AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1998
REGISTRATION NOS. 33-19423
811-5436
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 23 /X/
AND/OR
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 25 /X/
(CHECK APPROPRIATE BOX OR BOXES)
---------------
PHOENIX MULTI-PORTFOLIO FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
---------------
101 MUNSON STREET, GREENFIELD, MASSACHUSETTS 01301
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
C/O PHOENIX EQUITY PLANNING SHAREHOLDER SERVICES
(800) 243-1574
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------
THOMAS N. STEENBURG
VICE PRESIDENT, COUNSEL AND SECRETARY
PHOENIX DUFF & PHELPS CORPORATION
56 PROSPECT STREET
HARTFORD, CONNECTICUT 06115
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------
It is proposed that this filing will become effective
(check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
================================================================================
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
CROSS REFERENCE SHEET
REQUIRED BY RULE 495(a)
<TABLE>
<CAPTION>
PART A
FORM N-1A ITEM NO. PROSPECTUS CAPTION
- ------------------ ------------------
<S> <C>
1. Cover Page ...................................... Cover Page
2. Synopsis ........................................ Introduction; Fund Expenses
3. Condensed Financial Information ................. Financial Highlights
4. General Description of Registrant ............... Introduction; Investment Objectives and Policies;
Investment Techniques and Related Risks; Portfolio
Turnover; Additional Information
5. Management of the Fund .......................... Introduction; Management of the Trust
5A. Management's Discussion of Fund Performance...... Performance Information
6. Capital Stock and Other Securities .............. Introduction; Additional Information; Dividends,
Distributions and Taxes
7. Purchase of Securities Being Offered ............ Distribution Plans; How to Buy Shares; Investor
Account Services
8. Redemption or Repurchase ........................ How to Redeem Shares
9. Legal Proceedings ............................... Not applicable
PART B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------------------ -------------------------------------------
10. Cover Page ...................................... Cover Page
11. Table of Contents ............................... Table of Contents
12. General Information and History ................. The Fund
13. Investment Objectives and Policies .............. Investment Objectives and Policies; Investment
Restrictions; Portfolio Turnover
14. Management of the Fund .......................... Trustees and Officers
15. Control Persons and Principal Holders of
Securities ...................................... Trustees and Officers
16. Investment Advisory and Other Services .......... The Investment Adviser; The Distributor
17. Brokerage Allocation and Other Practices ........ Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities............... Net Asset Value; How to Buy Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered......................... How to Buy Shares; Investor Account
Services; How to Redeem Shares
20. Tax Status ...................................... Dividends, Distributions and Taxes
21. Underwriters .................................... The Distributor; Plans of Distribution
22. Calculations of Performance Data................. Performance Information
23. Financial Statements ............................ Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
P H O E N I X
FUNDS
PROSPECTUS MARCH 27, 1998
[arrow] PHOENIX TAX-EXEMPT
BOND PORTFOLIO
[arrow] PHOENIX MID CAP
PORTFOLIO
[arrow] PHOENIX INTERNATIONAL
PORTFOLIO
[arrow] PHOENIX REAL ESTATE
SECURITIES PORTFOLIO
[arrow] PHOENIX EMERGING MARKETS
BOND PORTFOLIO
[arrow] PHOENIX STRATEGIC
INCOME FUND
[LOGO] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX TAX-EXEMPT BOND PORTFOLIO
PHOENIX MID CAP PORTFOLIO
PHOENIX INTERNATIONAL PORTFOLIO
PHOENIX REAL ESTATE SECURITIES PORTFOLIO
PHOENIX EMERGING MARKETS BOND PORTFOLIO
PHOENIX STRATEGIC INCOME FUND
101 Munson Street
Greenfield, Massachusetts 01301
PROSPECTUS
March 27, 1998
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 Mid Cap Portfolio (the "Mid Cap Portfolio") seeks as
its investment objective long-term appreciation of capital. Under normal
circumstances, at least 65% of the total assets will be invested in the common
stocks of medium capitalization companies considered to have appreciation
potential.
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 and Related Risks"). 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.
Phoenix Strategic Income Fund (the "Income Portfolio"), formerly the
"Diversified Income Portfolio" was previously known as the "Endowment Fixed
Income Portfolio." The Fund seeks to maximize current income by investing in
debt securities as its investment objective. Capital appreciation is a secondary
objective. The Income Portfolio will invest principally in four market sectors:
(1) debt securities of U.S. companies including lower-rated, high yield
securities, (2) mortgage securities, (3) debt securities of foreign governments
and companies including non-dollar denominated, and (4) U.S. Government
securities. There can be no assurance that the Income Portfolio will achieve its
objectives.
One of the four principal market sectors in which the Income Portfolio
intends to invest is High Yield-High Risk Debt Securities, commonly referred to
as "junk bonds." These lower rated securities may be more susceptible to real or
perceived adverse economic conditions than investment grade securities. High
Yield-High Risk Securities are regarded as predominantly speculative with regard
to each issuer's continuing ability to make interest and principal payments. In
addition, the secondary market for High Yield-High Risk Securities may be less
liquid than the market for investment grade securities. Investors should
carefully assess the risks associated with an investment in the Fund. See
"Investment Objective and Policies" and "Investment Techniques and Related
Risks."
- --------------------------------------------------------------------------------
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: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
(continued from previous page)
Phoenix Multi-Portfolio Fund (the "Trust") is an open-end management
investment company whose shares are offered in six series. 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.
This Prospectus sets forth concisely the information about the Trust 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 Trust, 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 Trust is contained in a Statement of Additional
Information, dated March 27, 1998, 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.
The Commission maintains a Web site (http://www.sec.gov) that contains this
Prospectus, the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Commission.
SHARES OF THE TRUST 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.
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
INTRODUCTION .............................................................. 4
FUND EXPENSES ............................................................. 6
FINANCIAL HIGHLIGHTS ...................................................... 9
PERFORMANCE INFORMATION ................................................... 14
INVESTMENT OBJECTIVES AND POLICIES ........................................ 15
Tax-Exempt Bond Portfolio .............................................. 15
Mid Cap Portfolio ...................................................... 16
International Portfolio ................................................ 17
Emerging Markets Bond Portfolio ........................................ 20
Real Estate Portfolio .................................................. 21
Income Portfolio ....................................................... 23
INVESTMENT TECHNIQUES AND RELATED RISKS ................................... 24
INVESTMENT RESTRICTIONS ................................................... 30
PORTFOLIO TURNOVER ........................................................ 30
MANAGEMENT OF THE TRUST ................................................... 31
DISTRIBUTION PLANS ........................................................ 33
HOW TO BUY SHARES ......................................................... 34
INVESTOR ACCOUNT SERVICES ................................................. 38
NET ASSET VALUE ........................................................... 39
HOW TO REDEEM SHARES ...................................................... 39
DIVIDENDS, DISTRIBUTIONS AND TAXES ........................................ 41
ADDITIONAL INFORMATION .................................................... 42
APPENDIX .................................................................. 43
3
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of Phoenix
Multi-Portfolio Fund (the "Trust"). The Trust is an open-end management
investment company established in 1987 as a Massachusetts business trust. Shares
of the Trust are divided into six series or "Portfolios." Each Portfolio has a
different investment objective and is designed to meet different investment
needs. The Phoenix Tax-Exempt Bond Portfolio (the "Bond Portfolio"), the Phoenix
Mid Cap Portfolio (the "Mid Cap Portfolio"), the Phoenix International Portfolio
(the "International Portfolio"), the Phoenix Real Estate Securities Portfolio
(the "Real Estate Portfolio"), the Phoenix Emerging Markets Bond Portfolio (the
"Emerging Markets Portfolio"), the Phoenix Strategic Income Fund (the "Income
Portfolio"), are the six portfolios currently offered by the Trust (each a
"Portfolio," and, together, the "Portfolios").
THE INVESTMENT ADVISERS
The investment adviser for the Bond Portfolio, Mid Cap Portfolio,
International Portfolio, Emerging Markets Portfolio and Income Portfolio is
Phoenix Investment Counsel, Inc. ("PIC" or the "Adviser"). PIC is a subsidiary
of Phoenix Duff & Phelps Corporation and an indirect subsidiary of Phoenix Home
Life Mutual Insurance Company ("Phoenix Home Life"). The investment adviser for
the Real Estate Portfolio at its inception was 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
Duff & Phelps Investment Management Co. ("DPIM"), a subsidiary of Phoenix Duff &
Phelps Corporation and an indirect majority owned subsidiary of Phoenix Home
Life, for which DPIM is paid a fee by PRS. On March 2, 1998, DPIM purchased the
management rights for the Portfolio from PRS and PRS' contract was assigned to
DPIM.
See "Management of the Trust" for a description of the Investment Advisory
Contracts, management fees and each investment adviser's undertaking to
reimburse the Trust for certain expenses.
DISTRIBUTOR AND DISTRIBUTION PLANS
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Trust's shares. See "Distribution Plans"
and the Statement of Additional Information. Equity Planning also acts as
financial agent and as such receives a fee. See "The Financial Agent." Equity
Planning also serves as the Trust's transfer agent.
See "The Custodian and Transfer Agent."
The Trust has adopted amended and restated 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 Trust will pay the Distributor an amount equal
to 0.25% annually of the Trust'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 ("Service Fee"). Pursuant to the distribution plan adopted for Class B
Shares of a Portfolio, the Trust shall reimburse the Distributor up to a maximum
annual rate of 0.75% of the Trust'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 0.25% for a Service Fee. Pursuant
to the distribution plan adopted for Class C Shares and Class M Shares, the
Emerging Markets Portfolio and the Income Portfolio shall reimburse the
Distributor up to a maximum annual rate of 0.75% and 0.25%, respectively, of the
average daily net assets of the Emerging Markets Portfolio and the Income
Portfolio for distribution expenses incurred in connection with the sale and
promotion of each class of shares and 0.25% for a Service Fee. See "Distribution
Plans."
PURCHASE OF SHARES
The Trust offers two classes of shares of each Portfolio and two additional
classes of shares of the Emerging Markets Portfolio and the Income 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" and "Class M Shares") or (ii) on a
contingent deferred basis (the "Class B Shares" and "Class C Shares"). An
additional class of shares of the Income Portfolio (Class X Shares) is currently
closed to new investors. Completed applications 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 M SHARES ARE CURRENTLY CLOSED TO NEW
INVESTORS.
Class A and M 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
("State Street Bank") plus a sales charge. The maximum initial sales charge is
4.75% and 3.50%, respectively, of the offering price on single purchases of less
than $50,000. The sales charges are reduced on a graduated scale on single
purchases of $50,000 or more.
Class B and C Shares are offered to the public at the next determined net
asset value after receipt of an order by State Street Bank with no sales charge.
Class B Shares are subject to a sales charge if they are redeemed within five
years of purchase. Class C Shares redeemed within one year of purchase are
subject to a 1% sales charge.
Shares of each Class represent an identical interest in the investment
portfolio of a Portfolio and have the same rights. For more information on fees
and charges applicable for each Portfolio and Class, refer to "Fund Expenses"
and "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."
4
<PAGE>
REDEMPTION OF SHARES
Class A, M and X Shares may be redeemed at any time at the net asset value
per share next computed after receipt of a redemption request by State Street
Bank. Class B and C shareholders redeeming shares within certain time periods of
the date of purchase will normally be assessed a contingent deferred sales
charge. See "How to Redeem Shares."
RISK FACTORS
There can be no assurance that any Portfolio will achieve its investment
objectives. In addition, special risks may be presented by the particular types
of securities in which a Portfolio may invest. For example, although the Real
Estate Portfolio does not invest directly in real property, it does invest
primarily in securities concentrated in and directly related to the real estate
industry and may therefore be subject to certain risks associated with the
ownership of real estate and with the real estate industry in general. The Real
Estate Portfolio is non-diversified and as such there is no restriction on the
percentage of its assets that may be invested in the securities of any one
issuer. Accordingly, its value is potentially more susceptible to adverse
developments affecting a single issuer.
The Income Portfolio may invest in High Yield-High Risk Securities, commonly
referred to as "junk bonds." Investment in such securities is speculative and
involves risks not associated with investment in higher rated securities,
including overall greater risk of nonpayment of interest and principal and
potentially greater sensitivity to general economic conditions and changes in
interest rates.
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 emerging market countries. It invests in lower quality
securities of issuers which may have defaulted in the past on certain of their
financial obligations. Investment in less-developed countries whose markets are
still emerging generally presents greater risks than those presented by
investment in domestic issuers or countries with developed securities markets
and more advanced regulatory systems. 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 nonpayment 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 Mid Cap Portfolio may be as
high as 300% and the Emerging Markets Portfolio's annual turnover rate may be as
high as 600%. Because of PIC's strict "sell" discipline, each 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."
5
<PAGE>
<TABLE>
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, 1997, except where adjusted to reflect 1998 changes in Annual
Fund Operating Expenses of the Income Portfolio.
<CAPTION>
BOND BOND MID CAP MID CAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(CLASS A (CLASS B (CLASS A (CLASS B
SHARES) SHARES) SHARES) SHARES)
------- ------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases 4.75% None 4.75% None
(as percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None None
Dividends
Deferred Sales Load (as a percentage of original None 5% during the None 5% during the
purchase price or redemption proceeds, as first year, first year,
applicable) decreasing 1% decreasing 1%
annually to 2% annually to 2%
during the fourth during the fourth
& fifth years; & fifth years;
dropping from dropping from
2% to 0% after 2% to 0% after
the fifth year the fifth year
Redemption Fee None(a) None None(a) None
Exchange Fee 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%
12b-1 Fees (b) 0.25% 1.00% 0.25% 1.00%
Other Operating Expenses 0.26% 0.26% 0.33% 0.33%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES 0.96% 1.71% 1.33% 2.08%
==== ==== ==== ====
INTERNATIONAL INTERNATIONAL REAL ESTATE REAL ESTATE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(CLASS A (CLASS B (CLASS A (CLASS B
SHARES) SHARES) SHARES) SHARES)
------- ------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases 4.75% None 4.75% None
(as percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None None
Dividends
Deferred Sales Load (as a percentage of original None 5% during the None 5% during the
purchase price or redemption proceeds, as first year, first year,
applicable) decreasing 1% decreasing 1%
annually to 2% annually to 2%
during the fourth during the fourth
& fifth years; & fifth years;
dropping from dropping from
2% to 0% after 2% to 0% after
the fifth year the fifth year
Redemption Fee None(a) None None(a) None
Exchange Fee 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%
12b-1 Fees (b) 0.25% 1.00% 0.25% 1.00%
Other Operating Expenses (After Reimbursement) 0.56% 0.56% 0.30%(c) 0.30%(c)
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES 1.56% 2.31% 1.30% 2.05%
==== ==== ==== ====
</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) "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. Rule 12b-1 Fees as stated
include a Service Fee. See "Distribution Plans."
(c) The Adviser has agreed to reimburse the Real Estate 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, 1998 exceed
1.30% and 2.05%, respectively, of the average net assets. Other operating
expenses absent expense reimbursement equal approximately 0.54% and 0.54%,
respectively, of average net assets. Total operating expenses absent expense
reimbursement equal approximately 1.54% and 2.29%, respectively, of average net
assets.
6
<PAGE>
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
----------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS M
SHARES SHARES SHARES (C) SHARES (C)
------ ------ ---------- ----------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases 4.75% None None 3.50%
(as percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None None None None
Deferred Sales Load (as a percentage of original None 5% during the first year, 1% during the None
purchase price or redemption proceeds, as applicable) decreasing 1% annually first year
to 2% during the fourth &
fifth years; dropping from 2%
to 0% after the fifth year
Redemption Fee None(a) None None None
Exchange Fee 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%
12b-1 Fees (b) 0.25% 1.00% 1.00% 0.50%
Other Operating Expenses 0.40% 0.40% 0.38% 0.38%
---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES 1.40% 2.15% 2.13% 1.63%
==== ==== ==== ====
</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) "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. Rule 12b-1 Fees as stated
include a Service Fee. See "Distribution Plans."
(c) Prior to March 27, 1998 Class C and M Shares were not offered. Class M
Shares are currently closed to new investors.
<TABLE>
<CAPTION>
INCOME PORTFOLIO
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS M CLASS X
SHARES (B) SHARES (B) SHARES (B) SHARES (B) SHARES (D)
---------- ---------- ---------- ---------- ----------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases 4.75% None None 3.50% None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None None None
Dividends
Deferred Sales Load (as a percentage of None 5% during the first year, 1% during the None None
original purchase price or redemption decreasing 1% annually first year
proceeds, as applicable) to 2% during the fourth
and fifth years;
decreasing to 0% after
the fifth year
Redemption Fee None None None None None
Exchange Fee None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets
for the period ended November 30, 1998)
Management Fees 0.55% 0.55% 0.55% 0.55% 0.55%
12b-1 Fees (a) 0.25% 1.00% 1.00% 0.50% 0.00%
Other Operating Expenses (After
Reimbursement) (c) 0.20% 0.20% 0.20% 0.20% 0.20%
---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES 1.00% 1.75% 1.75% 1.25% 0.75%
==== ==== ==== ==== ====
</TABLE>
- ---------------
(a) "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. ("NASD"). Rule 12b-1 Fees
as stated include a Service Fee. See "Distribution Plans."
(b) Prior to March 27, 1998, Class A, Class B, Class C and Class M Shares
were not offered for the Income Portfolio.
(c) The Adviser has agreed to reimburse the Income Portfolio for the amount
by which other operating expenses for the fiscal year ended November 30, 1998
exceed 0.20% of the Fund's average net assets for Class A, Class B, Class C,
Class M Shares and Class X Shares, respectively. Other operating expenses are
estimated to be 1.79% for Class A, B, C, M and X Shares, respectively, absent
such reimbursement. Total fund operating expenses are estimated to be 2.59%,
3.34%, 3.34%, 2.84% and 2.34% for Class A, B, C, M and X Shares, respectively,
absent such reimbursement.
(d) Effective March 27, 1998, Class X and Class M Shares are closed to new
investors.
7
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
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:
<S> <C> <C> <C> <C>
Bond Portfolio (Class A Shares) $57 $ 77 $ 98 $160
Bond Portfolio (Class B Shares) 67 84 113 182
Mid Cap Portfolio (Class A Shares) 60 88 117 200
Mid Cap Portfolio (Class B Shares) 71 95 132 222
International Portfolio (Class A Shares) 63 94 128 224
International Portfolio (Class B Shares) 73 102 144 246
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) 61 89 119 205
Emerging Markets Portfolio (Class B Shares) 72 97 134 227
Emerging Markets Portfolio (Class C Shares) 32 67 114 246
Emerging Markets Portfolio (Class M Shares) 51 85 121 222
Income Portfolio (Class A Shares) 57 78 100 164
Income Portfolio (Class B Shares) 68 85 115 186
Income Portfolio (Class C Shares) 28 55 95 206
Income Portfolio (Class M Shares) 47 73 101 181
Income Portfolio (Class X Shares) 8 24 42 93
An investor would pay the following expenses on the same
$1,000 investment assuming (1) 5% annual return and (2) no
redemption at the end of each time period:
Bond Portfolio (Class A Shares) $57 $ 77 $ 98 $160
Bond Portfolio (Class B Shares) 17 54 93 182
Mid Cap Portfolio (Class A Shares) 60 88 117 200
Mid Cap Portfolio (Class B Shares) 21 65 112 222
International Portfolio (Class A Shares) 63 94 128 224
International Portfolio (Class B Shares) 23 72 124 246
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) 61 89 119 205
Emerging Markets Portfolio (Class B Shares) 22 67 114 227
Emerging Markets Portfolio (Class C Shares) 22 67 114 246
Emerging Markets Portfolio (Class M Shares) 51 85 121 222
Income Portfolio (Class A Shares) 57 78 100 164
Income Portfolio (Class B Shares) 18 55 95 186
Income Portfolio (Class C Shares) 18 55 95 206
Income Portfolio (Class M Shares) 47 73 101 181
Income Portfolio (Class X Shares) 8 24 42 93
</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. Class B Share
figures assume conversion to Class A Shares after eight years. See "Management
of the Fund," "Distribution Plans" and "How To Buy Shares."
8
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth certain financial information for the
respective fiscal years of the Portfolios. 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 Trust's most recent Annual Report (containing the report of Independent
Accountants and additional information relating to each Portfolio's performance)
are available at no charge upon request by calling (800) 243-4361.
<TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
TAX-EXEMPT BOND PORTFOLIO
<CAPTION>
CLASS A
------------------------------------------------------------------------------------ FROM
Year Ended November 30, INCEPTION
------------------------------------------------------------------------------------ 7/15/88 TO
1997 1996 1995 1994 1993 1992 1991 1990 1989 11/30/88
---- ---- ---- ---- ---- ---- ---- ---- ---- --------
Net asset value,
beginning of
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
period......... $11.28 $11.40 $10.09 $11.58 $11.10 $10.66 $10.37 $10.68 $10.18 $10.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income ....... 0.59 0.60 0.61 0.65 0.60(1) 0.66(1) 0.65(1) 0.65(1) 0.68(1) 0.24(1)
Net realized
and unrealized
gain (loss)... 0.05 (0.12) 1.34 (1.49) 0.76 0.57 0.29 -- 0.52 0.18
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS... 0.64 0.48 1.95 (0.84) 1.36 1.23 0.94 0.65 1.20 0.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from
net investment
income........ (0.59) (0.60) (0.61) (0.65) (0.60) (0.66) (0.65) (0.65) (0.68) (0.24)
Dividends from
net realized
gains......... (0.16) -- (0.03) -- (0.28) (0.13) -- (0.31) (0.02) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL
DISTRIBUTIONS. (0.75) (0.60) (0.64) (0.65) (0.88) (0.79) (0.65) (0.96) (0.70) (0.24)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
CHANGE IN NET
ASSET VALUE.... (0.11) (0.12) 1.31 (1.49) 0.48 0.44 0.29 (0.31) 0.50 0.18
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.. $11.17 $11.28 $11.40 $10.09 $11.58 $11.10 $10.66 $10.37 $10.68 $10.18
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(2).. 6.04% 4.30% 19.87% -7.55% 12.79% 11.92% 9.32% 6.49% 12.13% 11.06%(3)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(thousands)... $122,763 $136,558 $147,821 $141,623 $171,272 $35,625 $27,093 $20,240 $17,590 $12,226
RATIO TO AVERAGE
NET ASSETS OF:
Operating
expenses..... 0.96% 0.94% 0.97% 0.96% 0.75% 0.78% 0.94% 1.00% 1.00% 1.00%(3)
Net investment
income....... 5.36% 5.42% 5.65% 5.65% 5.33% 5.92% 6.17% 6.29% 6.55% 6.26%(3)
Portfolio
turnover....... 15% 27% 25% 54% 62% 145% 99% 130% 161% 33%(3)
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
TAX-EXEMPT BOND PORTFOLIO
<CAPTION>
CLASS B
---------------------------------------
YEAR ENDED FROM
NOVEMBER 30, INCEPTION
------------------------ 3/16/94 TO
1997 1996 1995 11/30/94
---- ---- ---- --------
Net asset value,
beginning of
<S> <C> <C> <C> <C>
period......... $11.32 $11.44 $10.12 $11.21
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income ....... 0.50 0.52 0.53 0.39
Net realized
and unrealized
gain (loss)... 0.06 (0.12) 1.35 (1.09)
------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS... 0.56 0.40 1.88 (0.70)
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from
net investment
income........ (0.50) (0.52) (0.53) (0.39)
Dividends from
net realized
gains......... (0.16) -- (0.03) --
------ ------ ------ ------
TOTAL
DISTRIBUTIONS. (0.66) (0.52) (0.56) (0.39)
------ ------ ------ ------
CHANGE IN NET
ASSET VALUE.... (0.10) (0.12) 1.32 (1.09)
------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.. $11.22 $11.32 $11.44 $10.12
====== ====== ====== ======
Total return(2).. 5.13% 3.60% 19.07% -6.42%(4)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(thousands)... $5,797 $4,762 $3,142 $1,147
RATIO TO AVERAGE
NET ASSETS OF:
Operating
expenses..... 1.71% 1.69% 1.72% 1.54%(3)
Net investment
income....... 4.60% 4.68% 4.90% 5.07%(3)
Portfolio
turnover....... 15% 27% 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.
9
<PAGE>
<TABLE>
INTERNATIONAL PORTFOLIO
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------
FROM
Year Ended November 30, INCEPTION
-------------------------------------------------------------------------- 11/1/89 TO
1997 1996 1995 1994 1993 1992 1991 1990 11/30/89
---- ---- ---- ---- ---- ---- ---- ---- --------
Net asset value,
beginning of
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
period......... $14.48 $12.20 $12.63 $11.16 $ 8.96 $10.90 $10.27 $10.44 $10.00
INCOME FROM
INVESTMENT
OPERATIONS(5)
Net investment
income (loss). 0.03(1) 0.04(1) 0.03(1) (0.01) -- 0.11 0.15 0.15(6) 0.02(6)
Net realized
and unrealized
gain (loss)... 1.01 2.28 0.42 1.48 2.20 (1.10) 0.69 (0.22) 0.42
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS... 1.04 2.32 0.45 1.47 2.20 (0.99) 0.84 (0.07) 0.44
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS
DISTRIBUTIONS
Dividends from
net investment
income........ (0.29) -- -- -- -- (0.12) (0.21) (0.10) --
Dividends from
net realized
gains......... (1.34) (0.04) (0.88) -- -- (0.64) -- -- --
Distribution
in excess of
accumulated
net investment
income........ -- -- -- -- -- (0.19) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL
DISTRIBUTIONS (1.63) (0.04) (0.88) -- -- (0.95) (0.21) (0.10) --
------ ------ ------ ------ ------ ------ ------ ------ ------
CHANGE IN NET
ASSET VALUE.... (0.59) 2.28 (0.43) 1.47 2.20 (1.94) 0.63 (0.17) 0.44
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END
OF PERIOD...... $13.89 $14.48 $12.20 $12.63 $11.16 $8.96 $10.90 $10.27 $10.44
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(2).. 8.21% 19.03% 4.12% 13.17% 24.55% -9.91% 8.26% -0.75% 53.53%(3)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(thousands).... $131,338 $135,524 $129,352 $167,918 $91,196 $26,188 $21,427 $16,583 $1,593
RATIO TO AVERAGE
NET ASSETS OF:
Operating
expenses...... 1.56% 1.57% 1.70% 1.47% 1.78% 1.97% 2.09% 1.50% 1.50%(3)
Net investment
income (loss). 0.22% 0.33% 0.23% 0.20% (0.04)% 0.85% 1.29% 1.48% 3.24%(3)
Portfolio
turnover........ 167% 151% 236% 186% 191% 82% 128% 99% --
Average
commission $0.0177 $0.0205 N/A N/A N/A N/A N/A N/A N/A
rate paid(7)...
</TABLE>
<TABLE>
INTERNATIONAL PORTFOLIO
<CAPTION>
CLASS B
------------------------------------------
Year Ended FROM
November 30, INCEPTION
-------------------------- 7/15/94 TO
1997 1996 1995 11/30/94
---- ---- ---- --------
Net asset value,
beginning of
<S> <C> <C> <C> <C>
period......... $14.22 $12.07 $12.60 $12.80
INCOME FROM
INVESTMENT
OPERATIONS(5)
Net investment
income (loss). (0.08)(1) (0.05)(1) (0.07)(1) (0.01)
Net realized
and unrealized
gain (loss)... 1.00 2.24 0.42 (0.19)
------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS... 0.92 2.19 0.35 (0.20)
------ ------ ------ ------
LESS
DISTRIBUTIONS
Dividends from
net investment
income........ (0.24) -- -- --
Dividends from
net realized
gains......... (1.34) (0.04) (0.88) --
Distribution
in excess of
accumulated
net investment
income........ -- -- -- --
------ ------ ------ ------
TOTAL
DISTRIBUTIONS (1.58) (0.04) (0.88) --
------ ------ ------ ------
CHANGE IN NET
ASSET VALUE.... (0.66) 2.15 (0.53) (0.20)
------ ------ ------ ------
NET ASSET VALUE,
END
OF PERIOD...... $13.56 $14.22 $12.07 $12.60
====== ====== ====== ======
Total return(2).. 7.37% 18.16% 3.28% -1.56%(4)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(thousands).... $10,159 $6,955 $3,261 $1,991
RATIO TO AVERAGE
NET ASSETS OF:
Operating
expenses...... 2.31% 2.31% 2.50% 1.93%(3)
Net investment
income (loss). (0.55)% (0.39)% (0.61)% 0.36%(3)
Portfolio
turnover........ 167% 151% 236% 186%
Average
commission $0.0177 $0.0205 N/A N/A
rate paid(7)...
</TABLE>
- ---------------
(1 Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in the total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the time of share purchases and redemptions.
(6) Net of reimbursement by Investment Adviser of $0.06 and $3.54,
respectively.
(7) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs or spreads on shares traded on a principal
basis.
10
<PAGE>
<TABLE>
MID CAP PORTFOLIO
<CAPTION>
CLASS A
------------------------------------------------------------------------------------------
FROM
Year Ended November 30, INCEPTION
---------------------------------------------------------------------------- 11/1/89 TO
1997 1996 1995 1994 1993 1992 1991 1990 11/30/89
---- ---- ---- ---- ---- ---- ---- ---- --------
Net asset value,
beginning of
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
period......... $21.65 $22.03 $18.03 $18.70 $17.95 $16.61 $11.95 $10.29 $10.00
INCOME FROM
INVESTMENT
OPERATIONS(5)
Net investment
income (loss). (0.02)(1) (0.03)(1) 0.05(1) 0.11 0.11 0.15 0.19 0.18(6) 0.03(6)
Net realized
and unrealized
gain.......... 1.52 2.53 4.74 0.10 1.44 2.41 4.64 1.59 0.26
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS... 1.50 2.50 4.79 0.21 1.55 2.56 4.83 1.77 0.29
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS
DISTRIBUTIONS
Dividends from
net investment
income........ -- -- (0.06) (0.10) (0.13) (0.21) (0.17) (0.11) --
Dividends from
net realized
gains......... (2.51) (2.88) (0.73) (0.78) (0.67) (1.01) -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL
DISTRIBUTIONS. (2.51) (2.88) (0.79) (0.88) (0.80) (1.22) (0.17) (0.11) --
------ ------ ------ ------ ------ ------ ------ ------ ------
CHANGE IN NET
ASSET VALUE.... (1.01) (0.38) 4.00 (0.67) 0.75 1.34 4.66 1.66 0.29
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.. $20.64 $21.65 $22.03 $18.03 $18.70 $17.95 $16.61 $11.95 $10.29
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(2).. 8.12% 13.52% 27.87% 1.03% 8.94% 16.44% 40.78% 17.26% 35.28%(3)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(thousands)... $360,053 $451,474 $487,674 $419,760 $426,027 $234,472 $119,870 $15,840 $1,568
RATIO TO AVERAGE
NET ASSETS OF:
Operating
expenses....... 1.33% 1.35% 1.42% 1.36% 1.34% 1.40% 1.24% 1.50% 1.50%(3)
Net investment
income (loss). (0.08)% (0.17)% 0.28% 0.59% 0.64% 0.93% 1.94% 2.22% 4.68%(3)
Portfolio
turnover........ 161% 242% 218% 227% 174% 287% 458% 454% 5%(3)
Average
commission $0.0542 $0.0504 N/A N/A N/A N/A N/A N/A N/A
rate paid(7)...
</TABLE>
<TABLE>
MID CAP PORTFOLIO
<CAPTION>
CLASS B
------------------------------------------
Year Ended FROM
November 30, INCEPTION
-------------------------- 7/18/94 TO
1997 1996 1995 11/30/94
---- ---- ---- --------
Net asset value,
beginning of
<S> <C> <C> <C> <C>
period......... $21.30 $21.85 $17.97 $17.68
INCOME FROM
INVESTMENT
OPERATIONS(5)
Net investment
income (loss). (0.16)(1) (0.18)(1) (0.12)(1) (0.01)
Net realized
and unrealized
gain.......... 1.47 2.51 4.75 0.30
------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS... 1.31 2.33 4.63 0.29
------ ------ ------ ------
LESS
DISTRIBUTIONS
Dividends from
net investment
income........ -- -- (0.02) --
Dividends from
net realized
gains......... (2.50) (2.88) (0.73) --
------ ------ ------ ------
TOTAL
DISTRIBUTIONS. (2.50) (2.88) (0.75) --
------ ------ ------ ------
CHANGE IN NET
ASSET VALUE.... (1.19) (0.55) 3.88 0.29
------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.. $20.11 $21.30 $21.85 $17.97
====== ====== ====== ======
Total return(2).. 7.27% 12.75% 26.92% 1.64%(4)
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(thousands)... $18,583 $17,599 $10,908 $1,519
RATIO TO AVERAGE
NET ASSETS OF:
Operating
expenses....... 2.08% 2.11% 2.18% 2.05%(3)
Net investment
income (loss). (0.85)% (0.92)% (0.58)% (0.23)%(3)
Portfolio
turnover........ 161% 242% 218% 227%
Average
commission $0.0542 $0.0504 N/A N/A
rate paid(7)...
</TABLE>
- ---------------
(1) Computed using average shares outstanding.
(2) Maximum sales charges are not reflected in the total return calculation.
(3) Annualized.
(4) Not annualized.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the time of share purchases and redemptions.
(6) Includes reimbursement by Investment Adviser of $0.01 and $0.23,
respectively.
(7) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs or spreads on shares traded on a principal
basis.
11
<PAGE>
<TABLE>
REAL ESTATE SECURITIES PORTFOLIO
<CAPTION>
CLASS A CLASS B
---------------------------------------- ----------------------------------------
Year Ended Year Ended
November 30, November 30,
----------------- FROM INCEPTION ----------------- FROM INCEPTION
1997 1996 3/1/95 TO 11/30/95 1997 1996 3/1/95 TO 11/30/95
---- ---- ------------------ ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $13.14 $10.72 $10.00 $13.10 $10.68 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.49(1)(6) 0.53(1) 0.43(1)(6) 0.38(2)(6) 0.46(2) 0.36(2)(6)
Net realized and unrealized gain.... 3.52 2.50 0.55 3.50 2.47 0.56
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS... 4.01 3.03 0.98 3.88 2.93 0.92
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.51) (0.59) (0.26) (0.41) (0.49) (0.24)
Dividends from net realized gains... (0.25) (0.02) -- (0.25) (0.02) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS................ (0.76) (0.61) (0.26) (0.66) (0.51) (0.24)
------ ------ ------ ------ ------ ------
CHANGE IN NET ASSET VALUE............. 3.25 2.42 0.72 3.22 2.42 0.68
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD........ $16.39 $13.14 $10.72 $16.32 $13.10 $10.68
====== ====== ====== ====== ====== ======
Total return(3)....................... 31.44% 29.20% 9.87%(5) 30.44% 28.25% 9.21%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands). $36,336 $22,872 $13,842 $23,091 $8,259 $2,239
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................. 1.30% 1.30% 1.30%(4) 2.05% 2.05% 2.05%(4)
Net investment income............... 3.34% 4.55% 5.79%(4) 2.55% 3.95% 5.03%(4)
Portfolio turnover.................... 54% 24% 9%(5) 54% 24% 9%(5)
Average commission rate paid(7)....... $0.0493 $0.0478 N/A $0.0493 $0.0478 N/A
</TABLE>
- ---------------
(1) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.07 and $0.12, respectively.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.07 and $0.12, respectively.
(3) Maximum sales charges are not reflected in the total return calculation.
(4) Annualized.
(5) Not annualized.
(6) Computed using average shares outstanding.
(7) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs or spreads on shares traded on a principal
basis.
<TABLE>
EMERGING MARKETS BOND PORTFOLIO
<CAPTION>
CLASS A CLASS B
---------------------------------------- ----------------------------------------
Year Ended Year Ended
November 30, November 30,
----------------- FROM INCEPTION ----------------- FROM INCEPTION
1997 1996 9/5/95 TO 11/30/95 1997 1996 9/5/95 TO 11/30/95
---- ---- ------------------ ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $14.80 $10.18 $10.00 $14.78 $10.18 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 1.38(6) 1.26(1) 0.25(1)(6) 1.26(6) 1.19(2) 0.22(2)(6)
Net realized and unrealized gain.... 0.17 4.56 0.18 0.18 4.53 0.20
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS... 1.55 5.82 0.43 1.44 5.72 0.42
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (1.28) (1.20) (0.25) (1.22) (1.12) (0.24)
------ ------ ------ ------ ------ ------
Dividends from net realized gains... (2.23) -- -- (2.23) -- --
TOTAL DISTRIBUTIONS................ (3.51) (1.20) (0.25) (3.45) (1.12) (0.24)
------ ------ ------ ------ ------ ------
CHANGE IN NET ASSET VALUE............. (1.96) 4.62 0.18 (2.01) 4.60 0.18
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD........ $12.84 $14.80 $10.18 $12.77 $14.78 $10.18
====== ====== ====== ====== ====== ======
Total return(3)....................... 11.91% 60.18% 4.40%(5) 11.07% 58.94% 4.22%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands). $67,875 $29,661 $12,149 $38,673 $9,713 $596
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................. 1.40% 1.50% 1.50%(4) 2.15% 2.25% 2.25%(4)
Net investment income............... 9.90% 10.41% 10.48%(4) 9.14% 9.79% 10.29%(4)
Portfolio turnover.................... 614% 378% 38%(5) 614% 378% 38%(5)
</TABLE>
- ---------------
(1) Includes reimbursement of operating expenses by investment adviser of
$0.07 and $0.03, respectively.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.07 and $0.03, respectively.
(3) Maximum sales charges are not reflected in the total return calculation.
(4) Annualized.
(5) Not annualized.
(6) Computed using average shares outstanding.
12
<PAGE>
<TABLE>
INCOME PORTFOLIO
<CAPTION>
CLASS X SHARES
---------------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------- FROM INCEPTION
1997 1996 1995 1994 4/1/93 TO 11/30/93
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $10.03 $9.45 $8.97 $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............... 0.74(1)(4) 0.78(1) 0.91(1) 0.63(1) 0.40(1)
Net realized and unrealized gain 0.09 0.59 0.51 (1.13) 0.12
------ ----- ----- ------ ------
(loss)........
TOTAL FROM INVESTMENT OPERATIONS... 0.83 1.37 1.42 (0.50) 0.52
------ ----- ----- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.75) (0.79) (0.94) (0.59) (0.40)
Dividends from net realized gains... (0.12) -- -- (0.06) --
------ ----- ----- ------ ------
TOTAL DISTRIBUTIONS................ (0.87) (0.79) (0.94) (0.65) (0.40)
------ ----- ----- ------ ------
CHANGE IN NET ASSET VALUE............. (0.04) 0.58 0.48 (1.15) 0.12
------ ----- ----- ------ ------
NET ASSET VALUE, END OF PERIOD........ $9.99 $10.03 $9.45 $8.97 $10.12
===== ====== ===== ===== ======
Total return(5)....................... 8.58% 15.32% 16.65% -5.26% 5.35%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands). $6,480 $5,967 $5,170 $1,780 $1,989
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses.................. 0.65% 0.65% 0.65% 0.65% 0.65%(2)
Net investment income............... 7.45% 8.11% 7.60% 6.64% 6.13%(2)
Portfolio turnover.................... 194% 231% 618% 124% 183%(2)
</TABLE>
- ---------------
(1) Includes reimbursement of operating expenses by Adviser of $0.22, $0.15,
$0.40, $0.34 and $0.35, respectively.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Total return figures stated reflect the deduction of the then current
management fee.
13
<PAGE>
PERFORMANCE INFORMATION
The Trust 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 each class of shares of
each Portfolio in accordance with formulas specified by the Securities and
Exchange Commission and 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 Trust 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 each class of
shares of each Portfolio will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in such class of 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 and M
Shares and the maximum contingent deferred sales charge applicable to a complete
redemption of the investment in the case of Class B and C Shares, and assume
that all dividends and distributions on each class of shares are reinvested when
paid. Performance data quoted for Class B, C and M Shares of the Bond, Mid Cap,
International, Real Estate and Emerging Markets Portfolios covering periods
prior to the inception of such classes of shares will reflect historical
performance of Class A Shares of such Portfolio as adjusted for the higher
operating expenses applicable to such class of shares. Performance data quoted
for Class A, B and C Shares of the Income Portfolio covering periods prior to
the inception of such classes of shares will reflect historical performance of
Class X Shares of the Income Portfolio as adjusted for the higher operating
expenses applicable to such class of shares. The Trust 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 Trust may from time to time, publish material citing historical
volatility for shares of the Trust.
The Trust 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 Trust 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 Trust 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 Trust against certain widely acknowledged outside standards
or indices for stock and bond market performance, such as Standard & Poor's 500
Composite Stock Price Index (the "S&P 500"), Standard & Poor's 400 Mid Cap Index
(S&P 400), Dow Jones Industrial Average, Europe Australia Far East Index (EAFE),
Consumer Price Index, Lehman Brothers Corporate Index, Lehman Brothers T-Bond
Index, Lehman Brothers Municipal Bond Index, J.P. Morgan Emerging Markets 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 measure of stock market performance and
represents common stocks of companies of varying sizes segmented across 90
different industries which are listed on the New York Stock Exchange, the
American Stock Exchange and traded over the NASDAQ National Market System. 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 Trust's or Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Trust to
respond quickly to changing market and economic conditions. From
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<PAGE>
time to time, the Trust may include specific portfolio holdings or industries in
such communications. To illustrate components of overall performance, the Trust
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 Trust's portfolio; or compare the Trust's equity or bond return figure to
well-known indices of market performance, including, but not limited to: the S&P
500, S&P 400, Dow Jones Industrial Average, NAREIT Equity Index, Europe
Australia Far East Index (EAFE), Lehman Brothers Municipal Bond Index, J. P.
Morgan Emerging Markets Bond Index, CS 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, Class B, Class C or Class M 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 Trust'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
six 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
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<PAGE>
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 creditworthy. Under normal conditions, however, at least 80% of the net
assets of the Bond Portfolio will be invested in municipal securities, the
income of which is fully exempt from federal income taxation.
Yields on municipal securities vary depending on a number of factors,
including the general condition of the financial markets and of the municipal
securities market, the size of a particular offering, the maturity of the
obligation and the credit rating of the issuer. Like other interest-bearing
securities, the value of municipal securities changes as interest rates
fluctuate. Normally, increases in interest rates cause a decrease in the market
value of interest-bearing securities and decreases in rates cause an increase in
such market value. Although subject to greater price fluctuation due to changes
in interest rates, tax laws and other general market factors, municipal
securities with longer maturities generally produce higher current yields than
municipal securities with shorter maturities. Lower-rated municipal securities
generally produce higher yields than higher-rated municipal securities since the
ability of the issuer of a lower-rated municipal security to pay interest and
principal is perceived as entailing a greater degree of risk and therefore must
reflect a commensurately greater return. Maturities and ratings, as well as
market conditions, are given due weight by PIC in determining whether, in its
judgment, particular municipal securities will provide a high level of current
income and/or potential for capital appreciation.
The table below shows the dollar weighted average of total investments, for
the year ended November 30, 1997, listed by S&P rating categories, or comparable
rating by another Nationally Recognized Statistical Rating Organization
("NRSRO"). The column titled "Not Rated" reflects the percentage of portfolio
holdings which were not rated by any NRSRO but which the Adviser has judged to
be comparable in quality to the corresponding rating categories.
S&P RATING RATED NOT RATED
---------- ----- ---------
AAA 38.5% 0.8%
AA 12.7 0.0
A 16.7 0.5
BBB 9.8 18.0
BB 0.8 0.0
B 0.0 0.3
CCC 0.0 0.0
CC 0.0 0.0
C 0.0 0.0
D 0.0 0.0
---- ----
Total 78.5% 19.6%
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 6% tax-free investment, the computation would be:
6% / (1-.28 tax rate), or 6% / .72 = 8.33% Taxable Yield.
In this example, an investor's after-tax yield will be higher from the 6%
tax-free investment if taxable yields are below 8.33%, 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 Trust 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.
MID CAP PORTFOLIO
The Mid Cap Portfolio's investment objective is to seek long-term
appreciation of capital. Since income is not an
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<PAGE>
objective, any income generated by the investment of the Portfolio's assets will
be incidental to its objective.
Under normal circumstances, at least 65% of the total assets of the Mid Cap
Portfolio will be invested in the common stock of medium capitalization
companies considered by PIC to have appreciation potential. The Mid Cap
Portfolio defines mid-cap companies as companies with individual market
capitalization at the time of acquisition that place them in the mid-range of
market capitalization ($1 billion to $10 billion) of companies as measured by
the Wilshire 5,000 Index or a comparable index or indices selected by PIC. Up to
one third of the assets of the Mid Cap Portfolio may be invested in foreign
securities. See "International Portfolio" and "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 Mid Cap 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 Mid Cap 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 Mid Cap
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 Mid Cap Portfolio may also engage in certain options
transactions, and enter into security held in the Portfolio will be continuously
monitored to ascertain futures contracts and related options for hedging
purposes, invest in repurchase agreements and lend portfolio securities. See
"Investment Techniques and Related Risks." Each 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 Mid Cap 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 Mid Cap
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." 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 mid-cap securities
considered to have appreciation potential, the assets of the Mid Cap Portfolio
may be considered to be subject to greater risks than would be involved if the
Portfolio invested in a broader range of 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 Mid Cap 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
17
<PAGE>
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 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 of 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.
18
<PAGE>
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. Exchange rates are determined by
forces of supply and demand in the foreign exchange markets, and these forces
are in turn affected by a range of economic, political, financial, governmental
and other factors. Exchange rate fluctuations can affect the Portfolio's net
asset value and dividends either positively or negatively depending upon whether
foreign currencies are appreciating or depreciating in value relative to the
U.S. dollar. Exchange rates fluctuate over both the short and long term. 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.
Particular risks are posed by investments in third world countries or
so-called "emerging markets." These securities may be especially volatile based
on relative economic, political and market conditions present in these
countries. The economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. Certain emerging market countries are either comparatively
undeveloped or are in the process of becoming developed and may consequently be
economically based on a relatively few or closely interdependent industries. A
high proportion of the shares of many emerging market issuers may also be held
by a limited number of large investors trading significant blocks of securities.
While the Adviser will strive to be sensitive to publicized reversals of
economic conditions, political unrest and adverse changes in trading status,
unanticipated political and social developments may affect the values of a
Portfolio's investments in such countries and the availability of additional
investments in such countries.
For many foreign securities, there are U.S. dollar-denominated American
Depository Receipts ("ADRs"), which are traded in the United States on exchanges
or over the counter and are sponsored and issued by domestic banks. ADRs
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. ADRs do not eliminate all the risk
inherent in investing in the securities of foreign issuers. However, by
investing in ADRs rather than directly in foreign issuers' stock, the
International Portfolio can avoid currency risks during the settlement period
for either purchases or sales. In general, there is a large, liquid market in
the United States for many ADRs. The information available for ADRs is subject
to the accounting, auditing and financial reporting standards of the domestic
market or exchange on which they are traded, which standards are more uniform
and more exacting than those to which many foreign issuers may be subject.
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.
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<PAGE>
Since the International Portfolio may invest up to 20% 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
former Soviet Union countries and Eastern Europe. The Portfolio will deem an
issuer to be located in an emerging market if:
o the issuer is organized under the laws of an emerging market country;
o the issuer's principal securities trading market is in an emerging market
country; or
o 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 collateralized by zero coupon U.S.
Treasury bonds. To reduce currency risk, the Portfolio will invest at least 65%
of its assets in U.S. dollar-denominated debt securities.
While the Portfolio is not "diversified," it will invest in a minimum of
three countries at any one time and will not commit more than 40% of its assets
to issuers in a single country.
The Portfolio will be investing predominantly in debt securities that are
rated below investment grade, or unrated but equivalent to those rated below
investment grade by internationally recognized rating agencies such as S&P or
Moody's. Debt securities rated below BBB by S&P or below Baa by Moody's are
considered to be below investment-grade. These types of High Yield-High Risk
Debt Obligations (commonly referred to as "junk bonds") are predominantly
speculative with respect to the capacity to pay interest and repayment of
principal and generally involve a greater risk of default and more volatility in
price than securities in higher rating categories, such as investment-grade U.S.
bonds. On occasion, the Portfolio may invest up to 5% of its net assets in
non-performing securities whose quality is comparable to securities rated as low
as D by S&P or C by Moody's. A large portion of the Portfolio's bond holdings
may trade at substantial discounts from face value.
The table below shows the dollar weighted average of total investments, for
the year ended November 30, 1997, listed by Moody's rating categories, or
comparable rating by another NRSRO. The column titled "Not Rated" reflects the
percentage of portfolio holdings which were not rated by any NRSRO but which the
Adviser has judged to be comparable in quality to the corresponding rating
categories.
MOODY'S RATING RATED NOT RATED
-------------- ----- ---------
Aaa 0.0% 0.0%
Aa 0.0 0.0
A 0.0 4.0
Baa 1.1 0.2
Ba 14.0 6.0
B 35.9 30.3
Caa 1.3 3.8
Ca 0.0 0.0
C 0.0 0.0
D 0.0 0.0
---- ----
Total 52.3% 44.3%
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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 are 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 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.
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<PAGE>
In determining whether an issuer is "principally engaged" in the real estate
industry, the Adviser 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 the Adviser 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 the Adviser 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 the Adviser 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 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 the
Adviser 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 on
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.
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<PAGE>
REITs (especially mortgage REITs) are subject to interest rate risks. When
interest rates decline, the value of a REIT's 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.
INCOME PORTFOLIO
The Income Portfolio's investment objective is to maximize current income by
investing in debt securities. Capital appreciation is a secondary objective.
In seeking its investment objectives, it is anticipated that, under normal
conditions, at least 65% of the value of the Portfolio's assets will be invested
in debt securities. The Portfolio will invest principally in four market
sectors: (1) debt securities of U.S. companies including lower-rated, high yield
securities, (2) mortgage securities, (3) debt securities of foreign governments
and companies including non-dollar denominated, and (4) U.S. Government
Securities.
The table below shows the dollar weighted average of total investments for
the fiscal year ended November 30, 1997, listed by Moody's Investors Service,
Inc. ("Moody's") rating categories, or comparable rating by another NRSRO. The
column titled "Not Rated" reflects the percentage of portfolio holdings which
were not rated by any NRSRO but which the Adviser has judged to be comparable in
quality to the corresponding rating categories.
MOODY'S RATING RATED NOT RATED
-------------- ----- ---------
Aaa 23.4% 0.0%
Aa 9.8 0.0
A 5.5 1.7
Baa 13.2 3.1
Ba 14.5 1.9
B 16.8 5.0
Caa 0.0 0.0
Ca 0.0 0.0
C 0.0 0.0
D 0.0 0.0
---- ----
Total 83.2 11.7
Investment Grade Securities of domestic issuers in which the Portfolio may
invest are all types of long- or short-term debt obligations ("Debt
Obligations"), such as bonds, debentures, notes, equipment lease certificates,
equipment trust certificates, asset-backed securities, commercial and
residential pass-through securities, collateralized mortgage obligations
(including REMICs) issued by private issuers ("private label CMOs"), conditional
sales contracts and commercial paper (including obligations secured by such
instruments). The Investment Grade Securities that the Portfolio may purchase
consist of securities rated in the top four rating categories by a NRSRO.
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.
High Yield-High Risk Securities of domestic issuers in which the Portfolio
may invest are preferred and preference stock and debt obligations. The High
Yield-High Risk Securities that the Portfolio may purchase are securities in the
lower rating categories of the NRSROs (BB through CCC and Ba through Caa), and
unrated securities. (The fact that certain securities are unrated does not
necessarily reflect the level of quality or risk that may be associated with
such securities. Some issuers do not seek to have their securities rated). These
lower rated and comparable unrated securities, while selected for their
relatively high yield, may be subject to greater fluctuations in market value
and greater risks of loss of income and principal than higher rated securities.
High yields often reflect the greater risks associated with the securities that
offer such yields. Because of these greater risks, High Yield-High Risk
Securities often carry lower ratings.
Up to 50% of the assets of the Income Portfolio may be invested in securities
of foreign issuers. The foreign securities in which the Portfolio may invest are
issued by foreign issuers in developed countries considered creditworthy by the
Adviser and in so-called emerging market countries. The Fund will invest in
government obligations supported by the authority to levy taxes sufficient to
ensure the payment of all principal and interest due on such obligations.
The U.S. Government Securities in which the Portfolio may invest are (1) U.S.
Treasury obligations, which differ only in their interest rates, maturities and
times of issuance and include U.S. Treasury bills (maturities of one year or
less), U.S. Treasury notes (maturities of one to 10 years) and U.S. Treasury
bonds (generally maturities of greater than 10 years); and (2) obligations
issued or guaranteed by U.S. Government agencies, authorities and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Government (such as Government National Mortgage
Association ("GNMA") Certificates), (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the U.S. Treasury (which line
of credit is equal to the face value of the government obligation), (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality, or (d) the creditworthiness of the
instrumentality. The Portfolio may invest in U.S. Government Securities
denominated in foreign currencies, such as U.S. Treasury obligations and
securities issued by GNMA, FNMA, FHLMC and SLMA (each as defined below). An
example of such an agency issue in which the Portfolio may invest is PERLS
(Principal Exchange Rate Linked Securities), which are bonds whose principal
repayment, while
23
<PAGE>
paid in U.S. dollars, is linked to the level of the exchange rate between the
U.S. dollar and the currency of one or more countries.
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).
RISK CONSIDERATIONS
Economic conditions can sometimes narrow the spreads between yields on lower
rated (or comparable unrated) securities and yields on higher rated securities.
If these spreads narrow to such a degree that the Adviser believes that the
yields available on lower rated or comparable unrated securities do not justify
the higher risks associated with those securities, the Portfolio may invest in
higher rated or comparable unrated securities. Investments in High Yield-High
Risk pass-through securities are subject to prepayment and reinvestment risks
similar to those described above.
High Yield-High Risk Securities may also include increasing rate notes.
Increasing rate notes are High Yielding-High Risk Securities with maturities
ranging from two to five years, whose interest rates increase under specified
conditions. They are issued as temporary financing with the intent of being
replaced in six months or less. Accordingly, investments in these securities can
result in the Portfolio having a higher than normal portfolio turnover rate. See
"Portfolio Turnover."
Some High Yield-High Risk Securities are convertible into or exchangeable for
equity securities or carry the right--in the form of a warrant or as part of a
unit with the security--to acquire equity securities. The Portfolio would
ordinarily purchase these securities for their yield characteristics rather than
for the purpose of exercising the associated rights to obtain equity securities.
However, if the Portfolio obtains equity securities, the Portfolio may hold
these equity securities for such period of time as the Adviser deems prudent,
provided that the value of such equity securities will not at any time exceed 2%
of the Portfolio's assets.
The Adviser evaluates the purchase of High Yield-High Risk Securities for the
Portfolio primarily through the exercise of its own investment and credit
analysis and on the ratings assigned by NRSROs. The Portfolio will not invest in
High Yield Securities rated lower than CCC/Caa by a NRSRO. Such securities are
regarded, on balance, as being of poor standing and predominantly speculative
with respect to the capacity to pay interest and repay principal in accordance
with the terms of the obligation. Although such securities will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. For a more complete
description of ratings of High Yield-High Risk Securities, see the Appendix.
Because of the additional risks associated with investments in these
securities, an investor may wish to consider carefully the manner in which the
Portfolio seeks its objective, and the investor's ability to assume these risks,
before investing in the Fund.
The risks of investing in foreign countries and companies are outlined above
in the International Portfolio "Risk Considerations" section. Additional risk
factors connected to investment in emerging markets securities are also
described above in the Emerging Markets Bond Portfolio "Risk Considerations"
section.
Mortgage pass-through securities, CMOs and REMICs are sometimes referred to
as "derivatives," as their value is derived from the performance or value of
such underlying instruments. The value of these instruments can fluctuate to a
greater degree than other debt securities in response to changes in interest
rates and under some circumstances the market for these securities can be less
liquid. Mortgage-backed securities may also be subject to 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.
INVESTMENT TECHNIQUES
AND RELATED RISKS
In addition to the investment policies described above, the Trust 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
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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 Mid Cap, Bond, International, Emerging Markets and Income Portfolios may
write exchange-traded covered call options on their securities. Call options may
be written on portfolio securities and on securities indices, and in addition,
in the case of the Mid Cap, International, Emerging Markets and Income
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 pledged
account at all times during the option period. Pledged accounts will contain any
asset, including equity securities and non-investment grade debt so long as the
asset is liquid, unencumbered and marked to market daily. 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.
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 and the Income Portfolio may invest up to 5% of their total assets in
exchange-traded call and put options on securities and, if appropriate,
securities indices. The Mid Cap, 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 Mid Cap, International, Emerging
Markets and Income 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 nonperformance 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 Mid Cap, International
or Emerging Markets Portfolios may be able
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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 Trust understands the position of the staff of the Commission to be that
purchased OTC options and the assets used as "cover" for written OTC options are
illiquid securities. The Trust 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, Mid Cap, International,
Emerging Markets and Income Portfolios may enter into financial futures
contracts and related options as a hedge against anticipated changes in the
market value of their portfolio securities or securities which they intend to
purchase or in the exchange rate of foreign currencies. Hedging is the
initiation of an offsetting position in the futures market which is intended to
minimize the risk associated with a position's underlying securities in the cash
market. Investment techniques related to financial futures and options are
summarized below and are described more fully in the Statement of Additional
Information.
Financial futures contracts consist of interest rate futures contracts,
foreign currency futures contracts and securities index futures contracts. An
interest rate futures contract obligates the seller of the contract to deliver,
and the purchaser to take delivery of, the interest rate securities called for
in the contract at a specified future time and at a specified price. A foreign
currency futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the foreign currency called for in the
contract at a specified future time and at a specified price. See "Foreign
Currency Transactions." A securities index assigns relative values to the
securities included in the index, and the index fluctuates with changes in the
market values of the securities so included. A securities index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. An
option on a financial futures contract gives the purchaser the right to assume a
position in the contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any time
during the period of the option.
The Bond, Mid Cap, International, Emerging Markets and Income 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 Mid Cap, International,
Emerging Markets and Income Portfolios may enter into financial futures
contracts on foreign currencies.
The Bond, Mid Cap, International, Emerging Markets and Income 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 all pledged account assets 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, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily equal to the market value of the futures contract minus
the Portfolio's initial margin deposit with respect thereto, will be deposited
in a pledged account with the Trust's custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged. The extent to which a
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. The 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
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no more than 10% of a Portfolio's total assets (15% of the Income Portfolio's
net 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 Trust's
account by the Trust'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 Trust to be creditworthy.
LENDING PORTFOLIO SECURITIES. In order to increase the return on its
investment, the Bond, Mid Cap, 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. The Income Portfolio may similarly lend up to one-third 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 creditworthy. Lending portfolio securities involves risk of delay in the
recovery of the loaned securities and in some cases the loss of rights in the
collateral should the borrower fail financially. See the Statement of Additional
Information.
VARIABLE AND FLOATING RATE SECURITIES. The Bond Portfolio may invest in
municipal securities which bear rates of interest that are adjusted periodically
according to a formula intended to minimize fluctuations in the values of the
instruments. These municipal securities are referred to as variable or floating
rate instruments. See the Statement of Additional Information.
WHEN-ISSUED SECURITIES. The Bond, Emerging Markets and Income 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 Mid Cap,
International, Emerging Markets and Income 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, any
asset, including equity securities and non-investment grade debt so long as the
asset is liquid, unencumbered and marked to market daily equal to the market
value of the contract, minus the Portfolio's initial margin deposit with respect
thereto, will be deposited in a pledged account with the Trust's custodian bank
to collateralize fully the position and thereby ensure that it is not leveraged.
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
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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 Income Portfolio will invest and 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 prepaid
principal on a CMO are paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by Government National
Mortgage Association (GNMA), the Federal National Mortgage Association, or
Federal National Mortgage Association. CMOs are structured into multiple
classes, with each class bearing a different stated maturity. Monthly payments
of principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired. REMICs are similar to
CMOs and are fixed pools of mortgages with multiple classes of interests held by
investors.
Each 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).
Each Portfolio may purchase pass-through securities at a premium or at a
discount. The values of pass-through securities in which the Portfolios 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 each 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 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.
ZERO COUPON BONDS. The Emerging Markets Portfolio and the Income Portfolio
may invest in debt obligations that do not make any interest payments for a
specified period of time prior to maturity or until maturity. Even though such
bonds do not pay current interest in cash, the Emerging Markets Portfolio and
the Income Portfolio are required to accrue interest income on such investments
and to distribute such amounts to shareholders. Thus, the Emerging Markets
Portfolio and the
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Income Portfolio would not be able to purchase income-producing securities to
the extent of cash used to pay such distributions and current income could be
less than it otherwise would have been. Alternatively, the Emerging Markets
Portfolio and the Income Portfolio might liquidate investments in order to
satisfy these distribution requirements. The value of these obligations
fluctuates more in response to interest rate changes, if they are of the same
maturity, than does the value of debt obligations that make current interest
payments.
HIGH YIELD-HIGH RISK SECURITIES. "High Yield-High Risk Securities" will
ordinarily be in the lower rating categories of NRSROs or will be non-rated
securities deemed by the Adviser to be substantially equivalent to securities in
such lower rating categories. High Yield-High Risk Securities generally involve
a greater volatility of price and risk of nonpayment of principal and interest
than securities in higher rating categories and yields on these securities
fluctuate over time.
The risk of loss due to default by the issuer is significantly greater for
the holders of High Yield-High Risk Securities because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.
During an economic downturn or a sustained period of rising interest rates,
highly leveraged issuers of High Yield-High Risk Securities may experience
financial stress and may not have sufficient revenues to meet their interest
payment obligations. The issuer's ability to service its debt obligations may
also be adversely affected by specific corporate developments, or the issuer's
inability to meet specific projected business forecasts, or the unavailability
of additional financing.
Factors adversely impacting the market value of High Yield-High Risk
Securities will adversely impact the Portfolio's net asset value to the extent
the Portfolio's assets are invested in such securities. In addition, the
Portfolio may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest on its portfolio
holdings. Because the High Yield-High Risk Securities market is relatively new
and its growth paralleled along economic expansion, it is not clear how this
market may withstand a prolonged recession or economic downturn.
A Portfolio may have difficulty disposing of certain High Yield-High Risk
Securities because there may be a thin trading market for such securities.
Because not all dealers maintain markets in all High Yield-High Risk Securities,
there is no established retail secondary market for many of these securities,
and it is anticipated that such securities could be sold only to a limited
number of dealers or institutional investors. To the extent a secondary trading
market for High Yield-High Risk Securities does exist, it is generally not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on the market price of the security,
and accordingly, the Portfolio's asset value, and on the Portfolio's ability to
dispose of particular issues when necessary to meet the Portfolio's liquidity
needs or on the Portfolio's ability to respond to a specific economic event, or
an event such as a deterioration in the creditworthiness of the issuer. The lack
of a liquid secondary market for certain securities may also make it more
difficult for the Portfolio to obtain accurate market quotations for purposes of
valuing the Portfolio's securities. Market quotations are generally available on
many high yield issues only from a limited number of dealers and may not
necessarily represent firm bids of such dealers of prices for actual sales.
While all these considerations are generally relevant to many high yield
securities, they may be particularly relevant to securities which represent, for
example, the right to receive only the interest payments ("IOs") to be made on a
particular security. The yield and value of IOs can be very sensitive to the
rate of principal payments on the debt security as well as to various market
factors. IOs issued by private issuers are generally considered illiquid.
Government-issued IOs backed by fixed-rate mortgages may be deemed liquid if
they can be disposed of promptly in the ordinary course of business at a value
reasonably close to that used in the calculation of net asset value per share.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of High Yield-High Risk
Securities, especially in a thinly-traded market.
From time to time, proposals have been discussed and new legislation adopted
designed to limit the use of certain High Yield-High Risk Securities by issuers
in connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such laws, or proposals,
if enacted into law, could reduce the market for such securities generally, and
could negatively affect the financial condition of issuers of High Yield-High
Risk Securities and the high yield market in general. For example, under a
provision of the Internal Revenue Code ("Code") enacted in 1989, a corporate
issuer may be limited from deducting all of the original issue discount on
high-yield discount obligations (i.e., certain types of debt securities issued
at a significant discount to their face amount).
The market values of High Yield-High Risk Securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also tend to be more sensitive to
economic conditions than are higher rated securities. Accordingly, these lower
rated securities are considered predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation and will generally involve more credit risk than
securities in the higher rating categories. Even securities rated BBB or Baa,
ratings which are considered investment grade, possess some speculative
characteristics.
The Income Portfolio has no requirements regarding whether the securities it
purchases must be rated. While credit ratings evaluate the safety of principal
and interest payments, they do not evaluate market value risk of High Yield-High
Risk Securities. In addition, credit rating agencies may not change credit
ratings on a timely basis to reflect subsequent events.
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Accordingly, use of lower rated securities places more importance on the ability
of the Adviser than does investing in higher quality fixed income securities.
The Adviser will base its investment decisions for the Portfolio on its own
determination of reasonable investment risk and reward. The Adviser's judgment
as to the "reasonableness" of the risk involved in any particular investment
will be a function of its experience in managing fixed-income investments and
its evaluation of (i) general economic and financial conditions; (ii) a specific
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of
interest and dividends, (d) ability to operate under adverse economic
conditions, and (e) fair market value of assets, and (iii) such other
considerations as the Adviser may deem appropriate.
BRADY BONDS. The Emerging Markets and Income Portfolios 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 and Income
Portfolios 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 Portfolios 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 Portfolios will be able to
enforce their rights through the lender, and not directly against the borrower.
As a result, in a loan participation the Portfolios assume credit risk with
respect to both the borrower and the lender.
When the Portfolios purchase loan assignments from lenders, they will acquire
direct rights against the borrower, but these rights and the Portfolios'
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
Trust 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 and the Emerging Markets
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 Mid Cap, Emerging
Markets and International Portfolios, any foreign government, its agencies and
instrumentalities) or (ii) purchase more than 10% of the outstanding voting
securities or more than 10% of the securities of any class of any one issuer. In
addition, no Portfolio may (i) purchase a restricted security or a security for
which market quotations are not readily available or a repurchase agreement
having a maturity longer than seven days if as a result of such purchase more
than 10% of the Portfolio's total assets (15% of the Income Portfolio's net
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. 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
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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 Mid Cap 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 TRUST
The Trust is an open-end management investment company known as a mutual
fund. The Trustees of the Trust ("Trustees") are responsible for the overall
supervision of the Trust and perform the various duties imposed on Trustees by
the Investment Company Act of 1940 and Massachusetts business trust law.
THE ADVISERS
The investment adviser to the Bond, Mid Cap, International, Emerging Markets
and Income 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. Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") of
Hartford, Connecticut 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 Trust,
PIC also serves as investment adviser to Phoenix Series Fund, Phoenix Strategic
Allocation Fund, Inc., Phoenix Strategic Equity Series Fund (except the Equity
Opportunities Fund), Phoenix Duff & Phelps Institutional Mutual Funds (except
Real Estate Equity Securities Portfolio and Enhanced Reserves Portfolio),
Phoenix Growth and Income Fund of Phoenix Equity Series Fund, Phoenix Investment
Trust 97 and The Phoenix Edge Series Fund (all Series other than the Real Estate
Securities Series and the Aberdeen New Asia Series) and as subadviser to the
SunAmerica Series Trust. PIC was originally organized in 1932 as John P. Chase,
Inc. As of December 31, 1997, PIC had approximately $20.5 billion in assets
under management.
The investment adviser to the Real Estate Portfolio is Duff & Phelps
Investment Management ("DPIM"). DPIM is a subsidiary of Phoenix Duff & Phelps
Corporation ("PD&P") and is located at 55 East Monroe Street, Suite 3600,
Chicago, Illinois 60603. PD&P is a New York Stock Exchange traded company that
provides investment management and related services to institutional investors,
corporations and individuals through operating subsidiaries. DPIM also serves as
investment adviser to the Core Equity Fund of Phoenix Equity Series Fund, the
Enhanced Reserves Portfolio and Core Equity Portfolio of Phoenix Duff & Phelps
Institutional Mutual Funds and three closed-end funds: Duff & Phelps Utilities
Income Inc., Duff & Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. As of December 31, 1997, DPIM had
approximately $13.0 billion in assets under management on a discretionary basis.
The investment advisers furnish investment programs for each Portfolio under
their management and manage the investment and reinvestment of the assets of
each Portfolio under their management subject at all times to the supervision of
the Trustees. The investment advisers are responsible for monitoring the
services provided to the Trust. The investment advisers, at their expense,
furnish to the Trust 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 Trust.
The Investment Advisory Agreements have been approved by the Trustees. The
Investment Advisory Agreements between the Trust and the Advisers have been
approved by relevant Shareholders.
For managing, or directing the management of the investments of the Bond, Mid
Cap, International, Emerging Markets and Income Portfolios, PIC is entitled to a
fee, payable monthly, at the following annual rates:
1ST $1-2 $2+
PORTFOLIO $1 BILLION BILLION BILLION
--------- ---------- ------- -------
Bond 0.45% 0.40% 0.35%
Mid Cap 0.75% 0.70% 0.65%
International 0.75% 0.70% 0.65%
Emerging Markets 0.75% 0.70% 0.65%
Income 0.55% 0.50% 0.45%
For managing, or directing the management of the investments of the Real
Estate Portfolio, DPIM 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. 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.
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For its services to the Bond, Mid Cap, International, Emerging Markets and
Income Portfolios of the Trust during the fiscal year ended November 30, 1997,
PIC received a fee of $5,292,155. For the fiscal year ended November 30, 1997,
PRS received a fee of $355,100.
The Adviser 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,
1998 exceed 1.30% and 2.05%, respectively, of the average net assets. PIC has
agreed to reimburse the Income Portfolio for the amount by which its other
operating expenses exceed 0.20% for each class of shares.
THE PORTFOLIO MANAGERS
Bond Portfolio
Mr. Timothy Heaney has served as Portfolio Manager of the Phoenix Tax-Exempt
Bond Portfolio since September 4, 1997 and as such is primarily responsible for
the day-to-day management of the Portfolio. Mr. Heaney is also the Portfolio
Manager of Phoenix California Tax Exempt Bonds, Inc. and from March 1, 1996 to
September 3, 1997, he served as Co-Manager. Mr. Heaney has been Vice President
of the Fund and Director, Fixed Income Research of PIC and National Securities
and Research Corporation since 1996. From 1995 to 1996, he was an Investment
Analyst with PIC, and from 1992 to 1994, he was an Investment Analyst with
Phoenix Home Life.
Mid Cap Portfolio
Mr. William J. Newman serves as Portfolio Manager of the Mid Cap Portfolio
and as such is primarily responsible for the day-to-day management of the
Portfolio. Mr. Newman also serves as Portfolio Manager of the Aggressive Growth
Fund Series of Phoenix Series Fund and as Portfolio Manager of each of the four
series of Phoenix Strategic Equity Series Fund. Mr. Newman is Chief Investment
Strategist and Executive Vice President of the Adviser and National Securities &
Research Corporation. Mr. Newman is also a Senior Vice President of the Fund,
and of The Phoenix Edge Series Fund, Phoenix Series Fund, Phoenix Income and
Growth Fund, Phoenix Strategic Allocation Fund, Inc., Phoenix Strategic Equity
Series Fund, Phoenix Worldwide Opportunities Fund, Phoenix-Aberdeen Series Fund,
and Phoenix Duff & Phelps Institutional Mutual Funds. Prior to his current
position Mr. Newman was Chief Investment Strategist and Managing Director of
Phoenix Home Life Mutual Insurance Company from April through November 1995,
Chief Investment Strategist for Kidder Peabody in New York from May 1993 to
December 1994, and Managing Director at Bankers Trust from March 1991 to May
1993.
International Portfolio
Mr. David Lui serves as Portfolio Manager of the Phoenix International
Portfolio and as such is primarily responsible for the day-to-day management of
the Portfolio. Mr. Lui has served as Portfolio Manager since March 1998 and
Co-Portfolio Manager from July 1996 through February 1998. Mr. Lui is also
Portfolio Manager of Phoenix Worldwide Opportunities Fund and the International
Series of The Phoenix Edge Series Fund. Mr. Lui since 1996 has served as a Vice
President of the Fund, Phoenix Worldwide Opportunities Fund, and The Phoenix
Edge Series Fund. He is also Portfolio Manager, Equities of PIC and the National
Securities & Research Corporation since 1996. He was also a Vice President,
Asian Equities, with Alliance Capital Management from 1993 to 1995.
Emerging Markets Portfolio
Mr. Peter S. Lannigan is the Portfolio Manager of the Emerging Markets
Portfolio and as such is primarily responsible for the day-to-day management of
the Portfolio. Mr. Lannigan served as Co-Manager of the Portfolio from April
1995 until November 14, 1996. Mr. Lannigan served as a Vice President of PIC
between May 1995 and September 1996, a Director, Fixed Income Research between
1996-1997 and presently he is a Managing Director, Fixed Income. He has also
been a Director, Fixed Income Research for National Securities & Research
Corporation, an affiliate of PIC, since 1996. From 1993 until 1995 he was a
Director, Fixed Income Research for Phoenix Home Life Mutual Life Insurance
Company, and, from 1989 to 1993, Mr. Lannigan was an Associate Director, Bond
Rating Group with Standard & Poor's Corp.
Real Estate Portfolio
Mr. Michael Schatt is responsible for managing the assets of the Real Estate
Portfolio. Mr. Schatt is employed as Managing Director of PD&P and is a Senior
Vice President of Phoenix Realty Securities, Inc., Vice President, Phoenix Duff
& Phelps Institutional Mutual Funds, The Phoenix Edge Series Fund, Phoenix
Multi-Portfolio Fund, Duff & Phelps Utilities Income, Inc. and DPIM. His current
responsibilities include serving as Portfolio Manager of the Real Estate Equity
Securities Portfolio of Phoenix Duff & Phelps Institutional Mutual Funds and
managing the real estate investment securities of Duff & Phelps Utilities Income
Inc. Previously, he served as Director of the Real Estate Advisory Practice for
Coopers & Lybrand, LLC and has over 16 years experience in the real estate
industry.
Income Portfolio
Mr. David L. Albrycht has been the Portfolio Manager of the Fund since
August, 1993. As such, Mr. Albrycht is primarily responsible for the day-to-day
management of the Fund. Since August of 1994, Mr. Albrycht has been a Vice
President and Portfolio Manager of Phoenix Multi-Sector Fixed Income Fund, Inc.
Since August 1993, Mr. Albrycht has also been the Portfolio Manager of Phoenix
Multi-Sector Short Term Bond Fund. Mr. Albrycht has been Vice President of The
Phoenix Edge Series Fund and Phoenix Series Fund since 1997. He also served as a
Vice President of PIC between May 1995 and September 1996, and, presently, is a
Managing Director, Fixed Income. He also was an Investment Officer with National
Securities & Research Corporation from 1994 to 1996, and in 1996 he became a
Director, Fixed Income. National Securities & Research Corporation is an
affiliate of PIC. Until November 1995, Mr. Albrycht was a Portfolio
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Manager of Phoenix Home Life Mutual Life Insurance Company and has held
various investment management positions with Phoenix Home Life during the last
five years.
THE FINANCIAL AGENT
Equity Planning also acts as financial agent of the Trust and,
as such, performs bookkeeping and pricing services and certain other
administrative functions for the Trust. As compensation, Equity Planning is
entitled to a fee, payable monthly and based upon (a) the average of the
aggregate daily net asset values of each Portfolio of the Trust, at the
following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
(b) a minimum fee based on the predominant type of assets of each Portfolio; and
(c) an annual fee of $12,000 for each class of shares beyond one. For its
services during the Trust's fiscal year ended November 30, 1997, Equity Planning
received $541,814, or 0.07% of average net assets.
THE CUSTODIANS AND TRANSFER AGENT
The custodian of the assets of the Bond Portfolio, Mid Cap Portfolio, Real
Estate Portfolio, Emerging Markets Portfolio and Income 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 Trust has
authorized the custodians to appoint one or more subcustodians for the assets of
the Trust held outside the United States. The securities and other assets of
each Portfolio of the Trust 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 Trust (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 subagents to
perform certain shareholder servicing functions from time to time for which such
agents shall be paid a fee by the Transfer Agent.
BROKERAGE COMMISSIONS
Although the Conduct Rules of the National Association of Securities Dealers,
Inc. ("NASD") 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 Trust.
DISTRIBUTION PLANS
The offices of Equity Planning, the national distributor of the Fund's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of the
Trust and a director and officer of Equity Planning. Michael E. Haylon, a
director of Equity Planning, is an officer of the Trust. G. Jeffrey Bohne, Nancy
G. Curtiss, William E. Keen, III, William R. Moyer, William J. Newman, Leonard
J. Saltiel and Thomas N. Steenburg are officers of the Trust and officers of
Equity Planning.
Equity Planning and the Trust have entered into distribution agreements under
which Equity Planning has agreed to use its best efforts to find purchasers for
Trust shares sold subject to an initial sales charge and those sold subject to a
contingent deferred sales charge. The Trust has granted Equity Planning the
exclusive right to purchase from the Trust and resell, as principal, shares
needed to fill unconditional orders for Trust shares. Equity Planning may sell
Trust shares through its registered representatives or through securities
dealers with whom it has sales agreements. Equity Planning may also sell Trust
shares pursuant to sales agreements entered into with banks or bank-affiliated
securities brokers who, acting as agent for their customers, place orders for
Trust shares with Equity Planning. Although the Glass-Steagall Act prohibits
banks and bank affiliates from engaging in the business of underwriting,
distributing or selling securities (including mutual fund shares), banking
regulators have 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
Trust.
The sale of Trust shares through a securities broker affiliated with a
particular bank is not expected to preclude the Trust from borrowing from such
bank or from availing itself of custodial or transfer agency services offered by
such bank.
The Trustees have adopted separate amended and restated distribution plans
under Rule 12b-1 of the 1940 Act for each class of shares of the Trust (the
"Class A Plan," the "Class B Plan," the "Class C Plan," the "Class M Plan" and
collectively the "Plans"). The Plans permit the Trust to reimburse the
Distributor for expenses incurred in connection with the sale and promotion of
Trust shares and the furnishing of shareholder services. Pursuant to the Plans,
the Trust will pay the Distributor 0.25% annually of the average daily net
assets of the Trust for providing services to shareholders, including assistance
in connection with inquiries related to shareholder accounts (the "Service
Fee"). Pursuant to the Class B Plan, the Trust may
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<PAGE>
reimburse the Distributor monthly for actual expenses of the Distributor up to
0.75% annually for the average daily net assets of each Portfolio's Class B
Shares. Under the Class C and M Plans, the Trust may reimburse the Distributor
monthly for actual expenses of the Distributor up to 0.75% and 0.25% annually of
the average daily net assets of the Emerging Markets and Income Portfolios'
Class C and M Shares, respectively.
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Trust (including underwriting
commissions and finance charges related to the payment of commissions); (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Distributor for services rendered in
connection with the sale and distribution of shares of the Trust; (iv) payment
of expenses incurred in sales and promotional activities, including advertising
expenditures related to the Trust; (v) the costs of preparing and distributing
promotional materials; (vi) the costs of printing the Trust's Prospectus and
Statement of Additional Information for distribution to potential investors; and
(vii) such other similar services that the Trustees determine are reasonably
calculated to result in the sale of shares of the Trust. From the Service Fee,
the Distributor expects to pay a quarterly fee to qualifying broker-dealer
firms, as compensation for providing personal services and/or the maintenance of
shareholder accounts, with respect to shares sold by such firms. This fee will
not exceed on an annual basis 0.25% of the average annual net asset value of
such shares, and will be in addition to sales charges on Trust shares which are
reallowed to such firms.
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 Trust will
be required to commit the selection and nomination of candidates for Trustees
who are not interested persons of the Trust to the discretion of other Trustees
who are not interested persons.
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 Trust's shareholders; or services providing
the Trust 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, 1997, the Trust paid $1,820,372 under
the Class A Plan and $733,729 under the Class B Plan. The fees were used to
compensate broker-dealers for servicing shareholder's accounts, including
$309,305 paid to W.S. Griffith & Co., Inc., an affiliate, compensating sales
personnel and reimbursing the Distributor for commission expenses and expenses
related to preparation of the marketing material. The Distributor's expenses
from selling and servicing Class B Shares may be more than the payments received
from contingent deferred sales charges collected on redeemed shares and from the
Trust under the Class B Plan. Those expenses may be carried over and paid in
future years. At November 30, 1997, the end of the last Plan year, the
Distributor had incurred unreimbursed expenses under the Class B Plan of
$3,516,731 (equal to 0.43% of the Fund's net assets) which have been carried
over into the present Class B Plan year. On a quarterly basis, the Trustees
review a report on expenditures under each Plan and the purposes for which
expenditures were made.
The NASD regards certain distribution fees as asset-based sales charges
subject to NASD sales load limits. The NASD's maximum sales charge rule may
require the Trustees to suspend distribution fees or amend either or both Plans.
HOW TO BUY SHARES
HOW DO YOU INVEST?
You may open an account with an initial investment of $500. This amount is
reduced to $25 for investments made under the "Investo-Matic" plan (see the New
Account Application), individual retirement accounts or under the systematic
exchange privilege described below. The initial investment requirement is waived
for investments made under pension, profit-sharing or employee benefit plans as
well as in connection with reinvested dividends and distributions.
You may make additional investments at any time with at least $25. The
subsequent investment minimum is waived for investments made under pension,
profit-sharing or employee benefit plans as well as in connection with
reinvested dividends and distributions.
An application should be completed to open a new Phoenix Funds account. A
check for the amount you wish to invest, made payable to the "Phoenix Funds,"
(along with the completed application if opening a new account), must be sent
to: Phoenix Funds, c/o State Street Bank and Trust Company ("State Street
Bank"), P.O. Box 8301, Boston, MA 02266-8301. You may also write to the
Distributor at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-2200 or
call (800) 243-1574.
Shares are sold at the public offering price based on the net asset value for
the class of shares bought next determined after State Street Bank receives your
order. In most cases, in order to receive that day's public offering price,
State Street Bank must receive your order before the close of trading on the New
York Stock Exchange. Shares purchased will be recorded electronically in
book-entry form by the Transfer Agent. No share certificates are available. See
"Net Asset Value."
WHAT ARE THE CLASSES AND HOW DO THEY DIFFER?
The Portfolios presently offer investors four classes of shares which bear
sales and distribution charges in different amounts. Currently, only the
Emerging Markets Portfolio and the Income Portfolio offer Class C and M Shares.
CLASS A SHARES. If you buy Class A Shares, you will pay a sales charge at the
time of purchase equal to 4.75% of the offering price (4.99% of the amount
invested). The sales
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<PAGE>
charge may be reduced or waived under certain conditions. Class A Shares are not
subject to any charges by the Trust when they are sold. Class A Shares have
lower Rule 12b-1 fees and pay higher dividends than any other class.
CLASS B SHARES. If you buy Class B Shares, you will not pay a sales charge at
the time of purchase. If you sell your Class B Shares within the first 5 years
after they are bought, you will pay a sales charge of up to 5% of your shares'
value. See "Deferred Sales Charge Alternative--Class B Shares." This charge
declines to zero over a period of 5 years and may be waived under certain
conditions. Class B shares have higher Rule 12b-1 fees and pay lower dividends
than Class A and M Shares. Class B Shares automatically convert to Class A
Shares eight years after purchase. The Distributor intends to limit investments
in Class B Shares to: (a) $250,000 for any person; (b) $1 million for any
unallocated employer sponsored plan; and (c) $250,000 for each participant in
any allocated qualified employer sponsored plan, including 401(k) plans,
provided such plan uses an approved participant tracking system. 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, such entity has assets of
over $10 million or more than 200 participant employees. Class B Shares will not
be sold to anyone who is over 85 years old.
CLASS C SHARES. If you buy Class C Shares, you will not pay a sales charge at
the time of purchase. If you sell your Class C Shares within the first year
after they are bought, you will pay a sales charge of 1% of your shares' value.
See "Deferred Sales Charge Alternative--Class C Shares." Class C Shares have the
same Rule 12b-1 fees and pay comparable dividends as Class B Shares. Class C
Shares do not convert to any other class of shares of the Trust. Class C Shares
are not currently offered for all Phoenix Funds.
CLASS M SHARES. CLASS M SHARES ARE CURRENTLY CLOSED TO NEW INVESTORS. If you
buy Class M Shares, you will pay a sales charge at the time of purchase equal to
3.50% of the offering price (3.63% of the amount invested). Class M Shares are
not subject to any charges by the Trust when they are sold. Class M Shares have
lower Rule 12b-1 fees and pay higher dividends than Class B and C Shares. Class
M Shares do not convert to any other class of shares of the Trust. Class M
Shares are not currently offered for all Phoenix Funds.
CLASS X SHARES. CLASS X SHARES ARE CURRENTLY CLOSED TO NEW INVESTORS.
WHAT ARRANGEMENT IS BEST FOR YOU?
The alternative purchase arrangement permits you to choose the method of
buying shares that is most beneficial to you given the amount of the purchase,
the length of time you expect to hold the shares, whether you wish to receive
distributions in cash or to reinvest them in additional shares, and other
circumstances. You should consider whether, during the anticipated term of your
investment, the accumulated continuing distribution and service fees and
contingent deferred sales charges of one class would be more than the initial
sales charge and accumulated distribution and service fees of another class of
shares bought at the same time. See "Distribution Plans" and "Fund Expenses."
INITIAL SALES CHARGE ALTERNATIVE--CLASS A AND M SHARES
The public offering price of Class A and M Shares is the net asset value plus
a sales charge that varies depending on the size of any "person's" (see "How To
Obtain Reduced Initial Sales Charges--Class A and M Shares: Combination Purchase
Privilege") purchase. Shares issued based on the automatic reinvestment of
income dividends or capital gains distributions are not subject to any sales
charges. The sales charge is divided between your investment dealer and the
Distributor as shown on the following tables.
CLASS A SHARES
SALES CHARGE AS
A PERCENTAGE OF
---------------
AMOUNT OF DEALER DISCOUNT
TRANSACTION OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- --------------------------------------------------------------
Under $50,000 4.75% 4.99% 4.25%
$50,000 but under
$100,000 4.50 4.71 4.00
$100,000 but under
$250,000 3.50 3.63 3.00
$250,000 but under
$500,000 3.00 3.09 2.75
$500,000 but under
$1,000,000 2.00 2.04 1.75
$1,000,000 or more None None None
CLASS M SHARES
(EMERGING MARKETS PORTFOLIO AND INCOME PORTFOLIO ONLY)
SALES CHARGE AS
A PERCENTAGE OF
---------------
AMOUNT OF DEALER DISCOUNT
TRANSACTION OFFERING NET AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- ---------------------------------------------------------------
Under $50,000 3.50% 3.63% 3.00%
$50,000 but under
$100,000 2.50 2.56 2.00
$100,000 but under
$250,000 1.50 1.52 1.00
$250,000 but under
$500,000 1.00 1.01 1.00
$500,000 or more None None None
DEFERRED SALES CHARGE ALTERNATIVE--
CLASS B AND C SHARES
Class B and C Shares are purchased without an initial sales charge; however,
shares sold within a specified time period are subject to a declining contingent
deferred sales charge (the "CDSC") at the rates set forth below. The charge will
be multiplied by the then current market value or the initial cost of the shares
being redeemed, whichever is less. No sales charge will be imposed on increases
in net asset value. In addition, shares issued based on the automatic
reinvestment of income dividends or capital gains distributions are not subject
to any sales charges. To minimize the CDSC, shares
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not subject to any charge will be redeemed first, followed by shares held the
longest time. The Distributor will add up all shares bought in any month and use
the last day of the preceding month in calculating the amount of shares owned
and time period held for Class B Shares. The trade date will be used for
purposes of aging Class C Share investments.
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS B SHARES
Year 1 2 3 4 5 6+
- --------------------------------------------------------------
CDSC 5% 4% 3% 2% 2% 0%
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS C
SHARES (EMERGING MARKETS PORTFOLIO AND INCOME PORTFOLIO ONLY)
Year 1 2+
- --------------------------------------------------------------
CDSC 1% 0%
DEALER CONCESSIONS
In addition to the dealer discount on purchases of Class A and M Shares, the
Distributor intends to pay investment dealers a sales commission of 4% of the
sale price of Class B Shares and a sales commission of 1% of the sale price of
Class C Shares sold by such dealers. Your broker, dealer or investment adviser
may also charge you additional commissions or fees for their services in selling
shares to you provided they notify the Distributor of their intention to do so.
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of the
Trust and/or for providing other shareholder services. Depending on the nature
of the services, these fees may be paid either from the Trust through
distribution fees, service fees or transfer agent fees or in some cases, the
Distributor may pay certain fees from its own profits and resources. From its
own profits and resources, the Distributor does intend to: (a) sponsor sales
contests, training and educational meetings and provide additional compensation
to qualifying dealers in the form of trips, merchandise or expense
reimbursements; (b) from time to time, pay special incentive and retention fees
to qualified wholesalers, registered financial institutions and third party
marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million
of Class A Share purchases by an account held in the name of a qualified
employee benefit plan with at least 100 eligible employees, 0.50% on the next $3
million, plus 0.25% on the amount in excess of $6 million; and (d) excluding
purchases as described in (c) above, pay broker/dealers an amount equal to 1% of
the amount of Class A Shares sold above $1 million but under $3 million, 0.50%
on the next $3 million, plus 0.25% on the amount in excess of $6 million. If
part or all of such investment, including investments by qualified employee
benefit plans, is subsequently redeemed within one year of the investment date,
the broker-dealer will refund to the Distributor such amounts paid with respect
to the investment. In addition, the Distributor may pay the entire applicable
sales charge on purchases of Class A Shares to selected dealers and agents. Any
dealer who receives more than 90% of a sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933.
HOW TO OBTAIN REDUCED INITIAL SALES CHARGES--CLASS A AND M SHARES
Investors choosing Class A or M Shares may be entitled to reduced sales
charges. The five ways in which sales charges may be avoided or reduced are
described below.
QUALIFIED PURCHASERS. If you fall within any one of the following categories,
you will not have to pay a sales charge on your purchase of Class A or M Shares:
(1) trustee, director or officer of the Phoenix Funds, the Phoenix-Engemann
Funds, Phoenix-Seneca Funds or any other mutual fund advised, subadvised or
distributed by the Adviser, Distributor or any of their corporate affiliates (an
"Affiliated Phoenix Fund"); (2) any director or officer, or any full-time
employee or sales representative (for at least 90 days), of the Adviser or
Distributor; (3) registered representatives and employees of securities dealers
with whom Distributor has sales agreements; (4) any qualified retirement plan
exclusively for persons described above; (5) any officer, director or employee
of a corporate affiliate of the Adviser or Distributor; (6) any spouse, child,
parent, grandparent, brother or sister of any person named in (1), (2), (3) or
(5) above; (7) employee benefit plans for employees of the Adviser, Distributor
and/or their corporate affiliates; (8) any employee or agent who retires from
Phoenix Home Life, Distributor and/or their corporate affiliates; (9) any
account held in the name of a qualified employee benefit plan, endowment fund or
foundation if, on the date of the initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 100 eligible employees;
(10) any person with a direct rollover transfer of shares from an established
Phoenix Fund, Phoenix-Engemann Fund or Phoenix-Seneca Fund qualified plan; (11)
any Phoenix Home Life separate account which funds group annuity contracts
offered to qualified employee benefit plans; (12) any state, county, city,
department, authority or similar agency prohibited by law from paying a sales
charge; (13) any fully matriculated student in any U.S. service academy; (14)
any unallocated account held by a third party administrator, registered
investment adviser, trust company, or bank trust department which exercises
discretionary authority and holds the account in a fiduciary, agency, custodial
or similar capacity, if in the aggregate such accounts held by such entity equal
or exceed $1,000,000; (15) any person who is investing redemption proceeds from
investment companies other than the Phoenix Funds, Phoenix-Engemann Fund or
Phoenix-Seneca Fund if, in connection with the purchases or redemption of the
redeemed shares, the investor paid a prior sales charge provided such investor
supplies verification that the redemption occurred within 90 days of the Phoenix
Fund purchase and that a sales charge was paid; (16) any deferred compensation
plan established for the benefit of any Phoenix Fund, Phoenix-Engemann Fund or
Phoenix-Seneca Fund trustee or director; provided that sales to persons listed
in (1) through (15) above are made upon the written assurance of the purchaser
that the purchase is made for investment purposes and that the shares so
acquired will not be resold except to the Fund; (17) purchasers of Class A or M
Shares bought through investment advisers and financial planners who charge an
advisory, consulting or other fee
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<PAGE>
for their services and buy shares for their own accounts or the accounts of
their clients; (18) retirement plans and deferred compensation plans and trusts
used to fund those plans (including, for example, plans qualified or created
under sections 401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi
trusts" that buy shares for their own accounts, in each case if those purchases
are made through a broker or agent or other financial intermediary that has made
special arrangements with the Distributor for such purchases; or (19) clients of
investment advisors or financial planners who buy shares for their own accounts
but only if their accounts are linked to a master account of their investment
advisor or financial planner on the books and records of the broker, agent or
financial intermediary with which the Distributor has made such special
arrangements (each of the investors described in (17) through (19) may be
charged a fee by the broker, agent or financial intermediary for purchasing
shares).
COMBINATION PURCHASE PRIVILEGE. Your purchase of any class of shares of this
or any other Affiliated Phoenix Fund (other than Phoenix Money Market Fund
Series Class A Shares), if made at the same time by the same "person," will be
added together to determine whether the combined sum entitles you to an
immediate reduction in sales charges. A "person" is defined in this and the
following sections as (a) any individual, their spouse and minor children
purchasing shares for his or their own account (including an IRA account)
including his or their own trust; (b) a trustee or other fiduciary purchasing
for a single trust, estate or single fiduciary account (even though more than
one beneficiary may exist); (c) multiple employer trusts or Section 403(b) plans
for the same employer; (d) multiple accounts (up to 200) under a qualified
employee benefit plan or administered by a third party administrator; or (e)
trust companies, bank trust departments, registered investment advisers, and
similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority and
which are held in a fiduciary, agency, custodial or similar capacity, provided
all shares are held of record in the name, or nominee name, of the entity
placing the order.
An "Affiliated Phoenix Fund" means any other mutual fund advised, subadvised
or distributed by the Adviser or Distributor or any corporate affiliate of
either or both the Adviser and Distributor provided such other mutual fund
extends reciprocal privileges to shareholders of the Phoenix Funds.
LETTER OF INTENT. If you sign a Letter of Intent, your purchase of any class
of shares of this or any other Affiliated Phoenix Fund (other than Phoenix Money
Market Fund Series Class A Shares), if made by the same person within a 13-month
period, will be added together to determine whether you are entitled to an
immediate reduction in sales charges. Sales charges are reduced based on the
overall amount you indicate that you will buy under the Letter of Intent. The
Letter of Intent is a mutually non-binding arrangement between you and the
Distributor. Since the Distributor doesn't know whether you will ultimately
fulfill the Letter of Intent, shares worth 5% of the amount of each purchase
will be set aside until you fulfill the Letter of Intent. When you buy enough
shares to fulfill the Letter of Intent, these shares will no longer be
restricted. If, on the other hand, you do not satisfy the Letter of Intent, or
otherwise wish to sell any restricted shares, you will be given the choice of
either buying enough shares to fulfill the Letter of Intent or paying the
difference between any sales charge you previously paid and the otherwise
applicable sales charge based on the intended aggregate purchases described in
the Letter of Intent. You will be given 20 days to make this decision. If you do
not exercise either election, the Distributor will automatically redeem the
number of your restricted shares needed to make up the deficiency in sales
charges received. The Distributor will redeem restricted Class A or M Shares
before Class C or B Shares, respectively. Oldest shares will be redeemed before
selling newer shares. Any remaining shares will then be deposited to your
account.
RIGHT OF ACCUMULATION. Your purchase of any class of shares of this or any
other Affiliated Phoenix Fund, if made over time by the same person may be added
together to determine whether the combined sum entitles you to a prospective
reduction in sales charges. You must provide certain account information to the
Distributor to exercise this right.
ASSOCIATIONS. Certain groups or associations may be treated as a "person" and
qualify for reduced Class A Share sales charges. The group or association must:
(1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge; (3)
work through an investment dealer; or (4) not be a group whose sole reason for
existing is to consist of members who are credit card holders of a particular
company, policyholders of an insurance company, customers of a bank or a
broker-dealer or clients of an investment adviser.
HOW TO OBTAIN REDUCED DEFERRED SALES CHARGES--CLASS B AND C SHARES
The CDSC is waived on the redemption (sale) of Class B and C Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section 72(m)(7);
(c) as a mandatory distribution upon reaching age 70 1/2 under any retirement
plan qualified undER Code Sections 401, 408 or 403(b) or resulting from the
tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using
an approved participant tracking system for participant hardships, death,
disability or normal retirement, and loans which are subsequently repaid; (e)
based on the exercise of exchange privileges among Class B and C Shares of this
or any other Affiliated Phoenix Fund; (f) based on any direct rollover transfer
of shares from an established Affiliated Phoenix Fund qualified plan into an
Affiliated Phoenix Fund IRA by participants terminating from the qualified plan;
and (g) based on the systematic withdrawal program (Class B Shares only). If, as
described in condition (a) above, an account is transferred to an account
registered in the name of a deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B or C Shares
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<PAGE>
are not redeemed within one year of the death, they will remain subject to the
applicable CDSC.
CONVERSION FEATURE--CLASS B SHARES
Class B Shares will automatically convert to Class A Shares of the same
Portfolio eight years after they are bought. Conversion will be on the basis of
the then prevailing net asset value of Class A and B Shares. There is no sales
load, fee or other charge for this feature. Class B Shares acquired through
dividend or distribution reinvestments will be converted into Class A Shares at
the same time that other Class B Shares are converted based on the proportion
that the reinvested shares bear to purchased Class B Shares. The conversion
feature is subject to the continuing availability of an opinion of counsel or a
ruling of the Internal Revenue Service that the assessment of the higher
distribution fees and associated costs with respect to Class B Shares does not
result in any dividends or distributions constituting "preferential dividends"
under the Code, and that the conversion of shares does not constitute a taxable
event under federal income tax law. If the conversion feature is suspended,
Class B Shares would continue to be subject to the higher distribution fee for
an indefinite period. Even if the Trust were unable to obtain such assurances,
it might continue to make distributions if doing so would assist in complying
with its general practice of distributing sufficient income to reduce or
eliminate federal taxes otherwise payable by the Funds.
INVESTOR ACCOUNT SERVICES
The Portfolios mail periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one copy
of most Portfolio 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 toll free at (800)
243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to the
shareholder account services can be found in the Funds' Statement of Additional
Information ("SAI").
BANK DRAFT INVESTING PROGRAM (INVESTO-MATIC PLAN). By completing the
Investo-Matic Section of the New Account Application, you may authorize the bank
named in the form to draw $25 or more from your personal checking or savings
account to be used to purchase additional shares for your account. The amount
you designate will be made available, in form payable to the order of the
Transfer Agent, by the bank on the date the bank draws on your account and will
be used to purchase shares at the applicable offering price.
DISTRIBUTION OPTION. Each Portfolio currently declares all income dividends
and all capital gain distributions, if any, payable in shares of the Portfolio
at net asset value or, at your option, in cash. By exercising the distribution
option, you 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 you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed 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 in your account at the then current net
asset value. Dividends and capital gain distributions received in shares are
taxable to you and credited to your account in full and fractional shares
computed at the closing net asset value on the next business day after the
record date. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
SYSTEMATIC WITHDRAWAL PROGRAM. The Systematic Withdrawal Program allows you
to periodically redeem a portion of your account on a predetermined monthly,
quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to your bank account. In addition to the limitations stated
below, withdrawals may not be less than $25 and minimum account balance
requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Portfolio worth $5,000 or more, as determined by the then current
net asset value per share, and elect to have all dividends reinvested.
Participants in the Program redeeming Class C Shares will be subject to any
applicable contingent deferred sales charge. The purchase of shares while
participating in the withdrawal program will ordinarily be disadvantageous to
the Class A or M Shares investor since a sales charge will be paid by the
investor on the purchase of Class A or M Shares at the same time as other shares
are being redeemed. For this reason, investors in Class A or M Shares may not
participate in an automatic investment program while participating in the
Systematic Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any applicable
contingent deferred sales charge on all shares redeemed. Accordingly, the
purchase of Class B Shares will generally not be suitable for an investor who
anticipates withdrawing sums in excess of the above limits shortly after
purchase.
TAX SHELTERED RETIREMENT PLANS. Shares of the Portfolios are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, SIMPLE 401(k), Profit-Sharing and
Money Purchase Pension Plans which can be adopted
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by self-employed persons ("Keogh") and by corporations and 403(b) Retirement
Plans. Write or call Equity Planning at (800) 243-4361 for further information
about the plans.
EXCHANGE PRIVILEGES
You may exchange shares of one Phoenix Fund for shares of another Phoenix
Fund or any other Affiliated Phoenix Fund without paying any fees or sales
charges. On exchanges with share classes that carry a contingent deferred sales
charge, the CDSC schedule of the original shares purchased continues to apply.
Shares held in book-entry form may be exchanged for shares of the same class of
other Phoenix Funds or any other Affiliated Phoenix Fund, provided the following
conditions are met: (1) the shares that will be acquired in the exchange (the
"Acquired Shares") are available for sale; (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 made; and (5) if you have elected not to use the telephone
exchange privilege (see below), a properly executed exchange request must be
received by the Distributor. Exchanges may be made over the telephone or in
writing and may be made at one time or systematically over a period of time.
Note, each Fund has different investment objectives and policies. You should
read the prospectus of the Phoenix Fund or any other Affiliated Phoenix Fund
into which the exchange is to be made before making any exchanges. This
privilege may be modified or terminated at any time on 60 days' notice.
MARKET TIMER RESTRICTIONS. Because excessive trading can hurt Portfolio
performance and harm shareholders, the Trust reserves the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30-day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These privileges
are limited under those agreements. The Distributor has the right to reject or
suspend these privileges upon reasonable notice.
TELEPHONE EXCHANGES. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Trust and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker-dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk if the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by the registered shareowner(s).
NET ASSET VALUE
The net asset value per share of each Portfolio is determined as of the close
of trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The net asset value per share of a Portfolio is
determined by adding the values of all securities and other assets of the
Portfolio, subtracting liabilities, and dividing by the total number of
outstanding shares of the Portfolio. The total liability allocated to a class,
plus that class' 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.
The Portfolio's investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Since the Fund does not
price securities on weekends or United States national holidays, the net asset
value of a Portfolio's foreign assets may be significantly affected on days when
the investor has no access to the Fund. Short-term investments having a
remaining maturity of less than sixty-one days are valued at amortized cost,
which the Trustees have determined approximates market value. For further
information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
You have the right to have the Trust buy back shares at the net asset value
next determined after receipt of a redemption order, 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. In the case of a Class B or C
Share redemption, you will be subject to the applicable deferred sales charge,
if any, for such shares (see "Deferred Sales Charge Alternative--Class B and C
Shares," above). Subject to certain restrictions, shares may be redeemed by
telephone or in writing. In addition, shares may be sold through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The Trust does not charge any redemption fees. Payment for
shares redeemed is made within seven days, provided that
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<PAGE>
redemption proceeds will not be disbursed until each check used for purchases
of shares has been cleared for payment by your bank, which may take up to 15
days after receipt of the check.
The requirements to redeem shares are outlined in the table below. Additional
documentation may be required for redemptions by corporations, partnerships or
other organizations, executors, administrators, trustees, custodians, guardians,
or from IRA's 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
Funds at (800) 243-1574. Redemption requests will not be honored until all
required documents in proper form have been received.
HOW CAN I SELL MY SHARES?
[Telephone] By Phone o Sales up to $50,000
o Not available on most retirement accounts
(800) 243-1574 o Requests received after 4PM will be executed on the
following business day
[Envelope] In Writing o Letter of instruction from the registered owner
including the fund and account number and the number
of shares or dollar amount you wish to sell
o No signature guarantee is required if your shares are
registered individually, jointly, or as custodian
under the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act, the proceeds of the
redemption do not exceed $50,000, and the proceeds
are payable to the registered owner(s) at the address
of record
[Hand] By Check o Select checkwriting on your New Account Application
o Bond Portfolio, Emerging Markets Portfolio and Income
Portfolio only
o $500 or more per check
o Cannot be used to close an account
Shares previously issued in certificate form cannot be redeemed until the
certificated shares have been deposited to your account.
TELEPHONE REDEMPTIONS
The Trust and the Transfer Agent will employ reasonable procedures to confirm
that telephone instructions are genuine. Address and bank account information
will be verified, telephone redemption instructions will be recorded on tape,
and all redemptions will be confirmed in writing to you. 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 Trust and/or the
Transfer Agent may be liable for following telephone instructions for redemption
transactions that prove to be fraudulent. Broker-dealers other than Equity
Planning have agreed to bear the risk of any loss resulting from any
unauthorized telephone redemption instruction from the firm or its registered
representatives. However, you would bear the risk of loss resulting from
instructions entered by an unauthorized third party that the Trust and/or the
Transfer Agent reasonably believe to be genuine. The Telephone Redemption
Privilege may be modified or terminated at any time on 60 days' notice to
shareholders. In addition, during times of drastic economic or market changes,
the Telephone Redemption Privilege may be difficult to exercise or may be
temporarily suspended. In such event, a redemption may be effected by written
request by following the procedure outlined above.
WRITTEN REDEMPTIONS
If you elect not to use the telephone redemption or telephone exchange
privileges, you must submit your request in writing. If the shares are being
exchanged between accounts that are not identically registered, the signature on
such request must be guaranteed by an eligible guarantor institution as defined
by the Transfer Agent in accordance with its signature guarantee procedures.
Currently, such procedures generally permit guarantees by banks, broker dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations.
REDEMPTION IN KIND
To the extent consistent with state and federal law, the Trust may make
payment of the redemption price either in cash or in kind. However, the Trust
has elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90-day period to the
lesser of $250,000 or 1% of the net asset value of the Trust at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the
Investment Company Act of 1940 Act and is irrevocable while the Rule is in
effect unless the Securities and Exchange Commission, by order, permits the
withdrawal thereof. In case of a redemption in kind, securities delivered in
payment for shares would be readily marketable and valued at the same value
assigned to them in computing the net asset value per share of a Portfolio. A
shareholder receiving such securities would incur brokerage costs when he sold
the securities.
ACCOUNT REINSTATEMENT PRIVILEGE
You have a onetime privilege of using redemption proceeds from Class A, B, C
and M Shares to purchase Class A Shares of any Phoenix Fund or any other
Affiliated Phoenix Fund with no sales charge (at net asset value next determined
after the request for reinvestment is made). For Federal income tax purposes, a
redemption and reinvestment 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 to
reinstate your account must be received by the Transfer Agent within 180 days of
the redemption, accompanied by payment for the shares (not in excess of the
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<PAGE>
redemption value). Class B shareholders who have had the contingent deferred
sales charge waived through participation in the Systematic Withdrawal Program
are not eligible to use the Reinstatement Privilege.
REDEMPTION OF SMALL ACCOUNTS
Due to the relatively high cost of maintaining small accounts, the Trust
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
Trust 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
60 days to make an additional investment in an amount which will increase the
value of the account to at least $200.
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 Mid Cap Portfolio and the International Portfolio each will distribute
its net investment income to its shareholders semiannually and net realized
capital gains, if any, to its shareholders at least annually.
The Emerging Markets Portfolio and the Income Portfolio will distribute their
net investment income to its shareholders monthly and net realized capital
gains, if any, to their 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 Mid Cap Portfolio, International Portfolio,
Emerging Markets Portfolio and the Income Portfolio 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 Mid Cap Portfolio (and, possibly, the
International Portfolio) may qualify for the corporate dividends-received
deduction.
Although the Real Estate and Emerging Markets Portfolios may be a
non-diversified portfolio, the Trust 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. The Emerging Markets Portfolio
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.
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
"Dividends, Distributions and 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
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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 Portfolio intends to qualify for, and may make the election
permitted under, Section 853 of the Code. Accordingly, shareholders may be able
to claim a credit or deduction on their income tax returns for, and may 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 six 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, nonresident 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 Trust 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 Trust 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 Trust sends to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service for
preparing federal income tax returns.
Investors are urged to consult their attorney or tax adviser regarding
specific questions as to Federal, foreign, state or local taxes.
ADDITIONAL INFORMATION
ORGANIZATION OF THE TRUST
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest. The Trust currently offers shares in different
series or "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
and C 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 and M 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 Trust 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
42
<PAGE>
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 Trust. Any general expenses of the Trust
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 Trust may be personally liable for
debts or claims against the Trust. The Declaration of Trust provides that
shareholders will not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that effect.
The Declaration of Trust provides for indemnification out of the Trust property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability, which is considered remote, is limited
to circumstances in which the Trust itself would be unable to meet its
obligations.
ADDITIONAL INQUIRIES
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semiannual 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.
REGISTRATION STATEMENT
This Prospectus omits certain information included in the Statement of
Additional Information and Part C of the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the 1940
Act. A copy of the Registration Statement may be obtained from the Securities
and Exchange Commission in Washington, D.C.
APPENDIX
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Trust will only invest in commercial paper which at the date of
investment is rated A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Services, Inc., or, if not rated, is issued or guaranteed by companies
which at the date of investment have an outstanding debt issue rated AA or
higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationship which exists with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt-edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they compromise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
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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, Bonds rated BB, B, CCC and CC are regarded, on balance, as
CCC, CC: 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:
<TABLE>
<CAPTION>
Account Type Give Social Security Number of Tax Identification Number of:
- --------------------------------- ----------------------------------------------------------------------
<S> <C>
Individual Individual
- --------------------------------- ----------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- --------------------------------- ----------------------------------------------------------------------
Uniform Gifts to Minors Minor
- --------------------------------- ----------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- --------------------------------- ----------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- --------------------------------- ----------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- --------------------------------- ----------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- --------------------------------- ----------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- --------------------------------- ----------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
o A corporation
o Financial institution
o Section 501(a) exempt organization (IRA, Corporate Retirement Plan,
403(b), Keogh)
o United States or any agency or instrumentality thereof
o A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof
o International organization or any agency or instrumentality thereof
o Registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o Real estate investment trust
o Common trust fund operated by a bank under section 584(a)
o An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1)
o 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 "Trust") 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 Trust, dated March 27, 1998. The Statement
contains more detailed information about the Trust 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 Boulevard,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Trust is contained in the Annual Report to
Shareholders for the year ended November 30, 1997 and is incorporated into the
Statement of Additional Information by reference.
[LOGO] Printed on recycled paper using soybean ink
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND BULK RATE MAIL
PO Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
[LOGO] PHOENIX
DUFF & PHELPS
PDP 467 (3/98)
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
101 Munson Street
Greenfield, Massachusetts 01301
STATEMENT OF ADDITIONAL INFORMATION
March 27, 1998
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Multi-Portfolio Fund (the "Trust"), dated March 27, 1998, and should be
read in conjunction with it. The Trust's Prospectus may be obtained by calling
Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or by
writing to Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, CT 06083-2200.
TABLE OF CONTENTS
PAGE
THE TRUST .............................................................. 1
INVESTMENT OBJECTIVES AND POLICIES ..................................... 1
INVESTMENT RESTRICTIONS ................................................ 12
PERFORMANCE ............................................................ 14
PERFORMANCE COMPARISONS ................................................ 15
PORTFOLIO TURNOVER ..................................................... 16
TRUSTEES AND OFFICERS .................................................. 16
PRINCIPAL SHAREHOLDERS ................................................. 22
THE INVESTMENT ADVISERS ................................................ 23
PORTFOLIO TRANSACTIONS ................................................. 24
DETERMINATION OF NET ASSET VALUE ....................................... 26
HOW TO BUY SHARES ...................................................... 26
ALTERNATIVE PURCHASE ARRANGEMENTS ...................................... 26
INVESTOR ACCOUNT SERVICES .............................................. 28
HOW TO REDEEM SHARES ................................................... 28
TAX SHELTERED RETIREMENT PLANS ......................................... 30
DIVIDENDS, DISTRIBUTIONS AND TAXES ..................................... 30
THE DISTRIBUTOR ........................................................ 32
PLANS OF DISTRIBUTION .................................................. 33
ADDITIONAL INFORMATION ................................................. 34
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device (TTY): (800) 243-1926
PDP468 (3/98)
<PAGE>
THE TRUST
Phoenix Multi-Portfolio Fund (the "Trust") is an open-end management
investment company which was organized under Massachusetts law in 1987 as a
Massachusetts business trust.
The Trust's Prospectus describes the investment objectives of the Phoenix
Tax-Exempt Bond Portfolio (the "Bond Portfolio"), the Phoenix Mid Cap Portfolio
(the "Mid Cap Portfolio") the Phoenix International Portfolio (the
"International Portfolio") the Phoenix Emerging Markets Bond Portfolio (the
"Emerging Markets Portfolio"), the Phoenix Real Estate Securities Portfolio (the
"Real Estate Portfolio") and the Phoenix Strategic Income Fund (the "Income
Portfolio") (each, a "Portfolio" and, together, the "Portfolios"), the six
Portfolios currently offered by the Trust, and summarizes the investment
policies and investment techniques each Portfolio will employ in seeking to
achieve its investment objective. The following discussion supplements the
description of the Portfolios' investment policies and investment techniques in
the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio is deemed to be a fundamental
policy and may not be changed without the approval of the shareholders of that
Portfolio. Investment restrictions described in this Statement of Additional
Information are fundamental policies of the Trust and may not be changed as to
any Portfolio without the approval of such Portfolio's shareholders.
MUNICIPAL SECURITIES
As described more fully in the Prospectus, the Bond Portfolio intends under
normal conditions to invest at least 80% of its net assets in municipal
securities. As used in the Prospectus and this Statement of Additional
Information, the term "municipal securities" means obligations, including
municipal bonds and notes and tax exempt commercial paper, issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia and their political subdivisions, agencies and instrumentalities,
the interest from which is, in the opinion of counsel to the issuers of such
securities, exempt from federal income tax. To the extent that an investment in
municipal securities does not run counter to any of the investment policies of
the Bond Portfolio or any of the investment restrictions to which the Bond
Portfolio is subject, the Bond Portfolio may invest in any combination of the
various types of municipal securities described below which, in the judgment of
Phoenix Investment Counsel, Inc., ("PIC"), the investment adviser to the Bond,
Mid Cap and International Portfolios will contribute to the attainment of the
Bond Portfolio's investment objective. Such combination of municipal securities
may vary from time to time. The two principal classes of municipal securities
are municipal bonds and municipal notes.
Municipal Bonds. Municipal bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have two principal
classifications: general obligation bonds and revenue bonds. Another type of
municipal bond is referred to as an industrial development bond. These three are
discussed below.
General Obligation Bonds. Issuers of general obligation bonds include states,
counties, cities, towns, and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
Revenue Bonds. The principal security for a revenue bond is generally the net
revenues derived from a particular facility, group of facilities, or, in some
cases, the proceeds of a special excise or other specific revenue source.
Revenue bonds are issued to finance a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may
be used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security, including partially
or fully insured mortgages, rent subsidized and/or collateralized mortgages,
and/or the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without obligation)
to make up deficiencies in the debt service reserve fund.
Industrial Development Bonds. Industrial development bonds, which are
considered municipal bonds if the interest paid is exempt from federal income
tax, are issued by or on behalf of public authorities to raise money to finance
various privately operated facilities for business and manufacturing, housing,
sports arenas and pollution control. These bonds are also used to finance public
facilities such as airports, mass transit systems, ports and parking. The
payment of the principal and interest on such bonds is dependent solely on the
ability of the facility's user to meet its financial obligations and the pledge,
if any, of real and personal property so financed as security for such payment.
Municipal Notes. Municipal notes generally are used to provide for short-term
working capital needs and generally have maturities of one year or less.
Municipal notes include:
Tax Anticipation Notes. Tax anticipation notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation of
various seasonal tax revenue, such as income, sales, use and business taxes, and
are payable from these specific future taxes.
1
<PAGE>
Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other types of revenue, such as federal revenues
available under federal revenue sharing programs.
Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the notes.
Construction Loan Notes. Construction loan notes are sold to provide
construction financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing Administration
under "Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae"
(the Government National Mortgage Association).
Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term
obligation with a stated maturity of 365 days or less. It is issued by state and
local governments or their agencies to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term financing.
In addition, other types of municipal securities similar to the
above-described municipal bonds and municipal notes are, or may become,
available. For the purpose of the Trust's investment restrictions set forth in
this Statement of Additional Information, the identification of the "issuer" of
a municipal security which is not a general obligation bond is made by PIC on
the basis of the characteristics of the obligation, the most significant of
which is the source of funds for the payment of principal and interest on such
security.
RISKS RELATING TO MUNICIPAL SECURITIES
There can be no assurance that the Bond Portfolio will achieve its investment
objective. Yields on municipal securities are dependent on a variety of factors,
including the general conditions of the money market and the municipal bond
market, the size of a particular offering, the maturity of the obligations and
the rating of the issue. Municipal securities with longer maturities tend to
produce higher yields and are generally subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities and lower
yields. The market prices of municipal securities usually vary, depending upon
available yields. An increase in interest rates will generally reduce the value
of portfolio investments, and a decline in interest rates will generally
increase the value of portfolio investments. The ability of the Portfolio to
achieve its investment objective is also dependent on the continuing ability of
the issuers of municipal securities in which the Portfolio invests to meet their
obligations for the payment of interest and principal when due. The ratings of
Moody's and Standard & Poor's represent their opinions as to the quality of
municipal securities which they undertake to rate. Ratings are not absolute
standards of quality; consequently, municipal securities with the same maturity,
coupon, and rating may have different yields. There are variations in municipal
securities, both within a particular classification and between classifications,
depending on numerous factors. It should also be pointed out that, unlike other
types of investments, municipal securities have traditionally not been subject
to regulation by, or registration with, the Securities and Exchange Commission
(the "Commission"), although there have been proposals which would provide for
such regulation in the future.
The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations.
Lawsuits challenging the validity under state constitutions of present
systems of financing public education have been initiated or adjusted in a
number of states, and legislation has been introduced to effect changes in
public school financing in some states. In other instances there have been
lawsuits challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which could ultimately
affect the validity of those municipal securities or the tax-free nature of the
interest thereon.
VARIABLE AND FLOATING RATE SECURITIES
Some municipal securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize fluctuation in values of
floating rate instruments. Variable rate instruments are those whose terms
provide for automatic establishment of a new interest rate on set dates.
Floating rate instruments are those whose terms provide for automatic adjustment
of their interest rates whenever some specified interest rate changes. Variable
rate and floating rate instruments will be referred to collectively as "Variable
Rate Securities." The interest rate on Variable Rate Securities is ordinarily
determined by reference to, or is a percentage of, a bank's prime rate, the
90-day U.S. Treasury Bill rate, the rate of return on commercial paper or bank
certificates of deposit, an index of short-term, tax-exempt rates, or some
objective standard. Generally, the changes in the interest rate on Variable Rate
Securities reduce the fluctuation in the market value of such securities.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than for fixed-rate obligations.
Variable Rate Demand Securities are Variable Rate Securities which have
demand features entitling the purchaser to resell the securities to the issuer
at an amount approximately equal to amortized cost or the principal amount
thereof plus accrued interest, which may be more or less than the price the Bond
Portfolio paid for them. The interest rate on Variable Rate Demand Securities
also varies either according to some objective standard, such as an index of
short-term, tax-exempt rates, or according to rates set by or on behalf of the
issuer.
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TAXABLE SECURITIES
The income from investments (either in the form of dividends or interest)
made by the Mid Cap Portfolio and the International Portfolio are expected to be
taxable as ordinary income.
The Bond Portfolio may also invest a portion of its net assets (up to 20%
under normal conditions and more under extraordinary circumstances, as described
in the Prospectus) in taxable securities.
Interest earned on investments in taxable securities may be taxable to
shareholders as ordinary income. Investors should be aware that investments in
taxable securities by the Bond Portfolio are restricted to:
U.S. Government Securities--obligations issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities (collectively
referred to as "U.S. Government" issues). Some of these securities are supported
by the full faith and credit of the U.S. Government; others are supported by the
right of the issuer to borrow from the U.S. Treasury; and the remainder are
supported only by the credit of the instrumentality.
Bank Obligations--certificates of deposit, bankers' acceptances, and other
short-term obligations of U.S. banks which at the date of the investment have
capital, surplus and undivided profits in excess of $100,000,000 as of the date
of their most recently published financial statements.
Commercial Paper--commercial paper which at the date of the investment is
rated P-l by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Corporation or, if not rated, is issued by a company which at the date of the
investment has an outstanding debt issue rated Aa or higher by Moody's or AA or
higher by Standard & Poor's.
Corporate Debt Securities--corporate debt securities which at the date of the
investment are rated Aa or higher by Moody's or AA or higher by Standard &
Poor's.
Repurchase Agreements--repurchase agreements with respect to any of the
foregoing, as described in the Trust's Prospectus.
The Bond Portfolio also has the right to hold cash reserves as the Adviser
deems necessary. For example, a Portfolio may invest in money market securities
or hold cash pending investment of proceeds from sales of its shares or from the
sale of portfolio securities and/or in anticipation of redemptions.
RATINGS
If the rating of a security purchased by a Portfolio is subsequently reduced
below the minimum rating required for purchase or a security purchased by the
Portfolio ceases to be rated, neither event will require the sale of the
security. However, the Adviser, as applicable, will consider any such event in
determining whether the Portfolio should continue to hold the security. To the
extent that ratings established by Moody's or Standard & Poor's may change as a
result of changes in such organizations or their rating systems, the Portfolios
will invest in securities which are deemed by the Portfolio's adviser to be of
comparable quality to securities whose current ratings render them eligible for
purchase by the Portfolio.
RISKS OF HIGH YIELD BONDS
The Mid Cap and International Portfolios may invest up to 10% and 20%,
respectively, of their total assets in bonds considered to be less than
investment grade, commonly known as "junk" bonds. The Emerging Markets Portfolio
and the Income Portfolio may invest up to 100% of their total assets in these
bonds. The Mid Cap and International Portfolios did not invest in any bonds
considered less than investment grade for the fiscal year ended November 30,
1997.
While management will seek to minimize risk through diversification and
continual evaluation of current developments in interest rates and economic
conditions, the market prices of lower-rated securities generally fluctuate more
than those of higher rated securities. Using credit ratings helps to evaluate
the safety of principal and interest payments but does not assess market risk.
Fluctuations in the market value of portfolio securities subsequent to
acquisition by the Portfolios will not normally affect cash income from such
securities but will be reflected in the Portfolio's net asset value.
Additionally, with lower-rated securities, there is a greater possibility that
an adverse change in the financial condition of the issuer, particularly a
highly-leveraged issuer, may affect its ability to make payments of income and
principal and increase the expenses of the Portfolio seeking recovery from the
issuer. Also, to the extent that the Portfolio invests in securities in the
lower rating categories, the achievement of its goals will be more dependent on
management's ability than would be the case if it were only investing in
securities in the higher rating categories. Lower-rated securities may be thinly
traded and therefore harder to value and more susceptible to adverse publicity
concerning the issuer.
WRITING AND PURCHASING OPTIONS ON SECURITIES AND SECURITIES INDICES
The Bond, Mid Cap, International, Emerging Markets and Income Portfolios may
engage in option transactions as described more fully in the Prospectus.
Call options on securities and securities indices written by the Portfolios
normally will have expiration dates between three and nine months from the date
written. The exercise price of a call option written by a Portfolio utilizing
this investment technique may be below, equal to or above the current market
value of the underlying security or securities index at the time the option is
written.
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During the option period, a Portfolio utilizing this investment technique may
be assigned an exercise notice by the broker-dealer through which the call
option was sold, requiring the Portfolio to deliver the underlying security (or
cash in the case of securities index calls) against payment of the exercise
price. This obligation is terminated upon the expiration of the option period or
at such earlier time as the Portfolio effects a closing purchase transaction. A
closing purchase transaction cannot be effected with respect to an option once
the Portfolio has received an exercise notice.
A multiplier for an index option performs a function similar to the unit of
trading for an option on an individual security. It determines the total dollar
value per contract of each point between the exercise price of the option and
the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices, Computer/Business
Equipment Index, Major Market Index, Amex Market Value Index, Computer
Technology Index, Oil and Gas Index, NYSE Options Index, Gaming/Hotel Index,
Telephone Index, Transportation Index, Technology Index, and Gold/ Silver Index.
The Mid Cap and International Portfolios may write call options and purchase
call and put options on these and any other indices traded on a recognized
exchange.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option written by a Portfolio, to prevent an underlying
security from being called, or to enable the Portfolio to write another call
option with either a different exercise price or expiration date or both. A
Portfolio may realize a net gain or loss from a closing purchase transaction,
depending upon whether the amount of the premium received on the call option is
more or less than the cost of effecting the closing purchase transaction. If a
call option written by a Portfolio expires unexercised, the Portfolio will
realize a gain in the amount of the premium on the option less the commission
paid.
The option activities of a Portfolio may increase its portfolio turnover rate
and the amount of brokerage commissions paid. A Portfolio will pay a commission
each time it purchases or sells a security in connection with the exercise of an
option. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
OVER-THE-COUNTER OPTIONS
As indicated in the Prospectus (see "Investment Techniques and Related
Risks"), the Mid Cap Portfolio, International and Emerging Markets Portfolios
may deal in over-the-counter options ("OTC options"). PIC understands the
position of the staff of the Commission to be that purchased OTC options and the
assets used in "cover" for written OTC options are illiquid securities. As
indicated in the Prospectus, the Portfolios have adopted procedures for engaging
in OTC options for the purpose of reducing any potential adverse effect of such
transactions upon the liquidity of a Portfolio. A brief description of such
procedures is set forth below.
The Mid Cap, International and Emerging Markets Portfolios will engage in OTC
options transactions only with dealers that meet certain credit and other
criteria. The Portfolios and PIC believe that the approved dealers present
minimal credit risks to the Portfolios and, therefore, should be able to enter
into closing transactions if necessary. A Portfolio currently will not engage in
OTC options transactions if the amount invested by the Portfolio in OTC options,
plus a "liquidity charge" related to OTC options written by the Portfolio (as
described below) plus the amount invested by the Portfolio in other illiquid
securities, would exceed 10% of the Portfolio's total assets. The "liquidity
charge" referred to above is computed as described below.
The Portfolios anticipate entering into agreements with dealers to which the
Portfolios sell OTC options. Under these agreements the Portfolios would have
the absolute right to repurchase the OTC options from the dealer at any time at
a price no greater than a price established under the agreements (the
"Repurchase Price"). The "liquidity charge" referred to above for a specific OTC
option transaction will be the Repurchase Price related to the OTC option less
the intrinsic value of the OTC option. The intrinsic value of an OTC call option
for such purposes will be the amount by which the current market value of the
underlying security exceeds the exercise price. In the case of an OTC put
option, intrinsic value will be the amount by which the exercise price exceeds
the current market value of the underlying security. If there is no such
agreement requiring a dealer to allow the Portfolios to repurchase a specific
OTC option written by the Portfolios, the "liquidity charge" will be the current
market value of the assets serving as "cover" for such OTC option.
LIMITATIONS ON OPTIONS ON SECURITIES AND SECURITIES INDICES
The Bond, Mid Cap, International, Emerging Markets and Income Portfolios may
write call options only if they are covered and remain covered for as long as
the Portfolio is obligated as a writer. Thus, if a Portfolio utilizing this
investment technique writes a call option on an individual security, the
Portfolio must own the underlying security or other securities that are
acceptable for a pledged account at all times during the option period. The
Portfolios will write call options on indices only to hedge in an economically
appropriate way portfolio securities which are not otherwise hedged with options
or financial futures contracts. Call options on securities indices written by a
Portfolio will be "covered" by identifying the specific portfolio securities
being hedged.
To secure the obligation to deliver the underlying security, the writer of a
covered call option on an individual security is required to deposit the
underlying security or other assets in a pledged account in accordance with
clearing corporation and exchange rules.
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In the case of an index call option written by a Portfolio, the Portfolio will
be required to deposit qualified securities. A "qualified security" is a
security against which the Portfolio has not written a call option and which has
not been hedged by the Portfolio by the sale of a financial futures contract. If
at the close of business on any day the market value of the qualified securities
falls below 100% of the current index value times the multiplier times the
number of contracts, the Portfolio will deposit an amount of cash, U.S.
Government Securities or other liquid high quality debt obligations equal in
value to the difference. In addition, when the Portfolio writes a call on an
index which is "in-the-money" at the time the call is written, the Portfolio
will pledge with the Trust's custodian bank cash, U.S. Government securities or
other liquid high quality debt obligations equal in value to the amount by which
the call is "in-the-money" times the multiplier times the number of contracts.
Any amount otherwise pledged may be applied to the Portfolio's other obligations
to pledge assets in the event that the market value of the qualified securities
falls below 100% of the current index value times the multiplier times the
number of contracts.
Each Portfolio utilizing this investment technique may invest up to 5% of its
total assets in exchange-traded call and put options on securities and
securities indices. A Portfolio may sell a call option or a put option which it
has previously purchased prior to the purchase (in the case of a call) or the
sale (in the case of a put) of the underlying security. Any such sale of a call
option or a put option would result in a net gain or loss, depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid.
In connection with a Portfolio's qualifying as a regulated investment company
under the Internal Revenue Code of 1986, other restrictions on the Portfolio's
ability to enter into option transactions may apply from time to time. See
"Dividends, Distributions and Taxes."
RISKS RELATING TO OPTIONS ON SECURITIES
During the option period, the writer of a call option has, in return for the
premium received on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security increase, but has retained the risk of loss should the price of the
underlying security decline. The writer has no control over the time within the
option period when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that the Portfolio
utilizing this investment technique may lose the premium it paid plus
transaction costs, if the Portfolio does not exercise the option and is unable
to close out the position prior to expiration of the option.
An option position may be closed out on an exchange only if the exchange
provides a secondary market for an option of the same series. Although the
Portfolios utilizing this investment technique will write and purchase options
only when PIC believes that a liquid secondary market will exist for options of
the same series, there can be no assurance that a liquid secondary market will
exist for a particular option at a particular time and that any Portfolio, if it
so desires, can close out its position by effecting a closing transaction. If
the writer of a covered call option is unable to effect a closing purchase
transaction, it cannot sell the underlying security until the option expires or
the option is exercised. Accordingly, a covered call writer may not be able to
sell the underlying security at a time when it might otherwise be advantageous
to do so.
Possible reasons for the absence of a liquid secondary market on an exchange
include the following: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) inadequacy of the facilities of
an exchange or the clearing corporation to handle trading volume; and (v) a
decision by one or more exchanges to discontinue the trading of options in
general or of particular options or impose restrictions on orders.
Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written on one or more
accounts or through one or more brokers). An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions. PIC believes that the position limits established by
the exchanges will not have any adverse impact upon the Portfolios.
RISKS OF OPTIONS ON SECURITIES INDICES
Because the value of an index option depends upon movements in the level of
the index rather than movements in the price of a particular security, whether a
Portfolio utilizing this investment technique will realize a gain or loss on the
purchase or sale of an option on an index depends upon movements in the level of
prices in the market generally or in an industry or market segment (depending on
the index option in question) rather than upon movements in the price of an
individual security. Accordingly, successful use by a Portfolio of options on
indices will be subject to PIC's ability to predict correctly movements in the
direction of the market generally or in the direction of a particular industry.
This requires different skills and techniques than predicting changes in the
prices of individual securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, a Portfolio utilizing this
investment technique would not be able to close out options which it had written
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or purchased and, if restrictions on exercise were imposed, might be unable to
exercise an option it purchased, which would result in substantial losses to the
Portfolio. However, it is the Trust's policy to write or purchase options only
on indices which include a sufficient number of securities so that the
likelihood of a trading halt in the index is minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, the Portfolios will write call options only on indices which meet
the interim described above.
Price movements in securities held by a Portfolio utilizing this investment
technique will not correlate perfectly with movements in the level of the index
and, therefore, the Portfolio bears the risk that the price of the securities
held by the Portfolio might not increase as much as the level of the index. In
this event, the Portfolio would bear a loss on the call which would not be
completely offset by movements in the prices of the securities held by the
Portfolio. It is also possible that the index might rise when the value of the
securities held by the Portfolio does not. If this occurred, the Portfolio would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and might also experience a loss in the market value of
its portfolio securities.
Unless a Portfolio utilizing this investment technique has other liquid
assets which are sufficient to satisfy the exercise of a call on an index, the
Portfolio will be required to liquidate securities in order to satisfy the
exercise. Because an exercise must be settled within hours after receiving the
notice of exercise, if the Portfolio fails to anticipate an exercise, it may
have to borrow from a bank (in an amount not exceeding 10% of the Portfolio's
total assets) pending settlement of the sale of securities in its portfolio and
pay interest on such borrowing.
When a Portfolio has written a call on an index, there is also a risk that
the market may decline between the time the Portfolio has the call exercised
against it, at a price which is fixed as of the closing level of the index on
the date of exercise, and the time the Portfolio is able to sell its securities.
As with options on its securities, the Portfolio will not learn that a call has
been exercised until the day following the exercise date but, unlike a call on a
security where the Portfolio would be able to deliver the underlying security in
settlement, the Portfolio may have to sell some of its securities in order to
make settlement in cash, and the price of such securities may decline before
they can be sold.
If a Portfolio exercises a put option on an index which it has purchased
before final determination of the closing index value for that day, it runs the
risk that the level of the underlying index may change before closing. If this
change causes the exercised option to fall "out-of-the-money" the Portfolio will
be required to pay the difference between the closing index value and the
exercise price of the option (multiplied by the applicable multiplier) to the
assigned writer. Although the Portfolio may be able to minimize this risk by
withholding exercise instructions until just before the daily cutoff time or by
selling rather than exercising an option when the index level is close to the
exercise price, it may not be possible to eliminate this risk entirely because
the cutoff times for index options may be earlier than those fixed for other
types of options and may occur before definitive closing index values are
announced.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS
The Bond, Mid Cap, International, Emerging Markets and Income Portfolios may
use financial futures contracts and related options to hedge against changes in
the market value of their portfolio securities or securities which they intend
to purchase. The Mid Cap, International, Emerging Markets and Income Portfolios
may use foreign currency futures contracts to hedge against changes in the value
of foreign currencies. (See "Foreign Currency Transactions" below). Hedging is
accomplished when an investor takes a position in the futures market opposite to
the investor's cash market position. There are two types of hedges--long (or
buying) and short (or selling) hedges. Historically, prices in the futures
market have tended to move in concert with (although in inverse relation to)
cash market prices, and prices in the futures market have maintained a fairly
predictable relationship to prices in the cash market. Thus, a decline in the
market value of securities or the value of foreign currencies may be protected
against to a considerable extent by gains realized on futures contracts sales.
Similarly, it is possible to protect against an increase in the market price of
securities which the Portfolio utilizing this investment technique may wish to
purchase in the future by purchasing futures contracts.
The Bond, Mid Cap, International, Emerging Markets and Income Portfolios may
purchase or sell any financial futures contracts which are traded on a
recognized exchange or board of trade and may purchase exchange- or board-traded
put and call options on financial futures contracts as a hedge against
anticipated changes in the market value of its portfolio securities or
securities which it intends to purchase. Financial futures contracts consist of
interest rate futures contracts, securities index futures contracts and foreign
currency futures contracts. A public market presently exists in interest rate
futures contracts covering long-term U.S. Treasury bonds, U.S. Treasury notes,
three-month U.S. Treasury bills and GNMA certificates. Securities index futures
contracts are currently traded with respect to the Standard & Poor's 500
Composite Stock Price Index and such other broad-based stock market indices as
the New York Stock Exchange Composite Stock Index and the Value Line Composite
Stock Price Index. A clearing corporation associated with the exchange or board
of trade on which a financial futures contract trades assumes responsibility for
the completion of transactions and also guarantees that open futures contracts
will be performed.
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In contrast to the situation in which a Portfolio purchases or sells a
security, no security is delivered or received by the Portfolio upon the
purchase or sale of a financial futures contract (although an obligation to
deliver or receive the underlying security in the future is created by such a
contract). Initially, when it enters into a financial futures contract, a
Portfolio utilizing this investment technique will be required to deposit in a
pledged account with the Trust's custodian bank with respect to such Portfolio
an amount of cash or U.S. Treasury bills. This amount is known as an initial
margin and is in the nature of a performance bond or good faith deposit on the
contract. The current initial margin deposit required per contract is
approximately 5% of the contract amount. Brokers may establish deposit
requirements higher than this minimum. However, subsequent payments, called
variation margin, will be made to and from the account on a daily basis as the
price of the futures contract fluctuates. This process is known as marking to
market.
The writer of an option on a futures contract is required to deposit a margin
balance pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although financial futures contracts by their terms call for actual delivery
or acceptance of securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out is
accomplished by effecting an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.
The Portfolios utilizing this investment technique will pay commissions on
financial futures contracts and related options transactions. These commissions
may be higher than those which would apply to purchases and sales of securities
directly, and will be in addition to those paid for direct purchases and sales
of securities.
LIMITATIONS ON FUTURES CONTRACTS AND RELATED OPTIONS
The Portfolios utilizing this investment technique may not engage in
transactions in financial futures contracts or related options for speculative
purposes but only as a hedge against anticipated changes in the market value of
portfolio securities or securities which it intends to purchase or foreign
currencies. A Portfolio utilizing this investment technique may not purchase or
sell financial futures contracts or related options if, immediately thereafter,
the sum of the amount of initial margin deposits on the Portfolio's existing
futures and related options positions and the premiums paid for related options
would exceed 5% of the market value of the Portfolio's total assets after taking
into account unrealized profits and losses on any such contracts. At the time of
purchase of a futures contract or a call option on a futures contract, any
asset, including equity securities and non-investment grade debt so long as the
asset is liquid, unencumbered and marked to market daily equal to the market
value of the futures contract minus the Portfolio's initial margin deposit with
respect thereto will be deposited in a pledged account with the Trust's
custodian bank with respect to such Portfolio to collateralize fully the
position and thereby ensure that it is not leveraged.
The extent to which a Portfolio may enter into financial futures contracts
and related options also may be limited by the requirements of the Internal
Revenue Code of 1986 for qualification as a regulated investment company. See
"Dividends, Distributions and Taxes."
RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS
Positions in futures contracts and related options may be closed out on an
exchange if the exchange provides a secondary market for such contracts or
options. A Portfolio utilizing this investment technique will enter into a
futures or futures related option position only if there appears to be a liquid
secondary market. However, there can be no assurance that a liquid secondary
market will exist for any particular option or futures contract at any specific
time. Thus, it may not be possible to close out a futures or related option
position. In the case of a futures position, in the event of adverse price
movements the Portfolio would continue to be required to make daily margin
payments. In this situation, if the Portfolio has insufficient cash to meet
daily margin requirements it may have to sell portfolio securities to meet its
margin obligations at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to take or make delivery of the
securities underlying the futures contracts it holds. The inability to close out
futures positions also could have an adverse impact on the Portfolio's ability
to hedge its positions effectively.
There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also limit a hedger's opportunity to benefit fully from
favorable market movement. In addition, investing in futures contracts and
options on futures contracts will cause a Portfolio to incur additional
brokerage commissions and may cause an increase in a Portfolio's turnover rate.
The successful use of futures contracts and related options depends on the
ability of the Adviser to forecast correctly the direction and extent of market
movements within a given time frame. To the extent market prices remain stable
during the period a futures
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contract or option is held by a Portfolio or such prices move in a direction
opposite to that anticipated, the Portfolio may realize a loss on the hedging
transaction which is not offset by an increase in the value of its portfolio
securities. As a result, the Portfolio's total return for the period may be less
than if it had not engaged in the hedging transaction.
Utilization of futures contracts by a Portfolio involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities or currencies which are being hedged.
If the price of the futures contract moves more or less than the price of the
securities or currency being hedged, the Portfolio will experience a gain or
loss which will not be completely offset by movements in the price of the
securities or currency. It is possible that, where a Portfolio has sold futures
contracts to hedge against decline in the market, the market may advance and the
value of securities held in the Portfolio or the currencies in which its foreign
securities are denominated may decline. If this occurred, the Portfolio would
lose money on the futures contract and would also experience a decline in value
in its portfolio securities. Where futures are purchased to hedge against a
possible increase in the prices of securities or foreign currencies before the
Portfolio is able to invest its cash (or cash equivalents) in securities (or
options) in an orderly fashion, it is possible that the market may decline; if
the Portfolio then determines not to invest in securities (or options) at that
time because of concern as to possible further market decline or for other
reasons, the Portfolio will realize a loss on the futures that would not be
offset by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in the
futures market elect to close out their contracts through offsetting
transactions rather than to meet margin deposit requirements. In such cases,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities or
currencies rather than to engage in closing transactions because such action
would reduce the liquidity of the futures market. In addition, because, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the underlying securities market,
increased participation by speculators in the futures market could cause
temporary price distortions. Because of the possibility of price distortions in
the futures market and of the imperfect correlation between movements in the
prices of securities or foreign currencies and movements in the prices of
futures contracts, a correct forecast of market trends may still not result in a
successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for a Portfolio
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to the Portfolio (i.e., the
loss of the premium paid) while the purchase or sale of the futures contract
would not have resulted in a loss, such as when there is no movement in the
price of the underlying securities.
REPURCHASE AGREEMENTS
Repurchase agreements, as described in the Trust's Prospectus, will be
entered into only with commercial banks, brokers and dealers considered by the
Trust to be creditworthy. The Trustees of the Trust will monitor each
Portfolio's repurchase agreement transactions periodically and, with the
Portfolios' investment advisers will consider standards which the investment
advisers will use in reviewing the creditworthiness of any party to a repurchase
agreement with a Portfolio. No more than an aggregate of 10% of a Portfolio's
total assets (15% of the Income Portfolio's net assets), at the time of
investment, will be invested in repurchase agreements having maturities longer
than seven days and other investments subject to legal or contractual
restrictions on resale, or for which there are not readily available market
quotations.
The use of repurchase agreements involves certain risks. For example, if the
seller under a repurchase agreement defaults on its obligation to repurchase the
underlying instrument at a time when the value of the instrument has declined, a
Portfolio may incur a loss upon its disposition. If the seller becomes insolvent
and subject to liquidation or reorganization under bankruptcy or other laws, a
bankruptcy court may determine that the underlying instrument is collateral for
a loan by the Portfolio and therefore is subject to sale by the trustee in
bankruptcy. Finally, it is possible that the Portfolio may not be able to
substantiate its interest in the underlying instrument. While the Trustees of
the Trust acknowledge these risks, it is expected that they can be controlled
through careful structuring of repurchase agreement transactions to meet
requirements for treatment as a purchase and sale under the bankruptcy laws and
through monitoring procedures designed to assure the creditworthiness of
counterparties to such transactions.
LENDING PORTFOLIO SECURITIES
The Portfolios may lend portfolio securities to broker-dealers and other
financial institutions in amounts up to 25% of the market or other fair value
for its total assets (one-third of the Income Portfolio's total assets),
provided that such loans are callable at any time by the Portfolio utilizing
this investment technique and are at all times secured by collateral held by the
Portfolio at least equal to the market value, determined daily, of the loaned
securities. The Portfolio utilizing this investment technique will continue to
receive any income on the loaned securities, and at the same time will earn
interest on cash collateral (which will be invested in short-term debt
obligations) or a securities lending fee in the case of collateral in the form
of U.S. Government securities. A loan may be terminated at any time by either
the Portfolio or the borrower. Upon termination of a loan, the borrower will be
required to return the securities to the Portfolio, and any gain or loss in the
market price during the period of the loan would accrue to
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the Portfolio. If the borrower fails to maintain the requisite amount of
collateral, the loan will automatically terminate, and the Portfolio may use the
collateral to replace the loaned securities while holding the borrower liable
for any excess of the replacement cost over the amount of the collateral.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Portfolio will follow the policy of calling the loan, in whole or
in part as may be appropriate, in order to exercise such rights if the matters
involved would have a material effect on the Portfolio's investment in the
securities which are the subject of the loan. The Portfolio may pay reasonable
finders, administrative and custodial fees in connection with loans of its
portfolio securities.
As with any extension of credit, there are risks of delay in recovery of the
loaned securities and in some cases loss of rights in the collateral should the
borrower of the securities fail financially. However, loans of portfolio
securities will be made only to firms considered by the Trust to be creditworthy
and when the Adviser believes the consideration to be earned justifies the
attendant risks.
WHEN-ISSUED SECURITIES
New issues of municipal and emerging market securities are often offered on a
when-issued basis, that is, delivery and payment for the securities normally
takes place 15 to 45 days or more after the date of the commitment to purchase.
The payment obligation and the interest rate that will be received on the
securities are each fixed at the time the buyer enters into the commitment. The
Bond, Emerging Market and Income Portfolios will generally make a commitment to
purchase such securities with the intention of actually acquiring the
securities. However, the Portfolios may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy.
When the Bond, Emerging Market and Income Portfolios purchase securities on a
when-issued basis, cash or liquid high quality debt securities equal in value to
commitments for the when-issued securities will be deposited in a segregated
account with the Trust's custodian bank. Such segregated securities either will
mature or, if necessary, be sold on or before the settlement date.
Securities purchased on a when-issued basis and the securities held in the
Bond, Emerging Market and Income Portfolios are subject to changes in market
value based upon the public perception of the creditworthiness of the issuer and
changes in the level of interest rates which will generally result in similar
changes in value; i.e., both experiencing appreciation when interest rates
decline and depreciation when interest rates rise. Therefore, to the extent the
Bond, Emerging Market and Income Portfolios remain substantially fully invested
at the same time that they have purchased securities on a when-issued basis,
there will be greater fluctuations in the net asset values than if the
Portfolios merely set aside cash to pay for when-issued securities. In addition,
there will be a greater potential for the realization of capital gains, which
are not exempt from federal income taxation. When the time comes to pay for
when-issued securities, the Bond, Emerging Market and Income Portfolios will
meet their obligations from then available cash flow, the sale of securities or,
although it would not normally expect to do so, from the sale of the when-issued
securities themselves (which may have a value greater or less than the payment
obligation). The policies described in this paragraph are not fundamental and
may be changed without shareholder approval.
FOREIGN CURRENCY TRANSACTIONS
The Mid Cap, International, Emerging Market and Income Portfolios (each a
"Foreign Currency Portfolio") each may engage in foreign currency transactions,
although the Mid Cap Portfolio has no present intention of doing so. The
following is a description of these transactions.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days ("Term") from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded directly between currency traders (usually
large commercial banks) and their customers.
No Portfolio will enter into such forward contracts or maintain a net
exposure in such contracts where it would be obligated to deliver an amount of
foreign currency in excess of the value of its portfolio securities and other
assets denominated in that currency. The Adviser believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that to do so is in the best interests of a Portfolio. The Trust's custodian
banks will segregate any asset, including equity securities and non-investment
grade debt so long as the asset is liquid, unencumbered and marked to market
daily in an amount not less than the value of a Foreign Currency Portfolio's
total assets committed to forward foreign currency exchange contracts entered
into for the purchase of a foreign currency. If the value of the securities
segregated declines, additional cash or securities will be added so that the
segregated amount is not less than the amount of the Foreign Currency
Portfolio's commitments with respect to such contracts. Generally, the Foreign
Currency Portfolios do not enter into forward contracts with terms longer than
one year.
Foreign Currency Options. A foreign currency option provides the option buyer
with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period for such options any time prior to expiration.
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A call rises in value if the underlying currency appreciates. Conversely, a
put rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect a Foreign Currency Portfolio against an
adverse movement in the value of a foreign currency, it does not limit the gain
which might result from a favorable movement in the value of such currency. For
example, if a Foreign Currency Portfolio were holding securities denominated in
an appreciating foreign currency and had purchased a foreign currency put to
hedge against a decline in the value of the currency, it would not have to
exercise its put. Similarly, if a Foreign Currency Portfolio had entered into a
contract to purchase a security denominated in a foreign currency and had
purchased a foreign currency call to hedge against a rise in the value of the
currency but instead the currency had depreciated in value between the date of
purchase and the settlement date, the Foreign Currency Portfolio would not have
to exercise its call but could acquire in the spot market the amount of foreign
currency needed for settlement.
Foreign Currency Futures Transactions. Each Foreign Currency Portfolio may
use foreign currency futures contracts and options on such futures contracts.
Through the purchase or sale of such contracts, a Foreign Currency Portfolio may
be able to achieve many of the same objectives attainable through the use of
foreign currency forward contracts, but more effectively and possibly at a lower
cost.
Unlike forward foreign currency exchange contracts, foreign currency futures
contracts and options on foreign currency futures contracts are standardized as
to amount and delivery period and are traded on boards of trade and commodities
exchanges. It is anticipated that such contracts may provide greater liquidity
and lower cost than forward foreign currency exchange contracts.
Regulatory Restrictions. To the extent required to comply with Securities and
Exchange Commission Release No. IC-10666, when purchasing a futures contract or
writing a put option, each Foreign Currency Portfolio will maintain in a pledged
account any asset, including equity securities and non-investment grade debt so
long as the asset is liquid, unencumbered and marked to market daily equal to
the value of such contracts.
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, a Foreign
Currency Portfolio will not enter into a futures contract or purchase an option
thereon if immediately thereafter the initial margin deposits for futures
contracts (including foreign currency and all other futures contracts) held by
the Foreign Currency Portfolio plus premiums paid by it for open options on
futures would exceed 5% of the Foreign Currency Portfolio's total assets.
Neither Foreign Currency Portfolio will engage in transactions in financial
futures contracts or options thereon for speculation, but only to attempt to
hedge against changes in market conditions affecting the values of securities
which the Portfolio holds or intends to purchase. When futures contracts or
options thereon are purchased to protect against a price increase on securities
intended to be purchased later, it is anticipated that at least 75% of such
intended purchases will be completed. When other futures contracts or options
thereon are purchased, the underlying value of such contracts will at all times
not exceed the sum of: (1) accrued profit on such contracts held by the broker;
(2) cash or high quality money market instruments set aside in an identifiable
manner; and (3) cash proceeds from investments due in 30 days.
EMERGING MARKET SECURITIES
The Emerging Markets Portfolio and the Income Portfolio may invest in
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with the
potential for rapid economic growth (emerging markets). Emerging markets will
include any country: (i) having an "emerging stock market" as defined by the
International Finance Corporation; (ii) with low-to-middle-income economies
according to the International Bank for Reconstruction and Development (the
"World Bank"); (iii) listed in World Bank publications as developing; or (iv)
determined by the Adviser to be an emerging market as defined above. The
Emerging Markets Portfolio and the Income Portfolio may also invest in
securities of: (i) companies the principal securities trading market for which
is an emerging market country; (ii) companies organized under the laws of, and
with a principal office in, an emerging market country, or (iii) companies whose
principal activities are located in emerging market countries.
The risks of investing in foreign securities may be intensified in the case
of investments in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolios are uninvested
and no return is earned thereon. The inability of the Portfolios to make
intended security purchases due to settlement problems could cause the
Portfolios to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses to
the Portfolios due to subsequent declines in value of portfolio securities or,
if the Portfolios have entered into a contract to sell the security, in possible
liability to the purchaser. Securities prices in emerging markets can be
significantly more volatile than in the more developed nations of the world,
reflecting the greater uncertainties of investing in less established markets
and economies. In particular, countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownership, or prohibitions of repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may
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suffer from extreme and volatile debt burdens or inflation rates. Local
securities markets may trade a small number of securities and may be unable to
respond effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times. Securities
of issuers located in countries with emerging markets may have limited
marketability and may be subject to more abrupt or erratic price movements.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Portfolios
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Portfolios of any restrictions on investments.
Investments in certain foreign emerging market debt obligations may be
restricted or controlled to varying degrees. These restrictions or controls may
at times preclude investment in certain foreign emerging market debt obligations
and increase the expenses of the Portfolios.
ADDITIONAL RISK FACTORS
As a result of its investments in foreign securities, the Emerging Markets
Portfolio may receive interest or dividend payments, or the proceeds of the sale
or redemption of such securities, in the foreign currencies in which such
securities are denominated. In that event, the Portfolio may convert such
currencies into dollars at the then current exchange rate. Under certain
circumstances, however, such as where the Adviser believes that the applicable
rate is unfavorable at the time the currencies are received or the Adviser
anticipates, for any other reason, that the exchange rate will improve, the
Portfolio may hold such currencies for an indefinite period of time.
In addition, the Portfolio may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into. This
could occur, for example, if an option written by the Portfolio is exercised or
the Portfolio is unable to close out a forward contract. The Portfolio may hold
foreign currency in anticipation of purchasing foreign securities. The Portfolio
may also elect to take delivery of the currencies underlying options or forward
contracts if, in the judgment of the Adviser, it is in the best interest of the
Portfolio to do so. In such instances as well, the Portfolio may convert the
foreign currencies to dollars at the then current exchange rate, or may hold
such currencies for an indefinite period of time.
While the holding of currencies will permit the Portfolio to take advantage
of favorable movements in the applicable exchange rate, it also exposes the
Portfolio to risk of loss if such rates move in a direction adverse to the
Portfolio's position. Such losses could reduce any profits or increase any
losses sustained by the Portfolio from the sale or redemption of securities, and
could reduce the dollar value of interest or dividend payments received. In
addition, the holding of currencies could adversely affect the Portfolio's
profit or loss on currency options or forward contracts, as well as its hedging
strategies.
REAL ESTATE INVESTMENT TRUSTS
As described in the Prospectus, the Real Estate Portfolio intends under
normal conditions to invest in real estate investment trusts ("REITs"). REITs
pool investors' funds for investment primarily in income-producing commercial
real estate or real estate related loans. A REIT is not taxed on income
distributed to shareholders if it complies with several requirements relating to
its organization, ownership, assets, and income and a requirement that it
distribute to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year.
REITs can generally be classified as follows:
--Equity REITs, which invest the majority of their assets directly in real
property and derive their income primarily from rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
--Mortgage REITs, which invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments.
--Hybrid REITs, which combine the characteristics of both equity REITs and
mortgage REITs.
REITs are like closed-end investment companies in that they are essentially
holding companies which rely on professional managers to supervise their
investments. A shareholder in the Real Estate Portfolio should realize that by
investing in REITs indirectly through the Portfolio, he will bear not only his
proportionate share of the expenses of the Portfolio, but also, indirectly,
similar expenses of underlying REITs.
RISKS OF INVESTMENT IN REAL ESTATE SECURITIES
Selecting REITs requires an evaluation of the merits of each type of asset a
particular REIT owns, as well as regional and local economics. Due to the
proliferation of REITs in recent years and the relative lack of sophistication
of certain REIT managers, the quality of REIT assets has varied significantly.
The Real Estate Portfolio will not invest in real estate directly, but only in
securities issued by real estate companies. However, the Portfolio may be
subject to risks similar to those associated with the direct ownership of real
estate because of its policy of concentrating in the securities of companies in
the real estate industry. These
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include declines in the value of real estate, risks related to general and local
economic conditions, dependence on management skill, cash flow dependence,
possible lack of availability of long-term mortgage funds, over-building,
extended vacancies of properties, decreased occupancy rates and increased
competition, increases in property taxes and operating expenses, changes in
neighborhood values and the appeal of the properties to tenants and changes in
interest rates.
In addition to these risks, equity REITs may be affected by changes in the
value of the underlying properties owned by the trusts, while mortgage REITs may
be affected by the quality of any credit extended. Further, equity and mortgage
REITs are dependent upon management skills and generally are not diversified.
Equity and mortgage REITs are also subject to potential defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for tax-free status
of income under the Code and failing to maintain exemption from the Investment
Company Act of 1940. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or lessor and may
incur substantial costs associated with protecting its investments. In addition,
investment in REITs could cause the Portfolio to possibly fail to qualify as a
regulated investment company.
DEBT SECURITIES
Up to 25% of the Real Estate Portfolio's total assets may be invested in debt
securities (which include for purposes of this investment policy convertible
debt securities which the Adviser believes have attractive equity
characteristics). The Real Estate Portfolio may invest in debt securities rated
BBB or better by Standard & Poor's Corporation ("S&P") or Baa or better by
Moody's Investor Service, Inc. ("Moody's") or, if not rated, are judged to be of
comparable quality as determined by the Adviser. In choosing debt securities for
purchase by the Portfolio, the Adviser will employ the same analytical and
valuation techniques utilized in managing the equity portion of the Real Estate
Portfolio's holdings (see "Investment Advisory and Other Services") and will
invest in debt securities only of companies that satisfy the Adviser's
investment criteria.
The value of the Real Estate Portfolio's investments in debt securities will
change as interest rates fluctuate. When interest rates decline, the values of
such securities generally can be expected to increase and when interest rates
rise, the values of such securities can generally be expected to decrease. The
lower-rated and comparable unrated debt securities described above are subject
to greater risks of loss of income and principal than are higher-rated fixed
income securities. The market value of lower-rated securities generally tends
to reflect the market's perception of the creditworthiness of the issuer and
short-term market developments to a greater extent than is the case with more
highly rated securities, which reflect primarily functions in general levels of
interest rates.
INVESTMENT RESTRICTIONS
The following information supplements the information included in the
Prospectus with respect to the investment restrictions to which the Portfolios
of the Trust are subject. The investment restrictions described below are
fundamental policies and may not be changed as to any Portfolio without the
approval of the lesser of (i) a majority of the Portfolio's outstanding shares
or (ii) 67% of the Portfolio's shares represented at a meeting of Trust
shareholders at which the holders of 50% or more of the Portfolio's outstanding
shares are present. No Portfolio of the Trust may:
(1) Make short sales of securities, unless at the time of sale the Portfolio
owns an equal amount of such securities.
(2) Purchase securities on margin, except that the Portfolio may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities. The deposit or payment by the Portfolio of initial
or maintenance margin in connection with financial futures contracts or
related options transactions is not considered the purchase of a security
on margin.
(3) Write, purchase or sell puts, calls or combinations thereof, except that
the Portfolios may (a) write exchange-traded covered call options on
portfolio securities and enter into closing purchase transactions with
respect to such options, and Portfolios, other than the Bond Portfolio,
may write exchange-traded covered call options on foreign currencies and
secured put options on securities and foreign currencies and write
covered call and secured put options on securities and foreign currencies
traded over the counter, and enter into closing purchase transactions
with respect to such options, (b) purchase exchange-traded call options
and put options, and such Portfolios, other than the Bond Portfolio and
the Income Portfolio, may purchase call and put options traded over the
counter, provided that the premiums on all outstanding call and put
options do not exceed 5% of its total assets, and enter into closing sale
transactions with respect to such options, and (c) engage in financial
futures contracts and related options transactions, provided that the sum
of the initial margin deposits on such Portfolio's existing futures and
related options positions and the premiums paid for related options would
not exceed 5% of its total assets.
(4) Borrow in excess of 10% of the market or other fair value of its total
assets, or pledge its assets to an extent greater than 15% of the market
or other fair value of its total assets. Any such borrowings shall be
from banks and shall be undertaken only as a temporary measure for
administrative purposes. Deposits in escrow in connection with the
writing of covered
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call options, secured put options, or the purchase or sale of financial
futures contracts and related options are not deemed to be a pledge or
other encumbrance. The Bond Portfolio will not purchase securities while
temporary bank borrowings in excess of 5% of its net assets are
outstanding.
(5) Underwrite the securities of other issuers, except to the extent that in
connection with the disposition of its portfolio securities, a Portfolio
may be deemed to be an underwriter. The Mid Cap (with respect to up to
one third of its assets), International, Emerging Markets and Income
Portfolios may buy and sell securities outside the United States which
are not registered with the Commission or marketable in the United
States.
(6) Concentrate its assets in the securities of issuers which conduct their
principal business activities in the same industry, except that the Real
Estate Portfolio may so concentrate its assets and the Bond Portfolio may
invest more than 25% of its assets in a particular segment of the
municipal securities market. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
(7) Make any investment in real estate, real estate limited partnerships,
commodities or commodities contracts, except that a Portfolio may (a)
purchase or sell readily marketable securities which are secured by
interests in real estate, including real estate investment and mortgage
investment trusts, and (b) engage in financial futures contracts and
related options transactions, provided that the sum of the initial margin
deposits on the Portfolio's futures and related options positions and the
premiums paid for related options would not exceed 5% of the Portfolio's
total assets, and (c) the Mid Cap, International, Emerging Markets and
Income Portfolios may enter into foreign currency transactions.
(8) Make loans, except that the Portfolio may (a) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors, whether publicly distributed or not, (b) invest
in repurchase agreements, provided that an aggregate of no more than 10%
of the Portfolio's net assets (taken at market value) may be invested in
repurchase agreements having maturities of more than seven days and all
other illiquid securities; however this limitation does not apply to the
Income Portfolio, and (c) loan its portfolio securities in amounts up to
one third of the market or other fair value of its total assets, subject
to restrictions described more fully above.
(9) Purchase securities of other investment companies, except that the
Portfolio may make such a purchase (a) in the open market involving no
commission or profit to a sponsor or dealer (other than the customary
broker's commission), provided that immediately thereafter (i) not more
than 10% of the Portfolio's total assets would be invested in such
securities and (ii) not more than 3% of the voting stock of another
investment company would be owned by the Portfolio, or (b) as part of a
merger, consolidation, or acquisition of assets.
(10) Invest more than 5% of its total assets in the securities of any one
issuer (except the U.S. Government and, in the case of the Mid Cap,
International and Emerging Markets Portfolios any foreign government, its
agencies and instrumentalities) or purchase more than 10% of the
outstanding voting securities or more than 10% of the securities of any
class of any one issuer; however, the foregoing limitations do not apply
to the Real Estate Portfolio and Emerging Markets Portfolio. With respect
to 75% of its assets, a Portfolio which may invest in foreign securities
will limit its investments in the securities of any one foreign
government, its agencies and instrumentalities, to 5% of the Portfolio's
total assets.
(11) Invest in securities of any issuer if any officer or Trustee of the Trust
or any officer or director of the Adviser owns more than 1/2 of 1% of the
outstanding securities of such issuer and all such persons own in the
aggregate more than 5% of the securities of such issuer.
(12) Invest in the aggregate more than 5% of its total assets in the
securities of any issuers (other than real estate investment trusts)
which have (with predecessors) a record of less than three years of
continuous operations; however this limitation does not apply to the
Income Portfolio.
(13) Invest in warrants or rights except where acquired in units or attached
to other securities. The Mid Cap, Real Estate, International and Emerging
Markets Portfolios each may invest up to 5% of its total assets in
warrants or rights which are not in units or attached to other
securities.
(14) (a)Purchase restricted securities (including repurchase agreements
having maturities of more than seven days) or securities for which
market value quotations are not readily available if as a result of
such purchase more than 10% of each Portfolio's, excluding the Income
Portfolio, total assets would be invested in the aggregate in such
securities.
(b)Purchase securities for which market quotations are not readily
available, including but not limited to repurchase agreements having
maturities of more than seven days, or which are not deemed liquid
pursuant to procedures adopted by the Trustees if as a result of such
purchase more than 15% of the Income Portfolio's net assets would be
invested in the aggregate in such securities.
(15) Invest in interests in oil, gas, or other mineral exploration or
development programs.
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(16) Issue senior securities as defined in the Investment Company Act of 1940
except to the extent that it is permissible to (a) borrow money from
banks pursuant to the Trust's investment restrictions regarding the
borrowing of money, and (b) enter into transactions involving forward
foreign currency contracts and options thereon, as described in the
Trust's Prospectus and this Statement of Additional Information.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the value or costs of the Portfolio's
assets will not be considered a violation of the restriction except as provided
in (11) above.
PERFORMANCE
Performance information for each Portfolio (and Class of Portfolio) may
appear in advertisements, sales literature, or reports to shareholders or
prospective shareholders. Performance information in advertisements and sales
literature may be expressed as the "yield" of the Bond Portfolio, Emerging
Markets Portfolio, and the Income Portfolio and as "average annual total return"
and "total return" of any of the other Portfolios.
Quotations of the yield for the Bond Portfolio, Emerging Markets Portfolio,
and the Income Portfolio will be based on all investment income per share earned
during a particular 30-day period (including dividends and interest), less
expenses (including pro rata Trust expenses and expenses applicable to each
particular Portfolio or Class of Portfolio) accrued during the period ("net
investment income"), and are computed by dividing net investment income by the
value of a share of the Portfolio or Class on the last day of the period,
according to the following formula:
a-b
YIELD = 2[( --- + 1)(6)-1]
cd
where a = dividends and interest earned during the period by the Portfolio,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the net asset value per share on the last day of the period.
For the 30-day period ended November 30, 1997, the yield for the Bond
Portfolio Class A shares and Class B shares was 4.67% and 4.14%, respectively;
the Emerging Markets Portfolio Class A shares and Class B shares was 10.68% and
11.38%; and the Income Portfolio Class X shares was 7.23%.
A Portfolio's average annual total return quotation is computed in accordance
with a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for the Portfolio for a specific
period is found by first taking a hypothetical $1,000 investment ("initial
investment") in the Portfolio's shares on the first day of the period, adjusting
to deduct the maximum sales charge, and computing the "redeemable value" of that
investment at the end of the period. The redeemable value is then divided by the
initial investment, and this quotient is taken to the Nth root (N representing
the number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Portfolio have been reinvested at net asset
value on the reinvestment dates during the period.
Calculation of a Portfolio's total return is subject to a standardized
formula. Total return performance for a specific period is calculated by first
taking an investment ("initial investment") in the Portfolio's shares on the
first day of the period, either adjusting or not adjusting to deduct the maximum
sales charge, and computing the "redeemable value" of that investment at the end
of the period. The total return percentage is then determined by subtracting the
initial investment from the redeemable value and dividing the remainder by the
initial investment and expressing the result as a percentage. The calculation
assumes that all income and capital gains dividends by the Portfolio have been
reinvested at net asset value on the reinvestment dates during the period. Total
return may also be shown as the increased dollar value of the hypothetical
investment over the period. Total return calculations that do not include the
effect of the sales charge would be reduced if such charge were included.
The manner in which total return will be calculated for public use is
described above. The following table illustrates average annual total return for
each Portfolio for the 1, 5 and 10 year periods ended November 30, 1997.
14
<PAGE>
AVERAGE ANNUAL TOTAL RETURN AS OF NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PERIODS ENDED
------------------------------------
PORTFOLIO 1 YEAR 5 YEAR SINCE INCEPTION(1)
--------- ------ ------ ------------------
Bond
<S> <C> <C> <C>
Class A 6.04% 5.67% 8.25%
Class B 5.13% N/A 5.36%
Mid Cap
Class A 8.12% 11.55% 16.41%
Class B 7.27% N/A 14.17%
International
Class A 8.21% 13.58% 8.34%
Class B 7.37% N/A 7.82%
Real Estate
Class A 31.44% N/A 25.42%
Class B 30.44% N/A 24.47%
Emerging Markets
Class A 11.91% N/A 29.63%
Class B 11.07% N/A 30.48%
Class C N/A N/A N/A
Class M N/A N/A N/A
Income
Class X(2) 8.37% N/A 6.28%
Class A N/A N/A N/A
Class B N/A N/A N/A
Class C N/A N/A N/A
Class M N/A N/A N/A
</TABLE>
- ---------------
(1)The Bond, Mid Cap, and International Portfolios Class A commenced operations
on July 15, 1988, November 1, 1989 and November 1, 1989, respectively. Bond
Portfolio Class B commenced operations on March 16, 1994. Mid Cap and
International Portfolios Class B commenced operations on July 18, 1994 and
July 15, 1994, respectively. The Real Estate and Emerging Markets Portfolios
Class A, B, C and M commenced operations on March 1, 1995, September 5, 1995,
March 27, 1998 and March 27, 1998, respectively. The Income Portfolio Class X
commenced operations on April 1, 1993 and Class A, B, C and M commenced
operations on March 27, 1998.
(2)Average annual total return figures for Class X of the Income Portfolio
covering periods prior to March 27, 1998 have been recalculated to reflect
the current management fee. As the management fee in effect prior to March
27, 1998 was lower than the current fee, the stated average annual total
returns are lower than the actual investment performance of Class X prior to
March 27, 1998.
Performance information reflects only the performance of a hypothetical
investment in each class during the particular time period on which the
calculations are based. Performance information should be considered in light of
the Portfolio's investment objectives and policies, characteristics and quality
of the portfolio, and the market condition during the given time period, and
should not be considered as a representation of what may be achieved in the
future.
The Trust also may quote annual, average annual and annualized total return
and aggregate total return performance data, for each class of shares of the
Portfolios, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such data
will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate rate
of return calculations.
PERFORMANCE COMPARISONS
Each Portfolio or Class of Portfolio may, from time to time, include in
advertisements containing total return the ranking of those performance figures
relative to such figures for groups of mutual funds having similar investment
objectives as categorized by ranking services such as Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Weisenberger Financial
Services, Inc., and rating services such as Morningstar, Inc. Additionally, a
Portfolio may compare its performance results to other investment or savings
vehicles (such as certificates of deposit) and may refer to results published in
various publications such as Changing Times, Forbes, Fortune, Money, Barrons,
Business Week, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's
Investment Adviser, The Wall Street Journal, New York Times, Consumer Reports,
Registered Representative, Financial Planning,
15
<PAGE>
Financial Services Weekly, Financial World, U.S. News and World Report, Standard
and Poor's The Outlook, Investor's Daily and Personal Investor. The total return
may be used to compare the performance of the Portfolios against certain widely
acknowledged outside standards or indices for stock and bond market performance,
such as the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"),
Standard & Poor's 400 Midcap Index (S&P 400), Dow Jones Industrial Average,
Europe Australia Far East Index (EAFE), NAREIT Equity Index, Consumer Price
Index, J.P. Morgan Emerging Markets Bond Index, Lehman Brothers Municipal Bond
Index, Lehman Brothers Aggregate Bond Index, Lehman Brothers Corporate Index and
Lehman Brothers T-Bond Index. The S&P 500 is a commonly quoted measure of stock
market performance and represents common stocks of companies of varying sizes
segmented across 90 different industries which are listed on the New York Stock
Exchange, the American Stock Exchange and traded over the NASDAQ National Market
System.
PORTFOLIO TURNOVER
The Portfolios pay brokerage commissions for purchases and sales of portfolio
securities. A high rate of portfolio turnover generally involves a
correspondingly greater amount of brokerage commissions and other costs which
must be borne directly by a Portfolio and thus indirectly by its shareholders.
It may also result in the realization of larger amounts of short-term capital
gains, which are taxable to shareholders as ordinary income. If such rate of
turnover exceeds 100%, the Portfolios will pay more in brokerage commissions
than would be the case if they had lower portfolio turnover rates. Historical
turnover rates can be found under the heading "Financial Highlights" located in
the Trust's Prospectus.
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the address
of each Trustee and executive officer is 56 Prospect Street, Hartford,
Connecticut, 06115-0480.
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- --------------------- -------------- -----------------------
<S> <C> <C>
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
E. Virgil Conway (68) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Freddie Mac Mortgage
Securities Fund (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present), The Harlem Youth Development Foundation
(1987-present), Accuhealth (1994-present), Trism, Inc.
(1994-present), Realty Foundation of New York (1972-present), New
York Housing Partnership Development Corp. (Chairman)
(1981-present) and Fund Directions (Advisory Director)
(1993-present). Director/Trustee, Phoenix Funds (1993-present).
Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff & Phelps
Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present). Member,
Audit Committee of the City of New York (1981-1996). Advisory
Director, Blackrock Fannie Mae Mortgage Securities Fund
(1989-1996). Chairman, Financial Accounting Standards Advisory
Council (1992-1995). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- --------------------- -------------- -----------------------
<S> <C> <C>
Harry Dalzell-Payne (68) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee, Phoenix-
330 East 39th Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
Apartment 29G Funds (1996-present). Director, Duff & Phelps Utilities Tax-Free
New York, NY 10016 Income Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director, Farragut Mortgage Co., Inc. (1991-1994).
Director/Trustee, the National Affiliated Investment Companies
(1983-1993). Formerly a Major General of the British Army.
*Francis E. Jeffries (67) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff & Phelps
Naples, FL 33963 Utilities Income Inc. (1987-present), Duff & Phelps Utilities
Tax-Free Income Inc. (1991-present) and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1993-present). Director, The Empire
District Electric Company (1984-present). Director (1989-1997),
Chairman of the Board (1993-1997), President (1989-1993), and
Chief Executive Officer (1989-1995), Phoenix Duff & Phelps
Corporation.
Leroy Keith, Jr. (59) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Carson Product Company Institutional Mutual Funds (1996-present). Director, Equifax Corp.
64 Ross Road (1991-present) and Evergreen International Fund, Inc.
Savannah, GA 30750 (1989-present). Trustee, Evergreen Liquid Trust, Evergreen Tax
Exempt Trust, Evergreen Tax Free Fund, Master Reserves Tax Free
Trust, and Master Reserves Trust. President, Morehouse College
(1987-1994). Chairman and Chief Executive Officer, Keith Ventures
(1992-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993).
*Philip R. McLoughlin (51) Trustee and Chairman (1997-present), Director (1995-present), Vice Chairman
President (1995-1997) and Chief Executive Officer (1995-present), Phoenix
Duff & Phelps Corporation. Director (1994-present) and Executive
Vice President, Investments (1988-present), Phoenix Home Life
Mutual Insurance Company. Director/Trustee and President, Phoenix
Funds (1989-present). Trustee and President, Phoenix-Aberdeen
Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1995-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-present). Director (1983-present) and Chairman
(1995-present), Phoenix Investment Counsel, Inc. Director
(1984-present) and President (1990-present), Phoenix Equity
Planning Corporation. Director (1993-present), Chairman
(1993-present) and Chief Executive Officer (1993-1995), National
Securities & Research Corporation. Director, Phoenix Realty Group,
Inc. (1994-present), Phoenix Realty Advisors, Inc. (1987-present),
Phoenix Realty Investors, Inc. (1994-present), Phoenix Realty
Securities, Inc. (1994-present), PXRE Corporation (Delaware)
(1985-present), and World Trust Fund (1991-present). Director and
Executive Vice President, Phoenix Life and Annuity Company
(1996-present). Director and Executive Vice President, PHL
Variable Insurance Company (1995-present). Director, Phoenix
Charter Oak Trust Company (1996-present). Director and Vice
President, PM Holdings, Inc. (1985-present). Director and
President, Phoenix Securities Group, Inc. (1993-1995). Director
(1992-present) and President (1992-1994), W.S. Griffith & Co.,
Inc. Director (1992-present) and President (1992-1994), Townsend
Financial Advisers, Inc. Director/Trustee, the National
Affiliated Investment Companies (until 1993).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- --------------------- -------------- -----------------------
<S> <C> <C>
**Everett L. Morris (69) Trustee Vice President, W. H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, NJ 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1993-present). Director, Public Service Enterprise
Group, Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings, Incorporated (1989-1993).
*James M. Oates (51) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing
Managing Director Director, Wydown Group (1994-present). Director, Phoenix Duff &
The Wydown Group Phelps Corporation (1995-present). Director/Trustee, Phoenix
IBEX Capital Markets LLC Funds (1987-present). Trustee, Phoenix-Aberdeen Series Fund and
60 State Street Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Suite 950 Director, Govett Worldwide Opportunity Funds, Inc.
Boston, MA 02109 (1991-present), Blue Cross and Blue Shield of New Hampshire
(1994-present), Investors Financial Service Corporation
(1995-present), Investors Bank & Trust Corporation
(1995-present), Plymouth Rubber Co. (1995-present), Stifel
Financial (1996-present) and Command Systems, Inc.
(1998-present). Member, Chief Executives Organization
(1996-present). Director (1984-1994), President (1984-1994) and
Chief Executive Officer (1986-1994), Neworld Bank.
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
*Calvin J. Pedersen (56) Trustee Director (1986-present), President (1993-present) and Executive
Phoenix Duff & Phelps Vice President (1992-1993), Phoenix Duff & Phelps Corporation.
Corporation Director/ Trustee, Phoenix Funds (1995-present). Trustee,
55 East Monroe Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 3600 Institutional Mutual Funds (1996-present). President and Chief
Chicago, IL 60603 Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present), Duff & Phelps Utilities Income Inc.
(1994-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present).
**Herbert Roth, Jr. (69) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-present), Phoenix Home Life Mutual Insurance
Company (1972-present), Landauer, Inc. (medical services)
(1970-present), Tech Ops./Sevcon, Inc. (electronic controllers)
(1987-present), and Mark IV Industries (diversified manufacturer)
(1985-present). Director, Key Energy Group (oil rig service)
(1988-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Richard E. Segerson (52) Trustee Managing Director, Mullin Associates (1993-present).
102 Valley Road Director/Trustee, Phoenix Funds (1993-present). Trustee,
New Canaan, CT 07840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Vice President and
General Manager, Coats & Clark, Inc. (previously Tootal American,
Inc.) (1991-1993). Director/Trustee, the National Affiliated
Investment Companies (1984-1993).
Lowell P. Weicker, Jr. (66) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), HPSC Inc. (1995-present), Duty Free International,
Inc. (1997-present) and Compuware (1996-present) and Burroughs
Wellcome Fund (1996-present). Visiting Professor, University of
Virginia (1997-present). Chairman, Dresing, Lierman, Weicker
(1995-1996). Governor of the State of Connecticut (1991-1995).
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- --------------------- -------------- -----------------------
<S> <C> <C>
Michael E. Haylon (40) Executive Director and Executive Vice President--Investments, Phoenix Duff &
Vice Phelps Corporation (1995-present). Executive Vice President,
President Phoenix Funds (1993-present) and Phoenix-Aberdeen Series Fund
(1996-present). Executive Vice President (1997-present), Vice
President (1996-1997), Phoenix Duff & Phelps Institutional Mutual
Funds. Director (1994-present), President (1995-present),
Executive Vice President (1994-1995), Vice President (1991-1994),
Phoenix Investment Counsel, Inc. Director (1994-present),
President (1996-present), Executive Vice President (1994-1996),
Vice President (1993-1994), National Securities & Research
Corporation. Director, Phoenix Equity Planning Corporation
(1995-present). Senior Vice President, Securities Investments,
Phoenix Home Life Mutual Insurance Company (1993-1995). Various
other positions with Phoenix Home Life Mutual Insurance Company
(1990-1993).
William J. Newman (59) Senior Vice Executive Vice President (1995-present) and Chief Investment Strategist
President (1996-present), Phoenix Investment Counsel, Inc. Senior Vice President
(1995-1996), Executive Vice President and Chief Investment Strategist
(1996-present), National Securities & Research Corporation. Senior
Vice President, Phoenix Equity Planning Corporation (1995-1996). Vice
President, Common Stock and Chief Investment Strategist, Phoenix
Home Life Insurance Company (April, 1995-November, 1995). Senior Vice
President, Phoenix Strategic Equity Series Fund (1996-present), The
Phoenix Edge Series Fund (1996-present), Phoenix Multi-Portfolio Fund
(1995-present), Phoenix Income and Growth Fund (1996-present),
Phoenix Series Fund (1995-present), Phoenix Strategic Allocation Fund,
Inc. (1996-present), Phoenix Worldwide Opportunities Fund (1996-
present), Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present), and Phoenix-Aberdeen Series Fund (1996-present).
Chief Investment Strategist, Kidder, Peabody Co., Inc. (1993-1994).
Managing Director, Equities, Bankers Trust Company (1991-1993).
James D. Wehr (40) Senior Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Senior Vice President (1997-present),
Vice President (1988-1997) Phoenix Multi-Portfolio Fund; Senior Vice
President (1997-present), Vice President (1990-1997) Phoenix
Series Fund; Senior Vice President (1997-present), Vice President
(1991-1997) The Phoenix Edge Series Fund; Senior Vice President
(1997-present), Vice President (1993-1997) Phoenix California Tax
Exempt Bonds, Inc., and Senior Vice President (1997-present), Vice
President (1996-1997) Phoenix Duff & Phelps Institutional Mutual
Funds. Senior Vice President (1997-present) Phoenix Multi-Sector
Fixed Income Fund, Inc., Phoenix Multi-Sector Short Term Bond Fund,
Phoenix Income and Growth Fund and Phoenix Strategic Allocation Fund,
Inc. Managing Director, Public Fixed Income, Phoenix Home Life
Insurance Company (1991-1995).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- --------------------- -------------- -----------------------
<S> <C> <C>
David L. Albrycht (36) Vice Managing Director, Fixed Income (1996-present) and Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present) and Investment Officer (1994-1996),
National Securities & Securities Research Corporation. Vice
President, Phoenix Multi-Portfolio Fund (1993-present), Phoenix
Multi-Sector Short Term Bond Fund (1993-present), Phoenix
Multi-Sector Fixed Income Fund, Inc. (1994-present), The Phoenix
Edge Series Fund (1997-present) and Phoenix Series Fund
(1997-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1995-1996).
Timothy M. Heaney (33) Vice Managing Director, Public Fixed Income (1997-present), Director,
President Fixed Income Research (1996-1997), Investment Analyst (1995-1996),
Phoenix Investment Counsel, Inc. Managing Director, Public Fixed
Income (1997-present), Director, Fixed Income Research
(1996-1997), National Securities & Research Corporation.
Investment Analyst, Phoenix Home Life Mutual Insurance Company
(1992-1994). Vice President, Phoenix California Tax Exempt Bonds,
Inc. (1996-present).
William E, Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning Corporation
100 Bright Meadow Blvd. President (1996-present). Vice President, Phoenix Funds, Phoenix Duff &
PO Box 2200 Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series Fund
Enfield, CT 06083-2200 (1996-present). Assistant Vice President, USAffinity Investments
LP (1994-1995). Treasurer and Secretary, USAffinity Funds
(1994-1995). Manager, Fund Administration, SEI Corporation
(1991-1994).
Peter S. Lannigan (38) Vice Director, Fixed Income Research (1996-present) and Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Director, Fixed
Income Research (1996-present), National Securities & Research
Corporation, Inc. Vice President, Phoenix Multi-Portfolio Fund
(1995-present). Director, Public Fixed Income, Phoenix Home Life
Mutual Insurance Company (1993-1995). Various positions with
Standard & Poor's Corporation (1989-1993).
David Lui (38) Vice Portfolio Manager, Equities, Phoenix Investment Counsel, Inc.
President (1996-present) and Portfolio Manager, Equities, National
Securities & Research Corporation (1996-present). Associate
Portfolio Manager, International Portfolios, Phoenix Home Life
Mutual Insurance Company (1995-1996). Vice President, The Phoenix
Edge Series Fund, (1996-present) and Phoenix Worldwide
Opportunities Fund (1996-present). Vice President, Asian Equities,
Alliance Capital Management (1993-1995).
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. President Phelps Corporation (1995-present). Senior Vice President, Finance
PO Box 2200 (1990-present), Chief Financial Officer (1996-present), and
Enfield, CT 06083-2200 Treasurer (1994-1996), Phoenix Equity Planning Corporation. Senior
Vice President (1990-present), Chief Financial Officer
(1996-present) and Treasurer (1994-present), Phoenix Investment
Counsel, Inc. Senior Vice President, Finance (1993-present), Chief
Financial Officer (1996-present), and Treasurer (1994-present),
National Securities & Research Corporation. Senior Vice President
and Chief Financial Officer, Duff Phelps Investment Management Co.
(1996-present). Vice President, Phoenix Funds (1990-present),
Phoenix-Duff & Phelps Institutional Mutual Funds (1996-present)
and Phoenix-Aberdeen Series Fund (1996-present). Senior Vice
President and Chief Financial Officer, W. S. Griffith & Co., Inc.
(1992-1995) and Townsend Financial Advisers, Inc. (1993-1995).
Vice President, the National Affiliated Investment Companies
(until 1993). Vice President, Investment Products Finance, Phoenix
Home Life Mutual Insurance Company (1990-1995).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH THE TRUST DURING THE PAST 5 YEARS
- --------------------- -------------- -----------------------
<S> <C> <C>
Leonard J. Saltiel (44) Vice Managing Director, Operations and Service (1996-present), Senior Vice
President Vice President, (1994-1996), Phoenix Equity Planning Corporation.
Vice President, Phoenix Funds (1994-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present), and Phoenix-Aberdeen
Series Fund (1996-present). Vice President, National Securities &
Research Corporation (1994-1996). Vice President, Investment
Operations, Phoenix Home Life Mutual Insurance Company (1994-1995).
Various positions with Home Life Insurance Company and Phoenix
Home Life Mutual Insurance Company (1987-1994).
Michael Schatt (50) Vice Managing Director, Phoenix Duff & Phelps Corporation
President (1994-present). Senior Vice President, Phoenix Realty Securities,
Inc. (1997-present). Vice President, Duff & Phelps Investment
Management Co. (1997-present), Duff & Phelps Utilities Income,
Inc. (1997-present), Phoenix Duff & Phelps Institutional Mutual
Funds (1997-present), The Phoenix Edge Series Fund (1997-present),
and Phoenix Multi-Portfolio Fund (1997-present). Director, Real
Estate Advisory Practice, Coopers & Lybrand (1990-1994).
Nancy G. Curtiss (45) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Second Vice President and Treasurer, Fund
Accounting, Phoenix Home Life Mutual Insurance Company
(1994-1995). Various positions with Phoenix Home Life Insurance
Company (1987-1994).
G. Jeffrey Bohne (50) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations (1993-1996). Vice President, Mutual Fund Customer
Service (1996-present), Phoenix Equity Planning Corporation,
Secretary/Clerk, Phoenix Funds (1993-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen
Series Fund (1996-present). Vice President, Home Life of New York
Insurance Company (1984-1992).
</TABLE>
- ---------------
*Trustees identified with an asterisk are considered to be interested persons
of the Trust (within the meaning of the Investment Company Act of 1940, as
amended) because of their affiliation with Phoenix Investment Counsel, Inc.,
or Phoenix Equity Planning Corporation or Phoenix Duff & Phelps Corporation.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Morris and
Roth will retire from the Board of Trustees effective January 1, 1999.
For services rendered to the Trust for the fiscal year ended November 30,
1997, the Trustees received an aggregate of $124,115. For services on the Boards
of Directors/Trustees of the Phoenix Funds, each Trustee who is not a full-time
employee of the Adviser or any of its affiliates currently receives a retainer
at the annual rate of $40,000 and a fee of $2,500 per joint meeting of the
Boards. Each Trustee who serves on the Audit Committee receives a retainer at
the annual rate of $2,000 and a fee of $2,000 per joint Audit Committee meeting
attended. Each Trustee who serves on the Nominating Committee receives a
retainer at the annual rate of $1,000 and a fee of $1,000 per joint Nominating
Committee meeting attended. Each Trustee who serves on the Executive Committee
and who is not an interested person of the Fund receives a retainer at the
annual rate of $1,000 and $1,000 per joint Executive Committee meeting attended.
The function of the Executive Committee is to serve as a contract review,
compliance review and performance review delegate of the full Board of Trustees.
Trustee fee costs are allocated equally to each of the Portfolios and the Funds
within the Phoenix Funds complex. The foregoing fees do not include
reimbursement of expenses incurred in connection with meeting attendance.
Officers and employees of the Adviser who are not interested persons are
compensated for their services by the Adviser and receive no compensation from
the Trust.
21
<PAGE>
For the Trust's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS ESTIMATED FUND COMPLEX
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS 13 FUNDS
NAME FROM FUND OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES
---- --------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Robert Chesek $7,403 $113,000
E. Virgil Conway+ 9,623 146,000
Harry Dalzell-Payne+ 8,258 127,500
Francis E. Jeffries 7,125* 110,000
Leroy Keith, Jr. 7,403 None None 113,000
Philip R. McLoughlin+ 0 for any for any 0
Everett L. Morris+ 7,980* Trustee Trustee 126,000
James M. Oates+ 7,980 124,500
Calvin J. Pedersen 0 0
Herbert Roth, Jr.+ 9,900* 149,500
Richard E. Segerson 8,355 129,500
Lowell P. Weicker 7,875 122,500
</TABLE>
- ---------------
*This compensation (and the earnings thereon) will be deferred pursuant to the
Deferred Compensation Plan. At November 30, 1997, the total amount of deferred
compensation (including interest and other accumulation earned on the original
amounts deferred) accrued for Messrs. Jeffries, Morris and Roth was $59,194,
$124,928 and $136,802, respectively. At present, by agreement among the Fund,
the Distributor and the electing director, director fees that are deferred are
paid by the Fund to the Distributor. The liability for the deferred compensation
obligation appears only as a liability of the Distributor.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
At February 27, 1998, the Trustees and officers as a group owned less than
1% of the then outstanding shares of the Trust.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of February 27, 1998 with
respect to each person who owns of record or is known by the Registrant to own
of record or beneficially own 5% or more of any class of the Registrant's equity
securities.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NAME OF PORTFOLIO NUMBER OF SHARES PERCENT OF CLASS
- ------------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
Phoenix Home Life Emerging Markets 1,994,295.054 33.17%
One American Row Class A
Hartford, CT 06115 Real Estate Class A 502,148.202 21.68%
Income Class X 687,557.080 100.00%
MLPF&S for the sole benefit Emerging Markets 749,184.697 19.68%
of its customers Class B
ATTN: Fund Administration International Class A 1,017,282.296 9.53%
4800 Deer Lake Dr E 3rd FL International Class B 50,273.093 5.55%
Jacksonville, FL 32246-6484 Bond Class B 61,739.549 11.36%
Donaldson Lufkin Jenrette Bond Class B 46,306.567 8.52%
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303
Phoenix Charter Oak Trust Co. TTEE International Class A 1,521,313.999 14.25%
Phoenix Home Life Employee Pension Plan
One American Row
Hartford, CT 06103
</TABLE>
22
<PAGE>
THE INVESTMENT ADVISERS
The offices of Phoenix Investment Counsel, Inc., (PIC) are located at 56
Prospect Street, Hartford, Connecticut 06115-0480. PIC was organized in 1932 as
John P. Chase, Inc. In addition to the Fund, PIC also serves as investment
adviser to The Phoenix Edge Series Fund (all Series other than Real Estate
Securities Series and Aberdeen New Asia Series), Phoenix Series Fund, Phoenix
Strategic Allocation Fund, Inc., Phoenix Strategic Equity Series Fund (except
Equity Opportunities Fund), Phoenix Duff & Phelps Institutional Mutual Funds
(except Real Estate Equity Securities Portfolio and Enhanced Reserves
Portfolio), Phoenix Growth and Income Fund of Phoenix Equity Series Fund,
Phoenix Investment Trust 97 and as subadviser to SunAmerica Series Trust among
others.
The offices of Duff & Phelps Investment Management Co., Inc. ("DPIM") are
located at 55 East Monroe Street, Suite 3600, Chicago, Illinois 60603. DPIM
serves as investment adviser to the Core Equity Fund of the Phoenix Equity
Series Fund, the Enhanced Reserves Portfolio and the Core Equity Portfolio of
Phoenix Duff & Phelps Institutional Mutual Funds and three closed-end funds:
Duff & Phelps Utilities Income, Inc., Duff & Phelps Utilities Tax-Free Income
Inc., and Duff & Phelps Utility and Corporate Bond Trust, Inc. The investment
adviser for the Real Estate Portfolio at its inception was 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 Duff & Phelps Investment Management Co. ("DPIM"), a
subsidiary of Phoenix Duff & Phelps Corporation and an indirect majority owned
subsidiary of Phoenix Home Life, for which DPIM is paid a fee by PRS. On March
2, 1998, DPIM purchased the management rights for the Portfolio from PRS and
PRS' contract was assigned to DPIM.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning"), a subsidiary of Phoenix Duff & Phelps
Corporation ("Phoenix Duff & Phelps"). DPIM is also a subsidiary of Phoenix Duff
& Phelps. The majority shareholder of Phoenix Duff & Phelps is Phoenix Home Life
Mutual Insurance Company ("Phoenix Home Life") of Hartford, Connecticut. Phoenix
Home Life is in the business of writing ordinary and group life and health
insurance and annuities. Equity Planning, a mutual fund distributor, acts as the
national distributor of the Trust's shares and as Financial Agent of the Trust.
The principal office of Phoenix Home Life is located at One American Row,
Hartford, Connecticut, 06115. The principal office of Equity Planning is located
at 100 Bright Meadow Boulevard, Enfield, Connecticut, 06082.
David L. Albrycht, Jeanne H. Dorey, Michael E. Haylon, Timothy M. Heaney,
Peter S. Lannigan, David Lui, William R. Moyer, William J. Newman and James D.
Wehr, officers of the Trust, are officers of PIC. Michael Schatt is an officer
of the Trust and also an officer of DPIM. Philip R. McLoughlin, President and
Trustee of the Trust, is a director and officer of PIC. Michael E. Haylon is an
officer of the Trust, a director of PIC and also an officer of DPIM.
The investment advisory agreements provide that the Trust will bear all costs
and expenses (other than those specifically referred to as being borne by the
Adviser) incurred in the operation of the Trust. Such expenses include, but
shall not be limited to, all expenses incurred in the operation of the Trust and
any public offering of its shares, including, among others, interest, taxes,
brokerage fees and commissions, fees of Trustees who are not employees of PIC or
PRS or any of its affiliates, expenses of Trustees, and shareholders' meetings,
expenses of printing and mailing proxy soliciting material, expenses of the
insurance premiums for fidelity and other coverage, expenses of the repurchase
and redemption of shares, expenses of the issue and sale of shares (to the
extent not borne by Equity Planning under its agreement with the Trust),
expenses of printing and mailing share certificates representing shares of the
Trust, association membership dues, charges of custodians, transfer agents,
dividend disbursing agents and financial agents, and bookkeeping, auditing and
legal expenses. The Trust will also pay the fees and bear the expense of
registering and maintaining the registration of the Trust and its shares with
the Securities and Exchange Commission and registering or qualifying its shares
under state or other securities laws and the expense of preparing and mailing
prospectuses and reports to shareholders. If authorized by the Trustees, the
Trust will also pay for extraordinary expenses and expenses of a non-recurring
nature which may include, but shall not be limited to, the reasonable cost of
any reorganization or acquisition of assets and the cost of legal proceedings to
which the Trust is a party.
Each Portfolio will pay expenses incurred in its own operation and will also
pay a portion of the Trust's general administration expenses allocated on the
basis of the asset values of the respective Portfolios.
For managing, or directing the management of the investments of each
Portfolio, PIC is entitled to a fee for the Bond Portfolio, payable monthly, at
the annual rate of 0.45% of the average of the aggregate daily net asset values
of the Portfolio up to $1 billion; 0.40% of such value between $1 billion and $2
billion; and 0.35% of such value in excess of $2 billion. PIC is entitled to a
monthly fee for the Mid Cap Portfolio, Emerging Markets Portfolio and
International Portfolio at the annual rate of 0.75% of the average of the
aggregate daily net asset values of each Portfolio up to $1 billion; 0.70% of
such value between $1 billion and $2 billion; and 0.65% of such value in excess
of $2 billion. PIC is also entitled to a fee, payable monthly, for the Income
Portfolio at the annual rate of 0.55% of the average of the aggregate daily net
assets up to $1 billion; 0.50% of such value between $1 billion and $2 billion;
and 0.45% of such value in excess of $2 billion. For managing or directing the
investments of the Real Estate Portfolio, DPIM is entitled to a fee payable
monthly, at the annual rate of 0.75% of the average of the aggregate daily net
asset values of the Portfolio up to $1 billion; 0.70% of such value between $1
billion and $2 billion; and 0.65% of such value in excess of $2 billion.
23
<PAGE>
The investment advisory agreements provide that the applicable adviser will
reimburse the Trust for the amount, if any, by which the total operating and
management expenses of any Portfolio (including the investment adviser's
compensation, but excluding interest, taxes, brokerage fees and commissions and
extraordinary expenses) for any fiscal year exceed the level of expenses which
such Portfolio is permitted to bear under the most restrictive expense
limitation (which is not waived) imposed on mutual funds by any state in which
shares of such Portfolio are then qualified for sale. Currently the most
restrictive state expense limitation provisions limit such expenses of any
Portfolio of the Trust to 2.5% of the first $30 million of average net assets,
2% of the next $70 million of such net assets and 1.5% of such net assets in
excess of $100 million. Such reimbursement, if any, will be made by the
applicable adviser to the Trust within five days after the end of each month. In
the event legislation were to be adopted in each state so as to eliminate this
restriction, the Trust would take such action necessary to eliminate this
expense limitation.
For its services to the Bond, Mid Cap, International, Emerging Markets and
Income Portfolios of the Trust during the fiscal year ended November 30, 1997,
PIC received a fee of $5,292,155. Of this total, PIC received fees from each
Portfolio as follows:
Portfolio 1995 1996 1997
--------- ---- ---- ----
Bond $ 669,273 $ 646,989 $ 593,217
Mid Cap 3,394,485 3,579,657 3,027,757
International 1,112,314 1,071,572 1,062,391
Emerging Markets 19,244 177,790 577,472
Income 12,581 27,273 31,318
For the fiscal year ended November 30, 1995, it was necessary that PIC
bear ordinary operating expenses of the Emerging Markets and Income Portfolios
of $35,783 and $83,472, respectively. Accordingly, the fees of $19,244 and
$12,581 to which PIC would otherwise have been entitled were reduced to
losses of $16,539 and $70,891.
For the fiscal year ended November 30, 1996, it was necessary that PIC
bear ordinary operating expenses of the Emerging Markets and Income Portfolios
of $123,979 and $87,028, respectively. Accordingly, the fees of $177,790 and
$27,273 to which PIC would otherwise have been entitled were reduced to
$53,811 and a loss of $59,755.
For the fiscal year ended November 30, 1997, it was necessary that PIC
bear ordinary operating expenses of the Income Portfolio of $140,966.
Accordingly, the fee of $31,318 to which PIC would otherwise have been
entitled were reduced to a loss of $109,648.
For its services to the Real Estate Portfolio during the fiscal years ended
November 30, 1995, 1996 and 1997, PRS received fees of $51,536, $168,177 and
$355,100, respectively. For the fiscal years 1995, 1996 and 1997, PRS bore
ordinary operating expenses of the Real Estate Portfolio of $113,319, $130,944
and $112,306, respectively. Accordingly, the fees which PRS would otherwise have
been entitled were reduced to $242,794 in fiscal year 1997, $37,233 in fiscal
year 1996 and a loss of $61,783 in fiscal year 1995.
The investment advisory agreements also provide that each adviser shall not
be liable to the Trust or to any shareholder of the Trust for any error of
judgment or mistake of law or for any loss suffered by the Trust or by any
shareholder of the Trust in connection with the matters to which the agreement
relates, except a loss resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard on the part of such adviser in the performance
of its duties thereunder.
Provided it has been approved by a vote of the majority of the outstanding
shares of a Portfolio of the Trust which is subject to its terms and conditions,
each investment advisory agreement continues from year to year with respect of
such Portfolio so long as (1) such continuance is approved at least annually by
the Trustees or by a vote of the majority of the outstanding shares of such
Portfolio and (2) the terms and any renewal of the agreement with respect to
such Portfolio have been approved by the vote of a majority of the Trustees who
are not parties to the agreement or interested persons, as that term is defined
in the Investment Company Act of 1940, of the Trust or the relevant adviser,
cast in person at a meeting called for the purpose of voting on such approval.
On sixty days' written notice and without penalty the agreement may be
terminated as to the Trust or as to a Portfolio by the Trustees or by the
relevant adviser and may be terminated as to a Portfolio by a vote of the
majority of the outstanding shares of such Portfolio. The Agreement
automatically terminates upon its assignment (within the meaning of the
Investment Company Act). The agreement provides that upon its termination, or at
the request of the relevant adviser, the Trust will eliminate all reference to
Phoenix from its name, and will not thereafter transact business in a name using
the word Phoenix.
PORTFOLIO TRANSACTIONS
In effecting portfolio transactions for the Trust, each adviser adheres to
the Trust's policy of seeking best execution and price, determined as described
below, except to the extent it is permitted to pay higher brokerage commissions
for "brokerage and research services" as defined herein. The determination of
what may constitute best execution and price in the execution of a
24
<PAGE>
securities transaction by a broker involves a number of considerations
including, without limitation, the overall direct net economic result to the
Trust (involving both price paid or received and any commissions and other costs
paid), the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, availability of
the broker to stand ready to execute possibly difficult transactions in the
future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by each adviser and the Subadviser
in determining the overall reasonableness of brokerage commissions paid by the
Trust.
Each adviser may cause the Trust to pay a broker an amount of commission for
effecting a securities transaction in excess of the amount of commission which
another broker or dealer would have charged for effecting that transaction if
such adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker. As provided in Section 28(e) of the Securities Exchange
Act of 1934, "brokerage and research services" include advising as to the value
of securities, the advisability of investing in, purchasing or selling
securities, the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts, and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Brokerage and research
services provided by brokers to the Trust are considered to be in addition to
and not in lieu of services required to be performed by each adviser under its
contract with the Trust and may benefit both the Trust and other accounts of
such adviser. Conversely, brokerage and research services provided by brokers to
other accounts of an adviser may benefit the Trust.
If the securities in which a particular Portfolio of the Trust invests are
traded primarily in the over-the-counter market, where possible the Portfolio
will deal directly with the dealers who make a market in the securities involved
unless better prices and executions are available elsewhere. Such securities may
be purchased directly from the issuer. Bonds and money market instruments are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes.
As described in the Prospectus, some portfolio transactions are, subject to
the Conduct Rules of the National Association of Securities Dealers, Inc. and
subject to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Trust.
The Trust has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser shall aggregate transactions unless it believes in its
sole discretion that such aggregation is inconsistent with its duty to seek best
execution (which shall include the duty to seek best price) for the Trust. No
advisory account of the Adviser is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the Adviser in that security on
a given business day, with all transaction costs share pro rata based on the
Trust's participation in the transaction. If the aggregated order is filled in
its entirety, it shall be allocated among the Adviser's accounts in accordance
with the allocation order, and if the order is partially filled, it shall be
allocated pro rata based on the allocation order. Notwithstanding the foregoing,
the order may be allocated on a basis different from that specified in the
allocation order if all accounts of the Adviser whose orders are allocated
receive fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by the Adviser's
compliance officer as soon as practicable after the opening of the markets on
the trading day following the day on which the order is executed. If an
aggregated order is partially filled and allocated on a basis different from
that specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or sale
for a reasonable period following the execution of the aggregated order that
would result in it receiving or selling more shares than the amount of shares it
would have received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall appear
appropriate.
For the fiscal years ended November 30, 1995, 1996 and 1997, brokerage
commissions paid by the Trust on Portfolio transactions totaled $3,531,634,
$3,104,255, and $2,269,745, respectively. Brokerage commissions of $1,670,096
paid during the fiscal year ended November 30, 1997, were paid on portfolio
transactions aggregating $804,872,336 executed by brokers who provided research
and other statistical and factual information.
Investment decisions for the Trust are made independently from those of the
other investment companies or accounts advised by either adviser. It may
frequently happen that the same security is held in the portfolio of more than
one fund. Simultaneous transactions are inevitable when several funds are
managed by the same investment adviser, particularly when the same security is
suited for the investment objectives of more than one fund. When two or more
funds advised by either adviser (or any subadviser) are simultaneously engaged
in the purchase or sale of the same security, the transactions are allocated
among the funds in a manner equitable to each fund. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as the Trust is concerned. In other cases, however, it is
believed that the ability of the Trust to participate in volume transactions
will produce better executions for the Trust. It is the opinion of the Board of
Trustees of the Trust that the desirability of utilizing each adviser as
investment adviser to the Trust outweighs the disadvantages that may be said to
exist from simultaneous transactions.
25
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Portfolio is determined as of the close
of trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Since the Trust does not price securities on
weekends or United States national holidays, the net asset value of a
Portfolio's foreign assets may be significantly affected on days when the
investor has no access to the Trust. The net asset value per share of a
Portfolio is determined by adding the values of all securities and other assets
of the Portfolio, subtracting liabilities, and dividing by the total number of
outstanding shares of the Portfolio. 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.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Portfolio which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of such Portfolio. All assets
and liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time a Portfolio has investments where market quotations
are not readily available, such investments are valued at the fair value thereof
as determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent investment
is $25. However, both the minimum initial and subsequent investment amounts are
$25 for investments pursuant to the "Investo-Matic" plan, a bank draft investing
program administered by Distributor, or pursuant to the Systematic Exchange
privilege or for an individual retirement account (IRA). In addition, there are
no subsequent investment minimum amounts in connection with the reinvestment of
dividend or capital gain distributions. Completed applications for the purchase
of shares should be mailed to: Phoenix Funds, c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Portfolios' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their net
asset value per share, plus a sales charge which, at the election of the
purchaser, may be imposed either (i) at the time of the purchase (the "initial
sales charge alternative") or (ii) on a contingent deferred basis (the "deferred
sales charge alternative"). Orders received by dealers prior to the close of
trading on the New York Stock Exchange are confirmed at the offering price
effective at that time, provided the order is received by the Distributor prior
to its close of business.
The alternative purchase arrangements permit an investor to choose the method
of purchasing shares that is more beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares, whether the investor
wishes to receive distributions in cash or to reinvest them in additional shares
of the Portfolios, and other circumstances. Investors should consider whether,
during the anticipated life of their investment in the Portfolio, the
accumulated continuing distribution and services fees and contingent deferred
sales charges on Class B or C Shares would be less than the initial sales charge
and accumulated distribution services fee on Class A or M Shares purchased at
the same time. Note, only the Emerging Markets Portfolio and the Income
Portfolio currently offer Class C and Class M Shares.
Dividends paid by the Portfolio, if any, with respect to each Class of Shares
will be calculated in the same manner at the same time on the same day, except
that fees such as higher distribution and services fees and any incremental
transfer agency costs relating to each Class of Shares will be borne exclusively
by that class. See "Dividends, Distributions and Taxes."
CLASS A SHARES
Class A Shares incur a sales charge when they are purchased and enjoy the
benefit of not being subject to any sales charge when they are redeemed. Class A
Shares are subject to ongoing distribution and services fees at an annual rate
of 0.25% of the
26
<PAGE>
Portfolio's aggregate average daily net assets attributable to the Class A
Shares. In addition, certain purchases of Class A Shares qualify for reduced
initial sales charges. See the Portfolios' current Prospectus for additional
information.
CLASS B SHARES
Class B Shares do not incur a sales charge when they are purchased, but they
are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions. See the Portfolios' current Prospectus for additional
information.
Class B Shares are subject to ongoing distribution and services fees at an
aggregate annual rate of up to 1.00% of the Portfolio's aggregate average daily
net assets attributable to the Class B Shares. Class B Shares enjoy the benefit
of permitting all of the investor's dollars to work from the time the investment
is made. The higher ongoing distribution and services fees paid by Class B
Shares will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related to Class A
Shares. Class B Shares will automatically convert to Class A Shares eight years
after the end of the calendar month in which the shareholder's order to purchase
was accepted, in the circumstances and subject to the qualifications described
in the Portfolios' Prospectus. The purpose of the conversion feature is to
relieve the holders of the Class B Shares that have been outstanding for a
period of time sufficient for the adviser and the Distributor to have been
compensated for distribution expenses related to the Class B Shares from most of
the burden of such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution and services fees. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge.
For purposes of conversion to Class A Shares, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares in
a shareholder's Portfolio account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Portfolio account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B Share dividends in the sub-account will also convert to
Class A Shares.
CLASS C SHARES--EMERGING MARKETS PORTFOLIO AND INCOME PORTFOLIO ONLY
Class C Shares are purchased without an initial sales charge but are subject
to a deferred sales charge if redeemed within one year of purchase. The deferred
sales charge may be waived in connection with certain qualifying redemptions.
Shares issued in conjunction with the automatic reinvestment of income
distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to ongoing distribution and services fees at
an aggregate annual rate of up to 1.00% of the Portfolio's aggregate average
daily net assets attributable to Class C Shares. See the Portfolios' current
Prospectus for more information.
CLASS M SHARES--EMERGING MARKETS PORTFOLIO AND INCOME PORTFOLIO ONLY
CLASS M SHARES ARE CURRENTLY CLOSED TO NEW INVESTORS. Class M Shares incur a
sales charge at the time of purchase but are not subject to any sales charge
when redeemed. Certain purchases of Class M Shares may qualify for reduced
initial sales charges as described in the Portfolios' Prospectus. Class M Shares
are subject to ongoing distribution and services fees at an aggregate annual
rate of up to 0.50% of the Portfolio's aggregate average daily net assets
attributable to Class M Shares.
CLASS X SHARES--INCOME PORTFOLIO ONLY
CLASS X SHARES ARE CURRENTLY CLOSED TO NEW INVESTORS.
IMMEDIATE INVESTMENT
In order to obtain immediate investment of funds, initial and subsequent
purchases of shares of a Portfolio may also be made by wiring Federal Trusts
directly pursuant to the following instructions. (Federal Trusts are monies held
in a bank account with a Federal Reserve Bank).
(1) For initial investments, telephone the Trust at (800) 367-5877. Certain
information will be requested from you regarding the account, and an
account number will be assigned.
(2) Once an account number has been assigned, direct your bank to wire the
Federal Trusts to State Street Bank and Trust Company, Custody &
Shareholder Services Division, Boston, Massachusetts 02105, attention of
the appropriate Portfolio of the Phoenix Multi-Portfolio Fund. Your bank
must include the account number and the name(s) in which your account is
registered in its wire and also request a telephone advice. Your bank may
charge a fee to you for transmitting funds by wire.
An order for shares of a Portfolio purchased with Federal Trusts will be
accepted on the business day Federal Trusts are wired provided the Federal
Trusts are received by 4:00 p.m. on that day; otherwise, the order will not be
accepted until the next business day. Shareholders should bear in mind that wire
transfers may take two or more hours to complete.
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<PAGE>
Promptly after an initial purchase of shares made by wiring Federal Trusts
directly, the shareholder should complete and mail to Equity Planning an Account
Application.
INVESTOR ACCOUNT SERVICES
The Portfolios offer combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges as
described in the Portfolios' current Prospectus. Certain privileges may not be
available in connection with all classes. In most cases, changes to account
services may be accomplished over the phone. Inquiries regarding policies and
procedures relating to shareholder account services should be directed to
Shareholder Services at (800) 243-1574.
EXCHANGES. Under certain circumstances, shares of any Phoenix Fund may be
exchanged for shares of the same Class of another Phoenix Fund or any other
Affiliated Phoenix Fund on the basis of the relative net asset values per share
at the time of the exchange. Exchanges are subject to the minimum initial
investment requirement of the designated Fund, Series, or Portfolio, except if
made in connection with the Systematic Exchange privilege. Shareholders may
exchange shares held in book-entry form for an equivalent number (value) of the
same class of shares of any other Affiliated Phoenix Fund, if currently offered.
On exchanges with share classes that carry a contingent deferred sales charge,
the CDSC schedule of the original shares purchased continues to apply. The
exchange of shares is treated as a sale and purchase for federal income tax
purposes (see also "Dividends, Distributions and Taxes").
SYSTEMATIC EXCHANGES. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund or any other Affiliated Phoenix
Fund automatically on a monthly, quarterly, semiannual or annual basis or may
cancel this privilege at any time. If you maintain an account balance of at
least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated
on the basis of the net asset value of the shares held in a single account), you
may direct that shares be automatically exchanged at predetermined intervals for
shares of the same class of another Affiliated Phoenix Fund. This requirement
does not apply to Phoenix "Self Security" program participants. Systematic
exchanges will be executed upon the close of business on the 10th day of each
month or the next succeeding business day. Systematic exchange forms are
available from the Distributor. Exchanges will be based upon each Fund's net
asset value per share next computed after the close of business on the 10th day
of each month (or next succeeding business day), without sales charge.
DIVIDEND REINVESTMENT ACROSS ACCOUNTS. If you maintain an account balance of
at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of one
of the other Phoenix Funds or any other Affiliated Phoenix Fund at net asset
value. You should obtain a current prospectus and consider the objectives and
policies of each Fund carefully before directing dividends and distributions to
another Fund. Reinvestment election forms and prospectuses are available from
Equity Planning. Distributions may also be mailed to a second payee and/or
address. Requests for directing distributions to an alternate payee must be made
in writing with a signature guarantee of the registered owner(s). To be
effective with respect to a particular dividend or distribution, notification of
the new distribution option must be received by the Transfer Agent at least
three days prior to the record date of such dividend or distribution. If all
shares in your account are repurchased or redeemed or transferred between the
record date and the payment date of a dividend or distribution, you will receive
cash for the dividend or distribution regardless of the distribution option
selected.
INVEST-BY-PHONE. This expedited investment service allows a shareholder to
make an investment in an account by requesting a transfer of funds from the
balance of their bank account. Once a request is phoned in, Equity Planning will
initiate the transaction by wiring a request for monies to the shareholder's
commercial bank, savings bank or credit union via Automated Clearing House
(ACH). The shareholder's bank, which must be an ACH member, will in turn forward
the monies to Equity Planning for credit to the shareholder's account. ACH is a
computer based clearing and settlement operation established for the exchange of
electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application and
attach a voided check if applicable. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) shareholders may call toll free
(800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. The Trust may delay the mailing of a check for redemption
proceeds of Trust shares purchased with a check or via Invest-by-Phone service
until the Trust has assured itself that good payment has been collected for the
purchase of the shares, which may take up to 15 days. The Trust and Equity
Planning reserve the right to modify or terminate the Invest-by-Phone service
for any reason or to institute charges for maintaining an Invest-by-Phone
account.
HOW TO REDEEM SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other
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than customary weekend and holiday closings, or if permitted by rules of the
Securities and Exchange Commission, during periods when trading on the Exchange
is restricted or during any emergency which makes it impracticable for the Trust
to dispose of its securities or to determine fairly the value of its net assets
or during any other period permitted by order of the Securities and Exchange
Commission for the protection of investors. Furthermore, the Transfer Agent will
not mail redemption proceeds until checks received for shares purchased have
cleared, which may take up to 15 days or more after receipt of the check. See
the Funds' current Prospectus for further information.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
Redemptions by Class B and Class C shareholders will be subject to the
applicable deferred sales charge, if any.
Each shareholder account in the Portfolios which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the giving
of not less than 30 days written notice to the shareholder mailed to the address
of record. During the 60-day period the shareholder has the right to add to the
account to bring its value to $200 or more. See the Portfolio's current
Prospectus for more information.
BY MAIL
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds, c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written request
to Equity Planning that the Trust redeem the shares. See the Portfolios' current
Prospectus for more information.
TELEPHONE REDEMPTIONS
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Portfolios' current Prospectus for
additional information.
BY CHECK (BOND PORTFOLIO, EMERGING MARKETS PORTFOLIO AND INCOME PORTFOLIO ONLY)
Any shareholder of these Portfolios may elect to redeem shares held in his
Open Account by check. Checks will be sent to an investor upon receipt by Equity
Planning of a completed application and signature card (attached to the
application). If the signature card accompanies an individual's initial account
application, the signature guarantee section of the form may be disregarded.
However, the Trust reserves the right to require that all signatures be
guaranteed prior to the establishment of a check writing service account. When
an authorization form is submitted after receipt of the initial account
application, all signatures must be guaranteed regardless of account value.
Checks may be drawn payable to any person in an amount of not less than $500,
provided that immediately after the payment of the redemption proceeds the
balance in the shareholder's Open Account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient number
of full and fractional shares in the shareholder's Open Account will be redeemed
to cover the amount of the check. The number of shares to be redeemed will be
determined on the date the check is received by the Transfer Agent. Presently
there is no charge to the shareholder for the check writing service, but this
may be changed or modified in the future upon two weeks written notice to
shareholders. Checks drawn from Class B and Class C accounts are subject to the
applicable deferred sales charge, if any.
The checkwriting procedure for redemption enables a shareholder to receive
income accruing on the shares to be redeemed until such time as the check is
presented to Equity Planning for payment. Inasmuch as canceled checks are
returned to shareholders monthly, no confirmation statement is issued at the
time of redemption.
Shareholders utilizing withdrawal checks will be subject to Equity Planning's
rules governing checking accounts. A shareholder should make sure that there are
sufficient shares in his Open Account to cover the amount of any check drawn. If
insufficient shares are in the account and the check is presented to Equity
Planning on a banking day on which the Trust does not redeem shares (for
example, a day on which the New York Stock Exchange is closed), or if the check
is presented against redemption proceeds of an investment made by check which
has not been in the account for at least fifteen calendar days, the check may be
returned marked "Non-sufficient Funds" and no shares will be redeemed. A
shareholder may not close his account by a withdrawal check because the exact
value of the account will not be known until after the check is received by
Equity Planning.
REINVESTMENT PRIVILEGE
Shareholders who may have overlooked features of their investment at the time
they redeemed have a privilege of reinvestment of their investment at net asset
value. See the Portfolios' current Prospectus for more information and
conditions attached to this privilege.
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TAX SHELTERED RETIREMENT PLANS
Shares of the Trust are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA,
SIMPLE 401(k), 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
QUALIFICATION AS A REGULATED INVESTMENT COMPANY ("RIC")
As stated in the Prospectus, each Portfolio is treated as a separate entity
for federal income tax purposes. Each Portfolio has elected to qualify and
intends to remain qualified as a RIC under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). In each taxable year a Portfolio
qualifies as a RIC, it (but not its shareholders) will be relieved of federal
income tax on that portion of its net investment income and net capital gains
that are currently distributed (or deemed distributed) to its shareholders. To
the extent that a Portfolio fails to distribute all of its taxable income, it
will be subject to corporate income tax (currently 35%) on any retained ordinary
investment income or short-term capital gains, and corporate income tax
(currently 35%) on any undistributed long-term capital gains. Each Portfolio
intends to make timely distributions, if necessary, sufficient in amount to
avoid the non-deductible 4% excise tax that is imposed on a RIC to the extent
that it fails to distribute, with respect to each calendar year, at least 98% of
its ordinary income for such calendar year and 98% of its net capital gains as
determined for a one-year period ending on October 31 of such calendar year (or
as determined on a fiscal year basis, if the Portfolio so elects).
The Code sets forth numerous criteria that must be satisfied in order for
each Portfolio to qualify as a RIC. Among these requirements, each Portfolio
must meet the following tests for each taxable year: (a) derive in each taxable
year at least 90% of its gross income from dividends, interest and gains from
the sale or other disposition of securities; and (b) meet certain
diversification requirements imposed under the Code at the end of each quarter
of the taxable year. Under certain state tax laws, each Portfolio must also
comply with the "short-short" test to qualify for treatment as a RIC for state
tax purposes. Under the "short-short" test the Portfolio must derive less than
30% of its gross income each taxable year as gains (without deduction for
losses) from the sale or other disposition of securities for less than three
months. If in any taxable year each Portfolio does not qualify as a regulated
investment company, all of its taxable income will be taxed at corporate rates.
In addition, if in any tax year the Portfolio does not qualify as a RIC for
state tax purposes a capital gain dividend may not retain its character in the
hands of the shareholder for state tax purposes.
In determining the Portfolio's gross income for purposes of the 30% test, any
gain realized by the Portfolio on a hedged position that is part of a
"designated hedge" will be offset by any decrease in value (whether realized or
not) of any offsetting position in the hedge during the period that the hedge
was outstanding. Thus, only the net gain (if any) from the hedge will be
included in the computation of the 30% test. At the present time, however, it is
not clear whether or to what extent such hedging exception will be available to
the Portfolios' contemplated hedging transactions. To the extent that the
hedging exception is not available, gains realized by the Portfolios from actual
dispositions of futures or forward contracts or options will be included in the
calculation of the 30% test if less than three months has elapsed between the
date such instruments are acquired and the date of their sale. This provision
may limit the Portfolios' ability to engage in such transactions.
In the case of the International and Emerging Markets Portfolios, gains from
foreign currencies (i.e., gains from foreign currency options, foreign currency
futures and foreign currency forward contracts) are anticipated to constitute
qualifying income for purposes of the 90% test.
Section 988 of the Code provides special rules for foreign currency
transactions under which foreign currency gains or losses from forward
contracts, futures contracts that are not required to be marked-to-market and
unlisted options generally will be treated as ordinary income or loss.
In addition to meeting the 90% and 30% tests, in order to qualify as a RIC
each Portfolio will be required to distribute annually to its shareholders as
dividends (not including "capital gains dividends," discussed below) at least
90% of its ordinary investment income, short-term capital gains and tax exempt
income, with certain modifications. Each Portfolio intends to make distributions
to shareholders that will be sufficient to meet the 90% distribution
requirement.
Each Portfolio must also diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the value of its total assets
consists of cash, cash items, U.S. Government Securities, and other securities
limited generally with respect to any one issuer to not more than 5% of the
total assets of that Portfolio and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any issuer (other than U.S. Government
Securities). For purposes of these diversification tests, the issuer of an
option on a particular security is the issuer of the underlying security. In the
case of a stock index futures contract or option thereon, the position taken by
the Internal Revenue Service in a recent letter ruling is that the issuers of
the stocks underlying the index, in proportion to the weighing of the stocks in
the computation of the index, are treated as the issuers of the instrument
irrespective of whether the underlying index is broad-based or narrow-based. In
the case of a foreign currency option, futures contract or forward contract,
however, there is as yet no
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specific guidance in the tax law concerning who will be treated as the issuer of
such instruments or how they will be valued for purposes of these
diversification tests.
Each Portfolio intends to comply with all of the foregoing criteria for
qualification as a RIC; however, there can be no assurance that the Portfolio
will so qualify and continue to maintain its status as a RIC. If a Portfolio
were unable for any reason to maintain its status as a RIC for any taxable year,
adverse tax consequences would ensue.
TAXATION OF SHAREHOLDERS
The Bond Portfolio expects that under normal conditions, at least 80% of its
net assets will be invested in state, municipal and other obligations the
interest on which is excluded from gross income for federal income tax purposes,
and that substantially all of its dividends therefore will be exempt interest
dividends which will be treated by its shareholders as excludable from federal
gross income. (The character of tax-exempt interest distributed by the Bond
Portfolio will flow through as tax-exempt interest to its shareholders provided
that 50% or more of the value of its assets at the end of each quarter of its
taxable year is invested in obligations the interest on which is excluded from
gross income for federal income tax purposes). An exempt interest dividend is
any dividend or part thereof (other than a capital gain dividend) paid by the
Bond Portfolio with respect to its net federal excludable municipal security
interest, and designated as an exempt interest dividend in a written notice
mailed to shareholders not later than 60 days after the close of the taxable
year. The percentage of total dividends paid by the Bond Portfolio with respect
to any taxable year which qualify as exempt interest dividends will be the same
for all shareholders receiving dividends with respect to such year. If a
shareholder receives an exempt interest dividend with respect to any share and
such share is held for 6 months or less, any loss on the sale or exchange of
such share will not be allowed to the extent of the exempt interest dividend
amount.
Interest on certain "private activity bonds" issued after August 7, 1986,
although otherwise tax-exempt, is treated as a tax preference item for
alternative minimum tax purposes. Under regulations to be promulgated, the Bond
Portfolio's exempt interest dividends will be treated as a tax preference item
for purposes of computing the alternative minimum tax liability of shareholders
in such Portfolio to the extent attributable to interest paid on "private
activity" bonds. Corporate shareholders should also be aware that the receipt of
exempt interest dividends could subject them to alternative minimum tax under
the provisions of Code Section 56(f) (relating generally to book income or
adjusted current earnings in excess of taxable income).
Interest on indebtedness incurred or continued by shareholders to purchase or
carry shares of the Bond Portfolio will not be deductible for federal income tax
purposes to the extent of the portion of the interest expense relating to exempt
interest dividends; that portion is determined by multiplying the total amount
of interest paid or accrued on the indebtedness by a fraction, the numerator of
which is the exempt interest dividends received by a shareholder in the
shareholder's taxable year and the denominator of which is the sum of the exempt
interest dividends and the taxable distributions received by the shareholder.
Distributions by the Mid Cap, International, Real Estate, Emerging Markets
and Income Portfolios from ordinary investment income and net short-term capital
gains will be taxed to the shareholders as ordinary dividend income to the
extent of the earnings and profits of the respective Portfolios. Similarly, any
portion of the Bond Portfolio's dividends which does not qualify as exempt
interest dividends and any short-term capital gain distribution will be taxed to
the Bond Portfolio shareholders as ordinary income for federal income tax
purposes. Ordinary income dividends received by corporate shareholders will
qualify for the 70% dividends-received deduction to the extent the Portfolios
designate such amounts as qualifying dividend distributions; however, the
portion that may be so designated is subject to certain limitations. As a result
of these limitations, it is not currently anticipated that certain distributions
by Portfolios will be qualifying dividend distributions. Distributions by a
Portfolio that are designated as capital gain distributions will be taxed to the
shareholders as capital gains, and will not be eligible for the corporate
dividends-received deduction.
Dividends declared by the Portfolios to shareholders of record in October,
November or December will be taxable to such shareholders in the year that the
dividend is declared, even if it is not paid until the following year (so long
as it is actually paid by the Portfolio prior to February 1). Also, shareholders
will be taxable on the amount of long-term capital gains designated by a
Portfolio by written notice mailed to shareholders within 60 days after the
close of the year, even if such amounts are not actually distributed to them.
Shareholders will be entitled to claim a credit against their own federal income
tax liability for taxes paid by the Portfolio on such undistributed gains, if
any. If a shareholder receives a long-term capital dividend with respect to any
share and such share is held for less than 6 months, any loss on sale or
exchange of such share will be long-term capital loss to the extent of long-term
capital dividend payments.
Dividends (other than exempt interest dividends) and capital gain
distributions will be taxable to shareholders as described above whether
received in cash or in shares under a Portfolio's distribution reinvestment
plan. With respect to distributions received in cash or reinvested in shares
purchased on the open market, the amount of the distribution for tax purposes
will be the amount of cash distributed or allocated to the shareholder. With
respect to distributions made in shares issued by the Portfolio as a stock
dividend, the amount of the distribution will be the fair market value of the
shares on the payment date.
Shareholders should be aware that the price of shares of a Portfolio that are
purchased prior to a dividend or distribution by the Portfolio may reflect the
amount of the forthcoming dividend or distribution. Such dividend or
distribution, when made, would
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be taxable to shareholders under the principles discussed above even though the
dividend or distribution may reduce the net asset value of shares below a
shareholder's cost and thus represent a return of a shareholder's investment in
an economic sense.
FOREIGN TAX CREDIT
The International Portfolio may incur liability for foreign income and
withholding taxes on investment income. The Portfolio intends to qualify for and
may make an election permitted under Section 853 of the Code. The effect of such
election is that the shareholders of such Portfolio will be able to claim a
credit or deduction on their U.S. federal income tax returns for, and may treat
as part of the amounts distributed to them, their pro rata share of the income
taxes paid by the Portfolio to foreign countries. (The election is not available
unless stocks or securities in foreign corporations represent more than 50% of
the value of the total assets of the Portfolio). The shareholders may claim a
deduction or credit by reason of the Portfolio's election subject to the
limitations imposed under Section 904 of the Code. The deduction for foreign
taxes paid may not be claimed by individual shareholders who do not elect to
itemize deductions on their federal income tax returns although such
shareholders may claim a credit for foreign income taxes paid. In either case,
shareholders will be required to report taxable income in the amount of their
respective pro rata share of foreign taxes paid by the Portfolio. Although the
International Portfolio intends to meet the requirements of the Code to "pass
through" such taxes, there can be no assurance that it will be able to do so in
the future.
SALE OR EXCHANGE OF PORTFOLIO SHARES
Gain or loss will be recognized by a shareholder upon the sale of his shares
in a Portfolio or upon an exchange of his shares in a Portfolio for shares in
another Portfolio. Provided that the shareholder is not a dealer in such shares,
such gain or loss will generally be treated as capital gain or loss, measured by
the difference between the adjusted basis of the shares and the amount realized
therefrom. Under current law, capital gains (whether long-term or short-term) of
individuals and corporations are fully includable in income and are taxed at the
regular federal income tax rates applicable to the shareholder's ordinary
income. Capital losses (whether long-term or short-term) may offset capital
gains plus (for non-corporate taxpayers only) up to $3,000 per year of ordinary
income.
TAX INFORMATION
Written notices will be sent to shareholders regarding the tax status of all
distributions made (or deemed to have been made) during each taxable year,
including the tax-exempt portion thereof (if applicable), the amount qualifying
for the dividends-received deduction (if applicable) and the amount designated
as capital gains dividends, undistributed capital gains (if any), tax credits
(if applicable), and cumulative return of capital (if any).
BACKUP WITHHOLDING
The Portfolios may be required to withhold federal income tax at a rate of
31% on reportable dividends paid to certain noncorporate shareholders.
Generally, shareholders subject to such backup withholding will be those for
whom a taxpayer identification number and certain required certifications are
not filed with the Portfolios or who, to a Portfolio's knowledge, have furnished
an incorrect number.
FOREIGN SHAREHOLDERS
Dividends paid by a Portfolio from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien individual,
a foreign trust or estate, a foreign corporation or a foreign partnership (a
"foreign shareholder") will be subject to United States withholding tax at a
rate of 30% unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Foreign shareholders are urged to consult
their own tax advisors concerning the applicability of the United States
withholding tax and any foreign taxes.
OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences, described above,
applicable to an investment in a Portfolio, there may be state or local tax
considerations and estate tax considerations applicable to the circumstances of
a particular investor. In particular, distributions by the Bond Portfolio may be
subject to state and local taxation even though wholly or partially exempt for
federal income tax purposes. The foregoing discussion is based upon the Code,
judicial decisions and administrative regulations, rulings and practices, all of
which are subject to change and which, if changed, may be applied retroactively
to a Portfolio, its shareholders and/or its assets. No rulings have been sought
from the Internal Revenue Service with respect to any of the tax matters
discussed above.
The information included in the Prospectus with respect to taxes, in
conjunction with the foregoing, is a general and abbreviated summary of
applicable provisions of the Code and Treasury regulations now in effect as
currently interpreted by the courts and the Internal Revenue Service. The Code
and these Regulations, as well as the current interpretations thereof, may be
changed at any time by legislative, judicial, or administrative action.
THE DISTRIBUTOR
Equity Planning, a registered broker-dealer which is an indirect less than
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company, serves as
Distributor of the Trust's shares. Philip R. McLoughlin, a Trustee and President
of the Trust, is a director
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and officer of Equity Planning. Michael E. Haylon, an officer of the Trust, is a
director of Equity Planning; and G. Jeffrey Bohne, Nancy G. Curtiss, William E.
Keen, III, William R. Moyer, and Leonard J. Saltiel, officers of the Trust, are
officers of Equity Planning.
The Trust and Equity Planning have entered into distribution agreements under
which Equity Planning has agreed to use its best efforts to find purchasers for
Trust shares and the Trust has granted to Equity Planning the exclusive right to
purchase from the Trust and resell, as principal, shares needed to fill
unconditional orders for Trust shares. Equity Planning may sell Trust shares
through its registered representatives or through securities dealers with whom
it has sales agreements. Equity Planning may also sell Trust shares pursuant to
sales agreements entered into with bank-affiliated securities brokers who,
acting as agent for their customers, place orders for Trust shares with Equity
Planning. Although the Glass-Steagall Act prohibits banks and bank affiliates
from engaging in the business of underwriting, distributing or selling
securities (including mutual fund shares), banking regulators have indicated
that such institutions are not prohibited from purchasing mutual fund shares
upon the order and for the account of their customers. If, because of changes in
law or regulations, or because of new interpretations of existing law, it is
determined that agency transactions of banks and bank affiliated securities
brokers are not permitted under the Glass-Steagall Act, the Trustees will
consider what action, if any, is appropriate. In addition, state securities laws
on this issue may differ from federal law, and banks and bank affiliates may be
required to register as securities dealers pursuant to state law. It is not
anticipated that termination of sales agreements with banks and bank affiliated
securities brokers would result in a loss to their customers or a change in the
net asset value per share of a Portfolio of the Trust.
For its services under the distribution agreements, Equity Planning receives
sales charges on transactions in Trust shares (see "How to Buy Shares" in the
Prospectus) and retains such charges less the portion thereof allowed to its
registered representatives and to securities dealers and securities brokers with
whom it has sales agreements. In addition, Equity Planning may receive payments
from the Trust pursuant to the Distribution Plans described below. For the
fiscal years ended November 30, 1995, 1996, and 1997, Equity Planning's gross
commissions on sales of Trust shares totalled $1,655,136, $1,599,637 and
$2,114,382, respectively. Of these amounts, $1,454,880, $1,340,721 and
$1,620,047, respectively, were paid to dealers with whom Equity Planning had
sales agreements.
Equity Planning also acts as Financial Agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Trust. As
compensation for such services, Equity Planning is entitled to a fee, payable
monthly and based upon the average of the aggregate daily net asset values of
each Portfolio, at the following incremental annual rates:
First $100 million .05% plus a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum fee applies to each Portfolio as follows:
Mid Cap Portfolio $50,000
Emerging Markets Portfolio $70,000
International Portfolio $70,000
Real Estate Securities Portfolio $70,000
Bond Portfolio $70,000
Income Portfolio $70,000
In addition, Equity Planning is paid $12,000 for each class of shares of each
Portfolio beyond one. For services to the Trust during the fiscal years ended
November 30, 1995, 1996, and 1997, the Financial Agent received fees of
$227,721, $243,021 and $541,814, respectively.
PLANS OF DISTRIBUTION
The Trust has adopted separate amended and restated distribution plans under
Rule 12b-1 of the 1940 Act for each class of shares of each Portfolio of the
Trust (the "Class A Plan," the "Class B Plan," the "Class C Plan," the "Class M
Plan" and collectively the "Plans"). The Plans permit the Trust to reimburse the
Distributor for expenses incurred in connection with activities intended to
promote the sale of shares of each class of shares of the Trust.
Pursuant to the Plans, the Trust may reimburse the Distributor for actual
expenses of the Distributor of 0.25% of the average daily net assets of the
Trust's average daily net assets for providing services to shareholders,
including assistance with inquiries related to shareholder accounts (the
"Service Fee"). Pursuant to the Class B Plan, the Trust may reimburse the
Distributor monthly for actual expenses of the Distributor up to 0.75% annually
of the average daily net assets of each Portfolio's Class B Shares. Pursuant to
the Class C and M Plans, the Trust may reimburse the Distributor monthly for
actual expenses of the Distributor up to 0.75% and 0.25% annually of the average
daily net assets of the Emerging Markets and Income Portfolios' Class C and M
Shares, respectively.
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Expenditures under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Trust (including underwriting fees and
financing expenses incurred in connection with the payment of commissions); (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Distributor in the form of the
Dealer Agreement for Phoenix Funds for services rendered in connection with the
sale and distribution of shares of the Fund; (iv) payment of expenses incurred
in sales and promotional activities, including advertising expenditures related
to the Fund; (v) the costs of preparing and distributing promotional materials;
(vi) the cost of printing the Trust's Prospectus and Statement of Additional
Information for distribution to potential investors; and (vii) such other
similar services that the Trustees determine are reasonably calculated to result
in the sale of shares of the Trust.
Each Plan requires that at least quarterly the Trustees of the Trust review a
written report with respect to the amounts expended under the Plans and the
purposes for which such expenditures were made. While the Plans are in effect,
the Trust will be required to commit the selection and nomination of candidates
for Trustees who are not interested persons of the Trust to the discretion of
other Trustees who are not interested persons. Each Plan continues in effect
from year to year only provided such continuance is approved annually in advance
by votes of the majority of both (a) the Board of Trustees of the Trust and (b)
the Rule 12b-1 Trustees, cast in person at a meeting called for the purpose of
voting on the Plan and any agreements related to the Plan.
For the fiscal year ended November 30, 1997 the Trust paid Rule 12b-1 Fees in
the amount of $2,554,101, of which the Distributor received $876,201,
unaffiliated broker-dealers received $1,368,595 and W.S. Griffith & Co., Inc.,
an affiliate, received $309,305. The Rule 12b-1 payments were used for (1)
compensating dealers $3,765,838, (2) compensating sales personnel $1,297,635,
(3) advertising $767,241, (4) printing and mailing of prospectuses to other than
current shareholders $60,035, (5) service costs $250,215 and (6) other $284,645.
No interested person of the Trust and no Trustee who is not an interested person
of the Trust, as that term is defined in the Investment Company Act of 1940, had
any direct or indirect financial interest in the operation of the Plans.
ADDITIONAL INFORMATION
The Trust's Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission which may be obtained from the Commission's
principal office at 450 Fifth Street, N.W., Washington, DC 20549, upon payment
of the fee prescribed by the rules and regulations promulgated by the
Commission.
FINANCIAL STATEMENTS
Financial information relating to the Trust is contained in the Annual
Reports to Shareholders for the year ended November 30, 1997 and is available by
calling Equity Planning at (800) 243-4361, or by writing to Equity Planning at
100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200. The
Annual Reports are incorporated into this Statement of Additional Information by
reference. A copy of the Annual Reports must precede or accompany this Statement
of Additional Information.
REPORTS TO SHAREHOLDERS
The fiscal year of the Trust ends on November 30. The Trust will send
financial statements to its shareholders at least semiannually. An annual report
containing financial statements audited by the Trust's independent accountants,
will be sent to shareholders each year.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, has been selected
independent accountants for the Trust. Price Waterhouse LLP audits the Trust's
annual financial statements and expresses an opinion thereon.
CUSTODIANS AND TRANSFER AGENT
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02105-8301,
serves as the Trust's custodian for all Portfolios except the International
Portfolio which is served by Brown Brothers Harriman & Company, 40 Water Street,
Boston, MA 02109. Equity Planning serves as the Trust's transfer agent. As
compensation, Equity Planning receives a fee equivalent to $19.25 for each
designated daily dividend shareholder account and $14.95 for each designated
non-daily dividend shareholder account plus out-of-pocket expenses. Transfer
Agent fees are also utilized to offset costs and fees paid to subtransfer agents
employed by Equity Planning. State Street Bank and Trust Company serves as a
subtransfer agent pursuant to a Subtransfer Agency Agreement.
34
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
PART C--OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a)Financial Statements:
Included in Part A: Financial Highlights
Included in Part B: Financial Statements and Notes Thereto,
and Report of Independent Accountants
covering the Strategic Income Fund are
included in the Annual Report to
Shareholders for the year ended November
30, 1997, incorporated by reference.
Financial Statements and Notes Thereto,
and Report of Independent Accountants
covering the Tax Exempt Bond Portfolio,
the Mid Cap Portfolio, the International
Portfolio, the Real Estate Portfolio and
the Emerging Markets Portfolio are included
in the Annual Report to Shareholders for the
year ended November 30, 1997,
incorporated by reference.
Included in Part C: Consent of Independent Accountants
(b)Exhibits:
1.1 Agreement and Declaration of Trust, previously filed with the
Registration Statement on December 31, 1987 and filed via EDGAR
with Post-Effective Amendment No. 20 and incorporated herein by
reference.
1.2 Amendment to Declaration of Trust, filed with Post-Effective
Amendment No. 2 on September 1, 1989, and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
1.3 Amendment to Declaration of Trust, filed with Post-Effective
Amendment No. 8 on April 8, 1993, and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
1.4 Amendment to Declaration of Trust adding the Phoenix Real
Estate Securities Portfolio, filed with Post-Effective
Amendment No. 14 on March 1, 1995, and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
1.5 Amendment to Declaration of Trust designating Classes of
Shares, filed with Post-Effective Amendment No. 14 on March 1,
1995, and filed via EDGAR with Post-Effective Amendment No. 20
and incorporated herein by reference.
1.6 Amendment to Declaration of Trust adding the Phoenix Emerging
Markets Bond Portfolio filed via EDGAR with Post-Effective
Amendment No. 17 on August 29, 1995 and incorporated herein by
reference.
1.7 Amendment to Declaration of Trust changing the name of the
Phoenix Endowment Fixed-Income Portfolio to Phoenix Diversified
Income Portfolio, filed via EDGAR with Post-Effective Amendment
No. 19 on April 19, 1996 and incorporated herein by reference.
1.8 Amendment to Declaration of Trust changing the name of the
Phoenix Capital Appreciation Portfolio to Phoenix Mid Cap
Portfolio dated May 22, 1996 and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
1.9 Amendment to Declaration of Trust changing the name of Phoenix
Diversified Income Portfolio to Phoenix-Strategic Income Fund
and designating Classes of Shares, filed via EDGAR with
Post-Effective Amendment No. 22 on January 26, 1998 and
incorporated herein by reference.
2. Not applicable.
3. Not applicable.
4. Reference is made to Article III of Registrant's Agreement and
Declaration of Trust, as amended, and filed with those
Registration Statements referred to in Exhibit 1, above.
5.1 Form of Investment Advisory Agreement between the Registrant
and Phoenix Investment Counsel, Inc. covering the Phoenix
Tax-Exempt Bond, Phoenix Capital Appreciation, Phoenix
International, Phoenix Endowment Equity and Phoenix Endowment
Fixed Income Portfolios, filed with Post-Effective Amendment
No. 12 on April 1, 1994, and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
C-1
<PAGE>
5.2 Investment Advisory Agreement between Registrant and Phoenix
Realty Securities, Inc. dated February 28, 1995 and assigned
March 2, 1998 to Duff & Phelps Investment Management Co. filed
via EDGAR herewith.
5.3 Investment Advisory Agreement between the Registrant and
Phoenix Investment Counsel, Inc. dated October 30, 1997
covering the Phoenix Strategic Income Fund (f/k/a Phoenix
Diversified Income Portfolio), and filed via EDGAR with
Post-Effective Amendment No. 22 on January 26, 1998 and
incorporated herein by reference.
5.4 Subadvisory Agreement dated November 19, 1997 among the
Registrant, Phoenix Realty Securities, Inc. and Duff & Phelps
Investment Management Co., covering the Real Estate Securities
Portfolio filed herewith via EDGAR.
6.1 Underwriting Agreement between Registrant and Phoenix Equity
Planning Corporation dated November 19, 1997 and filed via
EDGAR with Post-Effective Amendment No. 22 on January 26, 1998
and incorporated herein by reference.
6.2 Form of Sales Agreement between Phoenix Equity Planning
Corporation and dealers, filed via EDGAR herewith.
6.3 Form of Supplement to Phoenix Family of Funds Sales Agreement
filed via EDGAR with Post-Effective Amendment No. 22 on
January 26, 1998 and incorporated herein by reference.
6.4 Form of Financial Institution Sales Contract for the Phoenix
Family of Funds filed via EDGAR with Post-Effective Amendment
No. 22 on January 26, 1998 and incorporated herein by
reference.
7. Not applicable.
8.1 Custodian Contract between Registrant and State Street Bank and
Trust Company dated May 1, 1997, filed via EDGAR with
Post-Effective Amendment No. 22 on January 26, 1998 and
incorporated herein by reference.
8.2 Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. covering the Phoenix International Portfolio,
filed with Post-Effective Amendment No. 13 on December 12, 1994
and filed via EDGAR with Post-Effective Amendment No. 20 and
incorporated herein by reference.
9.1 A corrected Amended and Restated Financial Agent Agreement
between Registrant and Phoenix Equity Planning Corporation
dated November 19, 1997 and filed herewith via EDGAR.
9.2 Transfer Agency and Service Agreement between Registrant and
Phoenix Equity Planning Corporation, filed with Post-Effective
Amendment No. 13 on December 12, 1994 and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
9.3 Sub-Transfer Agency Agreement between Phoenix Equity Planning
Corporation and State Street Bank and Trust Company, filed with
Post-Effective Amendment No. 13 on December 12, 1994 and filed
via EDGAR with Post-Effective Amendment No. 20 and incorporated
herein by reference.
10.1 Opinion and Consent of Counsel covering shares of the Phoenix
Tax-Exempt Bond Portfolio, filed with Pre-Effective Amendment
No. 2 on July 7, 1988, and filed via EDGAR with Post-Effective
Amendment No. 22 on January 26, 1998 and incorporated herein by
reference.
10.2 Opinion and Consent of Counsel covering shares of the Phoenix
Capital Appreciation Portfolio and the Phoenix International
Portfolio, filed with Post-Effective Amendment No. 3 on October
30, 1989 and filed via EDGAR with Post-Effective Amendment No.
22 on January 26, 1998 and incorporated herein by reference.
10.3 Opinion and Consent of Counsel covering shares of the Phoenix
Endowment Equity Portfolio and Endowment Fixed-Income
Portfolio, filed with Post-Effective Amendment No. 8 on April
8, 1993, and filed via EDGAR with Post-Effective Amendment No.
22 on January 26, 1998 and incorporated herein by reference.
10.4 Opinion and Consent of Counsel covering shares of the Phoenix
Real Estate Securities Portfolio, filed with Post-Effective
Amendment No. 14 on March 1, 1995, and filed via EDGAR with
Post-Effective Amendment No. 20 and incorporated herein by
reference.
10.5 Opinion and Consent of Counsel covering shares of the Phoenix
Strategic Income Fund filed via EDGAR herewith.
11. Consent of Independent Accountants, filed herewith.
12. Not applicable.
13. Initial Capital Agreement, filed with Pre-Effective Amendment
No. 2 on July 7, 1988, and filed via EDGAR with Post-Effective
Amendment No. 22 on January 26, 1998 and incorporated herein by
reference.
14.1 Custodial Agreement and supporting documentation and
information relating to Internal Revenue Code Section 403(b)
(7) tax sheltered accounts, filed with Post-Effective Amendment
No. 3 on October 30, 1989, and filed via EDGAR with
Post-Effective Amendment No. 22 on January 26, 1998 and
incorporated herein by reference.
C-2
<PAGE>
14.2 Custodial Agreement and supporting documentation and
information relating to Individual Retirement Accounts
("IRAs"), filed with Post-Effective Amendment No. 3 on October
30, 1989, and filed via EDGAR with Post-Effective Amendment No.
22 on January 26, 1998 and incorporated herein by reference.
15.1 Class A Shares Amended and Restated Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act of 1940, filed
via EDGAR with Post-Effective Amendment No. 22 on January 26,
1998 and incorporated herein by reference.
15.2 Class B Shares Amended and Restated Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act of 1940, filed
via EDGAR with Post-Effective Amendment No. 22 on January 26,
1998 and incorporated herein by reference.
15.3 Class C Shares Amended and Restated Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act of 1940, filed
via EDGAR with Post-Effective Amendment No. 22 on January 26,
1998 and incorporated herein by reference.
15.4 Class M Shares Amended and Restated Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act of 1940, filed
via EDGAR with Post-Effective Amendment No. 22 on January 26,
1998 and incorporated herein by reference.
16. Not applicable.
17. Financial Data Schedule filed herewith via EDGAR and reflected
on EDGAR as Exhibit 27.
18.1 Amended and Restated Rule 18f-3 Dual Distribution Plan
effective November 19, 1997 filed via EDGAR with
Post-Effective Amendment No. 22 on January 26, 1998 and
incorporated herein by reference.
19. Powers of Attorney, filed via EDGAR with Post-Effective
Amendment No. 20 and Powers of Attorney filed via EDGAR with
Post-Effective Amendment No. 19 on April 1, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is given as of February 27, 1998.
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF SHAREHOLDER ACCOUNTS
-------------- ------------------------------
<S> <C> <C>
Shares of Beneficial Interest, $1 par value, of the Phoenix Class A 3,215
Tax-Exempt Bond Portfolio Class B 171
Shares of Beneficial Interest, $1 par value, of the Phoenix Class A 11,552
International Portfolio Class B 674
Shares of Beneficial Interest, $1 par value, of the Phoenix Class A 29,456
Mid Cap Portfolio Class B 2,176
Shares of Beneficial Interest, $1 par value, of the Phoenix 0
Endowment Equity Portfolio
Shares of Beneficial Interest, $1 par value, of the Phoenix Class X 5
Strategic Income Fund formerly the Diversified Income Portfolio Class A 0
Class B 0
Class C 0
Class M 0
Shares of Beneficial Interest, $1 par value, of the Class A 2,463
Real Estate Securities Portfolio Class B 1,942
Shares of Beneficial Interest, $1 par value, of the Class A 3,748
Phoenix Emerging Markets Portfolio Class B 2,457
Class C 0
Class M 0
</TABLE>
C-3
<PAGE>
ITEM 27. INDEMNIFICATION
Under the Agreement and Declaration of Trust establishing the Registrant any
present or former Trustee or officer of the Registrant and any person who serves
at the Registrant's request as a director, officer or trustee of another
organization in which the Registrant has any interest as a shareholder, creditor
or otherwise is indemnified against all liabilities incurred in connection with
the defense or disposition of any action, suit or other proceeding in which he
may be or may have been involved as a party or otherwise by reason of being or
having been such a Trustee, officer or director, except with respect to any
matter as to which he shall have been finally adjudicated in any such action,
suit or other proceeding not to have acted in good faith in the reasonable
belief that his action was in or not opposed to the best interest of the
Registrant and with respect to any liability to the Registrant or its
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS
See "Management of the Fund" in the Prospectus and "The Investment Advisers"
and "Trustees and Officers" in the Statement of Additional Information for
information regarding the business of the Advisers. For information as to the
business, profession, vocation or employment of a substantial nature of
directors and officers of the Advisers, reference is made to the Advisers'
current Form ADV (SEC File Nos. 801-5995 (PIC) and 801-14813 (DPIM)) filed under
the Investment Advisers Act of 1940, incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Equity Planning also serves as the principal underwriter for the
following other registrants:
Phoenix Series Fund, Phoenix Strategic Allocation Fund, Inc., Phoenix Duff &
Phelps Institutional Mutual Funds, Phoenix Multi-Sector Fixed Income Fund, Inc.,
Phoenix Multi-Sector Short Term Bond Fund, Phoenix-Aberdeen Series Fund, Phoenix
California Tax Exempt Bonds, Inc., Phoenix Income and Growth Fund, Phoenix
Worldwide Opportunities Fund, Phoenix Strategic Equity Series Fund, Phoenix
Equity Series Fund, Phoenix-Engemann Funds, Phoenix Investment Trust 97, Phoenix
Home Life Variable Universal Life Account, Phoenix Home Life Variable
Accumulation Account, PHL Variable Accumulation Account, Phoenix Life and
Annuity Variable Universal Life Account and PHL Variable Separate Account MVA1.
(b) Directors and executive officers of Phoenix Equity Planning Corporation
are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice President
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
John F. Sharry Executive Vice President, None
56 Prospect St. Mutual Fund Sales and
P.O. Box 150480 Operations
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, Vice President
56 Prospect St. Infrastructure
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
Paul A. Atkins Senior Vice President and None
56 Prospect St. Sales Manager
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Senior Vice President and Vice President
100 Bright Meadow Blvd. Chief Financial Officer
P.O. Box 2200
Enfield, CT 06083-2200
G. Jeffrey Bohne Vice President, Mutual Fund Secretary
101 Munson Street Customer Service
P.O. Box 810
Greenfield, MA 01302-0810
Eugene A. Charon Vice President and Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect St. Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Elizabeth R. Sadowinski Vice President, None
56 Prospect St. Administration
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Counsel and Assistant Secretary
56 Prospect St. Secretary
P.O. Box 150480
Hartford, CT 06115-0480
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 2200
Enfield, CT 06083-2200
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an affiliated
person of the Registrant or an affiliated person of such affiliated person,
directly or indirectly, from the Registrant during the Registrant's last fiscal
year.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder include Registrant's investment
advisers, Phoenix Investment Counsel, Inc. and Duff & Phelps Investment
Management Co.; Registrant's financial agent, transfer agent and principal
underwriter, Phoenix Equity Planning Corporation; Registrant's dividend
disbursing agent, State Street Bank and Trust Company; and Registrant's
custodians, State Street Bank and Trust Company and Brown Brothers Harriman &
Co. (custodian for the Phoenix International Portfolio). The address of the
Secretary of the Trust is 101 Munson Street, Greenfield, Massachusetts 01301;
the address of Phoenix Investment Counsel, Inc. is 56 Prospect Street, Hartford,
Connecticut 06115; and Duff & Phelps Investment Management Co. is 55 East Monroe
Street, Suite 3600, Chicago, Illinois 60603; the address of Phoenix Equity
Planning Corporation is 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200; the address of the dividend disbursing agent is P.O. Box
8301, Boston, Massachusetts 02266-8301, Attention: Phoenix Funds; the address of
custodian State Street Bank and Trust Company is P.O. Box 351, Boston,
Massachusetts 02101; and the address for the custodian of the Phoenix
International Portfolio is Brown Brothers Harriman & Co., 40 Water Street,
Boston, Massachusetts 02109.
ITEM 31. MANAGEMENT SERVICES
The information required by this Item is included in the Statement of
Additional Information.
C-5
<PAGE>
ITEM 32. UNDERTAKINGS
The information called for by Item 5A of Form N-1A is contained in the
Fund's Annual Report to Shareholders: accordingly, the Fund hereby undertakes to
furnish each person to whom a prospectus is delivered with a copy of the Fund's
latest Annual Report, upon request and without charge.
The Fund undertakes, if requested to do so by the holders of at least 10% of
the Fund's outstanding shares, to call a meeting of shareholders for the purpose
of voting upon the question of removal of a trustee or trustees and to assist in
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
Registrant undertakes to call a special meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or trustees and to
assist in communications with other shareholders, as required by Section 16(c)
of the 1940 Act, if requested to do so by holders of at least 10% of a Series'
outstanding shares.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Hartford, and State
of Connecticut on the 27th day of March, 1998.
PHOENIX MULTI-PORTFOLIO FUND
ATTEST: /S/ THOMAS N. STEENBURG BY: /S/ PHILIP R. MCLOUGHLIN
-------------------------- ------------------------------
THOMAS N. STEENBURG PHILIP R. MCLOUGHLIN
ASSISTANT SECRETARY PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated, on this 27th day of March, 1998.
SIGNATURE TITLE
--------- -----
--------------------------------------- Trustee
Robert Chesek*
--------------------------------------- Trustee
E. Virgil Conway*
--------------------------------------- Treasurer (principal
Nancy G. Curtiss* financial and
accounting officer)
--------------------------------------- Trustee
Harry Dalzell-Payne*
--------------------------------------- Trustee
Francis E. Jeffries*
--------------------------------------- Trustee
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin
--------------------------------------- Trustee and
Philip R. McLoughlin President
--------------------------------------- Trustee
Everett L. Morris*
--------------------------------------- Trustee
James M. Oates*
--------------------------------------- Trustee
Calvin J. Pedersen*
--------------------------------------- Trustee
Herbert Roth, Jr.*
--------------------------------------- Trustee
Richard E. Segerson*
--------------------------------------- Trustee
Lowell P. Weicker, Jr.*
*By /s/ Philip R. McLoughlin
----------------------------------------
* Philip R. McLoughlin, Attorney-in-fact
pursuant to powers of attorney previously
filed.
S-1(c)
Exhibit 5.2
Investment Advisory Agreement
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the 28th day of February, 1995 by and
between Phoenix Multi-Portfolio Fund (the "Trust"), a Massachusetts business
trust authorized to issue shares of beneficial interest in separate series, and
Phoenix Realty Securities, Inc. (the "Adviser"), a Connecticut corporation.
WITNESSETH THAT:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust on behalf of the Phoenix Real Estate Securities Portfolio (the
"Portfolio" or "Series"), for the period and on the terms set forth herein. The
Adviser accepts such appointment and agrees to render the services described in
this Agreement for the compensation herein provided.
2. In the event that the Trustees desire to retain the Adviser to render
investment advisory services hereunder with respect to one or more additional
series ("Additional Series"), the Trust shall notify the Adviser in writing. If
the Adviser is willing to render such services, it shall notify the Trust in
writing, whereupon such Additional Series shall become subject to the terms and
conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for the
Portfolio and any Additional Series which may become subject to the terms and
conditions set forth herein (sometimes collectively referred to as the "Series")
and shall manage the investment and reinvestment of the assets of each Series,
subject at all times to the supervision of the Trustees.
4. With respect to managing the investment and reinvestment of the Series'
assets, the Adviser shall provide, at its own expense:
(a) Investment research, advice and supervision;
(b) An investment program for each Series consistent with its investment
objectives;
(c) Implementation of the investment program for each Series including the
purchase and sale of securities;
(d) Advice and assistance on the general operations of the Trust;
(e) Regular reports to the Trustees on the implementation of each Series'
investment program; and
(f) Continuous monitoring and evaluation of the performance and investment
style of any subadviser recommended by Adviser and appointed to act on
behalf of the Trust.
5. The Adviser shall, for all purposes herein, be deemed to be an
independent contractor.
6. The Adviser shall furnish at its own expense, or pay the expenses of
the Trust, for the following:
(a) Office facilities, including office space, furniture and equipment;
<PAGE>
-2-
(b) Personnel necessary to perform the functions required to manage the
investment and reinvestment of each Series' assets (including those
required for research, statistical and investment work);
(c) Personnel to serve without salaries from the Trust as officers or
agents of the Trust. The Adviser need not provide personnel to perform,
or pay the expenses of the Trust for, services customarily performed
for an open-end management investment company by its national
distributor, custodian, financial agent, transfer agent, auditors and
legal counsel;
(d) Compensation and expenses, if any, of the Trustees who are also
full-time employees of the Adviser or any of its affiliates; and
(e) Any subadviser recommended by Adviser and appointed to act on behalf
of the Trust.
7. All costs and expenses not specifically enumerated herein as payable by
the Adviser shall be paid by the Trust. Such expenses shall include, but shall
not be limited to, all expenses (other than those specifically referred to as
being borne by the Adviser) incurred in the operation of the Trust and any
public offering of its shares, including, among others, interest, taxes,
brokerage fees and commissions, fees of Trustees who are not full-time employees
of the Adviser or any of its affiliates, expenses of Trustees' and shareholders'
meetings including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of repurchase and
redemption of shares, expenses of issue and sale of shares (to the extent not
borne by its national distributor under its agreement with the Trust), expenses
of printing and mailing stock certificates representing shares of the Trust,
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents and financial agents, bookkeeping, auditing and legal
expenses. The Trust will also pay the fees and bear the expense of registering
and maintaining the registration of the Trust and its shares with the Securities
and Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders. Additionally, if authorized by the Trustees, the Trust
shall pay for extraordinary expenses and expenses of a non-recurring nature
which may include, but not be limited to the reasonable and proportionate cost
of any reorganization or acquisition of assets and the cost of legal proceedings
to which the Trust is a party.
8. For providing the services and assuming the expenses outlined herein,
the Trust agrees that the Adviser shall be compensated as follows:
(a) Within five days after the end of each month, the Trust shall pay the
Adviser a fee based on the following annual rates as a percentage of
the average aggregate daily net asset values of the Portfolio: 0.75% of
the first $1 billion; 0.70% of the next billion dollars and 0.65% of
all sums in excess of the foregoing. The amounts payable to the Adviser
with respect to the Portfolio shall be based upon the average of the
values of the net assets of such Portfolio as of the close of business
each day, computed in accordance with the Declaration of Trust.
(b) Compensation shall accrue immediately upon the effective date of this
Agreement.
<PAGE>
-3-
(c) If there is termination of this Agreement during a month, each Series'
fee for that month shall be proportionately computed upon the average
of the daily net asset values of such Series for such partial period in
such month.
(d) The Adviser agrees to reimburse the Trust for the amount, if any, by
which the total operating and management expenses for any Series
(including the Adviser's compensation, pursuant to this paragraph, but
excluding taxes, interest, costs of portfolio acquisitions and
dispositions and extraordinary expenses), for any "fiscal year" exceed
the level of expenses which such Series is permitted to bear under the
most restrictive expense limitation (which is not waived by the State)
imposed on open-end investment companies by any state in which shares
of such Series are then qualified. Such reimbursement, if any, will be
made by the Adviser to the Trust within five days after the end of each
month. For the purpose of this subparagraph (d), the term "fiscal year"
shall include the portion of the then current fiscal year which shall
have elapsed at the date of termination of this Agreement.
9. The services of the Adviser to the Trust are not to be deemed
exclusive, the Adviser being free to render services to others and to engage in
other activities. Without relieving the Adviser of its duties hereunder and
subject to the prior approval of the Trustees and subject further to compliance
with applicable provisions of the Investment Company Act of 1940, as amended,
the Adviser may appoint one or more agents to perform any of the functions and
services which are to be provided under the terms of this Agreement upon such
terms and conditions as may be mutually agreed upon among the Trust, the Adviser
and any such agent.
10. The Adviser shall not be liable to the Trust or to any shareholder of
the Trust for any error of judgment or mistake of law or for any loss suffered
by the Trust or by any shareholder of the Trust in connection with the matters
to which this Agreement or any Subadvisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Adviser in the performance of its duties hereunder.
11. It is understood that:
(a) Trustees, officers, employees, agents and shareholders of the Trust
are or may be "interested persons" of the Adviser or any subadviser as
directors, officers, stockholders or otherwise;
(b) Directors, officers, employees, agents and stockholders of the Adviser
or any subadviser are or may be "interested persons" of the Trust as
Trustees, officers, shareholders or otherwise; and
(c) The existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder.
12. This Agreement shall become effective with respect to the Portfolio as
of the date stated above (the "Contract Date") and with respect to any
Additional Series, on the date specified in the notice to the Trust from the
Adviser in accordance with paragraph 2 hereof that the Adviser is willing to
serve as Adviser with respect to such Additional Series. Unless terminated as
herein
<PAGE>
-4-
provided, this Agreement shall remain in full force and effect for a period of
one year following the Contract Date, and, with respect to each Additional
Series, until the next anniversary of the Contract Date on which such Additional
Series became subject to the terms and conditions of this Agreement and shall
continue in full force and effect for periods of one year thereafter with
respect to each Series so long as (a) such continuance with respect to any such
Series is approved at least annually by either the Trustees or by a "vote of the
majority of the outstanding voting securities" of such Series and (b) the terms
and any renewal of this Agreement with respect to any such Series have been
approved by a vote of a majority of the Trustees who are not parties to this
Agreement or "interested persons" of any such party cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that the
continuance of this Agreement with respect to each Additional Series is subject
to its approval by a "vote of a majority of the outstanding voting securities"
of any such Additional Series on or before the next anniversary of the Contract
Date following the date on which such Additional Series became a Series
hereunder.
Any approval of this Agreement by a vote of the holders of a "majority of
the outstanding voting securities" of any Series shall be effective to continue
this Agreement with respect to such Series notwithstanding (a) that this
Agreement has not been approved by a "vote of a majority of the outstanding
voting securities" of any other Series of the Trust affected thereby and (b)
that this Agreement has not been approved by the holders of a "vote of a
majority of the outstanding voting securities" of the Trust, unless either such
additional approval shall be required by any other applicable law or otherwise.
13. The Trust may terminate this Agreement with respect to the Trust or to
the Portfolio upon 60 days' written notice to the Adviser at any time, without
the payment of any penalty, by vote of the Trustees or, as to each Series, by a
"vote of the majority of the outstanding voting securities" of such Series. The
Adviser may terminate this Agreement upon 60 days' written notice to the Trust,
without the payment of any penalty. This Agreement shall immediately terminate
in the event of its "assignment".
14. The terms "majority of the outstanding voting securities", "interested
persons" and "assignment", when used herein, shall have the respective meanings
in the Investment Company Act of 1940, as amended.
15. In the event of termination of this Agreement, or at the request of the
Adviser, the Trust will eliminate all reference to "Phoenix" from its name, and
will not thereafter transact business in a name using the word "Phoenix" in any
form or combination whatsoever, or otherwise use the word "Phoenix" as part of
its name. The Trust will thereafter in all prospectuses, advertising materials,
letterheads, and other material designed to be read by investors and prospective
investors delete from its name the word "Phoenix" or any approximation thereof.
If the Adviser chooses to withdraw the Trust's right to use the word "Phoenix",
it agrees to submit the question of continuing this Agreement to a vote of the
Trust's shareholders at the time of such withdrawal.
16. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the trust property of
the Trust, as provided in the Declaration of Trust. The execution and delivery
of this Agreement have been authorized by the Trustees and shareholders of the
Trust and signed by the President of the Trust, acting as such, and neither such
authorization by
<PAGE>
-5-
such Trustees and shareholders nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or be binding upon
or impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust. The Declaration
of Trust, as amended, is or shall be on file with the Secretary of The
Commonwealth of Massachusetts.
17. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX MULTI-PORTFOLIO FUND
By: /s/ Philip R. McLoughlin
--------------------------------------------
Philip R. McLoughlin, President
PHOENIX REALTY SECURITIES, INC.
By: /s/ Barbara Rubin
--------------------------------------------
Barbara Rubin, Executive Vice President
Exhibit 5.4
Subadvisory Agreement
<PAGE>
PHOENIX MULTI-PORTFOLIO FUND
SUBADVISORY AGREEMENT
---------------------
November 19, 1997
Duff & Phelps Investment Management Co.
55 East Monroe Street
Chicago, Illinois
RE: SUBADVISORY AGREEMENT
Gentlemen:
Phoenix Multi-Portfolio Fund (the "Fund") is a diversified open-end investment
company of the series type registered under the Investment Company Act of 1940
(the "Act"), and is subject to the rules and regulations promulgated thereunder.
The shares of the Fund are offered or may be offered in several series,
including the Real Estate Securities Portfolio (the "Series").
Phoenix Realty Securities, Inc. (the "Adviser") evaluates and recommends
series advisers for the Series and is responsible for the day-to-day management
of the Series.
1. Employment as a Subadviser. The Adviser, being duly authorized, hereby
employs Duff & Phelps Investment Management Co. (the "Subadviser") as a
discretionary series adviser to invest and reinvest the assets of the
Series on the terms and conditions set forth herein. The services of
the Subadviser hereunder are not to be deemed exclusive; the Subadviser
may render services to others and engage in other activities which do
not conflict in any material manner in the Subadviser's performance
hereunder.
2. Acceptance of Employment; Standard of Performance. The Subadviser
accepts its employment as a discretionary series adviser of the Series
and agrees to use its best professional judgment to make investment
decisions for the Series in accordance with the provisions of this
Agreement and as set forth in Schedule D attached hereto and made a
part hereof.
3. Services of Subadviser. In providing management services to the Series,
the Subadviser shall be subject to the investment objectives, policies
and restrictions of the Fund as they apply to the Series and as set
forth in the Fund's then current Prospectus and Statement of Additional
Information (as
<PAGE>
2
the same may be modified from time to time and provided to the
Subadviser by Adviser), and to the investment restrictions set forth in
the Act and the Rules thereunder, to the supervision and control of the
Trustees of the Fund (the "Trustees"), and to instructions from the
Adviser. The Subadviser shall not, without the Fund's prior approval,
effect any transactions which would cause the Series at the time of the
transaction to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All series transactions for the Series will be
consummated by payment to, or delivery by, the Custodian(s) from time
to time designated by the Fund (the "Custodian"), or such depositories
or agents as may be designated by the Custodian in writing, of all cash
and/or securities due to or from the Series. The Subadviser shall not
have possession or custody of such cash and/or securities or any
responsibility or liability with respect to such custody. The
Subadviser shall advise the Custodian and confirm in writing to the
Fund all investment orders for the Series placed by it with brokers and
dealers at the time and in the manner set forth in Schedule A hereto
(as amended from time to time). The Fund shall issue to the Custodian
such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Subadviser. The Fund
shall be responsible for all custodial arrangements and the payment of
all custodial charges and fees, and, upon giving proper instructions to
the Custodian, the Subadviser shall have no responsibility or liability
with respect to custodial arrangements or the act, omissions or other
conduct of the Custodian.
5. Allocation of Brokerage. The Subadviser shall have authority and
discretion to select brokers and dealers to execute Series transactions
initiated by the Subadviser, and to select the markets on or in which
the transactions will be executed.
A. In placing orders for the sale and purchase of Series securities for
the Fund, the Subadviser's primary responsibility shall be to seek the
best execution of orders at the most favorable prices. However, this
responsibility shall not obligate the Subadviser to solicit competitive
bids for each transaction or to seek the lowest available commission
cost to the Fund, so long as the Subadviser reasonably believes that
the broker or dealer selected by it can be expected to obtain a "best
execution" market price on the particular transaction and determines in
good faith that the commission cost is reasonable in relation to the
value of the brokerage and research services (as defined in Section
28(e)(3) of the Securities Exchange Act of 1934) provided
<PAGE>
3
by such broker or dealer to the Subadviser, viewed in terms of either
that particular transaction or of the Subadviser's overall
responsibilities with respect to its clients, including the Fund, as to
which the Subadviser exercises investment discretion, notwithstanding
that the Fund may not be the direct or exclusive beneficiary of any
such services or that another broker may be willing to charge the Fund
a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Adviser shall
have the right to require that transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the Adviser and the
Subadviser, shall be executed by brokers and dealers that provide
brokerage or research services to the Fund or that will be of value to
the Fund in the management of its assets, which services and
relationship may, but need not, be of direct benefit to the Series. In
addition, subject to paragraph A above and the applicable Conduct Rules
of the National Association of Securities Dealers, Inc., the Fund shall
have the right to request that series transactions be executed by
brokers and dealers by or through whom sales of shares of the Fund are
made.
C. The Subadviser shall not execute any Series transactions for the
Series with a broker or dealer that is an "affiliated person" (as
defined in the Act) of the Fund, the Subadviser or the Adviser without
the prior written approval of the Fund. The Fund will provide the
Subadviser with a list of brokers and dealers that are "affiliated
persons" of the Fund or Adviser.
6. Proxies. The Fund, or the Adviser as its authorized agent, will vote
all proxies solicited by or with respect to the issuers of securities
in which assets of the Series may be invested. At the request of the
Fund, the Subadviser shall provide the Fund with its recommendations as
to the voting of particular proxies.
7. Fees for Services. The compensation of the Subadviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the Investment
Advisory Agreement between the Fund and the Adviser, the Adviser is
solely responsible for the payment of fees to the Subadviser.
8. Limitation of Liability. The Subadviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its best
professional judgment, in good faith and believed by it to be
authorized or within the discretion or rights or
<PAGE>
4
powers conferred upon it by this Agreement, or in accordance with
specific directions or instructions from the Fund, provided, however,
that such acts or omissions shall not have constituted a breach of the
investment objectives, policies and restrictions applicable to the
Series and that such acts or omissions shall not have resulted from the
Subadviser's willful misfeasance, bad faith or gross negligence, a
violation of the standard of care established by and applicable to the
Subadviser in its actions under this Agreement or a breach of its duty
or of its obligations hereunder (provided, however, that the foregoing
shall not be construed to protect the Subadviser from liability under
the Act).
9. Confidentiality. Subject to the duty of the Subadviser and the Fund to
comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Series and the actions
of the Subadviser and the Fund in respect thereof.
10. Assignment. This Agreement shall terminate automatically in the event
of its assignment, as that term is defined in Section 2(a)(4) of the
Act. The Subadviser shall notify the Fund in writing sufficiently in
advance of any proposed change of control, as defined in Section
2(a)(9) of the Act, as will enable the Fund to consider whether an
assignment as defined in Section 2(a)(4) of the Act will occur, and to
take the steps necessary to enter into a new contract with the
Subadviser.
11. Representations, Warranties and Agreements of the Subadviser. The
Subadviser represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the
Investment Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of
the Fund, in the manner required or permitted by the Act and
the Rules thereunder, the records identified in Schedule B (as
Schedule B may be amended from time to time). The Subadviser
agrees that such records are the property of the Fund, and
will be surrendered to the Fund or to Adviser as agent of the
Fund promptly upon request of either.
C. It has or shall adopt a written code of ethics complying
with the requirements of Rule 17j-l under the Act and will
provide the Fund and Adviser with a copy of the code of ethics
and evidence of its adoption.
<PAGE>
5
Subadviser acknowledges receipt of the written code of ethics
adopted by and on behalf of the Fund (the "Code of Ethics").
Within 10 days of the end of each calendar quarter while this
Agreement is in effect, a duly authorized compliance officer
of the Subadviser shall certify to the Fund and to Adviser
that the Subadviser has complied with the requirements of Rule
17j-l during the previous calendar quarter and that there has
been no violation of its code of ethics, or the Code of
Ethics, or if such a violation has occurred, that appropriate
action was taken in response to such violation. The Subadviser
shall permit the Fund and Adviser to examine the reports
required to be made by the Subadviser under Rule 17j-l(c)(1)
and this subparagraph.
D. Reference is hereby made to the Declaration of Trust dated
February 18, 1986 establishing the Fund, a copy of which has
been filed with the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed with the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or
hereafter filed. The name Phoenix Multi-Portfolio Fund refers
to the Trustees under said Declaration of Trust, as Trustees
and not personally, and no Trustee, shareholder, officer,
agent or employee of the Fund shall be held to any personal
liability in connection with the affairs of the Fund; only the
trust estate under said Declaration of Trust is liable.
Without limiting the generality of the foregoing, neither the
Subadviser nor any of its officers, directors, partners,
shareholders or employees shall, under any circumstances, have
recourse or cause or willingly permit recourse to be had
directly or indirectly to any personal, statutory, or other
liability of any shareholder, Trustee, officer, agent or
employee of the Fund or of any successor of the Fund, whether
such liability now exists or is hereafter incurred for claims
against the trust estate.
12. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Subadviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A, B, and D, is subject
to the approval of the Trustees and the Shareholders of the Fund as and
to the extent required by the Act.
13. Effective Date; Term. This Agreement shall become effective on the date
set forth on the first page of this Agreement, and shall continue in
effect until the
<PAGE>
6
first meeting of the shareholders of the Series, and, if its renewal is
approved at that meeting in the manner required by the Act, shall
continue in effect thereafter only so long as its continuance has been
specifically approved at least annually by the Trustees in accordance
with Section 15(a) of the Investment Company Act, and by the majority
vote of the disinterested Trustees in accordance with the requirements
of Section 15(c) thereof.
14. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the
event of a breach of any provision thereof by a party so notified, or
otherwise upon thirty (30) days' written notice to the other parties,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other parties.
15. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the Commonwealth of Massachusetts.
16. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the
remainder of this
<PAGE>
Agreement shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
PHOENIX MULTI-PORTFOLIO FUND
By: /s/ Philip R. McLoughlin
--------------------------------------
Philip R. McLoughlin
President
PHOENIX REALTY SECURITIES, INC.
By: /s/ Barbara Rubin
--------------------------------------
Barbara Rubin
President
ACCEPTED:
DUFF & PHELPS INVESTMENT
MANAGEMENT CO.
By: /s/ William R. Moyer
--------------------------------
William R. Moyer
Vice President
SCHEDULES: A. Operational Procedures
B. Record Keeping Requirements
C. Fee Schedule
D. Subadviser Functions
<PAGE>
SCHEDULE A
----------
OPERATIONAL PROCEDURES
In order to minimize operational problems, it will be necessary for a flow of
information to be supplied to State Street Bank and Trust Company (the
"Custodian"), the custodian for the Fund.
The Subadviser must furnish the Custodian with daily information as to executed
trades, or, if no trades are executed, with a report to that effect, no later
than 5 p.m. (Eastern Standard time) on the day of the trade (confirmation
received from broker). The necessary information can be sent via facsimile
machine to the Custodian. Information provided to the Custodian shall include
the following:
1. Purchase or sale;
2. Security name;
3. CUSIP number (if applicable);
4. Number of shares and sales price per share;
5. Executing broker;
6. Settlement agent;
7. Trade date;
8. Settlement date;
9. Aggregate commission or if a net trade;
10. Interest purchased or sold from interest bearing security;
11. Other fees;
12. Net proceeds of the transaction;
13. Exchange where trade was executed; and
14. Identified tax lot (if applicable).
When opening accounts with brokers for, and in the name of, the Fund, the
account must be a cash account. No margin accounts are to be maintained in the
name of the Fund. Delivery instructions are as specified by the Custodian. The
Custodian will supply the Subadviser daily with a cash availability report. This
will normally be done by telex so that the Subadviser will know the amount
available for investment purposes.
<PAGE>
SCHEDULE B
----------
RECORDS TO BE MAINTAINED BY THE SUBADVISER
1. (Rule 31a-1(b)(5)) A record of each brokerage order, and all other
series purchases and sales, given by the Subadviser on behalf of the
Fund for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellations thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of series securities to named brokers or dealers was effected, and
the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or
dealers to:
(a) The Fund,
(b) The Adviser (Phoenix Realty Securities, Inc.)
(c) The Subadviser, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
<PAGE>
3. (Rule 31a-(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of series securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its
members who participate in the authorization. There shall be retained
as part of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of series securities and
such other information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Subadviser's transactions for the Fund.
- --------------------------------------
*Such information might include: current financial information, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or subadviser review.
<PAGE>
SCHEDULE C
----------
SUBADVISORY FEE
(a) For services provided to the Fund, the Adviser will pay to the
Subadviser, on or before the 10th day of each month, a fee, payable in arrears,
at the annual rate of 0.45% of the average daily net asset values of the Series
up to $1 billion; 0.35% of such values from $1 billion to $2 billion; and 0.30%
of such values in excess of $2 billion. The fees shall be prorated for any month
during which this agreement is in effect for only a portion of the month. In
computing the fee to be paid to the Subadviser, the net asset value of the Fund
and each Series shall be valued as set forth in the then current registration
statement of the Fund.
<PAGE>
SCHEDULE D
----------
SUBADVISER FUNCTIONS
With respect to managing the investment and reinvestment of the Series'
assets, the Subadviser shall provide, at its own expense:
(a) Investment research, advice and analysis, including, without
limitation, initial and ongoing i) assessment of national,
regional and specific real estate markets and real estate
related equities, and ii) detailed analysis of real estate
investment trust assets considered for purchase and held by
the Series with respect to inter alia local market conditions,
fair market value, overall property condition, insurance
converages and deductibles, tenant composition and vacancies,
compliance matters relating to zoning, handicap accessibility,
environmental, and other applicable codes, and such other
matters as the Adviser shall from time to time request;
(b) An investment program for the Series consistent with its
investment objectives based upon the development, review and
adjustment of buy/sell strategies approved from time to time
by the Board of Trustees and Adviser;
(c) Implementation of the investment program for the Series based
upon the foregoing criteria;
(d) Quarterly reports, in form and substance acceptable to
the Adviser, with respect to: i) compliance with the Code of
Ethics and the Subadviser's code of ethics; ii) compliance
with procedures adopted from time to time by the Trustees of
the Fund relative to securities eligible for resale under Rule
144A under the Securities Act of 1933, as amended; iii)
diversification of Series assets in accordance with the then
prevailing prospectus and statement of additional information
pertaining to the Series and governing laws; iv) compliance
with governing restrictions relating to the fair valuation of
securities for which market quotations are not readily
available or considered "illiquid" for the purposes of
complying with the Series' limitation on acquisition of
illiquid securities; v) any and all other reports reasonably
requested in accordance with or described in this Agreement;
and, vi) the implementation of the Series' investment program,
including, without limitation, analysis of Series performance;
<PAGE>
(e) Attendance by appropriate representatives of the Subadviser at
meetings requested by the Adviser or Trustees at such time(s)
and location(s) as reasonably requested by the Adviser or
Trustees; and
(f) Participation, overall assistance and support in marketing the
Series, including, without limitation, meetings with pension
fund representatives, broker/dealers who have a sales
agreement with Phoenix Equity Planning Corporation, and other
parties requested by the Adviser.
Exhibit 6.2
Sales Agreement
<PAGE>
[logo]PHOENIX Phoenix Funds
DUFF&PHELPS Sales Agreement
- --------------------------------------------------------------------------------
PHOENIX EQUITY PLANNING CORPORATION
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, Connecticut 06083-2200
Dealer Name:
Address:
Phoenix Equity Planning Corporation ("PEPCO", "we", "us", or "our") invites you
to participate in the sale and distribution of shares of registered investment
companies (which shall collectively be referred to hereinafter as the "Funds")
for which we are national distributor or principal underwriter, and which may be
listed in Annex A hereto which such Annex may be amended by us from time to
time. Upon acceptance of this agreement by PEPCO, you may offer and sell shares
of each of the Funds (hereafter "Shares") subject, however, to the terms and
conditions hereof including our right to suspend or cease the sale of such
shares. For the purposes hereof, the above referenced dealer shall be referred
to as "you".
1. You understand and agree that in all sales of Shares to the public, you
shall act as dealer for your own account. All purchase orders and
applications are subject to acceptance or rejection by us in our sole
discretion and are effective only upon confirmation by us. Each purchase
will be deemed to have been consummated in our principal office subject to
our acceptance and effective only upon confirmation to you by us.
2. You agree that all purchases of Shares by you shall be made only for the
purpose of covering purchase orders already received from your customers
(who may be any person other than a securities dealer or broker) or for
your own bona-fide investment.
3. You shall offer and sell Shares pursuant to this agreement for the purpose
of covering purchase orders of your customers, to the extent applicable,
(a) at the current public offering price ("Offering Price") for Class A
Shares or (b) at the Net Asset Value for Class B shares as set forth in the
current prospectus of each of the funds. The offer and sale of Class B
Shares by you is subject to Annex B hereto, "Compliance Standards for the
Sale of the Phoenix Funds Under Their Alternative Purchase Arrangements".
4. You shall pay us for Shares purchased within three (3) business days of the
date of our confirmation to you of such purchase or within such time as
required by applicable rule or law. The purchase price shall be (a) the
Offering Price, less only the applicable dealer discount (Dealer Discount)
for Class A Shares, if applicable, or (b) the Net Asset Value, less only
the applicable sales commission (Sales Commission) for Class B Shares, if
applicable, as set forth in the current prospectus at the time the purchase
is received by us. We have the right, without notice, to cancel any order
for which payment of good and sufficient funds has not been received by us
as provided in this paragraph, in which case you may be held responsible
for any loss suffered resulting from your failure to make payment as
aforesaid.
5. You understand and agree that any Dealer Discount, Sales Commission or fee
is subject to change from time to time without prior notice. Any orders
placed after the effective date of any such change shall be subject to the
Dealer Discount or Sales Commission in effect at the time such order is
received by us.
6. You understand and agree that Shares purchased by you under this Agreement
will not be delivered until payment of good and sufficient funds has been
received by us. Delivery of Shares will be made by credit to a shareholder
open account unless delivery of certificates is specified in the purchase
order. In order to avoid unnecessary delay, it is understood that, at your
request, any Shares resold by you to one of your customers will be
delivered (whether by credit to a shareholder open account or by delivery
of certificates) in the name of your customer.
<PAGE>
7. You understand that on all purchases of Shares to which the terms of this
Agreement are applicable by a shareholder for whom you are dealer of
record, we will pay you an amount equal to the Dealer Discount, Sales
Commission or fees which would have been paid to you with respect to such
Shares if such Shares had been purchased through you. You understand and
agree that the dealer of record for this purpose shall be the dealer
through whom such shareholder most recently purchased Shares of such fund,
unless the shareholder or you have instructed us otherwise. You understand
that all amounts payable to you under this paragraph and currently payable
under this agreement will be paid as of the end of the month unless
specified otherwise for the total amount of Shares to which this paragraph
is applicable but may be paid more frequently as we may determine in our
discretion. Your request for Dealer Discount or Sales Commission reclaims
will be considered if adequate verification and documentation of the
purchase in question is supplied to us, and the reclaim is requested within
three years of such purchase.
8. We appoint the transfer agent (or identified sub-transfer agent) for each
of the Funds as our agent to execute the purchase transaction of Shares and
to confirm such purchases to your customers on your behalf, and you
guarantee the legal capacity of your customers so purchasing such Shares.
You further understand that if a customer's account is established without
the customer signing the application form, you hereby represent that the
instructions relating to the registration and shareholder options selected
(whether on the application form, in some other document or orally) are in
accordance with the customer's instructions and you agree to indemnify the
Funds, the transfer agent (or identified sub-transfer agent) and us for any
loss or liability resulting from acting upon such instructions.
9. Upon the purchase of Class A Shares pursuant to a Letter of Intent, you
will promptly return to us any excess of the Dealer Discount previously
allowed or paid to you over that allowable in respect to such larger
purchases.
10. Unless at the time of transmitting a purchase order you advise us to the
contrary, we may consider that the investor owns no other Shares and may
further assume that the investor is not entitled to any lower sales charge
than that accorded to a single transaction in the amount of the purchase
order, as set forth in the current prospectus.
11. You understand and agree that if any Shares purchased by you under the
terms of this Agreement are, within seven (7) business days after the date
of our confirmation to you of the original purchase order for such Shares,
repurchased by us as agent for such fund or are tendered to such fund for
redemption, you shall forfeit the right to, and shall promptly pay over to
us the amount of any Dealer Discount or Sales Commission allowed to you
with respect to such Shares. We will notify you of such repurchase or
redemption within ten (10) days of the date upon which certificates are
delivered to us or to such fund or the date upon which the holder of Shares
held in a shareholder open account places or causes to be placed with us or
with such fund an order to have such shares repurchased or redeemed.
12. You agree that, in the case of any repurchase of any Shares made more than
seven (7) business days after confirmation by us of any purchase of such
Shares, except in the case of Shares purchased from you by us for your own
bona fide investment, you will act only as agent for the holders of such
Shares and will place the orders for repurchase only with us. It is
understood that you may charge the holder of such Shares a fair commission
for handling the transaction.
13. Our obligations to you under this Agreement are subject to all the
provisions of the respective distribution agreements entered into between
us and each of the Funds. You understand and agree that in performing your
services under this agreement you are acting in the capacity of an
independent contractor, and we are in no way responsible for the manner of
your performance or for any of your acts or omissions in connection
therewith. Nothing in the Agreement shall be construed to constitute you or
any of your agents, employees, or representatives as our agent, partner or
employee, or the agent, partner of employee of any of the Funds.
In connection with the sale and distribution of shares of Phoenix Funds,
you agree to indemnify and hold us and our affiliates, employees, and/or
officers harmless from any damage or expense as a result of (a) the
negligence, misconduct or wrongful act by you or any employee,
representative, or agent of yours and/or (b) any actual or alleged
violation of any securities laws, regulations or orders. Any indebtedness
or obligation of yours to us whether arising hereunder or otherwise, and
any liabilities incurred or moneys paid by us to any person as a result of
any misrepresentation, wrongful or unauthorized act or omission, negligence
of, or failure of you or your employees, representatives or agents to
comply with the Sales Agreement, shall be set off against any compensation
payable under this agreement. Any differential between such expenses and
compensation payable hereunder shall be payable to us upon demand. The
terms of this provision shall not be impaired by the termination of this
agreement.
In connection with the sale and distribution of shares of Phoenix Funds, we
agree to indemnify and hold you, harmless from any damage or expense on
account of the gross and willful negligence, misconduct or wrongful act of
us or any employee, representative, or agent of ours which arises out of or
is based upon any untrue statement or alleged untrue statement of material
fact, or the omission or alleged omission of a material fact in: (i) any
registration statement, including any prospectus or any post-effective
amendment thereto; or (ii) any material prepared and/or supplied by us for
use in conjunction with the offer or sale of Phoenix Funds; or (iii) any
state registration or other document filed in any state or jurisdiction in
order to qualify any Fund under the securities laws of such state or
jurisdiction. The terms of this provision shall not be impaired by the
termination of this agreement.
<PAGE>
14. We will supply you with reasonable quantities of the current prospectus,
periodic reports to shareholders, and sales materials for each of the
Funds. You agree not to use any other advertising or sales material
relating to the sale of shares of any of the Funds unless such other
advertising or sales material is pre-approved in writing by us.
15. You agree to offer and sell Shares only in accordance with the terms and
conditions of the then current prospectus of each of the Funds and subject
to the provisions of this Agreement, and you will make no representations
not contained in any such prospectus or any authorized supplemental sales
material supplied by us. You agree to use your best efforts in the
development and promotion of sales of the Shares covered by this Agreement,
and agree to be responsible for the proper instruction, training and
supervision of all sales representatives employed by you in order that such
Shares will be offered in accordance with the terms and conditions of this
Agreement and all applicable laws, rules and regulations. All expenses
incurred by you in connection with your activities under this Agreement
shall be borne by you. In consideration for the extension of the right to
exercise telephone exchange and redemption privileges to you and your
registered representatives, you agree to bear the risk of any loss
resulting from any unauthorized telephone exchange or redemption
instructions from you or your registered representatives. In the event we
determine to refund any amounts paid by any investor by reason of such
violation on your part, you shall forfeit the right to, and pay over to us,
the amount of any Dealer Discount or Sales Commission allowed to you with
respect to the transaction for which the refund is made.
16. You represent that you are properly registered as a broker or dealer under
the Securities and Exchange Act of 1934 and are member of the National
Association of Securities Dealers, Inc. (NASD) and agree to maintain
membership in the NASD or in the alternative, that you are a foreign dealer
not eligible for membership in the NASD. You agree to notify us promptly of
any change, termination or suspension of the foregoing status. You agree to
abide by all the rules and regulations of the NASD including Section 26 of
Article III of the Rules of Fair Practice, which is incorporated herein by
reference as if set forth in full. You further agree to comply with all
applicable state and Federal laws and the rules and regulations of
applicable regulatory agencies. You further agree that you will not sell,
or offer for sale, Shares in any jurisdiction in which such Shares have not
been duly registered or qualified for sale. You agree to promptly notify us
with respect to (a) the initiation and disposition of any formal
disciplinary action by the NASD or any other agency or instrumentality
having jurisdiction with respect to the subject matter hereof against you
or any of your employees or agents; (b) the issuance of any form of
deficiency notice by the NASD or any such agency regarding your training,
supervision or sales practices; and (c) the effectuation of any consensual
order with respect thereto.
17. Either party may terminate this agreement for any reason by written or
electronic notice to the other party which termination shall become
effective fifteen (15) days after the date of mailing or electronically
transmitting such notice to the other party. We may also terminate this
agreement for cause or as a result of a violation by you, as determined by
us in our discretion, of any of the provisions of this Agreement, said
termination to be effective on the date of mailing written or transmitting
electronic notice to you of the same. Without limiting the generality of
the foregoing, your own expulsion from the NASD will automatically
terminate this Agreement without notice. Your suspension from the NASD or
violation of applicable state or Federal laws or rules and regulations of
applicable regulatory agencies will terminate this Agreement effective upon
the date of our mailing written notice or transmitting electronic notice to
you of such termination. Our failure to terminate this Agreement for any
cause shall not constitute a waiver of our right to so terminate at a later
date.
18. All communications and notices to you or us shall be sent to the addresses
set forth at the beginning of this Agreement or to such other address as
may be specified in writing from time to time.
19. This agreement shall become effective upon the date of its acceptance by us
as set forth herein. This agreement may be amended by PEPCO from time to
time. This Agreement and all rights and obligations of the parties
hereunder shall be governed by and construed under the laws of the State of
Connecticut. This agreement is not assignable or transferable, except that
we may assign or transfer this agreement to any successor distributor of
the Shares described herein.
ACCEPTED ON BEHALF OF ACCEPTED ON BEHALF OF
PHOENIX EQUITY PLANNING DEALER FIRM:
CORPORATION:
Date ______________________________ Date __________________________________
By /s/ John F. Sharry By
________________________________ ____________________________________
Print Name John F. Sharry Print Name
_________________________ ____________________________
Managing Director, Retail Sales
Print Title _______________________ Print Title ___________________________
NASD CRD Number _______________________
<PAGE>
[LOGO]PHOENIX AMENDED ANNEX A, DEALER AGREEMENT WITH
DUFF&PHELPS PHOENIX EQUITY PLANNING CORPORATION, FEBRUARY 27, 1998
================================================================================
I. PHOENIX FAMILY OF FUNDS
- --------------------------------------------------------------------------------
PHOENIX SERIES FUND
Balanced Fund Series
Convertible Fund Series
Growth Fund Series
Aggressive Growth Fund Series
High Yield Fund Series
Money Market Fund Series
U.S. Government Securities Fund Series
PHOENIX-ABERDEEN SERIES FUND
Aberdeen New Asia Fund
Aberdeen Global Small Cap Fund
PHOENIX MULTI-PORTFOLIO FUND
Tax-Exempt Bond Portfolio
Mid Cap Portfolio
International Portfolio
Real Estate Securities Portfolio
Emerging Markets Bond Portfolio
Strategic Income Fund
PHOENIX STRATEGIC EQUITY SERIES FUND
Equity Opportunities Fund
Strategic Theme Fund
Small Cap Fund
PHOENIX EQUITY SERIES FUND
Core Equity Fund
Growth and Income Fund
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX VALUE EQUITY FUND
PHOENIX SMALL CAP VALUE FUND
PHOENIX-ENGEMANN FUNDS
Balanced Return Fund
Global Growth Fund
Growth Fund
Nifty Fifty Fund
Small & Mid-Cap Growth Fund
Value 25 Fund
- --------------------------------------------------------------------------------
Equity Planning may sponsor, to all qualifying dealers, on a non-discriminatory
basis, sales contests, training and educational meetings and provide to all
qualifying broker/dealers, from its own profits and resources, additional
compensation in the form of trips, merchandise or expense reimbursement. Brokers
or 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. Applicable waivers of Class A sales loads and Class B
contingent deferred sales charges are described in the prospectus.
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES (EXCEPT MULTI-SECTOR SHORT TERM MULTI-SECTOR SHORT TERM
BOND FUND & MONEY MARKET) BOND FUND CLASS A SHARES
DEALER DISCOUNT DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
TRANSACTION OFFERING PRICE OFFERING PRICE OFFERING PRICE OFFERING PRICE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.25% 2.25% 2.00%
- -------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.50 4.00 1.25 1.00
- -------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.50 3.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 3.00 2.75 1.00 1.00
- -------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00 1.75 0.75 0.75
- -------------------------------------------------------------------------------------------------------------------------------
$1,000,000 or more None None None None
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Shares of the Money Market Series are offered to the public at their constant
net asset value of $1.00 per share with no sales charge on Class A shares.
$1 MILLION NAV SALES FINDERS FEE: In connection with Class A Share purchases of
$1,000,000 or more (or subsequent purchases in any amount), Equity Planning may
pay broker/dealers, from its own profits and resources, a percentage of the net
asset value of shares sold (excluding Money Market shares) as set forth in the
table below. If part or all of such investment, is subsequently redeemed within
one year of the investment date, the broker/dealer will refund to Equity
Planning any such amounts paid with respect to the investment.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASE AMOUNT $1,000,000 to $3,000,000 $3,000,001 to $6,000,000 $6,000,001 or more
- -------------------------------------------------------------------------------------------------------------------------------
PAYMENT TO BROKER/DEALERS 1% 0.50 of 1% 0.25 of 1%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of Class A shares sold by such broker/dealers (except
Money Market Series) and remaining outstanding on the Funds' books during the
period in which the fee is calculated. Dealers must have an aggregate value of
$50,000 or more in one Fund to qualify for payment in that Fund.
<PAGE>
================================================================================
CLASS B SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES
(EXCEPT MULTI-SECTOR SHORT TERM BOND FUND) MULTI-SECTOR SHORT TERM BOND FUND CLASS B
<S> <C>
Sales Commission 4.00% Sales Commission 2.00%
</TABLE>
Broker/Dealer firms maintaining house/omnibus accounts, upon redemption of a
customer account within the time frames specified below, shall forward to Equity
Planning the indicated contingent deferred sales charge.
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First 5.00% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------
Second 4.00 1.50
- ---------------------------------------------------------------------------------------------------------------------------
Third 3.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------
Fourth and Fifth 2.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------
Sixth 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of shares sold by such broker/dealers (except Money Market
Series) and remaining outstanding on the Funds' books during the period in which
the fee is calculated, commencing one year after the investment date. Dealers
must have an aggregate value of $50,000 or more in one Fund to qualify for
payment in that Fund.
================================================================================
CLASS C SHARES - MULTI-SECTOR SHORT TERM BOND FUND ONLY
- --------------------------------------------------------------------------------
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
FINDERS FEE:
In connection with Class C Share purchases of $250,000 or more (or subsequent
purchases in any amount), Equity Planning may pay broker-dealers,
from its own resources, on amount equal to 0.50% of purchases above $250,000
but under $3 million plus 0.25% on purchases in excess of $3 million.
If all or part of the investment is subsequently redeemed, except for exchanges
or purchases of other Phoenix funds, within one year of the investment date, the
broker-dealer will refund to the Distributor such amount paid with respect to
the investment.
================================================================================
CLASS C SHARES - AVAILABLE ONLY FOR THE FUNDS LISTED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORE EQUITY FUND PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP
EMERGING MARKETS BOND PORTFOLIO MULTI-SECTOR FIXED INCOME FUND GROWTH FUND
(EFFECTIVE 3-27-98) STRATEGIC INCOME FUND VALUE EQUITY FUND
GROWTH AND INCOME FUND (EFFECTIVE 3-27-98) SMALL CAP VALUE FUND
HIGH YIELD FUND SERIES STRATEGIC THEME FUND PHOENIX-ENGEMANN BALANCED RETURN FUND
(EFFECTIVE 2-27-98) PHOENIX-ENGEMANN NIFTY FIFTY FUND PHOENIX-ENGEMANN VALUE 25 FUND
PHOENIX-ENGEMANN GROWTH FUND
</TABLE>
Sales Commission: 1%. Contingent deferred sales charge: 1% for one year from the
date of each purchase. Broker/Dealer firms maintaining house/omnibus accounts,
upon redemption of a customer account within one year of purchase date, shall
forward to Equity Planning the indicated contingent deferred sales charge.
TRAIL AND SERVICE FEE: Equity Planning intends to pay a fee after the first year
to qualifying broker/dealer firms at the equivalent of 0.75% annually, and a
Service Fee at the equivalent of 0.25% annually, based on the average daily net
asset value of shares sold by such broker/dealers and remaining outstanding on
the Funds' books during the period in which the fee is calculated. Dealers must
have an aggregate value of $50,000 or more in the Fund to qualify for payment.
<PAGE>
================================================================================
CLASS M SHARES - AVAILABLE ONLY FOR THE FUNDS LISTED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORE EQUITY FUND MULTI-SECTOR FIXED INCOME FUND VALUE EQUITY FUND
GROWTH AND INCOME FUND STRATEGIC THEME FUND SMALL CAP VALUE FUND
PHOENIX-ENGEMANN GROWTH FUND PHOENIX-ENGEMANN NIFTY FIFTY FUND PHOENIX-ENGEMANN BALANCED RETURN FUND
PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP PHOENIX-ENGEMANN VALUE 25 FUND
GROWTH FUND
</TABLE>
<TABLE>
<CAPTION>
DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF
OFFERING PRICE OFFERING PRICE OFFERING PRICE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 3.50% 3.00%
- ----------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 2.50 2.00
- ----------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 1.50 1.00
- ----------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 1.00 1.00
- ----------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 None None
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL:: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
================================================================================
II. A. PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Balanced Portfolio Growth Stock Portfolio
Enhanced Reserves Portfolio Money Market Portfolio
Managed Bond Portfolio U.S. Government Securities Portfolio
FINDER'S FEE: Equity Planning may pay broker/dealers, from its own profits and
resources, a percentage of the net asset value of Class X and Class Y shares
sold as set forth in the table below. If part of any investment is subsequently
redeemed within one year of the investment date, the broker/dealer will refund
to Equity Planning any such amounts paid with respect to the investment.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASE AMOUNT 0 to $5,000,000 $5,000,001 to $10,000,000 $10,000,001 or more
- -----------------------------------------------------------------------------------------------------------------------------------
PAYMENT TO BROKER/DEALERS 0.50% 0.25% 0.10%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
================================================================================
II. B. PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Phoenix Real Estate Equity Securities Portfolio
TRAIL: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
<PAGE>
PDP80A (2-98) Distributed by Phoenix Equity Planning Corporation,
Enfield, CT, 06083
<PAGE>
[logo]PHOENIX Annex B To Dealer Agreement With
DUFF&PHELPS Phoenix Equity Planning Corporation
- --------------------------------------------------------------------------------
Compliance Standards for
the Sale of the Phoenix Funds
Under Their Alternative Purchase Arrangements
As national distributor or principal underwriter of the Phoenix Funds, which
offer their shares on both a front-end and deferred sales charge basis, Phoenix
Equity Planning Corporation ("PEPCO") has established the following compliance
standards which set forth the basis upon which shares of the Phoenix Funds may
be sold. These standards are designed for those broker/dealers ("dealers") that
distribute shares of the Phoenix Funds and for each dealer's financial
advisors/registered representatives.
As shares of the Phoenix Funds are offered with two different sales arrangements
for sales and distribution fees, it is important for an investor not only to
choose a mutual fund that best suits his investment objectives, but also to
choose the sales financing method which best suits his particular situation. To
assist investors in these decisions and to ensure proper supervision of mutual
fund purchase recommendations, we are instituting the following compliance
standards to which dealers must adhere when selling shares of the Phoenix Funds:
1. Any purchase of a Phoenix Fund for less than $250,000 may be either of
shares subject to a front-end load (Class A shares) or subject to deferred
sales charge (Class B shares).
2. Any purchase of a Phoenix Fund by an unallocated qualified employer
sponsored plan for less than $1,000,000 may be either of shares subject to
a front-end load (Class A shares) or subject to deferred sales charge
(Class B shares). Class B shares sold to allocated qualified employer
sponsored plans will be limited to a maximum total value of $250,000 per
participant.
3. Any purchase of a Phoenix Fund for $250,000 or more (except as noted above)
or which qualifies under the terms of the prospectus for net asset value
purchase of Class A shares should be for Class A shares.
General Guidelines
These are instances where one financing method may be more advantageous to an
investor than the other. Class A shares are subject to a lower distribution fee
and, accordingly, pay correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase, such
investors would not have all of 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 of 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 of 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
(three years for Asset Reserve).
A National Association of Securities Dealers rule specifically prohibits
"breakpoint sales" of front-end load shares. A "breakpoint sale" is a sale to
the client of an amount of front-end load (Class A) shares just below the amount
which would be subject to the next breakpoint on the fund's sales charge
schedule. Because the deferred sales charge on Class B shares is reduced by 1%
for each year the shares are held, a redemption of Class B shares just before an
"anniversary date" is in some ways analogous to a breakpoint sale. A client
might wish to redeem just before an anniversary date for tax or other reasons,
and a client who chose to wait would continue to be at market risk.
Nevertheless, investment executives should inform clients intending to redeem
Class B shares near an anniversary date that, if the redemption were delayed,
the deferred sales charge would be reduced.
Responsibilities of Branch Office Manager (or other appropriate reviewing
officer).
A dealer's branch manger or other appropriate reviewing officer ("the Reviewing
Officer") must ensure that the financial advisor/registered representative has
advised the client of the available financing methods offered by the Phoenix
Funds, and the impact of choosing one method over another. In certain instances,
it may be appropriate for the Reviewing Officer to discuss the purchase directly
with the client. The reviewing officer should review purchases for Class A or
Class B shares given the relevant facts and circumstances, including but not
limited to: (a) the specific purchase order dollar amount; (b) the length of
time the investor expects to hold his shares; and (c) any other relevant
circumstances, such as the availability of purchases under letters of intent or
pursuant to rights of accumulation and distribution requirements. The foregoing
guidelines, as well as the examples cited above, should assist the Reviewing
Officer in reviewing and supervising purchase recommendations and orders.
Effectiveness
These compliance guidelines are effective immediately with respect to any order
for shares of those Phoenix Funds which offer their shares pursuant to the
alternative purchase arrangement.
Questions relating to these compliance guidelines should be directed by the
dealer to its national mutual fund sales and market group or its legal
department or compliance director. PEPCO will advise dealers in writing of any
future changes in these guidelines.
PEP80B 11/95
Exhibit 9.1
Amended and Restated Financial Agent Agreement
<PAGE>
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 19th day of November, 1997
by and between Phoenix Equity Planning Corporation, a Connecticut corporation
having a place of business located at 100 Bright Meadow Boulevard, Enfield,
Connecticut (the "Financial Agent") and each of the undersigned mutual funds
(hereinafter collectively and singularly referred to as the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the
daily net asset value of shares of the Trust in accordance with instructions
received from time to time from the Board of Trustees of the Trust; which
instructions shall be certified to Financial Agent by the Trust's Secretary.
Financial Agent shall report such net asset value so determined to the Trust and
shall perform such other services as may be requested from time to time by the
Trust as are reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and
in the places required by Rule 31a-2 under the Investment Company Act of 1940,
as amended, those books and records maintained by Financial Agent. Such books
and records are the property of the Trust and shall be surrendered promptly to
the Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of
the Trust, Financial Agent shall receive, within eight days after the end of
each month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted by
it in the exercise of due care in discharging its duties specifically described
hereunder and shall be answerable and accountable only for its own acts and
omissions and not for those of any agent employed by it nor for those of any
bank, trust company, broker, depository, correspondent or other person.
Financial Agent shall be protected in acting upon any instruction, notice,
request, consent, certificate, resolution, or other instrument or paper believed
by Financial Agent to be genuine, and to have been properly executed, and shall,
unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by Financial
Agent hereunder a certificate signed by the Secretary of the Trust. Financial
Agent shall be entitled, with respect to questions of law relating to its duties
hereunder, to advice of counsel (which may be counsel for the Trust) and, with
respect to anything done or omitted by it in good
<PAGE>
faith hereunder in conformity with the advice of or based upon an opinion of
counsel, to be held harmless by the Trust from all claims of loss or damage.
Nothing herein shall protect Financial Agent against any liability to the Trust
or to its respective shareholders to which Financial Agent would otherwise be
subject by reason of its willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties hereunder. Except as provided in this
paragraph, Financial Agent shall not be entitled to any indemnification by the
Trust.
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. Additional funds may become party to this Agreement by notifying the
Financial Agent in writing, and if the Financial agent agrees in writing to
provide its services, such fund shall become a Trust subject to the terms of the
Agreement. Such notification shall include a revised Schedule A reflecting the
new fund(s) as added to the appropriate fund classification(s).
<PAGE>
9. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC.
PHOENIX EQUITY SERIES FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX INVESTMENT TRUST 97
PHOENIX MULTI-PORTFOLIO FUND
PHOENIX MULTI-SECTOR FIXED
INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT
TERM BOND FUND
PHOENIX SERIES FUND
PHOENIX STRATEGIC ALLOCATION
FUND, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND
PHOENIX WORLDWIDE OPPOR-
TUNITIES FUND
By: /s/ Michael E. Haylon
------------------------------------
Michael E. Haylon
Executive Vice President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ Philip R. McLoughlin
------------------------------------
Philip R. McLoughlin
President
<PAGE>
SCHEDULE A
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
Annual Financial Agent Fees shall be based on the following formula:
(1) An incremental schedule applies as follows:
<TABLE>
<S> <C> <C>
Up to $100 million: 5 basis points on average daily net assets
$100 million to $300 million: 4 basis points on average daily net assets
$300 million through $500 million: 3 basis points on average daily net assets
Greater than $500 million: 1.5 basis points on average daily net assets
</TABLE>
A minimum fee will apply as follows:
Money Market $35,000
Equity $50,000
Balanced $60,000
Fixed Income $70,000
International $70,000
REIT $70,000
(2) An additional charge of $12,000 applies for each additional
class of shares above one, over and above the minimum asset-based fee previously
noted.
The following tables indicates the classification and effective date
for each of the applicable fund/series/portfolio:
Classification Series Name
-------------- -----------
Money Market Phoenix Money Market Fund Series
Equity Phoenix Aggressive Growth Fund Series
Phoenix Core Equity Fund
Phoenix Equity Opportunities Fund
Phoenix Growth and Income Fund
Phoenix Growth Fund Series
Phoenix Micro Cap Fund
Phoenix Mid Cap Portfolio
Phoenix Small Cap Fund
Phoenix Small Cap Value Fund
Phoenix Strategic Theme Fund
Phoenix Value Equity Fund
<PAGE>
Classification Series Name
-------------- -----------
Balanced Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Income and Growth Fund
Phoenix Strategic Allocation Fund, Inc.
Fixed Income Phoenix California Tax Exempt Bonds, Inc.
Phoenix Strategic Income Fund
Phoenix Emerging Markets Bond Portfolio
Phoenix High Yield Fund Series
Phoenix Multi-Sector Fixed Income Fund,
Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Tax-Exempt Bond Portfolio
Phoenix U.S. Government Securities Fund Series
International Phoenix International Portfolio
Phoenix Worldwide Opportunities Fund
REIT Phoenix Real Estate Securities Portfolio
Exhibit 10.5
Opinion and Consent of Counsel Covering
Shares of the Phoenix Strategic Income Fund
<PAGE>
[LETTERHEAD]
THE PHOENIX FUNDS
March 27, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Phoenix Multi-Portfolio Fund
Post-Effective Amendment No. 22 to
Registration Statement no. 33-19423
Dear Sirs:
As counsel to Phoenix Investment Counsel, Inc., I have participated in
the development of and am familiar with the Phoenix Multi-Portfolio Fund, an
open-end, management investment company whose shares are the subject of the
above-captioned Registration Statement on Form N-1A, and post-effective
amendment No. 22 to this Registration Statement significantly alters one of the
portfolios.
In rendering my opinion, I have examined such documents, records, and
matters of law as I deemed necessary for purposes of this opinion. I have
assumed the genuineness of all signatures of all parties, the authenticity of
all documents submitted as originals, the correctness of all copies, and the
correctness of all facts set forth in the certificates delivered to me and the
correctness of all written or oral statements made to me.
Based upon this review, I am of the opinion that, after effectiveness
of the post-effective amendment and the registration or qualification in the
appropriate states, and upon payment of the consideration described in the
registration statement, each share of each class of shares of the Phoenix
Strategic Income Fund, when issued, will have been validly and duly issued,
fully paid and non-assessable.
My opinion is rendered solely in connection with the Registration
Statement on Form N-1A under which the Shares will be registered and may not be
relied upon for any other purposes without my written consent. I hereby consent
to the use of this opinion as an exhibit to such Registration Statement.
Very truly yours,
/s/ Thomas N. Steenburg
-------------------------------
Thomas N. Steenburg
Exhibit 11
Consent of Independent Accountants
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 23 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 21, 1998, relating to the financial
statements and financial highlights appearing in the November 30, 1997 Annual
Report to Shareholders of the Tax-Exempt Bond Portfolio, Mid Cap Portfolio,
International Portfolio, Real Estate Securities Portfolio and Emerging Markets
Bond Portfolio of The Phoenix Multi-Portfolio Fund and of our report dated
January 21, 1998, relating to the financial statements and financial highlights
appearing in the November 30, 1997 Annual Report to Shareholders of the
Diversified Income Portfolio of The Phoenix Multi-Portfolio Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Financial Highlights" in the Prospectus
and under the heading "Additional Information - Independent Accountants" in the
Statement of Additional Information.
/s/ Price Waterhouse LLP
Boston, Massachusetts
March 27, 1998
<TABLE> <S> <C>
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<NAME> PHOENIX TAX EXEMPT BOND PORTFOLIO CLASS A
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<S> <C>
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<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
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<INVESTMENTS-AT-VALUE> 126785
<RECEIVABLES> 2198
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128983
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 423
<TOTAL-LIABILITIES> 423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121978
<SHARES-COMMON-STOCK> 10986
<SHARES-COMMON-PRIOR> 12111
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<OVERDISTRIBUTION-NII> (124)
<ACCUMULATED-NET-GAINS> 108
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6598
<NET-ASSETS> 128560
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8325
<OTHER-INCOME> 0
<EXPENSES-NET> (1300)
<NET-INVESTMENT-INCOME> 7025
<REALIZED-GAINS-CURRENT> 175
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 7621
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6761
<DISTRIBUTIONS-OF-GAINS> 1899
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5120
<NUMBER-OF-SHARES-REDEEMED> (6702)
<SHARES-REINVESTED> 458
<NET-CHANGE-IN-ASSETS> (13795)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1867
<OVERDISTRIB-NII-PRIOR> (118)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 593
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1300
<AVERAGE-NET-ASSETS> 131826
<PER-SHARE-NAV-BEGIN> 11.28
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> (0.16)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.17
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
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<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> PHOENIX TAX EXEMPT BOND PORTFOLIO CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
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<INVESTMENTS-AT-VALUE> 126785
<RECEIVABLES> 2198
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128983
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<OTHER-ITEMS-LIABILITIES> 423
<TOTAL-LIABILITIES> 423
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121978
<SHARES-COMMON-STOCK> 517
<SHARES-COMMON-PRIOR> 421
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (124)
<ACCUMULATED-NET-GAINS> 108
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6598
<NET-ASSETS> 128560
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8325
<OTHER-INCOME> 0
<EXPENSES-NET> (1300)
<NET-INVESTMENT-INCOME> 7025
<REALIZED-GAINS-CURRENT> 175
<APPREC-INCREASE-CURRENT> 421
<NET-CHANGE-FROM-OPS> 7621
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 234
<DISTRIBUTIONS-OF-GAINS> 66
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 200
<NUMBER-OF-SHARES-REDEEMED> (120)
<SHARES-REINVESTED> 16
<NET-CHANGE-IN-ASSETS> 1035
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1867
<OVERDISTRIB-NII-PRIOR> (118)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 593
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<GROSS-EXPENSE> 1300
<AVERAGE-NET-ASSETS> 131826
<PER-SHARE-NAV-BEGIN> 11.32
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.06
<PER-SHARE-DIVIDEND> (0.50)
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<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.22
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> PHOENIX MID CAP PORTFOLIO CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
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<TOTAL-ASSETS> 405520
<PAYABLE-FOR-SECURITIES> 25864
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<OTHER-ITEMS-LIABILITIES> 1020
<TOTAL-LIABILITIES> 26884
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 288268
<SHARES-COMMON-STOCK> 17445
<SHARES-COMMON-PRIOR> 20849
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34750
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55618
<NET-ASSETS> 378636
<DIVIDEND-INCOME> 2465
<INTEREST-INCOME> 2252
<OTHER-INCOME> 320
<EXPENSES-NET> (5488)
<NET-INVESTMENT-INCOME> (451)
<REALIZED-GAINS-CURRENT> 36322
<APPREC-INCREASE-CURRENT> (8036)
<NET-CHANGE-FROM-OPS> 27835
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 51980
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<NUMBER-OF-SHARES-SOLD> 2046
<NUMBER-OF-SHARES-REDEEMED> (8074)
<SHARES-REINVESTED> 2624
<NET-CHANGE-IN-ASSETS> (91420)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 52883
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 5488
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<PER-SHARE-NAV-BEGIN> 21.65
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<PER-SHARE-NAV-END> 20.64
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
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<NAME> PHOENIX MID CAP PORTFOLIO CLASS B
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-START> DEC-01-1996
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 288268
<SHARES-COMMON-STOCK> 924
<SHARES-COMMON-PRIOR> 826
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34750
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 55618
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<INTEREST-INCOME> 2252
<OTHER-INCOME> 320
<EXPENSES-NET> (5488)
<NET-INVESTMENT-INCOME> (451)
<REALIZED-GAINS-CURRENT> 36322
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<NET-CHANGE-FROM-OPS> 27835
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<DISTRIBUTIONS-OF-GAINS> 2026
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<SHARES-REINVESTED> 102
<NET-CHANGE-IN-ASSETS> 984
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<PER-SHARE-NAV-END> 20.11
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> PHOENIX INTERNATIONAL PORTFOLIO CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
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<PAID-IN-CAPITAL-COMMON> 111404
<SHARES-COMMON-STOCK> 9454
<SHARES-COMMON-PRIOR> 9362
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (332)
<ACCUMULATED-NET-GAINS> 11420
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19006
<NET-ASSETS> 141498
<DIVIDEND-INCOME> 1800
<INTEREST-INCOME> 715
<OTHER-INCOME> 0
<EXPENSES-NET> (2280)
<NET-INVESTMENT-INCOME> 235
<REALIZED-GAINS-CURRENT> 11443
<APPREC-INCREASE-CURRENT> (622)
<NET-CHANGE-FROM-OPS> 11056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2608
<DISTRIBUTIONS-OF-GAINS> 12022
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4286
<NUMBER-OF-SHARES-REDEEMED> (5208)
<SHARES-REINVESTED> 1013
<NET-CHANGE-IN-ASSETS> (4186)
<ACCUMULATED-NII-PRIOR> 2213
<ACCUMULATED-GAINS-PRIOR> 12614
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2280
<AVERAGE-NET-ASSETS> 141652
<PER-SHARE-NAV-BEGIN> 14.48
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> (1.34)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.89
<EXPENSE-RATIO> 1.56
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> PHOENIX INTERNATIONAL PORTFOLIO CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 123470
<INVESTMENTS-AT-VALUE> 142474
<RECEIVABLES> 500
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 142983
<PAYABLE-FOR-SECURITIES> 73
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1412
<TOTAL-LIABILITIES> 1485
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111404
<SHARES-COMMON-STOCK> 749
<SHARES-COMMON-PRIOR> 489
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (332)
<ACCUMULATED-NET-GAINS> 11420
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19006
<NET-ASSETS> 141498
<DIVIDEND-INCOME> 1800
<INTEREST-INCOME> 715
<OTHER-INCOME> 0
<EXPENSES-NET> (2280)
<NET-INVESTMENT-INCOME> 235
<REALIZED-GAINS-CURRENT> 11443
<APPREC-INCREASE-CURRENT> (622)
<NET-CHANGE-FROM-OPS> 11056
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 129
<DISTRIBUTIONS-OF-GAINS> 658
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 728
<NUMBER-OF-SHARES-REDEEMED> (525)
<SHARES-REINVESTED> 57
<NET-CHANGE-IN-ASSETS> 3204
<ACCUMULATED-NII-PRIOR> 2213
<ACCUMULATED-GAINS-PRIOR> 12614
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2280
<AVERAGE-NET-ASSETS> 141652
<PER-SHARE-NAV-BEGIN> 14.22
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 1.00
<PER-SHARE-DIVIDEND> (0.24)
<PER-SHARE-DISTRIBUTIONS> (1.34)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.56
<EXPENSE-RATIO> 2.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> PHOENIX REAL ESTATE SECURITIES PORTFOLIO CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<INVESTMENTS-AT-COST> 48301
<INVESTMENTS-AT-VALUE> 59421
<RECEIVABLES> 155
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59576
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 150
<TOTAL-LIABILITIES> 150
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44325
<SHARES-COMMON-STOCK> 2218
<SHARES-COMMON-PRIOR> 1741
<ACCUMULATED-NII-CURRENT> 212
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3769
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<NAME> PHOENIX EMERGING MARKETS BOND PORTFOLIO CLASS A
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<NAME> PHOENIX EMERGING MARKETS BOND PORTFOLIO CLASS B
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