As filed with the Securities and Exchange Commission on February 25, 1998
Registration No. 33-31243
File No. 811-5909
================================================================================
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. 13 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 15 [X]
(Check appropriate box or boxes)
-------------
Phoenix Multi-Sector Fixed Income Fund, Inc.
(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 Corporation--Customer Service
(800) 243-1574
(Registrant's Telephone Number)
-------------
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):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on February 27, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on pursuant to paragraph (a)(2) 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-SECTOR FIXED INCOME FUND, INC.
Cross Reference Sheet
Required by Rule 495
Under the Securities Act of 1933
PART A
Information Required in Prospectus
<TABLE>
<CAPTION>
Item Number Prospectus Caption
- ----------- -------------------
<S> <C> <C>
1. Cover Page ........................................... Cover Page
2. Synopsis ............................................. Fund Expenses
3. Condensed Financial Information ...................... Financial Highlights
4. General Description of Registrant .................... Cover Page; Introduction; Investment Objectives and
Policies; Additional Information
5. Management of the Fund ............................... Management of the Funds
5A. Management's Discussion of Fund Performance .......... Performance Information
6. Capital Stock and Other Securities ................... Dividends, Distributions and Taxes; Net Asset Value;
How to Buy Shares; Additional Information
7. Purchase of Securities Being Offered ................. Net Asset Value; How to Buy Shares; Investor Account
Services; Distribution Plans
8. Redemption or Repurchase ............................. How to Redeem Shares
9. Legal Proceeding ..................................... Not Applicable
</TABLE>
PART B
Information Required in Statement of Additional Information
<TABLE>
<CAPTION>
Item Number Statement of Additional Information
- ----------- ------------------------------------
<S> <C> <C>
10. Cover Page ................................................... Cover Page
11. Table of Contents ............................................ Table of Contents
12. General Information and History .............................. Cover Page; the Fund
13. Investment Objectives and Policies ........................... Investment Objective and Policies; Cover Page;
Investment Restrictions; Investment Techniques
14. Management of the Fund ....................................... Services of the Adviser; Other Information; Directors
and Officers
15. Control Persons and Principal Holders of Securities .......... Principal Shareholders
16. Investment Advisory and Other Services ....................... Services of the Adviser; Plans of Distribution
17. Brokerage Allocation ......................................... 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 Net Asset Value; How to Buy Shares; Investor Account
Offered ...................................................... Services; Redemption of Shares
20. Tax Status ................................................... Dividends, Distributions and Taxes
21. Underwriter .................................................. The Distributor; Plans of Distribution
22. Calculations of Performance Data ............................. Performance Information
23. Financial Statements ......................................... Financial Statements
</TABLE>
<PAGE>
[FRONT COVER]
P H O E N I X
F U N D S
Prospectus February 27, 1998
[triangle] PHOENIX MULTI-SECTOR
FIXED INCOME FUND, INC.
[triangle] PHOENIX MULTI-SECTOR
SHORT TERM BOND FUND
[LOGO] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
February 27, 1998
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fixed Income Fund") is
a diversified, open-end management investment company with an investment
objective to maximize current income consistent with the preservation of
capital.
In pursuing its objective, except as limited below, the Fixed Income Fund
may invest its assets in each or any combination of four market sectors in any
proportion deemed advisable by the Fund's investment adviser. The Fixed Income
Fund will not, however, invest more than 50% of its assets, determined at the
time of investment in High Yield-High Risk fixed income securities ("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 Fixed Income
Fund. See "Investment Objective and Policies" and "Investment Techniques and
Related Risks."
Phoenix Multi-Sector Short Term Bond Fund (the "Short Term Fund") is a
diversified, open-end management investment company with an investment objective
of providing high current income relative to short-term alternatives, while
attempting to limit fluctuations in the net asset value of Short Term Fund
shares resulting from movements in interest rates.
This Prospectus sets forth concisely the information about the Funds 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
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Funds, 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 an 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 Funds is contained in each Fund's Statement of Additional
Information, dated February 27, 1998, which have been filed with the Securities
and Exchange Commission (the "Commission") and which are available upon request
and 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 Statements of Additional Information are
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 Funds 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, the
Federal Reserve Board, or any other agency and involve investment risk,
including possible loss of principal.
- --------------------------------------------------------------------------------
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>
TABLE OF CONTENTS
Page
-----
INTRODUCTION ..................................... 3
FUND EXPENSES .................................... 5
FINANCIAL HIGHLIGHTS ............................. 7
PERFORMANCE INFORMATION .......................... 9
INVESTMENT OBJECTIVES AND POLICIES ............... 9
INVESTMENT TECHNIQUES AND RELATED RISKS .......... 14
INVESTMENT RESTRICTIONS .......................... 18
PORTFOLIO TURNOVER ............................... 18
MANAGEMENT OF THE FUNDS .......................... 18
DISTRIBUTION PLANS ............................... 19
HOW TO BUY SHARES ................................ 21
INVESTOR ACCOUNT SERVICES ........................ 25
NET ASSET VALUE .................................. 26
HOW TO REDEEM SHARES ............................. 26
DIVIDENDS, DISTRIBUTIONS AND TAXES ............... 28
ADDITIONAL INFORMATION ........................... 29
APPENDIX ......................................... 30
2
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of
Phoenix Multi-Sector Short Term Bond Fund (the "Short Term Fund") and Phoenix
Multi-Sector Fixed Income Fund, Inc. (the "Fixed Income Fund" and collectively
the "Funds"). The Fixed Income Fund is a diversified, open-end management
investment company established as a corporation under the laws of Maryland. The
Fixed Income Fund's investment objective is to maximize current income
consistent with the preservation of capital. The Fixed Income Fund will seek to
achieve its objective by investing in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities;
(b) debt securities issued by foreign issuers, including foreign governments and
their political subdivisions; (c) securities rated investment grade by a
nationally recognized statistical rating organization and (d) high yield, high
risk fixed income securities. There can be no assurance that the Fixed Income
Fund's investment objective will be achieved.
The Short Term Fund is a diversified, open-end management investment
company established as a business trust under the laws of Massachusetts. The
Short Term Fund's investment objective is to provide high current income
relative to other short-term investment alternatives, while attempting to limit
fluctuations in the net asset value of Fund shares resulting from movements in
interest rates. The Short Term Fund will seek to achieve its objective by
investing in the following market sectors: (a) securities issued or guaranteed
as to principal and interest by the U.S. Government, its agencies or
instrumentalities; (b) debt securities issued by foreign issuers, including
foreign governments and their political subdivisions; and (c) high yield ("junk
bonds") and investment grade fixed income securities. In pursuing its objective,
except as limited below, the Short Term Fund may invest its assets in each or
any combination of these market sectors in any proportion deemed advisable by
the Short Term Fund's investment adviser. There can be no assurance that the
Short Term Fund's objective will be achieved.
The Investment Adviser
National Securities & Research Corporation ("National" or the "Adviser") is
the investment adviser of the Funds and its professional staff selects and
supervises the investments in each Fund's portfolio. National is a subsidiary of
Phoenix Duff & Phelps Corporation and an indirect subsidiary of Phoenix Home
Life Mutual Insurance Company. See "Management of the Funds" for a description
of the Investment Advisory Agreements and management fees.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor")
serves as national distributor of each Fund'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 Funds' transfer agent. See "The Custodian and
Transfer Agent."
Each Fund has adopted amended and restated distribution plans pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). Pursuant to the amended and restated distribution plans adopted for Class
A Shares, the Funds shall reimburse the Distributor up to a maximum annual rate
of 0.05% of each Fund's average daily Class A Share net assets for distribution
expenditures incurred in connection with the sale and promotion of Class A
Shares. Although the Class A Shares Plans continue to provide for a 0.05%
distribution fee, the Distributor has voluntarily agreed to waive the Rule 12b-1
fee charged to Class A Shares for the fiscal year 1998. Pursuant to the amended
and restated distribution plans adopted for Class B Shares, Class C Shares and
Class M Shares of the Fixed Income Fund, the Fund shall reimburse the
Distributor up to a maximum annual rate of 0.75%, 0.75% and 0.25%, respectively,
of the Fund's average daily net assets for such Class of Shares for distribution
expenditures incurred in connection with the sale and promotion of each Class of
Shares. Pursuant to the amended and restated Class B and Class C Plans adopted
by the Short Term Fund, the fund shall reimburse the Distributor up to a maximum
annual rate of 0.50% and 0.25%, respectively, of the Fund's average daily net
assets for such Class of Shares for distribution expenditures incurred in
connection with the sale and promotion of each Class of Shares. In addition,
each Fund will pay the Distributor 0.25% annually of the average daily net
assets of each Class of Shares for furnishing shareholder services (the "Service
Fee"). See "Distribution Plans."
Purchase of Shares
The Fixed Income Fund offers four classes of shares 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").
Class A and M Shares of the Fixed Income Fund 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. See "Initial Sales
Charge Alternative--Class A and M Shares" and "How to Obtain Reduced Sales
Charges--Class A and M Shares."
Class B and C Shares of the Fixed Income Fund 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. See "Deferred Sales Charge
Alternative--Class B and C Shares" and "How to Obtain Reduced Sales Charges--
Class B and C Shares."
The Short Term Fund offers two classes of shares which may be purchased at
a price equal to their net asset value per share
3
<PAGE>
plus sales charges which, at the election of the purchaser, may be imposed (i)
at the time of purchase (the "Class A Shares"), or (ii) on a contingent
deferred basis (the "Class B Shares"), and one class of shares which may be
purchased at a price equal to their net asset value without a sales charge (the
"Class C Shares").
Class A Shares of the Short Term Fund are offered to the public at the next
determined net asset value after receipt of the order by State Street Bank plus
a maximum sales charge of 2.25% of the offering price (2.30% of the amount
invested) on single purchases of less than $50,000. The sales charge for Class A
Shares is reduced on a graduated scale on single purchases of $50,000 or more
and subject to other conditions stated below. See "Initial Sales Charge
Alternative--Class A and M Shares" and "How to Obtain Reduced Sales
Charges--Class A and M Shares."
Class B Shares of the Short Term Fund 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 three years of purchase. See "Deferred Sales Charge
Alternative--Class B and C Shares" and "How to Obtain Reduced Sales
Charges--Class B and C Shares."
Class C Shares of the Short Term Fund 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. See "Deferred Sales Charge Alternative--Class B and C Shares"
and "How to Buy Shares."
Shares of each Class of each Fund represent an identical interest in the
investment portfolio of a Fund and have the same rights. For more information on
fees and charges applicable for each Fund and Class, refer to "Fund Expenses"
and "How to Buy Shares."
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.
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investing program designated "Investo-Matic"), and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment amounts
are available under certain circumstances. See "How to Buy Shares."
Redemption of Shares
Class A and M 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 (excluding Class C Shares of the Short Term Fund) 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 each Fund will achieve its investment
objective. In addition, special risks may be presented by the particular types
of securities in which each Fund may invest. For example, the Fixed Income Fund
may invest up to 50% of its total assets and the Short Term Fund may invest up
to 35% of its assets in below investment grade securities. Such securities are
sometimes referred to as "junk bonds." Investing in junk bonds involves risks
not typically associated with investment in higher-rated securities, including
overall greater risk of non-payment of interest and principal and potentially
greater sensitivity to general economic conditions and changes in interest
rates. In addition, investors should consider risks inherent in foreign debt
securities, including foreign exchange rate fluctuations and exchange controls.
See "Investment Objectives and Policies" and "Investment Techniques and Related
Risks."
4
<PAGE>
FUND EXPENSES
The following table illustrates fees and expenses a shareholder will incur.
The fees and expenses are set forth in the table for the period ended October
31, 1997.
<TABLE>
<CAPTION>
Fixed Income Fund
---------------------------------------------------------------------------
Class A Class B Class C Class M
Shares Shares Shares (b) Shares (b)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% None None 3.50%
Maximum Sales Load Imposed on Reinvested Dividends None None None None
Deferred Sales Load (as a percentage of original purchase None 5% during the first 1% during the None
year, decreasing 1% first year
price or redemption proceeds, as applicable) annually to 2% during
the fourth and fifth years;
decreasing to 0% after
the fifth year
Redemption Fee None None None None
Exchange Fee None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .55% .55% .55% .55%
12b-1 Fees (a) (after waiver) .25% 1.00% 1.00% .50%
Other Operating Expenses .24% .24% .24% .24%
------ ----- ------ ------
Total Fund Operating Expenses (c) 1.04% 1.79% 1.79% 1.29%
====== ===== ====== ======
</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"). The
Distributor has voluntarily agreed to continue to limit the Class A 12b-1 Fees
to 0.25% for the fiscal year 1998. Absent such waiver, the Class A 12b-1 Fees
would have been 0.30% for the last fiscal year. The 12b-1 Fees as stated
include a Service Fee.
(b) Prior to October 14, 1997, Class C and Class M Shares were not
offered.
(c) For the fiscal year 1997, Total Fund Operating Expenses for Class A
Shares would have been 1.09% without the 12b-1 Fee waiver.
<TABLE>
<CAPTION>
Short Term Fund
-------------------------------------------------------------
Class A Shares Class B Shares Class C Shares (c)
---------------- ----------------------- -------------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2.25% None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load (as a percentage of original purchase None 2% during the first None
price or redemption proceeds, as applicable) year, decreasing
.50% annually to
1% during the third
year and dropping
from 1% to 0% after
the third year.
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .55% .55% .55%
12b-1 Fees(a) (after waiver) .25% .75% .50%
Other Operating Expenses (after expense reimbursement) (b) .20% .20% .20%
----- ----- -----
Total Fund Operating Expenses 1.00% 1.50% 1.25%
===== ===== =====
</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"). The
Distributor has voluntarily agreed to continue to limit the Class A 12b-1 Fees
to 0.25% for the fiscal year 1998. Absent such waiver, the Class A 12b-1 Fees
would have been 0.30% for the last fiscal year. The 12b-1 Fees as stated
include a Service Fee.
(b) The Adviser has agreed to reimburse the Fund's operating expenses
other than Management Fees and Rule 12b-1 Fees related to Class A, Class B and
Class C Shares for the amount, if any, by which such operating expenses for the
fiscal year ended October 31, 1998, exceed 0.20% of the average net assets.
Other Operating Expenses for Class A, Class B and Class C Shares would have
been 1.06% respectively, and Total Fund Operating Expenses for Class A, Class B
and Class C Shares would have been 1.86%, 2.36% and 2.11%, respectively, absent
such waiver or reimbursement, for the fiscal year ended October 31, 1997.
(c) Prior to October 1, 1997, Class C Shares were not offered.
5
<PAGE>
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
Example* 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a hypothetical $1,000
investment assuming (1) 5% annual return and (2) redemption at the
end of each time period:
Fixed Income Fund Class A Shares $58 $79 $102 $169
Fixed Income Fund Class B Shares 68 86 117 191
Fixed Income Fund Class C Shares 26 51 88 192
Fixed Income Fund Class M Shares 47 74 102 183
Short Term Fund Class A Shares 32 54 77 142
Short Term Fund Class B Shares 35 57 82 166
Short Term Fund Class C Shares 13 40 69 151
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:
Fixed Income Fund Class A Shares $58 $79 $102 $169
Fixed Income Fund Class B Shares 18 56 97 191
Fixed Income Fund Class C Shares 16 51 88 192
Fixed Income Fund Class M Shares 47 74 102 183
Short Term Fund Class A Shares 32 54 77 142
Short Term Fund Class B Shares 15 47 82 166
Short Term Fund Class C Shares 13 40 69 151
</TABLE>
*The purpose of the above table 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. See "Management of the Fund,"
"Distribution Plans," and "How to Buy Shares."
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth certain financial information for each class
of shares for each Fund. This financial information has been audited by Price
Waterhouse LLP, independent accountants. Their opinion and each Fund's Financial
Statements and notes thereto are incorporated by reference in each Fund's
Statement of Additional Information. Each Statement of Additional Information
and each Fund's most recent Annual Report (containing the report of Independent
Accountants and additional information relating to Fund performance) are
available at no charge upon request by calling (800) 243-4361.
FIXED INCOME FUND
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------
1997 1996 1995 1994
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 13.27 $ 12.56 $ 11.94 $ 14.13
Income from investment operations
Net investment income ............................ 1.03 0.94 0.96 0.76
Net realized and unrealized gain (loss) .......... 0.18 0.72 0.61 (1.35)
--------- ------- ------- -------
Total from investment operations ................ 1.21 1.66 1.57 (0.59)
--------- ------- ------- -------
Less distributions
Dividends from net investment income ............. (0.98) (0.95) (0.95) (0.77)
Dividends in excess of net investment income ..... -- -- -- (0.05)
Dividends from net realized gains ................ -- -- -- (0.63)
Tax return of capital ............................ -- -- -- (0.15)
--------- -------- -------- -------
Total distributions ............................. (0.98) (0.95) (0.95) (1.60)
--------- -------- -------- -------
Change in net asset value ......................... 0.23 0.71 0.62 (2.19)
--------- -------- -------- -------
Net asset value, end of period .................... $ 13.50 $ 13.27 $ 12.56 $ 11.94
========= ======== ======== =======
Total return(1) ................................... 9.22% 13.75% 13.83% (4.57)%
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $ 191,486 $169,664 $168,875 $172,966
Ratio to average net assets of:
Operating expenses ............................... 1.04%(5) 1.07% 1.10% 1.13%
Net investment income ............................ 7.28% 7.56% 8.10% 7.05%
Portfolio turnover ................................ 295% 255% 201% 123%
<CAPTION>
Class A
-----------------------------------------------------------
From
Year Ended October 31, Inception
------------------------------------------ 12/18/89 to
1993 1992 1991 10/31/90
------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 13.29 $ 12.81 $ 11.11 $ 11.91
Income from investment operations
Net investment income ............................ 1.14 1.24 1.22(2) 1.01(2)
Net realized and unrealized gain (loss) .......... 1.08 0.50 1.71 (.78)
------- ------- ------------ ------------
Total from investment operations ................ 2.22 1.74 2.93 .23
------- ------- ------------ ------------
Less distributions
Dividends from net investment income ............. (1.19) (1.21) (1.23) (1.03)
Dividends in excess of net investment income ..... (0.02) -- -- --
Dividends from net realized gains ................ (0.17) (0.05) -- --
Tax return of capital ............................ -- -- -- --
-------- -------- ------------ ------------
Total distributions ............................. (1.38) (1.26) (1.23) (1.03)
-------- -------- ------------ ------------
Change in net asset value ......................... 0.84 0.48 1.70 0.80
-------- -------- ------------ ------------
Net asset value, end of period .................... $ 14.13 $ 13.29 $ 12.81 $ 11.11
======== ======== ============ ============
Total return(1) ................................... 17.55% 14.11% 27.56% 1.85%
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $176,859 $141,627 $ 68,139 $ 8,667
Ratio to average net assets of:
Operating expenses ............................... 1.29% 1.48% 1.50% 1.20%
Net investment income ............................ 8.27% 9.42% 10.13% 9.59%
Portfolio turnover ................................ 207% 116% 180% 2%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 13.25 $ 12.54 $ 11.93 $ 14.10 $ 13.25
Income from investment operations
Net investment income ............................ 0.92 0.85 0.86 0.68 1.04
Net realized and unrealized gain (loss) .......... 0.18 0.71 0.61 (1.36) 1.08
--------- ------- ------- ------- -------
Total from investment operations ................ 1.10 1.56 1.47 (0.68) 2.12
--------- ------- ------- ------- -------
Less distributions
Dividends from net investment income ............. (0.87) (0.85) (0.86) (0.67) (1.08)
Dividends in excess of net investment income ..... -- -- -- (0.05) (0.02)
Dividends from net realized gains ................ -- -- -- (0.63) (0.17)
Tax return of capital ............................ -- -- -- (0.14) --
--------- -------- -------- ------- --------
Total distributions ............................. (0.87) (0.85) (0.86) (1.49) (1.27)
--------- -------- -------- ------- --------
Change in net asset value ......................... 0.23 0.71 0.61 (2.17) 0.85
--------- -------- -------- ------- --------
Net asset value, end of period .................... $ 13.48 $ 13.25 $ 12.54 $ 11.93 $ 14.10
========= ======== ======== ======= ========
Total return(1) ................................... 8.42% 12.84% 12.96% (5.21)% 16.78%
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $ 154,989 $142,869 $144,020 $156,629 $193,064
Ratio to average net assets of:
Operating expenses ............................... 1.79%(5) 1.82% 1.85% 1.78% 1.99%
Net investment income ............................ 6.52% 6.80% 7.30% 6.46% 7.36%
Portfolio turnover ................................ 295% 255% 201% 123% 207%
<CAPTION>
Class B Class C Class M
---------------- ------------------ ------------------
From From From
Inception Inception Inception
1/3/92 to 10/14/97 to 10/14/97 to
10/31/92 10/31/97 10/31/97
---------------- ------------------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of period .............. $ 13.02 $ 14.22 $ 14.22
Income from investment operations
Net investment income ............................ 0.94 0.04 0.04
Net realized and unrealized gain (loss) .......... 0.21 (0.74) (0.73)
--------- ---------- ----------
Total from investment operations ................ 1.15 (0.70) (0.69)
--------- ---------- ----------
Less distributions
Dividends from net investment income ............. (0.92) (0.04) (0.05)
Dividends in excess of net investment income ..... -- -- --
Dividends from net realized gains ................ -- -- --
Tax return of capital ............................ -- -- --
--------- ---------- ----------
Total distributions ............................. (0.92) (0.04) (0.05)
--------- ---------- ----------
Change in net asset value ......................... 0.23 (0.74) (0.74)
--------- ---------- ----------
Net asset value, end of period .................... $ 13.25 $ 13.48 $ 13.48
========= ========== ==========
Total return(1) ................................... 8.81%(4) (5.00)%(4) (4.97)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $ 82,522 $ 284 $ 124
Ratio to average net assets of:
Operating expenses ............................... 2.18%(3) 1.62%(3) 1.27%(3)
Net investment income ............................ 8.47%(3) 4.75%(3) 6.19%(3)
Portfolio turnover ................................ 116% 295% 295%
</TABLE>
- -----------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of $0.04
and $0.38, respectively.
(3) Annualized
(4) Not annualized
(5) For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
7
<PAGE>
SHORT TERM FUND
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------------------------------------
Year Ended From
October 31, Inception
------------------------------------------------------------------------------- 7/6/92 to
1997 1996 1995 1994 1993 10/31/92
--------------- --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................ $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83 $ 4.89
Income from investment
operations
Net investment income ............ 0.34 (2) 0.33 (2) 0.33 (2) 0.29 (2) 0.32 (2) 0.08 (2)
Net realized and
unrealized gain (loss) .......... 0.14 0.17 0.13 (0.26) 0.08 (0.06)
----------- ----------- ----------- ----------- ----------- ------------
Total from investment
operations .................... 0.48 0.50 0.46 0.03 0.40 0.02
----------- ----------- ----------- ----------- ----------- ------------
Less distributions
Dividends from net
investment income ............... (0.33) (0.33) (0.33) (0.29) (0.32) (0.08)
Dividends from net
realized gains .................. -- -- -- (0.03) -- --
Tax return of capital ............ -- -- -- (0.01) -- --
----------- ----------- ----------- ----------- ----------- ------------
Total distributions ............. (0.33) (0.33) (0.33) (0.33) (0.32) (0.08)
----------- ----------- ----------- ----------- ----------- ------------
Change in net asset value ......... 0.15 0.17 0.13 (0.30) 0.08 (0.06)
----------- ----------- ----------- ----------- ----------- ------------
Net asset value, end of
period ........................... $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83
=========== =========== =========== =========== =========== ============
Total return(1) ................... 10.08% 10.91% 10.27% 0.40% 8.49% 0.40%(5)
Ratios/supplemental data:
Net assets, end of period
(thousands) ...................... $ 28,557 $ 13,702 $ 9,303 $ 9,371 $ 6,829 $ 6,531
Ratio to average net assets of:
Operating expenses ............... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(4)
Net investment income ............ 6.54% 6.88% 7.07% 5.99% 6.39% 5.79%(4)
Portfolio turnover ................ 246% 232% 344% 121% 128% 6%(4)
<CAPTION>
Class B
------------------------------------------------------------------------------------------------
Year Ended From
October 31, Inception
------------------------------------------------------------------------------- 7/6/92 to
1997 1996 1995 1994 1993 10/31/92
--------------- --------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................ $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83 $ 4.89
Income from investment
operations
Net investment income ............ 0.31 (3) 0.31 (3) 0.30 (3) 0.27 (3) 0.30 (3) 0.07 (3)
Net realized and
unrealized gain (loss) .......... 0.15 0.17 0.13 (0.26) 0.08 (0.06)
Total from investment
operations .................... 0.46 0.48 0.43 0.01 0.38 0.01
Less distributions
Dividends from net
investment income ............... (0.31) (0.31) (0.30) (0.27) (0.30) (0.07)
Dividends from net
realized gains .................. -- -- -- (0.03) -- --
Tax return of capital ............ -- -- -- (0.01) -- --
-------- -------- -------- -------- -------- --------
Total distributions ............. (0.31) (0.31) (0.30) (0.31) (0.30) (0.07)
-------- -------- -------- -------- -------- --------
Change in net asset value ......... 0.15 0.17 0.13 (0.30) 0.08 (0.06)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ........................... $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83
======== ======== ======== ======== ======== ========
Total return(1) ................... 9.51% 10.36% 9.71% (0.03)% 8.02% 0.20%(5)
Ratios/supplemental data:
Net assets, end of period
(thousands) ...................... $ 10,318 $ 5,943 $ 4,659 $ 6,418 $ 3,968 $ 1,357
Ratio to average net assets of:
Operating expenses ............... 1.50% 1.50% 1.50% 1.45% 1.45% 1.45%(4)
Net investment income ............ 6.05% 6.38% 6.59% 5.74% 5.79% 5.30%(4)
Portfolio turnover ................ 246% 232% 344% 121% 128% 6%(4)
</TABLE>
- -----------
(1) Maximum sales charges are not included in total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.06, $0.08, $0.08, $0.09 and $0.14, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.06, $0.08, $0.08, $0.09 and $0.21, respectively.
(4) Annualized.
(5) Not annualized.
Class C
------------------
From
Inception
10/1/97 to
10/31/97
------------------
Net asset value, beginning of period ............. $ 5.15
Income from investment operations
Net investment income ........................... 0.03 (2)
Net realized and unrealized gain (loss) ......... (0.09)
------------
Total from investment operations ............... (0.06)
------------
Less distributions
Dividends from net investment income ............ (0.03)
Dividends from net realized gains ............... --
Tax return of capital ........................... --
------------
Total distributions ............................ (0.03)
------------
Change in net asset value ........................ (0.09)
------------
Net asset value, end of period ................... $ 5.06
============
Total return(1) .................................. (1.30)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $ 575
Ratio to average net assets of:
Operating expenses .............................. 1.25%(3)
Net investment income ........................... 5.51%(3)
Portfolio turnover ............................... 246%
- -----------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.04.
(3) Annualized
(4) Not annualized
8
<PAGE>
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and total return in
advertisements, sales literature or reports to current and prospective
shareholders. Both yield and total return figures are computed separately for
each Class of Shares in accordance with formulas specified by the Securities and
Exchange Commission. Yield and total return are based on historical earnings and
are not intended to indicate future performance.
The yield of each Fund will be computed by dividing the Fund'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 Fund's yield
for each class.
Standardized quotations of average annual total return for each class of
shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in such class of shares over a period of 1,
5 and 10 years (or the life of the Fund). Standardized total return quotations
reflect the deduction of a proportional share of each Class's expenses (on an
annual basis), deduction of the maximum initial sales load in the case of Class
A and Class M Shares or the maximum contingent deferred sales charge applicable
to a complete redemption of the investment in the case of Class B and Class C
Shares, and assume that all dividends and distributions on each class of shares
are reinvested when paid. Performance data quoted for a class of shares covering
periods prior to the inception of such class of shares will reflect historic
performance of Class A Shares adjusted for the higher operating expenses
applicable to such class of shares. Each Fund also may quote supplementally a
rate of total return over different periods of time or by means of aggregate,
average and year-by-year or other types of total return figures. In addition
each Fund may from time to time publish material citing historical volatility
for shares of each Fund.
Each Fund 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, each Fund may compare its performance
results to other investment or savings vehicles (such as certificates of
deposit) and may refer to results published in various publications such as
Changing Times, Forbes, Fortune, Money, Barrons, Business Week and Investor's
Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment
Adviser, The Wall Street Journal, The New York Times, Consumer Reports,
Registered Representative, Financial Planning, Financial Services Weekly,
Financial World, U.S. News and World Report, Standard and Poor's, The Outlook,
and Personal Investor. The Funds may from time to time illustrate the benefits
of tax deferral by comparing taxable investments to investments made through
tax-deferred retirement plans. The total return may also be used to compare the
performance of each Fund against certain widely acknowledged outside standards
or indices for stock and bond market performance, such as the Lehman Brothers
Aggregate Bond Index, Merrill Lynch Medium Quality Corporate Short-Term Bond
Index, Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Dow
Jones Industrial Average, Europe Australia Far East Index (EAFE), Consumer Price
Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index. The
Lehman Brothers Aggregate Bond Index is an unmanaged but commonly used measure
of bond performance. It is a combination of several Lehman Brothers Fixed Income
indexes.
Advertisements, sales literature and communications may contain information
about each Fund or the Advisor's current investment strategies and management
style. Current strategies and style may change to allow each Fund to respond
quickly to a changing market and economic conditions. From time to time, each
Fund may discuss specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Funds may
separate cumulative and average annual returns into income results and capital
gains or losses; or cite separately as a return figure the equity or bond
portion of the Fund's portfolio; or compare the Fund's equity or bond return
figure to well-known indices of market performance including but not limited to:
the S&P 500 Index, Dow Jones Industrial Average, Lehman Brothers Aggregate Bond
Index, Merrill Lynch Medium Quality Corporate Short-Term Bond Index, CS First
Boston High Yield Index and Salomon Brothers Corporate and Government Bond
Indices.
Performance information for the Funds reflect only the performance of a
hypothetical investment in Class A, Class B, Class C or Class M Shares of the
Fund during the particular time period on which the calculations are based.
Performance information should be considered in light of each Fund'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 a Fund, see the Statement of
Additional Information.
Each Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Fund and a comparison of that
performance to a securities market index.
INVESTMENT OBJECTIVES AND POLICIES
Fixed Income Fund
The Fixed Income Fund's investment objective is to maximize current income
consistent with the preservation of capital. The investment objective of the
Fund is a fundamental policy which may not be changed without the approval of
the holders of a majority of the outstanding shares of the Fund. There can be no
assurance that the Fund's investment objective will be achieved.
9
<PAGE>
The Fixed Income Fund will seek to achieve its objective by investing at
least 65% of its total assets in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
("U.S. Government Securities"); (b) debt securities issued by foreign issuers,
including foreign governments and their political subdivisions ("Foreign
Securities"); (c) securities rated at the time of purchase as investment grade
("Investment Grade Securities") by a nationally recognized statistical rating
organization ("NRSRO"); and (d) high yield, high risk fixed income securities
commonly referred to as "junk bonds". The Fund's assets generally will be
invested in each market sector, but the Fund may invest any amount of its assets
in any one sector (except for high yield, high risk corporate fixed income
securities, in which sector the Fund will not invest more than 50% of its assets
determined at the time of investment) and may choose not to invest in a sector
in order to achieve its investment objective. The Adviser believes that by
following this strategy, the Fund's net asset value is likely to be more stable
than that of a fund which invests in only one of these four fixed income
sectors. Greater stability would occur because, in general, broad
diversification over several market sectors tends to reduce volatility. For
certain of the risk considerations involved in an investment in the Fund, see
"Investment Techniques and Related Risks."
The table below shows the dollar weighted average of total investments, as
of October 31, 1997, listed by Standard & Poor's ("S&P") 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.
S&P Rating Rated Not Rated
- ------------- ---------- ----------
AAA 10.3% 0.0%
AA 3.8 0.0
A 9.4 1.0
BBB 29.0 5.6
BB 14.2 1.5
B 10.4 7.7
CCC 0.2 0.6
CC 0.0 0.0
C 0.0 0.0
D 0.0 0.0
---- ----
77.3 16.4
Short Term Fund
The Short Term Fund's investment objective is to provide high current
income relative to short-term investment alternatives, while attempting to limit
fluctuations in the net asset value of the Fund's shares resulting from
movements in interest rates. The Fund's investment objective is a fundamental
policy and may not be changed without approval of the holders of a majority of
the outstanding shares of the Fund. There can be no assurance that the Fund will
achieve its investment objective.
The Short Term Fund will seek to achieve its objective by investing in a
diversified portfolio of fixed income securities comprised primarily of
shorter-term securities having an expected remaining weighted average maturity
of three years or less. The Fund will seek to achieve its objective by investing
primarily in a portfolio of shorter-term securities in the following market
sectors: (a) securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities ("U.S. Government
Securities"), (b) debt securities issued by foreign issuers, including foreign
governments and their political subdivisions ("Foreign Securities"); and (c)
high yield and investment grade fixed income securities. The Fund's assets
generally will be invested in each fixed income sector; however, the Fund may
invest any amount of its assets in any one sector (except the Fund may not
invest more than 35% of its assets determined at the time of investment in
foreign debt securities). The Fund may choose not to invest in a sector in order
to achieve its investment objective. By following this strategy, the Fund's net
asset value is anticipated to be relatively stable because, in general, broad
diversification over several market sectors tends to reduce volatility. Under
normal circumstances, the Fund's portfolio will be invested primarily in
shorter-term fixed income securities.
The Short Term Fund may, however, invest up to 35% of its assets in
non-short-term securities of differing maturities and in preferred stock. There
will be fluctuations in the Fund's net asset value per share in response to
changes in the value of the securities in which the Fund invests due to changes
in prevailing interest rates and other market and credit factors. It is
anticipated that such fluctuations will generally be less than that of long-term
securities, since the asset values of short-term securities (without regard to
other market and credit factors) are typically less sensitive to interest rate
movements than longer term securities.
The Short Term Fund has no requirements regarding whether the securities it
purchases must be rated. The Fund will typically invest at least 65% of its
assets in Investment Grade Securities which are rated, at the time of
investment, BBB or above by Standard & Poor's Corporation ("S&P"), Duff & Phelps
Credit Rating Co. ("D&P") or Fitch Investor Services, Inc. ("Fitch"), or Baa or
above by Moody's Investor's Service, Inc. ("Moody's") (or, in the case of
unrated securities, judged by the Adviser to be of comparable quality). The Fund
may invest up to 10% of its assets in High Yield-High Risk Securities rated, at
the time of investment, lower than B and as low as Caa by Moody's and CCC by
S&P, D&P, or Fitch. Fixed income securities rated lower than BBB by S&P or Baa
by Moody's are commonly referred to as "junk bonds." The Fund may invest up to
35% of its assets in securities rated, at the time of investment, in securities
rated below BBB/Baa to as low as B by S&P, D&P, Fitch or Moody's. The Fund will
not invest in high yield securities rated at the time of investment lower than
CCC by S&P, D&P or Fitch or lower than Caa by Moody's. Securities rated CCC by
S&P are regarded by S&P as, on balance, 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
10
<PAGE>
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Securities rated Caa by Moody's are regarded
by Moody's to be of poor standing. The Fund may, but is not obligated to,
dispose of debt securities whose credit quality falls below investment grade.
For a more complete description of ratings of corporate obligations, see the
Appendix in the Statement of Additional Information. See also "Risk Factors and
Special Considerations."
U.S. Government Securities
The U.S. Government Securities in which the Funds 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 Funds 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 Funds invest is PERLS (Principal Exchange Rate Linked
Securities), which are bonds whose principal repayment, while 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.
Examples of agencies and instrumentalities that issue U.S. Government
Securities in which the Funds will invest are GNMA, the Federal Home Loan
Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association
("FNMA"), and Student Loan Marketing Association ("SLMA"). GNMA is a wholly
owned corporate instrumentality of the United States and is authorized to
borrow from the U.S. Treasury without limitation to meet its payment
obligations on the mortgage-backed securities which it issues and guarantees.
FNMA is a federally chartered but privately owned corporation which guarantees
the timely payment of principal of and interest on the certificates it issues;
the guarantee is not backed by the U.S. government. FHLMC and SLMA are
corporate instrumentalities of the United States which guarantee the timely
payment of interest on and the ultimate payment of principal of their
certificates; the guarantee is not backed by the U.S. Government. With respect
to obligations issued or guaranteed by U.S. Government agencies, authorities
and instrumentalities, guarantees as to the timely payment of principal and
interest do not extend to the value of the Funds' shares. In addition, the
market value of U.S. Government Securities fluctuates as interest rates change.
These securities may also include collateralized mortgage-backed obligations
("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs are
hybrid instruments with characteristics of both mortgage-backed and mortgage
pass-through securities. Similar to a bond, interest and pre-paid principal on
a CMO are paid, in most cases, semiannually. CMOs may be collateralized by
whole mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA. 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. Mortgages backing U.S.
Government Securities may include, among others, conventional 30-year
fixed-rate mortgages, graduated-payment mortgages, 15-year mortgages and
adjustable-rate mortgages.
The Funds 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).
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.
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
specific 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 the relevant 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
11
<PAGE>
discount. Furthermore, the proceeds from prepayments usually are reinvested at
current market rates, which may be higher than, but usually are lower than, the
rates earned on the original pass-through securities. This reinvestment risk is
increased in the case of GNMA securities because principal is repaid monthly
rather than in a lump sum at maturity.
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 the risk of prepayment.
The Funds may purchase pass-through securities at a premium or at a
discount. The values of pass-through securities in which the Funds may invest
will fluctuate with changes in interest rates. The value of such securities
varies inversely with interest rates, except that when interest rates decline,
the value of pass-through securities may not increase as much as other debt
securities because of the prepayment feature. Changes in the value of such
securities will not affect interest income from those obligations but will be
reflected in the Funds' net asset value.
Foreign Securities
The Foreign Securities in which the Funds may invest are issued by foreign
issuers in developed countries considered creditworthy by the Adviser and in
so-called emerging market countries. The Funds 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. Because foreign
government obligations, like U.S. Government obligations, are generally
guaranteed as to principal and interest by the government issuing the security,
the principal risk of investing in foreign government obligations is that the
foreign government will not, or will be unable to, meet its obligations. The
Funds may also purchase securities of non-governmental issuers considered
creditworthy by the Adviser. For a discussion of the risk considerations of
investing in foreign securities, see "Investment Techniques and Related Risks."
While a portion of the Fund's assets normally will be invested in securities
issued abroad and denominated in foreign currencies ("non-U.S. dollar
securities"), that amount may vary depending on the relative yield of such
securities, the relative strength of the economies and the financial markets of
such countries, the relative interest rates available in such countries and the
relationship of such countries' currencies to the U.S. dollar. Investments in
non-U.S. dollar securities and currency will be evaluated on the basis of
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies) as
well as technical and political data. Normally, the Fixed Income Fund invests
approximately 10-20% of its assets in non-U.S. dollar securities; however, the
Fixed Income Fund does not intend to invest more than 50% of its assets in such
securities. Under normal conditions, up to 35% of the Short Term Fund's assets
may be invested in foreign securities. The Funds may hold foreign currency or
buy and sell foreign currency contracts for hedging purposes to protect against
declines in the U.S. dollar value of foreign securities held by the Funds and
against increases in the U.S. dollar value of the foreign securities which the
Funds might purchase. The Funds' investment restrictions limit their investments
in any industry to 25% of its total assets. A foreign government will be treated
as an industry for purposes of this restriction. See "Investment Restrictions"
in the Statement of Additional Information.
Investment Grade Securities
Investment Grade Securities of domestic issuers in which the Funds may
invest are all types of long- or short-term debt obligations ("Debt
Obligations"), such as bonds, debentures, notes, municipal bonds, 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 Fund may invest in Investment Grade Securities of U.S.
issuers denominated in foreign currencies. The Investment Grade Securities that
the Fund 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.
Municipal bonds are debt obligations which generally have a maturity at the
time of issue in excess of one year and are issued to obtain funds for various
public purposes. The two principal classifications of municipal bonds are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or specific revenue source.
Industrial development bonds or private activity bonds are issued by or on
behalf of public authorities to obtain funds for privately operated facilities
and are, in most cases, revenue bonds which do not generally carry the pledge of
the full faith and credit of the issuer of such bonds, but depend for payment on
the ability of the industrial user to meet its obligations (or any property
pledged as security).
Mortgage pass-through securities created by non-governmental issuers (such
as commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be supported
by various forms of insurance or guarantees,
12
<PAGE>
including individual loan, title, pool and hazard insurance and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers.
High Yield-High Risk Securities
High Yield-High Risk Securities of domestic issuers in which the Funds may
invest are preferred and preference stock and Debt Obligations. The Funds may
invest in High Yield-High Risk Securities of domestic issuers which are
denominated in foreign currencies. The High Yield-High Risk Securities that the
Funds 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.
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 Funds 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 under "Investment Objective and
Policies--U.S. Government Securities."
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 Funds 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 Funds 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 Funds obtain equity securities, the Funds 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 a Fund's
assets.
The Adviser evaluates the purchase of High Yield-High Risk Securities for
the Funds primarily through the exercise of its own investment and credit
analysis and on the ratings assigned by NRSROs. The Funds will not invest in
High Yield-High Risk 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 securities obligations, see the
Appendix.
As a fundamental policy, the Fixed Income Fund's investments in High
Yield-High Risk Securities will be limited to not more than 50% of its assets
and the Short Term Fund will be limited to 35% of its assets. This restriction
applies at the time of investment and any subsequent change in the percentage
due to changes in market value of portfolio securities or other changes in the
total assets will not be considered a violation of this restriction. Because of
the additional risks associated with investments in these securities, an
investor may wish to consider carefully the manner in which each Fund seeks its
objective, and the investor's ability to assume these risks, before investing in
the Funds.
General Investment Policies
For temporary defensive purposes part or all of the Fixed Income Fund's
assets may be in cash or invested in cash equivalents at the discretion of the
Adviser. At times when the Adviser determines that Fund assets should be in cash
or invested in cash equivalents for temporary defensive purposes, the Fund will
not be investing in accordance with its investment objective. The Adviser will
convert Fund assets to cash or invest in cash equivalents for temporary
defensive purposes during periods of rising interest rates, unstable pricing and
currency exchange or in response to extreme market fluctuations.
The Fixed Income Fund expects that, under normal market conditions, the
maturity of any single portfolio security will not exceed 30 years in the U.S.
Government Securities sector, 15 years in the Foreign Securities sector, and 25
years in the Investment Grade Securities and High Yield-High Risk Securities
sectors. However, the dollar-weighted average maturity of the securities in such
sectors of the Fund's portfolio may vary significantly from time to time, based
on such factors as the Adviser's expectations as to future changes in interest
or exchange rates, the maturity schedules and possible prepayment of bonds held
by the Fund and the characteristics and maturities of securities available in
the market for purchase by the Fund at various future times. The adjustment of
the Fund's dollar-weighted average maturity through the sale of portfolio
holdings and the reinvestment of sale proceeds in securities of different
maturities may cause the Fund's portfolio turnover rate to be higher than if the
Fund had held its holdings until their maturity. For a discussion of portfolio
turnover rate, see "Portfolio Turnover."
As a fundamental policy, the Funds may borrow money from banks to the
extent permitted under the 1940 Act. As an operating (non-fundamental) policy,
the Funds do not intend
13
<PAGE>
to borrow any amount in excess of 10% of their respective assets, and would do
so only for temporary emergency or administrative purposes. In addition, to
avoid the potential leveraging of its assets, neither Fund will make additional
investments when its borrowings are in excess of 5% of their total assets. If a
Fund should determine to expand its ability to borrow beyond this current
operating policy, the Prospectus would be amended and shareholders would be
notified.
INVESTMENT TECHNIQUES AND RELATED RISKS
In addition to the investment policies described above, the Funds may
utilize the following investment practices or techniques.
Zero Coupon, Step Coupon and PIK Bonds
The Fixed Income Fund may invest up to 15% of its assets, determined at the
time of investment, in any combination of zero coupon bonds, step coupon bonds
and bonds on which interest is payable in kind ("PIK bonds"), in the aggregate.
The Short Term Fund will not invest more than 3% of its assets in zero coupon
bonds. A zero coupon bond is a bond that does not pay interest currently for its
entire life. Step coupon bonds frequently do not entitle the holder to any
periodic payments of interest for some initial period after the issuance of the
obligation; thereafter, step coupon bonds pay interest for fixed periods of time
at particular interest rates (a "step coupon bond"). In the case of a zero
coupon bond, the nonpayment of interest on a current basis may result from the
bond's having no stated interest rate, in which case the bond pays only
principal at maturity and is initially issued at a discount from face value.
Alternatively, a zero coupon obligation may provide for a stated rate of
interest, but provide that such interest is not payable until maturity, in which
case the bond may initially be issued at par. The value to the investor of a
zero coupon or step coupon bond is represented by the economic accretion either
of the difference between the purchase price and the nominal principal amount
(if no interest is stated to accrue) or of accrued, unpaid interest during the
bond's life or payment deferral period. PIK bonds are obligations which provide
that the issuer thereof may, at its option, pay interest on such bonds in cash
or in the form of additional debt securities. Such securities benefit the issuer
by mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of such
cash. The Funds will accrue income on such investments for tax and accounting
purposes, which is distributable to shareholders from available cash or
liquidated assets. See "Risk Factors" for additional information concerning the
characteristics of zero coupon bonds, step coupon bonds and PIK bonds. See also
"Dividends, Distributions and Taxes."
Options and Other Hedging Activities
The Fixed Income Fund may write and purchase options, including
over-the-counter options, for hedging purposes. The Fixed Income Fund may also
engage in foreign currency exchange transactions and in transactions involving
interest rate futures contracts and options thereon as a hedge against changes
in exchange and interest rates. The Short Term Fund may enter into various
hedging transactions, such as interest rate swaps, and the purchase and sale of
interest rate collars, caps and floors. The Short Term Fund reserves the right,
but has no current intention, to enter into futures contracts, and to write and
purchase options, including foreign currency options and over-the-counter
options. For more information regarding the Funds' options activities, see the
Statement of Additional Information.
Interest Rate Transactions. Interest rate swaps involve the exchange with
another party of commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of an interest rate
cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of interest
on a notional principal amount from the party selling such interest rate floor.
An interest rate collar combines the elements of purchasing a cap and selling a
floor. The collar protects against an interest rate rise above the maximum
amount but gives up the benefit of an interest rate decline below the minimum
amount. The net amount of the excess, if any, of the Fund's obligations over its
entitlements with respect to each interest rate swap will be accrued on a daily
basis and any asset, including equity securities and non-investment grade debt
so long as the asset is liquid, unencumbered and marked to market daily having
an aggregate net asset value at least equal to the accrued excess will be
maintained in a pledged account by the Fund's custodian. If there is a default
by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreements related to the transaction.
Loan Participations
The Funds may invest up to 5% of its net assets, determined at the time of
investment, in loan participations. A loan participation agreement involves the
purchase of a share of a loan made by a bank to a company in return for a
corresponding share of the borrower's principal and interest payments. Loan
participations of the type in which the Funds may invest include interests in
both secured and unsecured corporate loans. When the Funds purchase loan
assignments from lenders, they will acquire direct rights against the borrower,
but these rights and the Funds' obligations may differ from, and be more limited
than, those held by the assignment lender. The principal credit risk associated
with acquiring loan participation and assignment interests is the credit risk
associated with the underlying corporate borrower. There is also a risk that
there may not be a readily available market for participation loan interests
and, in some cases, this could result in the Funds disposing of such securities
at a substantial discount from face value or holding such securities until
maturity. See the Statement of Additional Information.
Trading of Securities
The Funds may trade securities from its portfolio which are not subject to
options, or which are not held in a segregated account with its custodian, for
short-term (less than one year)
14
<PAGE>
profits in order to take advantage of differentials in prices and yields or of
fluctuations in interest rates, consistent with its investment objective.
Repurchase Agreements
The Funds may enter into repurchase agreements with respect to U.S.
Government Securities. Repurchase agreements may be entered into only with
registered broker-dealers or government securities dealers ("dealers") and
depository institutions ("banks") believed by National to present minimum credit
risk in accordance with guidelines approved by the Funds' Directors/ Trustees.
National will review and monitor the creditworthiness of such dealers and banks.
Under such agreements, the dealer or bank agrees, upon entering into the
contract, to repurchase a security it sells at a time and price, mutually agreed
upon with the purchaser of such security, thereby determining the yield during
the term of the agreement. This results in a fixed rate of return insulated from
market fluctuations during such period. The seller under a repurchase agreement
will be required to maintain the value of the securities subject to the
agreement at not less than the repurchase price, and such value will be
determined on a daily basis by marking the underlying securities to their market
value. With respect to any repurchase agreements with a maturity of greater than
one day, such agreements shall be collateralized in an amount at least equal to
102% of the repurchase price. The Funds do not bear the risk of a decline in
value of the underlying security unless the seller defaults under its repurchase
obligation. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Funds could experience both delays in liquidating the
underlying securities and losses, including (a) possible decline in the value of
the underlying securities during the period while the Funds seek to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing rights. The Funds will
limit investments in repurchase agreements to 5% of their net assets.
Reverse Repurchase Agreements and Dollar Roll Agreements
The Funds may enter into reverse repurchase agreements and dollar roll
agreements. A dollar roll agreement is identical to a reverse repurchase
agreement except for the fact that substantially identical securities may be
repurchased. Under a reverse repurchase agreement or a dollar roll agreement, a
Fund sells securities and agrees to repurchase them, or substantially similar
securities in the case of a dollar roll agreement, at a mutually agreed upon
date and price. Reverse repurchase agreements and dollar roll agreements are
considered a form of borrowing. At the time the Fund enters into a reverse
repurchase agreement or a dollar roll agreement, it will establish and maintain
a pledged account with its Custodian containing any asset, including equity
securities and non-investment grade debt so long as the asset is liquid,
unencumbered and marked to market daily having a value not less than the
repurchase price (including accrued interest). The Funds' ability to enter into
reverse repurchase agreements and dollar roll agreements is limited by the
requirement to maintain assets in pledged accounts, by requirements relating to
each Fund's status as a regulated investment company under the Code, and by the
Funds' overall limitations on borrowing. Furthermore, because dollar roll
transactions may be for terms ranging between one and six months and unless
deemed liquid pursuant to procedures established by the Funds, they are subject
to the Funds' overall limitations on investment in illiquid securities.
While the use of reverse repurchase agreements and dollar roll agreements
creates opportunities for increased income, the use of these agreements may
cause losses. Reverse repurchase agreements and dollar roll agreements involve
the risk that the market value of the securities to be repurchased by the Fund
may decline below the price at which the Fund is obligated to repurchase. Also,
in the event the buyer of securities under a reverse repurchase agreement or a
dollar roll agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement or the dollar roll agreement
may effectively be restricted pending such decision.
When-Issued Securities and Delayed Delivery Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place more
than seven days in the future or after a period longer than the customary
settlement period for the particular security. Customary settlement for newly
issued mortgage-backed securities occurs only when the composition of the
underlying mortgage pools are set, typically once a month. At the time a Fund
makes the commitment to purchase a security on a when-issued or delayed delivery
basis, it will record the transaction and reflect the value of the security and
the liability to pay the purchase price in determining the Fund's net asset
value. The value of the security on the settlement date may be more or less than
the price paid as a result of, among other things, changes in the level of
interest rates or other market factors. No interest accrues on the security
between the time the Fund enters into the commitment and the time the security
is delivered. The Funds will establish a segregated account with the Custodian
in which it will maintain any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, equal in value to commitments for when-issued or delayed
delivery securities. Such segregated securities either will mature or, if
necessary, be sold on or before the settlement date. While when-issued or
delayed delivery securities may be sold prior to the settlement date, it is
intended that the Funds will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons,
in which case the Funds may sell their interest in the securities rather than
take delivery, and may reinvest the proceeds in similar or other securities. The
Funds may not invest more than 25% of their net assets at the time of investment
in securities purchased on a when-issued or delayed delivery basis.
Illiquid Securities
The Funds will not invest more than 15% of their net assets (taken at
market value at the time of the investment) in "illiquid securities." For this
purpose, illiquid securities include:
15
<PAGE>
securities subject to legal or contractual restrictions on resale (which may
include private placements (Rule 144A securities)); repurchase agreements
maturing in more than seven days; certain options traded over-the-counter that
the Funds have purchased; certain securities being used to cover options a Fund
has written; certain positions in interest-rate swaps, or interest-rate caps,
collars, or floors; certain private issue interest-only and principal-only
stripped securities; securities for which market quotations are not readily
available; or other securities which legally or in the Adviser's or
Trustees'/Directors' opinion may be deemed illiquid. Rule 144A of the
Securities Act provides an exemption for the sale of restricted stock to
facilitate trading between institutional investors in the private placement
market. In determining whether a Rule 144A security is liquid, the Trustees/
Directors may take into account the frequency of trades and quotes for the
security, the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, dealer undertakings to make a market
in the security, and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer). Dollar roll transactions may be for terms ranging
between one and six months and unless deemed liquid pursuant to procedures
established by the Trustees/Directors are subject to the Funds' overall
limitations on investment in illiquid securities.
Borrowing
As a fundamental policy, the Funds may borrow money from banks to the
extent permitted under the 1940 Act. The Funds do not intend at present to
borrow money from banks or financial institutions other than for emergency or
extraordinary purposes. The Funds will not borrow in excess of 10% of total
assets or make additional investments when borrowings are in excess of 5% of
their total assets. If the Funds should determine to expand their ability to
borrow beyond this current operating policy, the Prospectus would be amended
and shareholders would be notified. Reverse repurchase agreements and dollar
roll transactions are treated as borrowings by the Funds, and therefore the
Funds' entry into such transactions is subject to the Funds' overall
limitations on borrowing.
Risk Factors and Special Considerations
High Yield-High Risk Securities
Under normal conditions, up to 50% of the Fixed Income Fund's assets and
up to 35% of the Short Term Fund's assets may be invested in high yield-high
risk fixed income securities commonly referred to as "junk bonds." These
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 Funds' net asset value to the extent the
Funds' assets are invested in such securities. In addition, the Funds may incur
additional expenses to the extent they are required to seek recovery upon a
default in the payment of principal or interest on their 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.
The Funds 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 the Funds anticipate 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 Funds' net asset values, and on the Funds' ability to
dispose of particular issues when necessary to meet the Funds' liquidity needs
or on the Funds' 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 Funds to obtain accurate market quotations for purposes of valuing the
Funds' portfolios. 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
16
<PAGE>
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 Funds have no requirements regarding whether the securities they
purchase 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. 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 Funds 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.
Participation on Creditors' Committees. The Fixed Income Fund may from
time to time participate on committees formed by creditors to negotiate with
the management of financially troubled issuers of securities held by the Fund.
Such participation may subject the Fund to expenses such as legal fees and may
make the Fund an "insider" of the issuer for purposes of the federal securities
laws, and therefore may restrict the Fund's ability to purchase or sell a
particular security when it might otherwise desire to do so. Participation by
the Fund on such committees also may expose the Fund to potential liabilities
under the federal bankruptcy laws or other laws governing the rights of
creditors and debtors. The Fund will participate on such committees only when
the Adviser believes that such participation is necessary or desirable to
enforce the Fund's rights as a creditor or to protect the value of securities
held by the Fund.
Foreign Securities
Less public information may be available to the Adviser concerning issuers
of foreign securities as compared to equivalent domestic issuers. In certain
instances, there may be less government regulation of stock exchanges, brokers
and banks in foreign countries than in the United States. In addition,
differences exist among U.S. and foreign issuers with respect to growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions. In investing in bonds
denominated in foreign currencies, the Funds will be subject to the risk of
currency fluctuations. Foreign currencies may be affected by revaluation,
future adverse political and economic developments, and governmental
restrictions. The values of foreign investments and the investment income
derived from them also may be adversely affected by changes in currency
exchange control regulations.
Certain foreign countries are less stable politically than the United
States. The possibility exists that certain foreign governments may adopt
policies providing for expropriation or nationalization of assets, confiscatory
taxation, currency blockage or limitations on the use or removal of monies or
other assets of an investment company. Finally, the Funds may encounter
difficulty in obtaining and enforcing judgments against issuers of foreign
securities. 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.
Securities Denominated in Foreign Currencies
In investing in securities denominated in foreign currencies, the Funds
will be subject to the additional risk of currency fluctuations. An adverse
change in the value of a particular foreign currency as against the U.S.
dollar, to the extent that such change is not offset by a gain in other foreign
currencies, will result in a decrease in the Funds' assets. Any such change may
also have the effect of decreasing or limiting the income available for
distribution. Foreign currencies may be affected by revaluation, adverse
political and economic developments, and governmental restrictions. Although
the Funds will invest only in securities denominated in foreign currencies that
are fully convertible into U.S. dollars without legal restriction at the time
of investment, no assurance can be given that currency exchange controls will
not be imposed on any particular currency at a later date.
Changes in foreign exchange rates will affect the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar. Exchange rates are
17
<PAGE>
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
Funds' 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.
Securities of U.S. issuers denominated in foreign currencies may be less
liquid and their prices more volatile than securities issued by domestic issuers
and denominated in U.S. dollars. In addition, investing in securities
denominated in foreign currencies often entails costs not associated with
investment in U.S. dollar-denominated securities of U.S. issuers, such as the
cost of converting foreign currency to U.S. dollars, higher brokerage
commissions, custodial expenses and other fees. Non-U.S. dollar denominated
securities may be subject to certain withholding and other taxes of the relevant
jurisdiction, which may reduce the yield on the securities to the Funds and
which may not be recoverable by the Funds or its investors.
Zero Coupon, Step Coupon and PIK Bonds
The Fixed Income Fund may invest up to 15% of its assets in any combination
of zero coupon bonds, step coupon bonds and PIK bonds, in the aggregate. The
Short Term Fund will not invest more than 3% of its assets in zero coupon bonds.
See "Investment Techniques--Zero Coupon, Step Coupon and PIK Bonds." Zero coupon
and step coupon bonds are issued and traded at a discount from their face
amounts. The amount of the discount varies depending on such factors as the time
remaining until maturity of the bonds, prevailing interest rates, the liquidity
of the security and the perceived credit quality of the issuer. The market
prices of zero coupon, step coupon and PIK bonds generally are more volatile
than the market prices of securities that pay interest periodically and are
likely to respond to changes in interest rates to a greater degree than do bonds
on which regular cash payments of interest are being made that have similar
maturities and credit quality. In order to satisfy a requirement for
qualification as a "regulated investment company" under the Code, the Funds must
distribute their investment company taxable income, including the original issue
discount accrued on zero coupon or step coupon bonds or interest paid in
additional debt obligations on PIK bonds. Because the Funds will not receive on
a current basis cash payments in respect of accrued original issue discount on
zero coupon bonds, step coupon bonds during the period before interest payments
commence or interest paid in additional debt obligations on PIK bonds, the Funds
may have to distribute cash obtained from other sources in order to satisfy the
distribution requirement under the Code. See also "Dividends, Distributions and
Taxes."
INVESTMENT RESTRICTIONS
Not more than 25% of the total assets of the Funds will be concentrated in
the securities of any one industry. As a diversified investment company, at
least 75% of each Fund's total assets must be represented by cash or cash items,
government securities, securities of other investment companies and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the value of the total assets of each Fund. See the Statement of Additional
Information for a detailed description of all of the Funds' investment
restrictions.
PORTFOLIO TURNOVER
A change in securities held by each Fund is known as "portfolio turnover"
and may involve the payment by the Funds of dealer mark-up or underwriting
commissions and other transaction costs on the sale of securities, as well as on
the reinvestment of the proceeds in other securities. Portfolio turnover rate
for a fiscal year is the percentage determined by dividing the lesser of the
cost of purchases or proceeds from sales of portfolio securities by the average
of the value of portfolio securities during such year, all excluding securities
whose maturities at acquisition were one year or less. The Funds' portfolio
turnover rate will not be a limiting factor when the Adviser deems it desirable
to sell or purchase securities. Each Fund's portfolio turnover rate may be
higher if the Fund finds it necessary to significantly change its portfolio to
adopt a temporary defensive position. A high turnover rate may involve greater
expenses to the Funds and could involve realization of capital gains that would
be taxable to the shareholders. Portfolio turnover rates for the fiscal years of
the Funds are shown in the section "Financial Highlights."
MANAGEMENT OF THE FUND
Each Fund is an open-end management investment company known as a mutual
fund. The Directors of the Fixed Income Fund ("Directors") and the Trustees of
the Short Term Fund ("Trustees") are responsible for the overall supervision of
the operations of each Fund and perform the various duties imposed on
Directors/Trustees by the 1940 Act, and the Maryland General Corporation Law and
the laws of the Commonwealth of Massachusetts, respectively.
The Adviser
The Funds' investment adviser is National Securities & Research
Corporation, which is located at 56 Prospect Street, Hartford, Connecticut
06115. The Adviser is a subsidiary of Phoenix Duff & Phelps Corporation and an
indirect subsidiary of Phoenix Home Life Mutual Insurance Company ("Phoenix
Home Life") of Hartford, Connecticut. Phoenix Home Life is a majority
shareholder of Phoenix Duff & Phelps Corporation. Phoenix Home Life is in the
business of writing ordinary and group life and health insurance and annuities.
Its principal offices are located at One American Row, Hartford, Connecticut
06102. Phoenix Duff & Phelps Corporation is a New York Stock Exchange traded
company that provides various financial advisory services to institutional
investors, corporations and individuals through operating subsidiaries. The
Adviser also acts as the investment adviser or manager for Phoenix Income and
Growth Fund, Phoenix California Tax-Exempt Bonds, Inc., Phoenix Strategic
Equity Series Fund: Phoenix Equity Opportunities Fund, and the Phoenix
Worldwide Opportunities
18
<PAGE>
Fund. The Adviser currently has approximately $970 million in assets under
management. The Adviser has acted as an investment adviser for over sixty
years.
As compensation for its services, the Adviser receives a fee, which is
accrued daily against the value of each Fund's net assets and is payable
monthly by each Fund. The monthly fee is computed at an annual rate of .55% on
the first $1 billion of each Fund's average daily net assets, .50% on average
daily net assets between $1 billion and $2 billion, and .45% on average daily
net assets in excess of $2 billion. The ratio of management fees to average net
assets for the fiscal year ended October 31, 1997 for each class of shares of
each Fund was .55%.
The Portfolio Manager
Mr. David L. Albrycht is Portfolio Manager of the Funds, and as such, is
primarily responsible for the day-to-day management of the Funds' portfolios.
Mr. Albrycht co-managed the Fixed Income Fund since March 1994, and assumed
full management of the Fund in April 1995. He has been Portfolio Manager of the
Short Term Fund since August 1993.
Mr. Albrycht has also been the Portfolio Manager of the Phoenix Strategic
Income Fund of the Phoenix Multi-Portfolio Fund since August 1993. Mr. Albrycht
is a Managing Director, Fixed Income, of Phoenix Investment Counsel, Inc. and
National. He has held various investment management positions with Phoenix Home
Life from 1989 through 1995.
The Financial Agent
Equity Planning also acts as financial agent of the Funds and, as such,
performs administrative, bookkeeping and pricing functions for the Funds. As
compensation for such services, Equity Planning is entitled to a fee, payable
monthly and based upon (a) the average of the aggregate daily net asset values
of the Funds, 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 of $70,000 for each Fund; and (c) an annual fee of $12,000
for each class of shares beyond one. For its services during each Fund's fiscal
year ended October 31, 1997, Equity Planning received $145,836 from the Fixed
Income Fund and $70,205 from the Short Term Fund or 0.04% and 0.24%,
respectively, of each Fund's average net assets.
The Custodian and Transfer Agent
The custodian of the assets of the Funds is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts 02101 (the "Custodian"). The Funds
have authorized the custodian to appoint one or more subcustodians for the
assets of the Funds held outside the United States.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Funds (the "Transfer Agent") for
which it is paid $19.25 plus out-of-pocket expenses for each designated
shareholder account. The Transfer Agent has and shall engage sub-agents from
time to time to perform certain shareholder servicing functions for which such
agents shall be paid a fee by Equity Planning.
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 Funds. The Adviser may also
select an affiliated broker-dealer to execute transactions for the Funds,
provided that the commissions, fees or other remuneration paid to such
affiliated broker is reasonable and fair as compared to that paid to
non-affiliated brokers for comparable transactions.
DISTRIBUTION PLANS
The offices of Equity Planning, the national distributor of the Funds'
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Director/Trustee and
President of the Funds and a director and officer of Equity Planning. Michael
E. Haylon, a director of Equity Planning, is an officer of the Funds. G.
Jeffrey Bohne, Nancy G. Curtiss, William E. Keen, III, William R. Moyer,
Leonard J. Saltiel, and Thomas N. Steenburg are officers of the Funds and
officers of Equity Planning.
Equity Planning and the Funds have entered into amended and restated
distribution agreements under which Equity Planning has agreed to use its best
efforts to find purchasers each Funds' shares sold subject to an initial sales
charge and those sold subject to a contingent deferred sales charge. The Funds
have granted Equity Planning the exclusive right to purchase from the Funds and
resell, as principal, shares needed to fill unconditional orders for Fund
shares. Equity Planning may sell Fund shares through its registered
representatives or through securities dealers with whom it has sales
agreements. Equity Planning may also sell Fund shares pursuant to sales
agreements entered into with banks or bank affiliated securities brokers who,
acting as agent for their customers, place orders for Fund shares with Equity
Planning. Although the Glass-Steagall Act prohibits banks and bank affiliates
from engaging in the business of underwriting, distributing or selling
securities (including mutual fund shares), banking regulators have not
indicated that such institutions are prohibited from purchasing mutual fund
shares upon the order and for the account of their customers. If, because of
changes in law or regulations, or because of new interpretations of existing
law, it is determined that agency transactions of banks or bank affiliated
securities brokers are not permitted under the Glass-Steagall Act, the
Directors/ Trustees will consider what action, if any, is appropriate. It is
not anticipated that termination of sales agreements with
19
<PAGE>
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 the Fund.
The sale of Fund shares through a bank or a securities broker affiliated
with a bank is not expected to preclude the Funds from borrowing from such bank
or from availing itself of custodial or transfer agency services offered by
such bank.
The Directors/Trustees have adopted separate amended and restated
distribution plans under Rule 12b-1 of the 1940 Act for each class of shares of
the Funds (the "Class A Plan," the "Class B Plan," the "Class C Plan," the
"Class M Plan" and collectively the "Plans"). The Plans permit the Funds to
reimburse the Distributor for expenses incurred in connection with the sale and
promotion of Fund shares and to pay for the furnishing of shareholder services.
Pursuant to the Class A Plan, the Funds may reimburse the Distributor monthly
for actual expenses of the Distributor up to 0.05% annually of the average
daily net assets of the Funds' Class A Shares. However, the Distributor has
voluntarily agreed to waive reimbursement under the Class A Plan for fiscal
year 1998. Pursuant to the Class B, Class C and Class M Plans adopted by the
Fixed Income Fund, the Fund may reimburse the Distributor monthly for actual
expenses of the Distributor up to 0.75%, 0.75% and 0.25% annually of the
average daily net assets of the Fund's Class B, C and M Shares, respectively.
Pursuant to the Class B and C Plans adopted by the Short Term Fund, the Fund
may reimburse the Distributor monthly for actual expenses of the Distributor up
to 0.50% and 0.25% annually of the average daily net assets of the Fund's Class
B and C Shares, respectively.
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Funds (including underwriting
commissions and finance charges related to the payment of commissions; (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Distributor for services rendered
in connection with the sale and distribution of shares of the Funds; (iv)
payment of expenses incurred in sales and promotional activities including
advertising expenditures related to the Funds; (v) the costs of preparing and
distributing promotional materials; (vi) the costs of printing the Funds'
Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the
Directors/Trustees determine are reasonably calculated to result in the sale of
shares of the Funds. In addition, each Fund will pay the Distributor 0.25%
annually of the average daily net assets of the Funds for providing services to
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee"). From the Service Fee, the Distributor
expects to pay a quarterly fee to qualifying broker-dealer firms, as
compensation for providing personal services and/or the maintenance of
shareholder accounts, with respect to shares sold by such firms. This fee will
not exceed on an annual basis 0.25% of the average annual net asset value of
such shares, and will be in addition to sales charges on Fund shares which are
reallowed to such firms. To the extent that the entire amount of the Service
Fee is not paid to such firms, the balance will serve as compensation for
personal and account maintenance services furnished by the Distributor. The
Distributor also pays to dealers, as additional compensation with respect to
sales of the Fixed Income Fund's Class C and M Shares, 0.75% and 0.25% and with
respect to the Short Term Fund's Class C Shares, 0.25% of the average annual
net asset value of each class, respectively.
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 Funds' shareholders; or services providing
the Funds 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.
Under the Class A Plan, reimbursement or payment of expenses may not be
made unless such payments or reimbursement occurs prior to the earliest of (a)
the last day of the one-year period commencing on the last day of the calendar
quarter during which the specific service or activity was performed, or (b) the
last day of the one-year period commencing on the last day of the calendar
quarter during which payment was made by a third party on behalf of the Fund.
The Class B Plan, Class C Plan and Class M Plan, however, do not limit the
reimbursement of distribution related expenses to expenses incurred in
specified time periods.
For the fiscal year ended October 31, 1997, the Fixed Income Fund paid the
Distributor $463,149 under the Class A Plan, $1,529,736 under the Class B Plan,
$92 under the Class C Plan and $25 under the Class M Plan. For the fiscal year
ended October 31, 1997, the Short Term Fund paid the Distributor $51,494 under
the Class A Plan, $62,254 under the Class B Plan and $162 under the Class C
Plan. The fees were used to compensate broker-dealers for servicing
shareholder's accounts, including $72,223 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 Funds under the Class B Plans. Those
expenses may be carried over and paid in future years. At October 31, 1997, the
end of the last Plan year, the Distributor had incurred unreimbursed expenses
under the Fixed Income Fund Class B Plan of $1,710,933 (equal to 0.49% of the
Fund's net assets) and $180,548 under the Short Term Bond Fund's Class B Plan
(equal to 0.46% of the Fund's assets). These amounts have been carried into the
present Class B Plan year for each Fund, respectively.
On a quarterly basis, the Funds' Directors/Trustees review a report on
expenditures under each Plan and the purposes for which expenditures were made.
The Directors/Trustees conduct an additional more extensive review annually in
20
<PAGE>
determining whether each Plan will be continued. By its terms, continuation of
each Plan from year to year is contingent on annual approval by a majority of
the Funds' Directors/Trustees and by a majority of the Directors/Trustees who
are not "interested persons" (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of either Plan or any
related agreements (the "Plan Directors"). Each Plan provides that it may not
be amended to increase materially the costs which the Funds may bear without
approval of the applicable class of shareholders of each Fund and that other
material amendments must be approved by a majority of the Plan Directors by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan further provides that while it is in effect, the
selection and nomination of Directors/Trustees who are not "interested persons"
shall be committed to the discretion of the Directors/Trustees who are not
"interested persons." Each Plan may be terminated at any time by vote of a
majority of the Plan Directors or a majority of the applicable class of
outstanding shares of each Fund.
The Directors/Trustees have concluded that there is a reasonable
likelihood that the Plans will benefit the Funds and all classes of
shareholders.
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 Directors/Trustees to suspend distribution fees or amend some or
all of the Plans.
HOW TO BUY SHARES
How do you invest?
You may open a fund 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, P.O. Box 8301,
Boston, MA 02266-8301. See the Statement of Additional Information for more
information regarding the reduction or elimination of the minimum initial or
subsequent investments. 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. Ownership of shares is recorded electronically in
book entry form; no share certificates are available.
What are the classes and how do they differ?
The Funds presently offer investors up to four classes of shares which
bear sales and distribution charges in different amounts. Only the Fixed Income
Fund currently offers Class M shares.
Class A Shares. If you buy Class A Shares of the Fixed Income Fund, 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). If you purchase Class A Shares of the
Short Term Fund, you will pay a sales charge at the time of purchase equal to
2.25% of the offering price (2.30% of the amount invested). The sales charge
may be reduced or waived under certain conditions. Class A Shares are not
subject to any charges by the Funds 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 Fixed Income Fund Class B Shares
within the first five years after they are bought, you will pay a sales charge
of up to 5% of your shares' value. If you sell your Short Term Fund Class B
Shares within the first three years after they are purchased, you will pay a
sales charge of up to 2% of your shares' value. See "Deferred Sales Charge
Alternative--Class B Shares." This charge declines each year to zero 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 (for the Fixed Income Fund) or six years
(for the Short Term Fund) 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 Fixed Income Fund Class C Shares
within the first year after they are bought, you will pay a sales charge of 1%
of your shares' value. Class C Shares of the Short Term Fund are not subject to
any sales charge when shares are redeemed. 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. Class C Shares are not currently offered for all
Phoenix Funds.
Class M Shares. If you buy Class M Shares of the Fixed Income Fund, you
will pay a sales charge at the time of
21
<PAGE>
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 Fund 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
Fund. Class M Shares are not currently offered for all Phoenix Funds.
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--Fixed Income Fund
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
-----------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ------------------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Under $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 4.50 4.71 4.00
$100,000 but under $250,000 3.50 3.63 3.00
$250,000 but under $500,000 3.00 3.09 2.75
$500,000 but under $1,000,000 2.00 2.04 1.75
$1,000,000 or more None None None
</TABLE>
Class A Shares--Short Term Fund
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
-----------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ------------------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Under $50,000 2.25% 2.30% 2.00%
$50,000 but under $100,000 1.25 1.27 1.00
$100,000 but under $500,000 1.00 1.01 1.00
$500,000 but under $1,000,000 0.75 0.76 0.75
$1,000,000 or more None None None
</TABLE>
Class M Shares (Fixed Income Fund Only)
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
-----------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ----------------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
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
</TABLE>
Deferred Sales Charge Alternative--
Class B and C Shares
Class B Shares of both Funds and C Shares of the Fixed Income Fund 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. Class C Shares of the Short
Term Fund are purchased without an initial sales charge and are not subject to
any sales charge when shares are redeemed. 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 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.
Class B Shares--Fixed Income Fund
Year 1 2 3 4 5 6+
- ------ ---- ---- ---- ---- ---- ---
CDSC 5% 4% 3% 2% 2% 0%
Class B Shares--Short Term Fund
Year 1 2 3 4+
- ------ ---- --------- ---- ----
CDSC 2% 1.5% 1% 0%
Class C Shares--Fixed Income Fund
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 Fixed Income Fund Class B Shares, a sales commission of 2% of
the sale price of Short Term Fund Class B Shares and a sales commission of 1% of
the sale price of Fixed Income Fund 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.
22
<PAGE>
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of the
Funds and/or for providing other shareholder services. Depending on the nature
of the services, these fees may be paid either from the Funds through
distribution fees, service fees or transfer agent fees or, in some cases, the
Distributor may pay certain fees from its own profits and resources. From its
own profits and resources, the Distributor does intend to: (a) sponsor 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; (e)
subject to certain exclusions, pay broker/dealers an amount equal to 0.50% of
the amount of Short Term Fund Class C Shares sold above $250,000 but under $3
million plus 0.25% on the amount in excess of $3 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 funds advised,
subadvised or distributed by the Adviser, Distributor or any of their corporate
affiliates (an "Affiliated Phoenix Fund"); (2) any director or officer, or any
full-time employee or sales representative (for at least 90 days), of the
Adviser or Distributor; (3) registered representatives and employees of
securities dealers with whom Distributor has sales agreements; (4) any qualified
retirement plan exclusively for persons described above; (5) any officer,
director or employee of a corporate affiliate of the Adviser or Distributor; (6)
any spouse, child, parent, grandparent, brother or sister of any person named in
(1), (2), (3) or (5) above; (7) employee benefit plans for employees of the
Adviser, Distributor and/or their corporate affiliates; (8) any employee or
agent who retires from Phoenix Home Life, Distributor and/or their corporate
affiliates; (9) any account held in the name of a qualified employee benefit
plan, endowment fund or foundation if, on the date of the initial investment,
the plan, fund or foundation has assets of $10,000,000 or more or at least 100
eligible employees; (10) any person with a direct rollover transfer of shares
from an established Phoenix Fund or any other Affiliated Phoenix Fund qualified
plan; (11) any Phoenix Home Life separate account which funds group annuity
contracts offered to qualified employee benefit plans; (12) any state, county,
city, department, authority or similar agency prohibited by law from paying a
sales charge; (13) any fully matriculated student in any U.S. service academy;
(14) any unallocated account held by a third party administrator, registered
investment adviser, 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 or any other Affiliated
Phoenix Fund if, in connection with the purchases or redemption of the redeemed
shares, the investor paid a prior sales charge provided such investor supplies
verification that the redemption occurred within 90 days of the Phoenix Fund
purchase and that a sales charge was paid; (16) any deferred compensation plan
established for the benefit of any Phoenix Fund or any other Affiliated Phoenix
Fund trustee or director; provided that sales to persons listed in (1) through
(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 advisors and financial planners who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients; (18) retirement plans and deferred
compensation plans and trusts used to fund those plans (including, for example,
plans qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for such purchases; 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 the
Funds or any other Affiliated Phoenix Fund (other than Phoenix Money Market Fund
Series Class A Shares), if made at the same time by the same "person," will be
added together to determine whether the combined sum entitles you to an
immediate reduction in sales charges. A "person" is defined in this and the
following sections as (a) any individual, their spouse and minor children
purchasing shares for his or their own account (including an IRA account)
23
<PAGE>
including his or their own trust; (b) a trustee or other fiduciary purchasing
for a single trust, estate or single fiduciary account (even though more than
one beneficiary may exist); (c) multiple employer trusts or Section 403(b)
plans for the same employer; (d) multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party administrator;
or (e) trust companies, bank trust departments, registered investment advisers,
and similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial or similar capacity,
provided all shares are held of record in the name, or nominee name, of the
entity placing the order.
Letter of Intent. If you sign a Letter of Intent, your purchase of any
class of shares of the Funds or any other Affiliated Phoenix Fund (other than
Phoenix Money Market Fund Series Class A Shares), if made by the same person
within a thirteen month period, will be added together to determine whether you
are entitled to an immediate reduction in sales charges. Sales charges are
reduced based on the overall amount you indicate that you will buy under the
Letter of Intent. The Letter of Intent is a mutually non-binding arrangement
between you and the Distributor. Since the Distributor doesn't know whether you
will ultimately fulfill the Letter of Intent, shares worth 5% of the amount of
each purchase will be set aside until you fulfill the Letter of Intent. When you
buy enough shares to fulfill the Letter of Intent, these shares will no longer
be restricted. If, on the other hand, you do not satisfy the Letter of Intent,
or otherwise wish to sell any restricted shares, you will be given the choice of
either buying enough shares to fulfill the Letter of Intent or paying the
difference between any sales charge you previously paid and the otherwise
applicable sales charge based on the intended aggregate purchases described in
the Letter of Intent. You will be given 20 days to make this decision. If you do
not exercise either election, the Distributor will automatically redeem the
number of your restricted shares needed to make up the deficiency in sales
charges received. The Distributor will redeem restricted Class A 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 the Funds
or any other Affiliated Phoenix Fund, if made over time by the same person may
be added together to determine whether the combined sum entitles you to a
prospective reduction in sales charges. You must provide certain account
information to the Distributor to exercise this right.
Associations. Certain groups or associations may be treated as a "person"
and qualify for reduced Class A Share sales charges. The group or association
must: (1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge;
(3) work through an investment dealer; or (4) not be a group whose sole reason
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 701/2 under any retirement
plan qualified under Code Sections 401, 408 or 403(b) or resulting from the
tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using
an approved participant tracking system for participant hardships, death,
disability or normal retirement, and loans which are subsequently repaid; (e)
based on the exercise of exchange privileges among Class B and C Shares of the
Funds or any other Affiliated Phoenix Fund; (f) based on any direct rollover
transfer of shares from an established Phoenix Fund qualified plan into a
Phoenix Fund IRA by participants terminating from the qualified plan; and (g)
based on the systematic withdrawal program (Class B Shares only). If, as
described in condition (a) above, an account is transferred to an account
registered in the name of a deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B or C Shares are not redeemed within one year of the death, they will
remain subject to the applicable CDSC. Class C Shares of the Short Term Fund are
not subject to any sales charge when redeemed.
Conversion Feature--Class B Shares
Fixed Income Fund Class B Shares will automatically convert to Class A
Shares of the same Fund eight years after they are purchased. Short Term Fund
Class B Shares will automatically convert to Class A Shares of the same Fund six
years after they are purchased. Conversion will be on the basis of the then
prevailing net asset value of Class A and B Shares. There is no sales load, fee
or other charge for this feature. Class B Shares acquired through dividend or
distribution reinvestments will be converted into Class A Shares at the same
time that other Class B Shares are converted based on the proportion that the
reinvested shares bear to purchased Class B Shares. The conversion feature is
subject to the continuing availability of an opinion of counsel or a ruling of
the Internal Revenue Service that the assessment of the higher distribution fees
and associated costs with respect to Class B Shares does not result in any
dividends or distributions constituting "preferential dividends" under the Code,
and that the conversion of shares does not constitute a taxable event under
federal income tax law. If the conversion feature is suspended, Class B Shares
would continue to be subject to the higher distribution fee for an indefinite
period. Even if a Fund was unable to obtain such assurances, it might continue
to make distributions if doing so would assist in complying with its general
practice of distributing sufficient income to reduce or eliminate federal taxes
otherwise payable by the Fund.
24
<PAGE>
INVESTOR ACCOUNT SERVICES
The Funds 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 Fund reports will be mailed to households for multiple accounts with the
same surname at the same household address. Please contact Equity Planning to
request additional copies of shareholder reports 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. The Funds currently declare all income dividends and
all capital gain distributions, if any, payable in shares of the Funds 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 Fund 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 Funds are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE 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
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 that extends reciprocal privileges to
shareholders of the Phoenix Funds without paying any fees or sales charges.
Class A Shares of the Short Term Fund held less than six months are not eligible
for the Exchange Privilege. On exchanges with share classes that carry a
contingent deferred sales charge, the CDSC schedule of the original shares
purchased continues to apply. Exchanges of shares held in book-entry form may be
exchanged for shares of the same class of other Phoenix Funds or Affiliated
Phoenix Funds, 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.
25
<PAGE>
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 Affiliated Phoenix
Fund has different investment objectives and policies. You should read the
prospectus of the 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 Fund
performance and harm shareholders, the Funds reserve 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 Funds 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 Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The net asset value per share of each Fund is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the total number of outstanding shares
of each Fund. 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 each
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
The Funds' investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Directors/Trustees or their delegates. Foreign and domestic fixed income
securities (other than short-term investments) are valued on the basis of broker
quotations or valuations provided by a pricing service approved by the
Directors/Trustees when such prices are believed to reflect the fair value of
such securities. Short-term investments having a remaining maturity of less than
sixty-one days are valued at amortized cost, which the Directors/Trustees have
determined approximates market value. 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. For further information about security valuations,
see the Statement of Additional Information.
HOW TO REDEEM SHARES
You have the right to have the Funds 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 Funds do not charge any redemption fees. Payment for shares
redeemed is made within seven days, provided that 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 following table.
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.
26
<PAGE>
How can I sell my Shares?
<TABLE>
<S> <C> <C>
[TELEPHONE GRAPHIC] By Phone [bullet] Sales up to $50,000
[bullet] Not available on most retirement accounts
(800) 243-1574 [bullet] Requests received after 4PM will be
executed on the following business day
[CHECK GRAPHIC] By Check [bullet] Select checkwriting on your New Account
Application
[bullet] $500 or more per check
[bullet] Cannot be used to close an account
[ENVELOPE GRAPHIC] In Writing [bullet] 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
[bullet] 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
</TABLE>
Shares previously issued in certificate form cannot be redeemed until the
certificated shares have been deposited to your account.
Telephone Redemptions
The Funds 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 Funds 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 Funds 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.
Account Reinstatement Privilege
You have a one time privilege of using redemption proceeds from Class A, B,
C and M Shares to purchase Class A Shares of any 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
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 in Kind
To the extent consistent with state and federal law, the Funds may make
payment of the redemption price either in cash or in kind. However, the Funds
have elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90 day period to the
lesser of $250,000 or 1% of the net asset value of the Funds 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 the Funds. A
shareholder receiving such securities would incur brokerage costs when selling
such securities.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Funds
reserve 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
Funds redeem these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be allowed
30 days to make an additional investment in an amount which will increase the
value of the account to at least $200.
27
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds intend to continue to qualify annually as a regulated investment
company under Subchapter M of the Code and to distribute annually to
shareholders all or substantially all of its net investment income and net
realized capital gains, after utilization of any capital loss carryovers. If the
Funds so qualify, they generally will not be subject to Federal income tax on
the income it distributes.
Income dividends will be declared daily and paid monthly. Capital gain
distributions, if any, will be paid at least annually. An additional capital
gain distribution may be paid after the end of the Funds' fiscal year.
The Funds will be subject to a nondeductible 4% excise tax if it fails to
meet certain annual distribution requirements. In order to prevent imposition of
the excise tax, it may be necessary for the Funds to make distributions more
frequently than described in the previous paragraph.
Unless a shareholder elects to receive distributions in cash, dividends
will be paid in additional shares of the Funds credited at the next asset value
per share on the ex-dividend date. Dividends and distributions, whether received
in cash or in additional shares of the Funds, generally are subject to Federal
income tax and may be subject to state, local and other taxes. Shareholders will
be notified annually about the amount and character of distributions made to
them by each Fund.
Capital gains, if any, distributed to shareholders and designated by the
Funds as long-term capital gain dividends are taxable to shareholders as
long-term capital gain distributions regardless of the length of time shares of
the Funds have been held by the shareholder. Distributions of short-term capital
gains and net investment income, if any, are taxable to shareholders as ordinary
income.
Dividends and distributions generally will be taxable to shareholders in
the taxable year of the shareholder in which they are received. However,
dividends and distributions declared by a Fund in October, November or December
of any calendar year, with a record date in such a month, and paid during the
following January will be treated as if they were paid by the Fund and received
by shareholders on December 31 of the calendar year in which they were declared.
A redemption or other disposition (including an exchange) of shares of a
Fund generally will result in the recognition of a taxable gain or loss, which
will be a long- or short-term capital gain or loss (assuming the shares were a
capital asset in the hands of the shareholder), depending upon the shareholder's
holding period for his or her shares. In addition, if shares of a Fund are
disposed of at a loss and are replaced (either through purchases or through
reinvestment of dividends) within a period commencing thirty days before and
ending thirty days after the disposition of such shares, the realized loss will
be disallowed and appropriate adjustments to the tax basis of the new shares
will be made. In addition, special rules may apply to determine the amount of
gain or loss realized on an exchange.
Investment income received by the Funds from sources within foreign
countries may be subject to foreign income taxes withheld at the source.
The Funds may recognize interest attributable to them from holding zero
coupon securities. Current federal law requires that for most zero coupon
securities, a holder (such as the Funds) must accrue a portion of the discount
at which the security was purchased as income each year even though the Funds
receive no interest payment in cash on the security during the year. As a
regulated investment company, each Fund must pay out substantially all of its
net investment income each year. Accordingly, the Funds may be required to pay
out as an income distribution each year an amount which is greater than the
total amount of cash interest the Funds actually received. Such distributions
will be made from the cash assets of each Fund or by liquidation of portfolio
securities, if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Adviser will select which securities to sell. The
Funds may realize a gain or loss from such sales.
Investors are urged to consult their attorney or tax adviser regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
shareholders may be subject to U.S. Federal income tax rules that differ from
those described above. For more information regarding distributions and taxes,
see "Dividends, Distributions and Taxes" in the Statement of Additional
Information.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Funds may be required to withhold 31% of
all reportable payments including any taxable dividends, capital 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 Funds reserve the right to refuse to open an account for
any person failing to provide a taxpayer identification number along with the
required certifications.
The Funds send 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 advisor regarding specific questions as to Federal, foreign,
state or local taxes.
28
<PAGE>
ADDITIONAL INFORMATION
Organization of the Funds
Phoenix Multi-Sector Fixed Income Fund, Inc. The Fixed Income Fund was
organized as a corporation under the laws of the State of Maryland on September
20, 1989. On December 23, 1993 shareholders approved a change in the name of
the Fund, effective January 1, 1994, to reflect the Fund's affiliation with
Phoenix Home Life, which resulted from the transfer of ownership of the Fund's
Adviser to Phoenix Home Life on May 14, 1993. Prior to January 1, 1994, the
Fund's name was "National Multi-Sector Fixed Income Fund, Inc."
The Articles of Incorporation, as amended, provide for the issuance of up
to 500,000,000 Shares. The Fund's Shares are divided equally among four classes,
each consisting of 125,000,000 Shares. The Fund issues Class A, Class B, Class C
and Class M Common Stock. The shares of the Fund, when issued, will be fully
paid and non-assessable, have no preference, preemptive, exchange or similar
rights, and will be freely transferable. There is no requirement or intention to
hold annual meetings of shareholders. Accordingly, there will normally be no
meetings of shareholders for the purpose of electing Directors unless and until
such time as less than a majority of the Directors holding office have been
elected by shareholders, at which time the Directors then in office will call a
meeting for the election of Directors. Shareholders may, in accordance with the
Articles of Incorporation, cause a meeting of shareholders to be held for the
purpose of voting on the removal of a Director or Directors. Meetings of the
shareholders will be called upon written request of shareholders holding in the
aggregate at least 10% of the Fund's outstanding shares. The Directors will
provide appropriate assistance to shareholders, in compliance with the
provisions of the 1940 Act, if such a request for a meeting is received. Except
as set forth above, the Directors will continue to hold office and appoint
successor Directors. Shares do not have cumulative voting rights and the holders
of more than 50% of the shares of the Fund voting for the election of Directors
can elect all of the Directors of the Fund if they choose to do so and in such
event the holders of the remaining shares would not be able to elect any
Directors. Shareholders are entitled to redeem their shares as set forth under
"How to Redeem Shares."
Phoenix Multi-Sector Short Term Bond Fund. The Short Term Fund was
organized under Massachusetts law on February 20, 1992 as a business trust. On
December 23, 1993, shareholders of the Fund approved a change in the name of the
Fund, to reflect the Fund's affiliation with Phoenix Home Life, which resulted
from the transfer of ownership of the Adviser to Phoenix Home Life on May 14,
1993. On February 22, 1996, the Trustees approved another change in the Fund's
name to more accurately reflect its present investment policies and objectives.
Prior to this revision, the Fund's name was "Phoenix Asset Reserve." The
Declaration of Trust, as amended, provides that the Trustees are authorized to
create an unlimited number of series and, with respect to each series, to issue
an unlimited number of full and fractional shares of beneficial interest of one
or more classes and to divide or combine the shares into a greater or lesser
number of shares without thereby changing the proportionate beneficial interests
in the series. All shares have equal voting rights, except that only shares of
the respective series or separate classes within a series are entitled to vote
on matters concerning only that series or class. At the date of this Prospectus,
there is only one existing series of the Fund, having three classes of shares.
The shares of the Fund, when issued, will be fully paid and non-assessable,
have no preference, preemptive, or similar rights, and will be freely
transferable. There will normally be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Shareholders may, in accordance with the Declaration of Trust, cause a
meeting of shareholders to be held for the purpose of voting on the removal of
Trustees. Meetings of the shareholders may be called upon written request of
shareholders holding in the aggregate not less than 10% of the outstanding
shares having voting rights. The Trustees will provide appropriate assistance to
shareholders, in compliance with the provisions of the 1940 Act, if such a
request for a meeting is received. Except as set forth above and subject to the
1940 Act, the Trustees will continue to hold office and appoint successor
Trustees. Shares do not have cumulative voting rights and the holders of more
than 50% of the shares of the Fund voting for the election of Trustees can elect
all of the Fund's Trustees if they choose to do so and in such event the holders
of the remaining shares would not be able to elect any Trustees. Shareholders
are entitled to redeem their shares as set forth under "How to Redeem Shares."
The Declaration of Trust establishing the Fund (a copy of which, together
with all amendments thereto, is on file in the office of the Secretary of the
Commonwealth of Massachusetts), provides that the name "Phoenix Multi-Sector
Short Term Bond Fund" refers to the Trustees under the Declaration of Trust
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of the Fund shall be held to any
personal liability, nor shall resort be had to their personal property for the
satisfaction of any obligation or claim of said Fund but the "Trust Property"
only shall be liable.
Registration Statement
This Prospectus does not contain all the information included in each
Fund's Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and the 1940 Act. A copy of the Registration
Statements may be obtained from the Securities and Exchange Commission in
Washington, D.C. upon payment of the prescribed fee.
29
<PAGE>
APPENDIX
Description of Certain Bond Ratings
Moody's Investor's Service, Inc.
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 a 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.
Standard & Poor's Corporation
BB, B, CCC--Bonds rated BB, B and CCC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with terms of the obligation. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties of major risk exposures to adverse
conditions. Ability to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and financial alternatives
can be identified which could assist the obligor in satisfying its debt service
requirement.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
30
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<S> <C>
Account Type Give Social Security Number or Tax Identification Number of:
Individual Individual
Joint (or Joint Tenant) Owner who will be paying tax
Uniform Gifts to Minors Minor
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business (also provide owner's name)
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
Broker/Nominee Broker/Nominee
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest,
dividend or patronage dividend income on your federal income tax
return, you will be treated as negligent and subject to an IRS 5%
penalty tax on any resulting underpayment of tax unless there is clear
and convincing evidence to the contrary. If you falsify information on
this form or make any other false statement resulting in no backup
withholding on an account which should be subject to a backup
withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix
Multi-Sector Fixed Income Fund, Inc. and the Phoenix Multi-Sector Short Term
Bond Fund (the "Funds") which you should know before investing. Please read it
carefully and retain it for future reference.
Each Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information about each Fund, dated February 27, 1998. The Statements
contain more detailed information about the Funds and are incorporated into
this Prospectus by reference. You may obtain a free copy of the Statements by
writing the Funds c/o Phoenix Equity Planning Corporation, 100 Bright Meadow,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Funds is contained in the Annual Report
to Shareholders for the year ended October 31, 1997 for each Fund and are
incorporated into the Statements of Additional Information by reference.
[RECYCLE LOGO] Printed on recycled paper using soybean ink
<PAGE>
[BACK COVER] ----------------
BULK RATE MAIL
U.S. POSTAGE
Phoenix Funds PAID
PO Box 2200 Springfield, MA
Enfield CT 06083-2200 PERMIT NO. 444
---------------
[LOGO] PHOENIX
DUFF & PHELPS
PDP 694 (2/98)
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
February 27, 1998
This Statement of Additional Information is not the Prospectus but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fund"), dated February 27,
1998 and should be read in conjunction with it. The Fund's Prospectus may be
obtained by calling Phoenix Equity Planning Corporation ("Equity Planning") at
(800) 243-4361 or by writing to Equity Planning at 100 Bright Meadow Blvd., P.O.
Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
PAGE
THE FUND ...................................... 1
INVESTMENT OBJECTIVE AND POLICIES ............. 1
INVESTMENT RESTRICTIONS ....................... 1
INVESTMENT TECHNIQUES ......................... 2
PERFORMANCE INFORMATION ....................... 7
PORTFOLIO TRANSACTIONS AND BROKERAGE .......... 8
SERVICES OF THE ADVISER ....................... 9
NET ASSET VALUE ............................... 10
HOW TO BUY SHARES ............................. 10
INVESTOR ACCOUNT SERVICES ..................... 11
TAX SHELTERED RETIREMENT PLANS ................ 12
REDEMPTION OF SHARES .......................... 12
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 14
THE DISTRIBUTOR ............................... 16
PLANS OF DISTRIBUTION ......................... 16
DIRECTORS AND OFFICERS ........................ 17
OTHER INFORMATION ............................. 24
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
TTY: (800) 243-1926
PDP 695B (2/98)
<PAGE>
THE FUND
Phoenix Multi-Sector Fixed Income Fund, Inc. is a diversified open-end,
management investment company which was organized as a corporation under
Maryland law on September 20, 1989. On December 23, 1993, shareholders of the
Fund approved a change in the name of the Fund, effective January 1, 1994, to
reflect the Fund's affiliation with Phoenix Home Life, which resulted from the
transfer of ownership of the Fund's Adviser to Phoenix Home Life on May 14,
1993. Prior to January 1, 1994, the Fund's name was "National Multi-Sector Fixed
Income Fund, Inc.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize current income consistent with
the preservation of capital. The Fund will seek to achieve its objective by
investing in U.S. Government Securities, Foreign Securities, Investment Grade
Securities and High Yield-High Risk Securities (as such terms are defined in
the Prospectus). There is no assurance that the Fund will achieve its
investment objective.
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions are fundamental policies that cannot
be changed without the approval of the holders of a majority of the Fund's
outstanding voting securities (i.e., the lesser of (a) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (b) more than 50% of the outstanding shares.)
The Fund may not:
1. Underwrite the sale of securities of other issuers.
2. Deal in real estate, but it may purchase marketable securities of
companies which deal in real estate investment trusts.
3. Deal in commodities or commodity contracts, except that the Fund may,
subject to the limitations and conditions set forth herein, enter into
interest rate futures contracts and foreign currency futures contracts on
domestic and foreign exchanges, purchase and write put and call options on
interest rate futures contracts and foreign currency and write covered call
options.
4. Make loans to other persons but may, however, lend portfolio securities
(up to 33% of net assets at the time the loan is made) to brokers or
dealers or other financial institutions not affiliated with the Fund or the
Adviser subject to conditions established by the Adviser (See "Lending
Portfolio Securities").
5. Enter into repurchase agreements and purchase or hold participations in
loans in excess of 5% of net assets, respectively.
6. Borrow money, issue senior securities as defined in the Investment
Company Act of 1940, or pledge, mortgage or hypothecate its assets, except
that it may (i) borrow from banks, enter into reverse repurchase agreements
or employ similar investment techniques, and pledge its assets in
connection therewith, but only if immediately after such borrowing there is
asset coverage of 300%; and (ii) enter into transactions in options,
futures, and options on futures as described in the Fund's Prospectus and
Statement of Additional Information (the deposit of assets in escrow in
connection with the writing of covered put and call options and the
purchase of securities on a when-issued or delayed delivery basis and
collateral arrangements with respect to initial or variation margin
deposits for futures contracts will not be deemed to be pledges of the
Fund's assets).
7. Purchase on margin, except that for purposes of this restriction, the
deposit or payment of initial or variation margin in connection with
futures contracts will not be deemed to be a purchase of securities on
margin.
8. Sell short, except that the Fund may enter into short sales against the
box.
9. The Fund will not invest more than 25% of its assets in any one industry
or group of industries.
10. As a diversified investment company, at least 75% of the Fund's total
assets must be represented by cash or cash items, government securities,
securities of other investment companies and other securities limited in
respect of any one issuer to an amount not greater than 5% of the value of
the total assets of the Fund.
11. The Fund cannot make an investment for the purpose of exercising
control or management, nor may it invest in real estate limited
partnerships, or invest in oil, gas or other mineral leases.
12. The Fund will invest no more than 50% of its assets, determined at the
time of purchase, in High Yield-High Risk Securities.
1
<PAGE>
Non-Fundamental Policies
The following restrictions of the Fund are not fundamental policies and
may be changed by the Board of Directors of the Fund without shareholder
approval:
1. The Fund will not invest more than 15% of its net assets in illiquid
securities. See "Other Policies--Illiquid Securities."
2. The Fund may invest no more than 15% of its assets in any combination of
zero coupon bonds, step coupon bonds and payment-in-kind ("PIK") bonds.
3. The Fund does not intend to borrow any amount in excess of 10% of its
assets, and would do so only for temporary emergency or administrative
purposes. In addition, to avoid the potential leveraging of its assets, the
Fund will not make additional investments when its borrowings are in excess
of 5% of its total assets.
INVESTMENT TECHNIQUES
The Fund may utilize the following practices or techniques in pursuing its
investment objectives.
Options and Other Hedging Activities
The Fund may write and purchase options, including over-the-counter
options, for hedging purposes. The Fund may also engage in the writing of
covered call option contracts on securities owned at such times and from time
to time as the Adviser shall determine to be appropriate and consistent with
the investment objectives of the Fund. Such options must be listed on an
organized national securities exchange. The aggregate value of the securities
underlying the calls will be limited to not more than 25% of the net assets of
the Fund.
A call option gives the purchaser of the option the right to buy the
underlying security from the writer at the exercise price at any time prior to
the expiration of the contract, regardless of the market price of the security
during the option period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract. The writer forgoes
the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit. The Fund will write only call option contracts and
will receive a premium from the writing of such contracts, and it is believed
that total return to the Fund can be increased through such premiums consistent
with the Fund's investment objective.
The Fund may also write covered call options on securities indexes.
Through the writing of call index options the Fund can achieve many of the same
objectives as through the use of call options on individual securities. Call
options on securities indexes are similar to call options on a security except
that, rather than the right to take delivery of a security at a specified
price, a call option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the securities index upon which the call option is based is greater than the
exercise price of the option. The writing of such index call options would be
subject to the present limitation of covered call option writing.
The Fund may purchase options to close out a position, i.e., a "closing
purchase transaction"--the purchase of a call option on the same security with
the same exercise price and expiration date as the call option which it has
previously written on a particular security. When a security is sold from the
Fund's portfolio, the Fund will effect a closing purchase transaction so as to
close out any existing call option on that security, realizing a profit or loss
depending on whether the amount paid to purchase a call option is less or more
than the amount received from the sale thereof. In addition, the Fund may wish
to purchase a call option to hedge its portfolio against an anticipated
increase in the price of securities it intends to purchase or to purchase a put
option to hedge its portfolio against an anticipated decline in securities
prices. No more than 5% of the assets of the Fund may be invested in the
purchase of put and call options, including index options.
The Fund may also engage in foreign currency exchange transactions and in
transactions involving interest rate futures contracts and options thereon as a
hedge against changes in exchange and interest rates. Hedging is a means of
transferring risk that an investor does not desire to assume in an uncertain
interest or exchange rate environment. The Adviser believes it is possible to
reduce the effects of interest and exchange rate fluctuations on the value of
the Fund's portfolio, or sectors thereof, through the use of such strategies.
The costs of, and possible losses incurred from, the foregoing activities
may reduce the Fund's current income and involve a loss of principal. Any
incremental return earned by the Fund resulting from options transactions and
from its hedging activities would be expected to offset anticipated losses or a
portion thereof, and will be treated as long term or short term capital gains.
See "Dividends, Distributions and Taxes."
The Fund will not engage in the foregoing activities for speculative
purposes but only as a hedge against changes resulting from market conditions
in the values of securities in its portfolio, or sectors thereof, or that it
intends to acquire.
2
<PAGE>
Futures Contracts, Options on Futures Contracts and Forward Contracts
The Fund may enter into futures contracts to purchase and sell the
security or foreign currency underlying the contracts and is permitted to
purchase put and call options on the contracts. The Fund will engage in these
transactions solely for the purpose of hedging against the effects of changes
in the value of its portfolio securities or those it intends to purchase due to
anticipated changes in interest rates and currency values, and not for purposes
of speculation. In order for the Fund to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"), it
must, among other things, 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 held for less than three months. Accordingly, the Fund may have
to limit its ability to trade in futures contracts and related options in order
to comply with this test.
The Fund may enter into both interest rate futures contracts and foreign
currency futures contracts on domestic and foreign exchanges. Entering into a
futures contract to sell a debt security or foreign currency, which may be
referred to as entering into a "short" futures position, creates an obligation
by the seller to deliver a specified amount of the underlying security or
foreign currency at a specified future time and at an agreed upon price.
Entering into a futures contract to purchase a debt security or foreign
currency, which may be referred to as entering into a "long" futures position,
creates an obligation by the purchaser to take delivery of a specified amount
of the underlying security or foreign currency at a specified future time and
at a stated price. The specified instruments delivered or taken at the delivery
date are determined in accordance with the rules of the exchange on which the
futures contract is effected. Although the terms of futures contracts specify
actual delivery or receipt of the underlying commodity, futures contracts
generally are closed out before the delivery date without making delivery or
receiving the underlying instruments. Instead, the futures position is
terminated by entering into an opposite position in the same commodity on the
same (or a linked) exchange.
Upon entering into a futures contract, the Fund will be required to
deposit with a broker an amount of cash or cash equivalent equal to
approximately 1% to 5% of the contract price, which amount is subject to change
by the exchange on which the contract is traded or by the brokers. This amount,
which is known as "initial margin," does not involve the borrowing of funds to
finance the transactions; rather, it is in the nature of a performance bond or
good faith deposit on the contract that will be returned to the Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied. Subsequent payments, known as "variation margin," to and from
the broker, will be made daily as the price of the instrument underlying the
futures contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-market." Upon
the liquidation of a futures position, final determinations of variation margin
are then made, any additional cash is paid by the Fund or released to it and a
loss or gain is realized.
An interest rate futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a specified
debt security at a stated date, time, place and price. Among the debt
securities on which interest rate futures contracts currently are based are
futures contracts for the purchase or sale of U.S. Government Securities,
including long-term Treasury Bonds, Treasury Notes, three-month Treasury Bills
and Government National Mortgage Association modified pass-through
mortgage-backed securities ("GNMA pass-through securities") and 90-day
commercial paper. Interest rate futures contracts currently are traded in the
United States primarily on the floors of the Chicago Board of Trade ("CBT") and
the International Monetary Market of the Chicago Mercantile Exchange ("CME").
Interest rate futures also are traded on foreign exchanges such as the London
International Financial Futures Exchange ("LIFFE") and the Singapore
International Monetary Exchange ("SIMEX").
The Fund may enter into interest rate futures contracts to protect against
fluctuations in interest rates affecting the value of debt securities that the
Fund either holds or intends to acquire. If interest rates are expected to
increase, the Fund may enter into short interest rate futures contracts on debt
securities that correlate historically with the value of the portfolio
securities of the Fund to hedge against a decline in the value of these
securities. In the event that interest rates increase as anticipated, the value
of the interest rate futures contracts would increase at a similar rate thus
mitigating any decline in the value of the Fund's portfolio securities and
resulting in a higher net asset value than would have occurred without the sale
of the futures contracts. Although the Fund could accomplish a similar result
by selling certain of its debt securities, the liquidity of the futures market
permits it to maintain a defensive position without selling its portfolio
securities.
When the Fund anticipates that interest rates may decline, it may purchase
interest rate futures contracts to hedge against a rise in the price of debt
securities it intends to purchase. The value of certain futures contracts may
fluctuate at approximately the same rate as the value of the debt securities
the Fund intends to purchase, thus permitting the Fund to benefit from the
appreciating cost of the debt securities without actually buying them until the
market has stabilized. The Fund may liquidate the futures contract by offset
and buy the securities in the cash market. When the Fund enters into futures
contracts to hedge against the increasing cost of debt securities it might
purchase in the future, it will maintain any asset, including equity securities
and non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, in a pledged asset account with its custodian
sufficient to cover the obligations of the Fund with respect to the futures
contracts.
A foreign currency futures contract provides for the future sale and
purchase by the respective parties of a certain amount of a specified foreign
currency at a stated date, time, place and price. At present, foreign currency
futures contracts are based on
3
<PAGE>
British pounds, German deutsche marks, Canadian dollars, Japanese yen, French
francs, Swiss francs, and European Currency Units (ECUs). Foreign currency
futures contracts currently are traded on CME, MidAmerica Commodity Exchange,
the Philadelphia Board of Trade, LIFFE and SIMEX.
The Fund may enter into foreign currency futures contracts to attempt to
establish the rate at which it would be entitled to make a future exchange of
U.S. dollars for another currency. If the Fund anticipates that the value of a
foreign currency may decline against the U.S. dollar, it may enter into futures
contracts to sell that foreign currency in order to attempt to hedge against a
decline in the U.S. dollar value of those of its securities payable in those
currencies.
The Fund may also attempt to establish the price in U.S. dollars of
securities it intends to acquire at a future date by entering into futures
contracts to purchase foreign currencies in which those securities are
denominated to hedge against an increase in price, in U.S. dollars, of those
securities.
The Fund may purchase and write put and call options on interest rate
futures contracts as a hedge against changes in interest rates and on foreign
currency futures contracts as a hedge against fluctuating currency values, in
lieu of purchasing and writing options directly on the underlying security or
currency or purchasing and selling the underlying futures contracts. The Fund
may enter into closing transactions with respect to these options to terminate
existing positions.
When an option is exercised, the writer of the option will deliver to the
holder of the option the futures position together with the accumulated balance
in the option writer's futures margin account. The futures margin account
balance represents the amount by which the market price of the futures contract
exceeds (in the case of a call option) or is less than (in the case of a put
option) the exercise price of the option on the futures contract. The potential
loss related to the purchase of an option on a futures contract is limited to
the premium paid for the option plus related transaction costs.
The purchase of an option on an interest rate futures contract will give
the Fund the right to enter into a futures contract to purchase (in the case of
a call option) or sell (in the case of a put option) a particular debt security
at a specified exercise price at any time prior to the expiration date of the
option. Options on interest rate futures contracts currently are available with
respect to Treasury Bonds, Treasury Notes, and Eurodollars.
The Fund may purchase a put option on an interest rate futures contract to
hedge against a decline in the value of its portfolio securities as a result of
rising interest rates. Purchasing put options on futures contracts is similar
to purchasing put options on the portfolio securities themselves. As interest
rates rise, the value of debt securities generally declines, thus making put
options on interest rate futures more valuable. The Fund may purchase a call
option on an interest rate futures contract to hedge against the risk of an
increase in the price of securities it intends to purchase resulting from
declining interest rates. The purchase of call options in those situations
generally would have the same effect as purchasing call options on the debt
securities. The Fund may write put and call options on interest rates futures
contracts as part of closing sale transactions to terminate its option
positions.
The purchase of options on foreign currency futures contracts gives the
Fund the right to enter into a futures contract to purchase (in the case of a
call option) or sell (in the case of a put option) a particular currency at a
specified price at any time during the period before the option expires.
Options on foreign currency futures contracts are available with respect to
British pounds, German deutsche marks and Swiss francs. The Fund may purchase
options on foreign currency futures as a hedge against fluctuating currency
values.
The Fund is permitted to engage in foreign currency exchange transactions
in order to protect against uncertainty in the level of future exchange rates.
The Fund may conduct its currency exchange transactions on a "spot" (i.e.,
cash) basis at the rate then prevailing in the currency exchange market, or on
a forward basis, by entering into futures (as previously discussed) or forward
contracts to purchase or sell currency. The Fund's dealings in foreign currency
exchange contracts is limited to hedging involving either specific transactions
or portfolio positions.
Transaction hedging is the purchase or sale of foreign currency with
respect to specific receivables or payables of the Fund generally arising in
connection with the purchase or sale of its portfolio securities and accruals
of interest receivable and the Fund's expenses. The Fund may engage in
transaction hedging to protect against a change in the foreign currency
exchange rate between the date on which the Fund contracts to purchase or sell
the security and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign currency. In such
circumstances, the Fund will purchase or sell a foreign currency on a spot
basis at the prevailing spot rate.
Position hedging is the purchase or sale of currency with respect to
portfolio security positions denominated or quoted in that currency. The Fund
may engage in position hedging to protect against a decline in the value of the
currencies in which its portfolio securities are denominated or quoted. To
engage in position hedging, the Fund will enter into foreign currency futures
and related options (as described above), forward foreign currency contracts,
and options on foreign currencies. The Fund also will purchase or sell foreign
currency on a spot basis.
The Fund will not position hedge with respect to a particular currency for
an amount greater than the aggregate market value, determined at the time of
sale of foreign currency, of the securities held (or to be held) in its
portfolio denominated or quoted
4
<PAGE>
in or currently convertible into that currency. If the Fund enters into a
position hedging transaction, it will place in a pledged account with its
custodian 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 the total assets the Fund committed to the consummation of the
forward contract. If the value of the securities placed in the pledged account
declines, additional cash or securities will be placed in the account so that
the value of the account would equal the amount of assets the Fund committed to
the currency contract.
A forward foreign currency 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 as agreed upon by the parties, at a price
set at the date of the contract. The holder of a forward contract containing a
cancellation provision has the unilateral right to cancel the contract at
maturity by paying a specified fee. Forward contracts are entered into in the
interbank market conducted directly between currency dealers, which usually are
large commercial banks and brokerage houses, and their customers. Forward
currency contracts are conducted on a principal basis and therefore generally
involve no margin, commissions or other fees. Instead, bid and ask prices are
quoted by dealers who profit from the difference in the spread between those
prices.
Although the use of forward currency contracts does not eliminate
fluctuations in the underlying price of securities, it will establish a rate of
exchange that can be achieved in the future. Forward contracts limit the risk
of loss due to a decline in the value of the hedged currency but also limit any
potential gain that might result in the event the value of the currency
increases.
Unlike a foreign currency futures contract, which has a predetermined
maturity date in any month, a forward currency contract matures any fixed
number of days from the date of the contract agreed upon by the parties. At the
maturity of a forward contract, the Fund may either take or make delivery of
the currency specified in the contract, or, at or prior to maturity, it may
enter into a closing transaction involving the purchase or sale of an
offsetting contract. Because these contracts will be entered into on a
principal basis rather than on an exchange, closing transactions for forward
contracts will be effected with the currency dealer who was a party to the
original forward contract.
The Fund may also purchase or write put and call options on exchanges for
the purpose of hedging against changes in future currency exchange rates. An
option on a foreign currency gives the purchaser, in return for a premium paid
plus related transaction costs, the right to sell (in the case of a put option)
and buy (in the case of a call option), the underlying currency at a specified
price until the option expires. Currency options traded on United States or
other exchanges may be subject to position limits, which may affect the ability
of the Fund to hedge its positions. Foreign currency options currently are
traded on the Philadelphia Stock Exchange, the International Options Clearing
Corp. and LIFFE. The Fund will purchase and sell options on foreign exchanges
to the extent permitted by the Commodity Futures Trading Commission ("CFTC").
The Fund may purchase or write options on currency only when the Adviser
believes that a liquid secondary market exists for these options; however, no
assurance can be given that a liquid secondary market will exist for a
particular option at any specific time.
The value of an option on foreign currency depends upon the value of the
foreign currency when compared to the value of the U.S. dollar. Transactions in
foreign currency options generally involve smaller amounts than those on the
interbank market and therefore option investors may have to deal at prices for
the underlying foreign currencies that are less favorable than those for larger
transactions. In addition, the foreign currency market has neither a systematic
reporting of last sale information nor a regulatory requirement that available
quotations be firm or revised on a timely basis. Available quotation information
usually represents large transactions in the interbank market and may not
reflect transactions valued at less than $1 million. Because the interbank
market in foreign currencies is a global, around-the-clock market, significant
price and rate movements may take place during periods when the U.S. options
markets are closed and therefore may not be reflected in the U.S. options
markets.
The Fund will not use leverage when it enters into long futures contracts
or related options. For each long position the Fund enters into, it will
deposit any asset, including equity securities and non-investment grade debt so
long as the asset is liquid, unencumbered and marked to market daily, having a
value equal to the market value of the contract as collateral in a pledged
account with the custodian of the Fund. The Fund will not enter into futures
contracts and related options if as a result the aggregate of the initial
margin deposits on the Fund's existing futures and premiums paid for unexpired
options exceeds 5% of the fair market value of the Fund's assets.
Using futures contracts and related options involves certain risks,
including (1) the risk of imperfect correlation between fluctuations in the
value of a futures contract and the portfolio security that is being hedged;
(2) the risk that in its use of futures and related options the Fund may not
outperform a fund that does not make use of those instruments; (3) the fact
that no assurance can be given that active markets will be available to offset
positions; (4) the fact that futures contracts and options on futures may be
closed out, by entering into an offsetting position, only on the exchange on
which the contracts were entered into or through a linked exchange; (5) the
risk that the value of the assets underlying the futures contract on the date
of delivery will vary significantly from the amount which the Fund has agreed
to pay or the price at which the Fund has agreed to sell under such contract,
thereby subjecting the Fund to losses; and (6) the fact that successful use of
futures contracts and related options for hedging purposes will depend upon the
ability of the Adviser to predict correctly movements in the direction of the
overall interest rate and foreign currency markets.
5
<PAGE>
Certain exchanges on which futures are traded may establish daily limits in
the amount that the price of a futures or related option contract may fluctuate
from the previous day's settlement price. When a daily limit has been reached in
a particular contract, no trades may be made that day at a price beyond that
limit. If a daily limit were reached, the Fund could be prevented from
liquidating unfavorable positions and thus could be subject to losses. In
certain situations, the Fund would be unable to close a position and also would
have to make daily cash payments of variation margin. Although an increase in
the price of securities could partially or completely offset those losses, no
assurance can be given that the price of the underlying securities will
correlate with the price of the futures contracts and thus offset any losses on
the contracts.
Foreign currency futures contracts and related options, forward foreign
currency contracts and options on foreign currency may be traded on foreign
exchanges. The regulation of transactions on those exchanges may be less
extensive than the regulation of U.S. exchanges. The Fund only would trade those
options approved by the CFTC. Transactions on foreign exchanges also may not
involve a clearing mechanism and related guarantees and may be subject to the
risk of governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions also could be affected adversely by (1)
other foreign political, legal and economic factors; (2) less information being
available on which to make trading decisions than is available in the U.S.; (3)
a delay in the ability to act on significant events occurring in the foreign
markets during non-business hours in the United States; (4) different exercise
and settlement terms and margin requirements from those imposed domestically;
and (5) less trading volume than on U.S. exchanges.
An additional risk of foreign exchange transactions is that foreign
exchanges offer less protection against defaults in the forward trading of
currencies than is available on a United States exchange. Because a forward
foreign currency contract is not guaranteed by an exchange or clearinghouse, a
default on the contract would deprive the Fund of unrealized profits or would
force the Fund to cover its commitments for purchase or resale, if any, at the
current market price.
Lending Portfolio Securities
The Fund may lend portfolio securities to broker-dealers or other
institutional borrowers, but only when the borrower pledges cash, U.S.
government securities, or other liquid high-grade debt securities as collateral
to the Fund and agrees to maintain such collateral so that it amounts at all
times to at least 100% of the value of the securities loaned. While securities
are on loan, the borrower will pay the Fund any income earned thereon and the
Fund may invest any cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed-upon amount of income from a borrower
who has delivered equivalent collateral. Furthermore, the Fund may terminate
such loans at any time, and must receive reasonable interest on the collateral
as well as dividends, interest, or other distributions paid on the security
during the loan period. Upon expiration of the loan the borrower of the
securities will be obligated to return to the Fund the same number and kind of
securities as those loaned together with duly executed stock powers. The Fund
must be permitted to vote the proxies if a material event affecting the value
of the security is to occur. The Fund may pay reasonable fees in connection
with the loan, including reasonable fees to the Fund's Custodian for its
services. In the event that the borrower defaults on its obligation to return
borrowed securities because of insolvency or otherwise, the Fund could
experience delays and costs in gaining access to the collateral and could
suffer a loss to the extent that the value of the collateral falls below the
market value of the borrowed securities.
Loan Participations
The Fund may invest up to 5% of its net assets, determined at the time of
investment, in loan participations. A loan participation agreement involves the
purchase of a share of a loan made by a bank to a company in return for a
corresponding share of the borrower's principal and interest payments. Loan
participations of the type in which the Fund may invest include interests in
both secured and unsecured corporate loans.
In the event that a corporate borrower failed to pay its scheduled
interest or principal payments on participations held by the Fund, the market
value of the affected participation would decline, resulting in a loss of value
of such investment to the Fund. Accordingly, such participations are
speculative and may result in the income level and net assets of the Fund being
reduced. Moreover, loan participation agreements generally limit the right of a
participant to resell its interest in the loan to a third party and, as a
result, loan participations will be deemed by the Fund to be illiquid
investments. The Fund will invest only in participations with respect to
borrowers whose creditworthiness is, or is determined by the Adviser to be,
substantially equivalent to that of issuers whose senior unsubordinated debt
securities are rated B or higher by Moody's Investor's Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P").
Illiquid Securities
The fund will not invest more than 15% of its net assets in illiquid
securities. Illiquid securities are those that the Fund would not likely be
able to sell in any given seven day period. Securities such as private
placements and other restricted securities, loan participations, securities
with legal or contractual restrictions on resale, repurchase agreements that
mature in more than seven days and OTC options tend to be illiquid. The Board
of Directors of the Fund has adopted procedures for evaluating the liquidity of
securities. The procedures take into account the frequency of trades and quotes
for the security, the number of dealers willing to purchase and sell the
security and the number of other, qualified purchasers, dealer undertakings to
make a market in the security, and the nature of the marketplace for effecting
trades (i.e. the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
6
<PAGE>
Liquidity issues arise most frequently in two cases. "Rule 144A" securities
and OTC options.
"Rule 144A" securities are restricted securities (those not originally
issued in a public offering) that generally may not be traded. Pursuant to Rule
144A under the Securities Act of 1933, however, these securities can be readily
bought and sold by and among certain types of institutional investors,
including mutual funds. The liquidity procedures adopted by the Fund's Board of
Directors recognize the significance of Rule 144A and the institutional
marketplace it has produced for restricted securities.
The staff of the Securities and Exchange Commission (the "Commission") has
taken the position that purchased OTC options and the assets that "cover" for
written OTC options are illiquid securities unless certain procedures are
followed. The Fund intends to follow those procedures. Thus, the Fund will sell
OTC options only to qualified dealers who agree that the Fund may repurchase
any OTC options it writes for a maximum price to be calculated by a
predetermined formula. In such cases, the OTC option would be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option. The Fund may also follow certain
procedures from time to time which have been adopted by the Fund's Board of
Directors for the purpose of making determinations regarding the liquidity of
securities issued pursuant to Rule 144A under the Securities Act of 1933.
In determining whether a Rule 144A security is liquid, the Board of
Directors may take into account the frequency of trades and quotes for the
security, the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, dealer undertakings to make a market
in the security, and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer).
PERFORMANCE INFORMATION
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature.
Average annual return and yield are computed separately for each Class of
Shares in accordance with the formulas specified by the Commission. The yield
will be computed by dividing the Fund's net investment income over a 30-day
period by an average value (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 12-month period to
derive the Fund's yield. For the 30-day period ending October 31, 1997, the
Class A Shares yield, calculated pursuant to this formula was 6.93%. The Class
B Shares yield was 6.47%, the Class C Shares yield was 6.44% and the Class M
Shares yield was 6.36%, calculated pursuant to this formula.
Average annual total return quotations will be computed by finding the
average annual compounded rates of return over the 1, 5 and 10 year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years;
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
Performance data quoted for a Class of Shares covering periods prior to the
inception of such Class of Shares will reflect historical performance of Class A
shares adjusted for the higher operating expenses applicable to such Class of
Shares.
Advertisements, sales literature and other communications may contain
information about the Fund and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund to
respond quickly to changing market and economic conditions. From time to time
the Fund may include specific portfolio holdings or industries, in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital gains
components; or cite separately as a return figure the equity or bond portion of
the Fund's portfolio; or compare the Fund's equity or bond figures to well-known
indices of market performance, including, but not limited to: the S&P 500 Index,
Dow Jones Industrial Average, Lehman Brothers Aggregate Bond Index, CS First
Boston High Yield Index and Salomon Brothers Corporate Bond and Government Bond
Indices.
For the 1 and 5 year periods ended October 31, 1997, the average annual
total return of the Class A was 4.04%, 8.61, and from inception, December 18,
1989, through October 31, 1997, was 10.78%. For the 1 and 5 year periods ended
October 31, 1997 and since inception, January 3, 1992, for Class B Shares, the
average annual total return was 4.42%, 8.87%, and 9.13%, respectively. The
average annual total return for Class C Shares and Class M Shares since
inception, October 14, 1997, through October 31, 1997 was -5.95% and -8.29%,
respectively.
The Fund may also compute aggregate total return for specified periods
based on a hypothetical Class A, Class B, Class C or Class M account with an
assumed initial investment of $10,000. The aggregate return is determined by
dividing the net asset value
7
<PAGE>
of this account at the end of the specified period by the value of the initial
investment and is expressed as a percentage. Calculation of aggregate total
return reflects payment of the Class A and Class M maximum sales charges of
4.75% and 3.50%, respectively, and assumes reinvestment of all income dividends
and capital gain distributions during the period.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser places orders for the purchase and sale of securities,
supervises their execution and negotiates brokerage commissions on behalf of the
Fund. It is the practice of the Adviser to seek the best prices and execution of
orders and to negotiate brokerage commissions which in its opinion are
reasonable in relation to the value of the brokerage services provided by the
executing broker. Brokers who have executed orders for the Fund are asked to
quote a fair commission for their services. If the execution is satisfactory and
if the requested rate approximates rates currently being quoted by the other
brokers selected by the Adviser, the rate is deemed by the Adviser to be
reasonable. Brokers may ask for higher rates of commission if all or a portion
of the securities involved in the transaction are positioned by the broker, if
the broker believes it has brought the Fund an unusually favorable trading
opportunity, or if the broker regards its research services as being of
exceptional value. Payment of such commissions is authorized by the Adviser
after the transaction has been consummated. If the Adviser more than
occasionally differs with the broker's appraisal of opportunity or value, the
broker would not be selected to execute trades in the future.
The Adviser believes that the Fund benefits with a securities industry
comprised of many and diverse firms and that the long-term interests of
shareholders of the Fund are best served by its brokerage policies which will
include paying a fair commission rather than seeking to exploit its leverage to
force the lowest possible commission rate. The primary factors considered in
determining the firms to which brokerage orders are given are the Adviser's
appraisal of: the firm's ability to execute the order in the desired manner, the
value of research services provided by the firm, and the firm's attitudes toward
and interest in mutual funds in general including those managed and sponsored by
the Adviser. The Adviser does not offer or promise to any broker an amount or
percentage of brokerage commissions as an inducement or reward for the sale of
shares of the Fund. Over-the-counter purchases and sales are transacted directly
with principal market makers except in those circumstances where, in the opinion
of the Adviser, better prices and executions are available elsewhere. In the
over-the-counter market, securities are usually traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually contains a profit to the dealer. The
Fund also expects that securities will be purchased at times in underwritten
offerings where the price includes a fixed amount of compensation, usually
referred to as the underwriter's concession or discount. The foregoing
discussion does not relate to transactions effected on foreign securities
exchanges which do not permit the negotiation of brokerage commissions and where
the Adviser would, under the circumstances, seek to obtain best price and
execution on orders for the Fund.
The Fund 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 Fund. 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 shared pro rata based on the
Fund'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
Directors will annually review these procedures or as frequently as shall appear
appropriate.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry
groups, and individual issues. Research services will vary from firm to firm,
with broadest coverage generally from the large full-line firms. Smaller firms
in general tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor federal,
state, local and foreign political developments. Many of the brokers also
provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff since the brokers, as a group, tend
to monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, it provides the Adviser with a diverse
perspective on financial markets. Research and investment information is
provided by these and other brokers at no cost to the Adviser and is available
for the benefit of other accounts advised by the Adviser and its affiliates and
not all of this information will be used in connection with the Fund. While this
information may be useful in varying degrees and may tend to reduce the
Adviser's expenses, it is not possible to estimate
8
<PAGE>
its value and in the opinion of the Adviser it does not reduce the Adviser's
expenses in a determinable amount. The extent to which the Adviser makes use of
statistical, research and other services furnished by brokers is considered by
the Adviser in the allocation of brokerage business but there is no formula by
which such business is allocated. The Adviser does so in accordance with its
judgment of the best interest of the Fund and its shareholders.
During the fiscal years ended October 31, 1995, 1996 and 1997, the Fund
paid no brokerage commissions.
SERVICES OF THE ADVISER
The Adviser provides certain services and facilities required to carry on
the day-to-day operations of the Fund (for which it receives a management fee)
other than the costs of printing and mailing proxy materials, reports and
notices to shareholders; outside legal and auditing services; regulatory filing
fees and expenses of printing the Fund's registration statements (but the
Distributor purchases such copies of the Fund's prospectuses and reports and
communications to shareholders as it may require for sales purposes); insurance
expense; association membership dues; brokerage fees; and taxes.
The Adviser is a subsidiary of Phoenix Duff & Phelps Corporation whose
majority shareholder is Phoenix Home Life Mutual Insurance Company ("Phoenix
Home Life"). Phoenix Home Life's principal place of business is located at One
American Row, Hartford, Connecticut. The Adviser also serves as investment
adviser to Phoenix Worldwide Opportunities Fund, Phoenix Multi-Sector Short Term
Bond Fund, Phoenix California Tax Exempt Bonds, Inc., Phoenix Income and Growth
Fund, and Phoenix Strategic Equity Series Fund: Phoenix Equity Opportunities
Fund. The Adviser currently has approximately $970 million in assets under
management and has acted as an investment adviser for over sixty years.
The current Management Agreement was approved by the Directors of the Fund
on March 16, 1993 and by the shareholders of the Fund on May 7, 1993. The
Management Agreement became effective on May 14, 1993, and it will continue in
effect until lapsed or terminated. The Management Agreement will continue in
effect from year to year if specifically approved annually by a majority of the
Directors who are not interested persons of the parties thereto, as defined in
the Investment Company Act of 1940, as amended ("1940 Act"), and by either (a)
the Directors of the Fund or (b) the vote of a majority of the outstanding
voting securities of the Fund (as defined in the 1940 Act). The Agreement may be
terminated without penalty at any time by the Directors or by a vote of a
majority of the outstanding voting securities of the Fund or by the Adviser upon
60 days' written notice and will automatically terminate in the event of its
"assignment" as defined in Section 2(a)(4) of the 1940 Act.
The Management Agreement provides that the Adviser is not liable for any
act or omission in the course of, or in connection with, rendering services
under the Agreement in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under the Agreement.
The Agreement permits the Adviser to render services to others and to engage in
other activities.
As compensation for its services, the Adviser receives a fee, which is
accrued daily against the value of the Fund's average daily net assets and is
paid by the Fund monthly. The fee is computed at the annual rate of .55% of the
Fund's average daily net assets of up to $1 billion, .50% of the Fund's average
daily net assets from $1 billion to $2 billion, and .45% of the Fund's average
daily net assets in excess of $2 billion. Total management fees for the fiscal
years ended October 31, 1995, 1996 and 1997 amounted to $1,692,191, $1,696,487
and $1,860,360, respectively.
The Adviser makes its personnel available to serve as officers and
"interested" Directors of the Fund. The Fund has not directly compensated any of
its officers or Directors for services in such capacities except to pay fees to
the Directors who are not otherwise affiliated with the Fund. The Directors of
the Fund are not prohibited from authorizing the payment of salaries to the
officers pursuant to the Management Agreement, including out-of-pocket expenses,
at some future time.
In addition to the management fee, expenses paid by the Fund include: fees
of Directors who are not "interested persons," interest charges, taxes, fees and
commissions of every kind, including brokerage fees, expenses of issuance,
repurchase or redemption of shares, expenses of registering or qualifying shares
for sale (including the printing and filing of the Fund's registration
statements, reports and prospectuses excluding those copies used for sales
purposes which the Distributor purchases), accounting services fees, insurance
expenses, litigation expenses, association membership dues, all charges of
custodians, transfer agents, registrars, auditors and legal counsel, expenses of
preparing, printing and distributing all proxy material, reports and notices to
shareholders, and all costs incident to the Fund's existence as a Maryland
corporation.
The Adviser has agreed, under the terms of the Management Agreement, to
reimburse the Fund to the extent that, in any fiscal year, aggregate annual
expenses of the Fund, exclusive of payments made pursuant to a Rule 12b-1
distribution plan, taxes, brokerage fees, interest, and extraordinary charges
such as litigation costs, exceed the most restrictive expense limitations
imposed by any state in which the Fund's shares are qualified for sale.
Currently, the most restrictive expense limitations applicable to the Fund,
which provides that aggregate annual expenses of an investment company (which
excludes interest, taxes, certain annual distribution plan expenses, litigation
costs, and capital items such as brokerage costs) shall not exceed 2.5% of the
first $30,000,000 of the Fund's average net assets, 2% of the next $70,000,000
of the Fund's average net assets, and 1.5% of the remaining average net assets
of the Fund for any fiscal year. To the extent that the Fund's expenses exceed
this limitation, the Adviser would be required to reduce or rebate its
management fee.
9
<PAGE>
The Adviser would not be required to absorb any other Fund expenses in excess
of its fees. In the event legislation were to be adopted in each state so as to
eliminate this restriction, the Fund would take such action necessary to
eliminate this expense limitation. See the "Fund Expenses" table in the Fund's
current Prospectus for further information.
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Since the Fund does not price securities on
weekends or United States national holidays, the net asset value of the Fund's
foreign assets may be significantly affected on days when the investor has no
access to the Fund. The net asset value per share of the Fund is determined by
adding the values of all securities and other assets of the Fund, subtracting
liabilities, and dividing by the total number of outstanding shares of the Fund.
Assets and liabilities are determined in accordance with generally accepted
accounting principles and applicable rules and regulations of the Securities and
Exchange Commission. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Directors 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 the Fund if it invests in
foreign securities contemporaneously with the determination of the prices of the
majority of the portfolio securities of such Fund. All assets and liabilities
initially expressed in foreign currency values will be converted into United
States dollar values at the mean between the bid and ask quotations of such
currencies against United States dollars as last quoted by any recognized
dealer. If an event were to occur after the value of an investment was so
established but before the net asset value per share was determined, which was
likely to materially change the net asset value, then the instrument would be
valued using fair value considerations by the Directors or their delegates. If
at any time the Fund has investments where market quotations are not readily
available, such investments are valued at the fair value thereof as determined
in good faith by the Directors although the actual calculations may be made by
persons acting pursuant to the direction of the Directors.
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 Fund 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 Fund's behalf.
The Fund 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 Fund's 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 Fund, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated continuing distribution and services fee and contingent deferred
sales charges on Class B or C Shares would be less than the initial sales charge
and accumulated distribution and services fee on Class A or M Shares purchased
at the same time.
Dividends paid by the Fund, 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 fee and any incremental
transfer agency costs relating to each Class of Shares will be borne exclusively
by that class. See "Dividends, Distributions and Taxes."
10
<PAGE>
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 an ongoing distribution and services fee at an annual rate
of up to 0.30% of the Fund's aggregate average daily net assets attributable to
the Class A Shares; however, the Distributor has voluntarily agreed to limit the
fee to 0.25%. In addition, certain purchases of Class A Shares qualify for
reduced initial sales charges. See the Fund's 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 Fund's current Prospectus for additional
information.
Class B Shares are subject to an ongoing distribution and services fee at
an annual rate of up to 1.00% of the Fund's aggregate average daily net assets
attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment is
made. The higher ongoing distribution and services fee 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 Fund's 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 fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge.
For purposes of conversion to Class A Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares in
a shareholder's Trust account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Fund account
(other than those in the sub-account) 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
Class C Shares are purchased without an initial sales charge but are
subject to a deferred sales charge if redeemed within one year of purchase. The
deferred sales charge may be waived in connection with certain qualifying
redemptions. Shares issued in conjunction with the automatic reinvestment of
income distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to an ongoing distribution and services fee
of up to 1.00% of the Fund's aggregate average daily net assets attributable to
Class C Shares. See the Fund's current Prospectus for more information.
Class M Shares
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 Fund's
Prospectus. Class M Shares are subject to an ongoing distribution and services
fee of up to 0.50% of the Funds' aggregate average daily net assets attributable
to Class M Shares.
INVESTOR ACCOUNT SERVICES
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges as
described in the Fund's 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
11
<PAGE>
on a monthly, quarterly, semi-annual or annual basis or may cancel this
privilege at any time. If you maintain an account balance of at least $5,000,
or $2,000 for tax qualified retirement benefit plans (calculated on the basis
of the net asset value of the shares held in a single account), you may direct
that shares be automatically exchanged at predetermined intervals for shares of
the same class of another Phoenix Fund or any other 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. On Class B and C Share exchanges, the CDSC schedule of the original
shares purchased continues to apply.
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 you to make an
investment in an account by requesting a transfer of funds from the balance of
your bank account. Once a request is phoned in, the Transfer Agent will initiate
the transaction by wiring a request for monies to your commercial bank, savings
bank or credit union via Automated Clearing House (ACH). Your bank, which must
be an ACH member, will in turn forward the monies to the Transfer Agent for
credit to your account. ACH is a computer based clearing and settlement
operation established for the exchange of electronic transactions among
participating depository institutions. This service may also be used to sell
shares of the Fund and direct proceeds of sale through ACH to your bank account.
To establish this service, please complete the Invest-by-Phone Application
and attach a voided check. Upon the Transfer Agent's acceptance of the
authorization form (usually within two weeks) you may call toll free (800)
367-5877 prior to 3:00 p.m. (Eastern Time) to place your purchase request.
Instructions as to the account number and amount to be invested must be
communicated to the Transfer Agent. The Transfer Agent will then contact your
bank via ACH with appropriate instructions. The purchase is normally credited to
your account the day following receipt of the verbal instructions. The Fund may
delay the mailing of a check for redemption proceeds of Fund shares purchased
with a check or via Invest-by-Phone service until the Fund has assured itself
that good payment has been collected for the purchase of the shares, which may
take up to 15 days. The Fund and the Transfer Agent 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.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund and other Phoenix Funds may be offered in connection
with employer-sponsored 401(k) plans. Phoenix Home Life and its affiliates may
provide administrative services to these plans and to their participants, in
addition to the services that the Adviser and its affiliates provide to the
Phoenix Funds, and may receive compensation therefor. For information on the
terms and conditions applicable to employee participation in such plans,
including information on applicable plan administrative charges and expenses,
you should consult the plan documentation and employee enrollment information
which is available from participating employers.
REDEMPTION OF 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 therefore postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the New York Stock Exchange is restricted or during any emergency which makes it
impracticable for the Fund to dispose of its securities or to fairly value its
net assets during any other period permitted by order of the Securities and
Exchange Commission. Furthermore, the Transfer Agent will not mail redemption
proceeds until checks received for shares purchased have cleared, which may take
up to 15 days after receipt of the check. Redemptions by Class B and Class C
shareholders will be subject to the applicable deferred sales charge, if any.
See the Fund's current Prospectus for more information.
The Fund 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 Fund's behalf.
The Fund will be deemed to
12
<PAGE>
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 Fund's net asset values next computed after they are
accepted by an authorized broker or the broker's authorized designee.
By Mail
You 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 your possession, they must be mailed or presented, duly endorsed
in the full name of the account, with a written request to Equity Planning that
the Fund redeem the shares. See the Fund's current Prospectus for more
information.
By Telephone
Unless you elect in writing not to participate in the Telephone Redemption
Privilege, shares for which certificates have not been issued may be redeemed by
calling (800) 243-1574 and telephone redemptions will also be accepted on your
behalf from your registered representative as described in the Prospectus.
Address and bank account information will be verified, telephone redemption
instructions will be recorded on tape, and all redemptions will be confirmed in
writing. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. The Fund and the Transfer Agent
will employ reasonable procedures to confirm that telephone instructions are
genuine. To the extent that procedures reasonably designed to prevent
unauthorized telephone redemptions are not followed, the Fund and/or the
Transfer Agent may be liable for following telephone instructions for redemption
transactions that prove to be fraudulent. Broker-dealers other than Equity
Planning may 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 Fund and/or the
Transfer Agent reasonably believe to be genuine.
Telephone redemption orders received and accepted by the Transfer Agent on
any day when the Transfer Agent is open for business will be entered at the next
determined net asset value. However, telephone redemption orders received and
accepted by the Transfer Agent after the close of trading hours on the Exchange
will be executed on the following business day. If the amount of the redemption
is $500 or more, the proceeds may be wired to the designated commercial bank
account in the United States. If the amount of the redemption is less than $500,
the proceeds will be sent by mail to the address of record on your account. With
respect to the telephone redemption of shares purchased by check, such
redemption requests will be effected only after the Fund has assured itself that
good payment has been collected for the purchase of shares, which may take up to
15 days after receipt of the check. See the Fund's current Prospectus for more
information. This expedited redemption privilege is not available to HR-10, IRA
and 403(b)(7) Plans. In addition to the Telephone Redemption Privilege, you may
also redeem by telephone through the "Invest-by-Phone" service.
By Check
You may elect to redeem shares held in your account by check. Checks will
be sent to you upon receipt by Equity Planning of a completed application and
signature card (attached to the application). If the signature card accompanies
your initial account application, the signature guarantee section of the form
may be disregarded. However, the Fund reserves the right to require that all
signatures be guaranteed prior to the establishment of a check writing service
account. When an authorization form is submitted after receipt of the initial
account application, all signatures must be guaranteed regardless of account
value.
Checks may be drawn payable to any person in an amount of not less than
$500, provided that immediately after the payment of the redemption proceeds the
balance in your account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient
number of full and fractional shares in your 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 you 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 you 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. You should make sure that there
are sufficient shares in your 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 Fund 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. You may
not close your 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.
13
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to continue to qualify as a regulated investment company
("RIC") under certain provisions of the Internal Revenue Code (as amended the
"Code"). If the Fund so qualifies, it will not be subject to federal income tax
on its investment company taxable income (which includes dividends, interest and
the excess of net short-term capital gains over net long-term capital losses)
that it distributes to shareholders. To qualify for treatment as a regulated
investment company, the Fund generally must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to security loans and gains from the sale or disposition
of stock or securities or foreign currencies and other income (including but not
limited to gains from options, futures and forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each quarter of the
taxable year (i) at least 50% of the market value of the Fund's assets are
represented by cash, U.S. Government securities, securities of other regulated
investment companies and other securities, with such other securities of any one
issuer limited for the purposes of this calculation to an amount not greater
than 5% of the Fund's total assets and 10% of the outstanding voting securities
of any one issuer; and (ii) not more than 25% of the value of its total assets
is invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies). If in any
taxable year the Fund does not qualify as a regulated investment company, all of
its taxable income will be taxed to the Fund at corporate rates.
Under certain state tax laws, the Fund 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 Fund 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 the Fund 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 Fund 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.
Dividends paid by the Fund will be taxable to shareholders as ordinary
income, except for (a) such portion as may exceed a shareholder's ratable share
of the Fund's earnings and profits, which excess will be applied against and
reduce the shareholder's cost or other tax basis for his shares and (b) amounts
representing a distribution of net capital gains, if any, which are designated
by the Fund as capital gain dividends. If the amount described in (a) above
exceeds the shareholder's tax basis for his shares, the excess over basis will
be treated as gain from the sale or exchange of such shares. The excess of any
net long-term capital gains over net short-term capital losses recognized and
distributed by the Fund and designated by the Fund as a capital gain dividend,
is taxable to shareholders as long-term capital gain regardless of the length of
time a particular shareholder may have held his shares in the Fund. Dividends
and distributions are taxable as described, whether received in cash or
reinvested in additional shares of the Fund.
The Code imposes a 4% nondeductible excise tax on a regulated investment
company, such as the Fund, if it does not distribute to its shareholders (or is
deemed not to have distributed) during the calendar year an amount equal to 98%
of the Fund's ordinary income, with certain adjustments, for such calendar year,
plus 98% of the Fund's capital gains net income (adjusted for certain losses, as
prescribed in the Code) for the 12-month period ending on October 31 of such
calendar year. In addition, an amount equal to any undistributed investment
company taxable income or capital gain net income from the previous calendar
year must also be distributed to avoid the excise tax. The excise tax is imposed
on the amount by which the regulated investment company does not meet the
foregoing distribution requirements.
The Code provides that any dividend declared by the Fund in October,
November or December of any calendar year to shareholders of record on a date in
such month will be deemed to have been received by the shareholder on December
31 of that calendar year, provided that the dividend is actually paid by the
Fund during January of the following year.
Based on the aforementioned, the Fund's policy will be to distribute to its
shareholders at least 90% of net investment company taxable income as defined
above and in the Code and any net realized capital gains for each year and
consistent therewith to meet the distribution requirement of Part I of
subchapter M, including the requirements with respect to diversification of
assets and sources of income, so that the Fund will pay no taxes on net
investment income and net realized capital gains paid to shareholders.
The Fund intends to declare dividends daily. Dividends may be paid from net
investment income. Distribution of net realized short-term and long-term capital
gains will be distributed at least annually. Income dividends will be paid on
the last business day of the month and reinvested in additional shares at net
asset value, unless the shareholder elects to receive dividends in cash. Whether
received in shares or cash, dividends paid by the Fund from net investment
income and distributions from any net short- term capital gains are taxable to
shareholders as ordinary income. Distributions of net long-term capital gains,
if any, realized on sales of investments for the fiscal year normally will be
distributed following the end of the Fund's fiscal year. Distributions of net
long-term capital gains are taxable to shareholders as such, whether paid in
cash or additional shares of the Fund and regardless of the length of time Fund
shares have been owned by the shareholder. Net short-term capital gains are net
realized short-term capital gains, including net premiums from expired options,
net gains from closing purchase transactions, and net short- term gains from
securities sold upon the exercise of options or otherwise, less any net realized
long-term capital losses. Distributions paid by the Fund are subject to taxation
as of the date of payment, whether received by shareholders in cash or in shares
of the
14
<PAGE>
Fund, and whether representing an ordinary distribution or a long-term capital
gains distribution. No dividends or distributions will be made to a shareholder
on shares for which no payment has been received. It is not anticipated that
any of the dividends paid by the Fund will qualify for the 70% dividends
received deduction available to corporate shareholders of the Fund.
The Fund's investments in any regulated futures contracts, non-equity
options, or foreign currency contracts, as those terms are defined in the Code,
are considered section 1256 contracts. The principles of marking-to-market apply
to such contracts such that the contracts are treated as having been sold for
their fair market value on the last business day of the Fund's taxable year.
Generally, 60% of any net gain or loss recognized on the deemed sale, as well as
60% of the gain or loss with respect to any actual termination (including
expiration), will be treated as long-term capital gain or loss and the remaining
40% will be treated as short- term capital gain or loss. However, the gain or
loss on certain foreign currency contracts may be treated as ordinary income
under section 988 of the Code.
Premiums from expired call options written by the Fund and net gain or loss
from closing purchase transactions, which are not section 1256 contracts, are
generally treated as short-term capital gain or loss for federal income tax
purposes and are taxable to shareholders as ordinary income. If a written call
option is exercised, the premium is added to the proceeds of sale of the
underlying security, and the gain or loss from such sale will be short or
long-term, depending upon the period such security was held.
Payments which are classified as long-term capital gains distributions will
be taxed to shareholders as long-term capital gains regardless of how long
shareholders have held shares of the Fund. However, if a shareholder holds
shares of the Fund for six months or less, any loss on the sale of the shares
will be treated as a long-term capital loss to the extent of the long-term
capital gains distributions received by such shareholder.
Offsetting positions held by the Fund involving financial futures and
options transactions may be considered, for tax purposes, to constitute
"straddles." Depending on whether certain elections are available and made by
the Fund, losses realized by the Fund on one or more positions in such a
straddle will be deferred to the extent of unrealized gain in the offsetting
position. Moreover, short-term capital losses on straddle positions may be
re-characterized as long-term capital losses, and long-term capital gains may be
treated as short-term capital gains.
The Fund may have to limit its use of futures contracts and related options
in order to comply with the 30% test previously described above.
Under the Code, a shareholder who does not fall within one of certain
exempt categories may be subject to backup withholding at the rate of 31% with
respect to dividends and capital gains distributions paid to shareholders or
reinvested by the Fund and other amounts distributed by it including proceeds of
redemptions, unless such shareholder provides a social security or taxpayer
identification number, certifies as to exemption from backup withholding, and
otherwise complies with applicable requirements of the Code.
Sales and redemptions of shares of the Fund may result in gains or losses
for tax purposes to the extent of the difference between the proceeds from the
shares relinquished and the shareholder's adjusted tax basis for such shares. If
any shares have been held as a capital asset for more than one year, the gain or
loss realized will be long-term capital gain or loss.
The Fund may be subject to a tax on dividend or interest income received
from securities of non-U.S. issuers withheld by a foreign country at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of tax or exemption from tax on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested within various
countries is not known. The Fund intends to operate so as to qualify for treaty
tax benefits where applicable. To the extent that the Fund is liable for foreign
income taxes withheld at the source, the Fund may operate so as to meet the
requirements of the Code to "pass through" to the Fund's shareholders tax
benefits attributable to foreign income taxes paid by the Fund. If more than 50%
of the value of the Fund's total assets at the close of its taxable year is
comprised of securities issued by foreign corporations, the Fund may file an
election with the Internal Revenue Service to "pass through" to the Fund's
shareholders the amount of foreign income taxes paid by the Fund. Pursuant to
this election, shareholders will be required to (i) include in gross income,
even though not actually received, their respective pro rata share of foreign
taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes as paid
by them; and (iii) either deduct their pro rata share of foreign taxes in
computing their taxable income, or use such share as a foreign tax credit
against U.S. income taxes (but not both). No deduction for foreign taxes may be
claimed by a non-corporate shareholder who does not itemize deductions. The Fund
may meet the requirements to "pass through" to its shareholders foreign income
taxes paid, but there can be no assurance that the Fund will be able to do so.
Each shareholder will be notified within 60 days after the close of each taxable
year of the Fund if the foreign taxes paid by the Fund will "pass through" for
that year, and, if so, the amount of each shareholder's pro rata share (by
country) of (i) the foreign taxes paid and (ii) the Fund's gross income from
foreign sources. Shareholders who are not liable for federal income taxes will
not be affected by any such "pass through" of foreign tax credits.
Distributions and the transactions referred to in the preceding paragraphs
may be subject to state and local income taxes, and the treatment thereof may
differ from the federal income tax consequences discussed herein. Shareholders
are advised to consult with their tax advisers or attorneys.
15
<PAGE>
The Fund is organized as a Maryland corporation. Under current law, as long
as it qualifies for the federal income tax treatment described above, the Fund
itself is not liable for any income or franchise tax in the State of Maryland.
THE DISTRIBUTOR
Phoenix Equity Planning Corporation ("Equity Planning") acts as the
Distributor for the Fund and as such will conduct a continuous offering pursuant
to a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. Equity Planning is an indirect less
than wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company and
an affiliate of the Adviser. Shares of the Fund may be purchased through
investment dealers who have sales agreements with the Distributor. During the
fiscal years ended October 31, 1995, 1996 and 1997, purchasers of shares of the
Fund paid aggregate sales charges of $1,114,261, $841,871, and $1,111,355,
respectively, of which the Distributor received net commissions of $811,088,
$482,443, and $481,975, respectively, for its services, the balance being paid
to dealers.
The Underwriting Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Fund, or by vote
of a majority of the Fund's Directors who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Distribution Plan or in any related agreements. The Underwriting Agreement
will terminate automatically in the event of its assignment.
Equity Planning also acts as administrative agent of the Fund and as such
performs administrative, bookkeeping and pricing functions for the Fund. 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
the Fund, at the following incremental annual rates:
First $100 million .05% subject to a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum fee of $70,000 is applicable. In addition, Equity Planning is
paid $12,000 for each class of shares beyond one. For its services during the
Fund's fiscal year ended October 31, 1997, Equity Planning received $145,836.
PLANS OF DISTRIBUTION
The Fund has adopted separate amended and restated distribution plans under
Rule 12b-1 of the 1940 Act for each class of shares of the Fund (the "Class A
Plan, "the "Class B Plan," the "Class C Plan," the "Class M Plan" and
collectively the "Plans"). The Plans permit the Fund 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 Fund. For the fiscal
year 1998, the Distributor has voluntarily agreed to waive reimbursement for
Class A Shares.
Pursuant to the Plans, the Funds may reimburse the Distributor for actual
expenses of the Distributor up to 0.05% of the average daily net assets of the
Fund's Class A Shares, up to 0.75% of the average daily net assets of the Fund's
Class B and of Class C Shares, and up to 0.25% of the average daily net assets
of the Fund's Class M Shares. Expenditures under the Plans shall consist of: (i)
commissions to sales personnel for selling shares of the Fund (including
underwriting commissions 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 Fund's
Prospectus and Statement of Additional Information for distribution to potential
investors; and (vii) such other similar services that the Board of Directors of
the Fund determines are reasonably calculated to result in the sale of shares of
the Fund. In addition, the Fund will pay 0.25% annually of the average daily net
assets of the Fund's shares for providing services to shareholders, including
assistance in connection with inquiries related to shareholder accounts (the
"Service Fee").
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor, such
as services to the Fund's shareholders; or services providing the Fund with more
efficient methods of offering shares to coherent groups of clients, members or
prospects of a participant; or services permitting bulking of purchases or
sales, or transmission of such purchases or sales by computerized tape or other
electronic equipment; or other processing. If the Plans are terminated in
accordance with their terms, the obligations of the Fund to make payments to the
Distributor pursuant to the Plans will cease and the Fund will not be required
to make any payments past the date on which either Plan terminates.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Distributor may from time to time pay, from its own
resources or pursuant to the Plan, a bonus or other incentive to dealers (other
than the Distributor) which employ a registered representative who sells a
minimum dollar amount of the shares of the Fund during a specific period of
time. Such bonus or other incentive may take the form of payment for travel
expenses, including lodging, incurred in connection with
16
<PAGE>
trips taken by qualifying registered representatives and members of their
families to places within or without the United States or other bonuses such as
gift certificates or the cash equivalent of such bonuses. The Distributor may,
from time to time, reallow the entire portion of the sales charge on Class A
Shares which it normally retains to individual selling dealers. However, such
additional reallowance generally will be made only when the selling dealer
commits to substantial marketing support such as internal wholesaling through
dedicated personnel, internal communications and mass mailings.
The Directors have concluded that there is a reasonable likelihood that the
Plans will benefit the Fund and its shareholders. The Amended and Restated Plans
were approved by the Directors of the Fund on August 27, 1997. For the fiscal
year ended October 31, 1997, the Fund paid 12b-1 fees in the amount of
$1,993,002 ($463,149 under the Distribution Plan for Class A shares; $1,529,736
under the Distribution Plan for Class B shares; $92 under the Distribution Plan
for Class C Shares and $25 under the Distribution Plan for Class M Shares), of
which the Distributor of the Fund received $1,338,075. The 12b-1 payments were
used for: (1) compensating dealers, $1,846,979, (2) compensating sales
personnel, $533,414, (3) advertising, $284,212, (4) printing and mailing
prospectuses to other than current shareholders, $15,997, (5) service cost,
$73,362 and (6) other, $106,705.
On a quarterly basis, the Fund's Directors review a report on expenditures
under the Plans and the purposes for which expenditures were made. The Directors
conduct an additional, more extensive review annually in determining whether the
Plans will be continued. By their terms, continuation of the Plans from year to
year is contingent on annual approval by a majority of the Fund's Directors and
by a majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plans or any related agreements (the "Plan Directors"). The
Plans provide that they may not be amended to increase materially the costs
which the Fund may bear pursuant to the Plans without approval of the
shareholders of that class of the Fund and that other material amendments to the
Plans must be approved by a majority of the Plan Directors by vote cast in
person at a meeting called for the purpose of considering such amendments. The
Plans further provide that while they are in effect, the selection and
nomination of Directors who are not "interested persons" shall be committed to
the discretion of the Directors who are not "interested persons." The Plans may
be terminated at any time by vote of a majority of the Plan Directors or a
majority of the outstanding shares of the relevant class of the Fund.
The National Association of Securities Dealers, Inc. (the "NASD") regards
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Directors to
suspend distribution fees or amend the Plans.
DIRECTORS AND OFFICERS
The following table sets forth information concerning the Directors and
executive officers of the Fund, including their principal occupations during
the past five years. Unless otherwise noted, the address of each executive
officer and Director is 56 Prospect Street, Hartford, Connecticut, 06115-0480.
The Directors and executive officers are listed below:
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ------------------------ ---------------- ---------------------------------------------------------
<S> <C> <C>
Robert Chesek (63) Director Trustee/Director (1981-present) and Chairman (1989-1994)
49 Old Post Road Phoenix Funds. Trustee, Phoenix-Aberdeen Series Fund
Wethersfield, CT 06109 and Phoenix Duff & 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).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- ----------------------------------------------------------------
<S> <C> <C>
E. Virgil Conway (68) Director Chairman, Metropolitan Transportation Authority (1992-
9 Rittenhouse Road present). Trustee/Director, Consolidated Edison Company
Bronxville, NY 10708 of New York, Inc. (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). Member (1990-1995),
Chairman (1992-1995), Financial Accounting Standards
Advisory Council. Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Harry Dalzell-Payne (68) Director Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York, NY 10016 Phelps Utilities Tax-Free 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) Director 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,
Naples, FL 33963 Duff & Phelps 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.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ---------------------------- --------------- -------------------------------------------------------------
<S> <C> <C>
Leroy Keith, Jr. (59) Director Chairman and Chief Executive Officer, Carson Products
Chairman and Chief Company (1995-present). Director/Trustee, Phoenix Funds
Executive Officer (1980-present). Trustee, Phoenix-Aberdeen Series Fund
Carson Products Company and Phoenix Duff & Phelps Institutional Mutual Funds
64 Ross Road (1996-present). Director, Equifax Corp. (1991-present) and
Savannah, GA 30750 Evergreen International Fund, Inc. (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).
*Philip R. McLoughlin (51) Director and Chairman (1997-present), Director (1995-present), Vice
President Chairman (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>
19
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- -------------------------- --------------- ------------------------------------------------------------
<S> <C> <C>
**Everett L. Morris (69) Director Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee,
Colts Neck, NJ 07722 Phoenix-Aberdeen 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) Director Chairman, IBEX Capital Markets LLC (1997-present).
Managing Director Managing Director, Wydown Group (1994-present).
The Wydown Group Director, Phoenix Duff & Phelps Corporation (1995-
IBEX Capital Markets LLC present). Director/Trustee, Phoenix Funds (1987-present).
60 State Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff
Suite 950 & Phelps Institutional Mutual Funds (1996-present).
Boston, MA 02109 Director, AIB Govett Funds (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). Vice Chairman,
Massachusetts Housing Partnership (1992-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) Director Director (1986-present), President (1993-present) and
Phoenix Duff & Phelps Executive Vice President (1992-1993), Phoenix Duff &
Corporation Phelps Corporation. Director/Trustee, Phoenix Funds
55 East Monroe Street (1995- present). Trustee, Phoenix-Aberdeen Series Fund
Suite 3600 and Phoenix Duff & Phelps Institutional Mutual Funds
Chicago, IL 60603 (1996-present). President and Chief 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) Director 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).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------- --------------- ------------------------------------------------------------
<S> <C> <C>
Richard E. Segerson (52) Director Managing Director, Mullin Associates (1993-present).
102 Valley Road Director/Trustee, Phoenix Funds (1993-present). Trustee,
New Canaan, CT 06840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). 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) Director 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), Compuware
(1996-present) and Burroughs Wellcome Fund (1996-
present). Visiting Professor, University of Virginia (1997-
present). Director, Duty Free International, Inc. (1997).
Chairman, Dresing, Lierman, Weicker (1995-1996).
Governor of the State of Connecticut (1991-1995).
Michael E. Haylon (40) Executive Director and Executive Vice President-Investments,
Vice Phoenix Duff & Phelps Corporation (1995-present).
President Director (1994-present), President (1996-present), and
Executive Vice President (1994-1996), National Securities
& Research Corporation. Executive Vice President,
Phoenix Funds (1995-present), 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), and Executive Vice President
(1994-1995), Phoenix Investment Counsel, Inc. 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).
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.; Senior
Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds; and
Senior Vice President, 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. (1997-present). Senior Vice President
and Chief Investment Officer, Duff & Phelps Utilities Tax
Free Income Inc. (1997-present). Managing Director, Public
Fixed Income, Phoenix Home Life Insurance Company
(1991-1995). Various positions with Phoenix Home Life
Insurance Company.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund 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 &
Research Corporation. Vice President, Phoenix Multi-
Portfolio Fund (1993-present), Phoenix Multi-Sector Short
Term Bond Fund (1993-present), Multi-Sector Fixed
Income Fund (1994-present). Portfolio Manager, Phoenix
Home Life Mutual Insurance Company (1990-1995).
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-
P.O. Box 2200 Aberdeen Series Fund, and Phoenix Duff & Phelps Institutional
Enfield, CT 06083-2200 Mutual Funds (1996-present). Assistant Vice President,
USAffinity Investments LP, (1994-1995). Treasurer and
Secretary, USAffinity Funds (1994-1995). Manager, Fund
Administration, SEI Corporation (1991-1994).
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer, Phoenix
100 Bright Meadow Blvd. President Duff & Phelps Corporation (1995-present). Senior Vice
P.O. Box 2200 President (1990-present), Chief Financial Officer (1996-
Enfield, CT 06083-2200 present), Finance (until 1996) and Treasurer (1994-1996),
Phoenix Equity Planning Corporation. Senior Vice President
(1990-present), Chief Financial Officer (1996-present),
Finance (until 1996) and Treasurer (1994-present), Phoenix
Investment Counsel, Inc. Senior Vice President (1994-
present), Chief Financial Officer (1996-present), Finance
(until 1996), and Treasurer (1994-present), National Securities
& Research Corporation. 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, Phoenix Duff & Phelps Investment Management Co.
(1996-present). Vice President, Investment Products Finance,
Phoenix Home Life Mutual Insurance Company (1990-1995).
Senior Vice President, Finance, Phoenix Securities Group,
Inc. (1993-1995). Senior Vice President and Chief Financial
Officer (1993-1995) and Treasurer (1994-1995), W.S. Griffith
& Co., Inc. and Townsend Financial Advisers, Inc. Vice
President, the National Affiliated Companies (until 1993).
Leonard J. Saltiel (44) Vice Managing Director (1996-present), Senior Vice President
President (1994-1996), Phoenix Equity Planning Corporation.
Vice President, Phoenix Funds (1994-present), Phoenix-
Aberdeen Series Fund (1996-present) and Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present). 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).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------- --------------- -----------------------------------------------------------
<S> <C> <C>
Nancy G. Curtiss (45) Treasurer Vice President, Fund Accounting (1994-present) and
Treasurer (1996-present), Phoenix Equity Planning
Corporation. Treasurer, Phoenix Funds (1994-present),
Phoenix-Aberdeen Series Fund (1996-present) and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present).
Second Vice President and Treasurer, Fund Accounting,
Phoenix Home Life Mutual Insurance Company (1994-
1995). Various positions with Phoenix Home Life Mutual
Insurance Company (1987-1994).
G. Jeffrey Bohne (50) Secretary Vice President, Mutual Fund Customer Service (1996-
101 Munson Street present), Vice President, Transfer Agent Operations (1993-
Greenfield, MA 01301 1996), Phoenix Equity Planning Corporation. Secretary/
Clerk, Phoenix Funds (1993-present), Phoenix-Aberdeen
Series Fund (1996-present) and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Vice President
and General Manager, Phoenix Home Life Mutual
Insurance Co. (1993-present). Vice President, Home Life of
New York Insurance Company (1984-1992).
</TABLE>
- -----------
*Messrs. Jeffries, McLoughlin, Oates and Pedersen are "interested persons" of
the Fund within the meaning of the definition set forth in Section 2(a)(19) of
the 1940 Act.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Morris and
Roth will retire from the Board of Directors effective January 1, 1999.
Principal Shareholders
The following table sets forth information as of January 30, 1998 with
respect to each person who owns of record or is known by the Fund to own of
record or beneficially own 5% or more of any class of the Fund's equity
securities.
<TABLE>
<CAPTION>
Name of Shareholder Class Number of Shares Percent of Class
- -------------------------------------------------- --------- ------------------ -----------------
<S> <C> <C> <C>
Phoenix Home Life Class C 7,404.332 5.24%
56 Prospect Street Class M 7,416.924 76.39%
Hartford, CT 06103
MLPF&S for the sole benefit of its customers Class B 2,577,416.891 21.71%
ATTN: Fund Administration Class C 11,070.000 7.83%
4800 Deer Lake Dr. E 3rd Fl.
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette Securities Corporation Class C 61,631.542 43.62%
P.O. Box 2052
Jersey City, NJ 07303-2052
Lincoln Trust Company Class M 2,285.550 23.54%
FBO Robert L. Churchwell
P.O. Box 5831
Denver, CO 80217-5831
</TABLE>
For services rendered to the Fund for the fiscal year ended October 31,
1997, the Trustees received aggregate remuneration of $22,262. 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
Directors. Trustees costs are allocated equally to each
23
<PAGE>
of the Series and Funds within the Fund complex. The foregoing fees do not
include the reimbursement of expenses incurred in connection with meeting
attendance. Officers and employees of the Adviser who are interested persons
are compensated by the Adviser and receive no compensation from the Fund.
For the Fund's last fiscal year ending October 31, 1997, 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 $ 1,583 $59,000
E. Virgil Conway+ $ 1,980 $73,250
Harry Dalzell-Payne+ $ 1,755 $65,000
Francis E. Jeffries $ 1,125* $42,500
Leroy Keith, Jr. $ 1,583 None None $59,000
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $ 1,673* Trustee Trustee $63,000
James M. Oates+ $ 1,673 $62,250
Calvin J. Pedersen $ 0 $ 0
Herbert Roth, Jr.+ $ 2,093* $76,250
Richard E. Segerson $ 1,755 $65,500
Lowell P. Weicker, Jr. $ 1,688 $62,500
</TABLE>
- -----------
* This compensation (and the earnings thereon) was deferred pursuant to the
Trustees' Deferred Compensation Plan. At October 31, 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 $49,350, $108,675 and $135,965, respectively. At present, by
agreement among the Fund, the Distributor and the electing trustee, trustee
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.
On January 30, 1998, the Directors and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
OTHER INFORMATION
Independent Accountants
Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, has been
selected independent accountants for the Fund. Price Waterhouse LLP audits the
Fund's annual financial statements and expresses an opinion thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company, P. O. Box 8301, Boston, MA
02266-8301, serves as the Fund's Custodian, Phoenix Equity Planning
Corporation, 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, CT
06083-2200, serves as the Fund's transfer agent.
Reports to Shareholders
The fiscal year of the Fund ends on October 31. The Fund will send to its
shareholders at least semi-annually reports showing the securities of the
Fund's portfolio and other information. An annual report, containing financial
statements audited by the Fund's independent accountants, will be sent to
shareholders each year.
Financial Statements
Financial information relating to the Fund is contained in the Annual
Report to Shareholders for the fiscal year ended October 31, 1997. The Annual
Report is incorporated by reference into this Statement of Additional
Information. A copy of the Annual Report must precede or accompany this
Statement of Additional Information.
24
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- ------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--6.1%
U.S. Treasury Bonds--2.7%
U.S. Treasury Bonds
6.375%, 8/15/27 ............... AAA $ 750 $ 773,203
U.S. Treasury Bonds WI
6.125%, 11/15/27 (f) ......... AAA 8,500 8,494,050
------------
9,267,253
------------
U.S. Treasury Notes--3.3%
U.S. Treasury Notes 6.125%,
8/15/07 ..................... AAA 11,100 11,346,276
------------
Agency Mortgage-Backed Securities--0.1%
FHLMC 7.50%, 8/15/18 ............ AAA 48 48,217
FHLMC 8.75%, 3/15/20 ............ AAA 211 212,967
------------
261,184
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $20,822,272) ........................ 20,874,713
------------
NON-CONVERTIBLE BONDS--50.5%
Asset-Backed Securities--5.6%
BankAmerica Manufacturing
Housing Contract 97-1,
B1 6.94%, 6/10/21 ............ Baa(c) 2,095 2,125,770
BankBoston RV Asset
Backed Trust 97-1 B
6.98%, 11/15/17 ............... BBB 2,900 2,945,313
Continental Airlines 144A
7.522%, 6/30/01 (b) ......... BB 4,000 4,020,480
Green Tree Financial Corp.
93-2, B 8%, 7/15/18 (g) ...... A(c) 5,000 5,334,375
Green Tree Financial Corp.
94-1, B2 7.85%,
4/15/19 (g) .................. A(c) 2,000 2,083,125
Team Fleet Financing Corp.
96-1, B 144A 7.10%,
12/15/02 (b) .................. BBB 3,000 3,001,875
------------
19,510,938
------------
Automobiles--0.6%
Titan Tire Loan Participation
7%, 2/11/00 .................. NR 2,000 1,920,000
------------
Banks--0.9%
Citicorp Capital I 7.933%,
2/15/27 ..................... A- 3,000 3,152,580
------------
Communications Equipment--0.2%
Hermes Europe Railtel B.V. 144A
11.50%, 8/15/07 (b) ......... B 500 542,500
------------
Consumer Finance--0.9%
ITT Publimedia 144A
9.375%, 9/15/07 (b) ......... B- 3,000 3,067,500
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- ------------------
<S> <C> <C> <C>
Electric Companies--0.0%
Rural Electric Cooperative
9.73%, 12/15/17 ............... AAA $ 140 $ 147,314
------------
Industrial--0.8%
Polymer Group, Inc. 9%,
7/1/07 ........................ B 2,750 2,784,375
------------
Insurance--1.9%
Middletown Trust Notes
Series C, PIK interest
capitalization, Euro
11.75%, 7/15/10 (e) ......... A+ 1,600 6,666,080(1)
--------------
Leasing/Rental--0.2%
Williams Scotsman, Inc.
144A 9.875%,
6/1/07 (b) .................. B- 825 847,688
--------------
Leisure Time (Products)--1.0%
Autotote Corp. 144A
10.875%, 8/1/04 (b) ......... B+ 2,000 2,070,000
Mashantucket Pequot 144A
6.91%, 9/1/12 (b) ............ AAA 1,300 1,322,815
--------------
3,392,815
--------------
Miscellaneous--1.1%
Interamericas
Communication Corp. Unit
144A 14%, 10/27/07
(b) (k) ..................... NR 3,930 3,969,300
--------------
Non-Agency Mortgage-Backed Securities--31.6%
Bear Stearns Mortgage
Securities, Inc. 95-1,
1B3 144A 6.481%,
5/25/10 (b) .................. NR 623 584,128
Bear Stearns Mortgage
Securities, Inc. 95-1,
2B3 144A 7.40%,
7/25/10 (b) .................. NR 215 210,056
CS First Boston Mortgage
Securities 144A 97-1R,
1M4 7.364%,
2/28/22 (b) .................. Baa(c) 6,113 5,998,240
Chase Mortgage Finance
Corp. 94-1, B2 144A
6.613%, 3/28/25 (b) ......... A+(c) 3,236 3,198,141
Criimi Mae Trust I 96-C1,
A2 144A 7.56%,
6/30/33 (b) (g) ............... BBB 5,125 5,267,539
DLJMA 97-CF2, B2 144A
7.14%, 9/15/08 (b) ............ BBB- 3,900 3,907,312
Equitable Life 174, C1 144A
7.52%, 5/15/06 (b) ............ A(c) 1,000 1,063,750
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- --------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
Equitable Life 174, D1 144A
7.77%, 5/15/06 (b) (g) ...... Baa(c) $ 4,000 $ 4,280,000
FDIC REMIC Trust 94-C1,
2D 8.70%, 9/25/25 (g) ......... A(c) 5,000 5,171,875
FDIC REMIC Trust 96-C1,
1D 7.25%, 5/25/26 ............ Baa(c) 3,350 3,396,586
FFCA Secured Lending
Corp. 144A 97-1, B1
7.74%, 6/18/13 (b) ............ Aa(c) 750 792,422
FFCA Secured Lending
Corp. 144A 97-1, C1
7.93%, 9/18/14 (b) ............ A(c) 1,150 1,219,000
First Chicago/Lennar Trust
97-CHL1, D 144A 8.11%,
5/29/08 (b) .................. BB(c) 4,000 4,017,500
Fund America Structured
Trust 96-1, A 144A 0%,
10/25/30 (b) .................. Baa(c) 3,235 2,532,612
G.E. Capital Mortgage
Services, Inc. 97-1, A14
7.50%, 3/25/27 (g) ............ AAA 4,850 4,986,406
General Electric Mortgage
Services, Inc. 96-8, 2A5
7.50%, 5/25/26 (g) ............ AAA 3,632 3,756,051
Morgan Stanley Capital I
96-WF1, C 144A 6.59%,
10/16/06 (b) .................. A(c) 3,550 3,567,750
Norwest Asset Securities
Corp. 96-3, B1 7.25%,
9/25/26 ..................... A(c) 2,166 2,193,357
Norwest Asset Securities
Corp. 96-3, B2 7.25%,
9/25/26 ..................... BBB(c) 3,319 3,393,236
Prudential Home Mortgage
Securities 93-H, B4 144A
6.759%, 9/28/08 (b) ......... Baa(c) 4,609 4,574,356
Prudential Home Mortgage
Securities 96-A, B1
7.958%, 5/28/26 ............... NR 3,125 2,941,406
Prudential Home Mortgage
Securities 93L, 3B2 144A
6.641%, 12/25/23 (b) ......... NR 4,770 4,725,281
Resolution Trust Corp.
92-C3, B 9.05%, 8/25/23 ...... AA 2,675 2,715,259
Resolution Trust Corp.
92-C8, D 8.835%,
12/25/23 ..................... BBB- 4,101 4,159,655
Resolution Trust Corp. 95-1,
C2 7.50%, 10/25/28 ............ BBB 2,581 2,613,973
Resolution Trust Corp. 95-2,
C1 7.45%, 5/25/29 ............ Baa(c) 2,686 2,732,809
Resolution Trust Corp.
95-C2, C 7%, 5/25/27 ......... A(c) 2,687 2,717,275
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- --------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
Ryland Mortgage Securities
Corp. III 92-A, 1A 8.27%,
3/29/30 ..................... A- $ 350 $ 355,001
Structured Asset Securities
Corp. 93-C1, B 6.60%,
10/25/24 (g) .................. A+ 5,000 4,912,904
Structured Asset Securities
Corp. 95-C1, D 7.375%,
9/25/24 (g) .................. BBB 5,110 5,167,487
Structured Asset Securities
Corp. 95-C4, D 7%,
6/25/26 (g) .................. BBB 5,450 5,452,555
Structured Asset Securities
Corp. 96-C3, C 144A
7.375%, 6/25/30 (b) (g) ...... BBB 3,500 3,544,844
Wilshire Funding Corp.
97-WFC1, M3 7.25%,
8/25/27 ..................... Baa(c) 3,529 3,384,209
------------
109,532,975
------------
Oil--1.3%
Lomak Petroleum, Inc.
8.75%, 1/15/07 ............... B 4,550 4,584,125
------------
Publishing, Broadcasting, Printing & Cable--4.4%
Century Communications
8.75%, 10/1/07 ............... BB- 2,000 1,990,000
Comcast Cellular 144A
9.50%, 5/1/07 (b) ............ BB+ 1,650 1,707,750
Fox Kids Worldwide 144A
0%, 11/1/07 (b) (e) ......... B 8,250 4,681,875
Fox/Liberty Networks
LLC 144A 8.875%,
8/15/07 (b) .................. B 3,000 3,007,500
Fox/Liberty Networks LLC
144A 0%, 8/15/07 (b) ......... B 2,500 1,587,500
Hollinger International
Publishing, Inc. 9.25%,
3/15/07 ..................... BB- 2,125 2,188,750
------------
15,163,375
------------
Retail (Food Chains)--0.0%
ARA Services, Inc.
10.625%, 8/1/00 ............... BBB- 54 58,590
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $170,791,731) .......................... 175,340,155
------------
FOREIGN GOVERNMENT SECURITIES--22.4%
Algeria--1.4%
Algeria Tranch A Loans
6.688%, 3/4/00 (e) ............ NR 3,273 2,618,182
Algeria Tranch 1 Unaffected
Loans 7.375%,
3/4/00 (e) .................. NR 2,727 2,181,818
------------
4,800,000
------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- ------------------- --------------
<S> <C> <C> <C>
Argentina--1.6%
Republic of Argentina 144A
11.75%, 2/12/07 (b) ............ BBB- $ 3,000(m) $ 2,482,500
Republic of Argentina RegS
11.75%, 2/12/07 ............... BBB- 3,750(m) 3,103,125
------------
5,585,625
------------
Brazil--1.4%
Republic of Brazil C Bond,
PIK interest capitalization,
8%, 4/15/14 (e) ............... BB- 3,649 2,562,724
Republic of Brazil EI-L Euro
6.875%, 4/15/06 (e) ............ BB- 2,940 2,337,300
------------
4,900,024
------------
Bulgaria--2.2%
Bulgaria FLIRB Series A
Bearer Euro 2.25%,
7/28/12 (e) .................. B(c) 8,500 4,659,020
Republic of Bulgaria IAB
PDI Euro 6.563%,
7/28/11 (e) .................. B(c) 4,750 3,135,000
------------
7,794,020
------------
Colombia--2.4%
Republic of Colombia
7.625%, 2/15/07 ............... BBB- 3,400 3,193,416
Republic of Colombia Global
Bond 8.375%, 2/15/27 ......... Baa(c) 3,500 3,190,250
Republic of Colombia
Yankee 7.25%, 2/23/04 ......... BBB- 2,000 1,895,000
------------
8,278,666
------------
Ecuador--1.2%
Ecuador Bearer PDI Euro,
PIK interest capitalization,
6.688%, 2/27/15 (e) ............ NR 6,343 3,747,835
Ecuador Registered PDI,
PIK interest capitalization,
6.688%, 2/27/15 (e) ............ NR 547 323,089
------------
4,070,924
------------
Ivory Coast--0.5%
Ivory Coast FLIRB WI (f) ......... NR 1,500 476,250
Ivory Coast Non-Performing
Loans (d) ..................... NR 2,500 1,025,000
Ivory Coast PDI WI (f) ......... NR 750 286,875
------------
1,788,125
------------
Macedonia--0.4%
Macedonia C Bond, PIK
interest capitalization,
6.884%, 7/2/12 (e) ............ NR 2,000 1,230,000
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- ------------------- --------------
<S> <C> <C> <C>
Mexico--1.8%
United Mexican States
Global Bond 11.375%,
9/15/16 ........................ BB $ 6,000 $ 6,300,000
------------
Peru--0.6%
Peru FLIRB 144A 3.25%,
3/7/17 (b) (e) ............... NR 1,750 875,000
Peru PDI 144A 4%,
3/7/17 (b) (e) ............... NR 1,980 1,118,700
------------
1,993,700
------------
Poland--2.5%
Poland Discount Euro
6.688%, 10/27/24 (e) ......... BBB- 1,000 940,000
Poland PDI Bearer 5%,
10/27/14 (e) .................. BBB- 3,000 2,463,750
Poland Treasury Bill 0%,
10/21/98 ..................... NR 12,570(h) 2,938,112
Poland Treasury Bill 0%,
10/7/98 ........................ NR 10,470(h) 2,458,422
------------
8,800,284
------------
Russia--3.7%
Russia Principal Loans WI
6.719%, 12/15/20 (f) ......... NR 13,300 7,847,000
Russian Federation OFZ Linked
Notes 18.29%, 9/3/99 (e) ...... NR 14,346,000(i) 2,269,523
Vnesheconombank Loans
Yankee (d) ..................... NR 3,000 2,668,125
------------
12,784,648
------------
South Africa--0.9%
Republic of South Africa
13%, 8/31/10 .................. BBB+ 16,460(j) 3,098,755
------------
Venezuela--1.8%
Republic of Venezuela
9.25%, 9/15/27 ............... B+ 6,000 5,040,000
Republic of Venezuela
DCB Euro 6.75%,
12/18/07 (e) .................. B+ 1,500 1,312,500
------------
6,352,500
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $85,329,296) ..................................... 77,777,271
------------
FOREIGN NON-CONVERTIBLE BONDS--8.4%
Argentina--1.2%
CEI Citicorp 144A 11.25%,
2/14/07 (b) .................. NR 1,500(m) 1,215,000
Perez Companc SA 8.125%,
7/15/07 ........................ BBB- 3,000 2,861,250
------------
4,076,250
------------
Bermuda--0.3%
AES China Generating Co.
Yankee 10.125%,
12/15/06 ..................... BB- 870 874,350
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
Brazil--0.9%
Localiza Rent a Car 144A
10.25%, 10/1/05 (b) ......... B(c) $ 2,000 $ 1,800,000
Paging Network Do Brasil
144A 13.50%, 6/6/05 (b) .... NR 1,000 950,000
Tevecap SA RegS 12.625%,
11/26/04 ..................... B 250 255,000
------------
3,005,000
------------
Chile--1.8%
Compania Sud Amer Vapore
144A 7.375%,
12/8/03 (b) .................. BBB 5,000 4,943,750
Petropower I Funding
Trust 144A 7.36%,
2/15/14 (b) .................. BBB 1,450 1,433,296
------------
6,377,046
------------
China--0.4%
Greater Beijing 144A
9.50%, 6/15/07 (b) (k) ...... BB 1,700 1,547,000
------------
Ecuador--0.6%
Consorcio Ecuatoriano TE
RegS 14%, 5/1/02 ............ NR 2,150 2,171,500
------------
Germany--0.4%
Kablemedia Holding 0%,
8/1/06 (e) .................. B- 2,000 1,415,000
------------
Mexico--2.0%
Banco Nacional de Mexico
144A 7.57%, 12/31/00 (b) ..... NR 4,400 4,413,640
TFM SA de C.V., 0%,
6/15/09 (e) .................. B+ 4,000 2,480,000
------------
6,893,640
------------
Netherlands--0.6%
Netia Holdings 144A 0%,
11/1/07 (b) (e) ............ NR 3,500 2,108,750
------------
Venezuela--0.2%
Petrozuata Finance, Inc.
144A 8.22% 4/1/17 (b) ...... BBB- 650 670,898
------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $30,247,928) ........................ 29,139,434
------------
MUNICIPAL BONDS--4.6%
California--0.8%
Fresno Pension Obligation
Taxable 7.80%, 6/1/14 ...... AAA 500 552,380
Orange County Pension A
Taxable 7.67%, 9/1/09 ...... AAA 2,000 2,166,620
------------
2,719,000
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
Colorado--0.8%
Denver City and County
School District Taxable
6.76%, 12/15/07 ............ AAA $ 2,875 $ 2,933,765
------------
Florida--1.1%
Palm Beach Waste Revenue
Project B Taxable
10.50%, 1/1/11 (d) ......... NR 3,750 1,852,763
University of Miami
Exchangeable Revenue
Series A Taxable 7.65%,
4/1/20 (g) .................. AAA 1,965 2,040,435
------------
3,893,198
------------
Illinois--0.9%
Illinois Educational
Facilities Authority
Revenue Loyola
University Series A
Taxable 7.84%, 7/1/24 (g) .... AAA 3,000 3,168,690
------------
Pennsylvania--0.7%
Pennsylvania Economic
Development 9.50%,
1/1/12 ..................... NR 3,500 2,310,000
------------
Virginia--0.3%
Newport News Taxable
Series B 7.05%, 1/15/25 .... AA- 1,000 997,450
------------
TOTAL MUNICIPAL BONDS
(Identified cost $18,314,027) ............................ 16,022,103
------------
CONVERTIBLE BONDS--1.5%
Oil & Gas (Drilling & Equipment)--1.5%
Loews Corp. Cv. 3.125%,
9/15/07 ..................... A+ 4,600 5,238,250
------------
TOTAL CONVERTIBLE BONDS
(Identified cost $4,600,000) ............................... 5,238,250
------------
FOREIGN CONVERTIBLE BONDS--3.4%
Canada--0.5%
Petersburg Long Cv. 144A
9%, 6/1/06 (b) ............... NR 1,267 1,580,583
------------
Mexico--1.1%
Empresas ICA Sociedad
Euro Cv. 5%, 3/15/04 ......... BB- 1,500 1,158,750
Consorcio Grupo Dina Cv.
8%, 8/8/04 .................. NR 3,000 2,670,000
------------
3,828,750
------------
Russia--1.8%
Lukinter Finance BV Cv.
RegS 3.50%, 5/6/02 ......... BB- 4,875 6,337,500
------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $12,050,542) ............................ 11,746,833
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- -------
<S> <C> <C>
PREFERRED STOCKS--4.8%
Publishing--1.4%
American Radio Systems
Pfd. PIK 11.375% ................. 39,480 $ 4,698,171
------------
REITS--3.4%
Home Ownership Funding 2, Step-down
Pfd. 144A 13.338% (b) ............. 12,000 11,896,140
------------
TOTAL PREFERRED STOCKS
(Identified cost $15,594,279) ..... 16,594,311
------------
NUMBER
OF
CONTRACTS
---------
OPTIONS--0.0%
Brazil CDB Call Option 12/17/97
$80.75 (Par Subject to Call
$1,500,000) ..................... 1.5 0
Bulgaria IAB Call Option 1/12/98
$78.50 (Par Subject to Call
$3,000,000) ..................... 3 0
Peru PDI Call Option 1/12/98 $66
(Par Subject to Call $3,000,000).. 3 303
Russia Principal Call Option 12/23/97
$72.625 (Par Subject to Call
$3,000,000) ..................... 3 6,600
Venezuela DCB Call Option 12/8/97
$91.00 (Par Subject to Call
$2,000,000) ...................... 2 0
------------
6,903
------------
TOTAL OPTIONS
(Identified cost $472,350) ........ 6,903
------------
TOTAL LONG-TERM INVESTMENTS--101.7%
(Identified cost $358,222,425) .... 352,739,973
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- --------------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.2%
Commercial Paper--2.2%
Associates Corp. of North
America 5.73%,
11/3/97 ............... A-1+ $ 7,680 $ 7,677,555
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $7,677,555) .................. 7,677,555
--------------
TOTAL INVESTMENTS--103.9%
(Identified cost $365,899,980) ............... 360,417,528(a)
Cash and receivables, less liabilities--(3.9%) (13,533,855)
--------------
NET ASSETS--100.0% .............................. $ 346,883,673
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $8,422,980 and gross
depreciation of $14,949,198 for income tax purposes. At October 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$366,943,746.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities amounted to a value of $116,344,971 or 33.5% of net
assets.
(c) As rated by Moody's, Fitch, or Duff & Phelps.
(d) Non-income producing.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(f) When issued.
(g) All or a portion segregated as collateral.
(h) Par value represents Polish Zloty.
(i) Par value represents Russian Rubles.
(j) Par value represents South African Rand.
(k) Rights/Warrants incorporated as a unit.
(l) Security valued at fair value as determined in good faith by or under the
direction of the Directors.
(m) Par value represents Argentine Pesos.
See Notes to Financial Statements
7
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $365,899,980) $360,417,528
Receivables
Investment securities sold 73,655,017
Fund shares sold 777,050
Interest 5,237,820
------------
Total assets 440,087,415
------------
Liabilities
Payables
Custodian 1,276,237
Investment securities purchased 90,777,526
Income distribution payable 332,330
Fund shares repurchased 307,533
Distribution fee 178,916
Investment advisory fee 167,781
Transfer agent fee 69,496
Financial agent fee 14,620
Directors' fee 4,676
Accrued expenses 74,627
------------
Total liabilities 93,203,742
------------
Net Assets $346,883,673
============
Net Assets Consist of:
Capital paid in on shares of common stock $342,137,630
Undistributed net investment income 971,287
Accumulated net realized gain 9,257,208
Net unrealized depreciation (5,482,452)
------------
Net Assets $346,883,673
============
Shares of Class A common stock outstanding,
$0.10 par value, 125,000,000 shares authorized
(Net Assets $191,485,737) 14,180,654
Net asset value per share $ 13.50
Offering price per share $13.50/(1-4.75%) $ 14.17
Shares of Class B common stock outstanding,
$0.10 par value, 125,000,000 shares authorized
(Net Assets $154,989,345) 11,494,320
Net asset value and offering price per share $ 13.48
Shares of Class C common stock outstanding,
$0.10 par value, 125,000,000 shares authorized
(Net Assets $284,165) 21,074
Net asset value and offering price per share $ 13.48
Shares of Class M common stock outstanding,
$0.10 par value, 125,000,000 shares authorized
(Net Assets $124,426) 9,229
Net asset value per share $ 13.48
Offering price per share $13.48/(1-3.50%) $ 13.97
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $ 27,132,922
Dividends 994,968
------------
Total investment income 28,127,890
------------
Expenses
Investment advisory fee 1,860,360
Distribution fee--Class A 463,149
Distribution fee--Class B 1,529,736
Distribution fee--Class C 92
Distribution fee--Class M 25
Financial agent fee 145,836
Transfer agent 422,714
Printing 78,258
Custodian 64,164
Professional 54,318
Registration 36,600
Directors 22,262
Miscellaneous 21,794
------------
Total expenses 4,699,308
Custodian fees paid indirectly (31,110)
------------
Net expenses 4,668,198
------------
Net investment income 23,459,692
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 18,297,311
Net realized loss on foreign currency (31,189)
Net change in unrealized appreciation (depreciation)
on investments (13,926,558)
------------
Net gain on investments 4,339,564
------------
Net increase in net assets resulting from
operations $ 27,799,256
============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 23,459,692 $ 22,244,512
Net realized gain 18,266,122 10,341,278
Net change in unrealized appreciation (depreciation) (13,926,558) 5,985,981
------------- -------------
Increase in net assets resulting from operations 27,799,256 38,571,771
------------- -------------
From Distributions to Shareholders
Net investment income--Class A (13,142,727) (12,387,209)
Net investment income--Class B (9,715,503) (9,458,214)
Net investment income--Class C (518) --
Net investment income--Class M (361) --
------------- -------------
Decrease in net assets resulting from distributions to shareholders (22,859,109) (21,845,423)
------------- -------------
From Share Transactions
Class A
Proceeds from sales of shares (4,562,676 and 5,502,177 shares, respectively) 62,841,128 70,788,640
Net asset value of shares issued from reinvestment of distributions (619,297 and
587,270 shares, respectively) 8,494,539 7,517,879
Cost of shares repurchased (3,789,497 and 6,751,478 shares, respectively) (52,071,617) (86,500,171)
------------- -------------
Total 19,264,050 (8,193,652)
------------- -------------
Class B
Proceeds from sales of shares (2,633,503 and 1,249,907 shares, respectively) 36,085,338 16,054,776
Net asset value of shares issued from reinvestment of distributions (284,957 and
275,807 shares, respectively) 3,902,825 3,526,914
Cost of shares repurchased (2,207,175 and 2,226,264 shares, respectively) (30,270,502) (28,475,995)
------------- -------------
Total 9,717,661 (8,894,305)
------------- -------------
Class C
Proceeds from sales of shares (21,052 and 0 shares, respectively) 297,100 --
Net asset value of shares issued from reinvestment of distributions (22 and 0
shares, respectively) 303 --
Cost of shares repurchased (0 and 0 shares, respectively) -- --
------------- -------------
Total 297,403 --
------------- -------------
Class M
Proceeds from sales of shares (9,212 and 0 shares, respectively) 130,970 --
Net asset value of shares issued from reinvestment of distributions (17 and 0
shares, respectively) 240 --
Cost of shares repurchased (0 and 0 shares, respectively) -- --
------------- -------------
Total 131,210 --
------------- -------------
Increase (decrease) in net assets from share transactions 29,410,324 (17,087,957)
------------- -------------
Net increase (decrease) in net assets 34,350,471 (361,609)
Net Assets
Beginning of period 312,533,202 312,894,811
------------- -------------
End of period (including undistributed net investment income and
distributions in excess of net investment income of $971,287 and
($316,094), respectively) $ 346,883,673 $ 312,533,202
============= =============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
----------------- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.27 $ 12.56 $ 11.94 $ 14.13 $ 13.29
Income from investment operations
Net investment income 1.03 0.94 0.96 0.76 1.14
Net realized and unrealized gain (loss) 0.18 0.72 0.61 (1.35) 1.08
---------- -------- ---------- -------- --------
Total from investment operations 1.21 1.66 1.57 (0.59) 2.22
---------- -------- ---------- -------- --------
Less distributions
Dividends from net investment income (0.98) (0.95) (0.95) (0.77) (1.19)
Dividends from net realized gains -- -- -- (0.63) (0.17)
In excess of net investment income -- -- -- (0.05) (0.02)
Tax return of capital -- -- -- (0.15) --
---------- -------- ---------- -------- --------
Total distributions (0.98) (0.95) (0.95) (1.60) (1.38)
---------- -------- ---------- -------- --------
Change in net asset value 0.23 0.71 0.62 (2.19) 0.84
---------- -------- ---------- -------- --------
Net asset value, end of period $13.50 $ 13.27 $ 12.56 $ 11.94 $ 14.13
========== ======== ========== ======== ========
Total return(1) 9.22% 13.75% 13.83% (4.57)% 17.55%
Ratios/supplemental data:
Net assets, end of period (thousands) $191,486 $169,664 $ 168,875 $172,966 $176,859
Ratio to average net assets of:
Operating expenses 1.04%(2) 1.07% 1.10% 1.13% 1.29%
Net investment income 7.28% 7.56% 8.10% 7.05% 8.27%
Portfolio turnover 295% 255% 201% 123% 207%
</TABLE>
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
----------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.25 $ 12.54 $ 11.93 $ 14.10 $ 13.25
Income from investment operations
Net investment income 0.92 0.85 0.86 0.68 1.04
Net realized and unrealized gain (loss) 0.18 0.71 0.61 (1.36) 1.08
---------- -------- -------- -------- --------
Total from investment operations 1.10 1.56 1.47 (0.68) 2.12
---------- -------- -------- -------- --------
Less distributions
Dividends from net investment income (0.87) (0.85) (0.86) (0.67) (1.08)
Dividends from net realized gains -- -- -- (0.63) (0.17)
In excess of net investment income -- -- -- (0.05) (0.02)
Tax return of capital -- -- -- (0.14) --
---------- -------- -------- -------- --------
Total distributions (0.87) (0.85) (0.86) (1.49) (1.27)
---------- -------- -------- -------- --------
Change in net asset value 0.23 0.71 0.61 (2.17) 0.85
---------- -------- -------- -------- --------
Net asset value, end of period $13.48 $ 13.25 $ 12.54 $ 11.93 $ 14.10
========== ======== ======== ======== ========
Total return(1) 8.42% 12.84% 12.96% (5.21)% 16.78%
Ratios/supplemental data:
Net assets, end of period (thousands) $154,989 $142,869 $144,020 $156,629 $193,064
Ratio to average net assets of:
Operating expenses 1.79%(2) 1.82% 1.85% 1.78% 1.99%
Net investment income 6.52% 6.80% 7.30% 6.46% 7.36%
Portfolio turnover 295% 255% 201% 123% 207%
</TABLE>
(1)Maximum sales charges are not reflected in the total return calculation.
(2)For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian fees;
if expense offsets were included, the ratio would not significantly differ.
See Notes to Financial Statements
10
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class C Class M
------------------- -------------------
From Inception From Inception
10/14/97 to 10/14/97 to
10/31/97 10/31/97
------------------- -------------------
<S> <C> <C>
Net asset value, beginning of period $14.22 $ 14.22
Income from investment operations
Net investment income 0.04 0.04
Net realized and unrealized gain (loss) (0.74) (0.73)
---------- ---------
Total from investment operations (0.70) (0.69)
---------- ---------
Less distributions
Dividends from net investment income (0.04) (0.05)
Dividends from net realized gains -- --
---------- ---------
Total distributions (0.04) (0.05)
---------- ---------
Change in net asset value (0.74) (0.74)
---------- ---------
Net asset value, end of period $13.48 $13.48
========== =========
Total return(1) (5.00)%(2) (4.97)%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $284 $124
Ratio to average net assets of:
Operating expenses 1.62%(3) 1.27%(3)
Net investment income 4.75%(3) 6.19%(3)
Portfolio turnover 295% 295%
</TABLE>
(1)Maximum sales charges are not reflected in the total return calculation.
(2)Not annualized
(3)Annualized
See Notes to Financial Statements
11
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fund") is organized as
a Maryland corporation and is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company. The
Fund's investment objective is to maximize current income consistent with the
preservation of capital by investing in fixed income securities. The Fund
offers Class A, Class B, Class C and Class M shares. Class A shares are sold
with a front-end sales charge of up to 4.75%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a 1%
contingent deferred sales charge if redeemed within one year of purchase. Class
M shares are sold with a front-end sales charge of up to 3.50%. All classes of
shares have identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that each class bears different distribution
expenses and has exclusive voting rights with respect to its distribution plan.
Income and expenses of the Fund are borne pro rata by the holders of all
classes of shares, except that each class bears distribution expenses unique to
that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. Security valuation:
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service which utilizes information with respect to recent
sales, market transactions in comparable securities, quotations from dealers,
and various relationships between securities in determining value. Short-term
investments having a remaining maturity of 60 days or less are valued at
amortized cost which approximates market. All other securities and assets are
valued at their fair value as determined in good faith by or under the
direction of the Directors.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Discounts and premiums are amortized to income
using the effective interest method. Realized gains and losses are determined
on the identified cost basis.
C. Income taxes:
It is the policy of the Fund to comply with the requirements of the
Internal Revenue Code (the "Code") applicable to regulated investment
companies, and to distribute substantially all of its taxable income to its
shareholders. In addition, the Fund intends to distribute an amount sufficient
to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision for federal income taxes or excise taxes has been made.
D. Distributions to shareholders:
Distributions to shareholders are declared and recorded daily. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of expiring capital loss carryforwards,
foreign currency gain/loss, and losses deferred due to wash sales and excise
tax regulations. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to paid in capital.
E. Foreign currency translation:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement dates of a portfolio transaction, is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates between the date income is
accrued and paid is treated as a gain or loss on foreign currency. The Fund
does not separate that portion of the results of operations arising from
changes in exchange rates and that portion arising from changes in the market
prices of securities.
F. When-issued and delayed delivery transactions:
The Fund may engage in when-issued or delayed delivery transactions. The
Fund records when-issued securities on the trade date and maintains collateral
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled
to a fee at an annual rate of 0.55% for the first $1 billion of the average
daily net assets of the Fund.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of
12
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 (Continued)
$81,888 for Class A shares and $170 for Class M shares, and deferred sales
charges of $399,917 for Class B shares for the year ended October 31, 1997. In
addition, the Fund pays PEPCO a distribution fee at an annual rate of 0.25% for
Class A shares, 1.00% for Class B shares, 1.00% for Class C shares and 0.50%
for Class M shares of the average daily net assets of the Fund. The
Distribution Plan for Class A shares provides for fees to be paid up to a
maximum on an annual basis of 0.30%; the Distributor has voluntarily agreed to
limit the fee to 0.25%. The Distributor has advised the Fund that of the total
amount expensed for the year ended October 31, 1997, $1,338,075 was earned by
the Distributor, $595,248 was paid to unaffiliated participants, and $59,679
was paid to W.S. Griffith, an indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the average
daily net assets of the Fund through December 31, 1996, and starting on January
1, 1997, at an annual rate of 0.05% of average daily net assets up to $100
million, 0.04% of average daily net assets of $100 million to $300 million,
0.03% of average daily net assets of $300 million through $500 million, and
0.015% of average daily net assets greater than $500 million; a minimum fee may
apply. PEPCO serves as the Fund's Transfer Agent with State Street Bank and
Trust Company as sub-transfer agent. For the year ended October 31, 1997,
transfer agent fees were $422,714 of which PEPCO retained $203,729 which is net
of the fees paid to State Street.
At October 31, 1997, PHL and affiliates held 158,158 Class A shares and 12
Class B shares of the Fund with a combined value of $2,135,301.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities and
options, for the year ended October 31, 1997, aggregated $1,020,576,558 and
$988,216,733, including $265,375,186 and $280,185,681, of U.S. Government and
agency securities, respectively.
4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts.
5. LOAN AGREEMENTS
The Fund may invest in direct debt instruments which are interests in
amounts owned by a corporate, governmental, or other borrower to lenders or
lending syndicates. The Fund's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from third
parties. A loan is often administered by a bank or other financial institution
(the lender) that acts as agent for all holders. The agent administers the
terms of the loan, as specified in the loan agreement. When investing in a loan
participation, the Fund has the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
loan agreement and only upon receipt by the lender of payments from the
borrower. The Fund generally has no right to enforce compliance with the terms
of the loan agreement with the borrower. As a result, the Fund may be subject
to the credit risk of both the borrower and the lender that is selling the loan
agreement. For loans which the Fund is a participant, the Fund may not sell
it's participation in the loan without the lender's prior consent. When the
Fund purchases assignments from lenders it acquires direct rights against the
borrower on the loan. Direct indebtedness of emerging countries involves a risk
that the government entities responsible for the repayment of the debt may be
unable, or unwilling to pay the principal and interest when due.
6. CAPITAL LOSS CARRYFORWARDS
For the year ended October 31, 1997, the Fund was able to utilize losses
deferred in the prior year against current year capital gains in the amount of
$8,579,546.
7. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Fund has recorded
several reclassifications in the capital accounts. These reclassifications have
no impact on the net asset value of the Fund and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of October 31, 1997,
the Fund increased undistributed net investment income by $686,798, decreased
accumulated net realized gain by $249,356 and decreased capital paid in on
shares of common stock by $437,442.
This report is not authorized for distribution to prospective investors in the
Phoenix Multi-Sector Fixed Income Fund, Inc. unless preceded or accompanied by
an effective Prospectus which includes information concerning the sales charge,
Fund's record and other pertinent information.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGOTYPE] Price Waterhouse LLP [LOGO]
To the Trustees and Shareholders of
Phoenix Multi-Sector Fixed Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fund") at October 31, 1997,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
December 12, 1997
14
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
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 are included in the
Annual Report to Shareholders for the year end
October 31, 1997, incorporated by reference.
(b) Exhibits:
<TABLE>
<S> <C>
1. Articles of Incorporation of the Registrant and amendments thereto, previously filed, filed via EDGAR with
Post-Effective Amendment No. 10 on February 24, 1997 and herein incorporated by reference.
1.1 Articles of Amendment changing name of Corporation to Phoenix Multi-Sector Fixed Income Fund,
Inc., and Articles Supplementary reclassifying shares filed with Post-Effective Amendment No. 8 on
February 27, 1995, filed via EDGAR with Post-Effective Amendment No. 10 on February 24, 1997 and
incorporated herein by reference.
1.2 Articles Supplementary reallocating authorized unissued shares among all classes filed via EDGAR with
Post-Effective Amendment No. 13 on February 25, 1998.
2. By-laws of the Registrant, previously filed, filed via EDGAR with Post-Effective Amendment No. 10 on
February 24, 1997 and herein incorporated by reference.
3. Not applicable.
4. Reference is made to Exhibit 1.2, Articles Supplementary to the Articles of Incorporation reclassifying shares.
5. Management Agreement between Registrant and National Securities & Research Corporation dated May
14, 1993 filed with Post-Effective Amendment No. 6 on December 30, 1993, filed via EDGAR with Post-
Effective Amendment No. 10 on February 24, 1997 and incorporated herein by reference.
5.1 Amendment to Management Agreement dated January 1, 1994, filed with Post-Effective Amendment No. 8
on February 27, 1995, filed via EDGAR with Post-Effective Amendment No. 10 on February 24, 1997 and
incorporated herein by reference.
6.1 Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation ("Equity Planning")
dated November 19, 1997, filed via EDGAR with Post-Effective Amendment No. 13 on February 25, 1998.
6.2 Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers, filed herewith via
EDGAR with Post-Effective Amendment No. 13 on February 25, 1998.
6.3 Form of Supplement to Phoenix Family of Funds Sales Agreement field herewith via EDGAR with Post-
Effective Amendment No. 13 on February 25, 1998.
6.4 Form of Financial Institution Sales Contract for the Phoenix Family of Funds filed herewith via EDGAR
with Post-Effective Amendment No. 13 on February 25, 1998.
7. None.
8. Custodian Contract between Registrant and State Street Bank and Trust Company dated May 1, 1997, filed via
EDGAR with Post-Effective Amendment No. 12 on October 14, 1997 and incorporated herein by reference.
9. Transfer Agency and Service Agreement between Registrant and Phoenix Equity Planning Corporation
dated June 1, 1994, filed with Post-Effective Amendment No. 8 on February 27, 1995, filed via EDGAR
with Post-Effective Amendment No. 10 on February 24, 1997 and incorporated herein by reference.
9.1 Sub-Transfer Agent Agreement between Phoenix Equity Planning Corporation and State Street Bank and
Trust Company filed via EDGAR herewith.
9.2 Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation dated November 19, 1997, filed via EDGAR with Post-Effective Amendment No. 13 on
February 25, 1998.
10. Opinion of counsel as to legality of the shares dated February 24, 1995 filed with Post-Effective
Amendment No. 8 on February 27, 1995, filed via EDGAR with Post-Effective Amendment No. 10 on
February 24, 1997 and incorporated herein by reference.
11. Consent of Independent Accountants filed herewith.
12. Not Applicable
13. None.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
14. None.
15.1 Amended and Restated Distribution Plan for Class A Shares, filed via EDGAR with Post-Effective
Amendment No. 13 on February 25, 1998 herewith.
15.2 Amended and Restated Distribution Plan for Class B Shares, filed via EDGAR with Post-Effective
Amendment No. 13 on February 25, 1998 herewith.
15.3 Amended and Restated Distribution Plan for Class C Shares, filed via EDGAR with Post-Effective
Amendment No. 13 on February 25, 1998 herewith.
15.4 Amended and Restated Distribution Plan for Class M Shares, filed via EDGAR with Post-Effective
Amendment No. 13 on February 25, 1998 herewith.
16. Schedule for computation of yield and effective yield quotations, filed with Post-Effective Amendment No.
8 on February 27, 1995, filed via EDGAR with Post-Effective Amendment No. 10 on February 24, 1997
and incorporated herein by reference.
17. Financial Data Schedule filed herewith and reflected on EDGAR as Exhibit 27.
18. Amended and Restated Rule 18f-3 Multi-Class Distribution Plan effective November 1, 1997, filed via
EDGAR with Post-Effective Amendment No. 13 on February 25, 1998.
19. Powers of Attorney for Ms. Curtiss and Messrs. Chesek, Conroy, Dalzell-Payne, Jeffries, Keith, Morris,
Oates, Pedersen, Roth, Segerson and Weicker, filed via EDGAR with Post-Effective Amendment No. 10 on
February 24, 1997 and incorporated herein by reference.
</TABLE>
Item 25. Persons Controlled by or Under Common Control With Registrant
No person is controlled by, or under common control with, the Registrant.
Item 26. Number of Holders of Securities
As of December 31, 1997, the number of record holders of each class of
securities of the Registrant was as follows:
Number of
Title of Class Record-holders
- ------------------------- ---------------
Common Stock--Class A 8,189
Common Stock--Class B 6,098
Common Stock--Class C 35
Common Stock--Class M 6
Item 27. Indemnification
Under Section 2-418 of the Maryland General Corporation Law, with respect
to any proceeding against a present or former director, officer, agent, or
employee of the Registrant (a "corporation representative"), except a
proceeding brought by or on behalf of the Registrant, the Registrant may
indemnify the corporation representative against expenses, including attorney's
fees and judgments, fines, and amounts paid in settlement actually and
reasonably incurred by the corporate representative in connection with the
proceeding, if: (i) he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Registrant; and
(ii) with respect to any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful.
The Registrant is also authorized under Section 2-418 of the Maryland
General Corporation Law to indemnify a corporate representative under certain
circumstances against expenses incurred in connection with the defense of a
suit or action by or in the right of the Registrant. Reference is made to
Article VI of Registrant's Articles of Incorporation, Article VI of
Registrant's By-laws and Section 2-418 of the Maryland General Corporation Law.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Funds" in the Prospectus and "Services of the
Adviser" and "Directors and Officers" in the Statement of Additional
Information, each of which is included in this Post-Effective Amendment to the
Registration Statement.
For information as to the business, profession, vocation or employment of
a substantial nature of directors and officers of National Securities &
Research Corporation, the Adviser, reference is made to the Adviser's current
Form ADV (SEC File No. 801-8177) filed under the Investment Advisers Act of
1940 and incorporated herein by reference.
Item 29. Principal Underwriters
(a) Equity Planning also serves as the principal underwriter for the
following other registrants: Phoenix Strategic Allocation Fund, Inc.,
Phoenix Series Fund, Phoenix Multi-Sector Short Term Bond Fund, Phoenix
Multi-Portfolio 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 Duff &
Phelps Institutional Mutual Funds, Phoenix-Aberdeen Series Fund,
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.
C-2
<PAGE>
(b) Directors and executive officers of Phoenix Equity Planning are as
follows:
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name and Principal 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 Director and President
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, Vice President
56 Prospect St. Infrastructure
P.O. Box 150480
Hartford, CT 06115-0480
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 1900
Enfield, CT 06083-1900
John F. Sharry Managing Director, Mutual None
56 Prospect St. Fund Sales and Operations
P.O. Box 150480
Hartford, CT 06115-0480
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 1900
Enfield, CT 06083-1900
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 1900
Enfield, CT 06083-1900
</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.
C-3
<PAGE>
Item 30. Location of Accounts and Records
The account books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of the Fund, 100 Bright
Meadow Boulevard, Enfield, Connecticut 06083-1900, at the offices of
Registrant's investment adviser, National Securities & Research Corporation, 56
Prospect Street, Hartford, Connecticut 06115, at the offices of the Fund's
Custodian, State Street Bank and Trust Company, P.O. Box 8301, Boston,
Massachusetts 02266-8301, and at the offices of the Transfer Agent, Financial
Agent and Principal Underwriter, Phoenix Equity Planning Corporation, 100
Bright Meadow Boulevard, Enfield, Connecticut 06082-1900.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a prospectus
is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
C-4
<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 the 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 25th day of February, 1998.
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
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 the 25th day of February, 1998.
Signature Title
- ----------------------------- -------------------------------------------
- ----------------------------- Director
Robert Chesek*
- ----------------------------
E. Virgil Conway* Director
- ----------------------------
Nancy G. Curtiss* Treasurer
(Principal Financial and Accounting Officer)
- ----------------------------
Harry Dalzell-Payne* Director
- ----------------------------
Francis E. Jeffries* Director
- ----------------------------
Leroy Keith, Jr.* Director
/s/ Philip R. McLoughlin President and Director
- ---------------------------- (Principal Executive Officer)
Philip R. McLoughlin
- ----------------------------
Everett L. Morris* Director
- ----------------------------
James M. Oates* Director
- ----------------------------
Calvin J. Pedersen* Director
- ----------------------------
Herbert Roth, Jr.* Director
- ----------------------------
Richard E. Segerson* Director
- ----------------------------
Lowell P. Weicker, Jr.* Director
By: /s/ Philip R. McLoughlin
- -------------------------------
* Philip R. McLoughlin,
attorney-in-fact pursuant to powers of attorney previously filed.
S-1
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
ARTICLES SUPPLEMENTARY
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC., formerly National
Multi-Sector Fixed Income Fund, Inc., a Maryland corporation having its
principal Maryland office in the City of Baltimore in the State of Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland (the "Department"), that:
FIRST: The Corporation has authority to issue FIVE HUNDRED MILLION
(500,000,000) shares, of one or more distinct and separate series of classes
thereof as the Board of Directors shall from time to time create and establish,
with par value of Ten Cents ($0.10) each, and with aggregate par value of FIFTY
MILLION Dollars ($50,000,000). At a meeting of the Board of Directors of the
Corporation held on September 20, 1991, the Board of Directors determined to
implement a dual distribution system and, in connection therewith, to issue
shares of the Corporation's capital stock in two classes: Class A and Class B.
On May 25, 1994, the Corporation filed Articles Supplementary with the
Department classifying the Corporation's shares of capital stock as follows:
Number of Shares
Name of Class Allocated on May 25, 1994
------------- -------------------------
Class A 250,000,000
Class B 250,000,000
Class C 0
Class D 0
Common Stock 0
SECOND: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
THIRD: At a meeting of the Board of Directors of the Corporation held on
May 28, 1997, the Board of Directors determined to implement a multi-class
distribution system and, in connection therewith, to issue shares of the
corporation in four classes: Class A, Class B, Class C and Class M. At a meeting
of the Board of Directors of the Corporation held on August 27, 1997, the Board
of Directors classified as "Class C" shares of the Corporation ONE HUNDRED
TWENTY-FIVE MILLION (125,000,000) unissued shares of Class A Common Stock of the
Corporation, par value Ten Cents ($0.10) per share; redesignated as "Class M"
Common Stock the class previously designated "Class D" Common Stock of the
Corporation; classified as "Class M" shares of the Corporation ONE HUNDRED
TWENTY-FIVE MILLION (125,000,000) unissued shares of Class B Common Stock of the
Corporation, par value Ten Cents ($0.10) per share. Based on the foregoing,
notwithstanding anything possibly to the contrary, there shall presently exist
ONE HUNDRED TWENTY-FIVE MILLION (125,000,000) shares of Class A Common Stock of
the Corporation, par value Ten Cents ($0.10) per share; ONE HUNDRED TWENTY-FIVE
MILLION (125,000,000) shares of Class B Common Stock of the Corporation, par
value Ten Cents ($0.10) per share; ONE HUNDRED TWENTY-FIVE MILLION (125,000,000)
shares of Class C Common Stock of the Corporation, par value Ten Cents ($0.10)
per share; ONE HUNDRED TWENTY-FIVE MILLION (125,000,000) shares of Class M
Common Stock of the Corporation, par value Ten Cents ($0.10) per share.
(a) The assets belonging to each class shall be invested in the same
investment portfolio of the Corporation.
(b) The dividends and distributions of investment income and capital gains
with respect to each class shall be in such amounts as may be declared from
time to time by the Board of Directors, and the dividends and distributions
of each class may vary from dividends and distribution of investment
<PAGE>
income and capital gains with respect to the other classes to reflect
differing allocations of the expenses of the Corporation among the holders
of the classes and any resultant differences between the net asset value
per share of each class, to such extent and for such purposes as the Board
of Directors may deem appropriate. The allocation of investment income or
capital gains and expenses and liabilities of the Corporation among the
classes shall be determined by the Board of Directors in a manner that is
consistent with the order dated September 13, 1993 (Investment Company Act
of 1940 Release No. IC-19706) issued by the Securities and Exchange
Commission in connection with the application for exemption filed by
National Multi-Sector Fixed Income Fund, Inc., et. al., any amendment to
such order or any rule or interpretation under the Investment Company Act
of 1940 that modifies or supersedes such order.
(c) Class A and Class M shares (including fractional shares) may be subject
to an initial sales charge pursuant to the terms of the issuance of such
shares.
(d) The proceeds of the redemption of Class B and Class C shares (including
fractional shares) shall be reduced by the amount of any contingent
deferred sales charge payable on such redemption pursuant to the terms of
the issuance of such shares.
(e) The holders of each class of shares shall have (i) exclusive voting
rights with respect to provisions of any distribution plan adopted by the
Corporation pursuant to Rule 12b-1 under the Investment Company Act of 1940
(a "Plan") applicable to the respective class, and (ii) no voting rights
with respect to provisions of any Plan applicable to any other class or
with regard to any other matter submitted to a vote of shareholders which
does not affect holders of that respective class.
(f)(1) Each Class B share, other than a share purchased through the
automatic reinvestment of a dividend or a distribution with respect to
Class B shares, shall be converted automatically, and without any action or
choice on the part of the holder thereof, into Class A shares on the date
that is the first business day of the month in which the eighth anniversary
date of the date of the issuance of the Class B share falls (the
"Conversion Date"). With respect to Class B shares issued in an exchange or
series of exchanges for shares of capital stock or shares of beneficial
interest, as applicable, of another investment company or class or series
thereof registered under the Investment Company Act of 1940 pursuant to an
exchange privilege granted by the Corporation, the date of issuance of the
Class B shares for purposes of the immediately preceding sentence shall be
the date of issuance of the original shares of capital stock or shares of
beneficial interest, as applicable.
(2) Each Class B share purchased through the automatic reinvestment of a
dividend or a distribution with respect to Class B shares shall be
segregated in a separate sub-account. Each time any Class B shares in a
shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, an equal pro rata portion of the Class B shares then in the
sub-account will also convert automatically to Class A shares without any
action or choice on the part of the holder thereof. The portion will be
determined by the ratio that the shareholder's Class B shares converting to
Class A shares bears to the shareholder's total Class B shares not acquired
through dividends and distributions.
(3) The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel or a ruling of the
Internal Revenue Service that payment of different dividends on Class A
shares and Class B shares does not result in the Corporation's dividends or
distributions
-2-
<PAGE>
constituting "preferential dividends" under the Internal Revenue Code of
1986, as amended, and that the conversion of shares does not constitute a
taxable event under federal tax law.
(4) The number of Class A shares into which a share of Class B shares is
converted pursuant to paragraphs (f)(1) and (f)(2) hereof shall equal the
number (including for this purpose fractions of a share) obtained by
dividing the net asset value per share of the Class B shares (for purposes
of sales and redemptions thereof on the Conversion Date) by the net asset
value per share of the Class A shares (for purposes of sales and
redemptions thereof on the Conversion Date).
(5) On the Conversion Date, the Class B shares converted into Class A
shares will cease to accrue dividends and will no longer be deemed
outstanding and the rights of the holders thereof (except the right to
receive (i) the number of Class A shares into which the Class B shares have
been converted and (ii) declared but unpaid dividends to the Conversion
Date) will cease. Certificates representing Class A shares resulting from
the conversion need not be issued until certificates representing Class B
shares converted, if issued, have been received by the Corporation or its
agent duly endorsed for transfer.
FOURTH: The shares of the Corporation classified pursuant to Article THIRD
of these Articles Supplementary have been duly authorized and classified by the
Corporation's Board of Directors pursuant to authority and power contained in
the Corporation's Articles of Incorporation and in accordance with Section 2-208
of the Maryland General Corporation Law.
IN WITNESS WHEREOF, PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC. has caused
these Articles Supplementary to be executed by its duly authorized officers who
acknowledge that these Articles Supplementary are the act of the Corporation,
that to the best of their knowledge, information and belief, the matters and
facts set forth herein relating to authorization and approval of these Articles
Supplementary are true in all material respects and that this statement is made
under the penalties of perjury.
DATED this 27th day of August, 1997.
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
By: /s/ Philip R. McLoughlin
-------------------------------------
Philip R. McLoughlin
President
ATTEST:
By: /s/ Thomas N. Steenburg
--------------------------
Thomas N. Steenburg
Assistant Secretary
-3-
UNDERWRITING AGREEMENT
THIS AGREEMENT made as of this 19th day of November, 1997, by and between
Phoenix Multi-Sector Fixed Income Fund, Inc., a Maryland corporation having a
place of business located at 101 Munson Street, Greenfield, Massachusetts (the
"Fund") and Phoenix Equity Planning Corporation, a Connecticut corporation
having a place of business located at 100 Bright Meadow Boulevard, Enfield,
Connecticut (the "Underwriter").
WITNESSETH THAT:
1. The Fund hereby grants to the Underwriter the right to purchase shares
of beneficial interest of each class of each series of the Fund established and
designated as of the date hereof and of any additional series and classes
thereof which the Board of Directors or Board of Trustees, as applicable
("Trustees") may establish and designate during the term of this Agreement
(called the "Series" and "Classes", respectively) and to resell shares of
various Classes, as applicable, of each Series (collectively called the
"Shares") as principal and not as agent. The Underwriter accepts such
appointment and agrees to render the services described in this Agreement for
the compensation herein provided.
2. The Underwriter's right to purchase Shares shall be exclusive except
that the terms of this Agreement shall not apply to Shares issued or
transferred:
a) pursuant to an offer of exchange exempted under Section 22(d) of the
Investment Company Act of 1940, as amended (the "Act") by reason of
the fact that said offer is permitted by Section 11 of the Act,
including any offer made pursuant to clause (1) or (2) of Section
11(b);
b) upon the sale to a registered unit investment trust which is the
issuer of periodic payment plan certificates the net proceeds of which
are invested in redeemable securities;
c) pursuant to an offer made solely to all registered holders of Shares,
or all registered holders of Shares of any Series, proportionate to
their holdings or proportionate to any cash distribution made to them
by the Fund (subject to appropriate qualifications designed solely to
avoid issuance of fractional securities);
d) in connection with any merger or consolidation of the Fund or of any
Series with any other investment company or the acquisition by the
Fund, by purchase or otherwise, of any other investment company;
1
<PAGE>
e) pursuant to sales exempted from Section 22(d) of the Act, by rule or
regulation or order of the Securities and Exchange Commission as
provided in the then current registration statement of the Fund; or
f) in connection with the reinvestment by Fund shareholders of dividend
and capital gains distributions.
3. The "Net Asset Value" and the "Public Offering Price" of the Shares as
referred to in this Agreement shall be computed in accordance with the
provisions of the then current registration statement of the Fund. The
Underwriter shall be notified promptly by the Fund of such computations.
4. The Underwriter has and shall enter into written sales agreements with
broker/dealers ("dealers") and with banks as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, (Exchange Act) that are not
required to register as a broker/dealer under the Exchange Act or the
regulations thereunder ("Banks"). Such sales agreements shall provide that
dealers or Banks shall use their best efforts to promote the sale of Shares.
Such sales agreements shall include such terms and conditions as Underwriter may
determine not inconsistent with this Agreement; provided, however, that such
sales agreements shall specify a) that the dealer is registered as a
broker/dealer under the Exchange Act and a member of the National Association of
Securities Dealers, Inc. or, in the alternative, that the Bank is exempt from
broker/dealer registration under the Exchange Act; and b) that such dealers and
Banks agree that they will comply with all applicable state, and federal laws
and the rules and regulations of applicable regulatory agencies.
5. Each day the Underwriter shall have the right to purchase from the Fund,
as principal, the amount of Shares needed to fill unconditional orders for such
Shares received by the Underwriter from dealers, Banks, or investors, but no
more than the Shares needed, at a price equal to the Net Asset Value of the
Shares. Any purchase of Shares by the Underwriter under this Agreement shall be
subject to reasonable adjustment for clerical errors, delays and errors of
transmission and cancellation of orders.
6. With respect to transactions other than with dealers or Banks, the
Underwriter will sell Shares only at the Public Offering Price then in effect,
except to the extent that sales at less than the Public Offering Price may be
allowed by the Act, any rule or regulation promulgated thereunder or by order of
the Securities and Exchange Commission, provided, however, that any such sales
at less than the Public Offering Price shall be consistent with the terms of the
then current registration statement of the Fund. The Underwriter will sell at
Net Asset Value Shares of any Classes which are offered by the then current
registration statement or prospectus of the Fund for sale at such Net Asset
Value or at Net Asset Value with a contingent deferred sales charge ("CDSC
Shares"). The Underwriter shall receive from the Fund all contingent deferred
sales charges applied on redemptions of CDSC Shares.
2
<PAGE>
7. Sales at a discount from the Public Offering Price shall be made in
accordance with the terms and conditions of the terms of the current
registration statement of the Fund allowing such discounts. Such discounts shall
not exceed the difference between the Net Asset Value and the Public Offering
Price; however, the Underwriter may offer compensation in excess of the
difference between the Net Asset Value and the Public Offering Price, at its
discretion and from its own profits and resources, and only as described in the
current registration statement of the Fund. With respect to sales of CDSC
Shares, the Underwriter, in accordance with the terms of the current
registration statement of the Fund, shall pay dealers a commission on such sales
from its own profits and resources.
8. As reimbursement for expenditures made in connection with providing
certain distribution-related services, the Underwriter may receive from the Fund
a distribution service fee under the terms and conditions set forth in the
Fund's distribution plan adopted under Rule 12b-1 under the Investment Company
Act of 1940, as amended, as the plan may be amended from time to time and
subject to any further limitations on such fees as the Trustees may impose. The
Underwriter may receive from the Fund a service fee to be retained by the
Underwriter as compensation for providing services to shareholders of the Fund
or to be paid to dealers and Banks for providing services to their clients who
are also shareholders of the Fund.
9. The Fund shall furnish the Underwriter with copies of its organizational
documents, as amended from time to time. The Fund shall also furnish the
Underwriter with any other documents of the Fund which will assist the
Underwriter in the performance of its duties hereunder.
10. The Underwriter agrees to use its best efforts (in states where it may
lawfully do so) to obtain from investors unconditional orders for Shares
authorized for issue by the Fund and registered under applicable Federal
securities laws, and, so long as it does so, nothing herein contained shall
prevent the Underwriter from entering into similar arrangements with other
registered investment companies. The Underwriter may, in the exercise of its
discretion, refuse to accept orders for Shares from any person.
11. Upon receipt by the Fund of a purchase order from the Underwriter,
accompanied by proper delivery instructions, the Fund shall, as promptly as
practicable thereafter, cause evidence of ownership of Shares to be delivered as
indicated in such purchase order. Payment for such Shares shall be made by the
Underwriter to the Fund in a manner acceptable to the Fund, provided that the
Underwriter shall pay for such Shares no later than the third business day after
the Underwriter shall have contracted to purchase such shares.
12. In connection with offering for sale and selling Shares, the Fund authorizes
the Underwriter to give only such information and to make only such statements
or representations as are contained in the then current registration statement
of the Fund. The Underwriter shall be responsible for the approval and filing of
sales material as required under SEC and NASD regulations.
3
<PAGE>
13. The Fund agrees to pay the following expenses:
a) the cost of mailing stock certificates representing Shares;
b) fees and expenses (including legal expenses) of registering and
maintaining registrations of the Fund and of each Series and Class
with the Securities and Exchange Commission including the preparation
and printing of registration statements and prospectuses for filing
with said Commission;
c) fees and expenses (including legal expenses) incurred in registering
and qualifying Shares for sale with any state regulatory agency and
fees and expenses of maintaining, renewing, increasing or amending
such registrations and qualifications;
d) the expense of any issue or transfer taxes upon the sale of Shares to
the Underwriter by the Fund;
e) the cost of preparing and distributing reports and notices to
shareholders; and
f) fees and expenses of the transfer agent, including the cost of
preparing and mailing notices to shareholders pertaining to
transactions with respect to such shareholders accounts.
14. The Underwriter agrees to pay the following expenses:
a) all expenses of printing prospectuses and statements of additional
information used in connection with the sale of Shares and printing
and preparing all other sales literature;
b) all fees and expenses in connection with the qualification of the
Underwriter as a dealer in the various states and countries;
c) the expense of any stock transfer tax required in connection with the
sale of Shares by the Underwriter as principal to dealers or to
investors; and
d) all other expenses in connection with offering for sale and the sale
of Shares which have not been herein specifically allocated to the
Fund.
15. The Fund hereby appoints the Underwriter its agent to receive requests
to accept the Fund's offer to repurchase Shares upon such terms and conditions
as may be described in the Fund's then current registration statement. The
agency granted in this paragraph 15 is terminable at the discretion of the Fund.
As compensation for acting as such agent and as part of the
4
<PAGE>
consideration for acting as underwriter, Underwriter shall receive from the Fund
all contingent deferred sales charges imposed upon the redemption of Shares.
Whether and to what extent a contingent deferred sales charge will be imposed
shall be determined in accordance with, and in the manner set forth in, the
Fund's prospectus.
16. The Fund agrees to indemnify and hold harmless the Underwriter, its
officers and directors and each person, if any, who controls the Underwriter
within the meaning of section 15 of the Securities Act of 1933, as amended,
against any losses, claims, damages, liabilities and expenses (including the
cost of any legal fees incurred in connection therewith) which the Underwriter,
its officers, directors or any such controlling person may incur under said Act,
under any other statute, at common law or otherwise, arising out of or based
upon
a) any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement or prospectus
(including amendments and supplements thereto), or
b) any omission or alleged omission to state a material fact required to
be stated in the Fund's registration statement or prospectus or
necessary to make the statements in either not misleading, provided,
however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or
omission or alleged untrue statement or omission made in reliance and
in conformity with information furnished to the Fund by the
Underwriter for use in the Fund's registration statement or
prospectus, such indemnification is not applicable. In no case shall
the Fund indemnify the Underwriter or its controlling persons as to
any amounts incurred for any liability arising out of or based upon
any action for which the Underwriter, its officers and directors or
any controlling person would otherwise be subject to liability by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of the reckless disregard of
its obligations and duties under this Agreement.
17. The Underwriter agrees to indemnify and hold harmless the Fund, its
officers and trustees and each person, if any, who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, against any
losses, claims, damages, liabilities and expenses (including the cost of any
legal fees incurred in connection therewith) which the Fund, its officers,
trustees or any such controlling person may incur under said Act, under any
other statute, at common law or otherwise arising out of the acquisition of any
shares by any person which
a) may be based upon any wrongful act by the Underwriter or any of its
employees or representatives, or
b) may be based upon any untrue statement or alleged untrue statement of
a material fact contained in the Fund's registration statement,
prospectus (including
5
<PAGE>
amendments and supplements thereto) or sales material, or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading if such statement
or omission was made in reliance upon information furnished or confirmed in
writing to the Fund by the Underwriter.
18. It is understood that:
a) trustees, officers, employees, agents and shareholders of the Fund are
or may be interested persons, as that term is defined in the Act
("Interested Persons"), of the Underwriter as directors, officers,
stockholders or otherwise;
b) directors, officers, employees, agents and stockholders of the
Underwriter are or may be Interested Persons of the Fund as trustees,
officers, shareholders or otherwise;
c) the Underwriter may be an Interested Person of the Fund as shareholder
or otherwise; and
d) the existence of any such dual interest shall not offset the validity
hereof or of any transactions hereunder.
19. The Fund may terminate this Agreement by 60 days written notice to the
Underwriter at any time, without the payment of any penalty, by vote of the
Trustees or by a vote of a majority of the outstanding voting securities, as
that term is defined in the Act, of the Fund. The Underwriter may terminate this
Agreement by 60 days written notice to the Fund, without the payment of any
penalty. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in the Act.
20. Subject to prior termination as provided in paragraph 19, this
Agreement shall continue in force for one year from the date of execution and
from year to year thereafter so long as the continuance after such one year
period shall be specifically approved at least annually by vote of the Trustees,
or by a vote of a majority of the appropriate class of outstanding voting
securities, as that term is defined in the Act, of the Fund. Additionally, each
annual renewal of this Agreement must be approved by the vote of a majority of
the Trustees who are not parties to the Agreement or Interested Persons of any
such party, cast in person at a meeting of the Trustees called for the purpose
of voting on such approval.
6
<PAGE>
21. This Agreement shall become effective upon the date first set forth
above. This Agreement shall be governed by the laws of the State of Connecticut
and shall be binding on the successors and assigns of the parties to the extend
permitted by law.
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 MULTI-SECTOR
FIXED INCOME FUND, INC.
By: /s/ Philip R. McLoughlin
---------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ David R. Pepin
---------------------------
David R. Pepin
Executive Vice President
7
[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, Nov. 5, 1997
- --------------------------------------------------------------------------------
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
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
(effective 11-20-97)
- --------------------------------------------------------------------------------
Equity Planning may sponsor, to all qualifying dealers, on 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.
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>
*In the case of accounts held in the name of qualified employees, 1% is paid on
the first $1 million.
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) excluding purchases by qualified employee benefit plans
with at least 100 eligible employees, Equity Planning may pay broker-dealers,
from its own resources, an 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 Multi-Sector Fixed Income Fund Value Equity Fund
Growth and Income Fund Strategic Theme Fund Small Cap Value Fund
(effective 11-20-97)
</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
(effective 11-20-97)
</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 (except Money Market Portfolio) 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sales Promotion:
- --------------------------------------------------------------------------------
In connection with net purchases of any combination of classes of eligible Funds
between October 1, 1997 and December 31, 1997, Equity Planning may pay
participating broker/dealers, from its profits and resources, an additional
dealer discount or sales commission equal to 0.50% of the purchase price. This
promotion will not apply to shares acquired through non-commissionable
exchanges.
Eligible Funds:
Phoenix Value Equity Fund Phoenix Small Cap Value Fund
(effective 11-20-97)
Phoenix-Engemann Funds:
Growth Fund Nifty Fifty Fund
Balanced Return Fund Global Growth Fund
Small & Mid-Cap Growth Fund Value 25 Fund
Phoenix Equity Series Fund:
Core Equity Fund Growth and Income Fund
<PAGE>
- --------------------------------------------------------------------------------
III. Phoenix - Engemann Funds
- --------------------------------------------------------------------------------
Nifty Fifty Fund Growth Fund
Small & Mid-Cap Growth Fund Global Growth Fund
Balanced Return Fund Value 25 Fund
Equity Planning at its expense, may from time to time also provide additional
compensation to dealers who sell shares of any of the Funds. Compensation may
include financial assistance to dealers in connection with conferences, sales
training or promotional programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the Funds and/ or other
dealer-sponsored special events.
Service Fees: Dealers may be eligible to receive a continuing service fee equal
to 0.25% per annum of the average net asset value of the Funds' shares held by
such persons in order to compensate them for providing certain services to their
clients, including processing redemption transactions and providing account
maintenance and certain information and assistance with respect to the Funds,
and responding to shareholder inquiries.
Class B and C CDSC: 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.
- --------------------------------------------------------------------------------
III. A. Phoenix - Engemann Funds: Class A Shares
- --------------------------------------------------------------------------------
Class A Shares for Initial Sales Charge Alternative
The public offering price of Class A shares for purchasers choosing the initial
sales charge alternative is the net asset value per share plus a sales charge
depending upon the amount purchases as described in the following table.
<TABLE>
<CAPTION>
Dealer Commission
Sales Charge as of Percentage of as percentage of
Amount of Purchase Public the Public
at the Public Offering Price Offering Price Offering Price
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.50% 5.00%
- ---------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.75 4.25
- ---------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.75 3.25
- ---------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 2.50 2.00
- ---------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00 1.75
- ---------------------------------------------------------------------------------------------------------------------------------
$1,000,000 or more None *
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Finders Fee: On purchases made at net asset value, as described in the
prospectus, dealers may receive a one-time fee, as follows: 1% on purchases up
through $2 million, plus 0.80% on the next $1 Million, plus 0.20% on the next $2
million, and 0.10% on the excess over $5 million.
- --------------------------------------------------------------------------------
III. B. Phoenix - Engemann Funds: Class B Shares
- --------------------------------------------------------------------------------
Class B Shares for Deferred Sales Charge Alternative
Equity Planning may pay out of its own resources to the selling dealer a
commission equal to 4.25% of the amount of the purchase.
Years Since Purchase CDSC as a Percentage of
Dollar Amount
Subject to Charge
- --------------------------------------------------------------------------------
First 5.00%
- --------------------------------------------------------------------------------
Second 4.00
- --------------------------------------------------------------------------------
Third 3.00
- --------------------------------------------------------------------------------
Fourth 3.00
- --------------------------------------------------------------------------------
Fifth and Thereafter None
- --------------------------------------------------------------------------------
III. C. Phoenix - Engemann Funds: Class C Shares
- --------------------------------------------------------------------------------
Equity Planning may pay out of its own resources to the selling dealer a
commission equal to 1% of the amount of the purchase.
Trail: To the extent dealer provides distribution, marketing or administrative
services in connection with the sale of the Shares of a Fund, dealer may receive
a fee based on the average net asset value of such Shares which are attributable
to customers of dealer, at the rate of 0.75% per annum.
Global Growth Fund, Small & Mid-Cap Growth Fund, Value 25 Fund only: 1% CDSC for
1 year.
PDP80A (11-97) 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
PHOENIX EQUITY PLANNING CORPORATION
SUPPLEMENT TO PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
It is hereby agreed that this AGREEMENT, dated this __________ day
of __________, 19__, between ________________________________________ ("Dealer")
and Phoenix Equity Planning Corporation ("Distributor"), supplements and amends
the Sales Agreement between Dealer and Distributor dated by Distributor
_______________________ 19__ ("Sales Agreement').
WHEREAS, Dealer wishes to use shares of the Funds in a fee-based
program made available by Dealer to clients of Dealer (the "Fee-Based Program");
WHEREAS, Dealer wishes to afford its fee-based clients the
opportunity to qualify for the ability to purchase shares of the Funds at net
asset value; and
WHEREAS, Distributor is willing to allow Dealer to purchase shares
of the Funds for clients in the Fee-Based Program subject to the provisions of
this agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by both parties, Dealer
and Distributor hereby agree as follows:
1. Dealer may sell shares of any Funds made available by
Distributor, from time to time, at net asset value to bona fide clients of
Dealer for use solely in their Fee-Based Program. Dealer will earn no concession
or commission on any such sale.
2. Distributor, after consulting Dealer, will determine, from time
to time, which Funds it will make available to Dealer for use in the Fee-Based
Program. Dealer will comply with all provisions of the Prospectus and Statement
of Additional Information of each Fund.
1
<PAGE>
3. All shares made available to Dealer under the Fee-Based Program
must be purchased by Dealer for the benefit of Dealer's clients participating in
its Fee-Based Program under which Dealer provides portfolio management and other
services to such clients for a fee. Such fee to be paid in connection with
investment in the Funds shall at all times be at a level acceptable to
Distributor. Dealer acknowledges that it has sent the Distributor the current
fee schedule for the Fee-Based Program and Dealer agrees to notify Distributor
at least thirty (30) days in advance in writing of any amendment to such fee
schedule. The current fee schedule is attached. Dealer shall not prepare, use or
distribute brochures, written materials or advertising in any form that refers
to sales of the Funds as no-load or at net asset value except, in the case of
brochures, it may refer to the Funds as available at net asset value under the
Fee-Based Program if the fees and expenses of the Fee-Based Program are given at
least equal prominence. Notwithstanding the foregoing, in connection with
explaining the fees and expenses of the Fee-Based Program, representatives of
Dealer may describe to customers the option of purchasing Fund shares through
the Fee-Based Program at net asset value.
4. Distributor warrants that all necessary disclosures regarding
the sale of shares at net asset value will be set forth in the Prospectus and
Statement of Additional Information of the Funds available under this Agreement.
5. Dealer may maintain either an omnibus account(s) solely for the
clients of its Fee-Based program or may maintain separate accounts for each
client of its Fee-Based Program with the Fund's transfer agent. If an omnibus
account(s) is maintained, Dealer shall be solely responsible for meeting all
legal obligations with respect to each beneficial owner including, but not
limited to, the delivery of proxies, annual and semi-annual reports and other
materials.
6. This Agreement shall be governed and interpreted in accordance
with the laws of the State of Connecticut. This Agreement shall not relieve
Dealer or Distributor from any obligations either may have under any other
agreements between them (except with respect to the payment of service fees),
including but not limited to the Sales Agreement, which is incorporated by
reference herein and shall control in case of any conflict with this Agreement.
7. Distributor is not endorsing, recommending or otherwise involved
in providing any investment product or advisory service of Dealer (including but
not limited to the Fee-Based Program). Distributor is merely affording Dealer
the opportunity to use shares of the Funds distributed by Distributor as an
investment medium for the Fee-Based Program.
8. This Agreement is not exclusive and may be terminated by either
party upon sixty (60) days prior written notice to the other party. It shall
terminate automatically upon termination of the Sales Agreement between the
parties. This Agreement may be amended only by a written instrument, signed by
both parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the date set
forth above by a duly authorized officer of each party.
2
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
By: _______________________________________
John F. Sharry
Managing Director, Retail Sales
Dealer: _____________________________
By: _________________________________
Name: _______________________________
Title: ______________________________
Address: ____________________________
____________________________
____________________________
Phone: ______________________________
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P O Box 2200
Enfield, CT 06083-2200
(230) 253-1000
3
FINANCIAL INSTITUTION SALES CONTRACT
FOR THE PHOENIX FAMILY OF FUNDS
Between: and
PHOENIX EQUITY PLANNING CORPORATION
Distributor of: The Phoenix Family of Funds
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
As distributor of The Phoenix Family of Funds (the "Funds"), we agree that you
may make available to your customers, under an agency relationship with your
customers, shares of beneficial interest issued by the Funds (the "Shares"),
subject to any limitation imposed by the Funds and to confirmation by us of each
transaction. By your acceptance hereof, you agree to all of the following terms
and conditions:
I. Offering Prices and Fees
The public offering price at which you may make Shares available to your
customers is the net asset value thereof, as computed from time to time, plus
any applicable sales charge described in the then current prospectus of the
applicable Fund. In the case of purchases by you, as agent for your customers,
of shares sold with a sales charge, you will receive an agency fee consisting of
a portion of the public offering price, determined on the same basis as the
"dealer discount" described in the then current Prospectus of the Funds, and
such other compensation to dealers as may be described therein, which shall be
payable to you at the same time and on the same basis as the same is paid to
such dealers, consistent with applicable law, rules and regulations. In
determining the amount of any agency fee payable to you hereunder, we reserve
the right to revise the agency fee referred to herein upon written notice to
you. We will furnish you upon request with the public offering prices for the
Shares and you agree to quote such prices in connection with any Shares made
available by you as agent for your customers. Each purchase of Shares by your
customers is made subject to confirmation by us at the public offering price
next computed after receipt of the order. There is no sales charge or agency fee
to you on the reinvestment of dividends and distributions.
II. Manner of Making Shares Available for Purchase
We will, upon request, deliver to you a copy of each Fund's then current
Prospectus and will provide you with such number of copies of each Fund's
current Prospectus, Statement of Additional Information and shareholder reports
and of supplementary sales materials prepared by us, as you may reasonably
request. It shall be your obligation to ensure that all such information and
materials are distributed to your customers who own Shares in accordance with
securities and/or banking law and regulations and any other applicable
regulations. Neither you nor any other person is authorized to give any
information or make any representations other than those contained in such
prospectuses, Statements of Additional Information and shareholder reports or in
such supplemental sales materials. You shall not furnish or cause to be
furnished to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional materials and
sales literature, advertisements, press releases, announcements, statements,
posters, signs or similar material), except such information and materials as
may be furnished to you by us or the Fund, and such other information and
materials as may be approved in writing by us. We reserve the right to reject
any purchases for any accounts which we reasonably determine are not made in
accordance with the terms of the applicable Fund Prospectus and the provisions
of this Agreement.
You hereby agree:
(i) to not purchase any Shares as agent for any customer, unless you
deliver or cause to be delivered to such customer, at or prior to the
time of such purchase, a copy of the then-current Prospectus of the
applicable Fund unless such customer has acknowledged receipt of the
Prospectus of such Fund. You hereby represent that you understand your
obligation to deliver a prospectus to customers who purchase Shares
pursuant to federal securities laws and you have taken all necessary
steps to comply with such prospectus delivery requirements;
PEP 613 12-92
<PAGE>
(ii) to transmit to us promptly upon receipt any and all orders received by
you, it being understood that no conditional orders will be accepted;
(iii) to obtain from each customer for whom you act as agent for the
purchase of Shares any taxpayer identification number certification
and backup withholding information required under the Internal Revenue
Code, as amended from time to time (the "Code"), and the regulations
set forth thereunder, or other sections of the Code which may become
applicable and to provide us or our designee with timely written
notice of any failure to obtain such taxpayer identification number
certification or information in order to enable the implementation of
any required backup withholding in accordance with the Code and the
regulations thereunder;
(iv) to pay to us the offering price, less any agency fee to which you are
entitled, within five (5) business days of our confirmation of your
customer's order, or such shorter time as may be required by law. You
may, subject to our approval, remit the total public offering price to
us, and we will return to you your agency fee. If such payment is not
received within said time period, we reserve the right, without prior
notice, to cancel the sale, or at our option to return the Shares to
the issuer for redemption or repurchase. In the latter case, we shall
have the right to hold you responsible for any loss resulting to us.
Should payment be made by local bank check, liquidation of Shares may
be delayed pending clearance of your check; and
(v) to offer and sell Shares, and execute telephone transactions only in
accordance with the terms and conditions of the then current
prospectuses of the relevant Funds and to make no representations not
contained in any such prospectus or in any authorized supplemental
material supplied to you. In addition, in consideration for the
extension of the right to exercise telephone transaction privileges,
you acknowledge that neither the Funds nor the Transfer Agent nor
Equity Planning will be liable for any loss, injury or damage incurred
as a result of acting upon, nor will they be responsible for the
authenticity of, any telephone instructions, and you agree to
indemnify and hold harmless the Funds, Equity Planning and the
Transfer Agent against any loss, injury or damage resulting from any
unauthorized telephone transaction instruction from you or your
representatives. (Telephone instructions will be recorded on tape).
Unless otherwise mutually agreed in writing or except as provided below, each
transaction placed by you shall be promptly confirmed by us in writing to you,
and shall be confirmed to the customer promptly upon receipt by us of
instructions from you as to such customer. In the case of a purchase order by
customer's application, each transaction shall be promptly confirmed in writing
directly to the customer and a copy of each confirmation shall be sent
simultaneously to you. You understand that in the case of an Omnibus Account we
shall send a confirmation to you as the shareholder of record only. We reserve
the right, at our discretion and without notice, to suspend the sale of Shares
or withdraw entirely the sale of Shares of any or all of the Funds. All orders
are subject to acceptance or rejection by us in our sole discretion, and by the
Funds in their sole discretion. The procedure stated herein relating to the
pricing and handling of orders shall be subject to instructions which we may
forward to you from time to time.
III. Compliance With Law
You hereby represent that you are either (1) a "bank" as defined in Section
3(a)(6) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and at the time of each transaction in shares of the Funds, are not required to
register as a broker-dealer under the Exchange Act or regulations thereunder; or
(2) registered as a broker-dealer under the Exchange Act, a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
affiliated with a bank.
(i) If you are a bank, not required to register as a broker-dealer under
the Exchange Act, you further represent and warrant to us that with
respect to any sales in the United States, you will use your best
efforts to ensure that any purchase of Shares by your customers
constitutes a suitable investment for such customers. You shall not
effect any transaction in, or induce any purchase or sale of, any
Shares by means of any manipulative deceptive or other fraudulent
device or contrivance and shall otherwise deal equitable and fairly
with your customers with respect to transactions in Shares of a Fund.
-2-
<PAGE>
(ii) If you are a NASD member broker-dealer affiliated with a bank and
registered under the Exchange Act, you further represent and warrant
to us that with respect to any sales in the United States, you agree
to abide by all of the applicable laws, rules and regulations
including applicable provisions of the Securities Act of 1933 as
amended, and the applicable rules and regulations of the NASD,
including, without limitation, its Rules of Fair Practice, and the
applicable rules and regulations of any jurisdiction in which you make
Shares available for sale to your customers. You agree not to make
available for sale to your customers the Shares in any jurisdiction in
which the Shares are not qualified for sale or in which you are not
qualified as a broker-dealer. We shall have no obligation or
responsibility as to your right to make Shares of any Fund available
to your customers in any jurisdiction. You agree to notify us
immediately in the event of (a) your expulsion or suspension from the
NASD or your becoming subject to any enforcement action by the
Securities and Exchange Commission, NASD, or any other self-regulatory
organization, or (b) your violation of any applicable federal or state
law, rule or regulation including, but not limited to, those of the
SEC, NASD, or other self-regulatory organization, arising out of or in
connection with this Agreement, or which may otherwise affect in any
material way your ability to act in accordance with the terms of this
Agreement.
You shall not make Shares of any Fund available to your customers, including
your fiduciary customers, except in compliance with all federal and state laws
and rules and regulations of regulatory agencies or authorities applicable to
you, or any of your affiliates engaging in such activity, which may affect your
business practices. You confirm that you are not in violation of any banking law
or regulations to which you are subject. You agree to hold us and the Funds
harmless and indemnify us in the event that you or any of your representatives
should violate any law, rule or regulation or any provisions of this Agreement.
In the event that we determine to refund any amounts paid by a customer in
connection with any such violation on your part, you shall forfeit the right to
the amount of any agency fee allowed by us with respect to the transaction for
which the refund is made. All expenses which you incur in connection with your
activities under this Agreement shall be borne by you.
IV. Relationship With Customer
With respect to any and all transactions in the Shares of any Fund pursuant to
this Agreement, it is understood and agreed in each case that: (i) you shall be
acting solely as agent for the account of your customer; (ii) each transaction
shall be initiated solely upon the order of your customer; (iii) we shall
execute transactions only upon receiving instructions from you acting as agent
for your customer or upon receiving instructions directly from your customer;
(iv) as between you and your customer, your customer will have full beneficial
ownership of all Shares; and (v) each transaction shall be for the account of
your customer and not for your account.
Subject to the foregoing, however, you may maintain record ownership of such
customers' Shares in an "Omnibus Account" or an account registered in your name
or the name of your nominee, for the benefit of such customers. You understand
that such Shares must be held in a separate account for each shareholder of such
Funds. You represent and warrant to us that you will have full right, power and
authority to effect transactions (including, without limitation, any purchases
and redemptions) in Shares on behalf of all customer accounts provided by you.
V. Relationship With Financial Institutions
Your obligations to us 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. It is further understood that neither
this Agreement nor the performance of the services of the respective parties
hereunder shall be considered to constitute an exclusive arrangement, or to
create a partnership, association or joint venture between you and us. In making
available Shares of the Funds under this Agreement, nothing herein shall be
construed to constitute you or any of your agents, employees or representatives
as our agent or employee, or as an agent or employee of the Funds, and you shall
not make any representations to the contrary. As distributor of the Funds, we
shall have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the distribution of the Shares. We shall
not be under any obligation to you, except for obligations expressly assumed by
us in this Agreement.
-3-
<PAGE>
VI. Termination
Either party hereto may terminate this Agreement, without cause, upon ten days'
written notice to the other party. We may terminate this Agreement for cause
upon the violation by you of any of the provisions hereof, such termination to
become effective on the date such notice of termination is mailed to you. If you
are registered as a broker-dealer and affiliated with a bank, this Agreement
shall terminate automatically if either Party ceases to be a member of the NASD.
VII. Assignability
This Agreement is not assignable or transferable, except that we may assign or
transfer this Agreement to any successor distributor of the Funds.
VIII. Miscellaneous
(i) All communications mailed to us should be sent to the above address.
Any notice to you shall be duly given if mailed or delivered to you at
the address specified by you below.
(ii) This Agreement constitutes the entire agreement and understanding
between the parties and supersedes any and all prior agreements
between the parties.
(iii) This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of
Connecticut.
Very truly yours,
PHOENIX EQUITY PLANNING CORPORATION
By _________________________________________
Authorized Signature
____________________________________________
Name and Title
We accept and agree to the foregoing Agreement as of the date set forth below
Financial Institution: __________________________________
By _________________________________________
Authorized Signature, Title
____________________________________________
____________________________________________
Address
(NASD CRD # if applicable _________________ )
Date: ______________________________________
Please return the signed copy of this Sales Contract to Phoenix Equity Planning
Corporation at the above address.
Exhibit 9.1
Sub-Transfer Agent Agreement
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
between
PHOENIX EQUITY PLANNING CORPORATION
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Terms of Appointment; Duties of the Bank and 1-4
Transfer Agent
2. Fees and Expenses 4
3. Bank as Trustee or Custodian of Retirement Plans 4-5
4. Wire Transfer Operating Guidelines 5-7
5. Data Access and Proprietary Information 7-8
6. Indemnification 8-9
7. Standard of Care 10
8. Covenants of the Transfer Agent and the Bank 10
9. Representations and Warranties of the Bank 11
10. Representations and Warranties of the Transfer Agent 11
11. Termination of Agreement 12
12. Assignment 12
13. Amendment 12
14. Massachusetts Law to Apply 13
15. Force Majeure 13
16. Consequential Damages 13
17. Limitation of Shareholder Liability 13
18. Merger of Agreement 13
19. Counterparts 13
<PAGE>
AGREEMENT effective as of the 1st day of June, 1994, by and between
PHOENIX EQUITY PLANNING CORPORATION, a Connecticut corporation, having its
principal office and place of business at 100 Bright Meadow Boulevard, Enfield,
Connecticut, 06083, (the "Transfer Agent"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank");
WHEREAS, the Transfer Agent has been appointed by each of the investment
companies (including each series thereof) listed on Schedule A (the "Fund(s)"),
each an open-end diversified management investment company registered under the
Investment Company Act of 1940 as amended, as transfer agent, dividend
disbursing agent and shareholder servicing agent in connection with certain
activities, and the Transfer Agent has accepted each such appointment;
WHEREAS, the Transfer Agent has entered into a Transfer Agency and Service
Agreement with each of the Funds (including each series thereof) listed on
Schedule A pursuant to which the Transfer Agent is responsible for certain
transfer agency and dividend disbursing functions for each Fund's shares
("Shares") and each Fund's shareholders ("Shareholders") and the Transfer Agent
is authorized to subcontract for the performance of its obligations and duties
thereunder in whole or in part with the Bank;
WHEREAS, the Transfer Agent desires to appoint the Bank as sub-transfer
agent, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenant herein contained,
the parties hereto agree as follows:
1. Duties of the Bank and the Transfer Agent
1.1 Subject to the terms and conditions set forth in this Agreement, the
Bank shall act as the Transfer Agent's non-exclusive sub-transfer agent for
Shares in connection with any accumulation plan, open-account, dividend
reinvestment plan, retirement plan or similar plan provided to Shareholders and
set out in each Fund's currently effective prospectus and statement of
additional information ("Prospectus"), including without limitation any
periodic investment plan or periodic withdrawal program. As used herein the
term "Shares" means the authorized and issued shares of common stock, or shares
of beneficial interest, as the case may be, for each Fund listed in Schedule A.
In accordance with procedures established from time to time by agreement
between the Transfer Agent and the Bank, the Bank and Transfer Agent shall
provide the services listed in this Section 1.
(a) According to the service responsibility schedule attached hereto
for Shareholder accounts and record-keeping the Bank or the
Transfer Agent shall:
(i) receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the custodian of each Fund authorized pursuant
to the articles of incorporation or organization of each
Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) in respect to the transactions in items (i), (ii), and
(iii) above, the Bank shall execute transactions directly
with broker-dealers authorized by each Fund;
(v) at the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
(vi) effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) prepare and transmit payments for dividends and
distributions declared by each Fund;
<PAGE>
(viii) issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to the
Bank and protecting the Bank and each Fund, and the Bank
at its option, may issue replacement certificates in place
of mutilated stock certificates upon presentation thereof
and without such indemnity;
(ix) maintain records of account for and advise the Transfer
Agent and its Shareholders as to the foregoing;
(x) record the issuance of Shares of each Fund and maintain
pursuant to Rule 17Ad-10 (e) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act") a record of
the total number of Shares of each Fund that are
authorized, based upon data provided to it by each Fund or
the Transfer Agent and issued and outstanding, the Bank
shall also provide each Fund on a regular basis with the
total number of Shares which are authorized and issued and
outstanding and shall have no obligation, when recording
the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the
issues or sale of such Shares, which functions shall be
the sole responsibility of each Fund or the Transfer
Agent.
1.2 (a) For reports, the Bank shall:
(i) maintain all Shareholder accounts, prepare meeting, proxy,
and mailing lists, withhold taxes on U.S. resident and
non-resident alien accounts, prepare and file U.S.
Treasury reports required with respect to dividends and
distributions by federal authorities for all Shareholders,
prepare confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder account
information.
(b) For blue sky reporting the Bank shall provide a system that will
enable each Fund or the Transfer Agent to monitor the total
number of Shares sold in each State, and each Fund or the
Transfer Agency shall:
(i) identify to the Bank in writing those transactions and
assets to be treated as exempt from blue sky reporting for
each State; and
(ii) verify the establishment of transactions for each State on
the system prior to activity for each State, the
responsibility of the Bank for each Fund's blue sky State
registration status is solely limited to the initial
establishment of transactions subject to blue sky
compliance by the Fund or the Transfer Agent and the
reporting of such transactions to the Fund as provided
above.
1.3 Per the attached service responsibility schedule procedures as to who
shall provide certain of the services in Section 1 may be established from time
to time by agreement between the Transfer Agent and the Bank. The Bank may at
times perform only a portion of these services and the Transfer Agent may
perform these services on each Fund's behalf.
1.4 The Bank shall provide additional services on behalf of the Transfer
Agent (i.e., escheat services) as may be agreed upon in writing between the Bank
and the Transfer Agent.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the
Transfer Agent agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section 2.2 below
may be changed from time to time subject to mutual written agreement between the
Transfer Agent and the Bank. For purposes hereof the term account should refer
to any Shareholder account designated as such on the DST mutual fund system (or
any replacement system) provided further that so called omnibus accounts shall
be considered to be a single account.
2.2 In addition to the fees paid under Section 2.1 above, the Transfer
Agent agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by the Bank at the request or with the consent of the
Transfer Agent, will be reimbursed by the Transfer Agent.
<PAGE>
2.3 The Transfer Agent agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to all
accounts shall be advanced to the Bank by the Transfer Agent at least seven (7)
days prior to the mailing date of such materials.
3. Bank as Trustee or Custodian of Retirement Plans
As agreed upon in writing between the parties, the Bank and Transfer Agent
agree that the Bank may serve as the named custodian or trustee of individual
retirement accounts established under section 408 of the Internal Revenue Code
(the "Code"), tax-sheltered plans established under section 403 (b) of the Code,
qualified plans under section 401(a) of the Code, or money purchase plans,
pension plans or profit sharing plans with a cash deferred arrangement under
section 401(k) of the Code (collectively "Retirement Plans").
3.1 The Bank shall provide certain recordkeeping services as more fully
described in the TRAC-2000 Procedures manual provided to the Fund for
Shareholders who become plan participants of Retirement Plans using TRAC-2000
System.
3.2 The Bank shall:
(a) have no investment responsibility for the selection of
investments, no liability for any investments made for Retirement
Plans other than to maintain custody and provide recordkeeping of
the investments subject to the terms of the Agreement; and
(b) not serve as "Plan Administrator" (as defined in the Employee
Retirement Income Securities Act of 1974, as amended) of any
Retirement Plan, or in any other administrative capacity or other
capacity except as trustee or custodian thereof, the Bank shall
not keep records of Retirement Plan accounts except as provided
herein.
3.3 The Transfer Agent agrees that in any communications from the Transfer
Agent or the Funds to any prospective or actual Shareholder, neither the Funds
nor the Transfer Agent shall state or represent that the Bank has any investment
discretion or other power concerning investments of any Retirement Plan or the
Bank shall serve as plan administrator or have any administrative or other
responsibility for the administration or operation of any Retirement Plan. The
Funds, the Funds' designee, or the Transfer Agent as may be required to comply
with the Code and all other applicable federal and state laws shall:
(a) serve as third party administrators of all Retirement Plans; and
(b) provide all Retirement Plan prototype document design, tax form
preparation (excluding services performed by the Bank under
section 1.2 of this Agreement), discrimination testing and
consulting about Retirement Plan qualification and maintenance.
4. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial Code
4.1 The Bank is authorized to promptly debit the appropriate Transfer Agent
account(s) upon the receipt of a payment order in compliance with the selected
security procedure (the "Security Procedure") chosen for funds transfer and in
the amount of money that the Bank has been instructed to transfer. The Bank
shall execute payment orders in compliance with the Security Procedure and with
the Transfer Agent instructions on the execution date provided that such payment
order is received by the customary deadline for processing such a request,
unless the payment order specifies a later time. All payment orders and
communications received after this time-frame will be deemed to have been
received the next business day.
4.2 The Transfer Agent acknowledges that the Security Procedure it has
designated on the Transfer Agent Selection Form was selected by the Transfer
Agent from Security Procedures offered by the Bank. The Transfer Agent shall
restrict access to confidential information relating to the Security Procedure
to authorized persons as communicated to the Bank in writing. The Transfer Agent
must notify the Bank immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Transfer Agent's authorized personnel. The Bank shall verify the authenticity of
all such instructions according to the Security Procedure.
<PAGE>
4.3 The Bank shall process all payment orders on the basis of the account
number contained in the payment order. In the event of a discrepancy between any
name indicated on the payment order and the account number, the account number
shall take precedence and govern.
4.4 When the Transfer Agent initiates or receives Automated Clearing House
("ACH") credit and debit entries pursuant to these guidelines and the rules of
the National Automated Clearing House Association and the New England Clearing
House Association, the Bank will act as an Originating Depository Financial
Institution and/or receiving depository Financial Institution, as the case may
be, with respect to such entries. Credits given by the Bank with respect to an
ACH credit entry are provisional until the Bank receives final settlement for
such entry from the Federal Reserve Bank. If the Bank does not receive such
final settlement, the Transfer Agent agrees that the Bank shall receive a refund
of the amount credited to the Transfer Agent in connection with such entry, and
the party making payment to the Transfer Agent via such entry shall not be
deemed to have paid the amount of the entry.
4.5 The Bank reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of the Bank's receipt of such payment
order; (b) if initiating such payment order would cause the Bank, in the Bank's
sole judgement, to exceed any volume, aggregate dollar, network, time, credit or
similar limits upon wire transfers which are applicable to the Bank; or (c) if
the Bank, in good faith, is unable to satisfy itself that the transaction has
been properly authorized.
4.6 The Bank shall use reasonable efforts to act on all authorized requests
to cancel or amend payment orders received in compliance with the Security
Procedure provided that such requests are received in a timely manner affording
the Bank reasonable opportunity to act. However, the Bank assumes liability if
the request for amendment or cancellation cannot be satisfied.
4.7 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the payment order
instructions as received and the Bank complies with the Security Procedure. The
Security Procedure is established for the purpose of authenticating payment
orders only and not for the detection of errors in payment orders.
4.8 The Bank shall assume no responsibility for lost interest with respect
to the refundable amount of any unauthorized payment order unless the Bank is
notified of the unauthorized payment order within (30) days or notification by
the Bank of the acceptance of such payment order. In no event (including failure
to execute a payment order) shall the Bank be liable for special, indirect or
consequential damages, even if advised of the possibility of such damages.
4.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within 24 hours notice of which may be delivered through the Bank's
proprietary information systems, or by facsimile or call-back. Client must
report any objections to the execution of an order within 30 days.
5. Data Access and Proprietary Information
5.1 The Transfer Agent acknowledges that the data bases, computer programs,
screen formats, report formats, interactive design techniques, and other
information furnished to the Transfer Agent by the Bank are provided solely in
connection with the services rendered under this Agreement and constitute
copyrighted trade secrets or proprietary information of substantial value to the
Bank. Such databases, programs, formats, designs, techniques and other
information are collectively referred to below as "Proprietary Information". The
Transfer Agent agrees that it shall treat all Proprietary Information as
proprietary to the Bank and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as expressly
permitted hereunder. The Transfer Agent agrees for itself and its employees and
agents:
(a) to use such programs and databases (i) solely on the Transfer
Agent's computers, or (ii) solely from equipment at the locations
agreed to between the Transfer Agent and the Bank and (iii) in
accordance with the Bank's applicable user documentation;
<PAGE>
(b) to refrain from copying or duplicating in any way (other than in
the normal course of performing processing on the Transfer Agents
computers) any part of any Proprietary Information;
(c) to refrain from obtaining unauthorized access to any programs,
data or other information not owned by the Transfer Agent, and if
such access if accidently obtained, to respect and safeguard the
same Proprietary Information;
(d) to refrain from causing or allowing information transmitted from
the Bank's computer to the Transfer Agent's terminal to be
retransmitted to any other computer terminal or other device
except as expressly permitted by the Bank, such permission not to
be unreasonably withheld;
(e) that the Transfer Agent shall have access only to those
authorized transactions as agreed to between the Transfer Agent
and the Bank; and
(f) to honor reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law and under applicable statutes.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section 5 shall
survive any earlier termination of this Agreement.
6. Indemnification
6.1 The Bank shall not be responsible for, and the Transfer Agent shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payment, expenses and liability arising
out of or attributable to:
(a) all actions of the Bank or its agent or subcontractors required
to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct;
(b) the Transfer Agents' lack of good faith, negligence or willful
misconduct;
(c) the reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services
which (i) are received by the Bank or its agents or
subcontractors from the Transfer Agent or its duly authorized
representative, and (ii) have been prepared, maintained or
performed by the Transfer Agent including but not limited to any
previous transfer agent or registrar excluding the Bank;
(d) the reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Transfer
Agent;
(e) the offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
6.2 At any time the Bank may apply to any officer of the Transfer Agent for
instructions, and may consult with legal counsel acceptable to the Transfer
Agent with respect to any matter arising in connection with the services to be
performed by the Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Transfer
Agent for any action taken or omitted by it in reliance upon such instructions
or upon the opinion of such counsel.
The Bank, its agents and subcontractors shall be protected and indemnified
in acting upon any paper or document furnished by or on behalf of the Transfer
Agent, reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, tape, CRT data entry or other similar means authorized by the
Transfer Agent, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Transfer Agent.
The Bank, its agents and subcontractors shall also be protected and indemnified
in recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar, or of
a co-transfer agent or co-registrar.
<PAGE>
6.3 In order that the indemnification provisions contained in this Section
6 shall apply, upon the assertion of a claim for which the Transfer Agent may be
required to indemnify the Bank, the Bank shall promptly notify the Transfer
Agent of such assertion, and shall keep the Transfer Agent advised with respect
to all developments concerning such claim. The Transfer Agent shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank.
The Bank shall in no case confess any claim or make any compromise in any
case in which the Transfer Agent may be required to indemnify the Bank except
with the Transfer Agent's prior written consent.
6.4 The indemnity provisions of Section 6 shall survive any earlier
termination of this Agreement.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best
efforts to insure the accuracy of all services performed under this Agreement,
but assumes no responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith, or willful
misconduct or that of its employees.
8. Covenants of the Transfer Agent and the Bank
8.1 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Transfer Agent for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.2 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of each Fund or the Transfer Agent and will be
preserved, maintained and made available in accordance with such section and
rules, for monitoring by the Transfer Agent, and will be surrendered promptly to
the Transfer Agent on and in accordance with its request. The Bank shall furnish
adequate resources and office space in order to allow the Transfer Agent or any
governmental authority to inspect all books, procedures, information and records
required hereby.
8.3 The Bank and the Transfer Agent agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
8.4 In case of any requests or demands for the inspection of the
Shareholder records of the Transfer Agent, the Bank will endeavor to notify the
Transfer Agent and to secure instructions from an authorized officer of the
Transfer Agent as to such inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person, whenever it is advised by counsel
that it may be held liable for the failure to exhibit the Shareholder records to
such person.
9. Representations and Warranties of the Bank
The Bank represents and warrants to the Transfer Agent that:
(a) it is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b) it is duly qualified to carry on its business in the Commonwealth of
Massachusetts;
(c) it is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement;
(d) all requisite corporation proceedings have been taken to authorize it
to enter into and perform this Agreement;
(e) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement;
<PAGE>
(f) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act.
10. Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to the Bank that:
(a) it is a Connecticut corporation duly organized and existing and in
good standing under the laws of Connecticut;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all corporate proceedings required by said articles of incorporation
and by-law have been taken to authorize it to enter into and perform
this Agreement;
(d) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act.
11. Termination of Agreement
11.1 This Agreement shall continue for a period of three years (the
"Initial Term") and be renewed or terminated as stated below.
11.2 This Agreement shall terminate upon the termination of the Transfer
Agency Agreement between the Funds and the Transfer Agent.
11.3 This Agreement may be terminated or renewed after the Initial Term by
either party upon ninety (90) days written notice to the other.
11.4 Should either party exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the party exercising its right to terminate. Additionally, the party receiving
the notice to terminate reserves the right to charge the terminating party for
any other reasonable expenses associated with such termination.
12. Assignment
12.1 Except as provided in Section 12.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
12.3 The Bank may, without further consent on the part of the Transfer
Agent, subcontract for the performance hereof with (a) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A (c)(2) of the Exchange Act ("Section
17A (c)(2); (b) National Financial Data Services, Inc., a subsidiary of BFDS
duly registered as a transfer agent pursuant to Section 17A (c)(2) or (c) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to the
Transfer Agent for the acts and omissions of any subcontractor as it is for its
own acts and omissions.
13. Amendment
This Agreement may be amended or modified by a written agreement executed
by both parties.
14. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
15. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
<PAGE>
16. Consequential Damages
Neither party to this agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
17. Limitations of Shareholder Liability
The Bank hereby expressly acknowledges that recourse against the Funds
shall be subject to those limitations provided by governing law and the
Declaration of Trust of the Funds, as applicable, and agrees that obligations
assumed by the Funds pursuant to the Transfer Agency Agreement shall be limited
in all cases to the Funds and their respective assets. The Bank shall not seek
satisfaction from the Shareholders or any Shareholders of the Funds, nor shall
the Bank seek satisfaction of any obligations from the Trustees/Directors or any
individual Trustee/Director of the Funds.
18. Merger of Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written.
19. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the 21st day of July 1994.
PHOENIX EQUITY PLANNING CORPORATION
BY: /s/ William R. Moyer
---------------------------------------
William R. Moyer
Senior Vice President, Finance
ATTEST:
/s/Patricia O. McGlaughlin
- -----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/Donald E. Logue
---------------------------
Executive Vice President
ATTEST:
/s/S. Cesso
- -------------------------------
<PAGE>
STATE STREET BANK & TRUST COMPANY
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS PLAN
TRANSFER AND DIVIDEND DISBURSEMENT AGENT
THE PHOENIX FUNDS
PHOENIX SERIES FUNDS
PHOENIX HIGH YIELD FUND SERIES--A & B SHARES
*NATIONAL BOND FUND MERGED WITH A SHARES
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES--A & B SHARES
*NATIONAL FEDERAL SECURITIES TRUST MERGED WITH A SHARES
PHOENIX BALANCED FUND SERIES--A & B SHARES
PHOENIX CONVERTIBLE FUND SERIES--A & B SHARES
PHOENIX GROWTH FUND SERIES--A & B SHARES
PHOENIX MONEY MARKET FUND SERIES--A & B SHARES
PHOENIX MULTI PORTFOLIO FUNDS
PHOENIX TAX EXEMPT BOND PORTFOLIO--A & B SHARES
*NATIONAL SECURITIES TAX EXEMPT BONDS MERGED WITH A SHARES
PHOENIX CAPITAL APPRECIATION PORTFOLIO--A & B SHARES
PHOENIX INTERNATIONAL PORTFOLIO--A & B SHARES
PHOENIX ENDOWMENT EQUITY PORTFOLIO
PHOENIX ENDOWMENT FIXED-INCOME PORTFOLIO
OTHER PHOENIX FUNDS
PHOENIX TOTAL RETURN FUND, INC.--A & B SHARES
*NATIONAL TOTAL RETURN MERGED WITH A SHARES
PHOENIX MULTI-SECTOR FIXED INCOME FD, INC.--A & B SHARES
*PHOENIX HIGH QUALITY MERGED WITH A SHARES
PHOENIX EQUITY OPPORTUNITIES FUND--A & B SHARES
*A SHARES FORMERLY NATIONAL STOCK FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND--A & B SHARES
PHOENIX INCOME AND GROWTH FUND--A & B SHARES
PHOENIX CALIFORNIA TAX EXEMPT BOND FUND--A & B SHARES
PHOENIX ASSET RESERVE--A & B SHARES
<PAGE>
STATE STREET BANK & TRUST COMPANY
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS PLAN
TRANSFER AND DIVIDEND DISBURSEMENT AGENT
THE PHOENIX FUNDS
State Street shall charge PEPCO an annual fee based on a per shareholder
account per fund class for the next three (3) years equal to the following:
PHOENIX FEE SCHEDULE
Annual Per Account Fee
1994 $6.75
1995-1996* 1-600,000 ACCTS $7.00
600,000-1,000,000 ACCTS $6.75
OVER 1,000,000 ACCTS $6.60
Monthly Minimum/Fund Applied to Acct. Fee $1,500.00
Annual Closed Account Fee $1.20
Checkwriting Fees:
Per Check Cleared $1.00
Privilege Set-Up $5.00
Annual 12(B)1 Fee (Billed Quarterly) $1.00
Annual Investor Processing Fee
(Per Investor) $1.80
Other Fees: (1994-1996)
Management $27.00-$37.00 Per Hr. Per FTE
Fund Administrator $29.00 Per Hr. Per FTE
All Transfer Agent Functions $22.50 Per Hr. Per FTE
Liaisons Over 4,000/mth $26.00 Per Item
[bullet] This schedule is based on 700K accounts, 26 funds, and 4,000 liaison
items.
[bullet] If the account base decreases significantly, the per account fee will
be reviewed by both parties.
[bullet] If 12(B)1 product is discontinued the annual per account fee will be
increased by $1.00 [bullet]
[bullet] Additional Fund Administrators will be added as new funds are opened
(ratio 1:8) and charged as detailed above.
[bullet] This schedule does not include fees for Image terminals, conversions,
acquisitions, customer service, audio response, 401 recordkeeping, new product
lines, and out-of-pockets.
In witness whereof, Phoenix Equity Planning Corporation and State Street
Bank and Trust Company have agreed upon this fee schedule and have caused this
fee schedule to be executed in their names and on their behalf through their
duly authorized officers for the next three years.
PHOENIX EQUITY PLANNING CORPORATION STATE STREET BANK & TRUST CO.
By /s/Edward P. Hourihan By /s/ Mark Toomey
------------------------ --------------------------
Title Vice President Title Vice President
Date 7/15/94 Date 7/12/74
*The fee for this period shall be adjusted by the parties to reflect then
prevailing levels of service furnished by State Street.
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
SERVICE RESPONSIBILITY SCHEDULE
<TABLE>
<CAPTION>
FUNCTIONAL PEPCO BFDS
RESPONSIBILITIES (Transfer Agent) (Sub Transfer Agent)
<S> <C> <C>
A. Transmission Processing:
Remittance Cash Processing X
New Account Setup
[bullet] Regular X
[bullet] Fiduciary X
[bullet] Quality Assurance X
Transfers
[bullet] Regular X
[bullet] Fiduciary X
[bullet] Dealer X
[bullet] Quality Assurance X
Redemptions
[bullet] Regular X
[bullet] Fiduciary X
[bullet] Quality Assurance X
Wire Order
[bullet] Set-Up X
[bullet] Settlement X
[bullet] Quality Assurance X
[bullet] Monitoring of Outstanding Trades X
Maintenance
[bullet] Registration X
[bullet] Rep/Dealer File X *X
[bullet] Sub Files X
[bullet] Quality Assurance X
[bullet] ACH Prenote Reject X
[bullet] All Account Options X
Adjustments (through 12/94)
[bullet] Account Corrections *X
[bullet] LOI Processing *X
[bullet] Year-End Accounts Adjustments *X
[bullet] Sharelot Adjustments *X
[bullet] Bounced Checks *X
[bullet] ACH Cancellations *X
[bullet] Quality Assurance *X
B. Customer Service:
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Telephones X
[bullet] Customer Inquiry X
[bullet] Transaction Line
[bullet] Timer Exchanges *X
[bullet] Liaison Support (Through 12/4) *X
Correspondence X
[bullet] Shareholder/Dealer Letters X
[bullet] Transfer of Assets Letters/Followup X
[bullet] Notice of Levy X
Dealer Services
[bullet] FundsServ/Networking Implementation X
[bullet] Dealer Security Access X
[bullet] Enhancements-Communications/Testing X
???ent Services
[bullet] Product Development/Implementation X
[bullet] Mailings X
[bullet] Year End Reporting X
C. Support:
Image/AWD
[bullet] Scanning X X
[bullet] Work Distribution X
[bullet] Retrieval X
[bullet] Technical Support X
Microfilm/Research Prior Agent X *X
[bullet] Media Production
[bullet] Design/Printing X
[bullet] Marketing Materials X
[bullet] Forms Development X
Corporate Actions
[bullet] Report Generation X
[bullet] Proxy Solicitation X
[bullet] Periodic Financial Activities (DIVs, PACs,
SWPs, etc.) X
Compliance/Regulatory
[bullet] Escheatment X
[bullet] Tax Filings X
[bullet] Lost Shareholder Recovery X
[bullet] BNotice/CNotice Reporting *X
</TABLE>
<PAGE>
<TABLE>
<S> <C>
[bullet] Lost Certificate Processing/SIC *X
[bullet] Reporting
Recon/Control
[bullet] Cash Settlement X
[bullet] Account Reconcilement X
[bullet] Commission Payment X
[bullet] Automated Trade Settlement X
[bullet] Balance Credit Review X
[bullet] Reclaims *X
[bullet] Dividend Processing X
Financial Reporting
[bullet] Billing to the Fund X
Will be internalized to PEPCO
</TABLE>
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 OPPORTUNITIES 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:
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
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
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. 13 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 12, 1997, relating to the financial
statements and financial highlights appearing in the October 31, 1997 Annual
Report to Shareholders of the Phoenix Multi-Sector Fixed Income Fund, Inc.,
which is also incorporated by reference into the Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Other Information - Independent Accountants"
in the Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 24, 1998
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
(the "Fund")
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class A shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class A shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of .05% the average daily value of the net assets of
the Fund's Class A shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class A shares of the
Fund and the furnishing of services to Class A shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class A shares of the Fund (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 selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class A shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class A shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class A
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class A shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections. No amounts paid or payable by the Fund under this Plan or any
related agreement may be used to pay for, or reimburse payment for, sales or
promotional services or activities unless such payment or reimbursement takes
place prior to the earliest of (a) the last day of the one-year period
commencing on the last day of the calendar quarter during which the specific
service or activity was performed, or (b) the last day of the one-year period
commencing on the last day of the calendar quarter during which payment for the
service or activity was made by a third party on behalf of the Fund.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class A shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be
<PAGE>
amended at any time, provided that (a) the Plan may not be amended to increase
materially the amount of the distribution expenses provided in Paragraph 2
hereof (including the Service Fee) without the approval of at least a majority
of the outstanding voting securities (as defined in the Act) of the Class A
shares of the Fund and (b) all material amendments to this Plan must be approved
by a majority vote of the Trustees of the Fund and of the Disinterested Trustees
cast in person at a meeting called for the purpose of such vote.
6. Selection of Disinterested Trustees
-----------------------------------
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class A shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class A shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
[Adopted at a duly held meeting of the Board of Directors on August 27, 1997.]
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
(the "Fund")
CLASS B SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class B shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class B shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of .75% of the average daily value of the net assets
of the Fund's Class B shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class B shares of the
Fund and the furnishing of services to Class B shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class B shares of the Fund (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 selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class B shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class B shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class B
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class B shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class B shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class B shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
-----------------------------------
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class B shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class B shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
[Adopted at a duly held meeting of the Board of Directors on August 27, 1997.]
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
(the "Fund")
CLASS C SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class C shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class C shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of .75% of the average daily value of the net assets
of the Fund's Class C shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class C shares of the
Fund and the furnishing of services to Class C shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class C shares of the Fund (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 selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class C shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class C shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class C
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class C shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class C shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class C shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
-----------------------------------
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class C shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class C shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
[Adopted by the sole initial Class C shareholder on October 14, 1997.]
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
(the "Fund")
CLASS M SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class M shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class M shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of .25% of the average daily value of the net assets
of the Fund's Class M shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class M shares of the
Fund and the furnishing of services to Class M shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class M shares of the Fund (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 selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class M shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class M shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class M
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class M shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class M shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class M shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
-----------------------------------
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class M shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class M shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
[Adopted by the sole initial Class M shareholder on October 14, 1997.]
PHOENIX FUNDS
(the "Funds")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended
("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Funds shall offer
multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this
Plan.
2. The Multi-Class Structure
-------------------------
The portfolios of the Funds listed on Schedule A hereto shall offer up to
four classes of shares as indicated on Schedule A: Class A, Class B, Class C and
Class M ("Multi-Class Portfolios"). Shares of the Multi-Class Portfolios shall
represent an equal pro rata interest in the respective Multi-Class Portfolio
and, generally, shall have identical voting, dividend, liquidation, and other
rights, preferences, powers, restrictions, limitations, qualifications and terms
and conditions, except that: (a) each class shall have a different designation;
(b) each class shall bear any Class Expenses, as defined by Section 2(b), below;
(c) each class shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its distribution arrangement; and (d) each
class shall have separate voting rights on any matter submitted to shareholders
in which the interests of one class differ from the interests of any other
class. In addition, Class A, Class B, Class C and Class M shares shall have the
features described in Sections a, b, c and d, below.
a. Distribution Plans
------------------
The Funds have adopted Distribution Plans pursuant to Rule 12b-1 with
respect to each Multi-Class Portfolio, containing substantially the following
terms:
i. Class A shares of each Multi-Class Portfolio shall reimburse
Phoenix Equity Planning Corporation (the "Distributor") for costs and expenses
incurred in connection with distribution and marketing of shares thereof, as
provided in the Class A Distribution Plan and any supplements thereto, subject
to an annual limit of 0.25%, or in some cases 0.30%, of the average daily net
assets of a Multi-Class Portfolio's Class A shares.
<PAGE>
-2-
ii. Class B shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution and
marketing of shares thereof, as provided in the Class B Distribution Plan and
any supplements thereto, subject to an annual limit of 1.00% of the average
daily net assets of a Multi-Class Portfolio's Class B shares.
iii. Class C shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution and
marketing of shares thereof, as provided in the Class C Distribution Plan and
any supplements thereto, subject to an annual limit of 1.00%, or in some cases
0.50%, of the average daily net assets of a Multi-Class Portfolio's Class C
shares.
iv. Class M shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution and
marketing of shares thereof, as provided in the Class M Distribution Plan and
any supplements thereto, subject to an annual limit of 0.50% of the average
daily net assets of a Multi-Class Portfolio's Class M shares.
b. Allocation of Income and Expenses
---------------------------------
i. General.
The gross income, realized and unrealized capital gains and losses and
expenses (other than Class Expenses, as defined below) of each Multi-Class
Portfolio shall be allocated to each class on the basis of its net asset value
relative to the net asset value of the Multi-Class Portfolio. Expenses to be so
allocated include expenses of the Funds that are not attributable to a
particular Multi-Class Portfolio or class of a Multi-Class Portfolio but are
allocated to a Multi-Class Portfolio ("Fund Expenses") and expenses of a
particular Multi-Class Portfolio that are not attributable to a particular class
of that Multi-Class Portfolio ("Portfolio Expenses"). Fund Expenses include, but
are not limited to, trustees' fees, insurance costs and certain legal fees.
Portfolio Expenses include, but are not limited to, certain state registration
fees, custodial fees, advisory fees and other expenses relating to the
management of the Multi-Class Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses") shall
be limited to: (1) transfer agency fees; (2) stationery, printing, postage, and
delivery expenses relating to preparing and distributing shareholder reports,
prospectuses, and proxy statements; (3) state Blue Sky registration fees; (4)
SEC registration fees; (5) expenses of administrative personnel and services to
the extent related to another category of class-specific expenses; (6) trustees'
fees and expenses; (7) accounting expenses, auditors' fees, litigation expenses,
and legal fees and expenses; and (8) expenses incurred in connection with
shareholder meetings. Expenses described in subsection (a) (i) and (ii) above of
this paragraph must be allocated to the class for which they are incurred. All
other expenses described in this paragraph will be allocated as Class
<PAGE>
-3-
Expenses, if a Fund's President and Treasurer have determined, subject to Board
approval or ratification, which of such categories of expenses will be treated
as Class Expenses, consistent with applicable legal principles under the 1940
Act and the Internal Revenue Code of 1986, as amended ("Code"). The difference
between the Class Expenses allocated to each share of a class during a year and
the Class Expenses allocated to each share of any other class during such year
shall at all times be less than .50% of the average daily net asset value of the
class of shares with the smallest average net asset value. The afore-described
description of Class Expenses and any amendment thereto shall be subject to the
continuing availability of an opinion of counsel or a ruling from the Internal
Revenue Service to the effect that any such allocation of expenses or the
assessment of higher distribution fees and transfer agency costs on any class of
shares does not result in any dividends or distributions constituting
"preferential dividends" under the Code.
In the event that a particular expense is no longer reasonably
allocable by class or to a particular class, it shall be treated as a Fund
Expense or Portfolio Expense as applicable, and in the event a Fund Expense or
Portfolio Expense becomes allocable as a Class Expense, it shall be so
allocated, subject to compliance with Rule 1 8f-3 and Board approval or
ratification.
The initial determination of expenses that will be allocated as Class
Expenses and any subsequent changes thereto as set forth in this Plan shall be
reviewed by the Board of Trustees and approved by such Board and by a majority
of the Trustees who are not "interested persons" of the Fund, as defined in the
1940 Act ("Independent Trustees").
iii. Waivers or Reimbursements of Expenses.
Investment Advisor may waive or reimburse its management fee in whole
or in part provided that the fee is waived or reimbursed to all shares of the
Fund in proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a Class
Expense may waive or reimburse that fee in whole or in part only if the revised
fee more accurately reflects the relative cost of providing to each Multi-Class
Portfolio the service for which the Class Expense is charged.
Distributor may waive or reimburse a Rule 12b- 1 Plan fee payment in
whole or in part.
c. Exchange Privileges
-------------------
Shareholders of a Multi-Class Portfolio may exchange shares of a particular
class for shares of the same class in another Multi-Class Portfolio, at the
relative net asset values of the respective shares to be exchanged and with no
sales charge, provided the shares to be acquired in the exchange are, as may be
necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount. Each
Multi-Class
<PAGE>
-4-
Portfolio reserves the right to temporarily or permanently terminate exchange
privileges, impose conditions upon the exercision of exchange privileges, or
reject any specific order for any dealer, shareholder or person whose
transactions seem to follow a timing pattern, including those who request more
than one exchange out of a Multi-Class Portfolio within any thirty (30) day
period. Each Multi-Class Portfolio reserves the right to terminate or modify
these exchange privileges at any time upon giving prominent notice to
shareholders at least 60 days in advance.
d. Conversion Feature
------------------
Class B Shares of a Multi-Class Portfolio will automatically convert to
Class A Shares of that portfolio, without sales charge, at the relative net
asset values of each such classes, not later than eight years from the
acquisition of the Class B Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of an opinion of counsel or a
ruling from the Internal Revenue Service to the effect that the conversion of
shares does not constitute a taxable event under federal income tax law.
3. Board Review
------------
a. Approval of Amended and Restated Plan
-------------------------------------
The Board of Trustees, including a majority of the Independent Trustees, at
a meeting held on November 19, l997, approved the Amended and Restated Plan
based on a determination that the Plan, including the expense allocation, is in
the best interests of each class and Multi-Class Portfolio individually and of
the Funds. Their determination was based on their review of information
furnished to them which they deemed reasonably necessary and sufficient to
evaluate the Plan.
b. Approval of Amendments
----------------------
The Plan may not be amended materially unless the Board of Trustees,
including a majority of the Independent Trustees, have found that the proposed
amendment, including any proposed related expense allocation, is in the best
interests of each class and Multi-Class Portfolio individually and of the Funds.
Such funding shall be based on information required by the Board and furnished
to them that the Board deems reasonably necessary to evaluate the proposed
amendment.
c. Periodic Review
---------------
The Board shall review reports of expense allocations and such other
information as they request at such times, or pursuant to such schedule, as they
may determine consistent with applicable legal requirements.
<PAGE>
-5-
4. Contracts
---------
Any agreement related to the Multi-Class System shall require the parties
thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
--------------
The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of the
first day of each Fund's current fiscal year.
6. Amendments
----------
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3(b) of this
Plan.
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Class A Class B Class C Class M
------- ------- ------- -------
<S> <C> <C> <C> <C>
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC. X X -- --
PHOENIX EQUITY SERIES FUND:
PHOENIX CORE EQUITY FUND X X X X
PHOENIX GROWTH AND INCOME FUND X X X X
PHOENIX INCOME AND GROWTH FUND X X -- --
PHOENIX INVESTMENT TRUST 97:
PHOENIX SMALL CAP VALUE FUND X X X X
PHOENIX VALUE EQUITY FUND X X X X
PHOENIX MULTI-PORTFOLIO FUND:
EMERGING MARKETS BOND PORTFOLIO X X X X
INTERNATIONAL PORTFOLIO X X -- --
MID CAP PORTFOLIO X X -- --
REAL ESTATE SECURITIES PORTFOLIO X X -- --
STRATEGIC INCOME PORTFOLIO X X X X
TAX-EXEMPT BOND PORTFOLIO X X -- --
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC. X X X X
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND X X X --
PHOENIX SERIES FUND:
AGGRESSIVE GROWTH FUND SERIES X X -- --
BALANCED FUND SERIES X X -- --
CONVERTIBLE FUND SERIES X X -- --
GROWTH FUND SERIES X X -- --
HIGH YIELD FUND SERIES X X X X
MONEY MARKET FUND SERIES X X X X
U.S. GOVERNMENT SECURITIES FUND
SERIES X X __ __
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND X X __ __
MICRO CAP FUND X X __ __
SMALL CAP FUND X X __ __
STRATEGIC THEME FUND X X X X
PHOENIX STRATEGIC ALLOCATION FUND, INC. X X __ __
PHOENIX WORLDWIDE OPPORTUNITIES FUND X X __ __
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PHOENIX MULTI-SECTOR FIXED INCOME FUND CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 365900
<INVESTMENTS-AT-VALUE> 360417
<RECEIVABLES> 79670
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 440087
<PAYABLE-FOR-SECURITIES> 90778
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2426
<TOTAL-LIABILITIES> 93204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342138
<SHARES-COMMON-STOCK> 14181
<SHARES-COMMON-PRIOR> 12788
<ACCUMULATED-NII-CURRENT> 971
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9257
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5482)
<NET-ASSETS> 346884
<DIVIDEND-INCOME> 995
<INTEREST-INCOME> 27133
<OTHER-INCOME> 0
<EXPENSES-NET> (4668)
<NET-INVESTMENT-INCOME> 23460
<REALIZED-GAINS-CURRENT> 18266
<APPREC-INCREASE-CURRENT> (13927)
<NET-CHANGE-FROM-OPS> 27799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13143)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4563
<NUMBER-OF-SHARES-REDEEMED> (3789)
<SHARES-REINVESTED> 619
<NET-CHANGE-IN-ASSETS> 21822
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (316)
<OVERDIST-NET-GAINS-PRIOR> (8760)
<GROSS-ADVISORY-FEES> 1860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4668
<AVERAGE-NET-ASSETS> 338247
<PER-SHARE-NAV-BEGIN> 13.27
<PER-SHARE-NII> 1.03
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> (0.98)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.50
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> PHOENIX MULTI-SECTOR FIXED INCOME FUND CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 365900
<INVESTMENTS-AT-VALUE> 360417
<RECEIVABLES> 79670
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 440087
<PAYABLE-FOR-SECURITIES> 90778
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2426
<TOTAL-LIABILITIES> 93204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342138
<SHARES-COMMON-STOCK> 11494
<SHARES-COMMON-PRIOR> 10783
<ACCUMULATED-NII-CURRENT> 971
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9257
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5482)
<NET-ASSETS> 346884
<DIVIDEND-INCOME> 995
<INTEREST-INCOME> 27133
<OTHER-INCOME> 0
<EXPENSES-NET> (4668)
<NET-INVESTMENT-INCOME> 23460
<REALIZED-GAINS-CURRENT> 18266
<APPREC-INCREASE-CURRENT> (13927)
<NET-CHANGE-FROM-OPS> 27799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9715)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2634
<NUMBER-OF-SHARES-REDEEMED> (2207)
<SHARES-REINVESTED> 285
<NET-CHANGE-IN-ASSETS> 12120
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (316)
<OVERDIST-NET-GAINS-PRIOR> (8760)
<GROSS-ADVISORY-FEES> 1860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4668
<AVERAGE-NET-ASSETS> 338247
<PER-SHARE-NAV-BEGIN> 13.25
<PER-SHARE-NII> 0.92
<PER-SHARE-GAIN-APPREC> 0.18
<PER-SHARE-DIVIDEND> (0.87)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.48
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> PHOENIX MULTI-SECTOR FIXED INCOME FUND CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 365900
<INVESTMENTS-AT-VALUE> 360417
<RECEIVABLES> 79670
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 440087
<PAYABLE-FOR-SECURITIES> 90778
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2426
<TOTAL-LIABILITIES> 93204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342138
<SHARES-COMMON-STOCK> 21
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 971
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9257
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5482)
<NET-ASSETS> 346884
<DIVIDEND-INCOME> 995
<INTEREST-INCOME> 27133
<OTHER-INCOME> 0
<EXPENSES-NET> (4668)
<NET-INVESTMENT-INCOME> 23460
<REALIZED-GAINS-CURRENT> 18266
<APPREC-INCREASE-CURRENT> (13927)
<NET-CHANGE-FROM-OPS> 27799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 284
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (316)
<OVERDIST-NET-GAINS-PRIOR> (8760)
<GROSS-ADVISORY-FEES> 1860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4668
<AVERAGE-NET-ASSETS> 338247
<PER-SHARE-NAV-BEGIN> 14.22
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (0.74)
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.48
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> PHOENIX MULTI-SECTOR FIXED INCOME FUND CLASS M
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 365900
<INVESTMENTS-AT-VALUE> 360417
<RECEIVABLES> 79670
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 440087
<PAYABLE-FOR-SECURITIES> 90778
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2426
<TOTAL-LIABILITIES> 93204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342138
<SHARES-COMMON-STOCK> 9
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 971
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9257
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5482)
<NET-ASSETS> 346884
<DIVIDEND-INCOME> 995
<INTEREST-INCOME> 27133
<OTHER-INCOME> 0
<EXPENSES-NET> (4668)
<NET-INVESTMENT-INCOME> 23460
<REALIZED-GAINS-CURRENT> 18266
<APPREC-INCREASE-CURRENT> (13927)
<NET-CHANGE-FROM-OPS> 27799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 124
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (316)
<OVERDIST-NET-GAINS-PRIOR> (8760)
<GROSS-ADVISORY-FEES> 1860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4668
<AVERAGE-NET-ASSETS> 338247
<PER-SHARE-NAV-BEGIN> 14.22
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (0.73)
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.48
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
