PROSPECTUS
PHOENIX
MULTI-PORTFOLIO FUND
PROSPECTUS
MARCH 8, 1996
as supplemented March 9, 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
as supplemented March 9, 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%((4))
((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
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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
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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* 64.61%
*The unrated bonds are equivalent to Baa 6.6%, Ba 26.3% 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
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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
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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.
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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
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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
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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
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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
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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
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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. Timothy M. Heaney and Mr. James D. Wehr are co-managers of the Phoenix
Tax-Exempt Bond Portfolio, and as such, are primarily responsible for the day-
to-day management of the portfolio. Mr. Heaney has managed the Bond Portfolio
since March 1, 1996. Mr. Wehr has managed the Bond Portfolio since 1988.
Mr. Heaney has been the Co-Portfolio Manager of the Phoenix California Tax
Exempt Bonds, Inc., advised by National Securities & Research Corporation, since
March 1, 1996. Mr. Heaney presently is an Investment Analyst, with PIC and
previously held a similar position from 1992 to 1994 with Phoenix Home Life
Mutual Insurance Company. He held various positions with Connecticut National
Bank between 1990 and 1992.
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 Bonds, Inc.
on July 31, 1993 and a Co-Portfolio Manager on March 1, 1996. 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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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.
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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.
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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)
