As filed with the Securities and Exchange Commission on February 28, 1996
Registration No. 33-4575
Investment Company Act File No. 811-656
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. 5 [x]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 6 [x]
(Check appropriate box or boxes)
-------
Phoenix Multi-Sector Short Term Bond Fund
(Exact Name of Registrant as Specified in Charter)
-------
101 Munson Street, Greenfield, Massachusetts
01301
(Address of Principal Executive Offices)
(Zip Code)
c/o Phoenix Equity Planning Corporation--Shareholder Services
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
-------
Philip R. McLoughlin, Esq.
Vice Chairman and Chief Executive Officer
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
-------
It is proposed that this filing will become effective (check appropriate
box):
[x] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(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.
Declaration Pursuant to Rule 24f-2
-------
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
A Rule 24f-2 Notice for the fiscal year ended on October 31, 1995 was filed
by Registrant with the Commission on December 28, 1995.
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
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
Objective and Policies; Additional
Information
5. Management of the Fund Management of the Fund
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;
Alternative Sales Arrangements;
Distribution Plans; Investor Accounts and
Services Available
8. Redemption or Repurchase How to Redeem Shares
9. Legal Proceedings Not Applicable
</TABLE>
PART B
Information Required in Statement of Additional Information
<TABLE>
<CAPTION>
Item Number Statement of Additional Information Caption
- -------------- ----------------------------- --------------------------------------------
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and
History Cover Page; General Information
13. Investment Objectives and Cover Page; Investment Objective;
Policies Investment Policies; Investment
Restrictions
14. Management of the Fund Services of the Adviser; Trustees and
Officers; Other Information
15. Control Persons and Not Applicable
Principal Holders of
Securities
16. Investment Advisory and Services of the Adviser
Other Services
17. Brokerage Allocation Portfolio Transactions and Brokerage
18. Capital Stock and Other Net Asset Value; How to Buy Shares
Securities
19. Purchase, Redemption and Net Asset Value; How to Buy Shares;
Pricing of Securities Being Exchange Privileges; How to Redeem Shares
Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriters The National Distributor
22. Calculation of Performance Performance Information
Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
PROSPECTUS
PHOENIX MULTI-SECTOR
SHORT TERM BOND FUND
PROSPECTUS
PHOENIX
MARCH 1, 1996
[Phoenix Logo] Phoenix Duff & Phelps
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
February 28, 1996
Phoenix Multi-Sector Short Term Bond Fund (the "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 Fund shares
resulting from movements in interest rates. The 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 Fund may invest its
assets in each or any combination of these market sectors in any proportion
deemed advisable by the Fund's investment adviser. There can be no assurance
that the Fund's objective will be achieved.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. No dealer, salesperson or
any other person has been authorized to give any information or to make any
represen- tations 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 Fund, Adviser or Distributor. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
of the securities offered hereby in any state in which or to any person to
whom it is unlawful to make such offer. Neither the delivery of this
Prospectus nor any sale hereunder shall, under any circumstances, create any
implication that information herein is correct at any time subsequent to its
date. Investors should read and retain this Prospectus for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated February 28, 1996, which has been filed with
the Securities and Exchange Commission (the "Commission") and which is
available at no charge by calling 800-243-4361 or by writing to Phoenix
Equity Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200. The Statement of Additional Information is
incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity, and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation, 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/EXCHANGES: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-------
<S> <C>
INTRODUCTION 3
FUND EXPENSES 4
FINANCIAL HIGHLIGHTS 5
PERFORMANCE INFORMATION 6
INVESTMENT OBJECTIVE AND POLICIES 6
INVESTMENT TECHNIQUES AND RELATED RISKS 10
INVESTMENT RESTRICTIONS 13
PORTFOLIO TURNOVER 14
MANAGEMENT OF THE FUND 14
DISTRIBUTION PLANS 15
HOW TO BUY SHARES 16
INVESTOR ACCOUNTS AND SERVICES AVAILABLE 20
NET ASSET VALUE 23
HOW TO REDEEM SHARES 23
DIVIDENDS, DISTRIBUTIONS AND TAXES 24
ADDITIONAL INFORMATION 25
APPENDIX 26
</TABLE>
2
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by, and the operations of
Phoenix Multi-Sector Short Term Bond Fund (the "Fund"). The Fund is a
diversified, open-end management investment company established as a business
trust under the laws of Massachusetts. The Fund's investment objective is
high current income relative to other short-term investment alternatives,
while seeking to limit fluctuations in the net asset value of Fund shares
resulting from movements in interest rates.
The Investment Adviser
National Securities & Research Corporation ("National" or the "Adviser") is
the investment adviser of the Fund and its professional staff selects and
supervises the investments in the Fund's portfolio. National is a subsidiary
of Phoenix Duff & Phelps Corporation and prior to November 1, 1995, was an
indirect subsidiary of Phoenix Home Life Mutual Insurance Company. For
managing, or directing the investments of the Fund, the Adviser receives a
fee, which is accrued daily and payable monthly, at an annual rate of: .55%
of the Fund's average aggregate daily net assets up to $1 billion; .50% of
the Fund's average aggregate daily net assets between $1 billion and $2
billion; and .45% of the Fund's average aggregate daily net assets in excess
of $2 billion. "See Management of the Fund."
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor")
serves as Distributor of the Fund's shares. See "Distribution Plans" and the
Statement of Additional Information. Equity Planning also acts as financial
agent of the Fund as such receives a quarterly fee based on the average of
the aggregate daily net asset values of the Fund at an annual rate of $300
per $1 million. Equity Planning also serves as the Fund's transfer agent.
The Fund has adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Pursuant to the
distribution plan adopted for Class A Shares, the Fund shall reimburse the
Distributor up to a maximum annual rate of 0.30% of the Fund's average daily
Class A Share net assets for distribution expenditures incurred in connection
with the sale and promotion of Class A Shares and for furnishing shareholder
services. Although the Class A Shares Plan continues to provide for a 0.30%
distribution fee, the Distributor has voluntarily agreed to limit the Rule 12b-1
fee charged to Class A Shares to 0.25% for the fiscal year 1996. Pursuant to the
distribution plan adopted for Class B Shares, the Fund shall reimburse the
Distributor up to a maximum annual rate of .75% of the Fund's average daily
Class B Share net assets for distribution expenditures incurred in connection
with the sale and promotion of Class B Shares and for furnishing shareholder
services. See "Distribution Plans".
Purchase of Shares
The Fund offers two classes of shares of beneficial interest on a continuous
basis which may be purchased at a price equal to their net asset value per
share 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").
Completed applications for the purchase of shares should be mailed to the
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301.
Class A Shares are offered to the public at the next determined net asset
value after receipt of the order by State Street Bank and Trust Company plus
a maximum sales charge of 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 "How to Buy
Shares," "How to Obtain Reduced Sales Charges on Class A Shares" and "Net
Asset Value."
Class B Shares are offered to the public at the next determined net asset
value after receipt of an order by State Street Bank and Trust Company with
no sales charge. Class B Shares are subject to a sales charge if they are
redeemed within three years of purchase. See "How to Buy Shares" and
"Deferred Sales Charge Alternative--Class B Shares".
Shares of each class represent an identical interest in the investment
portfolio of the Fund and generally have the same rights except that Class B
Shares bear the cost of higher distribution fees which cause the Class B
Shares to have a higher expense ratio and to receive lower dividends than
Class A Shares. See "How to Buy Shares."
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investment program designated "Investo-Matic"), and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment
amounts are available under certain circumstances. See "How to Buy Shares."
Redemption Price
Class A Shares may be redeemed at any time at the net asset value per share
next computed after receipt of a redemption request by Equity Planning, the
Fund's transfer agent. Class B shareholders redeeming shares within three
years of the date of purchase will normally be assessed a contingent deferred
sales charge. See "How to Redeem Shares."
Risk Factors
There can be no assurance that the Fund will achieve its investment
objective. In addition, special risks may be presented by the particular
types of securities in which the Fund may invest. For example, the Fund may
invest up to 35% of its assets in below investment grade securities rated
below BBB/Baa by Standard & Poor's Corporation and Moody's Investor's
Service, Inc. 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 Objective and Policies".
3
<PAGE>
FUND EXPENSES
The following table illustrates all fees and expenses a shareholder will
incur. The fees and expenses are set forth in the table are for the fiscal
year ended October 31, 1995.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
-------------- ---------------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) 2.25% None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original purchase price None 2% during the
or redemption proceeds, first year,
as applicable) decreasing
.50% annually
to 1% during
the thirdyear
and dropping
from 1% to 0%
after the
third year.
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets for the year ended
October 31, 1995)
Management Fees .55% .55%
12b-1 Fees .25% .75%
Other Operating Expenses (After Expense Reimbursement)(b) .20% .20%
------------ --------------
Total Fund Operating Expenses 1.00% 1.50%
============ ==============
</TABLE>
(a) "Rule 12b-1 Fees" represent an asset-based sales charge that, for a
long-term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
While the Plan for Class A shares continues to provide for a 0.30%
distribution fee, the Distributor has voluntarily agreed to continue to limit
the fee to 0.25% for the fiscal year 1996.
(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 and Class B
Shares for the amount, if any, by which such operating expenses for the
fiscal year ended October 31, 1995, exceed .20% of the average net assets.
The Total Fund Operating Expenses for Class A and Class B Shares would have
been 2.78% and 3.22%, respectively, absent such waiver or reimbursement.
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
--------------------------------------
1 year 3 years 5 years 10 years
----- ------ ------ ---------
<S> <C> <C> <C> <C>
Example*
- -----------------------------------------------------------
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:
Class A Shares $32 $54 $77 $142
Class B Shares $35 $57 $82 $153
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:
Class A Shares $32 $54 $77 $142
Class B Shares $15 $47 $82 $153
</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. See
"Management of the Fund," "Distribution Plans" and "How to Buy Shares".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for each
class of shares for the Fund. This financial information has been audited by
Price Waterhouse LLP, independent accountants. Their opinion and the Fund's
Financial Statements and notes thereto are incorporated by reference in the
Statement of Additional Information. The Statement of Additional Information
and the Fund's most recent Annual Report (which contains a discussion of the
Fund's performance) are available at no charge by calling (800) 243-4361.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Year Ended From
October 31, Inception
----------------------------------------- 7/6/92 to
1995 1994 1993 10/31/92
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $4.61 $4.91 $4.83 $4.89
Income from investment
operations
Net investment income 0.33(2) 0.29(2) 0.32(2) 0.08(2)
Net realized and
unrealized gain (loss) 0.13 (0.26) 0.08 (0.06)
--------- --------- --------- ---------
Total from investment
operations 0.46 0.03 0.40 0.02
--------- --------- --------- ---------
Less distributions:
Dividends from net
investment income (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) (0.32) (0.08)
--------- --------- --------- ---------
Change in net asset value 0.13 (0.30) 0.08 (0.06)
--------- --------- --------- ---------
Net asset value, end of
period $4.74 $4.61 $4.91 $4.83
========= ========= ========= =========
Total return( (1)) 10.27% 0.40% 8.49% 0.40%
Ratios/supplemental data:
Net assets, end of period
(thousands) $9,303 $9,371 $6,829 $6,531
Ratio to average net assets
of:
Operating expenses 1.00% 1.00% 1.00% 1.00%(4)
Net investment income 7.07% 5.99% 6.39% 5.79%(4)
Portfolio turnover 344% 121% 128% 6%(4)
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------
Year Ended From
October 31, Inception
----------------------------------------- 7/6/92 to
1995 1994 1993 10/31/92
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $4.61 $4.91 $4.83 $4.89
Income from investment
operations
Net investment income 0.30(3) 0.27(3) 0.30(3) 0.07(3)
Net realized and
unrealized gain (loss) 0.13 (0.26) 0.08 (0.06)
--------- --------- --------- ---------
Total from investment
operations 0.43 0.01 0.38 0.01
--------- --------- --------- ---------
Less distributions:
Dividends from net
investment income (0.30) (0.27) (0.30) (0.07)
Dividends from net
realized gains -- (0.03) -- --
Tax return of capital -- (0.01) -- --
--------- --------- --------- ---------
Total distributions (0.30) (0.31) (0.30) (0.07)
--------- --------- --------- ---------
Change in net asset value 0.13 (0.30) 0.08 (0.06)
--------- --------- --------- ---------
Net asset value, end of
period $4.74 $4.61 $4.91 $4.83
========= ========= ========= =========
Total return( (1)) 9.71% -0.03% 8.02% 0.20%(5)
Ratios/supplemental data:
Net assets, end of period
(thousands) $4,659 $6,418 $3,968 $1,357
Ratio to average net assets
of:
Operating expenses 1.50% 1.45% 1.45% 1.45%(4)
Net investment income 6.59% 5.74% 5.79% 5.30%(4)
Portfolio turnover 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
$0.08, $0.08, $0.09 and $0.14, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.08, $0.08, $0.09 and $0.21, respectively.
(4) Annualized.
(5) Not annualized.
5
<PAGE>
PERFORMANCE INFORMATION
The 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
Class A and Class B 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 the 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 Class A and
Class B Shares will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in either Class A or Class B
Shares over a period of 1, 5 and 10 years (or the life of the class of shares
of the Fund). Standardized total return quotations reflect the deduction of a
proportionate share of each Class's expenses (on an annual basis), deduction
of the maximum initial sales load in the case of Class A Shares or the
maximum contingent deferred sales load applicable to a complete redemption of
the investment in the case of Class B Shares, and assume that all dividends
and distributions on Class A and Class B Shares are reinvested when paid. It
is expected that the performance of Class A Shares will be better than that
of Class B Shares as a result of lower distribution fees and certain
incrementally lower expenses paid by Class A Shares. The Fund also may quote
supplementally a rate of total return over different periods of time by means
of aggregate, average, and year-by-year or other types of total return
figures. In addition, the Fund may from time to time publish materials citing
historical volatility for shares of the Fund.
The 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, the Fund may compare its performance
results to other investment or savings vehicles (such as certificates of
deposit) and may refer to results published in various publications such as
Changing Times, Forbes, Fortune, Money, Barrons, Business Week and Investor's
Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's
Investment Adviser, The Wall Street Journal, The New York Times, Consumer
Reports, Registered Representative, Financial Planning, Financial Services
Weekly, Financial World, U.S. News and World Report, Standard and Poor's The
Outlook, and Personal Investor. The Fund may from time to time illustrate the
benefits of tax deferral by comparing taxable investments to investments made
through tax-deferred retirement plans. The total return may also be used to
compare the performance of the Fund against certain widely acknowledged
outside standards or indices for stock and bond market performance, such as
the Standard & Poor's 500 Stock Index (the "S&P 500"), Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer Price Index,
Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index. The S&P 500
is a commonly quoted market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 stocks relative to the base
period 1941-43. The S&P 500 is composed almost entirely of common stocks of
companies listed on the New York Stock Exchange, although the common stocks
of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
Advertisements, sales literature and communications may contain
information about the Fund or Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund
to respond quickly to a changing market and economic conditions. From time to
time, the Fund may discuss 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 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, First Boston
High Yield Index and Salomon Brothers Corporate and Government Bond Indices.
Performance information for the Fund reflects only the performance of a
hypothetical investment in Class A or Class B Shares of the Fund during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objective
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 the Fund, see the Statement of
Additional Information.
The Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of the Fund and a comparison of that
performance to a securities market index.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide high current income relative
to short-term investment alternatives, while seeking to limit fluctuations in
the net asset value of Fund 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.
6
<PAGE>
The Fund will seek to achieve its objective by investing in a diversified
portfolio of fixed income securities comprised primarily of short-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 short-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 likely 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 short-term fixed income securities.
The 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 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
securities 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
such portion of its assets in 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 BB by S&P or Ba 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 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.
The Fund invested the following dollar weighted average percentages of
fixed assets as rated by Moody's, or having a comparable rating according to
S&P, D&P or Fitch rating category, for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Moody's
-----
<S> <C>
Aaa 14.3%
Aa 7.7%
A 2.2%
Baa 25.3%
Ba 22.2%
B 7.7%
Unrated 13.4%
</TABLE>
U.S. Government Securities
The U.S. Government Securities in which the Fund may invest are (1) U.S.
Treasury obligations, which differ only in their interest rates, maturities
and time of issuance and include U.S. Treasury bills (maturities of one year
or less), U.S. Treasury notes (original 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 Fund 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 Fund
invests 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 Fund will invest are GNMA, the Federal Home Loan
Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association
("FNMA"), and the 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
7
<PAGE>
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
Fund's shares. In addition, the market value of U.S. Government Securities
fluctuates as interest rates change.
U.S. Government Securities in which the Fund invests may be issued by U.S.
Government agencies in the form of collateralized mortgage-backed obligations
("CMOs"). CMOs are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by 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.
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.
U.S. Government Securities in which the Fund invests may be structured as
mortgage pass-through securities. 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 and other mortgage-related securities 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 markets 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 these 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 discount. The Fund may
purchase pass-through securities at a premium or at a discount.
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. 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.
Therefore, pass-through 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. Changes in the value of such securities will not affect
interest payments from those obligations but will be reflected in the Fund's
net asset value.
Foreign Securities
The Foreign Securities in which the Fund may invest are issued by foreign
issuers in developed countries considered creditworthy by the Adviser and in
so called emerging markets. The Fund will invest in government obligations
supported by the authority to levy taxes sufficient to ensure the payment of
all principal and interest due on such obligations. 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 Fund 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 "Risk Factors". While
35% or less of the Fund's assets normally will be invested in foreign
securities, the overall percentage invested and the allocations among
specific foreign securities will vary depending upon the relative yields of
such securities, the relative strength of the economies and financial markets
of eligible issuers and the expected trends in the value of foreign
currencies compared to the U.S. dollar. The Fund will make this comparative
analysis based on a review of economic, financial, political and other
relevant information reasonably available to it. The Fund may hold foreign
currency deposits or buy and sell foreign currency contracts (including
forward and swap contracts) in order to protect against decreases in the U.S.
dollar value of foreign securities. The Fund's investment restrictions
provide that it will not acquire a security if, as a result, the Fund would
have 25% or more of the value of its total assets invested in the securities
8
<PAGE>
of any one industry. 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 Fund may invest
include the following types of debt obligations of varying maturities ("Debt
Obligations"): bonds, debentures, notes, municipal bonds, zero coupon bonds,
convertible securities, equipment lease certificates, equipment trust
certificates, commercial and residential pass-through securities and other
mortgage-related securities deemed appropriate by the Adviser, collateralized
mortgage obligations issued by private issuers ("private label CMOs"),
conditional sales contracts and commercial paper (including obligations
secured by such instruments).
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, 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.
The Investment Grade Securities that the Fund may purchase consist of
securities rated Aaa/AAA, AA/AA, A/A and Baa/BBB (the top four rating
categories) by Moody's, S&P, D&P or Fitch, respectively. Securities rated Baa
by Moody's or BBB by S&P are medium grade investment obligations. Moody's
describes securities rated Baa as having 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. See the
Appendix for a complete description of ratings of corporate obligations. The
Fund may invest in Investment Grade Securities of U.S. issuers that are
denominated in foreign currencies. Such securities shall not be counted for
purposes of the 35% limit applicable to Foreign Securities. The Fund may hold
foreign currency deposits or buy and sell foreign currency contracts
(including forward and swap contracts) in order to protect against decreases
in the U.S. dollar value of such securities.
High Yield-High Risk Securities
High Yield-High Risk Securities in which the Fund may invest are preferred
or preference stock and debt obligations rated below investment grade by the
established rating agencies and unrated securities deemed to be of comparable
quality, which the Adviser believes will produce a relatively high yield
compared to short-term investments. 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 securities often carry lower ratings. They are also
colloquially known as "junk bonds."
The Adviser evaluates the purchase of high yield securities for the Fund
primarily through the exercise of its own investment and credit analysis and
on the ratings assigned by the rating agencies. The Adviser seeks to reduce
risk resulting from fluctuations in market value and limit fluctuations in
the net asset value per share of the Fund through diversification and by
attention to current developments and trends in both the economy and
financial markets. The Fund will invest only in the high yield securities of
issuers which the Adviser believes will continue to meet principal and
interest payments.
The Fund may invest in high yield securities of domestic issuers which are
denominated in foreign currencies. Any such securities shall not be counted
for purposes of the 35% limit applicable to foreign securities. The Fund may
hold foreign currency deposits or buy and sell foreign currency contracts
(including forward and swap contracts) in order to protect against decreases
in the U.S. dollar value of such securities.
High yield securities may also include increasing rate notes. Increasing
rate notes are high yield, 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 or
refinanced within six months to two years after issuance.
The Fund's investments in high yield securities will be limited to not
more than 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 the Fund seeks its
objective, and the investor's ability to assume these risks, before investing
in the Fund.
9
<PAGE>
INVESTMENT TECHNIQUES AND RELATED RISKS
In addition to the investment policies described above, the Fund may
utilize the following investment practices or techniques.
Hedging
General Policies. To preserve a return or spread on a particular investment
or portion of its portfolio, the Fund may enter into various hedging
transactions, such as interest rate swaps, and the purchase or sale of
interest rate collars, caps and floors. Hedging transactions may also be used
to attempt to protect against possible declines in the market value of the
Fund's assets resulting from downward trends in the debt securities markets
(generally due to a rise in interest rates), to protect the Fund's unrealized
gains in the value of its portfolio securities, to facilitate the sale of
such securities or to establish a position in the securities markets as a
temporary substitute for purchasing particular securities. Any or all of
these techniques may be used at any time. There is no particular strategy
that requires use of one technique rather than another. Use of any hedging
transaction is a function of market conditions. The hedging transactions that
the Fund currently contemplates using are described in more detail below.
Further hedging transactions may be used by the Fund in the future as they
are developed or deemed by the Trustees to be appropriate, and to be in the
best interest of investors in the Fund. The Fund intends to use these
transactions as a hedge against interest rate fluctuations and not as
speculative investments. The 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.
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 an amount of cash or liquid
high-grade debt securities having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated 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.
When-Issued and Forward Commitment Securities. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices and secure a favorable rate of return. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment
for the securities take place at a later date, which can be a month or more
after the date of the transaction. At the time the Fund makes the commitment
to purchase securities on a when-issued or forward commitment basis, it will
record the transaction and thereafter reflect the value of such securities in
determining its net asset value. At the time the Fund enters into a
transaction on a when-issued or forward commitment basis, a segregated
account consisting of cash or liquid high-grade debt securities equal to the
value of the when-issued or forward commitment securities will be
established and maintained with the Custodian and will be marked to the
market daily. On the delivery date, the Fund will meet its obligations from
securities that are then maturing or sales of the securities held in the
segregated asset account and/or from then available cash flow. Typically no
income accrues on securities purchased on a when-issued basis prior to the
time delivery of the securities is made, although the Fund may earn income on
securities it has deposited in a separate account. When purchasing a security
on a when-issued basis, the Fund assumes the rights and risks of ownership of
the security, including the risk of price and yield fluctuations, and takes
such fluctuations into account when determining its net asset value. Because
the Fund is not required to pay for the security until the delivery date,
these risks are in addition to the risks associated with the Fund's other
investments. If the Fund remains substantially fully invested at a time when
when-issued purchases are outstanding, the when-issued purchases may result
in a form of leverage, which magnifies the potential for gain or loss and
increases the speculative nature of the Fund. The Trustees, however, do not
believe the Fund's net asset value or income will be exposed to additional
risk as the result of when-issued purchases. When-issued securities and
forward commitments may be sold prior to the settlement date, but the Fund
presently intends to enter into when-issued and forward commitments only with
the intention of actually receiving or delivering the securities, as the case
may be. If the Fund disposes of the right to acquire a when-issued security
prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it can incur a gain or loss due to market
fluctuation. There is always a risk that the securities may not be delivered
and that the Fund may incur a loss or will have lost the opportunity to
invest the amount set aside for such transaction in the segregated asset
account. Settlements in the ordinary course, which may take substantially
more than five business days for mortgage-related securities, are not treated
by the Fund as when-issued or forward commitment transactions.
Repurchase Agreements
The Fund may invest in repurchase agreements, which are agreements pursuant
to which securities are acquired by the Fund from a third party with the
commitment that they will be repurchased by the seller at a fixed price on an
agreed-upon date.
10
<PAGE>
These agreements may be made with respect to those U.S. Government Securities
in which the Fund is authorized to invest. Repurchase agreements may be
characterized as loans secured by the underlying securities. The resale price
reflects the purchase price plus an agreed upon market rate of interest which
is unrelated to the coupon rate or date of maturity of the purchased
security. The collateral will be marked to market daily.
Repurchase agreements facilitate portfolio management and allow the Fund
to earn additional revenue. The Fund enters into repurchase agreements in
order to increase liquidity or as a temporary investment while the Fund is
acquiring suitable long term investments. The Fund may enter into repurchase
agreements with (i) depository institutions ("banks") and (ii) securities
dealers ("dealers"), provided that such banks or dealers meet the
creditworthiness standards established by the Trustees. The Adviser will
monitor the continued creditworthiness of banks and dealers, subject to
oversight by the Trustees.
The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its
obligation to repurchase the underlying securities, as a result of its
bankruptcy or otherwise, the Fund will seek to dispose of such securities,
which action could involve costs or delays. To minimize the risk, the
securities underlying the repurchase agreement will be held by the Custodian
at all times in an amount at least equal to the repurchase price, including
accrued interest.
Reverse Repurchase Agreements and Dollar Roll Agreements
The Fund 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,
the 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 segregated account with its Custodian containing
U.S. Government Securities cash or other liquid high-grade debt securities
having a value not less than the repurchase price (including accrued
interest). The Fund's ability to enter into reverse repurchase agreements and
dollar roll agreements is limited by the requirement to maintain assets in
segregated accounts, by requirements relating to the Fund's status as a
regulated investment company under the Code, and by the Fund's overall
limitations on borrowing. Furthermore, because dollar roll transactions may
be for terms ranging between one and six months, they may be deemed to be
"illiquid" and subject to the Fund's 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.
U.S. Treasury and Corporate Zero Coupon Securities
The Fund may invest from time to time in U.S. Treasury and corporate zero
coupon securities. Zero coupon securities are issued and traded at a discount
from their face amount. The amount of the discount varies depending on such
factors as the time remaining until maturity of the securities and prevailing
interest rates. The market prices of U.S. Treasury zero coupon securities are
generally more volatile than the market prices of securities that pay
interest periodically and are more 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 Fund must distribute its investment company
taxable income, including the original issue discount accrued on zero coupon
securities. Because the Fund will not receive on a current basis cash
payments in respect of accrued original issue discount on zero coupon
securities during the period before maturity, the Fund will distribute cash
obtained from other sources in order to satisfy the distribution requirement
under the Code. The Fund will not invest more than 3% of its assets in zero
coupon securities. See "Dividends, Distributions and Taxes."
Lending of Securities
The Fund may make secured loans of its portfolio securities to brokers,
dealers and financial institutions provided that cash, U.S. government
securities or other liquid high-quality debt securities, or bank letters of
credit equal to at least 100% of the market value of the securities loaned
are deposited and maintained by the borrower with the Fund. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities to a particular
borrower, the Adviser (subject to review by the Trustees) will consider all
relevant facts and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay the Fund any
income earned thereon and the Fund may invest any cash collateral in liquid
high-grade portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower who has delivered
equivalent collateral. The Fund may pay reasonable finders, administrative
and custodial fees in connection with a loan. The Fund will not lend
portfolio securities in excess of 5% of the value of its total assets or lend
its portfolio securities to any officer, director, employee or affiliate of
the Fund or the Adviser. The Trustees will monitor the Fund's lending of
portfolio securities.
11
<PAGE>
Illiquid Securities
The Fund will not invest more than 15% of its net assets (taken at market
value at the time of the investment) in "illiquid securities." For this
purpose, illiquid securities include: securities subject to legal or
contractual restrictions on resale (which may include private placements);
repurchase agreements maturing in more than seven days; certain options
traded over-the-counter that the Fund has 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' opinion may be deemed illiquid.
Dollar roll transactions may be for terms ranging between one and six months
and may be deemed to be "illiquid" and subject to the Fund's overall
limitations on investment in illiquid 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. The principal credit risk
associated with acquiring participation 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 Fund disposing of such
securities at a substantial discount from face value or holding such
securities until maturity.
Borrowing
As a fundamental policy, the Fund may borrow money from banks to the extent
permitted under the 1940 Act. The Fund does not intend at present to borrow
money from banks or financial institutions other than for emergency or
extraordinary purposes. The Fund will not borrow in excess of its total
assets or make additional investments when its borrowings are in excess of 5%
of its total assets. If the Fund should determine to expand its 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 Fund, and therefore the
Fund's entry into such transactions is subject to the Fund's overall
limitations on borrowing.
Risk Factors and Special Considerations
High Yield-High Risk Securities.
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.
Factors adversely impacting the market value of high yield securities will
adversely impact the Fund's net asset value to the extent the Fund's assets
are invested in such securities. In addition, the Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings.
The risk of loss due to default by the issuer is significantly greater for
the holders of high yield securities because such securities are generally
unsecured and are often subordinated to other debt of the issuer. During an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield 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.
The Fund may have difficulty disposing of certain high yield securities
because there may be a thin trading market for such securities. Because not
all dealers maintain markets in all high yield securities, there is no
established retail secondary market for many of these securities, and the
Fund anticipates 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 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, on the Fund's net asset value, and on the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or on the Fund's ability to respond to a specific economic
event, or an event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities may also
make it more difficult for the Fund to obtain accurate market quotations for
purposes of valuing the Fund's portfolio. 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 securities, especially in a thinly-traded
market.
12
<PAGE>
From time to time, proposals have been discussed and legislation adopted
designed to limit the use of certain high yield securities by issuers in
connection with leveraged buyouts, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. For example, under a
provision of the 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). However, the actual effect of such legislation or proposals,
if enacted into law, is uncertain.
The market values of high yield 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 Baa by
Moody's which are considered investment grade possess some speculative
characteristics.
While credit rating agencies evaluate the safety of principal and interest
payments, they do not evaluate market value risk of high yield securities. In
addition, credit rating agencies may not change credit ratings on a timely
basis to reflect subsequent events. Accordingly, investing in 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 Fund 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.
Foreign Securities.
Under normal conditions, up to 35% of the Fund's assets may be invested in
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 Fund will be
subject to the risk of currency fluctuations. Foreign currencies may be
affected by devaluation, 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 values and currency exchange control regulations. Although the
Fund will invest only in securities denominated in foreign currencies that
are fully exchangeable 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 at a later date.
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 Fund may
encounter difficulty in obtaining and enforcing judgments against issuers of
foreign securities.
Securities Denominated in Foreign Currencies.
In investing in securities denominated in foreign currencies, the Fund 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 value of the Fund's 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 Fund will invest only in securities denominated in
foreign currencies that are fully convertible to 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.
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
Fund and which may not be recoverable by the Fund or its investors.
INVESTMENT RESTRICTIONS
Not more than 25% of the total assets of the Fund will be concentrated in
the securities of any one industry. The Fund may not, with respect to 75% of
the total assets of the Fund, invest more than 5% of the value of its total
assets in the securities of any one issuer, or, with respect to 100% of the
total assets of the Fund, own more than 10% of the outstanding voting
securities of any one issuer (other than U.S. Government obligations). See
the Statement of Additional Information for a detailed description of all of
the Fund's investment restrictions.
13
<PAGE>
PORTFOLIO TURNOVER
A change in securities held by the Fund is known as "portfolio turnover"
and may involve the payment by the Fund 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. Except as
described below, the Fund's portfolio turnover rate will not be a limiting
factor when the Adviser deems it desirable to sell or purchase securities.
The Fund cannot accurately predict its portfolio turnover rate but the
Adviser anticipates that the portfolio turnover rate for the Fund will not
exceed 200%. A 200% annual turnover rate would occur, for example, if all the
securities in the portfolio were replaced two times in a period of one year.
The Fund's portfolio turnover rate may be higher than that described above if
the Fund finds it necessary to significantly change its portfolio to adopt a
temporary defensive position. A high turnover rate involves greater expenses
to the Fund and could involve realization of capital gains that would be
taxable to the shareholders. Portfolio turnover rates for the fiscal years of
the Fund are shown in the section "Financial Highlights."
The ability of the Fund to make purchases and sales of securities and to
engage in options and futures transactions will be limited by the
requirements of the Code that less than 30% of the Fund's gross income be
derived from gains on the sale of securities held for less than three months,
and by other Code requirements. See "Dividends, Distributions and Taxes."
MANAGEMENT OF THE FUND
The Fund is a mutual fund, technically known as an open-end management
investment company. The Trustees of the Fund ("Trustees") are responsible for
the overall supervision of the operations of the Fund and perform the various
duties imposed on Trustees by the 1940 Act and the laws of the Commonwealth
of Massachusetts.
The Adviser
The Fund's investment adviser is National Securities & Research Corporation
("the Adviser"), which is located at 56 Prospect Street, Hartford,
Connecticut 06115. The Adviser is a subsidiary of Phoenix Duff & Phelps
Corporation of Chicago, Illinois. Prior to November 1, 1995, the Adviser was
an indirect, wholly owned 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 06115. 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 Multi-Sector Fixed Income
Fund, Inc., Phoenix California Tax-Exempt Bonds, Inc., Phoenix Equity
Opportunities Fund and Phoenix Worldwide Opportunities Fund. The Adviser
currently has approximately $1.7 billion in assets under management. The
Adviser has acted as an investment adviser for over sixty years.
The Adviser continuously furnishes an investment program for the Fund and
manages the investment and reinvestment of the Fund's assets subject at all
times to the supervision of the Trustees. The Adviser, at its expense,
furnishes to the Fund adequate office space and facilities and certain
administrative services, including the services of any member of its staff
who serves as an officer of the Fund.
As compensation for its services, the Adviser receive a fee, which is
accrued daily against the value of the Fund's net assets and is payable
monthly by the Fund. The monthly fee is computed at an annual rate of .55% of
the Fund's average daily net assets up to $1 billion; .50% of the Fund's
average daily net assets between $1 billion and $2 billion; and .45% on the
average daily net assets in excess of $2 billion. The Adviser's fee is
accrued daily against the value of the Fund's net assets and is payable
monthly. The ratio of management fees to average net assets for the fiscal
year ended October 31, 1995 for Class A Shares and Class B Shares was .55%.
For its services to the Fund during the fiscal year ended October 31, 1995,
the Adviser received a fee of $78,929.
The Portfolio Manager
Mr. David L. Albrycht has been the Portfolio Manager of the Fund since
August 1993. As such, Mr. Albrycht is primarily responsible for the day to
day management of the Fund's portfolio. Since April of 1993, Mr. Albrycht has
also been the Portfolio Manager of the Phoenix Endowment Fixed Income
Portfolio of the Phoenix Multi-Portfolio Fund, advised by Phoenix Investment
Counsel, Inc. ("PIC"), an affiliate of National. Mr. Albrycht is Vice
President of Phoenix Multi-Sector Fixed Income Fund, Inc. and assumed full
management of the Fund August 1995. Mr. Albrycht is a Vice President of PIC
and has held various investment management positions with Phoenix Home Life
during the past five years. Since May 14, 1993, he has served as Investment
Officer of National.
The Financial Agent
Equity Planning acts as financial agent of the Fund and, as such, performs
administrative, bookkeeping and pricing functions for the Fund. As compensation,
Equity Planning receives a quarterly fee based on the average of the aggregate
daily net asset values of the Fund at the annual rate of $300 per $1 million.
For its services during the Fund's fiscal year ended October 31, 1995, Equity
Planning received $4,305, or 0.03% of average net assets.
The Custodian and Transfer Agent
The custodian of the assets of the Fund is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts
14
<PAGE>
02101 (the "Custodian"). The Fund has authorized the custodian to appoint one or
more subcustodians for the assets of the Fund 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 Fund (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 service functions for which such
agents shall be paid a fee by Equity Planning.
Brokerage Commissions
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Fund. The Adviser may also
select an affiliated broker-dealer to execute transactions for the Fund,
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 Trust's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of
the Trust and a director and officer of Equity Planning. G. Jeffrey Bohne,
James M. Dolan, William R. Moyer, Leonard J. Saltiel, and Nancy G. Curtiss
are officers of the Trust and officers of Equity Planning.
Equity Planning and the Trust have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Trust shares sold subject to an initial sales charge and those
sold subject to a contingent deferred sales charge. The Trust has granted
Equity Planning the exclusive right to purchase from the Trust and resell, as
principal, shares needed to fill unconditional orders for Trust shares.
Equity Planning may sell Trust shares through its registered representatives
or through securities dealers with whom it has sales agreements. Equity
Planning may also sell Trust shares pursuant to sales agreements entered into
with banks or bank affiliated securities brokers who, acting as agent for
their customers, place orders for Trust shares with Equity Planning. Although
the Glass-Steagall Act prohibits banks and bank affiliates from engaging in
the business of underwriting, distributing or selling securities (including
mutual fund shares), banking regulators have not indicated that such
institutions are prohibited from purchasing mutual fund shares upon the order
and for the account of their customers. If, because of changes in law or
regulations, or because of new interpretations of existing law, it is
determined that agency transactions of banks or bank affiliated securities
brokers are not permitted under the Glass-Steagall Act, the Trustees will
consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with banks or bank affiliated securities
brokers would result in a loss to their customers or a change in the net
asset value per share of a Series of the Trust.
The sale of Trust shares through a bank or a securities broker affiliated
with a bank is not expected to preclude the Trust from borrowing from such
bank or from availing itself of custodial or transfer agency services offered
by such bank.
The Trustees have adopted separate 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," and collectively the "Plans"). The Plans permit the Fund to
reimburse the Underwriter for expenses incurred in connection with the sale
and promotion of Fund shares and the furnishing of shareholder services.
Pursuant to the Class A Plan, the Fund may reimburse the Underwriter for
actual expenses of the Underwriter up to 0.30% annually of the average daily
net assets of the Fund's Class A Shares. However, the Underwriter has
voluntarily agreed to limit the maximum amount of reimbursement under the
Class A Plan for fiscal year 1996 to 0.25% annually of the average daily net
assets of the Fund's Class A Shares. Under the Class B Plan, the Fund may
reimburse the Underwriter monthly for actual expenses of the Underwriter up
to 0.75% annually of the average daily net assets of the Fund's Class B
Shares.
Expenditures incurred under the Plans may consist of: (i) commissions to sales
personnel for selling shares of the Fund (including underwriting commissions and
finance charges related to the payment of commissions for sales of Class B
Shares); (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 Underwriter for
services rendered in connection with the sale and distribution of shares of the
Fund and provision of shareholder services; (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 costs 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 determine are reasonably calculated to result
in the sale of shares of the Fund; provided, however, that a portion of such
amount paid to the Underwriter, which portion shall be equal to or less than
0.25% annually of the average daily net assets of the Fund shares, may be paid
for reimbursing the costs of providing services to shareholders, including
assistance in connection with inquiries related to shareholder accounts (the
"Service Fee"). From the Service Fee, the Underwriter expects to pay a quarterly
fee to qualifying broker-dealer firms, as compensation for providing personal
services and/or the
15
<PAGE>
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
Underwriter. The Underwriter may realize a profit from these arrangements.
In order to receive payments under the Plans, participants must meet such
qualifications as are to be established in the sole discretion of the
Underwriter, such as services to the Fund's shareholders; or services
providing the Fund with more efficient methods of offering shares to groups
of clients, members or prospects of a participant; or services permitting
bulking of purchases or sales, or transmissions of such purchases or sales by
computerized tape or other electronic equipment, or other batch processing.
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, however, does not limit the reimbursement of
distribution related expenses to expenses incurred in specified time periods.
For the fiscal year ended October 31, 1995, the Fund paid $23,443 under
the Class A Plan and $37,302 under the Class B Plan. The fees were used to
compensate unaffiliated broker-dealers for servicing shareholder's accounts,
compensating sales personnel and reimbursing the Underwriter for commission
expenses and expenses related to preparation of the marketing material. On a
quarterly basis, the Fund's Trustees review a report on expenditures under
each Plan and the purposes for which expenditures were made. The Trustees
conduct an additional more extensive review annually in 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 Fund's
Trustees 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 either Plan or any related agreements (the "Plan
Trustees"). Each Plan provides that it may not be amended to increase
materially the costs which the Fund may bear without approval of the
applicable class of shareholders of the Fund and that other material
amendments must be approved by a majority of the Plan Trustees 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 Trustees who are not "interested persons" shall be committed to
the discretion of the Trustees who are not "interested persons". Each Plan
may be terminated at any time by vote of a majority of the Plan Trustees or a
majority of the applicable class of outstanding shares of the Fund. If the
Plans are terminated in accordance with their terms, the obligations of the
Fund to make payments to the Underwriter pursuant to the Plans, including
payments for expenses carried over from previous years, will cease.
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit the Fund and all classes of shareholders. The Class A Plan
and the Class B Plan were approved by shareholders of the Fund at a special
meeting of shareholders held on April 30, 1993.
The National Association of Securities Dealers ("NASD") regards certain
distribution fees as asset-based sales charges subject to NASD sales load
limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend either or both Plans.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25. Both the minimum initial and subsequent investment amounts
are $25 for investments pursuant to the "Investo-Matic" plan, a bank draft
investing program administered by Equity Planning, or pursuant to the
Systematic Exchange privilege. (See the Statement of Additional Information.)
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.
Each class of shares represents an interest in the same portfolio of
investments of the Fund, have the same rights and is identical to the others
in all respects, except that Class B Shares bear the expenses of the deferred
sales arrangement and any expenses (including the higher distribution
services fee and any incremental transfer agency costs) resulting from such
sales arrangement. Each class has exclusive voting rights with respect to
provisions of the Rule 12b-1 distribution plan pursuant to which its
distribution services fee is paid and each class has different exchange
privileges. Only the Class B Shares are subject to a conversion feature. The
net income attributable to Class B Shares and the dividends payable on Class
B Shares will be reduced by the amount of the higher distribution services
fee and incremental expenses associated with such distribution services fee;
likewise, the net asset value of the Class B Shares will be reduced by such
amount to the extent the Fund has undistributed net income.
Subsequent investments for the purchase of full and fractional shares in
amounts of $25 or more may be made through an investment dealer or by sending a
check to Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301. Share certificates representing any number of full shares
will be issued only on request, and subject to certain conditions. A fee may be
incurred by the shareholder for a lost or stolen share certificate. Sales
personnel of broker-dealers distributing the Fund's shares may receive differing
compensation for selling Class A or Class B Shares.
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange
privileges. Certain privileges may not be available
16
<PAGE>
in connection with Class B Shares. Shares of the Fund held longer than six
months or shares of any other Phoenix Fund (except Phoenix Money Market Fund
Series Class A Shares) may be exchanged for shares of the same class on the
basis of the relative net asset values per share at the time of the exchange.
Exchanges are subject to the minimum initial investment requirement of the
designated Phoenix Fund, except if made in connection with the Systematic
Exchange privilege. Shareholders may exchange shares held in book-entry form for
an equivalent number (value) of the same class of any other Phoenix Fund. On
Class B share exchanges, the contingent deferred sales charge schedule of the
original shares purchased is not taken and continues to apply.
Alternative Sales Arrangements
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Fund, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the
Fund, the accumulated continuing distribution services fee and contingent
deferred sales charges on Class B Shares prior to conversion would be less
than the initial sales charge and accumulated distribution services fee on
Class A Shares purchased at the same time, and to what extent such
differential would be offset by the higher yield of Class A Shares. In this
regard, Class A Shares will be more beneficial to the investor who qualifies
for certain reduced initial sales charges. For this reason, the Underwriter
intends to limit sales of Class B Shares sold to any shareholder to a maximum
total value of $250,000. Class B Shares sold to unallocated qualified
employer sponsored plans will be limited to a total value of $1,000,000.
Class B Shares sold to allocated qualified employer sponsored plans,
including 401(k) plans, will be limited to a maximum total value of $250,000
for each participant. The Underwriter reserves the right to decline the sale
of Class B Shares to allocated qualified employer sponsored plans not
utilizing an approved participant tracking system. In addition, Class B
Shares will not be sold to any qualified employee benefit plan, endowment
fund or foundation if, on the date of the initial investment, the plan, fund
or foundation has assets of $10,000,000 or more or at least 100 eligible
employees. Class B Shares will also not be sold to investors who have reached
the age of 85 because of such persons' expected distribution requirements.
Class A Shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends per share. However, because
initial sales charges are deducted at the time of purchase, such investors
would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced initial
sales charges who expect to maintain their investment for an extended period
of time might consider purchasing Class A Shares because the accumulated
continuing distribution charges on Class B Shares may exceed the initial
sales charge on Class A Shares during the life of the investment. Again,
however, such investors must weigh this consideration against the fact that,
because of such initial sales charge, not all their funds will be invested
initially. However, other investors might determine that it would be more
advantageous to purchase Class B Shares to have all their funds invested
initially, although remaining subject to higher continuing distribution
charges and, for a three-year period, being subject to a contingent deferred
sales charge.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge, as set forth below. Offering prices become effective at the
close of the general trading session of the New York Stock Exchange. Orders
received by dealers prior to such time are confirmed at the offering price
effective at that time, provided the order is received by the Underwriter
prior to its close of business.
The sales charge varies with the size of the purchase and reduced charges
apply to the aggregate of purchases of the Fund made at one time by "any
person," which term includes an individual and his/her spouse and their
children under the age of 21, or a trustee or other fiduciary purchasing
shares for a single trust, estate or fiduciary account although more than one
beneficiary is involved.
Class A Shares of the Fund are offered to the public at the net asset
value next computed after the purchase order is received by State Street Bank
and Trust Company, plus a maximum sales charge of 2.25% of the offering price
(2.30% of the amount invested) on single purchases of less than $50,000. The
sales charge is reduced on a graduated scale on single purchases of $50,000
or more as shown below.
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Discount
Amount of as Percentage as Percentage as Percentage
Transaction of Offering of Amount of
at Offering Price Price Invested Offering Price*
- --------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Less than $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 .75% .76% .75%
$1,000,000 or more None None None**
</TABLE>
*Equity Planning will sponsor sales contests, training and educational meetings
and provide to all qualifying dealers, from its own profits and resources,
additional compensation in the form of trips, merchandise or expense
reimbursement. Brokers 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. Equity Planning shall also pay
service and retention fees, from its own profits and resources, to qualified
wholesalers in connection with the sale of shares of Phoenix Funds (exclusive of
Class A Shares of Phoenix Money Market Series) by registered financial
institutions and related third party marketers.
17
<PAGE>
**In connection with Class A Share purchases (or subsequent purchases in any
amoung) by an account held in the name of a qualified employee benefit plan
with at least 100 eligible employees, Equity Planning may pay broker/ dealers,
from its own resources, an amount equal to 1% on the first $3 million of
purchases, 0.50% on the next $3 million, plus 0.25% on the amount in excess
of $6 million.
In connection with Class A Share purchases of $1,000,000 or more (or
subsequent purchases in any amount), excluding purchases by qualified
employee benefit plans as described above, Equity Planning may pay
broker-dealers, from its own profits and resources, a percentage of the net
asset value of any shares sold as set forth below:
<TABLE>
<CAPTION>
Purchase Amount Payment to Broker-Dealer
- -------------------------- ---------------------------
<S> <C>
$1,000,000 to $3,000,000 1%
$3,000,001 to $6,000,000 0.50 of 1%
$6,000,001 or more 0.25 of 1%
</TABLE>
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 Underwriter any such
amounts paid with respect to the investment.
How to Obtain Reduced Sales Charges on Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares
to (1) any Phoenix Fund trustee, director or officer; (2) any director or
officer, or to any full-time employee or sales representative (who has acted
as such for at least 90 days), of the Adviser or of Equity Planning; (3)
registered representatives and employees of securities dealers with whom
Equity Planning has sales agreements; (4) any qualified retirement plan
exclusively for persons described above; (5) any officer, director or
employee of a corporate affiliate of the Adviser or Equity Planning; (6) any
spouse, child, parent, grandparent, brother or sister of any person named in
(1), (2), (3) or (5) above; (7) employee benefit plans for employees of the
Adviser, Equity Planning and/or their corporate affiliates; (8) any employee
or agent who retires from Phoenix Home Life or Equity Planning 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
initial investment, the plan, fund or foundation has assets of $10,000,000 or
more or at least 100 eligible employees; (10) any person with a direct
rollover transfer of shares from an established Phoenix Fund qualified plan;
(11) any Phoenix Home Life separate account which funds group annuity
contracts offered to qualified employee 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 a U.S. service
academy; (14) any unallocated accounts held by a third party administrator,
registered investment adviser, trust company, or bank trust department which
exercises discretionary authority and holds the account in a fiduciary,
agency, custodial or similar capacity, if in the aggregate such accounts 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
if, in connection with the purchases or redemption of the redeemed shares,
the investor paid a prior sales charge and provided such investor supplies
verification that the redemption occurred within 90 days of the Phoenix Fund
purchase and that a sales charge was paid; or (16) any account established by
financial institutions, broker-dealers or registered investment advisers that
charge an account management fee or transaction fee, provided such entity has
entered into an agreement for this program with the Underwriter; and provided
that sales to persons listed in (1) through (15) above are made upon the
written assurance of the purchaser that the purpose is made for investment
purposes and that the shares so acquired will not be resold except to the
Fund.
Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to any sales charges. The Fund
receives the entire net asset value of its Class A Shares sold to investors.
The Underwriter's commission is the sales charge shown above less any
applicable discount or commission "re-allowed" to selected dealers and
agents. The Underwriter will re-allow discounts to selected dealers and
agents in the amounts indicated in the table above. In this regard, the
Underwriter may elect to re-allow the entire sales charge to selected
dealers and agents for all sales with respect to which orders are placed with
the Underwriter. A selected dealer who receives re-allowance in excess of 90%
of such a sales charge may be deemed to be an "underwriter" under the
Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Fund or shares of any other Phoenix Fund,
(including Class B Shares and excluding Money Market Fund Series Class A Shares)
if made at a single time by a single purchaser, will be combined for the purpose
of determining whether the total dollar amount of such purchases entitles the
purchaser to a reduced sales charge on any such purchases of Class A Shares.
Each purchase of Class A Shares will then be made at the public offering price,
as described in the then current Prospectus relating to such shares, which at
the time of such purchase is applicable to a single transaction of the total
dollar amount of all such purchases. The term "single purchaser" includes an
individual, or an individual, his spouse and their children under the age of
majority purchasing for his or their own account (including an IRA account)
including his or their own trust, commonly known as a living trust; a trustee or
other fiduciary purchasing for a single trust, estate or single fiduciary
account, although more than one beneficiary is involved; multiple trusts or
403(b) plans for the same employer; multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party administrator;
or trust companies, bank trust departments, registered investment advisers, and
similar entities placing orders or providing
18
<PAGE>
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. Class A Shares or shares of any other Phoenix Fund
(including Class B Shares and excluding Money Market Fund Series Class A
Shares) may be purchased by a "single purchaser" (as defined above) within a
period of thirteen months pursuant to a Letter of Intent, in the form
provided by Equity Planning, stating the investor's intention to invest in
such shares during such period an amount which, together with the value (at
their maximum offering prices on the date of the Letter) of the Class A
Shares of the Fund or Class A or Class B Shares of any other Phoenix Fund
then owned by such investor, equals a specified dollar amount. Each purchase
of shares made pursuant to a Letter of Intent will be made at the public
offering price, as described in the then current Prospectus relating to such
shares, which at the time of purchase is applicable to a single transaction
of the total dollar amount specified in the Letter of Intent.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Fund or Equity Planning to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete his
investment is held in escrow in the form of shares (valued at the purchase
price thereof) registered in the investor's name until he completes his
investment, at which time escrowed shares are deposited to his account. If
the investor does not complete his investment and does not within 20 days
after written request by Equity Planning or his dealer pay the difference
between the sales charge on the dollar amount specified in his Letter of
Intent and the sales charge on the dollar amount of actual purchases, the
difference will be realized through the redemption of an appropriate number
of the escrowed shares and any remaining escrowed shares will be deposited to
his account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the Fund, or any other Phoenix Fund, made over
time. Reduced sales charges are offered to investors whose shares, in the
aggregate, are valued (i.e., the dollar amount of such purchases plus the
then current value (at the public offering price as described in the then
current prospectus relating to such shares) of shares of all Phoenix Funds
owned) in excess of the threshold amounts described in the section entitled
"Initial Sales Charge Alternative--Class A Shares." To use this option, the
investor must supply sufficient information as to account registrations and
account numbers to permit verification that one or more of his purchases
qualifies for a reduced sales charge.
Associations. A group or association may be treated as a "single
purchaser" and qualify for reduced initial sales charges under the
Combination Privilege and Right of Accumulation if the group or association
(1) has been in existence for at least six months; (2) has a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge;
(3) gives its endorsements or authorization to the investment program to
facilitate solicitation of the membership by the investment dealer, thus
effecting economies of sales effort; and (4) is not a group whose sole
organizational nexus is that the members are credit card holders of a
company, policyholders of an insurance company, customers of a bank or a
broker-dealer or clients of an investment adviser.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge
at the time of purchase. The Class B Shares are being sold without an initial
sales charge but are subject to a sales charge if redeemed within three years
of purchase.
Proceeds from the contingent deferred sales charge are paid to the
Underwriter and are used in whole or in part by the Underwriter to defray the
expenses of the Underwriter related to providing distribution-related
services to the Fund in connection with the sale of Class B Shares, such as
the payment of compensation to selected dealers and agents for selling Class
B Shares. The combination of the contingent deferred sales charge and the
distribution fee facilitates the ability of the Fund to sell the Class B
Shares without a sales charge being deducted at the time of purchase.
Contingent Deferred Sales Charge. Class B Shares which are redeemed within
three years of purchase will be subject to a contingent deferred sales charge
at the rates set forth below charged as a percentage of the dollar amount
subject thereto. The charge will be assessed on an amount equal to the lesser
of the current market value or the cost of the shares being redeemed.
Accordingly, no sales charge will be imposed on increases in net asset value
above the initial purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains distributions.
The Underwriter intends to pay investment dealers a sales commission of 2%
of the sales price of Class B Shares sold by such dealers, subject to future
amendment or termination. The Underwriter will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by
shareholders on the redemption of shares to finance the 2% commission plus
interest and related marketing expenses.
The amount of the contingent deferred sales charge, if any, will vary
depending on the number of years from the time of payment for the purchase of
Class B Shares until the time of redemption of such shares. Solely for purposes
of determining the number of years from the time of any payment for the
purchases of shares, all payments during a month will be aggregated and deemed
to have been made on the last day of the previous month.
19
<PAGE>
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge as
a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- ---------------------- ---------------------
<S> <C>
First 2.0%
Second 1.5%
Third 1.0%
Fourth 0 %
</TABLE>
In determining whether a contingent deferred sales charge is applicable to
a redemption, it will be assumed that any Class A Shares are being
redeemed first, Class B Shares held for over 5 years and shares acquired
pursuant to reinvestment of dividends or distributions are redeemed next. Any
Class B Shares held longest during the 3 year period are redeemed next unless
the shareholder directs otherwise. The charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired
10 additional shares through dividend reinvestment. If, at such time the
investor makes his first redemption of 50 shares (proceeds of $600), 10
shares will not be subject to charge because of dividend reinvestment. With
respect to the remaining 40 shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 1.5% (the applicable rate in the second year after purchase) or
$6.00.
The contingent deferred sales charge is waived on redemptions of shares
(a) if redemption is made within one year of death (i) of the sole
shareholder on an individual account, (ii) of a joint tenant where the
surviving joint tenant is the deceased's spouse, or (iii) of the beneficiary
of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act
(UTMA) or other custodial account; (b) if redemption is made within one year
of disability, as defined in Section 72(m)(7) of the Code; (c) in connection
with mandatory distributions upon reaching age 70-1/2 under any retirement
plan qualified under Sections 401, 408 or 403(b) of the Code or any
redemption resulting from the tax-free return of an excess contribution to an
IRA; (d) in connection with redemptions by 401(k) plans using an approved
participant tracking system for: participant hardships, death, disability or
normal retirement, and loans which are subsequently repaid; (e) in connection
with the exercise of certain exchange privileges among Class B Shares of the
Fund and Class B Shares of other Phoenix Funds; (f) in connection with any
direct rollover transfer of shares from an established Phoenix Fund qualified
plan into a Phoenix Fund IRA by participants terminating from the qualifying
plan; and (g) in accordance with the terms specified under the Systematic
Withdrawal Program. If, upon the occurrence of a death as outlined above, the
account is transferred to an account registered in the name of the deceased's
estate, the contingent deferred sales charge will be waived on any redemption
from the estate account occurring within one year of the death. If the Class
B Shares are not redeemed within one year of the death, they will remain
Class B Shares and be subject to the applicable contingent deferred sales
charge when redeemed.
Class B Shares of the Fund will automatically convert to Class A Shares
without a sales charge at the relative net asset values of each of the
classes after six years from the acquisition of the Class B Shares, and as a
result, will thereafter be subject to the lower distribution fee under the
Class A Plan. Such conversion will be on the basis of the relative net asset
value of the two classes without the imposition of any sales load, fee or
other charge. The purpose of the conversion feature is to relieve the holders
of Class B Shares that have been outstanding for a period of time sufficient
for Equity Planning to have been compensated for distribution expenses from
most of the burden or such distribution-related expenses.
INVESTOR ACCOUNTS AND SERVICES AVAILABLE
An account will be opened for the investor after the investor makes an
initial investment. Shares purchased will be held in the shareholder's
account by the Transfer Agent which will forward a statement each time there
is a change in the number of shares in the account. At any time, a
shareholder may request that a certificate be issued, subject to certain
conditions, representing any number of full shares held in his or her
account.
The Fund mails periodic reports to shareholders. In order to reduce the
volume of mail, to the extent possible, only one copy of most Fund reports
will be mailed to households for multiple accounts with the same surname at
the same household address. Please contact Equity Planning to request
additional copies of shareholder reports.
Shareholder inquiries should be directed to the Fund at (800) 243-1574.
Bank Draft Investing Program (Investo-Matic Plan)
By completing the Investo-Matic Section of the New Account Application, a
shareholder may authorize the bank named in the form to draw $25 or more from
his personal checking account on or about the 15th day of the month, to be
used to purchase additional shares for his account. The amount the
shareholder designates will be made available, in form payable to the order
of the Transfer Agent by the bank on the date the bank draws on his/her
account and will be used to purchase shares at the applicable offering price.
The shareholder or his or her registered representative may, by telephone or
written notice, cancel or change the dollar amount being invested pursuant to
the Investo-Matic Plan unless the shareholder has notified the Fund or
Transfer Agent that his or her registered representative shall not have this
authority.
Distribution Option
The Fund currently declares all income dividends and all capital gain
distributions, if any, payable in shares of the Fund at net asset value or,
at the option of the shareholder, in cash.
20
<PAGE>
By exercising the distribution option, a shareholder may elect to: (1) receive
both dividends and capital gain distributions in additional shares or (2)
receive dividends in cash and capital gain distributions in additional shares or
(3) receive both dividends and capital gain distributions in cash. If a
shareholder elects to receive dividends and/or distributions in cash and the
check cannot be delivered or remains uncashed by the shareholder due to an
invalid address, then the dividend and/or distribution will be reinvested after
the Transfer Agent has been informed that the proceeds are undeliverable.
Additional shares will be purchased for the shareholder's account at the then
current net asset value. Shareholders who maintain an account balance of at
least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated
on the basis of the net asset value of the shares held in a single account), may
direct that any dividends and distributions paid with respect to shares in that
account be automatically reinvested in a single account of one of the other
Phoenix Funds at net asset value. Shareholders should obtain a current
prospectus and consider the objectives and policies of each 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. Dividends and
capital gain distributions received in shares are taxable to the shareholder and
credited to the shareholder's account in full and fractional shares computed at
the closing net asset value on the next business day after the record date. A
distribution option may be changed at any time by notifying Customer Service by
telephone at (800) 243-1574 or by sending a letter signed by the registered
owner(s) of the account. Requests for directing distributions to an alternate
payee must be made in writing with a signature guarantee of the registered
owner(s). To be effective with respect to a particular dividend or distribution,
notification of the new distribution option must be received by the Transfer
Agent at least three days prior to the record date of such dividend or
distribution. If all shares in the shareholder's account are repurchased or
redeemed or transferred between the record date and the payment date of a
dividend or distribution, he/she will receive cash for the dividend or
distribution regardless of the distribution option selected.
Systematic Withdrawal Program
The Systematic Withdrawal Program allows shareholders to periodically redeem
a portion of their account on a predetermined monthly or quarterly,
semiannual or annual basis. A sufficient number of full and fractional shares
shall therefore 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 the shareholder's bank account. In
addition to the limitations stated below, withdrawals may not be less than
$25 and minimum account balance requirements shall continue to apply. See
"Redemption of Small Accounts".
Class A shareholders participating in the Systematic Withdrawal Program
must own shares of the Fund worth $5,000 or more, as determined by the
then-current net asset value per share. The purchase of shares while
participating in the withdrawal program will ordinarily be disadvantageous to
the Class A Shares investor since a sales charge will be paid by the investor
on the purchase of Class A Shares at the same time as other shares are being
redeemed. For this reason, investors in Class A Shares may not participate in
an automatic investment program while participating in the Systematic
Withdrawal Program.
To participate in the Systematic Withdrawal Program, Class B shareholders
must initially own shares of the Fund worth $5,000 or more and elect to have
all dividends reinvested in additional Class B Shares of the Fund. Through
the Program, Class B shareholders may withdraw up to 1% of their aggregate
net investments (purchases, at initial value, to date net of non-Program
redemptions) each month or up to 3% of their aggregate net investments each
quarter without incurring otherwise applicable contingent deferred sales
charges.
Class B shareholders redeeming more shares than the percentage permitted
by the withdrawal program shall be subject to any applicable contingent
deferred sales charge. Accordingly, the purchase of Class B Shares will
generally not be suitable for an investor who anticipates withdrawing sums in
excess of the above limits shortly after purchase.
Tax Sheltered Retirement Plans
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations and 403(b) Retirement Plans. Write or call
Equity Planning (800) 243-4631 for further information about the plans.
Exchange Privileges
Shareholders may exchange Class A or Class B Shares held in book entry form
for shares of the same class of other Phoenix Funds (except Class A Shares of
Phoenix Money Market Series), provided the following conditions are met: (1)
the shares that will be acquired in the exchange (the "Acquired Shares") are
available for sale in the shareholder's state of residence; (2) the Acquired
Shares are of the same class as the shares to be surrendered (the "Exchanged
Shares"); (3) the Acquired Shares will be registered to the same shareholder
account as the Exchanged Shares; (4) the account value of the Fund whose
shares are to be acquired must equal or exceed the minimum initial investment
amount required by that Fund after the exchange is implemented; and (5) if a
shareholder has elected not to utilize the Telephone Exchange Privilege (see
below), a properly executed exchange request must be
21
<PAGE>
received by Equity Planning. Exchange privileges are not available for certain
shareholders holding Class A Shares of Phoenix Money Market Fund Series and
Class A Shares of the Fund held less than 6 months.
Subject to the above requirements for an exchange, a shareholder or
his/her registered representative may, by telephone or written notice, elect
to have Class A Shares held longer than six months or Class B Shares of the
Fund exchanged for the same class of shares of another Phoenix Fund
automatically on a monthly, quarterly, semi-annual, or annual basis or may
cancel the privilege ("Systematic Exchange").
Shareholders who maintain an account balance in the Fund of at least
$5,000, or $2,000 for tax qualified retirement benefit plans (calculated on
the basis of the net asset value of the shares held in a single account), may
direct that shares of the Fund be automatically exchanged at predetermined
intervals for shares of the same class of another Phoenix Fund. If the
shareholder is participating in the Self Security program offered by Phoenix
Home Life, it is not necessary to maintain the above account balances in
order to use the Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of
a month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Fund's net asset value per share next
computed following receipt of a properly executed exchange request, without a
sales charge. On Class B Share exchanges, the contingent deferred sales
charge schedule applicable to initial purchases continues to apply.
The exchange of shares from one fund to another is treated as a sale of
the Exchanged Shares and a purchase of the Acquired Shares for Federal income
tax purposes. The shareholder may, therefore, realize a taxable gain or loss.
"See Dividends, Distributions and Taxes" for information concerning the
Federal income tax treatment of the disposition of shares.
It is the policy of the Underwriter to discourage and prevent frequent
trading by shareholders among the Fund and other Phoenix Funds in response to
market fluctuations. The Fund reserves the right to refuse exchange purchases
by any person or broker/dealer if, in the Fund's or Advisor's opinion, the
exchange would adversely affect the Fund's ability to invest according to its
investment objective and policies, or otherwise adversely effect the Fund and
its shareholders. The Fund reserves the right to terminate or modify its
exchange privileges at any time upon giving prominent notice to shareholders
at least 60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the current prospectus of
the fund into which the exchange is to be made before any exchange requests
are made.
Telephone Exchanges
Telephone Exchange privileges are only available in states where the shares
to be acquired may be legally sold (see the Statement of Additional
Information). Unless a shareholder elects in writing not to participate in
the Telephone Exchange Privilege, shares for which certificates have not been
issued may be exchanged by calling (800) 367-5877 provided that the exchange
is made between accounts with identical registrations. Under the Telephone
Exchange Privilege, telephone exchange orders may also be entered on behalf
of the shareholder by his or her registered representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both accounts, the Transfer Agent will require
address verification and will record telephone instructions on tape. All
exchanges will be confirmed in writing with the shareholder. To the extent
that procedures reasonably designed to prevent unauthorized telephone
exchanges are not followed, the Fund and/or the Transfer Agent may be liable
for following telephone instructions for exchange transactions that prove to
be fraudulent. Broker/dealers other than Equity Planning have agreed to bear
the risk of any loss resulting from any unauthorized telephone exchange
instruction from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instructions entered
by an unauthorized third party that the Fund and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Exchange Privilege may be
modified or terminated at any time on 60 days' notice to shareholders. In
addition, during times of drastic economic or market changes, the Telephone
Exchange Privilege may be difficult to exercise or may be suspended
temporarily. In such event an exchange may be effected by following the
procedure outlined for tendering shares represented by certificate(s).
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates,
in order to exchange shares the shareholder must submit a written request to
Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston,
MA 02266-8301. If the shares are being exchanged between accounts that are
not registered identically, the signature on such request must be guaranteed
by an eligible guarantor institution as defined by the Fund's transfer agent
in accordance with its signature guarantee procedures. Currently such
procedures generally permit guarantees by banks, broker/dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Any outstanding certificate or
certificates for the tendered shares must be duly endorsed and submitted.
Purchase and withdrawal plans and reinvestment and exchange privileges are
described more fully in the Statement of Additional Information. For further
information, call Equity Planning at (800) 243-1574.
22
<PAGE>
NET ASSET VALUE
The net asset value per share of each class of shares is determined as of
the close of regular trading of the New York Stock Exchange (the "Exchange")
on days when the Exchange is open.
The net asset value of the Fund is computed by dividing the value of the
Fund's securities, plus any cash and other assets (including dividends and
interest accrued but not collected) less all liabilities (including accrued
expenses) by the number of the shares of the Fund outstanding. The total
liability allocated to a class, plus that class' distribution fee and any
other expenses specially allocated to that class, are deducted from the
proportionate interest of such class in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that class
outstanding to produce the net asset value per share. Fixed-income securities
are valued by using independent pricing services, market quotations, prices
provided by market makers, and/or estimates of market values obtained from
yield data relating to investments or securities with similar characteristics
in accordance with procedures established in good faith by the Trustees.
Short-term securities with remaining maturities of less than 60 days are
valued at amortized cost unless it is determined by the Board of Trustees
that amortized cost does not reflect the fair value of such obligations.
Generally, trading in foreign securities, as well as trading in corporate
bonds, U.S. government securities, money market instruments and repurchase
agreements, is substantially completed each day at various times prior to the
close of the regular trading session of the Exchange. The values of such
securities used in computing the net asset value of the Fund are determined
as of such times. Occasionally, events affecting the value of such securities
may occur between such times and such closing which will not be reflected in
the computation of the Fund's net asset value. If events occur which
materially affect the value of such securities, the securities will be valued
at fair market value as determined in accordance with procedures established
in good faith by the Trustees.
HOW TO REDEEM SHARES
Shareholders have the right to have the Fund buy back shares at the net
asset value next determined after receipt of a redemption 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 (see "Net Asset
Value"). In the case of Class B Share redemption, investors will be subject
to the applicable deferred sales charge, if any, for such shares (see
"Deferred Sales Charge Alternative--Class B Shares," above). To redeem, any
outstanding share certificates in proper form for transfer must be received
by Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301. To be in proper form to redeem shares, the signatures
of the shareholder(s) on the certificate or stock power must be signed
exactly as registered, including any fiduciary title, on a written
instruction letter, certificate, or accompanying stock power, such signatures
being guaranteed by an eligible guarantor institution as determined in
accordance with standards and procedures established by the Transfer Agent
(please contact the Fund at (800) 243-1574 with any questions regarding
eligible guarantors).
If no certificate has been issued, the Transfer Agent requires a written
request with signature guarantee. The Transfer Agent may waive the signature
guarantee requirement if the shares are registered in the names of
individuals singly, jointly, or as custodian under the Uniform Gifts to
Minors Act, the proceeds of the redemption do not exceed $50,000, and the
proceeds are payable to the registered owners(s) at the address of record.
Such requests must be signed by each person in whose name the account is
registered. In addition, a shareholder may sell shares back to the Fund
through securities dealers who may charge customary commissions for their
services. The redemption price in such case will be the price as of the close
of the regular trading session of the Exchange on that day, provided the
order is received by the dealer prior thereto, and is transmitted to the
Underwriter prior to the close of its business. No charge is made by the Fund
on redemptions, but shares tendered through investment dealers may be subject
to a service charge by such dealers. Payment for shares redeemed is made
within seven days; provided, however, that redemption proceeds will not be
disbursed until each check used for purchases of shares has been cleared for
payment by the investor's bank, which may take up to 15 days after receipt of
the check.
Additional documentation may be required for redemptions by corporations,
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 Fund at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
Telephone Redemptions
Unless a shareholder elects in writing not to participate in the Telephone
Redemption Privilege, shares for which certificates have not been issued may
be redeemed by telephoning (800) 367-5877 and telephone redemptions will also
be accepted on behalf of the shareholders from his or her registered
representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
shareholder. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Fund and/or the Transfer Agent may be liable for following
telephone instructions for 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.
23
<PAGE>
However, the shareholder would bear the risk of loss resulting from
instructions entered by an unauthorized third party that the Fund and/or the
Transfer Agent reasonably believe to be genuine. The Telephone Redemption
Privilege may be modified or terminated at any time upon 60 days notice to
shareholders. In addition, during times of drastic economic or market
changes, the Telephone Redemption Privilege may be difficult to exercise and
a shareholder should submit a written redemption request, as described above.
If the amount of the redemption is over $500, the proceeds will be wired
to the shareholder's designated U.S. commercial bank account. If the amount
of the redemption is less than $500, the proceeds will be sent by check to
the address of record on the shareholder's account.
Telephone redemption requests must be received by the Transfer Agent by
the close of trading on the New York Stock Exchange on any day when the
Transfer Agent is open for business. Requests made after that time or on a
day when the Transfer Agent is not open for business cannot be accepted by
the Transfer Agent. The proceeds of a telephone redemption will normally be
sent on the first business day following receipt of the redemption request.
However, with respect to the telephone redemption of shares purchased by
check, such requests will only be effected after the Fund has assured itself
that good payment has been collected for the purchase of shares, which may
take up to 15 days. This expedited redemption privilege is not available to
HR-10, IRA and 403(b)(7) Plans.
Reinvestment Privilege
Shareholders have a one time privilege of using redemption proceeds to
purchase Class A Shares of any Phoenix Fund with no sales charge (at 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 for reinvestment must be received
by the Underwriter 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 Reinvestment Privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any
shareholder whose account has a value, due to redemptions, of less than $200.
Before the Fund redeems these shares, the shareholder will be given notice
that the value of the shares in the account is less than the minimum amount
and will be allowed 30 days to make an additional investment in an amount
which will increase the value of the account to at least $200.
A shareholder should contact his/her broker/dealer if he/she wishes to
transfer shares from an existing broker/dealer street name account to a
street name account with another broker/dealer. The Fund has no specific
procedures governing such account transfers.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends 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 Fund so
qualifies, it generally will not be subject to Federal income tax on the
income it distributes. The discussion below is based upon the assumption that
the Fund will be treated as a regulated investment company.
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 Fund's fiscal year.
The Fund 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 Fund 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 Fund 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 Fund, 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 the Fund.
Capital gains, if any, distributed to shareholders and designated by
the Fund 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 Fund 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 the 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 the
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. A capital loss realized on a disposition
of Fund shares held six months or less will be treated as a long-
24
<PAGE>
term capital loss to the extent of capital gain dividends received with
respect to such shares. In addition, if shares of the 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 Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source.
The Fund may recognize interest attributable to it from holding zero
coupon securities. Current Federal law requires that for most zero coupon
securities, a holder (such as the Fund) must accrue a portion of the discount
at which the security was purchased as income each year even though the Fund
receives no interest payment in cash on the security during the year. As a
regulated investment company, the Fund must pay out substantially all of its
net investment income each year. Accordingly, the Fund 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 Fund actually received. Such distributions
will be made from the cash assets of the 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 Fund may realize a gain or loss from such sales.
Investors are urged to consult their attorney or tax advisers 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 Fund may be required to withhold 31% of all
reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds, for any account which does not
have a taxpayer identification number or social security number and certain
required certifications.
The Fund reserves the right to refuse to open an account for any person
failing to provide a taxpayer identification number along with the required
certifications.
The Fund sends to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing Federal income tax returns. Investors are urged to consult
their attorney or tax advisor regarding specific questions as to Federal,
foreign, state or local taxes.
ADDITIONAL INFORMATION
Organization of the Fund
The Fund was organized under Massachusetts law on February 20, 1992 as a
business trust. The Declaration of Trust 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 two 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 the
Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and the 1940 Act, with respect to the
securities offered hereby, certain portions of which have been omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. The Registration Statement, including the exhibits filed
therewith, may be examined at the office of the Securities and Exchange
Commission in Washington, D.C.
25
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS OF CORPORATE OBLIGATIONS
DESCRIPTION OF BOND RATINGS
Moody's Investor's Service, Inc.
<TABLE>
<CAPTION>
<S> <C>
Aaa: Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of
investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a
large or an exceptionally stable margin and
principal is secure. While the various protective
elements are likely to change, such changes as can
be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa
group they comprise what are generally known as
high grade bonds. They are rated lower than the
best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or
there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable
investment attributes and are to be considered as
upper medium grade obligations. Factors giving
security to principal and interest are considered
adequate but elements may be present which suggest
a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly
protective nor poorly secured. Interest payments
and principal security appear adequate for the
present but certain protective elements may be
lacking or may be characteristically unreliable
over any great length of time. Such bonds lack
outstanding investment characteristics and in fact
have speculative characteristics as well.
Note: Those bonds in the Aa, A and Baa groups which Moody's
believes possess the strongest investment attributes are
designated by the symbols Aa1, A1 and Baa1.
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 safe guarded 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 and interest
Standard & Poor's Corporation
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
AAA: Bonds rated AAA have the highest rating assigned
by Standard & Poor's. Capacity to pay interest
and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the
higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay
interest and repay principal although they are
somewhat more susceptible to the adverse effects
of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB: Bonds rated BBB are regarded as having an
adequate capacity to pay principal and interest.
Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or
changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest
for bonds in this category than for bonds in the
A category.
BB,B, Bonds rated BB,B,CCC are regarded, on balance, as
CCC: 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 exposure to adverse
conditions.
</TABLE>
26
<PAGE>
Duff & Phelps Credit Rating Co.
D&P is a Nationally Recognized Statistical Rating Organization by the SEC as
well as State Commissions and insurance regulatory bodies. Ratings qualify
for SEC Rule 2a-7 provisions and broker/dealer capital computation
guidelines on commercial paper inventory. D&P ratings also qualify for NAIC
rating designations and for ERISA guidelines governing asset-backed
securities as stated by the Department of Labor.
Rating Scale:
Duff & Phelps offers ratings for short-term and long-term debt, preferred
stock, structured financings, and insurer's claims paying ability. D&P
ratings are specific to credit quality, i.e., the likelihood of timely
payment for principal, interest, and in the case of a preferred stock rating,
preferred stock dividends. The insurance company claims paying ability
ratings reflect an insurer's ability to meet its claims obligations.
<TABLE>
<CAPTION>
Long-Term Ratings
------------------------------------------
<S> <C>
AAA Highest Quality
AA+,AA,AA- High Quality
A+,A,A- Good Quality
BBB+,BBB,BBB- Satisfactory Quality
(investment grade)
BB+,BB,BB- Non-Investment Grade
B+,B,B- Non-Investment Grade
CCC Speculative
</TABLE>
<TABLE>
<CAPTION>
Short-Term Ratings
-------------------------------------
<S> <C>
Duff 1 }
Duff 1 } A-1/P-1
Duff 1 }
Duff 2 A-2/P-2
Duff 3 A-3/P-3
Duff 4 Non-Investment Grade
Duff 5 Defaulted
</TABLE>
Fitch Investor Services, Inc.
<TABLE>
<CAPTION>
<S> <C>
AAA: Bonds considered to be investment grade and of the
highest credit quality. The obligor has an
exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay
interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA".
Because bonds rated in the "AAA" and "AA"
categories are not significantly vulnerable to
foreseeable future developments, short-term debt of
these issuers is generally rated "F-1+."
A: Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay
interest and repay principal is considered to be
strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances
than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability
to pay interest and repay principal is considered
to be adequate. Adverse changes in economic
conditions and circumstances, however, are more
likely to have adverse impact on these bonds, and
therefore impair timely payment. The likelihood
that the ratings of these bonds will fall below
investment grade is higher than for bonds with
higher ratings.
Plus (+) Plus and minus signs are used with a rating symbol
Minus (-): to indicate the relative position of a credit
within the rating category. Plus and minus signs,
however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific
issue.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Conditional: A conditional rating is premised on the
successful completion of a project or the
occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the
amount of information available from the issuer
to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures
or is called or refinanced and, at Fitch's
discretion, when an issuer fails to furnish
proper and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify
investors of an occurrence that is likely to
result in a rating change and the likely
direction of such change. These are designated
as "Positive", indicating a potential upgrade;
"Negative"; for potential downgrade, or
"Evolving", where ratings may be raised or
lowered. FitchAlert is relatively short-term,
and would be resolved within 12 months.
27
<PAGE>
Credit Trend: Credit Trend indicators show whether credit
fundamentals are improving, stable, declining or
uncertain, as follows:
Improving
Stable
Declining
Uncertain
</TABLE>
Credit Trend indicators are not predictions that any rating change will
occur, and have a longer-term time frame than issues placed on FitchAlert.
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The
ratings ("BB" to "C") represent Fitch's assessment of the likelihood of
timely payment of principal and interest in accordance with the terms of
obligation for bond issuers not in default. For defaulted bonds, the rating
("DDD" to "D") is an assessment of the potential recovery value through
reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor
as well as the economic and political environment, that might affect the
issuer's futures financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
<TABLE>
<CAPTION>
<S> <C>
BB: Bonds are considered speculative. The
obligor's 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 requirements.
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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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.
DDD,DD, Bonds are in default on interest and/or
and D: principal payments. Such bonds are extremely
speculative and should be valued on the basis of
their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents
the highest potential for recovery on these
bonds, and "D" represents the lowest potential
for recovery.
Plus (+) Plus and minus signs are used with a rating
Minus (-): symbol to indicate the relative position of a
credit within the rating category. Plus and
minus signs however, are not used in the "DDD",
"DD", or "D" categories.
</TABLE>
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch's short-term ratings are as follows:
<TABLE>
<CAPTION>
<S> <C>
F-1+: Exceptionally Strong Credit Quality. Issues
assigned this rating are regarded as having the
strongest degree of assurance for timely
payment.
F-1: Very Strong Credit Quality. Issues assigned
this rating reflect an assurance of timely
payment only slightly less in degree than
issues rated "F-l+."
F-2: Good Credit Quality. Issues assigned this
rating have a satisfactory degree of assurance
for timely payment, but the margin of safety is
not as great as for issues assigned "F-1+" and
"F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this
rating have characteristics suggesting that the
degree of assurance for timely payment is
adequate, however, near-term adverse changes
could cause these securities to be rated below
investment grade.
F-5: Weak Credit Quality. Issues assigned this
rating have characteristics suggesting a
minimal degree of assurance for timely payment
and are vulnerable to near-term adverse changes
in financial and economic conditions.
D: Default. Issues assigned this rating are in
actual or imminent payment default.
LOC: The symbol LOC indicates that the rating is
based on a letter of credit issued by a
commercial bank.
</TABLE>
28
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
Account TypeGive Social Security Number or Tax Identification Number of:
<TABLE>
<CAPTION>
<S> <C>
Individual Individual
Joint (or Joint Tenant) Owner who will be paying tax
Uniform Gifts to Minors Minor
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business (also provide owner's name)
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
Broker/Nominee Broker/Nominee
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
(bullet) A corporation
(bullet) Financial institution
(bullet) Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
(bullet) United States or any agency or instrumentality thereof
(bullet) A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
(bullet) International organization or any agency or instrumentality
thereof
(bullet) Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
(bullet) Real estate investment trust
(bullet) Common trust fund operated by a bank under section 584(a)
(bullet) An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
(bullet) Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you
will be treated as negligent and subject to an IRS 5% penalty tax on
any resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
This Prospectus sets forth concisely the information about the Phoenix
Multi-Sector Short Term Bond Fund (the "Fund") which you should know before
investing. Please read it carefully and retain it for future reference.
The Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information about the Fund, dated February 28, 1996. The Statement
contains more detailed information about the Fund and is incorporated into
this Prospectus by reference. You may obtain a free copy of the Statement by
writing the Fund c/o Phoenix Equity Planning Corporation, 100 Bright Meadow,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Trust is contained in the Annual Report
to Shareholders for the year ended October 31, 1995 and is incorporated into
the Statement of Additional Information by reference.
[Recycle Logo] Printed on recycled paper using soybean ink
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
February 28, 1996
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 Short Term Bond Fund (the "Fund"), dated
February 28, 1996 and should be read in conjunction with it. The Fund's
Prospectus may be obtained by calling Phoenix Equity Planning Corporation
("Equity Planning") at (800) 243-4361 or by writing to Equity Planning at 100
Bright Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES (6) 1
INVESTMENT RESTRICTIONS (13) 7
PORTFOLIO TRANSACTIONS AND BROKERAGE (14) 8
SERVICES OF THE ADVISER (14) 9
NET ASSET VALUE (22) 10
HOW TO BUY SHARES (16) 10
EXCHANGE PRIVILEGES (23) 11
INVEST-BY-PHONE 11
TAX SHELTERED RETIREMENT PLANS (24) 12
REDEMPTION OF SHARES (28) 12
DIVIDENDS, DISTRIBUTIONS AND TAXES 13
THE NATIONAL DISTRIBUTOR (15) 15
PLANS OF DISTRIBUTION 15
TRUSTEES AND OFFICERS 17
OTHER INFORMATION 21
PERFORMANCE INFORMATION (6) 21
</TABLE>
Numbers appearing in parentheses correspond to related disclosures in the
Fund's Prospectus.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders/Exchanges: (800) 367-5877
TTY: (800) 243-1926
PDP (2/96)
<PAGE>
THE FUND
Phoenix Multi-Sector Short Term Bond Fund is a diversified open-end,
management investment company, consisting currently of one series, with two
classes of shares. The Fund was organized as a business trust under
Massachusetts law on February 20, 1992. 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 Mutual Insurance Company ("Phoenix Home
Life"), which resulted from the transfer of ownership of National 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."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide high current income while
limiting fluctuations in principal value resulting from movements in interest
rates. There is no assurance that the Fund will achieve its investment
objective.
Mortgage-Backed Securities
GNMA Certificates. The Government National Mortgage Association ("GNMA")
is a wholly owned corporate instrumentality of the United States within the
Department of Housing and Urban Development. The National Housing Act of
1934, as amended (the "Housing Act"), authorizes GNMA to guarantee the timely
payment of the principal of and interest on certificates that are based on
and backed by a pool of mortgage loans insured by the Federal Housing
Administration under the Housing Act, or Title V of the Housing Act of 1949
("FHA Loans"), or guaranteed by the Department of Veterans Affairs under the
Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or by pools
of other eligible mortgage loans. The Housing Act provides that the full
faith and credit of the United States government is pledged to the payment of
all amounts that may be required to be paid under any guaranty. In order to
meet its obligations under such guaranty, GNMA is authorized to borrow from
the U.S. Treasury with no limitations as to amount.
The GNMA Certificates in which the Fund will invest will represent a
pro-rata interest in one or more pools of the following types of mortgage
loans: (i) fixed rate level payment mortgage loans; (ii) fixed rate graduated
payment mortgage loans; (iii) fixed rate growing equity mortgage loans; (iv)
fixed rate mortgage loans secured by manufactured (mobile) homes; (v)
mortgage loans on multifamily residential properties under construction; (vi)
mortgage loans on completed multifamily projects; (vii) fixed rate mortgage
loans as to which escrowed funds are used to reduce the borrower's monthly
payments during the early years of the mortgage loans ("buydown" mortgage
loans); (viii) mortgage loans that provide for adjustments in payments based
on periodic changes in interest rates or in other payment terms of the
mortgage loans; and (ix) mortgage-backed serial notes. All of these mortgage
loans will be FHA Loans or VA Loans and, except as otherwise specified above,
will be fully-amortizing loans secured by first liens on one-to four-family
housing units.
FNMA Certificates. The Federal National Mortgage Association ("FNMA") is a
federally chartered and privately owned corporation organized and existing
under the Federal National Mortgage Association Charter Act of 1938. The
obligations of FNMA are not backed by the full faith and credit of the U.S.
government.
Each FNMA Certificate will represent a pro rata interest in one or more
pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable
rate mortgage loans; and (vi) fixed rate and adjustable mortgage loans
secured by multifamily projects.
FHLMC Certificates. The Federal Home Loan Mortgage Corporation ("FHLMC")
is a corporate instrumentality of the United States created pursuant to the
Emergency Home Finance Act of 1970, as amended (the "FHLMC Act"). The
obligations of FHLMC are obligations solely of FHLMC and are not backed by
the full faith and credit of the U.S. government.
FHLMC Certificates represent a pro-rata interest in a group of mortgage
loans (a "FHLMC Certificate group") purchased by FHLMC. The mortgage loans
underlying the FHLMC Certificates will consist of fixed rate or adjustable
rate mortgage loans with original terms to maturity of between 10 and 30
years, substantially all of which are secured by first liens on one-to-four
family residential properties or multifamily projects. Each mortgage loan
must meet the applicable standards set forth in the FHLMC Act. A FHLMC
Certificate group may include whole loans, participation interests in whole
loans and undivided interests in whole loans and participations comprising
another FHLMC Certificate group.
Adjustable Rate Mortgages--Interest Rate Indices. The One Year Treasury
Index is the figure derived from the average weekly quoted yield on U.S.
Treasury Securities adjusted to a constant maturity of one year. The Cost of
Funds Index reflects the monthly weighted average cost of funds of savings
and loan associations and savings banks whose home offices are located in
Arizona, California and Nevada (the "FHLB Eleventh District") that are member
institutions of the Federal Home Loan Bank of San Francisco (the "FHLB of San
Francisco"), as computed from statistics tabulated and published by the FHLB
of San Francisco. The FHLB of San Francisco normally announces the Cost of
Funds Index on the last working day of the month following the month in which
the cost of funds was incurred.
1
<PAGE>
A number of factors affect the performance of the Cost of Funds Index and may
cause the Cost of Funds Index to move in a manner different from indices based
upon specific interest rates, such as the One Year Treasury Index. Because of
the various origination dates and maturities of the liabilities of member
institutions of the FHLB Eleventh District upon which the Cost of Funds Index is
based, among other things, at any time the Cost of Funds Index may not reflect
the average prevailing market interest rates on new liabilities of similar
maturities. There can be no assurance that the Cost of Funds Index will
necessarily move in the same direction or at the same rate as prevailing
interest rates since as longer term deposits or borrowings mature and are
renewed at market interest rates, the Cost of Funds Index will rise or fall
depending upon the differential between the prior and the new rates on such
deposits and borrowings. In addition, dislocations in the thrift industry in
recent years have caused and may continue to cause the cost of funds of thrift
institutions to change for reasons unrelated to changes in general interest rate
levels. Furthermore, any movement in the Cost of Funds Index as compared to
other indices based upon specific interest rates may be affected by changes
instituted by the FHLB of San Francisco in the method used to calculate the Cost
of Funds Index. To the extent that the Cost of Fund Index may reflect interest
changes more slowly than other indices, mortgage loans which adjust in
accordance with the Cost of Funds Index may produce a higher yield later than
would be produced by such other indices, and in a period of declining interest
rates, the Cost of Funds Index may remain higher than other market interest
rates which may result in a higher level of principal prepayments on mortgage
loans which adjust in accordance with the Cost of Funds Index than mortgage
loans which adjust in accordance with other indices.
LIBOR, the London Interbank Offered Rate, is the interest rate that the
most creditworthy international banks dealing in U.S. dollar-denominated
deposits and loans charge each other for large dollar-denominated loans.
LIBOR is also usually the base rate for large dollar-denominated loans in the
international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or twelve month intervals.
Stripped Mortgage-Backed Securities
The cash flows and yields on interest-only ("IO") and principal-only ("PO")
classes are extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets. For example, a rapid
or slow rate of principal payments may have a material adverse effect on the
yield to maturity of IOs or POs, respectively. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, an
investor may fail to recoup fully its initial investment in an IO class of a
stripped mortgage-backed security, even if the IO class is rated AAA or Aaa.
Conversely, if the underlying Mortgage Assets experience slower than
anticipated prepayments of principal, the yield on the PO class will be
affected more severely than would be the case with a traditional
Mortgage-Backed Security.
Borrowing and Reverse Repurchase Agreements
The Fund may borrow for temporary administrative or emergency purposes. This
borrowing may be unsecured. The Investment Company Act of 1940, as amended
(the "1940 Act") requires the Fund to maintain continuous asset coverage
(that is, total assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount borrowed. If the 300% asset coverage should
decline as a result of market fluctuations or other reasons, the Fund may be
required to sell some of its portfolio holdings within three days to reduce
the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. To avoid the potential leveraging effects of the Fund's borrowings,
additional investment will not be made while unsecured bank borrowing is in
excess of 5% of the Fund's total assets. Borrowing may exaggerate the effect
on net asset value of any increase or decrease in the market value of the
portfolio. Money borrowed will be subject to interest costs which may or may
not be recovered by appreciation of the securities purchased. The Fund also
may be required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.
Among the forms of investments in which the Fund may engage, and which may
be deemed to constitute borrowings, is the entry into reverse repurchase
agreements. A reverse repurchase agreement involves the sale of a
portfolio-eligible security by a Fund, coupled with its agreement to
repurchase the instrument at a specified time and price. The Fund will
maintain a segregated account with its Custodian consisting of cash, U.S.
Government securities or high quality debt securities equal (on a daily mark-
to-market basis) to its obligations under reverse repurchase agreements with
broker-dealers and banks. However, reverse repurchase agreements involve the
risk that the market value of securities retained by the Fund may decline
below the repurchase price of the securities sold by the Fund which it is
obligated to repurchase.
The Fund also may enter into "mortgage dollar rolls," which are similar to
reverse repurchase agreements in certain respects. In a "dollar roll"
transaction, the Fund sells a mortgage-related security (such as a GNMA
security) to a dealer and simultaneously agrees to purchase a similar
security (but not the same security) in the future at a pre-determined price.
A "dollar roll" can be viewed, like a reverse repurchase agreement, as a
collateralized borrowing in which the Fund pledges a mortgage-related
security to a dealer to obtain cash. Unlike in the case of reverse repurchase
agreements, the dealer with which the Fund enters into a dollar roll
transaction is not obligated to return the same securities as those
originally sold by the Fund, but only securities which are "substantially
identical." To be considered "substantially identical," the securities
returned to the Fund generally must: (1) be collateralized by the same types
of underlying mortgages; (2) be issued by the same agency and be part of the
same program; (3)
2
<PAGE>
have a similar original stated maturity; (4) have identical net coupon rates;
(5) have similar market yields (and therefore price); and (6) satisfy "good
delivery" requirements, meaning that the aggregate principal amount of the
securities received back must be within 2.5% of the initial amount delivered.
The Fund's obligations under a dollar roll agreement must be covered by
cash or high quality debt securities equal in value to the securities subject
to repurchase by the Fund, maintained in a segregated account. Dollar roll
transactions are treated as borrowings by the Fund, and therefore the Fund's
entry into dollar roll transactions is subject to the Fund's overall
limitations on borrowing. Furthermore, because dollar roll transactions may
be for terms ranging between one and six months, dollar roll transactions may
be deemed "illiquid" and subject to the Fund's overall limitations on
investment in illiquid securities.
Lending Portfolio Securities
The Fund may make secured loans of its portfolio securities to
broker-dealers and other financial institutions. The 1940 Act requires that
(a) the borrower pledge and maintain collateral consisting of cash, a letter
of credit issued by a domestic U.S. bank, or securities issued or guaranteed
by the U.S. government having a value at all times not less than 100% of the
value of the securities loaned; (b) the borrower add to such collateral
whenever the price of the securities borrowed rises (i.e., the value of the
loan is "marked to the market" on a daily basis); (c) the loan be made
subject to termination by the Fund at any time; and (d) the Fund receives
reasonable interest on the loan (which may include the investing of any cash
collateral in high quality interest-bearing short-term investments), any
distributions on the loaned securities, and any increase in their market
value. In addition, voting rights may pass with the loaned securities, but if
a material event were to occur, the loan must be called and the securities
voted by the Fund.
Hedging
The Fund may write and purchase options, including over-the-counter
options, for hedging purposes. 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, respectively. 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 hedging 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
hedging activities would be expected to offset anticipated losses or a
portion thereof. See "Dividends, Distributions and Taxes."
The Fund will not enter into options or futures transactions for
speculative purposes, but only as a hedge against changes in the values of
securities in its portfolio, or sectors thereof, or in securities that it
intends to acquire resulting from market conditions.
Options on Securities and Indexes
The Fund may, as specified in the Prospectus, purchase and sell both put and
call options on debt or other securities or indexes in standardized contracts
traded on foreign or national securities exchanges, boards of trade, or
similar entities, or quoted on NASDAQ or on a regulated foreign
over-the-counter market, and agreements, sometimes called cash puts, which
may accompany the purchase of a new issue of bonds from a dealer.
An option on a security (or index) is a contract that gives the holder of
the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option, the
security underlying the option (or the cash value of the index) at a
specified exercise price at any time during the term of the option. The
writer of an option on a security has the obligation upon exercise of the
option to deliver the underlying security upon payment of the exercise price
or to pay the exercise price upon delivery of the underlying security. Upon
exercise, the writer of an option on an index is obligated to pay the
difference between the cash value of the index and the exercise price
multiplied by the specified multiplier for the index option. (An index is
designed to reflect specified facets of a particular financial or securities
market, a specified group of financial instruments or securities, or certain
economic indicators.)
The Fund will write call options and put options only if they are
"covered." In the case of a call option on a security, the option is
"covered" if the Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are placed in a segregated account by its
custodian) upon conversion or exchange of other securities held by the Fund.
For a call option on an index, the option is covered if the Fund maintains
with its custodian cash or cash equivalents equal to the contract value. A
call option is also covered if the Fund holds a call on the same security or
index as the call written where the exercise price of the call held is (i)
equal to or less than the exercise price of the call written, or (ii) greater
than the exercise price of the call written, provided the difference is
maintained by the Fund in cash or cash equivalents in a segregated account
with its custodian. A put option on a security or an index is "covered" if
the Fund maintains cash or cash equivalents equal to the exercise price in a
segregated account with its custodian. A put option is also covered if the
Fund holds a put on the same security or index as the put written where the
exercise price of the put held is (i) equal to or greater than the exercise
price of the put written, or (ii) less than the exercise price of the put
written, provided the difference is maintained by the Fund in cash or cash
equivalents in a segregated account with its custodian.
3
<PAGE>
If an option written by the Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires unexercised, the Fund realizes a capital loss
equal to the premium paid.
Prior to the earlier of exercise or expiration, an option may be closed
out by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration).
There can be no assurance, however, that a closing purchase or sale
transaction can be effected when the Fund desires.
The Fund will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from
writing the option, or, if it is more, the Fund will realize a capital loss.
If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Fund will realize a capital gain or,
if it is less, the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include supply and
demand, interest rates, the current market price of the underlying security
or index in relation to the exercise price of the option, the volatility of
the underlying security or index, and the time remaining until the expiration
date.
The premium paid for a put or call option purchased by the Fund is an
asset of the Fund. The premium received for an option written by the Fund is
recorded as a deferred credit. The value of an option purchased or written is
marked to market daily and is valued at the closing price on the exchange on
which it is traded or, if not traded on an exchange or no closing price is
available, at the mean between the last bid and asked prices.
Risks Associated with Options on Securities and Indexes
There are several risks associated with transactions in options on
securities and on indexes. For example, there are significant differences
between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when and how to use options
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close out
an option that it had purchased on a security, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If
the Fund were unable to close out a covered call option that it had written
on a security, it would not be able to sell the underlying security unless
the option expired without exercise. As the writer of a covered call option,
the Fund forgoes, during the option's life, the opportunity to profit from
increases in the market value of the security covering the call option above
the sum of the premium and the exercise price of the call.
If trading were suspended in an option purchased by the Fund, the Fund
would not be able to close out the option. If restrictions on exercise were
imposed, the Fund might be unable to exercise an option it has purchased.
Except to the extent that a call option on an index written by the Fund is
covered by an option on the same index purchased by the Fund, movements in
the index may result in a loss to the Fund; however, such losses may be
mitigated by changes in the value of the Fund's securities during the period
the option was outstanding.
Foreign Currency Options
The Fund may buy or sell put and call options on foreign currencies either
on exchanges or in the over-the-counter market. A put option on a foreign
currency gives the purchaser of the option the right to sell a foreign
currency at the exercise price until the option expires. Currency options
traded on U.S. or other exchanges may be subject to position limits which may
limit the ability of the Fund to reduce foreign currency risk using such
options. Over-the-counter options differ from traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller, and generally do not have as much market liquidity as exchange-traded
options.
Futures Contracts and Options on Futures Contracts
The Fund may use interest rate, foreign currency or index futures contracts,
as specified in the Prospectus. An interest rate, foreign currency or index
futures contract provides for the future sale by one party and purchase by
another party of a specified quantity of a financial instrument, foreign
currency or the cash value of an index at a specified price and time. A
futures contract on an index is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.
Although the value of an index might be a function of the value of certain
specified securities, no physical delivery of these securities is made. A
public market exists in futures contracts covering several indexes as well as
a number of financial instruments and foreign currencies, including: the S&P
500; the S&P 100; the NYSE composite; U.S. Treasury bonds; U.S. Treasury
notes; GNMA Certificates; three month U.S. Treasury bills; 90-day commercial
paper; bank certificates of deposit; Eurodollar certificates of deposit; the
Australian dollar; the Canadian dollar; the British pound; the German mark;
the Japanese yen; the French franc; the Swiss franc; the Mexican peso; and
certain multinational currencies, such as the European Currency Unit ("ECU").
It is expected that other futures contracts will be developed and traded in
the future.
The Fund may purchase and write call and put options on futures. Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid,
4
<PAGE>
to assume a long position (call) or short position (put) in a futures
contract at a specified exercise price at any time during the period of
option. Upon exercise of a call option, the holder acquires a long position
in the futures contract and the writer is assigned the opposite short
position. In the case of a put option, the opposite is true.
As long as required by regulatory authorities, the Fund will limit its use
of futures contracts and futures options to hedging transactions. For
example, the Fund might use futures contracts to hedge against anticipated
changes in interest rates that might adversely affect either the value of the
Fund's securities or the price of the securities which the Fund intends to
purchase. The Fund's hedging activities may include sales of futures
contracts as an offset against the effect of expected increases in interest
rates, and purchases of futures contracts as an offset against the effect of
expected declines in interest rates. Although other techniques could be used
to reduce the Fund's exposure to interest rate fluctuations, the Fund may be
able to hedge its exposure more effectively and perhaps at a lower cost by
using futures contracts and futures options.
The Fund will only enter into futures contracts and futures options which
are standardized and traded on a U.S. or foreign exchange, board of trade, or
similar entity, or quoted on an automated quotation system.
When a purchase or sale of a futures contract is made by the Fund, the
Fund is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of cash or U.S. Government securities ("initial
margin"). The margin required for a futures contract is set by the exchange
on which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its initial margin
deposits. A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily change
in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the Fund
but is instead a settlement between the Fund and the broker of the amount one
would owe the other if the futures contract expired. In computing daily net
asset value, the Fund will mark to market its open futures positions.
The Fund is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security or index, and delivery month). If an offsetting
purchase price is less than the original sale price, the Fund realizes a
capital gain, or if it is more, the Fund realizes a capital loss. Conversely,
if an offsetting sales price is more than the original purchase price, the
Fund realizes a capital gain, or if it is less, the Fund realizes a capital
loss. The transaction costs must also be included in these calculations.
Limitations on Use of Futures and Futures Options
The Fund will not enter into a futures contract or futures options contract
if, immediately thereafter, the aggregate initial margin deposits relating to
such positions plus premiums paid by it for open futures option positions,
less the amount by which any such options are "in-the-money," would exceed 5%
of the Fund's total assets. A call option is "in-the-money" if the value of
the futures contract that is the subject of the option exceeds the exercise
price. A put option is "in-the-money" if the exercise price exceeds the value
of the futures contract that is the subject of the option.
When entering into a futures contract, the Fund will maintain with its
custodian (and mark-to-market on a daily basis) cash, U.S. Government
securities, or other highly liquid debt securities that, when added to the
amount deposited with a futures commission merchant as margin, are equal to
the market value of the futures contract. Alternatively, the Fund may "cover"
its position by purchasing a put option on the same futures contract with a
strike price as high or higher than the price of the contract held by the
Fund.
When selling a futures contract, the Fund will maintain with its custodian
(and mark-to-market on a daily basis) liquid assets that, when added to the
amount deposited with a futures commission merchant as margin, are equal to
the market value of the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments underlying the
contract (or, in the case of an index futures contract, a portfolio with a
volatility substantially similar to that of the index on which the futures
contract is based), or by holding a call option permitting the Fund to
purchase the same futures contract at a price no higher than the price of the
contract written by the Fund (or at a higher price if the difference is
maintained in liquid assets with the Fund's custodian).
When selling a call option on a futures contract, the Fund will maintain
with its custodian (and mark-to-market on a daily basis) cash, U.S.
Government securities, or other highly liquid debt securities that, when
added to the amounts deposited with a futures commission merchant as margin,
equal the total market value of the futures contract underlying the call
option. Alternatively, the Fund may cover its position by entering into a
long position in the same futures contract at a price no higher than the
strike price
5
<PAGE>
of the call option, by owning the instruments underlying the futures
contract, or by holding a separate call option permitting the Fund to
purchase the same futures contract at a price not higher than the strike
price of the call option sold by the Fund.
When selling a put option on a futures contract, the Fund will maintain
with its custodian (and mark-to-market on a daily basis) cash, U.S.
Government securities, or other highly liquid debt securities that equal the
purchase price of the futures contract, less any margin on deposit.
Alternatively, the Fund may cover the position either by entering into a
short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the put option is the same or higher than the strike price of the
put option sold by the Fund.
In order to comply with applicable regulations of the Commodity Futures
Trading Commission ("CFTC") pursuant to which the Fund avoids being deemed a
"commodity pool," the Fund is limited in its futures trading activities to
positions which constitute "bona fide hedging" positions within the meaning
and intent of applicable CFTC rules, or to positions which qualify under an
alternative test. Under this alternative test, the "underlying commodity
value" of each long position in a commodity contract in which the Fund
invests may not at any time exceed the sum of: (1) the value of short-term
U.S. debt obligations or other U.S. dollar-denominated high quality
short-term money market instruments and cash set aside in an identifiable
manner, plus any Funds deposited as margin on the contract; (2) unrealized
appreciation on the contract held by the broker; and (3) cash proceeds from
existing investments due in not more than 30 days. "Underlying commodity
value" means the size of the contract multiplied by the daily settlement
price of the contract.
The requirements for qualification as a regulated investment company also
may limit the extent to which the Fund may enter into futures, futures
options or forward contracts.
Risks Associated with Futures and Futures Options
There are several risks associated with the use of futures contracts and
futures options as hedging techniques. A purchase or sale of a futures
contract may result in losses in excess of the amount invested in the futures
contract. There can be no guarantee that there will be a correlation between
price movements in the hedging vehicle and in the Fund securities being
hedged. In addition, there are significant differences between the securities
and futures markets that could result in an imperfect correlation between the
markets, causing a given hedge not to achieve its objectives. The degree of
imperfection of correlation depends on circumstances such as variations in
speculative market demand for futures and futures options on securities,
including technical influences in futures trading and futures options, and
differences between the financial instruments being hedged and the
instruments underlying the standard contracts available for trading in such
respects as interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when and how to hedge involves the
exercise of skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during
a particular trading day and therefore does not limit potential losses
because the limit may work to prevent the liquidation of unfavorable
positions. For example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of positions and subjecting some holders of futures
contracts to substantial losses.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or a futures option position, and the
Fund would remain obligated to meet margin requirements until the position is
closed. In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be
no assurance that an active secondary market will develop or continue to
exist.
Additional Risks of Foreign Exchange-Traded Options, Futures and Forward
Currency Exchange Contracts
Options on securities, futures contracts, options on futures contracts,
currencies and options on currencies may be traded on foreign exchanges. Such
transactions may not be regulated as effectively as similar transactions in
the United States; may not involve a clearing mechanism and related
guarantees; and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities. The value of such positions
also could be adversely affected by (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in
the United States, and (v) lesser trading volume.
6
<PAGE>
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions are fundamental policies that cannot
be changed without approval by holders of a "majority of the outstanding
voting securities" of the Fund, which as used herein means the vote of the
lesser of (i) 67% or more of the outstanding voting securities of the Fund
present at a meeting, if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding voting securities of the Fund. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act.
The Fund may not:
(1) with respect to 75% of the total assets of the Fund (taken at market
value at the time of purchase), invest more than 5% of the value of its
total assets in the securities of any one issuer, or, with respect to
100% of the total assets of the Fund, own more than 10% of the
outstanding voting securities of any one issuer, in each case other than
U.S. Government securities (as defined in the 1940 Act);
(2) invest 25% or more of the value of its total assets in securities of
issuers engaged in any one industry (excluding U.S. Government securities
as defined in the 1940 Act);
(3) purchase or sell real estate (although it may purchase securities secured
by real estate or interests therein, or securities issued by companies
which invest in real estate, or interests therein (other than real estate
limited partnership interests));
(4) purchase or sell commodities or commodities contracts or oil, gas or
mineral programs. This restriction shall not prohibit the Fund, subject
to restrictions described in the Prospectus and elsewhere in this
Statement of Additional Information, from purchasing, selling or entering
into futures contracts, options on futures contracts, foreign currency
forward contracts, foreign currency options, or any interest rate or
foreign currency-related hedging instrument, subject to compliance with
any applicable provisions of the federal securities or commodities laws.
(5) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities,
but it may make margin deposits in connection with transactions in
options, futures and options on futures;
(6) borrow money, issue senior securities, or pledge, mortgage or hypothecate
its assets, except that the Fund 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 each borrowing there is asset coverage of 300% and (ii) enter into
transactions in options, futures and options on futures as described in
the Prospectus and in this 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 a Fund's assets);
(7) lend any funds or other assets, except that the Fund may, consistent with
its investment objective and policies: (a) invest in debt obligations
including bonds, debentures or other debt securities, bankers'
acceptances and commercial paper, even though purchase of such
obligations may be deemed to be the making of loans; (b) enter into
repurchase agreements; and (c) lend its portfolio securities in an amount
not to exceed 1/3 of the value of its total assets, provided such loans
are made in accordance with applicable guidelines established by the
Securities and Exchange Commission and the Trustees;
(8) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities,
it may be deemed to be an underwriter under the federal securities laws;
or
(9) maintain a short position, or purchase, write or sell puts, calls,
straddles, spreads or combinations thereof, except as set forth in the
Prospectus and in this Statement of Additional Information for
transactions in options, futures, and options on futures.
Non-Fundamental Policies
The following restrictions of the Fund are not fundamental policies and may
be changed by the Board of Trustees of the Fund without shareholder approval.
The Fund may not:
(A) invest for the purpose of exercising control or management;
(B) purchase securities of other investment companies, except that the Fund
may, for temporary purposes, purchase shares of money market mutual
funds, subject to such restrictions as may be imposed by the 1940 Act and
rules thereunder, or by any State in which shares of the Fund are
registered;
(C) invest more than 15% of the net assets of the Fund (taken at market value
at the time of the investment) in "illiquid securities". Illiquid
securities may include securities subject to legal or contractual
restrictions on resale (which may include private placements), repurchase
agreements maturing in more than seven days, certain options traded over
the counter that
7
<PAGE>
the Fund has purchased, certain securities being used to cover options
the Fund has written, securities for which market quotations are not
readily available, or other securities which legally or in the Adviser's
or Trustees' opinion may be deemed illiquid;
(D) invest in a security if, as a result of such investment, more than 5% of
its total assets (taken at market value at the time of such investment)
would be invested in securities of issuers (other than issuers of Federal
agency obligations) having a record, together with predecessors or
unconditional guarantors, of less than three years of continuous
operation;
(E) purchase or retain securities of any issuer if 5% of the securities of
such issuer are owned by those officers and directors or trustees of the
Fund or of the Adviser who each own beneficially more than 1/2 of 1% of
its securities;
(F) purchase securities for the Fund from, or sell portfolio securities to,
any of the officers and directors or trustees of the Fund or of the
Adviser; or
(G) borrow any amount in excess of 10% of the Fund's total assets or make
additional investments when the Fund's borrowings are in excess of 5% of
the Fund's total assets.
Notwithstanding the provisions of restriction (G), the Fund has no current
intention of borrowing money from banks or other financial institutions,
other than on a temporary basis for emergency or extraordinary purposes,
provided, however, that the provisions of restriction (G) shall not be deemed
to apply to reverse repurchase agreements and other investment techniques
which may be deemed to constitute borrowings for purposes of the 1940 Act.
Unless otherwise indicated, all percentage limitations listed above apply
to the Fund only at the time a transaction is entered into. Accordingly, if a
percentage restriction is adhered to at the time of investment, a later
increase or decrease in the percentage which results from a relative change
in values or from a change in the Fund's net assets will not be considered a
violation.
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 diverse firms and that the
long-term interests of shareholders of the Fund are best served by their
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 attitude 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 execution 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 Trustees of the Fund, including a majority of disinterested Trustees,
have adopted procedures which allow the Adviser to allocate a portion of the
Fund's portfolio brokerage transactions to brokers affiliated with the Fund
or Adviser, including, without limitation, Duff & Phelps Securities Co. In
order for affiliated brokers to effect any portfolio transactions for the
Fund, the commissions, fees, or other remuneration received by such brokers
must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other nonaffiliated brokers in connection with
comparable transactions involving similar securities being purchased or sold
on a securities exchange during a comparable period of time.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, 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
8
<PAGE>
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 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 will be
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.
The Fund paid no brokerage commissions for the fiscal years ended October
31, 1995, 1994 and 1993.
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; legal and auditing services; regulatory filing
fees and expenses of printing the Fund's registration statements (but the
Underwriter purchases such copies of the Fund's prospectuses and reports and
communications to shareholders as it may require for sales purposes at
printer's over-run cost); insurance expense; association membership dues;
brokerage fees; and taxes.
For services provided and the expenses assumed pursuant to the Management
Agreement, the Fund will pay to the Adviser as compensation a fee at the
annual rate of 0.55% of the Fund's average daily net assets up to $1 billion;
0.50% of the Fund's average daily net assets between $1 billion and $2
billion; and 0.45% of the Fund's average daily net assets in excess of $2
billion. The Adviser's fee will be accrued daily against the value of the
Fund's net assets and will be payable monthly by the Fund. Total management
fees for the fiscal years ended October 31, 1993, 1994, and 1995 amounted to
$51,268, $74,109 and $78,929, respectively, which amounts were waived by the
Adviser.
The Adviser has voluntarily agreed, under the terms of the Management
Agreement, to reimburse the Fund to the extent that, in any fiscal year, the
aggregate annual expenses of the Fund, exclusive of distribution fees, taxes,
brokerage, interest and (with the prior consent of any necessary state
securities commissions) extraordinary expenses, but including the management
fee, exceed the most restrictive expense limitation established pursuant to
the statutes or regulations of any jurisdiction in which such shares of the
Fund are then qualified for offer or sale. Currently, the most restrictive of
such limitations would require the Adviser to reimburse the Fund to the
extent that in any fiscal year such aggregate expenses exceed 2.5% of the
first $30,000,000, 2% of the next $70,000,000, and 1.5% of the remaining
average net assets of the Fund.
The Adviser is a subsidiary of Phoenix Duff & Phelps Corporation having a
place of business is located at 56 Prospect Street, Hartford, Connecticut.
The Adviser serves as investment adviser to other registered investment
companies. For the purposes hereof, the Fund, as well as such other
investment companies advised by the Adviser and all other funds within the
Phoenix family of funds shall hereinafter be referred to collectively as the
"Phoenix Funds." The Adviser presently has approximately $1.7 billion in
managed assets. The Adviser has acted as investment adviser for over sixty
years.
The current Management Agreement was approved by the Board of Trustees 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 continues in
effect from year to year if specifically approved annually by a majority of
the Trustees who are not interested persons of the parties thereto, as
defined in the 1940 Act, and by either (a) the Board of Trustees 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 Trustees 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.
The Adviser makes its personnel available to serve as officers and
"interested" Trustees of the Fund. The Fund has not directly compensated any
of its officers or Trustees for services in such capacities except to pay
fees to the Trustees who are not otherwise affiliated with the Fund. The Fund
reimburses all Trustees for their out-of-pocket expenses. The Trustees 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.
9
<PAGE>
In addition to the management fee, expenses paid by the Fund include fees
of Trustees 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 Underwriter purchases at printer's over-run
cost); accounting services fees, insurance 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 Massachusetts business trust.
NET ASSET VALUE
The net asset value per share of each Class of shares of the Fund is
determined as of the close of business of the regular trading session of the
New York Stock Exchange (the "Exchange") on each day that the Exchange is
open. The net asset value per share of each class of shares is computed by
deducting the total liabilities of the Fund allocated to each class
(including distribution fees and any other expenses specifically allocated to
that class) from the proportionate interest in the Fund's assets, and
dividing the remainder by the number of shares of that class outstanding. See
the Fund's current Prospectus for additional information.
HOW TO BUY SHARES
Alternative Purchase Arrangements
Shares of the Fund may be purchased from investment dealers having a sales
agreement with the Underwriter 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").
The minimum initial purchase is $500 ($25 if using the bank draft program
designated "Investo-Matic"), and the minimum subsequent investment is $25.
Investors may qualify for reduced sales charges. See the Fund's current
Prospectus.
Class A Shares
An investor who elects the initial sales charge alternative acquires 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 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. Certain purchases of Class A shares
qualify for reduced initial sales charges. See the Fund's current Prospectus.
Class B Shares
An investor who elects the deferred sales charge alternative acquires Class
B shares. Class B shares do not incur a sales charge when they are purchased,
but 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.
Class B shares are subject to an ongoing distribution 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 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 six
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 Underwriter to have been compensated for
distribution expenses related to the Class B shares from most of the burden
of such distribution related expenses. See "Conversion Feature," below.
The alternative purchase arrangement permits 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 services fee
and contingent deferred sales charges on Class B shares prior to conversion
would be less than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to what extent
such differential would be offset by the lower expenses attributable to Class
A shares.
Class A shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends, to the extent any
dividends are paid, per share. However, because initial sales charges are
deducted at the time of purchase, such investors would not have all their
funds invested initially and, therefore, would initially own fewer shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class A
10
<PAGE>
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 weight this
consideration against the fact that, because of such initial sales charges,
not all their funds will be invested initially. However, other investors
might determine that it would be more advantageous to purchase Class B shares
to have all their funds invested initially, although remaining subject to
higher continuing distribution charges and, for a three-year period, being
subject to a contingent deferred sales charge.
The distribution expenses incurred by the Underwriter in connection with
the sale of the shares will be paid, in the case of Class A shares, from the
proceeds of the initial sales charge and the ongoing distribution services
fee and, in the case of Class B shares, from the proceeds of the ongoing
distribution services fee and the contingent deferred sales charge incurred
upon redemption within three years of purchase. Sales personnel of
broker-dealers distributing the Fund's shares may receive differing
compensation for selling Class A or Class B shares. Investors should
understand that the purpose and function of the contingent deferred sales
charge and ongoing distribution services fee with respect to the Class B
shares are the same as those of the initial sales charge and ongoing
distribution services fees with respect to the Class A shares. Dividends paid
by the Fund, if any, with respect to Class A and Class B shares will be
calculated in the same manner at the same time on the same day. However, the
higher distribution services fee and any incremental transfer agency costs
relating to Class B shares will be borne exclusively by the class. See
"Dividends, Distributions and Taxes."
The Directors of the Fund have determined that currently no conflict of
interest exists between the Class A and Class B shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict arises.
Conversion Feature
Class B shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period
ending six 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
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. The purpose of the conversion feature is to relieve the holders
of Class B shares that have been outstanding for a period of time sufficient
for the Underwriter to have been compensated for distribution expenses
related to the Class B shares from most of the burden of such
distribution-related expenses.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's Fund account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B shares in the sub-account will also convert to Class
A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service to the effect that (i) the assessment of the higher
distribution services fee and transfer agency costs with respect to Class B
shares does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) that the conversion of shares does not constitute a
taxable event under federal income tax law.
EXCHANGE PRIVILEGES
Shareholders may exchange their Class A or Class B Shares for shares of
the same class of other Phoenix Funds (except Class A shares of the Phoenix
Money Market Fund Series and Class A Shares of the Fund held for a period
less than six months) on the basis of the relative net asset values per share
at the time of exchange. On Class B share exchanges, the contingent deferred
sales charge schedule of the original shares purchased continues to apply.
See the Fund's current Prospectus under "Exchange Privileges" for additional
information and conditions for exchanges.
INVEST-BY-PHONE
This expedited investment service allows a shareholder to make an
investment in an account by requesting a transfer of funds from the balance
of their bank account. Once a request is phoned in, Phoenix Equity Planning
Corporation ("Equity Planning") will initiate the transaction by wiring a
request for monies to the shareholder's commercial bank, savings bank or
credit union via Automated Clearing House (ACH). The shareholder's bank,
which must be an ACH member, will in turn forward the monies to Equity
Planning for credit to the shareholder's account. ACH is a computer based
clearing and settlement operation established for the exchange of electronic
transactions among participating depository institutions. This service may
also be used to sell shares of the Fund and direct proceeds of sale through
ACH to a shareholder's bank account.
To establish this service, please complete the Invest-by-Phone section of
the New Account Application and attach a voided check if applicable. Upon
Equity Planning's acceptance of the authorization form (usually within two
weeks) shareholders may call toll free (800) 367-5877 prior to 3:00 p.m.
(Eastern Time) to place their purchase request. Instructions as to the
account number
11
<PAGE>
and amount to be invested must be communicated to Equity Planning. Equity
Planning will then contact the shareholder's bank via ACH with appropriate
instructions. The purchase is normally credited to the shareholder's account
the day following receipt of the verbal instructions. The 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 Equity Planning reserve the right to modify or terminate the
Invest-by-Phone service for any reason or to institute charges for
maintaining an Invest-by-Phone account.
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 National and its affiliates provide to the
Phoenix Funds, and may receive compensation therefor. For information on the
terms and conditions applicable to employee participation in such plans,
including information on applicable plan administrative charges and expenses,
prospective investors should consult the plan documentation and employee
enrollment information which is available from participating employers.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed at the net asset value next determined
after receipt of a redemption order and any other required documentation in
proper form. In the case of Class B Shares held by the shareholder for less
than three years, investors will be subject to the applicable deferred sales
charge, if any, for such shares (See the Fund's current Prospectus under "How
to Buy Shares"). The right to redeem shares may be suspended during any
period when: (1) the New York Stock Exchange is closed other than customary
weekend and holiday closings; (2) trading on the New York Stock Exchange is
restricted, or an emergency exists as determined by the Securities and
Exchange Commission, so that disposal of the Fund's portfolio securities or
fair determination of its net asset value is not reasonably practicable; or
(3) the Securities and Exchange Commission has by order permitted such
suspension. Furthermore, the Transfer Agent will not mail redemption proceeds
until checks received for shares purchased have cleared, which may take up to
15 days or more. Class A shareholders who have redeemed their shares may be
entitled to reinstate their investment, subject to certain conditions, at net
asset value (without a sales charge). In addition, certain smaller accounts
may be subject to involuntary redemption.
A shareholder account in the Fund which has been in existence for at least
one year and has a value of less than $250 may be redeemed by the Fund in
which the shareholder is invested upon the giving of not less than 60 days'
written notice to the shareholder mailed to the address of record, unless the
decrease in value of such account has resulted solely from market activity.
During the 60 day period, the shareholder has the right to add to the account
to bring its value to $250 or more. See the Fund's current Prospectus for
more information.
By Mail
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when
certificates for shares are in the possession of the shareholder, they must
be mailed or presented, duly endorsed in the full name of the account, with a
written request to Equity Planning that the Fund redeem the shares.
By Telephone
Unless a shareholder elects in writing not to participate in the Telephone
Redemption Privilege, shares for which certificates have not been issued may
be redeemed by calling (800) 367-5877 and telephone redemptions will also be
accepted on behalf of the shareholder from his or her registered
representative as described in the Prospectus. Address and bank account
information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
shareholder. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. The Fund and the Transfer Agent
will employ reasonable procedures to confirm that telephone instructions are
genuine. To the extent that procedures 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, the shareholder would bear the risk of
loss resulting from instructions entered by an unauthorized third party that
the Fund and/or the Transfer Agent reasonably believe to be genuine.
If the amount of the redemption is $500 or more, the proceeds will 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 the shareholder's account. Telephone redemption
requests must be received by Equity Planning by the close of trading on the
New York Stock Exchange on any day when Equity Planning is open for business.
Requests made after that time or on a day when
12
<PAGE>
Equity Planning is not open for business cannot be accepted by Equity
Planning. The proceeds of a telephone redemption will normally be sent on the
first business day following receipt of the redemption request.
However, with respect to the telephone redemption of shares purchased by
check, such 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. This expedited redemption privilege is
not available to HR-10, IRA and 403(b)(7) Plans. In addition to the Telephone
Redemption Privilege, a shareholder may also redeem by telephone through the
"Invest-by-Phone" service.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to continue to qualify as a regulated investment company
under certain provisions of the Internal Revenue Code of 1986, as amended
(the "Code"). If the Fund so qualifies, it will not be subject to federal
income tax on the 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; (b) derive in each taxable
year less than 30% of its gross income from gains (without deduction for
losses) from the sale or other disposition of (i) stock or securities held
for less than three months; (ii) foreign currencies or options, futures or
forward contracts on foreign currencies) held for less than three months but
only if such investments are not directly related to the Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities); and (iii) options, futures or forward
contracts (other than options, futures and forward contracts on foreign
currencies) held for less than three months; and (c) 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 it at corporate rates.
Based on the foregoing, the Fund's policy will be to distribute to its
shareholders at least 90% of investment company taxable income and any net
realized capital gains for each year, so that the Fund generally will pay no
taxes on net investment income and net realized capital gains paid to
shareholders. As described above, less than 30% of the Fund's gross income
must be derived from gains from the sale or other disposition of certain
investments held for less than three months. Accordingly, the Fund may be
restricted with respect to certain activities, including the following
activities, all of which may produce such gains: writing of options on
securities which have been held less than three months; writing of options
which expire in less than three months; effecting closing purchase
transactions with respect to options which have been written less than three
months prior to such transactions; and transactions involving futures and
forward contracts.
Dividends paid by the Fund will be taxable to shareholders of the Fund 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 regulated investment
companies, such as the Fund, if the Fund 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 each regulated investment company does not meet the foregoing
distribution requirements.
The Code provides that any dividends 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 a shareholder on
December 31 of that calendar year, provided that the dividend is actually
paid by the Fund during January of the following year.
The Fund intends to declare dividends daily and to pay dividends monthly.
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
13
<PAGE>
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 the shares have been owned by the
shareholder. Net short-term capital gains are net realized short-term capital
gains, generally 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 generally are subject to
taxation as of the date of payment, whether received by shareholders in cash
or in shares of the 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 investment 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 generally 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.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time it actually collects such receivables or pays such
liabilities generally are treated as ordinary gain or loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain futures contracts, forward contracts and options,
gains or losses attributable to fluctuations in the value of the foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains
and losses, referred to under the Code as section 988 gains or losses, may
increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
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.
Certain offsetting positions held by the Fund (including certain positions
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 position in such a straddle may 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 tax consequences of certain investments and other activities that the
Fund may make or undertake (such as, but not limited to, dollar roll
agreements) are not entirely clear. While the Fund will endeavor to treat the
tax items arising from these transactions in a manner which it believes to be
appropriate, assurance cannot be given that the Internal Revenue Service or a
court will agree with the Fund's treatment and that adverse tax consequences
will not ensue.
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.
It is expected that the Fund will not be eligible to elect to pass-through
to its shareholders the amount of foreign income and similar taxes paid by
it, so that shareholders will not be eligible to claim a foreign tax credit
or to deduct their pro rata share of such foreign taxes. Such foreign taxes
generally will reduce the net income of the Fund distributable to
shareholders. If the Fund were eligible to make the pass-through election,
and so elected, shareholders would be notified regarding the relevant items
to be taken into account by the shareholders.
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 20%
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
certified social security
14
<PAGE>
or taxpayer identification number, certifies as to exemption from backup
withholding, and otherwise complies with applicable requirements of the Code.
Backup withholding is not an additional tax. Any amount withheld may be
credited against the shareholder's U.S. federal tax liability.
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.
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.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Fund may not be taken into account in determining the gain or loss on
the disposition of those shares. This rule applies if shares of the Fund are
exchanged within 90 days after the date they were purchased and new shares of
a regulated investment company are acquired without a sales charge or at a
reduced sales charge. In that case, the gain or loss recognized on the
exchange will be determined by excluding from the tax basis of the shares
exchanged all or a portion of the amount of the sales charge incurred in
acquiring those shares. This exclusion applies to the extent that the
otherwise applicable sales charge with respect to the newly acquired shares
is reduced as a result of having incurred the sales charge initially. The
portion of the sales charge affected by this rule will be treated as an
amount paid for the new shares.
Dividends, distributions and redemption proceeds also may be subject to
state, local and foreign taxes depending upon each shareholder's particular
situation. In addition, foreign shareholders may be subject to federal income
tax rules that differ from those described above. Shareholders are advised to
consult with their tax advisers or attorneys.
The Fund is organized as a Massachusetts business trust. 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
Commonwealth of Massachusetts.
THE NATIONAL DISTRIBUTOR
Phoenix Equity Planning Corporation ("Equity Planning") acts as the
Underwriter for the Fund and as such will conduct a continuous offering
pursuant to a "best efforts" arrangement requiring the Underwriter to take
and pay for only such securities as may be sold to the public. Equity
Planning is a subsidiary of Phoenix Duff & Phelps Corporation and an
affiliate of National. Shares of the Fund may be purchased through investment
dealers who have sales agreements with the Underwriter. During the fiscal
years ended October 31, 1993, 1994 and 1995, purchasers of the Fund shares
paid aggregate sales charges of $90,533, $50,671 and $53,927, respectively,
of which the principal underwriter received net commissions of $15,528, $10,267
and $34,673, respectively, for its services, the balance being paid to
dealers.
Equity Planning also acts as administrative agent of the Fund and, as
such, performs administrative, bookkeeping and pricing functions for the
Fund. As compensation, Equity Planning receives a quarterly fee based on the
average of the aggregate daily net asset values of the Fund at the annual
rate of $300 per $1 million. For its services during the Fund's fiscal year
ended October 31, 1995, Equity Planning received $4.305 , or 0.03% of average
net assets.
Equity Planning also acts as the transfer agent of the Fund, and as such
performs certain shareholder servicing functions for the Fund for which it is
paid a fee of $19.25 plus out of pocket expenses for each shareholder
account, payable monthly and equal to 1/12 the annual fee. Equity Planning
has and shall engage sub-agents from time to time to perform certain of such
functions for which such agents shall be paid a fee by Equity Planning.
Please contact the Underwriter at the following phone numbers with service
inquiries: Wire Order Room (800) 367-5877, Customer Service Department (800)
243-1574.
PLANS OF DISTRIBUTION
Both Class A and Class B Shares of the Fund have adopted separate
distribution plans under Rule 12b-1 of the 1940 Act. The Plans permit the
Fund to reimburse the Underwriter for expenses incurred in connection with
activities intended to promote the sale of shares of each Class. Pursuant to
each Plan, with respect to Class A Shares, the Fund may reimburse the
Underwriter for actual expenses of the Underwriter related to that class up
to 0.30% annually of the average daily net assets of the Fund, and, with
respect to Class B Shares, the Fund may reimburse the Underwriter for actual
expenses of the Underwriter related to that class up to 0.75% annually of the
average daily net assets of the Fund. Expenditures under the Plans shall
consist of: (i) commissions to sales personnel for selling shares of the Fund
including Underwriting fees and financing expenses for sales of shares; (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 Underwriter 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
15
<PAGE>
services that the Trustees of the Fund determine are reasonably calculated to
result in the sale of shares of the Fund, provided, however, that a portion
of such amount equal to or less than 0.25% annually of the average daily net
assets of Fund shares may be paid for reimbursing the costs of providing
services to shareholders, including assistance in connection with inquiries
related to shareholder accounts (the "Service Fee").
Expenses not reimbursed during any year, because of the limitations on
reimbursements, may be carried over and paid in future years when actual
expenses are less than the respective limits under each Plan. If a
reimbursement appears probable, it will be accounted for as a current expense
of the Fund regardless of the time period over which the reimbursement may
actually be paid by the Fund. If the Plans are terminated in accordance with
their terms, the obligations of the Fund to make payments to the Underwriter
pursuant to the Plans, including payments for expenses carried over from
previous years, 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 Underwriter 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 Underwriter) 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 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 Underwriter may,
from time to time, reallow the entire portion of the sales charge 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 Trustees have concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. The Plan was approved by
shareholders of the Fund at a special meeting of shareholders held on May 7,
1993. For the fiscal year ended October 31, 1995, the Fund paid 12b-1 fees in
the amount of $60,745 of which the principal underwriter of the Fund received
$40,665. The 12b-1 payments were used for (1) compensating dealers (52,159),
(2) compensating sales personnel (7,606), and (3) compensating the
Underwriter for marketing material (980).
On a quarterly basis, the Fund's Trustees review a report on expenditures
under the Plans and the purposes for which expenditures were made. The
Trustees conduct an additional, more extensive review annually in determining
whether the Plans will be continued. By its terms, continuation of the Plans
from year to year is contingent on annual approval by a majority of the
Fund's Trustees and by a majority of the 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 the Plans or any related agreements
(the "Plan Trustees"). The Plans provides 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 the Fund and that other material
amendments to the Plans must be approved by a majority of the Plan Trustees
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 Trustees who are not "interested persons" shall
be committed to the discretion of the Trustees who are not "interested
persons". The Plans may be terminated at any time by vote of a majority of
the Plan Trustees or a majority of the outstanding shares of the Fund.
The Underwriting Agreements may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Underwriter, by
vote of a majority of the outstanding class of voting securities of the Fund,
or by vote of a majority of the Fund's Trustees who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreements. The Underwriting Agreement
will terminate automatically in the event of its assignment.
The National Association of Securities Dealers ("NASD"), recently approved
certain amendments to the NASD's mutual fund maximum sales charge rule. The
amendments would, under certain circumstances, regard distribution fees as
asset-based sales charges subject to NASD sales load limits. The NASD's
maximum sales charge rule may require the Trustees to suspend distribution
fees or amend the Plan.
16
<PAGE>
TRUSTEES AND OFFICERS
The following table sets forth information concerning the Trustees 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 Trustee is 56 Prospect Street, Hartford, Connecticut, 06115-0480.
On November 15, 1995, the Trustees voted to increase the number of Trustees
to fourteen and to appoint Francis E. Jeffries, Everett L. Morris and Calvin
J. Pedersen to fill the vacancies caused by the increase. The elected and
appointed Trustees and executive officers are listed below:
<TABLE>
<CAPTION>
Positions
Held
With The Principal Occupations
Name and Address Fund During Past 5 Years
- ----------------------------- --------- ---------------------------------------------------------------
<S> <C> <C>
C. Duane Blinn (68) Trustee Partner in the law firm of Day, Berry & Howard.
Day, Berry & Howard Director/Trustee, Phoenix Funds (1980-present),
City Place Director/Trustee, the National Affiliated Investment
Hartford, CT 06103 Companies (until 1993).
Robert Chesek (61) Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Director/Trustee, the National Affiliated
Wethersfield, CT 06109 Investment Companies (until 1993). Vice President, Common
Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994).
E. Virgil Conway (66) Trustee Trustee/Director, Consolidated Edison Company of New York,
9 Rittenhouse Road Inc. (1970-present), Pace University (1978-present), Atlantic
Bronxville, NY 10708 Mutual Insurance Company (1974-present), HRE Properties
(1989-present), Greater New York Councils, Boy Scouts of
America (1985-present), Union Pacific Corp. (1978-present),
Blackrock Fund for Fannie Mae Mortgage Securities (Advisory
Director) (1989-present), Centennial Insurance Company;
Josiah Macy, Jr., Foundation, and The Harlem Youth
Development Foundation. Chairman, Metropolitan Transportation
Authority (1992-present). Chairman, Audit Committee of the
City of New York (1981-present). Director/Trustee, Phoenix
Funds (1993-present). Director/Trustee, the National
Affiliated Investment Companies (until 1993). Director,
Accuhealth (1994-present), Trism, Inc. (1994-present).
Director, Realty Foundation of New York (1972- present), and
Chairman, New York Housing Partnership Development Corp.
(1981-present). Advisory Director, Fund Directions (1993-
present). Former Director, New York Chamber of Commerce and
Industry (1974-1990).
Harry Dalzell-Payne (66) Trustee Director/Trustee, Phoenix Funds (1983-present). Director,
330 East 39th St. Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee,
Apt. 29G the National Affiliated Investment Companies (1983-1993).
New York, NY 10016 Consultant, The Levett Group Holding, Inc. (1989-1990).
Independent real estate market consultant (1982-1990).
Formerly a Major General of the British Army.
*Francis E. Jeffries (65) Director Chairman of the Board, Phoenix Duff & Phelps Corporation.
Phoenix Duff & Phelps Trustee, Phoenix Duff & Phelps Mutual Funds. Director, Duff &
Corporation Phelps Utilities Income Fund, Duff & Phelps Utilities
55 East Monroe Street Tax-Free Income, Inc., Duff & Phelps Utility and Corporate
Suite 3600 Bond Trust, Inc. and The Empire District Electric Company.
Chicago, IL 60603 (Director 1989-1995), Chief Executive Officer (1992-1995) and
President (1989-1993), Duff & Phelps Corporation.
Leroy Keith, Jr. (57) Trustee Director/Trustee, Phoenix Funds (1980-present). Director,
Chairman and Chief Equifax Corp. (1991-present), and Keystone International
Executive Officer Fund, Inc. (1989-present). Trustee, Keystone Liquid Trust,
Carson Products Company Keystone Tax Exempt Trust, Keystone Tax Free Fund, Master
64 Ross Road Reserves Tax Free Trust, and Master Reserves Trust.
Savannah, GA 31405 Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993).
President, Morehouse College (1987-1994). Chairman and Chief
Executive Officer, Keith Ventures (1994-1995). Chairman and
Chief Executive Officer, Carson Products Company (1995-present).
17
<PAGE>
*Philip R. McLoughlin (49) Trustee Director, Vice Chairman and Chief Executive Officer, Phoenix
and Duff & Phelps Corporation (1995-present). Director
President (1994-present) and Executive Vice President, Investments
(1987-present), Phoenix Home Life Mutual Insurance Company.
Director/Trustee and President, Phoenix Funds (1989-present).
Director (1983-present) and Chairman (1995-present), Phoenix
Investment Counsel, Inc. Director (1984-present) and
President (1990-present), Phoenix Equity Planning
Corporation. Director, Phoenix Realty Group, Inc.
(1994-present), Phoenix Realty Advisors, Inc. (1987-present),
Phoenix Realty Investors, Inc. (1994-present), Phoenix Realty
Securities, Inc. (1994-present), Phoenix Founders, Inc.
(1981-present), PXRE Corporation (Delaware) (1985-present),
World Trust Fund (1991-present). Director/ Trustee, the
National Affiliated Investment Companies (until 1993).
Director (1994-present), Chairman (1993-1995), President and
Chief Executive Officer (1995-present), National Securities &
Research Corporation and Director and President, Phoenix
Securities Group, Inc. (1993-1995). Director (1992-present)
and President (1992-1994), W.S. Griffith & Co. Inc. and
Director (1992-1995) and President (1992-1994) Townsend
Financial Advisers, Inc. Director and Vice President, PM
Holdings, Inc. (1985-present)
Everett L. Morris (67) Director Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director, Duff & Phelps Utilities Tax-Free Income, Inc., Duff
Colts Neck, N.J. 07722 & Phelps Utility and Corporate Bond Trust, Inc., Public
Service Enterprise Group Incorporated and President and Chief
Operating Officer of Enterprise Diversified Holdings
Incorporated (1992-1993). Senior Executive Vice President and
Chief Financial Officer, Public Service Electric and Gas
Company (1991-1992). Director, First Fidelity Bank, N.A.,
N.J. (until 1991).
James M. Oates (49) Trustee Director, Phoenix Duff & Phelps Corporation (1995-present).
Managing Director Director/ Trustee, Phoenix Funds (1987-present). Director,
The Wydown Group Govett Worldwide Opportunity Funds, Inc. (1991-present), Blue
50 Congress St. Cross and Blue Shield of New Hampshire (1994-present),
Suite 1000 Investors Financial Services Corporation (1995-present), and
Boston, MA 02109 Investors Bank & Trust Corporation (1995-present), Stifel
Financial Corporation (1986-1995). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Director and President (1984-1994) and Chief Executive
Officer (1986-1994), Neworld Bank. Director, Savings Bank
Life Insurance Company (1988-1994).
*Calvin J. Pedersen (54) Director Director (since 1992) and President (since July 1993),
Phoenix Duff & Phelps Phoenix Duff & Phelps Corporation. Executive Vice President,
Corporation Duff & Phelps (January 1992 to July 1993). President and
55 East Monroe Street Chief Executive Officer, Duff & Phelps. Director, Duff &
Suite 3600 Phelps Utilities Tax-Free Income, Inc. and Duff & Phelps
Chicago, IL 60603 Utility and Corporate Bond Trust, Inc. Trustee, Phoenix Duff
& Phelps Mutual Funds.
* Messrs. Jeffries, McLoughlin 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.
18
<PAGE>
Philip R. Reynolds (68) Trustee Director/Trustee, Phoenix Funds (1984-present). Director,
43 Montclair Drive Vestaur Securities, Inc. (1972-present). Trustee and
West Hartford, CT 06107 Treasurer, J. Walton Bissell Foundation, Inc. and Treasurer,
J. Walton Bissell Foundation, Inc. (1988-present)
Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Herbert Roth, Jr. (67) Trustee Director/Trustee, Phoenix Funds (1980-present). Director,
134 Lake Street Boston Edison Company (1978-present), Phoenix Home Life
P.O. Box 909 Mutual Insurance Company (1972-present), Landauer, Inc.
Sherborn, MA 01770 (medical services) (1970-present), Tech Ops./Sevcon Inc.
(electronic controllers) (1987-present), Key Energy Group
(oil rig service) (1988-1993), and Mark IV Industries
(diversified manufacturer) (1985-present). Director/Trustee,
the National Affiliated Investment Companies (until 1993).
Richard E. Segerson (50) Trustee Director/Trustee, Phoenix Funds (1993-present). Consultant,
102 Valley Road Tootal Group (1989-1991). Vice President and General Manager,
New Canaan, CT 06840 Coats & Clark (previously Tootal American, Inc.) (1991-1993).
Director/Trustee, the National Affiliated Investment
Companies (1984-1993).
Lowell P. Weicker, Jr. (64) Trustee Trustee/Director, the Phoenix Funds (1995-present). Chairman,
Dresing Lierman Weicker Dresing, Lierman, Weicker (1995-present). Director, UST, Inc.
6931 Arlington Road (1995-present). Governor of the State of Connecticut
Suite 501 (1991-1995).
Bethesda, MD 20814
Martin J. Gavin (45) Executive Executive Vice President-Finance and Operations, Phoenix Duff
Vice & Phelps Corporation (1995-present). Senior Vice President,
President Investment Products, Phoenix Home Life Mutual Insurance
Company (1989-1995). Director and Executive Vice President,
Phoenix Equity Planning Corporation (1990-present). Director
(1994-present) and Executive Vice President (1991-present),
Phoenix Investment Counsel, Inc. Director and Executive Vice
President, Phoenix Securities Corp. (1993-1995), National
Securities & Research Corporation (1993-present) and Townsend
Financial Advisers, Inc. (1993-1995). Executive Vice
President, Phoenix Funds (1995-present). Executive Vice
President, National Affiliated Investment Companies (until
1993). Director and Vice President, PM Holdings (1994-1995).
Director (1993-present) and Executive Vice President
(1993-1994) W.S. Griffith & Co., Inc.
Michael E. Haylon (38) Executive Executive Vice President-Investments, Phoenix Duff & Phelps
Vice Corporation (1995-1995). Senior Vice President, Securities
President Investments, Phoenix Home Life Mutual Insurance Company
(1993-present). Director and Executive Vice President
(1994-present), National Securities & Research Corporation.
Executive Vice President, Phoenix Funds (1995-present) and
Director (1994-present) and President (1995-present), Phoenix
Investment Counsel, Inc. Director, Phoenix Equity Planning
Corporation (1995-present). Various other positions with
Phoenix Home Life Mutual Insurance Company (1990-1993).
David L. Albrycht (34) Vice Portfolio Manager, Phoenix Home Life Mutual Insurance Company
President (1990-1995). Vice President, Phoenix Multi-Sector Short Term
Bond Fund (1993-present), Phoenix Multi-Portfolio Fund
(1993-present) and Phoenix Investment Counsel, Inc.
(1995-present). Investment Officer, National Securities &
Research Corporation (1994-present).
19
<PAGE>
James M. Dolan (46) Vice Vice President and Compliance Officer (1994-present) and
100 Bright Meadow Blvd. President Assistant Secretary (1981-present), Phoenix Equity Planning
P.O. Box 2200 Corporation. Vice President, Phoenix Funds (1989-present).
Enfield, CT 06083-2200 Vice President (1991-present), Assistant Clerk and Assistant
Secretary (1982-present), Phoenix Investment Counsel, Inc.
Vice President and Chief Compliance Officer (1994-present),
Phoenix Realty Advisors, Inc. and Chief Compliance Officer
(1995-present), Phoenix Realty Securities, Inc. Assistant
Vice President (1993-1994), Vice President and Compliance
Officer, Assistant Secretary, National Securities & Research
Corporation (1994-present). Vice President, the National
Affiliated Investment Companies (until 1993). Various other
positions with Phoenix Equity Planning Corporation
(1978-1994).
William R. Moyer (51) Vice Senior Vice President and Chief Financial Officer, Phoenix
100 Bright Meadow Blvd. President Duff & Phelps Corporation (1995-present). Vice President,
P.O. Box 2200 Investment Products Finance, Phoenix Home Life Mutual
Enfield, CT 06083-2200 Insurance Company (1990-1995). Senior Vice President, Finance
(1990-present), and Treasurer (1994-present), Phoenix Equity
Planning Corporation, and Phoenix Investment Counsel, Inc.
Vice President, Phoenix Funds (1990-present). Vice President,
the National Affiliated Investment Companies (until 1993).
Senior Vice President, Finance, Phoenix Securities Group,
Inc. (1993-1995). Senior Vice President, Finance
(1993-present), and Treasurer (1994-present), National
Securities & Research Corporation. Senior Vice President,
Chief Financial Officer (1993-1995) and Treasurer
(1994-1995), W.S. Griffith & Co., Inc. and Townsend Financial
Advisers.
Leonard J. Saltiel (42) Vice Vice President, Investment Operations, Phoenix Home Life
President Mutual Insurance Company (1994-present). Senior Vice
President, Phoenix Equity Planning Corporation
(1994-present). Vice President, Phoenix Funds (1994-present)
and National Securities & Research Corporation
(1994-present). Various positions with Home Life Insurance
Company and Phoenix Home Life Mutual Insurance Company
(1987-1994).
Nancy G. Curtiss (43) Treasurer Second Vice President and Treasurer, Fund Accounting, Phoenix
Home Life Mutual Insurance Company (1994-present). Treasurer,
Phoenix Funds (1994-present). Vice President, Fund
Accounting, Phoenix Equity Planning Corporation
(1994-present). Various positions with Phoenix Home Life
Insurance Company (1987-1994).
G. Jeffrey Bohne (48) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations, Phoenix Equity Planning Corporation
(1993-present). Secretary, the Phoenix Funds (1993-present).
Vice President, Home Life of New York Insurance Company
(1984-1992).
</TABLE>
For services rendered to the Fund for the fiscal year ended October 31,
1995, the Trustees received aggregate remuneration of $27,709. For services
on the Boards of Directors/Trustees of the Phoenix Funds, each Trustee who is
not a full-time employee of the Adviser or any of its affiliates currently
receives a retainer at the annual rate of $36,000 and a fee of $2,000 per
joint meeting of the Boards. Each Trustee who serves on the Audit Committee
receives a retainer at the annual rate of $2,000 and a fee of $2,000 per
joint Audit Committee meeting attended. Each Trustee who serves on the
Nominating Committee receives a retainer at the annual rate of $1,000 and a
fee of $1,000 per joint Nominating Committee meeting attended. Each Trustee
who serves on the Executive Committee and who is not an interested person of
the Fund receives a retainer at the annual rate of $1,000 and $1,000 per
joint Executive Committee meeting attended. Trustees costs are allocated
equally to each of the Series and Funds within the
20
<PAGE>
Fund complex. The foregoing fees do not include the reimbursement of expenses
incurred in connection with meeting attendance. Officers and interested
Trustees of the Fund are compensated for their services by the Adviser and
receive no compensation from the Fund.
For the Fund's last fiscal year ending October 31, 1995, the Trustees
received the following compensation:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement Benefits Estimated From Fund and
Compensation Accrued as Part Annual Benefits Fund Complex
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ------------------------- ------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
C. Duane Blinn $1,740* $50,000
Robert Chesek $1,390 $40,000
E. Virgil Conway $1,775 $51,000
Harry Dalzell-Payne $1,455 $42,000
Leroy Keith, Jr. $1,395 None None $40,000
Philip R. McLoughlin $ 0 for any for any $ 0
James M. Oates $1,740 Trustee Trustee $50,000
Philip R. Reynolds $1,455 $42,000
Herbert Roth, Jr. $1,840* $53,000
Richard E. Segerson $1,740 $50,000
Lowell P. Weicker, Jr. $ 630 $21,000
</TABLE>
*This compensation (and the earnings thereon) was deferred pursuant to the
Trustees' Deferred Compensation Plan.
On October 31, 1995, the Trustees and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
OTHER INFORMATION
Independent Accountants
Price Waterhouse LLP has been selected as independent accountants for the
Fund.
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 a
semi-annual report containing unaudited financial statements to the
shareholders. An annual report, containing financial statements audited by
independent accountants, will be sent to shareholders each year, and is
available without charge upon request.
Financial Statements
Financial information relating to the Fund is contained in the Annual Report
to Shareholders for the year ended October 31, 1995 and is available by
calling Equity Planning at (800) 243-4361, or by writing to Equity Planning
at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200. 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.
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 Class A and Class
B 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, 1995, the Class A Shares yield, calculated pursuant
to this formula, was 66.9%. The Class B Shares yield was 6.44% calculated
pursuant to this formula.
21
<PAGE>
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).
The Fund's Class A Shares average total return quotation for the period
November 1, 1994 through October 31, 1995 was 7.71%. The Class B Shares
average annual total return for the same period was 7.71%. The average annual
total return since inception July 6, 1992 through October 31, 1995 for Class A
Shares and Class B Shares was 5.10% and 5.26%, respectively.
It was assumed, for the purpose of the above computation that (i) the
maximum sales charge of 2.25% was deducted for the initial payment on Class A
Shares; (ii) that the maximum contingent deferred sales charge of 2% was
applied to Class B Shares; and (iii) all dividends and distributions on each
class of shares will be reinvested at the offering price as described in the
Fund's prospectus. The computation reflects all recurring fees that are
charged to all shareholder accounts. Moreover, the ending redeemable value
assumes a complete redemption at the end of the 1, 5 or 10 year period.
22
PHOENIX ASSET RESERVE
MARKET AND PORTFOLIO REVIEW
Fund Description: Phoenix Asset Reserve Fund invests in a wide variety of
short-term fixed-income securities. These securities may include U.S.
treasury, agency, corporate and yankee bonds, as well as mortgage-backed and
asset-backed securities. The Fund emphasizes the most undervalued sectors of
the market and de-emphasizes the most overvalued sectors.
Investment Environment: Over the twelve-month reporting period ended October
31, 1995, the fixed-income investment environment has improved dramatically.
A favorable combination of slowing economic growth and moderate inflation has
translated into a strong bond market rally. This rally could be extended if
Congress passes significant deficit reduction legislation. Also, the recent
strength of the U.S. dollar is a positive factor for continued moderate
inflation.
- ------------------------------ [LINE GRAPH] ----------------------------------
12/15/89
10/31/90
10/31/91 [PLOT POINTS UNAVAILABLE--REQUEST FROM CLIENT?]
10/31/92
10/31/93
10/31/94
10/31/95
- --------------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on July 6,
1992 (inception of the Fund).
Total returns for Class A shares reflect the maximum sales charge of 2.25% on
the initial investment and assume reinvestment of dividends and capital
gains. Class B shares reflect the 2% contingent deferred sales charge (CDSC),
which is applicable on all shares redeemed during the 1st year after purchase
and 1.5% for all shares redeemed during the 2nd year after purchase (scaled
down to 1%-3rd year and 0% thereafter). The investment return and principal
value of the investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less at redemption than at purchase price.
Returns indicate past performance, which is not predictive of future
performance.
*The Merrill Lynch Corporate Medium Quality Bond Index is an unmanaged but
commonly used index that tracks the returns of 410 corporate issues rated
between BBB and A by Standard & Poor's, with maturities from 1 to 3 years. The
index's performance does not reflect sales charges.
**Foreign investing involves special risks, such as currency fluctuation, less
public disclosure as well as economic and political risks.
Portfolio Review: The Fund turned in strong results over this reporting
period. For the twelve-month period ended October 31, 1995, the Fund's Class
A shares produced a total return of 10.27% and Class B shares returned 9.71%.
As measured by the Merrill Lynch Corporate Medium Quality Bond Index, the
market returned 9.49% for the same period. Our outperformance can be
explained by the overweighting in investment-grade corporates, high-yield
corporates and commercial mortgage-backed securities.
Outlook: Our outlook for the bond market remains positive. In the months
ahead, we expect to de-emphasize U.S. treasury securities in favor of more
attractive market sectors. Currently, we have increased exposure to
commercial mortgage-backed securities as positive market technicals have
resulted in attractive valuations. We also continue to overweight the yankee
bond sector. Our focus is on Argentinean and Brazilian corporate bonds, given
the improving political and economic momentum in these countries. Lastly, we
have decreased our exposure to non-dollar securities since we believe that
U.S. dollar-denominated securities represent better relative value.
Average Annual Total Returns for Periods Ending 10/31/95
From Inception
7/6/92 to
1 Year 10/31/95
- -----------------------------------------------------------------------
Class A with 2.25% sales charge 7.71% 5.10%
- -----------------------------------------------------------------------
Class A at net asset value 10.27% 5.80%
- -----------------------------------------------------------------------
Class B with CDSC 7.71% 5.26%
- -----------------------------------------------------------------------
Class B at net asset value 9.71% 5.26%
- -----------------------------------------------------------------------
Merrill Lynch Corporate Medium
Quality Bond Index* 9.49% 5.90%
- -----------------------------------------------------------------------
<PAGE>
Phoenix Asset Reserve
INVESTMENTS AT OCTOBER 31, 1995
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------- ----- --------------
U.S. GOVERNMENT SECURITIES--10.6%
U.S. Treasury Notes--3.6%
U.S. Treasury Notes 6%, '97 Aaa $500 $ 503,220
-------------
Agency Mortgage-Backed Securities--7.0%
GNMA 9%, '25 Aaa 927 974,687
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $1,475,268) 1,477,907
-------------
NON-CONVERTIBLE BONDS--58.9%
Airlines--1.1%
AMR Corp. 7.75%, '97 Baa 155 158,215
-------------
Auto & Trucks--2.0%
Cummins Engine, Inc. 10.39%, '96 Baa 275 284,281
-------------
Banks--2.6%
Banponce Financial Corp. 5.48%,
'98 Baa 375 366,183
-------------
Chemical-Specialty--2.2%
Borden Chemical & Plastics 9.50%,
'05 Ba 300 309,000
-------------
Entertainment, Leisure & Gaming--1.2%
Time Warner, Inc. 6.835%, '00 (d) Ba 162 162,810
-------------
Hospital Management & Services--2.9%
Tenet Healthcare Corp. 9.625%,
'02 Ba 375 405,000
-------------
Metals & Mining--1.8%
USX Corp. 6.375%, '98 Baa 250 246,410
-------------
Natural Gas--1.9%
Arkla, Inc. 9.875%, '97 Ba 250 261,585
-------------
Non-Agency Mortgage Backed--33.7%
Bear Stearns Mortgage 95-1, 2B3
144A 7.40%, '10 (b) NR 327 282,446
Countrywide Funding Corp. 93-12,
B3 6.625%, '24 Baa 233 229,452
G.E. Capital Corp. 94-26, B2
7.03%, '09 Ba 287 276,068
Kidder PeabodyAcceptance Corp.
94-C2, D 7.18%, '05 BBB((c)) 350 342,125
Merrill Lynch Mortgage, Inc.
95-C2, C 7.79%, '21 A 250 254,649
Nomura Asset Securities Corp.
94-MD2, A6 7.14%, '03 (d) A((c)) 205 204,009
Non-Agency Mortgage Backed--continued
Prudential Home Mortgage 93-L,
3B2 144A 6.641%, '23 (b) NR $250 $ 236,250
Resolution Trust Corp. 93-N3, 3
144A 7.80%, '03 (b) Ba 208 208,333
Resolution Trust Corp. 91-M5, A
9%, '17 Aa 424 444,081
Resolution Trust Corp. 92-C3, B
9.05%, '23 AA((c)) 205 210,944
Resolution Trust Corp. 93-C1, B
8.75%, '24 Aa 500 517,656
Resolution Trust Corp. 93-C3, A4
6.55%, '24 Aaa 122 121,733
Resolution Trust Corp. 93-C2, B
7.75%, '25 AA((c)) 250 256,957
Resolution Trust Corp. 95-C1, A5
6.0205%, '27 Aaa 258 256,569
Resolution Trust Corp. 95-1, C2
7.50%, '28 Baa 368 364,700
Salomon Brothers Mortgage Trust
VII93-C1, A1 6.47%, '23 Aa 241 240,435
White Hall Partners 95-C1, B
7.43%, '25 A((c)) 250 252,969
-------------
4,699,376
-------------
Oil--2.6%
Tosco Corp. 9%, '97 Ba 350 362,240
-------------
Telecommunications Equipment--2.3%
Panamsat L.P. 9.75%, '00 Ba 300 317,250
-------------
Utility-Electric--1.8%
Coso Funding Corp. 144A 7.99%,
'97 (b) Baa 250 253,125
-------------
Utility-Gas--2.8%
Crown Central Petroleum 10.875%,
'05 Ba 375 394,688
-------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $8,110,403) 8,220,163
-------------
FOREIGN NON-CONVERTIBLE BONDS--8.9%
Argentina--1.7%
Compania Nav Perez Co. 144A
8.375%, '98 (b) NR 250 238,750
-------------
Columbia--1.9%
Financiera Energ Nacional 144A
9%, '99 (b) BBB((c)) 250 257,500
-------------
Mexico--3.5%
Fomento Economico Mexicano Euro
9.50%, '97 NR 250 243,750
See Notes to Financial Statements
<PAGE>
Mexico--(continued)
Fomento Economico Mexicano 144A
Euro 9.50%, '97 (b) NR $250 $ 243,750
-------------
487,500
-------------
Singapore--1.8%
Asia Pulp & Paper Co. Yankee
11.75%, '05 Ba 250 255,625
-------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $1,240,480) 1,239,375
-------------
FOREIGN GOVERNMENT SECURITIES--9.3%
Argentina--2.1%
Republic of Argentina Bearer FRB
6.8125%,
'05 (d) B 500 297,813
-------------
Brazil--3.2%
Republic of Brazil Discount
Series ZL 6.8125%,
'24 (d) NR 750 447,187
-------------
Philippines--1.3%
Central Bank of Philippines NMB
Euro 6.8125%,
'05 (d) BB((c)) 200 180,125
-------------
Poland--2.7%
Poland Discount Euro 6.875%, '24
(d) NR 500 383,125
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $1,275,088) 1,308,250
-------------
MUNICIPAL BONDS--3.6%
New York--3.6%
Beth Israel Medical Center
Taxable 6.52%, '97 Aaa $500 $ 501,425
-------------
TOTAL MUNICIPAL BONDS
(Identified cost $500,850) 501,425
-------------
TOTAL LONG-TERM INVESTMENTS--91.3%
(Identified cost $12,602,089) 12,747,120
-------------
SHORT-TERM OBLIGATIONS--7.2%
Commercial Paper--6.0%
AT&T Corp. 5.70%, 11-1-95 P-1 290 290,000
BellSouth Telecommunications,
Inc. 5.75%, 11-9-95 P-1 300 299,617
GTE North, Inc. 5.79%, 11-10-95 P-1 250 249,638
-------------
839,255
-------------
Federal Agency Securities--1.2%
Federal Home Loan Mortgage 5.85%, 11-1-95 160 160,000
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $999,255) 999,255
-------------
TOTAL INVESTMENTS--98.5%
(Identified cost $13,601,344) 13,746,375(a)
=============
Cash & receivables, less liabilities--1.5% 216,222
-------------
NET ASSETS--100.0% ........................................$13,962,597
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $194,707 and gross
depreciation of $75,154 for income tax purposes. At October 31, 1995, the
aggregate cost of securities for federal income tax purposes was
$13,626,822. At October 31, 1995, the Fund had capital loss carryforwards
aggregating $500,786 available to offset future gains and expiring as
follows: $192,085 in 2002 and $308,701 in 2003.
(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,
1995, these securities amounted to a value of $1,720,154 or 12.3% of net
assets.
(c) As rated by Standard & Poor's, Fitch and/or Duff & Phelp's.
(d) Variable rate; interest rate shown reflects the rate currently in effect.
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
Assets
Investment securities at value
(Identified cost $13,601,344) $13,746,375
Cash 5,600
Receivables
Interest 167,441
Receivable from adviser 62,358
Fund shares sold 46,098
Deferred organization expense 28,292
-----------
Total assets 14,056,164
-----------
Liabilities
Payables
Fund shares repurchased 14,425
Income distribution payable 15,205
Distribution fee 4,937
Financial agent fee 352
Trustees' fee 6,758
Transfer agent fee 4,234
Accrued expenses 47,656
-----------
Total liabilities 93,567
-----------
Net Assets $13,962,597
===========
Net Assets Consist of:
Capital paid in on shares of beneficial
interest $14,359,168
Distributions in excess of net investment
income (15,205)
Accumulated net realized losses (526,397)
Net unrealized appreciation 145,031
-----------
Net Assets $13,962,597
===========
Class A
Shares of beneficial interest outstanding,
$0.01 par value, unlimited authorization
(Net Assets $9,303,367) 1,961,242
Net asset value per share $4.74
Offering price per share
$4.74/(1-2.25%) $4.85
Class B
Shares of beneficial interest outstanding,
$0.01 par value, unlimited authorization
(Net Assets $4,659,230) 982,080
Net asset value and offering price per share $4.74
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
Investment Income
Interest $1,159,337
----------
Total investment income 1,159,337
----------
Expenses
Investment advisory fee 78,929
Distribution fee--Class A 23,443
Distribution fee--Class B 37,302
Financial agent fee 4,305
Registration 58,728
Transfer agent 53,741
Printing 43,801
Professional 37,524
Trustees 27,709
Custodian 18,482
Amortization of deferred organization
expense 16,716
Miscellaneous 14,955
----------
Total expenses 415,635
Less fees reimbursed by Adviser (247,284)
----------
Net expenses 168,351
----------
Net investment income 990,986
----------
Net Realized and Unrealized
Gain (Loss) on Investments
Net realized loss on securities (340,004)
Net unrealized appreciation on investments 716,254
----------
Net gain on investments 376,250
----------
Net increase in net assets resulting from
operations $1,367,236
==========
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year Year
Ended Ended
October 31, October 31,
1995 1994
-------------- ---------------
From Operations
Net investment income $ 990,986 $ 795,158
Net realized loss (340,004) (197,642)
Net unrealized appreciation
(depreciation) 716,254 (553,898)
------------- --------------
Increase in net assets resulting
from operations 1,367,236 43,618
------------- --------------
From Distributions to Shareholders
Net investment income--Class A (661,287) (491,625)
Net investment income--Class B (326,755) (279,100)
Net realized gains--Class A -- (42,320)
Net realized gains--Class B -- (23,734)
Tax return of capital--Class A -- (21,252)
Tax return of capital--Class B -- (12,065)
------------- --------------
Decrease in net assets resulting
from distributions to shareholders (988,042) (870,096)
------------- --------------
From Share Transactions
Class A
Proceeds from sales of shares
(1,676,012 and 1,907,229 shares,
respectively) 7,796,116 9,055,762
Net asset value of shares issued
from reinvestment of distributions
(103,434 and 75,198 shares,
respectively) 479,080 387,214
Cost of shares repurchased
(1,851,728 and 1,339,067 shares,
respectively) (8,606,909) (6,389,169)
------------- --------------
Total (331,713) 3,053,807
------------- --------------
Class B
Proceeds from sales of shares
(259,029 and 944,497 shares,
respectively) 1,195,146 4,434,897
Net asset value of shares issued
from reinvestment of distributions
(47,980 and 42,799 shares,
respectively) 221,981 222,357
Cost of shares repurchased
(717,637 and 402,570 shares,
respectively) (3,290,924) (1,892,740)
------------- --------------
Total (1,873,797) 2,764,514
------------- --------------
(Decrease) increase in net assets
from share transactions (2,205,510) 5,818,321
------------- --------------
Net (decrease) increase in net
assets (1,826,316) 4,991,843
Net Assets
Beginning of period 15,788,913 10,797,070
------------- --------------
End of period (including
distributions in excess of net
investment income of ($15,205) and
($14,488), respectively) $13,962,597 $15,788,913
============= ==============
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class A
-------------------------------------------------------
From
Year Ended Inception
October 31, 7/6/92 to
----------------------------------------
1995 1994 1993 10/31/92
------------ ------------ ------------ -------------
Net asset value,
beginning of
period $ 4.61 $ 4.91 $ 4.83 $ 4.89
Income from
investment
operations
Net investment
income 0.33((2)) 0.29((2)) 0.32((2)) 0.08((2))
Net realized and
unrealized gain
(loss) 0.13 (0.26) 0.08 (0.06)
---------- ---------- ---------- -----------
Total from
investment
operations 0.46 0.03 0.40 0.02
---------- ---------- ---------- -----------
Less
distributions
Dividends from
net investment
income (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) (0.32) (0.08)
---------- ---------- ---------- -----------
Change in net
asset value 0.13 (0.30) 0.08 (0.06)
---------- ---------- ---------- -----------
Net asset value,
end of period $ 4.74 $ 4.61 $ 4.91 $ 4.83
========== ========== ========== ===========
Total
return((1)) 10.27% 0.40% 8.49% 0.40%((5))
Ratios/supplemental
data:
Net assets, end
of period
(thousands) $9,303 $9,371 $6,829 $6,531
Ratio to average
net assets of:
Operating
expenses 1.00% 1.00% 1.00% 1.00%((4))
Net investment
income 7.07% 5.99% 6.39% 5.79%((4))
Portfolio
turnover 344% 121% 128% 6%((4))
Class B
----------------------------------------
From
Year Ended Inception
October 31, 7/6/92 to
1995 1994 1993 10/31/92
------- ------- ------- ----------
Net asset value,
beginning of
period $ 4.61 $ 4.91 $ 4.83 $ 4.89
Income from
investment
operations
Net investment
income 0.30((3)) 0.27((3)) 0.30((3)) 0.07((3))
Net realized and
unrealized gain
(loss) 0.13 (0.26) 0.08 (0.06)
------ ------ ------ ---------
Total from
investment
operations 0.43 0.01 0.38 0.01
------ ------ ------ ---------
Less
distributions
Dividends from
net investment
income (0.30) (0.27) (0.30) (0.07)
Dividends from
net realized
gains -- (0.03) -- --
Tax return of
capital -- (0.01) -- --
------ ------ ------ ---------
Total
distributions (0.30) (0.31) (0.30) (0.07)
------ ------ ------ ---------
Change in net
asset value 0.13 (0.30) 0.08 (0.06)
------ ------ ------ ---------
Net asset value,
end of period $ 4.74 $ 4.61 $ 4.91 $ 4.83
====== ====== ====== =========
Total return((1)) 9.71% -0.03% 8.02% 0.20%((5))
Ratios/supplemental
data:
Net assets, end
of period
(thousands) $4,659 $6,418 $3,968 $1,357
Ratio to average
net assets of:
Operating
expenses 1.50% 1.45% 1.45% 1.45%((4))
Net investment
income 6.59% 5.74% 5.79% 5.30%((4))
Portfolio
turnover 344% 121% 128% 6%((4))
((1)) Maximum sales charges are not included in total return calculation.
((2)) Includes reimbursement of operating expenses by investment adviser of
$0.08, $0.08, $0.09 and $0.14, respectively.
((3)) Includes reimbursement of operating expenses by investment adviser of
$0.08, $0.08, $0.09 and $0.21, respectively.
((4)) Annualized.
((5)) Not annualized.
See Notes to Financial Statements
<PAGE>
PHOENIX ASSET RESERVE
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Asset Reserve (the "Fund") is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management investment company. The Fund offers both
Class A and Class B shares. Class A shares are sold with a front-end sales
charge of up to 2.25%. Class B shares are sold with a contingent deferred
sales charge which declines from 2% to zero depending on the period of time
the shares are held. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. Income and expenses of the Fund
are borne pro rata by the holders of both classes of shares, except that each
class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. Security valuation:
Securities listed or traded on a national securities exchange are valued at
the last sale price, or if there had been no sale of the security on that
day, at the mean between the last bid and asked prices. Securities traded in
the over-the-counter market are valued at the mean between the last bid and
asked prices; and if no active market exists, at the bid price. Short-term
investments having a remaining maturity of less than sixty days 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 Trustees.
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. Dividend income is recorded on the
ex-dividend date or, in the case of certain foreign securities, as soon as
the Fund is notified. 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, partnerships, 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, other assets and liabilities are valued using the foreign
currency exchange rate effective at the end of the reporting period. Cost of
investments is translated at the currency exchange rate effective at the date
of settlement. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement dates of a portfolio transaction is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates, between the date income
is accrued and paid, is treated as a gain or loss on foreign currency. The
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. Organization Expense
In 1992 the Fund incurred organizational expenses in the amount of $82,967.
The Fund has deferred these expenses and is amortizing such expenses on a
straight line basis over five years from the date of commencement of
operations.
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 wholly-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled
to a fee at an annual rate of 0.55% of the average daily net assets of the
Fund. The Adviser has agreed to assume expenses of the Fund in excess of
1.00% of Class A and 1.50% of the average aggregate daily net asset value of
Class B shares. For the year ended October 31, 1995 the Adviser has
reimbursed the Fund $247,284 for such expenses.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp. ("PEPCO"),
an indirect wholly-owned subsidiary of PHL, has advised the Fund that it
received selling commissions of $2,985 for Class A shares and deferred sales
charges of $31,688 for Class B shares for the year ended October 31, 1995. In
addition, the Fund pays PEPCO a distribution fee at an annual rate of 0.25%
for Class A shares and 0.75% for Class B shares of
<PAGE>
PHOENIX ASSET RESERVE
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 (Continued)
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, 1995, $40,665 was earned by the Distributor and
$20,080 was earned by unaffiliated participants.
As Financial Agent of the Fund, PEPCO receives a fee at an annual rate of
0.03% of the average daily net assets of the Fund for bookkeeping,
administration and pricing services. PEPCO serves as the Fund's Transfer
Agent with State Street Bank and Trust as sub-transfer agent. For the year
ended October 31, 1995, transfer agent fees were $53,741 of which PEPCO
retained $396 which is net of the fees paid to State Street.
At October 31, 1995, PHL and affiliates held 24,525 Class A shares of the
Fund with a value of $116,251.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities, for the
year ended October 31, 1995, aggregated $45,382,948 and $47,159,919,
including $31,041,294 and $29,880,833, respectively, of U.S. Government
securities.
4. RECLASS 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, 1995,
the Fund has decreased undistributed net investment income by $3,661,
increased accumulated net realized gains by $11,375 and decreased capital
paid in on shares of beneficial interest by $7,714.
This report is authorized for use by other than shareholders only when
accompanied or preceded by the delivery of a current prospectus showing the
sales charge and other material information.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Logo: Price Waterhouse LLP] [Circle Logo: PW]
To the Trustees and Shareholders of
Phoenix Asset Reserve
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 Asset Reserve (the "Fund") at October 31, 1995, 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, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
December 18, 1995
<PAGE>
PHOENIX ASSET RESERVE
101 Munson Street
Greenfield, Massachusetts 01301
Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Leroy Keith, Jr.
Philip R. McLoughlin
James M. Oates
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Martin J. Gavin, Executive Vice President
Michael E. Haylon, Executive Vice President
David L. Albrycht, Vice President
James M. Dolan, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
National Securities & Research Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Principal Underwriter
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[Back cover]
Phoenix Asset Reserve
P.O. Box 2200
Enfield, CT 06083-2200
[double-diamond logo] Phoenix Duff & Phelps
PDP 681 (12/95)
Bulk Rate Mail
U.S. Postage
PAID
Springfield, MA
Permit No. 444
<PAGE>
[Front cover]
Phoenix Funds
Phoenix Asset Reserve
Annual Report
October 31, 1995
[graphic photo: antique dollar bills]
[double-diamond logo] Phoenix Duff & Phelps
<PAGE>
PHOENIX ASSET RESERVE
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 ended October 31, 1995, incorporated
by reference.
(b) Exhibits:
<TABLE>
<CAPTION>
<S> <C>
1. Declaration of Trust of the Registrant, previously
filed, and herein incorporated by reference.
1.1 Amendment to Declaration of Trust changing name of
Trust, filed with Post-Effective Amendment No. 4 on
February 27, 1995 and incorporated herein by
reference.
1.2 Amendment to Declaration of Trust changing name of
Fund and filed herewith.
2. By-laws of the Registrant, previously filed, and
herein incorporated by reference.
3. Not applicable.
4. Reference is made to Article V of the Registrant's
Declaration of Trust, as amended, and filed with the
Registration Statement referred to in Exhibit 1.1.
5. Management Agreement between Registrant and National
Securities & Research Corporation dated May 14,
1993, filed with Post-Effective Amendment No. 2 on
December 30, 1993 and incorporated herein by
reference.
5.1 Amendment to Management Agreement dated January 1,
1994, filed with Post-Effective Amendment No. 4 on
February 27, 1995 and incorporated herein by
reference.
6. (a) Underwriting Agreement for Class A Shares
between Registrant and Phoenix Equity Planning
Corporation ("Equity Planning") dated May 14, 1993,
filed with Post-Effective Amendment No. 2 on
December 30, 1993 and incorporated herein by
reference.
(b) Underwriting Agreement for Class B Shares
between Registrant and Equity Planning dated May 14,
1993, filed with Post-Effective Amendment No. 2 on
December 30, 1993 and incorporated herein by
reference.
7. None.
8. Custodian Contract between Registrant and State
Street Bank and Trust Company dated October 14,
1993, filed with Post-Effective Amendment No. 2 on
December 30, 1993 and incorporated herein by
reference.
9.1 Transfer Agency and Service Agreement between
Registrant and Phoenix Equity Planning Corporation
dated June 1, 1994, filed with Post-Effective
Amendment No. 4 on February 27, 1995 and
incorporated herein by reference.
9.2 Form of Sales Agreement, filed with Post-Effective
Amendment No. 2 on December 30, 1993 and
incorporated herein by reference.
9.3 Financial Agent Agreement between Registrant and
Phoenix Equity Planning Corporation dated May 25,
1994, filed with Post-Effective Amendment No. 4 on
February 27, 1995 and incorporated herein by
reference.
10. Opinion as to legality of the shares, previously
filed, and herein incorporated by reference.
11. Consent of Independent Accountants, filed herewith
and incorporated herein by reference.
12. Not applicable.
13. None.
14. None.
C-1
<PAGE>
15. (a) Distribution Plan for Class A Shares dated May
14, 1993, filed with Post-Effective Amendment No. 2
on December 30, 1993 and incorporated herein by
reference.
(b) Distribution Plan for Class B Shares dated May
14, 1993, filed with Post-Effective Amendment No. 2
on December 30, 1993 and incorporated herein by
reference.
16. Schedule for computation of yield and effective
yield quotations, filed with Post-Effective
Amendment No. 4 on February 27, 1995 and
incorporated herein by reference.
17. Financial Data Schedule filed herewith and reflected
on EDGAR as Exhibit 27.
18. Rule 18f-3 Dual Distribution Plan effective November
15, 1995, filed herewith, and incorporated herein by
reference.
19. Power of attorney, filed herewith and powers of
attorney filed with Post-Effective Amendment No. 3
on March 4, 1994 and a power of attorney filed with
Post-Effective Amendment No. 4 on February 27, 1995.
</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 30, 1995, the number of record holders of each class of
securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
- ---------------------------------------- -----------------
<S> <C>
Shares of Beneficial Interest--Class A 370
Shares of Beneficial Interest--Class B 305
</TABLE>
Item 27. Indemnification
Registrant's indemnification provision is set forth in Pre-Effective
Amendment No. 3 filed with the Securities and Exchange Commission on July 6,
1992, and is incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser
See "Management of the Fund" in the Prospectus and "Services of the Adviser"
and "Trustees and Officers" in the Statement of Additional Information, each
of which is included in this Post-Effective Amendment.
The directors and officers of National Securities & Research Corporation
(the "Adviser") and their business and other connections are as follows:
<TABLE>
<CAPTION>
Positions with
Name Investment Adviser Other Vocation or Employment
- -------------------------- ------------------------ -----------------------------------
<S> <C> <C>
Martin J. Gavin Director and Executive Executive Vice President -
Vice President Finance and Operations, Phoenix
Duff & Phelps Corporation. Senior
Vice President, Investment
Products, Phoenix Home Life
Mutual Insurance Company.
Director and Executive Vice
President, Phoenix Investment
Counsel, Inc., Phoenix Securities
Group, Inc. and Phoenix Equity
Planning Corporation. Director
and Executive Vice President,
W.S. Griffith & Co., Inc.,
Director and Vice President, PM
Holdings, Inc. Executive Vice
President, Phoenix Funds.
Michael E. Haylon Director and Executive Executive Vice President -
Vice President Investments, Phoenix Duff &
Phelps Corporation. Senior Vice
President, Securities
Investments, Phoenix Home Life
Mutual Insurance Company.
Executive Vice President, Phoenix
Funds. Director and President,
Phoenix Investment Counsel, Inc.
Director, Phoenix Equity Planning
Corporation.
C-2
<PAGE>
Philip R. McLoughlin President, CEO & Director, Vice Chairman and Chief
Director Executive Officer, Phoenix Duff &
Phelps Corporation. Director and
Executive Vice President,
Investments, Phoenix Home Life
Mutual Insurance Company.
Director and President, Phoenix
Equity Planning Corporation.
Director and Chairman, Phoenix
Investment Counsel, Inc.,
Director, Phoenix Realty
Advisors, Inc. Phoenix Realty
Group, Inc., Phoenix Realty
Investors, Inc., Phoenix Realty
Securities, Inc., Phoenix
Founders, Inc., and World Trust
Fund; Director and Vice
President, PM Holdings, Inc.
Director/Trustee/President of
the Phoenix Funds; President and
Director of Phoenix Securities
Group, Inc. Director, W.S.
Griffith & Co., Inc.
William R. Moyer Senior Vice President, Senior Vice President and Chief
Finance and Treasurer Financial Officer, Phoenix Duff &
Phelps Corporation. Vice
President, Investment Products
Finance, Phoenix Home Life Mutual
Life Insurance Company. Senior
Vice President, Finance and
Treasurer, Phoenix Equity
Planning Corporation and Phoenix
Investment Counsel, Inc. Vice
President, Phoenix Funds, Senior
Vice President, Finance, Phoenix
Securities Group, Inc., and
Senior Vice President, Chief
Financial Officer and Treasurer,
W.S. Griffith & Co., Inc.
William J. Newman Senior Vice President Vice President, Common Stock and
Chief Investment Strategist,
Phoenix Home Life Mutual
Insurance Company. Executive Vice
President, Phoenix Investment
Counsel, Inc. and Senior Vice
President, Phoenix Equity
Planning Corporation. Senior Vice
President, The Phoenix Edge
Series Fund and Phoenix
Multi-Portfolio Fund. Vice
President, Phoenix Strategic
Equity Series Fund.
Michael K. Arends Vice President Portfolio Manager, Phoenix Home
Lie Mutual Insurance Company.
Vice President, Phoenix Series
Fund, Phoenix Strategic Equity
Series Fund, and Phoenix
Investment Counsel, Inc.
Curtiss O. Barrows Vice President Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual
Insurance Company. Vice
President, Phoenix Series Fund,
Phoenix Multi-Portfolio Fund, The
Phoenix Edge Series Fund, and
Phoenix Investment Counsel, Inc.
James M. Dolan Vice President and Assistant Vice President
Compliance Officer, Compliance, Phoenix Home Life
Assistant Secretary Mutual Insurance Company. Vice
President and Compliance Officer,
Assistant Secretary, Phoenix
Equity Planning Corporation. Vice
President, Phoenix Funds. Vice
President, Assistant Clerk and
Assistant Secretary, Phoenix
Investment Counsel, Inc. Vice
President and Chief Compliance
Officer, Phoenix Realty Advisors,
Inc. and Chief Compliance
Officer, Phoenix Realty
Securities, Inc.
C-3
<PAGE>
Jeanne H. Dorey Vice President Portfolio Manager, International,
Phoenix Home Life Mutual
Insurance Company. Vice
President, The Phoenix Edge
Series Fund, Phoenix Multi-
Portfolio Fund, Phoenix
Investment Counsel, Inc. and
Phoenix Worldwide Opportunities
Fund.
Christopher J. Kelleher Vice President Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual
Insurance Company. Vice
President, Phoenix Series Fund,
The Phoenix Edge Series Fund and
Phoenix Investment Counsel, Inc.
Thomas S. Melvin, Jr. Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual
Insurance Company. Vice
President, Phoenix Investment
Counsel, Inc. and Phoenix
Multi-Portfolio Fund.
Amy L. Robinson Vice President Managing Director, Securities
Administration, Phoenix Home Life
Mutual Insurance Company. Vice
President, The Phoenix Edge
Series Fund, Phoenix Series Fund,
and Phoenix Investment Counsel,
Inc.
Leonard J. Saltiel Vice President Vice President, Investment
Operations, Phoenix Home Life
Mutual Insurance Company. Senior
Vice President, Phoenix Equity
Planning Corporation. Vice
President, Phoenix Funds.
Elizabeth R. Sadowinski Vice President Vice President, Mutual Fund
Customer Service, Phoenix Home
Life Mutual Insurance Company.
Vice President, Field and
Investor Services, Phoenix Equity
Planning Corporation.
Dorothy J. Skaret Vice President Director, Public Fixed Income,
Phoenix Home Life Mutual Life
Insurance Company. Vice
President, Phoenix Series Fund,
The Phoenix Edge Series Fund,
Phoenix Investment Counsel, Inc.
and Phoenix Realty Securities,
Inc.
James D. Wehr Vice President Managing Director, Public Fixed
Income, Phoenix Home Life Mutual
Insurance Company. Vice
President, Phoenix Series Fund,
The Phoenix Edge Series Fund,
Phoenix Multi-Portfolio Fund,
Phoenix Investment Counsel, Inc.,
and Phoenix California Tax-Exempt
Bonds Inc.
John T. Wilson Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual
Insurance Company. Vice
President, Phoenix
Multi-Portfolio Fund, The Phoenix
Edge Series Fund, Phoenix
Worldwide Opportunities Fund and
Phoenix Investment Counsel, Inc.
Eugene A. Charon Controller Controller, Phoenix Equity
Planning Corporation and Phoenix
Investment Counsel, Inc.
Thomas N. Steenburg Secretary Senior Vice President and
Counsel, Phoenix Duff & Phelps
Corporation. Counsel, Phoenix
Home Life Mutual Insurance
Company. Secretary, Phoenix
Investment Counsel, Inc. and
Phoenix Equity Planning
Corporation.
</TABLE>
C-4
<PAGE>
The respective principal addresses of the companies or other entities named
above are as follows:
<TABLE>
<CAPTION>
<S> <C>
Phoenix Duff & Phelps Corporation }56 Prospect Street
}P.O. Box 150480
}Hartford, CT 06115-0480
Phoenix Equity Planning Corporation }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
Phoenix Home Life Mutual Insurance Company }One American Row
}Hartford, CT 06115
Phoenix Investment Counsel, Inc. }One American Row
}Hartford, CT 06115-2520
Phoenix Realty Advisors, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Group, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Investors, Inc. }One American Row
}Hartford, CT 06115
Phoenix Realty Securities, Inc. }One American Row
}Hartford, CT 06115
Phoenix Securities Group, Inc. }One American Row
}Hartford, CT 06115
PM Holdings, Inc. }One American Row
}Hartford, CT 06115
The Phoenix Funds }101 Munson Street
}Greenfield, MA 01301
W.S. Griffith & Co., Inc. }100 Bright Meadow Boulevard
}P.O. Box 2200
}Enfield, CT 06083-2200
World Trust Fund }KREDIETRUST
}Societe Anonyme
}11, rue Aldringen
}L-2690 Luxembourg
}R.C. Luxembourg B 10.750
</TABLE>
Item 29. Principal Underwriter
(a) See "The Underwriter" and "How to Buy Shares" in the Prospectus and "The
National Distributor" and "Distribution Plans of," in the Statement of
Additional Information, both of which are included in this Post-Effective
Amendment to the Registration Statement.
(b)
<TABLE>
<CAPTION>
Position and
Name and Offices Position and Offices
Principal Address with Underwriter with Registrant
- -------------------------- ------------------- -----------------------------------
<S> <C> <C>
Martin J. Gavin Director and Executive Vice President
100 Bright Meadow Blvd. Executive
P.O. Box 2200 Vice President
Enfield, CT 06083-2200
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
C-5
<PAGE>
Philip R. McLoughlin Director and Trustee and President
One American Row President
Hartford, CT 06115
Leonard J. Saltiel Senior Vice Vice President
100 Bright Meadow Blvd. President
P.O. Box 2200
Enfield, CT 06083-2200
William R. Moyer Senior Vice Vice President
100 Bright Meadow Blvd. President,
P.O. Box 2200 Finance and
Enfield, CT 06083-2200 Treasurer
William J. Newman Senior Vice None
56 Prospect Street President
P.O. Box 150480
Hartford, CT 06115-0480
G. Jeffrey Bohne Vice President, Secretary
101 Munson Street Transfer Agent
Greenfield, MA 01301 Operations
Nancy G. Curtiss Vice President, Treasurer
100 Bright Meadow Blvd. Fund Accounting
P.O. Box 2200
Enfield, CT 06083-2200
Maris Lambergs Vice None
100 Bright Meadow Blvd. President/National
P.O. Box 2200 Sales Manager
Enfield, CT 06083-2200
James M. Dolan Vice President and Vice President
100 Bright Meadow Blvd. Compliance
P.O. Box 2200 Officer;
Enfield, CT 06083-2200 Assistant
Secretary
Elizabeth Sadowinski Vice President, Assistant Secretary
100 Bright Meadow Blvd. Field and
Enfield, CT 06083-2200 Investor Service
Eugene A. Charon Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Thomas N. Steenburg Secretary Assistant Secretary
One American Row
Hartford, CT 06102-5056
</TABLE>
C-6
<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 Registrant's
investment adviser, National Securities & Research Corporation, One American
Row, Hartford, CT 06102-5056; 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 06083-1900.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish 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-7
<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 its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, and State of Connecticut on the 20th day of February, 1996.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
ATTEST: /s/ Thomas N. Steenburg
Thomas N. Steenburg
Assistant Secretary
By: /s/ Philip R. McLoughlin
Philip R. McLoughlin
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacitites on the date indicated, on the 20th day of February, 1996.
<TABLE>
<CAPTION>
Signature Title
- ---------------------------- -----------------------------
<S> <C>
- ------------------ Trustee
C. Duane Blinn*
- ------------------ Trustee
Robert Chesek*
- ------------------ Trustee
E. Virgil Conway* Treasurer (Principal
- ------------------ Financial and
Nancy G. Curtiss** Accounting Officer)
- ------------------ Trustee
Harry Dalzell-Payne*
- ------------------ Trustee
Francis E. Jeffries
- ------------------ Trustee
Leroy Keith, Jr.* President and Trustee
- ------------------
/s/ Philip R. McLoughlin (Principal Executive Officer)
- ------------------
Philip R. McLoughlin
- ------------------- Trustee
Everett L. Morris
- ------------------- Trustee
James M. Oates*
- ------------------- Trustee
Calvin J. Pedersen
- ------------------- Trustee
Philip R. Reynolds*
- ------------------- Trustee
Herbert Roth, Jr.*
- ------------------- Trustee
Richard E. Segerson*
- ------------------- Trustee
Lowell P. Weicker, Jr.***
</TABLE>
By /s/ Philip R. McLoughlin
- ----------------------------
Philip R. McLoughlin
* Attorney-in-fact pursuant to powers of attorney filed with Post-Effective
Amendment No. 3 on March 4, 1994.
** Attorney-in-fact pursuant to power of attorney filed with Post-Effective
Amendment No. 4 on February 27, 1995.
***Philip R. McLoughlin
Attorney-in-fact pursuant to power of attorney filed herewith.
S-1(c)
PHOENIX ASSET RESERVE
Amendment to Declaration of Trust
We, the undersigned, being a majority of the members of the Board of
Trustees of the Phoenix Asset Reserve, a Massachusetts business trust organized
under a Declaration of Trust dated February 20, 1992, as amended June 29, 1992
and January 1, 1994, acting pursuant to Section 8.3 of ARTICLE VIII of said
Declaration of Trust for the purpose of changing the name of the Fund designated
"Phoenix Asset Reserve" to the "Phoenix Multi-Sector Short Term Bond Fund"
hereby further amend said Declaration of Trust, effective February 21, 1996, by
deleting the first paragraph of Section 1.1 of ARTICLE I thereof and by
inserting in lieu of such paragraph the following paragraph:
"Section 1.1. Name. The name of the Trust created hereby is "Phoenix
Multi-Sector Short Term Bond Fund".
WITNESS our hands this 21st day of February, 1996.
.
<TABLE>
<CAPTION>
<S> <C>
/s/ C. Duane Blinn /s/ Philip R. McLoughlin
- --------------------- -------------------------
C. Duane Blinn Philip R. McLoughlin
/s/ Robert Chesek /s/ Everett L. Morris
- --------------------- -------------------------
Robert Chesek Everett L. Morris
/s/ E. Virgil Conway /s/ James M. Oates
- --------------------- -------------------------
E. Virgil Conway James M. Oates
/s/ Harry Dalzell-Payne /s/ Philip R. Reynolds
- --------------------- -------------------------
Harry Dalzell-Payne Philip R. Reynolds
/s/ Francis E. Jeffries /s/ Herbert Roth, Jr.
- --------------------- -------------------------
Francis E. Jeffries Herbert Roth, Jr.
/s/ Leroy Keith, Jr. /s/ Richard E. Segerson
- --------------------- -------------------------
Leroy Keith, Jr. Richard E. Segerson
/s/ Lowell P. Weicker, Jr.
--------------------------
Lowell P. Weicker, Jr.
</TABLE>
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. 5 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 18, 1995, relating to the financial
statements and financial highlights appearing in the October 31, 1995 Annual
Report to Shareholders of the Phoenix Asset Reserve (currently the Phoenix
Multi- Sector Short Term Bond Fund), which is also incorporated by reference
into the Registration Statement. We also consent to the reference to us under
the heading "Financial Highlights" in the Prospectus and under the heading
"Independent Acountants" in the Statement of Additional Information
PRICE WATERHOUSE LLP
Boston, Massachustts
February 23, 1996
EXHIBIT 18
RULE 18f-3 DUAL DISTRIBUTION PLAN3
<PAGE>
PHOENIX FUNDS
(the "Funds")
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 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 two
classes of shares, Class A and Class B ("Multi-Class Portfolios"). Shares of the
Multi-Class Portfolios shall represent an equal pro rata interest in the
respective 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 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 and Class B shares shall have
the features described in Sections a, b, c and d, below.
a. Distribution Plan
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 with
respect to Class B shares for each Multi-Class Portfolio, containing
substantially the following terms:
Class B shares of each Portfolio shall reimburse Phoenix Equity Planning
Corporation (the "Distributor") for costs and expenses incurred in connection
with distribution and marketing of shares of the Fund, as provided in the
Distribution Plan and any supplements thereto, subject to an annual limit of
1.00% of the average daily net assets of a Portfolio's Class B shares.
<PAGE>
- 2 -
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
Portfolio shall be allocated to each class on the basis of its net asset value
relative to the net asset value of the Portfolio. Expenses to be so allocated
include expenses of the Fund that are not attributable to a particular Portfolio
or class of a Portfolio but are allocated to a Portfolio ("Fund Expenses") and
expenses of a particular Portfolio that are not attributable to a particular
class of that 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 Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (a) payments pursuant to the Distribution Plan for that
class; (b) transfer agent fees attributable to a specific class, (c) printing
and postage expenses related to preparing and distributing material such as
shareholder reports, prospectuses and proxy materials to current shareholders of
the class; (d) registration fees for shares of the class (other than those set
forth in Section b.i. above); (e) the expense of administrative personnel and
services as required to support the shareholders of a specific class; (f)
litigation or other legal expenses relating solely to one class of shares; and
(g) Trustees' fees incurred as a result of issues relating to a class of shares.
Expenses described in (a) of this paragraph must be allocated to the class for
which they are incurred. All other expenses described in this paragraph may be
allocated as Class Expenses, if the 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").
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 18f-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")
<PAGE>
- 3 -
iii. Waivers or Reimbursements of Expenses
Expenses may be waived or reimbursed by the Funds' investment
adviser(s), their principal underwriters, or any other provider of services to a
Portfolio or Fund without the prior approval of the Board of Trustees.
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.
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 of 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 (i) the assessment
of the higher distribution fees and transfer agency costs with respect to Class
B Shares does not result in any dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, as amended,
and (ii) that the conversion of shares does not constitute a taxable event under
federal income tax law.
3. Board Review
a. Initial Approval
The Board of Trustees, including the Independent Trustees at a
meeting held on November 15, 1995, initially approved the Plan based on a
determination that the Plan, including the expense allocation, is in the best
interests of each class and Portfolio individually and of the Funds.
b. Approval of Amendments
The Plan may not be amended materially unless the Board of
Trustees, the Independent Trustees, have found that the proposed amendment,
including any proposed related expense allocation, is in the best interests of
each class and Portfolio individually and of the Fund.
<PAGE>
- 4 -
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.
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 Plan, having been reviewed and approved by the Board of Trustees and
the Independent Trustees, shall take effect as of November 15, 1995.
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.
funds\1912
<PAGE>
SCHEDULE A
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND
STRATEGIC THEME FUND
SMALL CAP FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND:
CAPITAL APPRECIATION PORTFOLIO
DIVERSIFIED INCOME
INTERNATIONAL PORTFOLIO
REAL ESTATE SECURITIES PORTFOLIO
TAX-EXEMPT BOND PORTFOLIO
EMERGING MARKETS BOND PORTFOLIO
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX SERIES FUND:
BALANCED SERIES
CONVERTIBLE SERIES
GROWTH SERIES
HIGH YIELD FUND SERIES
MONEY MARKET FUND SERIES
U.S. GOVERNMENT SECURITIES FUND
U.S. STOCK FUND
PHOENIX TOTAL RETURN FUND, INC.
PHOENIX WORLDWIDE OPPORTUNITIES FUND
funds\1922
EXHIBIT 19
POWER OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix Asset
Reserve, hereby constitute and appoint Philip R. McLoughlin and Patricia O.
McLaughlin as my true and lawful attorneys and agents with full power to sign
for me in the capacity indicated below, any or all Registration Statements or
amendments thereto filed with the Securities and Exchange Commission under the
Securities Act of 1933 and/or the Investment Company Act of 1940 relating to
Phoenix Asset Reserve and hereby ratify and confirm my signature as it may
be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
June 6, 1995 /s/ Lowell P. Weicker, Jr., Trustee
Lowell P. Weicker, Jr.
funds\1579
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix Asset
Reserve, hereby constitute and appoint Philip R. McLoughlin and Thomas N.
Steenburg as my true and lawful attorneys and agents with full power to sign for
me in the capacity indicated below, any or all Registration Statements or
amendments thereto filed with the Securities and Exchange Commission under the
Securities Act of 1933 and/or the Investment Company Act of 1940 relating to
Phoenix Asset Reserve and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
, 1996 _________________________, Trustee
Everett L. Morris
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of The Phoenix Edge
Series Fund, hereby constitute and appoint Philip R. McLoughlin and Patricia O.
McLaughlin as my true and lawful attorneys and agents with full power to sign
for me in the capacity indicated below, any or all Registration Statements or
amendments thereto filed with the Securities and Exchange Commission under the
Securities Act of 1933 and/or the Investment Company Act of 1940 relating to The
Phoenix Edge Series Fund, and hereby ratify and confirm my signature as it may
be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Trustee Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix
California Tax Exempt Bonds, Inc., hereby constitute and appoint Philip R.
McLoughlin and Patricia O. McLaughlin as my true and lawful attorneys and agents
with full power to sign for me in the capacity indicated below, any or all
Registration Statements or amendments thereto filed with the Securities and
Exchange Commission under the Securities Act of 1933 and/or the Investment
Company Act of 1940 relating to Phoenix California Tax Exempt Bonds, Inc., and
hereby ratify and confirm my signature as it may be signed by said attorneys and
agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Director Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix
Multi-Sector Fixed Income Fund, Inc., hereby constitute and appoint Philip R.
McLoughlin and Patricia O. McLaughlin as my true and lawful attorneys and agents
with full power to sign for me in the capacity indicated below, any or all
Registration Statements or amendments thereto filed with the Securities and
Exchange Commission under the Securities Act of 1933 and/or the Investment
Company Act of 1940 relating to Phoenix Multi-Sector Fixed Income Fund, Inc.,
and hereby ratify and confirm my signature as it may be signed by said attorneys
and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Director Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix Equity
Opportunities Fund, hereby constitute and appoint Philip R. McLoughlin and
Patricia O. McLaughlin as my true and lawful attorneys and agents with full
power to sign for me in the capacity indicated below, any or all Registration
Statements or amendments thereto filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940 relating to Phoenix Equity Opportunities Fund, and hereby ratify and
confirm my signature as it may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Trustee Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix Income and
Growth Fund, hereby constitute and appoint Philip R. McLoughlin and Patricia O.
McLaughlin as my true and lawful attorneys and agents with full power to sign
for me in the capacity indicated below, any or all Registration Statements or
amendments thereto filed with the Securities and Exchange Commission under the
Securities Act of 1933 and/or the Investment Company Act of 1940 relating to
Phoenix Income and Growth Fund, and hereby ratify and confirm my signature as it
may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Trustee Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Directors of Phoenix Total
Return Fund, Inc., hereby constitute and appoint Philip R. McLoughlin and
Patricia O. McLaughlin as my true and lawful attorneys and agents with full
power to sign for me in the capacity indicated below, any or all Registration
Statements or amendments thereto filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940 relating to Phoenix Total Return Fund, Inc., and hereby ratify and confirm
my signature as it may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Director Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix Series
Fund, hereby constitute and appoint Philip R. McLoughlin and Patricia O.
McLaughlin as my true and lawful attorneys and agents with full power to sign
for me in the capacity indicated below, any or all Registration Statements or
amendments thereto filed with the Securities and Exchange Commission under the
Securities Act of 1933 and/or the Investment Company Act of 1940 relating to
Phoenix Series Fund, and hereby ratify and confirm my signature as it may be
signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Trustee Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix
Multi-Portfolio Fund, hereby constitute and appoint Philip R. McLoughlin and
Patricia O. McLaughlin as my true and lawful attorneys and agents with full
power to sign for me in the capacity indicated below, any or all Registration
Statements or amendments thereto filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940 relating to Phoenix Multi-Portfolio Fund, and hereby ratify and confirm my
signature as it may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
June 6, 1995 /s/ Lowell P. Weicker, Jr., Trustee
------------------------------------
Lowell P. Weicker, Jr.
funds\2035
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix Worldwide
Opportunities Fund, hereby constitute and appoint Philip R. McLoughlin and
Patricia O. McLaughlin as my true and lawful attorneys and agents with full
power to sign for me in the capacity indicated below, any or all Registration
Statements or amendments thereto filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940 relating to Phoenix Worldwide Opportunities Fund, and hereby ratify and
confirm my signature as it may be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
___________________, 1995 ___________________________________,
Trustee Lowell P. Weicker, Jr.
funds\2035
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Class A
<NUMBER> 1
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 13601
<INVESTMENTS-AT-VALUE> 13746
<RECEIVABLES> 276
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14056
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 93
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14359
<SHARES-COMMON-STOCK> 1961
<SHARES-COMMON-PRIOR> 2034
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (15)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (526)
<ACCUM-APPREC-OR-DEPREC> 145
<NET-ASSETS> 13963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1159
<OTHER-INCOME> 0
<EXPENSES-NET> (168)
<NET-INVESTMENT-INCOME> 991
<REALIZED-GAINS-CURRENT> (340)
<APPREC-INCREASE-CURRENT> 716
<NET-CHANGE-FROM-OPS> 1367
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 661
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1676
<NUMBER-OF-SHARES-REDEEMED> 1852
<SHARES-REINVESTED> 103
<NET-CHANGE-IN-ASSETS> (67)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (14)
<OVERDIST-NET-GAINS-PRIOR> (198)
<GROSS-ADVISORY-FEES> 79
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 416
<AVERAGE-NET-ASSETS> 14351
<PER-SHARE-NAV-BEGIN> 4.61
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 0.13
<PER-SHARE-DIVIDEND> (0.33)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 4.74
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Class B
<NUMBER> 2
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 13601
<INVESTMENTS-AT-VALUE> 13746
<RECEIVABLES> 276
<ASSETS-OTHER> 34
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14056
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 93
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14359
<SHARES-COMMON-STOCK> 982
<SHARES-COMMON-PRIOR> 1393
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (15)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (526)
<ACCUM-APPREC-OR-DEPREC> 145
<NET-ASSETS> 13963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1159
<OTHER-INCOME> 0
<EXPENSES-NET> (168)
<NET-INVESTMENT-INCOME> 991
<REALIZED-GAINS-CURRENT> (340)
<APPREC-INCREASE-CURRENT> 716
<NET-CHANGE-FROM-OPS> 1367
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 327
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 259
<NUMBER-OF-SHARES-REDEEMED> 718
<SHARES-REINVESTED> 48
<NET-CHANGE-IN-ASSETS> (1759)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (14)
<OVERDIST-NET-GAINS-PRIOR> (198)
<GROSS-ADVISORY-FEES> 79
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 416
<AVERAGE-NET-ASSETS> 14351
<PER-SHARE-NAV-BEGIN> 4.61
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.13
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 4.74
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
