Director/Trustee, Phoenix Funds 
   Executive Officer                                (1980-present). Director Equifax Corp. (1991-present), and 
  Carson Products Company                           Keystone International Fund, Inc. (1989-present). Trustee, 
  64 Ross Road                                      Keystone Liquid Trust, Keystone Tax Exempt Trust, Keystone 
  Savannah, GA 31405                                Tax Free Fund, Master Reserves Tax Free Trust, and Master 
                                                    Reserves Trust. Director/Trustee, the National Affiliated 
                                                    Investment Companies (until 1993). Director, Blue Cross/ 
                                                    Blue Shield (1989-1993) and First Union Bank of Georgia 
                                                    (1989- 1993). President, Morehouse College (1987-1994). 
                                                    Chairman and Chief Executive Officer, Keith Ventures 
                                                    (1994-1995). 

                                      16 
<PAGE>
 
                                 Positions Held                       Principal Occupation(s) 
Name, Address and Age             With the Fund                       During the Past 5 Years 
 -----------------------------   ---------------   ------------------------------------------------------------- 
*Philip R. McLoughlin (49)        Trustee and       Director (1994-present) and Executive Vice President, 
                                  President         Investments, Phoenix Home Life Mutual Insurance Company 
                                                    (1987-present). Director, Vice Chairman and Chief Executive 
                                                    Officer, Phoenix Duff & Phelps Corporation (1995-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 Re Corporation (Delaware) (1985- present). 
                                                    Director, 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 Phoenix 
                                                    Securities Group, Inc. (1993-present). Director 
                                                    (1992-present) and President (1992-1994) W.S. Griffith & 
                                                    Co., Inc. and Townsend Financial Advisers, Inc. 
James M. Oates (49)               Trustee           Managing Director, The Wydown Group (1994-present). Director 
  Managing Director                                 Phoenix Duff & Phelps Corporation (1995-present). 
  The Wydown Group                                  Director/Trustee, Phoenix Funds (1987-present) Director, 
  50 Congress Street                                Govett Worldwide Opportunity Funds, Inc. (1991-present), 
  Suite 1000                                        Stifel Financial Corporation (1986-present). Director, 
  Boston, MA 02109                                  Investors Bank and Trust Corporation and Investors Financial 
                                                    Services Corporation. Director/Trustee, the National 
                                                    Affiliated Investment Companies (until 1993). Director 
                                                    (1984-1994), President (1984-1994) and Chief Executive 
                                                    Officer (1986-1994), Neworld Bank. Savings Bank Life 
                                                    Insurance Company (1988-1994). Director, Blue Cross & Blue 
                                                    Shield of New Hampshire. 
Philip R. Reynolds (68)           Trustee           Director/Trustee, Phoenix Funds (1984-present). Director, 
  43 Montclair Drive                                Vestaur Securities, Inc. (1972-present). Trustee, Treasurer, 
  West Hartford, CT 06107                           J. Walton Bissell Foundation and Treasurer, J. Walton 
                                                    Bissell Foundation Inc. (1988- present). Director/Trustee, 
                                                    the National Affiliated Investment Companies (until 1993). 
Herbert Roth, Jr. (67)            Trustee           Director/Trustee, Phoenix Funds (1980-present). Director, 
  134 Lake Street                                   Boston Edison Company (1978-present), Phoenix Home Life 
  P.O. Box 909                                      Mutual Insurance Company (1972-present), Landauer, Inc. 
  Sherborn, MA 01770                                (medical services) (1970- present), Tech Ops./Sevcon, Inc. 
                                                    (electronic controllers) (1987-present), Key Energy Group 
                                                    (oil rig service) (1988-1994), and Mark IV Industries 
                                                    (diversified manufacturer) (1985-present). Director/Trustee, 
                                                    the National Affiliated Investment Companies (until 1993). 
Richard E. Segerson (50)          Trustee           Director/Trustee, Phoenix Funds, (1993-present). Consultant, 
  102 Valley Road                                   Tootal Group (1989-1991) and Texas Air Corporation 
  New Canaan, CT 06840                              (1987-1989). Vice President and General Manager, Coats & 
                                                    Clark, Inc. (previously Tootal American, Inc.) (1991-1993). 
                                                    Director/Trustee, the National Affiliated Investment 
                                                    Companies (1984-1993). 
Lowell P. Weicker, Jr. (64)       Trustee           Trustee/Director, the Phoenix Funds (1995-present). Former 
  Dresing Lierman Weicker                           Governor of the State of Connecticut (1991-1995). Director, 
  6931 Arlington Road                               UST, Inc. (1995- present). 
  Suite 501 
  Bethesda, MD 20814 

<FN>
 *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. 
</FN>
                                      17 
<PAGE>
 
                                 Positions Held                       Principal Occupation(s) 
Name, Address and Age             With the Fund                       During the Past 5 Years 
 -----------------------------   ---------------    ------------------------------------------------------------ 
Martin J. Gavin (45)              Executive         Director and Executive Vice President, Finance and 
                                  Vice              Operations, Phoenix Duff & Phelps Corporation 
                                  President         (1995-present). Senior Vice President, Investment Products, 
                                                    Phoenix Home Life Mutual Insurance Company (1989-1995). 
                                                    Director and Executive Vice President, Phoenix Equity 
                                                    Planning Corporation (1990-present). Director (1994-present) 
                                                    and Executive Vice President (1991-present), Phoenix 
                                                    Investment Counsel, Inc. Director and Executive Vice 
                                                    President, Phoenix Securities Group, Inc. (1993-present) and 
                                                    National Securities & Research Corporation (1993-present). 
                                                    Director (1993-present) and Executive Vice President 
                                                    (1993-1994), W.S. Griffith & Co., Inc. and Townsend 
                                                    Financial Advisers, Inc. Executive Vice President, the 
                                                    Phoenix Funds (1993-present). Director and Vice President, 
                                                    PM Holdings, Inc. (1994-present). Executive Vice President, 
                                                    National Affiliated Investment Companies (until 1993). 
Michael E. Haylon (38)            Executive Vice    Director and Executive Vice President, Investments, Phoenix 
                                  President         Duff & Phelps Corporation (1995-present). Senior Vice 
                                                    President, Securities Investments, Phoenix Home Life Mutual 
                                                    Insurance Company (1993- 1995). Executive Vice President, 
                                                    the Phoenix Funds (1995-present). Director (1994-present) 
                                                    and President (1995-present), Phoenix Investment Counsel, 
                                                    Inc. Director and Executive Vice President 
                                                    (1994-present), National Securities & Research Corporation. 
                                                    Various other positions with Phoenix Home Life Mutual 
                                                    Insurance Company (1990-1993). 
William J. Newman (56)            Senior Vice       Executive Vice President, Phoenix Investment Counsel, Inc. 
                                  President         (1995- present). Vice President, Common Stock, and Chief 
                                                    Investment Strategist, Phoenix Home Life Mutual Insurance 
                                                    Company (April 1995-November 1995). Senior Vice President, 
                                                    National Securities & Research Corporation (1995-present). 
                                                    Senior Vice President, Phoenix Equity Planning Corporation 
                                                    (1995-present). Vice President, Phoenix Strategic Equity 
                                                    Series Fund (1995-present). Senior Vice President, The 
                                                    Phoenix Edge Series Fund (1995-present) and Phoenix Multi- 
                                                    Portfolio Fund (1995-present). Chief Investment Strategist, 
                                                    Kidder, Peabody Co. Inc. (1993-1994). Managing Director, 
                                                    Equities, Bankers Trust (1991-1993) and McKay Shields 
                                                    (1988-1990). 
David L. Albrycht (34)            Vice President    Vice President, Phoenix Asset Reserve (1993-present) and 
                                  and Portfolio     Phoenix Multi-Sector Fixed Income Fund, Inc. (1994-present). 
                                  Manager           Vice President, Phoenix Investment Counsel, Inc. 
                                                    (1995-present). Portfolio Manager, Phoenix Home Life Mutual 
                                                    Insurance Company (1990-1995). 
Curtiss O. Barrows (44)           Vice President    Vice President, Phoenix Series Fund (1985-present), National 
                                  and Portfolio     Securities & Research Corporation (1993-present), The 
                                  Manager           Phoenix Edge Series Fund (1986-present) and Phoenix 
                                                    Investment Counsel, Inc. (1991-present). Portfolio Manager, 
                                                    Public Bonds, Phoenix Home Life Mutual Insurance Company 
                                                    (1991-1995). Various other positions with Phoenix Home Life 
                                                    Mutual Insurance Company (1985-1991). 
James M. Dolan (46)               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). 

                                      18 
<PAGE>
 
                                 Positions Held                       Principal Occupation(s) 
Name, Address and Age             With the Fund                       During the Past 5 Years 
 -----------------------------   ---------------   ------------------------------------------------------------- 
Jeanne H. Dorey (34)              Vice President    Vice President, Phoenix Worldwide Opportunities Fund 
                                  and Portfolio     (1993-present), National Securities & Research Corporation 
                                  Manager           (1993-present), The Phoenix Edge Series Fund (1993-present) 
                                                    and Phoenix Investment Counsel, Inc. (1993-present). 
                                                    Portfolio Manager, International, Phoenix Home Life Mutual 
                                                    Insurance Company (1993-1995). 
Peter S. Lannigan (35)            Vice President    Vice President, Phoenix Investment Counsel, Inc. 
                                  and Portfolio     (1995-present). Director, Public Fixed Income, Phoenix Home 
                                  Manager           Life Mutual Insurance Company (1993-1995). Associate 
                                                    Director, Bond Rating Group, Standard & Poor's Corp. 
                                                    (1989-1993). 
Thomas S. Melvin, Jr. (52)        Vice President    Vice President, Phoenix Investment Counsel, Inc. 
                                                    (1994-present) and National Securities & Research 
                                                    Corporation (1994-present). Portfolio Manager, Common Stock, 
                                                    Phoenix Home Life Mutual Insurance Company (1991-1995). 
William R. Moyer (51)             Vice President    Senior Vice President, Finance (1990-present), and Treasurer 
  100 Bright Meadow Blvd.                           (1994- present), Phoenix Equity Planning Corporation, and 
  P.O. Box 2200                                     Phoenix Investment Counsel, Inc. Senior Vice President and 
  Enfield, CT 06083-2200                            Chief Financial Officer, Phoenix Duff & Phelps Corporation, 
                                                    (1995-present). Vice President, Phoenix Funds 
                                                    (1990-present). 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. Vice 
                                                    President, Investment Products Finance, Phoenix Home Life 
                                                    Mutual Insurance Company (1990-1995). Vice President, the 
                                                    National Affiliated Investment Companies (until 1993). 
Scott C. Noble (49)               Vice              Director and President, Phoenix Realty Group, Inc. 
                                  President         (1995-present). Senior 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). 
Barbara Rubin (42)                Vice              Vice President, Real Estate, Phoenix Home Life Mutual 
                                  President and     Insurance Company (1992-present). Vice President, Phoenix 
                                  Portfolio         Multi-Portfolio Fund (1994-present) and The Phoenix Edge 
                                  Manager           Series Fund (1995-present). Second Vice President, Real 
                                                    Estate, Phoenix Home Life Mutual Insurance Company 
                                                    (1986-1992). Vice President (1991-present) 238 Columbus 
                                                    Blvd, 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 (41)           Vice              Senior Vice President, Phoenix Equity Planning Corporation 
                                  President         (1994- present). Vice President, Phoenix Funds 
                                                    (1994-present) and National Securities & Research 
                                                    Corporation. Vice President, Investment Operations, Phoenix 
                                                    Home Life Mutual Insurance Company (1994- 1995). Various 
                                                    positions with Home Life Insurance Company and Phoenix Home 
                                                    Life Mutual Insurance Company (1987-1994). 

                                      19 
<PAGE>
 
                                 Positions Held                       Principal Occupation(s) 
Name, Address and Age             With the Fund                       During the Past 5 Years 
 -----------------------------   ---------------   ------------------------------------------------------------- 
James D. Wehr (38)                Vice President    Vice President, Phoenix California Tax Exempt Bonds, Inc. 
                                  and Portfolio     (1993- present), Phoenix Multi-Portfolio Fund 
                                  Manager           (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). Managing Director, 
                                                    Public Fixed Income, Phoenix Home Life Mutual Insurance 
                                                    Company, (1991-1995). Various positions with Phoenix Home 
                                                    Life Mutual Insurance Company (1981-1991). 
John T. Wilson (32)               Vice President    Vice President, Phoenix Investment Counsel, Inc. 
                                  and Portfolio     (1995-present). Portfolio Manager, The Phoenix Edge Series 
                                  Manager           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). Portfolio Manager, Common Stock, Phoenix 
                                                    Home Life Mutual Life Insurance Company (1990-1995). 
G. Jeffrey Bohne (48)             Secretary         Vice President, Transfer Agent Operations, Phoenix Equity 
  101 Munson Street                                 Planning Corporation (1993-present). Secretary, the Phoenix 
  Greenfield, MA 01301                              Funds (1993- present). Clerk, Phoenix Total Return Fund, 
                                                    Inc. (1994-present). Vice President and General Manager, 
                                                    Phoenix Home Life Mutual Insurance Co. (1993-1995). Vice 
                                                    President, Home Life of New York Insurance Company 
                                                    (1984-1992). 
Nancy G. Curtiss (43)             Treasurer         Treasurer, Phoenix Funds (1994-present). Vice President, 
                                                    Fund Accounting, Phoenix Equity Planning Corporation 
                                                    (1994-present). Second Vice President and Treasurer, Fund 
                                                    Accounting, Phoenix Home Life Mutual Insurance Company 
                                                    (1994-1995). Various positions with Phoenix Home Life 
                                                    Insurance Company (1987-1994). 
</TABLE>

   For services rendered to the Fund for the fiscal year ended November 30, 
1995, the Trustees receive aggregate remuneration of $102,545. 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 $36,000 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. Trustee fee costs are allocated 
equally to each of the Series and the Funds within the Phoenix Funds complex. 
The foregoing fees do not include reimbursement of expenses incurred in 
connection with meeting attendance. Officers and interested Trustees of the 
Fund are compensated for their services by the Adviser and receive no 
compensation from the Fund. 

                                      20 
<PAGE>
 
For the Fund's last fiscal year, the Trustees received the following 
compensation: 

<TABLE>
<CAPTION>
                                                                                         Total 
                                               Pension or                             Compensation 
                             Aggregate     Retirement Benefits      Estimated        From Fund and 
                           Compensation      Accrued as Part     Annual Benefits      Fund Complex 
          Name               From Fund      of Fund Expenses     Upon Retirement    Paid to Trustees 
- ------------------------   -------------   -------------------   ---------------   ------------------ 
<S>                          <C>                 <C>                <C>                 <C>           
C. Duane Blinn               $10,305*                                                   $47,500* 
Robert Chesek                $  9,338                                                   $ 42,750 
E. Virgil Conway             $ 11,673                                                   $ 53,500 
Harry Dalzell-Payne          $  9,718                                                   $ 44,500 
Leroy Keith, Jr.             $  9,278              None                None             $      0
Philip R. McLoughlin         $      0            for any             for any            $ 42,500  
James M. Oates               $ 11,225            Trustee             Trustee            $ 51,500 
Philip R. Reynolds           $  9,718                                                   $ 44,500 
Herbert Roth, Jr.            $12,340*                                                   $ 56,500 
Richard E. Segerson          $ 11,225                                                   $ 51,500 
Lowell P. Weicker            $  7,725                                                   $ 34,500 
</TABLE>

   *At the request of Messrs. Blinn and Roth, arrangements have been 
established to permit their compensation (and the earnings thereon) to be 
deferred until their retirement or resignation from the Board of Trustees, or 
their death or permanent disability. 

                           THE INVESTMENT ADVISERS 

   The offices of Phoenix Investment Counsel, Inc., (PIC) are located at 56 
Prospect Street, Hartford, Connecticut 06115-0480. 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., JNL Series Trust, and SunAmerica Series Trust among 
others. The offices of Phoenix Realty Securities, Inc. (PRS) are located at 
38 Prospect Street, Hartford, Connecticut 06115. 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 subsidiary of Phoenix Duff & Phelps
Corporation of Chicago, Illinois. Prior to November 1, 1995 PIC Equity Planning
were indirect, wholly-owned subsidiaries 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. 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. 

   David L. Albrycht, Curtiss O. Barrows, James M. Dolan, Jeanne H. Dorey, 
Peter S. Lannigan, Thomas S. Melvin, Jr., William R. Moyer, William J. 
Newman, James D. Wehr and John T. Wilson, 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. Martin J. Gavin and Michael E. Haylon, officers of 
the Fund, are officers and Directors of PIC. 

   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. 

                                      21 
<PAGE>

   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; 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, Emerging 
Markets Portfolio and International Portfolio at the annual rate of 0.75% of 
the average of the aggregate daily net asset values of each 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 
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. 

   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. 

  For its services to the Bond, Capital Appreciation, International Portfolios
and Emerging Markets Portfolios of the Fund during the fiscal year ended
November 30, 1995, PIC received a fee of $5,195,316. For its services to the
Real Estate Portfolio PRS during the year ended November 30, 1995, PRS received
a fee of $51,536. Of these totals, PIC received fees from each Portfolio as
follows:

                              1993          1994            1995 
Capital Appreciation       $2,495,574    $3,277,801      $3,394,485 
International                 352,036     1,150,757       1,112,314 
Bond                          140,385       735,312         669,273 
Emerging Markets               --                --          19,244 

   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 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 

                                      22 
<PAGE>
 
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. 

   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, 1993, 1994 and 1995, brokerage
commissions paid by the Fund on Portfolio transactions totaled $1,318,229,
$3,679,752 and $3,531,634 respectively. Brokerage commissions of $3,332,687 paid
during the fiscal year ended November 30, 1995, were paid on portfolio
transactions aggregating $1,732,166,109 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 

                                      23 
<PAGE>
 
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 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 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. 

                                      24 
<PAGE>
 
   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. 

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. 

                                      25 
<PAGE>
 
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 Funds, c/o State 
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301, 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 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 

                                      26 
<PAGE>
 
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 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. 

                                      27 
<PAGE>
 
   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 Phoenix Funds, 
c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 
02266-8301. 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 Phoenix Funds, 
c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 
02266-8301, 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. 

    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 

                                      28 
<PAGE>
 
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 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 

                                      29 
<PAGE>
 
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. 

                                    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 

                                      30 
<PAGE>
 
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. 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. 

   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 

                                      31 
<PAGE>
 
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). 

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. 

                                      32 
<PAGE>
 
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 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, 1993, 1994 and 
1995, Equity Planning's gross commissions on sales of Fund shares totalled 
$6,920,952, $3,280,958 and $1,655,136, respectively. Of these amounts, 
$6,298,000, $2,912,614 and $1,454,880, 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, 1993, 1994 
and 1995, the Financial Agent received fees of $174,841, $231,177 and 
$227,721, respectively. 

   Equity Planning also acts as Transfer Agent of the Fund. As compensation, 
Equity Planning receives a fee equivalent to $19.25 for each designated daily 
dividend shareholder account and $14.95 for each designated non-daily 
dividend 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; Martin J. Gavin, an officer of the Fund, is a 
director of Equity Planning. Michael E. Haylon, an officer of the Fund, is a 
director of Equity Planning; and G. Jeffrey Bohne, Nancy G. Curtiss, James M. 
Dolan, William R. Moyer, William J. Newman 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 

                                      33 
<PAGE>
 
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 (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, 1995 the Fund paid Rule 12b-1 Fees in the amount of $1,984,050, of
which the National Distributor received $515,858 and unaffiliated broker-dealers
received $1,468,192. The Rule 12b-1 payments were used for (1) compensating
dealers ($1,817,870 ), (2) compensating sales and shareholder services personnel
($142,624) and (3) compensating the National Distributor for marketing materials
($23,557). 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 

   Financial information relating to the Fund is contained in the Annual 
Report to Shareholders for the year ended November 30, 1995 and is available 
by calling Equity Planning at (800) 243-4361, or by writing to Equity 
Planning at 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 
06083-2200. The Annual Report is incorporated into this Statement of 
Additional Information by reference. A copy of the Annual Report must precede 
or accompany this Statement of Additional Information. 

INDEPENDENT ACCOUNTS

  Price Waterhouse LLP with principal offices at 160 Federal Street, Boston, MA
02110, has been selected independent accounts for the Fund.

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