As filed with the Securities and Exchange Commission on February 25, 1998
Registration No. 33-45758
Investment Company Act File No. 811-6566
================================================================================
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. 9 [X]
and/or
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [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)
-------------
Thomas N. Steenburg
Vice President, Counsel and Secretary
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
-------------
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on February 27, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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<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 ............................................. Introduction
3. Condensed Financial Information ...................... Financial Highlights
4. General Description of Registrant .................... Cover Page, Introduction; Investment Objectives and
Policies; Additional Information
5. Management of the Fund ............................... Management of the Funds
5A. Management's Discussion of Fund Performance .......... Performance Information
6. Capital Stock and Other Securities ................... Dividends, Distributions and Taxes; Net Asset Value;
How to Buy Shares; Additional Information
7. Purchase of Securities Being Offered ................. Net Asset Value; How to Buy Shares; Distribution
Plans; Investor Account Services
8. Redemption or Repurchase ............................. How to Redeem Shares
9. Pending Legal Proceedings ............................ Not Applicable
</TABLE>
PART B
Information Required in Statement of Additional Information
<TABLE>
<CAPTION>
Item Number Statement of Additional Information
- ---------------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
10. Cover Page ................................................... Cover Page
11. Table of Contents ............................................ Table of Contents
12. General Information and History .............................. Cover Page; the Fund
13. Investment Objectives and Policies ........................... Cover Page; Investment Objective and Policies;
Investment Restrictions; Investment Techniques
14. Management of the Fund ....................................... Services of the Adviser; Trustees and Officers; Other
Information
15. Control Persons and Principal Holders of Securities .......... Principal Shareholders
16. Investment Advisory and Other Services ....................... Services of the Adviser; Plans of Distribution
17. Brokerage Allocation ......................................... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities ........................... Net Asset Value; How to Buy Shares
19. Purchase, Redemption and Pricing of Securities Being Net Asset Value; How to Buy Shares; Investor Account
Offered ...................................................... Services; Redemption of Shares
20. Tax Status ................................................... Dividends, Distributions and Taxes
21. Underwriters ................................................. The Distributor; Plans of Distribution
22. Calculation of Performance Data .............................. Performance Information
23. Financial Statements ......................................... Financial Statements
</TABLE>
<PAGE>
[FRONT COVER]
P H O E N I X
F U N D S
Prospectus February 27, 1998
[TRIANGLE] PHOENIX MULTI-SECTOR
FIXED INCOME FUND, INC.
[TRIANGLE] PHOENIX MULTI-SECTOR
SHORT TERM BOND FUND
[LOGOTYPE] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
February 27, 1998
Phoenix Multi-Sector Fixed Income Fund, Inc. (the "Fixed Income Fund") is
a diversified, open-end management investment company with an investment
objective to maximize current income consistent with the preservation of
capital.
In pursuing its objective, except as limited below, the Fixed Income Fund
may invest its assets in each or any combination of four market sectors in any
proportion deemed advisable by the Fund's investment adviser. The Fixed Income
Fund will not, however, invest more than 50% of its assets, determined at the
time of investment in High Yield-High Risk fixed income securities ("junk
bonds"). These lower rated securities may be more susceptible to real or
perceived adverse economic conditions than investment grade securities. High
Yield-High Risk securities are regarded as predominantly speculative with
regard to each issuer's continuing ability to make interest and principal
payments. In addition, the secondary market for High Yield-High Risk securities
may be less liquid than the market for investment grade securities. Investors
should carefully assess the risks associated with an investment in the Fixed
Income Fund. See "Investment Objective and Policies" and "Investment Techniques
and Related Risks."
Phoenix Multi-Sector Short Term Bond Fund (the "Short Term Fund") is a
diversified, open-end management investment company with an investment
objective of providing high current income relative to short-term alternatives,
while attempting to limit fluctuations in the net asset value of Short Term
Fund shares resulting from movements in interest rates.
This Prospectus sets forth concisely the information about the Funds that
a prospective investor should know before investing. No dealer, salesperson or
any other person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Funds, Adviser or Distributor. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state in which, or to any person to whom, it
is unlawful to make such an offer. Neither the delivery of this Prospectus nor
any sale hereunder shall, under any circumstances, create any implication that
information herein is correct at any time subsequent to its date. Investors
should read and retain this Prospectus for future reference. Additional
information about the Funds is contained in each Fund's Statement of Additional
Information, dated February 27, 1998, which have been filed with the Securities
and Exchange Commission (the "Commission") and which are available upon request
and at no charge by calling 800-243-4361 or by writing to Phoenix Equity
Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. The Statements of Additional Information are
incorporated herein by reference.
The Commission maintains a Web site (http://www.sec.gov) that contains
this Prospectus, the Statement of Additional Information, material incorporated
by reference, and other information regarding registrants that file
electronically with the Commission.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity, and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency and involve
investment risk, including possible loss of principal.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
TABLE OF CONTENTS
Page
-----
INTRODUCTION ..................................... 3
FUND EXPENSES .................................... 5
FINANCIAL HIGHLIGHTS ............................. 7
PERFORMANCE INFORMATION .......................... 9
INVESTMENT OBJECTIVES AND POLICIES ............... 9
INVESTMENT TECHNIQUES AND RELATED RISKS .......... 14
INVESTMENT RESTRICTIONS .......................... 18
PORTFOLIO TURNOVER ............................... 18
MANAGEMENT OF THE FUNDS .......................... 18
DISTRIBUTION PLANS ............................... 19
HOW TO BUY SHARES ................................ 21
INVESTOR ACCOUNT SERVICES ........................ 25
NET ASSET VALUE .................................. 26
HOW TO REDEEM SHARES ............................. 26
DIVIDENDS, DISTRIBUTIONS AND TAXES ............... 28
ADDITIONAL INFORMATION ........................... 29
APPENDIX ......................................... 30
2
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of
Phoenix Multi-Sector Short Term Bond Fund (the "Short Term Fund") and Phoenix
Multi-Sector Fixed Income Fund, Inc. (the "Fixed Income Fund" and collectively
the "Funds"). The Fixed Income Fund is a diversified, open-end management
investment company established as a corporation under the laws of Maryland. The
Fixed Income Fund's investment objective is to maximize current income
consistent with the preservation of capital. The Fixed Income Fund will seek to
achieve its objective by investing in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or
instrumentalities; (b) debt securities issued by foreign issuers, including
foreign governments and their political subdivisions; (c) securities rated
investment grade by a nationally recognized statistical rating organization and
(d) high yield, high risk fixed income securities. There can be no assurance
that the Fixed Income Fund's investment objective will be achieved.
The Short Term Fund is a diversified, open-end management investment
company established as a business trust under the laws of Massachusetts. The
Short Term Fund's investment objective is to provide high current income
relative to other short-term investment alternatives, while attempting to limit
fluctuations in the net asset value of Fund shares resulting from movements in
interest rates. The Short Term Fund will seek to achieve its objective by
investing in the following market sectors: (a) securities issued or guaranteed
as to principal and interest by the U.S. Government, its agencies or
instrumentalities; (b) debt securities issued by foreign issuers, including
foreign governments and their political subdivisions; and (c) high yield ("junk
bonds") and investment grade fixed income securities. In pursuing its
objective, except as limited below, the Short Term Fund may invest its assets
in each or any combination of these market sectors in any proportion deemed
advisable by the Short Term Fund's investment adviser. There can be no
assurance that the Short Term Fund's objective will be achieved.
The Investment Adviser
National Securities & Research Corporation ("National" or the "Adviser")
is the investment adviser of the Funds and its professional staff selects and
supervises the investments in each Fund's portfolio. National is a subsidiary
of Phoenix Duff & Phelps Corporation and an indirect subsidiary of Phoenix Home
Life Mutual Insurance Company. See "Management of the Funds" for a description
of the Investment Advisory Agreements and management fees.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor")
serves as national distributor of each Fund's shares. See "Distribution Plans"
and the Statement of Additional Information. Equity Planning also acts as
financial agent and as such receives a fee. See "The Financial Agent." Equity
Planning also serves as the Funds' transfer agent. See "The Custodian and
Transfer Agent."
Each Fund has adopted amended and restated distribution plans pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). Pursuant to the amended and restated distribution plans adopted for
Class A Shares, the Funds shall reimburse the Distributor up to a maximum
annual rate of 0.05% of each Fund's average daily Class A Share net assets for
distribution expenditures incurred in connection with the sale and promotion of
Class A Shares. Although the Class A Shares Plans continue to provide for a
0.05% distribution fee, the Distributor has voluntarily agreed to waive the
Rule 12b-1 fee charged to Class A Shares for the fiscal year 1998. Pursuant to
the amended and restated distribution plans adopted for Class B Shares, Class C
Shares and Class M Shares of the Fixed Income Fund, the Fund shall reimburse
the Distributor up to a maximum annual rate of 0.75%, 0.75% and 0.25%,
respectively, of the Fund's average daily net assets for such Class of Shares
for distribution expenditures incurred in connection with the sale and
promotion of each Class of Shares. Pursuant to the amended and restated Class B
and Class C Plans adopted by the Short Term Fund, the fund shall reimburse the
Distributor up to a maximum annual rate of 0.50% and 0.25%, respectively, of
the Fund's average daily net assets for such Class of Shares for distribution
expenditures incurred in connection with the sale and promotion of each Class
of Shares. In addition, each Fund will pay the Distributor 0.25% annually of
the average daily net assets of each Class of Shares for furnishing shareholder
services (the "Service Fee"). See "Distribution Plans."
Purchase of Shares
The Fixed Income Fund offers four classes of shares which may be purchased
at a price equal to their net asset value per share plus a sales charge which,
at the election of the purchaser may be imposed (i) at the time of purchase
(the "Class A Shares" and "Class M Shares"), or (ii) on a contingent deferred
basis (the "Class B Shares" and "Class C Shares").
Class A and M Shares of the Fixed Income Fund are offered to the public at
the next determined net asset value after receipt of the order by State Street
Bank and Trust Company ("State Street Bank") plus a sales charge. The maximum
initial sales charge is 4.75% and 3.50%, respectively, of the offering price on
single purchases of less than $50,000. The sales charges are reduced on a
graduated scale on single purchases of $50,000 or more. See "Initial Sales
Charge Alternative--Class A and M Shares" and "How to Obtain Reduced Sales
Charges--Class A and M Shares."
Class B and C Shares of the Fixed Income Fund are offered to the public at
the next determined net asset value after receipt of an order by State Street
Bank with no sales charge. Class B Shares are subject to a sales charge if they
are redeemed within five years of purchase. Class C Shares redeemed within one
year of purchase are subject to a 1% sales charge. See "Deferred Sales Charge
Alternative--Class B and C Shares" and "How to Obtain Reduced Sales Charges--
Class B and C Shares."
The Short Term Fund offers two classes of shares which may be purchased at
a price equal to their net asset value per share
3
<PAGE>
plus sales charges which, at the election of the purchaser, may be imposed (i)
at the time of purchase (the "Class A Shares"), or (ii) on a contingent
deferred basis (the "Class B Shares"), and one class of shares which may be
purchased at a price equal to their net asset value without a sales charge (the
"Class C Shares").
Class A Shares of the Short Term Fund are offered to the public at the
next determined net asset value after receipt of the order by State Street Bank
plus a maximum sales charge of 2.25% of the offering price (2.30% of the amount
invested) on single purchases of less than $50,000. The sales charge for Class
A Shares is reduced on a graduated scale on single purchases of $50,000 or more
and subject to other conditions stated below. See "Initial Sales Charge
Alternative--Class A and M Shares" and "How to Obtain Reduced Sales
Charges--Class A and M Shares."
Class B Shares of the Short Term Fund are offered to the public at the
next determined net asset value after receipt of an order by State Street Bank
with no sales charge. Class B Shares are subject to a sales charge if they are
redeemed within three years of purchase. See "Deferred Sales Charge
Alternative--Class B and C Shares" and "How to Obtain Reduced Sales
Charges--Class B and C Shares."
Class C Shares of the Short Term Fund are offered to the public at the
next determined net asset value after receipt of an order by State Street Bank
with no sales charge. See "Deferred Sales Charge Alternative--Class B and C
Shares" and "How to Buy Shares."
Shares of each Class of each Fund represent an identical interest in the
investment portfolio of a Fund and have the same rights. For more information
on fees and charges applicable for each Fund and Class, refer to "Fund
Expenses" and "How to Buy Shares."
Completed applications for the purchase of shares should be mailed to the
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, Boston,
MA 02266-8301.
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investing program designated "Investo-Matic"), and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment amounts
are available under certain circumstances. See "How to Buy Shares."
Redemption of Shares
Class A and M Shares may be redeemed at any time at the net asset value
per share next computed after receipt of a redemption request by State Street
Bank. Class B and C (excluding Class C Shares of the Short Term Fund)
shareholders redeeming shares within certain time periods of the date of
purchase will normally be assessed a contingent deferred sales charge. See "How
to Redeem Shares."
Risk Factors
There can be no assurance that each Fund will achieve its investment
objective. In addition, special risks may be presented by the particular types
of securities in which each Fund may invest. For example, the Fixed Income Fund
may invest up to 50% of its total assets and the Short Term Fund may invest up
to 35% of its assets in below investment grade securities. Such securities are
sometimes referred to as "junk bonds." Investing in junk bonds involves risks
not typically associated with investment in higher-rated securities, including
overall greater risk of non-payment of interest and principal and potentially
greater sensitivity to general economic conditions and changes in interest
rates. In addition, investors should consider risks inherent in foreign debt
securities, including foreign exchange rate fluctuations and exchange controls.
See "Investment Objectives and Policies" and "Investment Techniques and Related
Risks."
4
<PAGE>
FUND EXPENSES
The following table illustrates fees and expenses a shareholder will
incur. The fees and expenses are set forth in the table for the period ended
October 31, 1997.
<TABLE>
<CAPTION>
Fixed Income
Fund
-----------
Class A
Shares
-----------
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75%
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load (as a percentage of original purchase None
price or redemption proceeds, as applicable)
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .55%
12b-1 Fees (a) (after waiver) .25%
Other Operating Expenses .24%
-----
Total Fund Operating Expenses (c) 1.04%
=====
<CAPTION>
Fixed Income Fund
-------------------------------------------------------------
Class B Class C Class M
Shares Shares (b) Shares (b)
------------------------------- ----------------- -----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None 3.50%
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load (as a percentage of original purchase 5% during the first 1% during the None
price or redemption proceeds, as applicable) year, decreasing 1% first year
annually to 2% during
the fourth and fifth years;
decreasing to 0% after
the fifth year
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .55% .55% .55%
12b-1 Fees (a) (after waiver) 1.00% 1.00% .50%
Other Operating Expenses .24% .24% .24%
---- ---- -----
Total Fund Operating Expenses (c) 1.79% 1.79% 1.29%
==== ==== =====
</TABLE>
(a) "12b-1 Fees" represent an asset-based sales charge that, for a
long-term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD"). The
Distributor has voluntarily agreed to continue to limit the Class A 12b-1 Fees
to 0.25% for the fiscal year 1998. Absent such waiver, the Class A 12b-1 Fees
would have been 0.30% for the last fiscal year. The 12b-1 Fees as stated include
a Service Fee.
(b) Prior to October 14, 1997, Class C and Class M Shares were not offered.
(c) For the fiscal year 1997, Total Fund Operating Expenses for Class A
Shares would have been 1.09% without the 12b-1 Fee waiver.
<TABLE>
<CAPTION>
Short Term Fund
-------------------------------------------------------------
Class A Shares Class B Shares Class C Shares (c)
---------------- ----------------------- -------------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 2.25% None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load (as a percentage of original purchase None 2% during the first None
price or redemption proceeds, as applicable) year, decreasing
.50% annually to
1% during the third
year and dropping
from 1% to 0% after
the third year.
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .55% .55% .55%
12b-1 Fees(a) (after waiver) .25% .75% .50%
Other Operating Expenses (after expense reimbursement) (b) .20% .20% .20%
----- ---- -----
Total Fund Operating Expenses 1.00% 1.50% 1.25%
===== ==== =====
</TABLE>
(a) "12b-1 Fees" represent an asset-based sales charge that, for a
long-term shareholder, may be higher than the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD"). The
Distributor has voluntarily agreed to continue to limit the Class A 12b-1 Fees
to 0.25% for the fiscal year 1998. Absent such waiver, the Class A 12b-1 Fees
would have been 0.30% for the last fiscal year. The 12b-1 Fees as stated include
a Service Fee.
(b) The Adviser has agreed to reimburse the Fund's operating expenses other
than Management Fees and Rule 12b-1 Fees related to Class A, Class B and Class C
Shares for the amount, if any, by which such operating expenses for the fiscal
year ended October 31, 1998, exceed 0.20% of the average net assets. Other
Operating Expenses for Class A, Class B and Class C Shares would have been 1.06%
respectively, and Total Fund Operating Expenses for Class A, Class B and Class C
Shares would have been 1.86%, 2.36% and 2.11%, respectively, absent such waiver
or reimbursement, for the fiscal year ended October 31, 1997.
(c) Prior to October 1, 1997, Class C Shares were not offered.
5
<PAGE>
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
Example* 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a hypothetical $1,000
investment assuming (1) 5% annual return and (2) redemption at the
end of each time period:
Fixed Income Fund Class A Shares $58 $79 $102 $169
Fixed Income Fund Class B Shares 68 86 117 191
Fixed Income Fund Class C Shares 26 51 88 192
Fixed Income Fund Class M Shares 47 74 102 183
Short Term Fund Class A Shares 32 54 77 142
Short Term Fund Class B Shares 35 57 82 166
Short Term Fund Class C Shares 13 40 69 151
An investor would pay the following expenses on the same $1,000
investment assuming (1) 5% annual return and (2) no redemption at
the end of each time period:
Fixed Income Fund Class A Shares $58 $79 $102 $169
Fixed Income Fund Class B Shares 18 56 97 191
Fixed Income Fund Class C Shares 16 51 88 192
Fixed Income Fund Class M Shares 47 74 102 183
Short Term Fund Class A Shares 32 54 77 142
Short Term Fund Class B Shares 15 47 82 166
Short Term Fund Class C Shares 13 40 69 151
</TABLE>
*The purpose of the above table is to help the investor understand the various
costs and expenses that the investor will bear, directly or indirectly. The
Example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown. Class B Share figures
assume conversion to Class A shares. See "Management of the Fund,"
"Distribution Plans," and "How to Buy Shares."
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth certain financial information for each class
of shares for each Fund. This financial information has been audited by Price
Waterhouse LLP, independent accountants. Their opinion and each Fund's Financial
Statements and notes thereto are incorporated by reference in each Fund's
Statement of Additional Information. Each Statement of Additional Information
and each Fund's most recent Annual Report (containing the report of Independent
Accountants and additional information relating to Fund performance) are
available at no charge upon request by calling (800) 243-4361.
FIXED INCOME FUND
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------
1997 1996 1995 1994
---------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $13.27 $12.56 $11.94 $14.13
Income from investment operations
Net investment income ............................ 1.03 0.94 0.96 0.76
Net realized and unrealized gain (loss) .......... 0.18 0.72 0.61 (1.35)
--------- -------- -------- ---------
Total from investment operations ................ 1.21 1.66 1.57 (0.59)
--------- -------- -------- ---------
Less distributions
Dividends from net investment income ............. (0.98) (0.95) (0.95) (0.77)
Dividends in excess of net investment income ..... -- -- -- (0.05)
Dividends from net realized gains ................ -- -- -- (0.63)
Tax return of capital ............................ -- -- -- (0.15)
--------- -------- --------- ---------
Total distributions ............................. (0.98) (0.95) (0.95) (1.60)
--------- -------- --------- ---------
Change in net asset value ......................... 0.23 0.71 0.62 (2.19)
--------- -------- --------- ---------
Net asset value, end of period .................... $13.50 $13.27 $12.56 $11.94
========= ========= ========= =========
Total return(1) ................................... 9.22% 13.75% 13.83% (4.57)%
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $191,486 $169,664 $168,875 $172,966
Ratio to average net assets of:
Operating expenses ............................... 1.04%(5) 1.07% 1.10% 1.13%
Net investment income ............................ 7.28% 7.56% 8.10% 7.05%
Portfolio turnover ................................ 295% 255% 201% 123%
<CAPTION>
Class A
-----------------------------------------------------------
From
Inception
12/18/89 to
1993 1992 1991 10/31/90
------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $13.29 $12.81 $11.11 $11.91
Income from investment operations
Net investment income ............................ 1.14 1.24 1.22(2) 1.01(2)
Net realized and unrealized gain (loss) .......... 1.08 0.50 1.71 (.78)
-------- ------- ------------ ------------
Total from investment operations ................ 2.22 1.74 2.93 .23
-------- ------- ------------ ------------
Less distributions
Dividends from net investment income ............. (1.19) (1.21) (1.23) (1.03)
Dividends in excess of net investment income ..... (0.02) -- -- --
Dividends from net realized gains ................ (0.17) (0.05) -- --
Tax return of capital ............................ -- -- -- --
-------- -------- ------------ ------------
Total distributions ............................. (1.38) (1.26) (1.23) (1.03)
-------- -------- ------------ ------------
Change in net asset value ......................... 0.84 0.48 1.70 0.80
-------- -------- ------------ ------------
Net asset value, end of period .................... $14.13 $13.29 $12.81 $11.11
======== ======== ============ ============
Total return(1) ................................... 17.55% 14.11% 27.56% 1.85%
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $176,859 $141,627 $68,139 $8,667
Ratio to average net assets of:
Operating expenses ............................... 1.29% 1.48% 1.50% 1.20%
Net investment income ............................ 8.27% 9.42% 10.13% 9.59%
Portfolio turnover ................................ 207% 116% 180% 2%
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............. $13.25 $12.54 $11.93 $14.10 $13.25
Income from investment operations
Net investment income ............................ 0.92 0.85 0.86 0.68 1.04
Net realized and unrealized gain (loss) .......... 0.18 0.71 0.61 (1.36) 1.08
--------- -------- ------- -------- --------
Total from investment operations ................ 1.10 1.56 1.47 (0.68) 2.12
--------- -------- ------- -------- --------
Less distributions
Dividends from net investment income ............. (0.87) (0.85) (0.86) (0.67) (1.08)
Dividends in excess of net investment income ..... -- -- -- (0.05) (0.02)
Dividends from net realized gains ................ -- -- -- (0.63) (0.17)
Tax return of capital ............................ -- -- -- (0.14) --
--------- -------- -------- -------- --------
Total distributions ............................. (0.87) (0.85) (0.86) ( 1.49) (1.27)
--------- -------- -------- -------- --------
Change in net asset value ......................... 0.23 0.71 0.61 (2.17) 0.85
--------- -------- -------- -------- --------
Net asset value, end of period .................... $13.48 $13.25 $12.54 $11.93 $14.10
========= ======== ======== ======== ========
Total return(1) ................................... 8.42% 12.84% 12.96% (5.21)% 16.78%
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $154,989 $142,869 $144,020 $156,629 $193,064
Ratio to average net assets of:
Operating expenses ............................... 1.79%(5) 1.82% 1.85% 1.78% 1.99%
Net investment income ............................ 6.52% 6.80% 7.30% 6.46% 7.36%
Portfolio turnover ................................ 295% 255% 201% 123% 207%
<CAPTION>
Class B Class C Class M
---------------- ------------------ ------------------
From From From
Inception Inception Inception
1/3/92 to 10/14/97 to 10/14/97 to
10/31/92 10/31/97 10/31/97
---------------- ------------------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of period .............. $13.02 $14.22 $14.22
Income from investment operations
Net investment income ............................ 0.94 0.04 0.04
Net realized and unrealized gain (loss) .......... 0.21 (0.74) (0.73)
--------- ---------- ----------
Total from investment operations ................ 1.15 (0.70) (0.69)
--------- ---------- ----------
Less distributions
Dividends from net investment income ............. (0.92) (0.04) (0.05)
Dividends in excess of net investment income ..... -- -- --
Dividends from net realized gains ................ -- -- --
Tax return of capital ............................ -- -- --
--------- ---------- ----------
Total distributions ............................. (0.92) (0.04) (0.05)
--------- ---------- ----------
Change in net asset value ......................... 0.23 (0.74) (0.74)
--------- ---------- ----------
Net asset value, end of period .................... $13.25 $13.48 $13.48
========= ========== ==========
Total return(1) ................................... 8.81%(4) (5.00)%(4) (4.97)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............. $82,522 $284 $124
Ratio to average net assets of:
Operating expenses ............................... 2.18%(3) 1.62%(3) 1.27%(3)
Net investment income ............................ 8.47%(3) 4.75%(3) 6.19%(3)
Portfolio turnover ................................ 116% 295% 295%
</TABLE>
- -----------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of $0.04
and $0.38, respectively.
(3) Annualized
(4) Not annualized
(5) For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
7
<PAGE>
SHORT TERM FUND
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------
Year Ended
October 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ........................ $4.91 $4.74 $4.61 $4.91 $4.83
Income from investment
operations
Net investment income ............ 0.34(2) 0.33(2) 0.33(2) 0.29(2) 0.32(2)
Net realized and
unrealized gain (loss) .......... 0.14 0.17 0.13 (0.26) 0.08
----------- ----------- ----------- ----------- -----------
Total from investment
operations .................... 0.48 0.50 0.46 0.03 0.40
----------- ----------- ----------- ----------- -----------
Less distributions
Dividends from net
investment income ............... (0.33) (0.33) (0.33) (0.29) (0.32)
Dividends from net
realized gains .................. -- -- -- (0.03) --
Tax return of capital ............ -- -- -- (0.01) --
----------- ----------- ----------- ----------- -----------
Total distributions ............. (0.33) (0.33) (0.33) (0.33) (0.32)
----------- ----------- ----------- ----------- -----------
Change in net asset value ......... 0.15 0.17 0.13 (0.30) 0.08
----------- ----------- ----------- ----------- -----------
Net asset value, end of
period ........................... $5.06 $4.91 $4.74 $4.61 $4.91
=========== =========== =========== =========== ===========
Total return(1) ................... 10.08% 10.91% 10.27% 0.40% 8.49%
Ratios/supplemental data:
Net assets, end of period
(thousands) ...................... $28,557 $13,702 $ 9,303 $9,371 $6,829
Ratio to average net assets of:
Operating expenses ............... 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income ............ 6.54% 6.88% 7.07% 5.99% 6.39%
Portfolio turnover ................ 246% 232% 344% 121% 128%
<CAPTION>
Class A
---------------
From
Inception
7/6/92 to
10/31/92
---------------
<S> <C>
Net asset value, beginning
of period ........................ $4.89
Income from investment
operations
Net investment income ............ 0.08(2)
Net realized and
unrealized gain (loss) .......... (0.06)
------------
Total from investment
operations .................... 0.02
------------
Less distributions
Dividends from net
investment income ............... (0.08)
Dividends from net
realized gains .................. --
Tax return of capital ............ --
------------
Total distributions ............. (0.08)
------------
Change in net asset value ......... (0.06)
------------
Net asset value, end of
period ........................... $4.83
============
Total return(1) ................... 0.40%(5)
Ratios/supplemental data:
Net assets, end of period
(thousands) ...................... $6,531
Ratio to average net assets of:
Operating expenses ............... 1.00%(4)
Net investment income ............ 5.79%(4)
Portfolio turnover ................ 6%(4)
<CAPTION>
Class B
------------------------------------------------------------------------------------
Year Ended From
October 31, Inception
---------------------------------------------------------------------- 7/6/92 to
1997 1996 1995 1994 1993 10/31/92
----------- ----------- --------- --------- ----------- ----------
<S> <C> <C>
Net asset value, beginning
of period ........................ $4.91 $4.74 $4.61 $4.91 $4.83 $4.89
Income from investment
operations
Net investment income ............ 0.31(3) 0.31(3) 0.30(3) 0.27(3) 0.30(3) 0.07(3)
Net realized and
unrealized gain (loss) .......... 0.15 0.17 0.13 (0.26) 0.08 (0.06)
---------- ----------- ---------- ---------- ---------- ----------
Total from investment
operations .................... 0.46 0.48 0.43 0.01 0.38 0.01
---------- ----------- ---------- ---------- ---------- ----------
Less distributions
Dividends from net
investment income ............... (0.31) (0.31) (0.30) (0.27) (0.30) (0.07)
Dividends from ne
realized gains .................. -- -- -- (0.03) -- --
Tax return of capital ............ -- -- -- (0.01) -- --
---------- ----------- ---------- ---------- ---------- ----------
Total distributions ............. (0.31) (0.31) (0.30) (0.31) (0.30) (0.07)
---------- ----------- ---------- ---------- ---------- ----------
Change in net asset value ......... 0.15 0.17 0.13 (0.30) 0.08 (0.06)
---------- ----------- ---------- ---------- ---------- ----------
Net asset value, end of
period ........................... $5.06 $4.91 $4.74 $4.61 $4.91 $4.83
========== =========== ========== ========== ========== ==========
Total return(1) ................... 9.51% 10.36% 9.71% (0.03)% 8.02% 0.20%(5)
Ratios/supplemental data:
Net assets, end of perio
(thousands) ...................... $10,318 $5,943 $4,659 $6,418 $3,968 $1,357
Ratio to average net assets of:
Operating expenses ............... 1.50% 1.50% 1.50% 1.45% 1.45% 1.45%(4)
Net investment income ............ 6.05% 6.38% 6.59% 5.74% 5.79% 5.30%(4)
Portfolio turnover ................ 246% 232% 344% 121% 128% 6%(4)
</TABLE>
- -----------
(1) Maximum sales charges are not included in total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.06, $0.08, $0.08, $0.09 and $0.14, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.06, $0.08, $0.08, $0.09 and $0.21, respectively.
(4) Annualized.
(5) Not annualized.
<TABLE>
<CAPTION>
Class C
------------------
From
Inception
10/1/97 to
10/31/97
------------------
<S> <C>
Net asset value, beginning of period ............. $5.15
Income from investment operations
Net investment income ........................... 0.03(2)
Net realized and unrealized gain (loss) ......... (0.09)
------------
Total from investment operations ............... (0.06)
------------
Less distributions
Dividends from net investment income ............ (0.03)
Dividends from net realized gains ............... --
Tax return of capital ........................... --
------------
Total distributions ............................ (0.03)
------------
Change in net asset value ........................ (0.09)
------------
Net asset value, end of period ................... $5.06
============
Total return(1) .................................. (1.30)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $575
Ratio to average net assets of:
Operating expenses .............................. 1.25%(3)
Net investment income ........................... 5.51%(3)
Portfolio turnover ............................... 246%
</TABLE>
- -----------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of $0.04.
(3) Annualized
(4) Not annualized
8
<PAGE>
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and total return in
advertisements, sales literature or reports to current and prospective
shareholders. Both yield and total return figures are computed separately for
each Class of Shares in accordance with formulas specified by the Securities
and Exchange Commission. Yield and total return are based on historical
earnings and are not intended to indicate future performance.
The yield of each Fund will be computed by dividing the Fund's net
investment income over a 30-day period by an average value of invested assets
(using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount will be compounded for six
months and then annualized for a twelve month period to derive the Fund's yield
for each class.
Standardized quotations of average annual total return for each class of
shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in such class of shares over a period of 1,
5 and 10 years (or the life of the Fund). Standardized total return quotations
reflect the deduction of a proportional share of each Class's expenses (on an
annual basis), deduction of the maximum initial sales load in the case of Class
A and Class M Shares or the maximum contingent deferred sales charge applicable
to a complete redemption of the investment in the case of Class B and Class C
Shares, and assume that all dividends and distributions on each class of shares
are reinvested when paid. Performance data quoted for a class of shares
covering periods prior to the inception of such class of shares will reflect
historic performance of Class A Shares adjusted for the higher operating
expenses applicable to such class of shares. Each Fund also may quote
supplementally a rate of total return over different periods of time or by
means of aggregate, average and year-by-year or other types of total return
figures. In addition each Fund may from time to time publish material citing
historical volatility for shares of each Fund.
Each Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and rating services
such as Morningstar, Inc. Additionally, each Fund may compare its performance
results to other investment or savings vehicles (such as certificates of
deposit) and may refer to results published in various publications such as
Changing Times, Forbes, Fortune, Money, Barrons, Business Week and Investor's
Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's
Investment Adviser, The Wall Street Journal, The New York Times, Consumer
Reports, Registered Representative, Financial Planning, Financial Services
Weekly, Financial World, U.S. News and World Report, Standard and Poor's, The
Outlook, and Personal Investor. The Funds may from time to time illustrate the
benefits of tax deferral by comparing taxable investments to investments made
through tax-deferred retirement plans. The total return may also be used to
compare the performance of each Fund against certain widely acknowledged
outside standards or indices for stock and bond market performance, such as the
Lehman Brothers Aggregate Bond Index, Merrill Lynch Medium Quality Corporate
Short-Term Bond Index, Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500"), Dow Jones Industrial Average, Europe Australia Far East Index
(EAFE), Consumer Price Index, Lehman Brothers Corporate Index and Lehman
Brothers T-Bond Index. The Lehman Brothers Aggregate Bond Index is an unmanaged
but commonly used measure of bond performance. It is a combination of several
Lehman Brothers Fixed Income indexes.
Advertisements, sales literature and communications may contain
information about each Fund or the Advisor's current investment strategies and
management style. Current strategies and style may change to allow each Fund to
respond quickly to a changing market and economic conditions. From time to
time, each Fund may discuss specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Funds may
separate cumulative and average annual returns into income results and capital
gains or losses; or cite separately as a return figure the equity or bond
portion of the Fund's portfolio; or compare the Fund's equity or bond return
figure to well-known indices of market performance including but not limited
to: the S&P 500 Index, Dow Jones Industrial Average, Lehman Brothers Aggregate
Bond Index, Merrill Lynch Medium Quality Corporate Short-Term Bond Index, CS
First Boston High Yield Index and Salomon Brothers Corporate and Government
Bond Indices.
Performance information for the Funds reflect only the performance of a
hypothetical investment in Class A, Class B, Class C or Class M Shares of the
Fund during the particular time period on which the calculations are based.
Performance information should be considered in light of each Fund's investment
objectives and policies, characteristics and quality of the portfolio, and the
market conditions during the given time period, and should not be considered as
a representation of what may be achieved in the future. For a description of
the methods used to determine total return for a Fund, see the Statement of
Additional Information.
Each Fund's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Fund and a comparison of that
performance to a securities market index.
INVESTMENT OBJECTIVES AND POLICIES
Fixed Income Fund
The Fixed Income Fund's investment objective is to maximize current income
consistent with the preservation of capital. The investment objective of the
Fund is a fundamental policy which may not be changed without the approval of
the holders of a majority of the outstanding shares of the Fund. There can be
no assurance that the Fund's investment objective will be achieved.
9
<PAGE>
The Fixed Income Fund will seek to achieve its objective by investing at
least 65% of its total assets in the following sectors of the fixed income
securities markets: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
("U.S. Government Securities"); (b) debt securities issued by foreign issuers,
including foreign governments and their political subdivisions ("Foreign
Securities"); (c) securities rated at the time of purchase as investment grade
("Investment Grade Securities") by a nationally recognized statistical rating
organization ("NRSRO"); and (d) high yield, high risk fixed income securities
commonly referred to as "junk bonds". The Fund's assets generally will be
invested in each market sector, but the Fund may invest any amount of its
assets in any one sector (except for high yield, high risk corporate fixed
income securities, in which sector the Fund will not invest more than 50% of
its assets determined at the time of investment) and may choose not to invest
in a sector in order to achieve its investment objective. The Adviser believes
that by following this strategy, the Fund's net asset value is likely to be
more stable than that of a fund which invests in only one of these four fixed
income sectors. Greater stability would occur because, in general, broad
diversification over several market sectors tends to reduce volatility. For
certain of the risk considerations involved in an investment in the Fund, see
"Investment Techniques and Related Risks."
The table below shows the dollar weighted average of total investments, as
of October 31, 1997, listed by Standard & Poor's ("S&P") rating categories, or
comparable rating by another NRSRO. The column titled "Not Rated" reflects the
percentage of portfolio holdings which were not rated by any NRSRO but which
the Adviser has judged to be comparable in quality to the corresponding rating
categories.
<TABLE>
<CAPTION>
S&P Rating Rated Not Rated
- ------------ ---------- ----------
<S> <C> <C>
AAA 10.3% 0.0%
AA 3.8 0.0
A 9.4 1.0
BBB 29.0 5.6
BB 14.2 1.5
B 10.4 7.7
CCC 0.2 0.6
CC 0.0 0.0
C 0.0 0.0
D 0.0 0.0
---- ----
77.3 16.4
</TABLE>
Short Term Fund
The Short Term Fund's investment objective is to provide high current
income relative to short-term investment alternatives, while attempting to
limit fluctuations in the net asset value of the Fund's shares resulting from
movements in interest rates. The Fund's investment objective is a fundamental
policy and may not be changed without approval of the holders of a majority of
the outstanding shares of the Fund. There can be no assurance that the Fund
will achieve its investment objective.
The Short Term Fund will seek to achieve its objective by investing in a
diversified portfolio of fixed income securities comprised primarily of
shorter-term securities having an expected remaining weighted average maturity
of three years or less. The Fund will seek to achieve its objective by
investing primarily in a portfolio of shorter-term securities in the following
market sectors: (a) securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Securities"), (b) debt securities issued by foreign issuers,
including foreign governments and their political subdivisions ("Foreign
Securities"); and (c) high yield and investment grade fixed income securities.
The Fund's assets generally will be invested in each fixed income sector;
however, the Fund may invest any amount of its assets in any one sector (except
the Fund may not invest more than 35% of its assets determined at the time of
investment in foreign debt securities). The Fund may choose not to invest in a
sector in order to achieve its investment objective. By following this
strategy, the Fund's net asset value is anticipated to be relatively stable
because, in general, broad diversification over several market sectors tends to
reduce volatility. Under normal circumstances, the Fund's portfolio will be
invested primarily in shorter-term fixed income securities.
The Short Term Fund may, however, invest up to 35% of its assets in
non-short-term securities of differing maturities and in preferred stock. There
will be fluctuations in the Fund's net asset value per share in response to
changes in the value of the securities in which the Fund invests due to changes
in prevailing interest rates and other market and credit factors. It is
anticipated that such fluctuations will generally be less than that of
long-term securities, since the asset values of short-term securities (without
regard to other market and credit factors) are typically less sensitive to
interest rate movements than longer term securities.
The Short Term Fund has no requirements regarding whether the securities
it purchases must be rated. The Fund will typically invest at least 65% of its
assets in Investment Grade Securities which are rated, at the time of
investment, BBB or above by Standard & Poor's Corporation ("S&P"), Duff &
Phelps Credit Rating Co. ("D&P") or Fitch Investor Services, Inc. ("Fitch"), or
Baa or above by Moody's Investor's Service, Inc. ("Moody's") (or, in the case
of unrated securities, judged by the Adviser to be of comparable quality). The
Fund may invest up to 10% of its assets in High Yield-High Risk Securities
rated, at the time of investment, lower than B and as low as Caa by Moody's and
CCC by S&P, D&P, or Fitch. Fixed income securities rated lower than BBB by S&P
or Baa by Moody's are commonly referred to as "junk bonds." The Fund may invest
up to 35% of its assets in securities rated, at the time of investment, in
securities rated below BBB/Baa to as low as B by S&P, D&P, Fitch or Moody's.
The Fund will not invest in high yield securities rated at the time of
investment lower than CCC by S&P, D&P or Fitch or lower than Caa by Moody's.
Securities rated CCC by S&P are regarded by S&P as, on balance, predominantly
speculative with respect to the capacity to pay interest and repay principal in
accordance with the terms of the obligation. Although such securities will
likely have some quality and protective
10
<PAGE>
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Securities rated Caa by Moody's are regarded
by Moody's to be of poor standing. The Fund may, but is not obligated to,
dispose of debt securities whose credit quality falls below investment grade.
For a more complete description of ratings of corporate obligations, see the
Appendix in the Statement of Additional Information. See also "Risk Factors and
Special Considerations."
U.S. Government Securities
The U.S. Government Securities in which the Funds may invest are (1) U.S.
Treasury obligations, which differ only in their interest rates, maturities and
times of issuance and include U.S. Treasury bills (maturities of one year or
less), U.S. Treasury notes (maturities of one to 10 years) and U.S. Treasury
bonds (generally maturities of greater than 10 years); and (2) obligations
issued or guaranteed by U.S. Government agencies, authorities and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Government (such as Government National Mortgage
Association ("GNMA") Certificates), (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the U.S. Treasury (which line
of credit is equal to the face value of the government obligation), (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality, or (d) the creditworthiness of the
instrumentality. The Funds may invest in U.S. Government Securities denominated
in foreign currencies, such as U.S. Treasury obligations and securities issued
by GNMA, FNMA, FHLMC and SLMA (each as defined below). An example of such an
agency issue in which the Funds invest is PERLS (Principal Exchange Rate Linked
Securities), which are bonds whose principal repayment, while paid in U.S.
dollars, is linked to the level of the exchange rate between the U.S. dollar
and the currency of one or more countries.
Examples of agencies and instrumentalities that issue U.S. Government
Securities in which the Funds will invest are GNMA, the Federal Home Loan
Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association
("FNMA"), and Student Loan Marketing Association ("SLMA"). GNMA is a wholly
owned corporate instrumentality of the United States and is authorized to
borrow from the U.S. Treasury without limitation to meet its payment
obligations on the mortgage-backed securities which it issues and guarantees.
FNMA is a federally chartered but privately owned corporation which guarantees
the timely payment of principal of and interest on the certificates it issues;
the guarantee is not backed by the U.S. government. FHLMC and SLMA are
corporate instrumentalities of the United States which guarantee the timely
payment of interest on and the ultimate payment of principal of their
certificates; the guarantee is not backed by the U.S. Government. With respect
to obligations issued or guaranteed by U.S. Government agencies, authorities
and instrumentalities, guarantees as to the timely payment of principal and
interest do not extend to the value of the Funds' shares. In addition, the
market value of U.S. Government Securities fluctuates as interest rates change.
These securities may also include collateralized mortgage-backed obligations
("CMOs") and real estate mortgage investment conduits ("REMICs"). CMOs are
hybrid instruments with characteristics of both mortgage-backed and mortgage
pass-through securities. Similar to a bond, interest and pre-paid principal on
a CMO are paid, in most cases, semiannually. CMOs may be collateralized by
whole mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are
structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class. Investors holding
the longer maturity classes receive principal only after the first class has
been retired. REMICs are similar to CMOs and are fixed pools of mortgages with
multiple classes of interests held by investors. Mortgages backing U.S.
Government Securities may include, among others, conventional 30-year
fixed-rate mortgages, graduated-payment mortgages, 15-year mortgages and
adjustable-rate mortgages.
The Funds may also invest in pass-through securities that are derived from
mortgages. A pass-through security is formed when mortgages are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgages is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service
fee).
Mortgage pass-through securities, CMOs and REMICs are sometimes referred
to as "derivatives," as their value is derived from the performance or value of
such underlying instruments. The value of these instruments can fluctuate to a
greater degree than other debt securities in response to changes in interest
rates and under some circumstances the market for these securities can be less
liquid. Mortgage backed securities may also be subject to prepayment risk.
Prepayment rates are important because of their effect on the yield and price
of securities. Prepayments occur when the holder of an individual mortgage
prepays the remaining principal before the mortgage's scheduled maturity date.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Although the
specific pattern of prepayments is estimated and reflected in the price paid
for pass-through securities at the time of purchase, the actual prepayment
behavior of the relevant mortgages cannot be known at that time. Therefore, it
is not possible to predict accurately the realized yield or average life of a
particular issue of pass-through securities. Prepayments that occur faster than
estimated adversely affect yields for pass-throughs purchased at a premium
(that is, a price in excess of principal amount) and may cause a loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-throughs purchased at a
11
<PAGE>
discount. Furthermore, the proceeds from prepayments usually are reinvested at
current market rates, which may be higher than, but usually are lower than, the
rates earned on the original pass-through securities. This reinvestment risk is
increased in the case of GNMA securities because principal is repaid monthly
rather than in a lump sum at maturity.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. Generally, however,
prepayments on fixed rate mortgage loans will increase during a period of
falling interest rates and decrease during a period of rising interest rates.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities or
decline in value from declining interest rates because of the risk of
prepayment.
The Funds may purchase pass-through securities at a premium or at a
discount. The values of pass-through securities in which the Funds may invest
will fluctuate with changes in interest rates. The value of such securities
varies inversely with interest rates, except that when interest rates decline,
the value of pass-through securities may not increase as much as other debt
securities because of the prepayment feature. Changes in the value of such
securities will not affect interest income from those obligations but will be
reflected in the Funds' net asset value.
Foreign Securities
The Foreign Securities in which the Funds may invest are issued by foreign
issuers in developed countries considered creditworthy by the Adviser and in
so-called emerging market countries. The Funds will invest in government
obligations supported by the authority to levy taxes sufficient to ensure the
payment of all principal and interest due on such obligations. Because foreign
government obligations, like U.S. Government obligations, are generally
guaranteed as to principal and interest by the government issuing the security,
the principal risk of investing in foreign government obligations is that the
foreign government will not, or will be unable to, meet its obligations. The
Funds may also purchase securities of non-governmental issuers considered
creditworthy by the Adviser. For a discussion of the risk considerations of
investing in foreign securities, see "Investment Techniques and Related Risks."
While a portion of the Fund's assets normally will be invested in securities
issued abroad and denominated in foreign currencies ("non-U.S. dollar
securities"), that amount may vary depending on the relative yield of such
securities, the relative strength of the economies and the financial markets of
such countries, the relative interest rates available in such countries and the
relationship of such countries' currencies to the U.S. dollar. Investments in
non-U.S. dollar securities and currency will be evaluated on the basis of
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies) as
well as technical and political data. Normally, the Fixed Income Fund invests
approximately 10-20% of its assets in non-U.S. dollar securities; however, the
Fixed Income Fund does not intend to invest more than 50% of its assets in such
securities. Under normal conditions, up to 35% of the Short Term Fund's assets
may be invested in foreign securities. The Funds may hold foreign currency or
buy and sell foreign currency contracts for hedging purposes to protect against
declines in the U.S. dollar value of foreign securities held by the Funds and
against increases in the U.S. dollar value of the foreign securities which the
Funds might purchase. The Funds' investment restrictions limit their
investments in any industry to 25% of its total assets. A foreign government
will be treated as an industry for purposes of this restriction. See
"Investment Restrictions" in the Statement of Additional Information.
Investment Grade Securities
Investment Grade Securities of domestic issuers in which the Funds may
invest are all types of long- or short-term debt obligations ("Debt
Obligations"), such as bonds, debentures, notes, municipal bonds, equipment
lease certificates, equipment trust certificates, asset-backed securities,
commercial and residential pass-through securities, collateralized mortgage
obligations (including REMICs) issued by private issuers ("private label
CMOs"), conditional sales contracts and commercial paper (including obligations
secured by such instruments). The Fund may invest in Investment Grade
Securities of U.S. issuers denominated in foreign currencies. The Investment
Grade Securities that the Fund may purchase consist of securities rated in the
top four rating categories by a NRSRO. Securities rated Baa or BBB are medium
grade investment obligations that may have speculative characteristics. Changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments, in the case of such
obligations, than is the case for higher grade securities.
Municipal bonds are debt obligations which generally have a maturity at
the time of issue in excess of one year and are issued to obtain funds for
various public purposes. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or specific revenue source.
Industrial development bonds or private activity bonds are issued by or on
behalf of public authorities to obtain funds for privately operated facilities
and are, in most cases, revenue bonds which do not generally carry the pledge
of the full faith and credit of the issuer of such bonds, but depend for
payment on the ability of the industrial user to meet its obligations (or any
property pledged as security).
Mortgage pass-through securities created by non-governmental issuers (such as
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be
supported by various forms of insurance or guarantees,
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including individual loan, title, pool and hazard insurance and letters of
credit, which may be issued by governmental entities, private insurers or the
mortgage poolers.
High Yield-High Risk Securities
High Yield-High Risk Securities of domestic issuers in which the Funds may
invest are preferred and preference stock and Debt Obligations. The Funds may
invest in High Yield-High Risk Securities of domestic issuers which are
denominated in foreign currencies. The High Yield-High Risk Securities that the
Funds may purchase are securities in the lower rating categories of the NRSROs
(BB through CCC and Ba through Caa), and unrated securities. (The fact that
certain securities are unrated does not necessarily reflect the level of
quality or risk that may be associated with such securities. Some issuers do
not seek to have their securities rated.) These lower rated and comparable
unrated securities, while selected for their relatively high yield, may be
subject to greater fluctuations in market value and greater risks of loss of
income and principal than higher rated securities. High yields often reflect
the greater risks associated with the securities that offer such yields.
Because of these greater risks, High Yield-High Risk Securities often carry
lower ratings.
Economic conditions can sometimes narrow the spreads between yields on
lower rated (or comparable unrated) securities and yields on higher rated
securities. If these spreads narrow to such a degree that the Adviser believes
that the yields available on lower rated or comparable unrated securities do
not justify the higher risks associated with those securities, the Funds may
invest in higher rated or comparable unrated securities. Investments in high
yield, high risk pass-through securities are subject to prepayment and
reinvestment risks similar to those described above under "Investment Objective
and Policies--U.S. Government Securities."
High Yield-High Risk Securities may also include increasing rate notes.
Increasing rate notes are high yielding, high risk securities with maturities
ranging from two to five years, whose interest rates increase under specified
conditions. They are issued as temporary financing with the intent of being
replaced in six months or less. Accordingly, investments in these securities
can result in the Funds having a higher than normal portfolio turnover rate.
See "Portfolio Turnover."
Some High Yield-High Risk Securities are convertible into or exchangeable
for equity securities or carry the right--in the form of a warrant or as part
of a unit with the security--to acquire equity securities. The Funds would
ordinarily purchase these securities for their yield characteristics rather
than for the purpose of exercising the associated rights to obtain equity
securities. However, if the Funds obtain equity securities, the Funds may hold
these equity securities for such period of time as the Adviser deems prudent,
provided that the value of such equity securities will not at any time exceed
2% of a Fund's assets.
The Adviser evaluates the purchase of High Yield-High Risk Securities for
the Funds primarily through the exercise of its own investment and credit
analysis and on the ratings assigned by NRSROs. The Funds will not invest in
High Yield-High Risk Securities rated lower than CCC/Caa by a NRSRO. Such
securities are regarded, on balance, as being of poor standing and
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with the terms of the obligation. Although such
securities will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. For a more complete description of ratings of high yield securities
obligations, see the Appendix.
As a fundamental policy, the Fixed Income Fund's investments in High
Yield-High Risk Securities will be limited to not more than 50% of its assets
and the Short Term Fund will be limited to 35% of its assets. This restriction
applies at the time of investment and any subsequent change in the percentage
due to changes in market value of portfolio securities or other changes in the
total assets will not be considered a violation of this restriction. Because of
the additional risks associated with investments in these securities, an
investor may wish to consider carefully the manner in which each Fund seeks its
objective, and the investor's ability to assume these risks, before investing
in the Funds.
General Investment Policies
For temporary defensive purposes part or all of the Fixed Income Fund's
assets may be in cash or invested in cash equivalents at the discretion of the
Adviser. At times when the Adviser determines that Fund assets should be in
cash or invested in cash equivalents for temporary defensive purposes, the Fund
will not be investing in accordance with its investment objective. The Adviser
will convert Fund assets to cash or invest in cash equivalents for temporary
defensive purposes during periods of rising interest rates, unstable pricing
and currency exchange or in response to extreme market fluctuations.
The Fixed Income Fund expects that, under normal market conditions, the
maturity of any single portfolio security will not exceed 30 years in the U.S.
Government Securities sector, 15 years in the Foreign Securities sector, and 25
years in the Investment Grade Securities and High Yield-High Risk Securities
sectors. However, the dollar-weighted average maturity of the securities in
such sectors of the Fund's portfolio may vary significantly from time to time,
based on such factors as the Adviser's expectations as to future changes in
interest or exchange rates, the maturity schedules and possible prepayment of
bonds held by the Fund and the characteristics and maturities of securities
available in the market for purchase by the Fund at various future times. The
adjustment of the Fund's dollar-weighted average maturity through the sale of
portfolio holdings and the reinvestment of sale proceeds in securities of
different maturities may cause the Fund's portfolio turnover rate to be higher
than if the Fund had held its holdings until their maturity. For a discussion
of portfolio turnover rate, see "Portfolio Turnover."
As a fundamental policy, the Funds may borrow money from banks to the
extent permitted under the 1940 Act. As an operating (non-fundamental) policy,
the Funds do not intend
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to borrow any amount in excess of 10% of their respective assets, and would do
so only for temporary emergency or administrative purposes. In addition, to
avoid the potential leveraging of its assets, neither Fund will make additional
investments when its borrowings are in excess of 5% of their total assets. If a
Fund should determine to expand its ability to borrow beyond this current
operating policy, the Prospectus would be amended and shareholders would be
notified.
INVESTMENT TECHNIQUES AND RELATED RISKS
In addition to the investment policies described above, the Funds may
utilize the following investment practices or techniques.
Zero Coupon, Step Coupon and PIK Bonds
The Fixed Income Fund may invest up to 15% of its assets, determined at
the time of investment, in any combination of zero coupon bonds, step coupon
bonds and bonds on which interest is payable in kind ("PIK bonds"), in the
aggregate. The Short Term Fund will not invest more than 3% of its assets in
zero coupon bonds. A zero coupon bond is a bond that does not pay interest
currently for its entire life. Step coupon bonds frequently do not entitle the
holder to any periodic payments of interest for some initial period after the
issuance of the obligation; thereafter, step coupon bonds pay interest for
fixed periods of time at particular interest rates (a "step coupon bond"). In
the case of a zero coupon bond, the nonpayment of interest on a current basis
may result from the bond's having no stated interest rate, in which case the
bond pays only principal at maturity and is initially issued at a discount from
face value. Alternatively, a zero coupon obligation may provide for a stated
rate of interest, but provide that such interest is not payable until maturity,
in which case the bond may initially be issued at par. The value to the
investor of a zero coupon or step coupon bond is represented by the economic
accretion either of the difference between the purchase price and the nominal
principal amount (if no interest is stated to accrue) or of accrued, unpaid
interest during the bond's life or payment deferral period. PIK bonds are
obligations which provide that the issuer thereof may, at its option, pay
interest on such bonds in cash or in the form of additional debt securities.
Such securities benefit the issuer by mitigating its need for cash to meet debt
service, but also require a higher rate of return to attract investors who are
willing to defer receipt of such cash. The Funds will accrue income on such
investments for tax and accounting purposes, which is distributable to
shareholders from available cash or liquidated assets. See "Risk Factors" for
additional information concerning the characteristics of zero coupon bonds,
step coupon bonds and PIK bonds. See also "Dividends, Distributions and Taxes."
Options and Other Hedging Activities
The Fixed Income Fund may write and purchase options, including
over-the-counter options, for hedging purposes. The Fixed Income Fund may also
engage in foreign currency exchange transactions and in transactions involving
interest rate futures contracts and options thereon as a hedge against changes
in exchange and interest rates. The Short Term Fund may enter into various
hedging transactions, such as interest rate swaps, and the purchase and sale of
interest rate collars, caps and floors. The Short Term Fund reserves the right,
but has no current intention, to enter into futures contracts, and to write and
purchase options, including foreign currency options and over-the-counter
options. For more information regarding the Funds' options activities, see the
Statement of Additional Information.
Interest Rate Transactions. Interest rate swaps involve the exchange with
another party of commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate floor. An interest rate collar combines the elements of purchasing a cap
and selling a floor. The collar protects against an interest rate rise above
the maximum amount but gives up the benefit of an interest rate decline below
the minimum amount. The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest rate swap will
be accrued on a daily basis and any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily having an aggregate net asset value at least equal to
the accrued excess will be maintained in a pledged account by the Fund's
custodian. If there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements related to the
transaction.
Loan Participations
The Funds may invest up to 5% of its net assets, determined at the time of
investment, in loan participations. A loan participation agreement involves the
purchase of a share of a loan made by a bank to a company in return for a
corresponding share of the borrower's principal and interest payments. Loan
participations of the type in which the Funds may invest include interests in
both secured and unsecured corporate loans. When the Funds purchase loan
assignments from lenders, they will acquire direct rights against the borrower,
but these rights and the Funds' obligations may differ from, and be more
limited than, those held by the assignment lender. The principal credit risk
associated with acquiring loan participation and assignment interests is the
credit risk associated with the underlying corporate borrower. There is also a
risk that there may not be a readily available market for participation loan
interests and, in some cases, this could result in the Funds disposing of such
securities at a substantial discount from face value or holding such securities
until maturity. See the Statement of Additional Information.
Trading of Securities
The Funds may trade securities from its portfolio which are not subject to
options, or which are not held in a segregated account with its custodian, for
short-term (less than one year)
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profits in order to take advantage of differentials in prices and yields or of
fluctuations in interest rates, consistent with its investment objective.
Repurchase Agreements
The Funds may enter into repurchase agreements with respect to U.S.
Government Securities. Repurchase agreements may be entered into only with
registered broker-dealers or government securities dealers ("dealers") and
depository institutions ("banks") believed by National to present minimum
credit risk in accordance with guidelines approved by the Funds' Directors/
Trustees. National will review and monitor the creditworthiness of such dealers
and banks. Under such agreements, the dealer or bank agrees, upon entering into
the contract, to repurchase a security it sells at a time and price, mutually
agreed upon with the purchaser of such security, thereby determining the yield
during the term of the agreement. This results in a fixed rate of return
insulated from market fluctuations during such period. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price, and such value
will be determined on a daily basis by marking the underlying securities to
their market value. With respect to any repurchase agreements with a maturity
of greater than one day, such agreements shall be collateralized in an amount
at least equal to 102% of the repurchase price. The Funds do not bear the risk
of a decline in value of the underlying security unless the seller defaults
under its repurchase obligation. In the event of a bankruptcy or other default
of a seller of a repurchase agreement, the Funds could experience both delays
in liquidating the underlying securities and losses, including (a) possible
decline in the value of the underlying securities during the period while the
Funds seek to enforce its rights thereto; (b) possible subnormal levels of
income and lack of access to income during this period; and (c) expenses of
enforcing rights. The Funds will limit investments in repurchase agreements to
5% of their net assets.
Reverse Repurchase Agreements and Dollar Roll Agreements
The Funds may enter into reverse repurchase agreements and dollar roll
agreements. A dollar roll agreement is identical to a reverse repurchase
agreement except for the fact that substantially identical securities may be
repurchased. Under a reverse repurchase agreement or a dollar roll agreement, a
Fund sells securities and agrees to repurchase them, or substantially similar
securities in the case of a dollar roll agreement, at a mutually agreed upon
date and price. Reverse repurchase agreements and dollar roll agreements are
considered a form of borrowing. At the time the Fund enters into a reverse
repurchase agreement or a dollar roll agreement, it will establish and maintain
a pledged account with its Custodian containing any asset, including equity
securities and non-investment grade debt so long as the asset is liquid,
unencumbered and marked to market daily having a value not less than the
repurchase price (including accrued interest). The Funds' ability to enter into
reverse repurchase agreements and dollar roll agreements is limited by the
requirement to maintain assets in pledged accounts, by requirements relating to
each Fund's status as a regulated investment company under the Code, and by the
Funds' overall limitations on borrowing. Furthermore, because dollar roll
transactions may be for terms ranging between one and six months and unless
deemed liquid pursuant to procedures established by the Funds, they are subject
to the Funds' overall limitations on investment in illiquid securities.
While the use of reverse repurchase agreements and dollar roll agreements
creates opportunities for increased income, the use of these agreements may
cause losses. Reverse repurchase agreements and dollar roll agreements involve
the risk that the market value of the securities to be repurchased by the Fund
may decline below the price at which the Fund is obligated to repurchase. Also,
in the event the buyer of securities under a reverse repurchase agreement or a
dollar roll agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether
to enforce the Fund's obligation to repurchase the securities, and the Fund's
use of the proceeds of the reverse repurchase agreement or the dollar roll
agreement may effectively be restricted pending such decision.
When-Issued Securities and Delayed Delivery Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis. In such transactions, the price is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place more
than seven days in the future or after a period longer than the customary
settlement period for the particular security. Customary settlement for newly
issued mortgage-backed securities occurs only when the composition of the
underlying mortgage pools are set, typically once a month. At the time a Fund
makes the commitment to purchase a security on a when-issued or delayed
delivery basis, it will record the transaction and reflect the value of the
security and the liability to pay the purchase price in determining the Fund's
net asset value. The value of the security on the settlement date may be more
or less than the price paid as a result of, among other things, changes in the
level of interest rates or other market factors. No interest accrues on the
security between the time the Fund enters into the commitment and the time the
security is delivered. The Funds will establish a segregated account with the
Custodian in which it will maintain any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, equal in value to commitments for when-issued or
delayed delivery securities. Such segregated securities either will mature or,
if necessary, be sold on or before the settlement date. While when-issued or
delayed delivery securities may be sold prior to the settlement date, it is
intended that the Funds will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons,
in which case the Funds may sell their interest in the securities rather than
take delivery, and may reinvest the proceeds in similar or other securities.
The Funds may not invest more than 25% of their net assets at the time of
investment in securities purchased on a when-issued or delayed delivery basis.
Illiquid Securities
The Funds will not invest more than 15% of their net assets (taken at
market value at the time of the investment) in "illiquid securities." For this
purpose, illiquid securities include:
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securities subject to legal or contractual restrictions on resale (which may
include private placements (Rule 144A securities)); repurchase agreements
maturing in more than seven days; certain options traded over-the-counter that
the Funds have purchased; certain securities being used to cover options a Fund
has written; certain positions in interest-rate swaps, or interest-rate caps,
collars, or floors; certain private issue interest-only and principal-only
stripped securities; securities for which market quotations are not readily
available; or other securities which legally or in the Adviser's or
Trustees'/Directors' opinion may be deemed illiquid. Rule 144A of the
Securities Act provides an exemption for the sale of restricted stock to
facilitate trading between institutional investors in the private placement
market. In determining whether a Rule 144A security is liquid, the Trustees/
Directors may take into account the frequency of trades and quotes for the
security, the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, dealer undertakings to make a market
in the security, and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer). Dollar roll transactions may be for terms ranging
between one and six months and unless deemed liquid pursuant to procedures
established by the Trustees/Directors are subject to the Funds' overall
limitations on investment in illiquid securities.
Borrowing
As a fundamental policy, the Funds may borrow money from banks to the
extent permitted under the 1940 Act. The Funds do not intend at present to
borrow money from banks or financial institutions other than for emergency or
extraordinary purposes. The Funds will not borrow in excess of 10% of total
assets or make additional investments when borrowings are in excess of 5% of
their total assets. If the Funds should determine to expand their ability to
borrow beyond this current operating policy, the Prospectus would be amended
and shareholders would be notified. Reverse repurchase agreements and dollar
roll transactions are treated as borrowings by the Funds, and therefore the
Funds' entry into such transactions is subject to the Funds' overall
limitations on borrowing.
Risk Factors and Special Considerations
High Yield-High Risk Securities
Under normal conditions, up to 50% of the Fixed Income Fund's assets and
up to 35% of the Short Term Fund's assets may be invested in high yield-high
risk fixed income securities commonly referred to as "junk bonds." These
securities ("High Yield-High Risk Securities") will ordinarily be in the lower
rating categories of NRSROs or will be non-rated securities deemed by the
Adviser to be substantially equivalent to securities in such lower rating
categories. High Yield-High Risk Securities generally involve a greater
volatility of price and risk of nonpayment of principal and interest than
securities in higher rating categories and yields on these securities fluctuate
over time.
The risk of loss due to default by the issuer is significantly greater for
the holders of High Yield-High Risk Securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer. During an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of High Yield-High Risk Securities may
experience financial stress and may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific corporate developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing.
Factors adversely impacting the market value of High Yield-High Risk Securities
will adversely impact the Funds' net asset value to the extent the Funds'
assets are invested in such securities. In addition, the Funds may incur
additional expenses to the extent they are required to seek recovery upon a
default in the payment of principal or interest on their portfolio holdings.
Because the High Yield-High Risk Securities market is relatively new and its
growth paralleled along economic expansion, it is not clear how this market may
withstand a prolonged recession or economic downturn.
The Funds may have difficulty disposing of certain High Yield-High Risk
Securities because there may be a thin trading market for such securities.
Because not all dealers maintain markets in all High Yield-High Risk
Securities, there is no established retail secondary market for many of these
securities, and the Funds anticipate that such securities could be sold only to
a limited number of dealers or institutional investors. To the extent a
secondary trading market for High Yield-High Risk Securities does exist, it is
generally not as liquid as the secondary market for higher rated securities.
The lack of a liquid secondary market may have an adverse impact on the market
price of the security, and accordingly, the Funds' net asset values, and on the
Funds' ability to dispose of particular issues when necessary to meet the
Funds' liquidity needs or on the Funds' ability to respond to a specific
economic event, or an event such as a deterioration in the creditworthiness of
the issuer. The lack of a liquid secondary market for certain securities may
also make it more difficult for the Funds to obtain accurate market quotations
for purposes of valuing the Funds' portfolios. Market quotations are generally
available on many high yield issues only from a limited number of dealers and
may not necessarily represent firm bids of such dealers of prices for actual
sales. While all these considerations are generally relevant to many high yield
securities, they may be particularly relevant to securities which represent,
for example, the right to receive only the interest payments ("IOs") to be made
on a particular security. The yield and value of IOs can be very sensitive to
the rate of principal payments on the debt security as well as to various
market factors. IOs issued by private issuers are generally considered
illiquid. Government-issued IOs backed by fixed-rate mortgages may be deemed
liquid if they can be disposed of promptly in the ordinary course of business
at a value reasonably close to that used in the calculation of net asset value
per share. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of High Yield-High
Risk Securities, especially in a thinly-traded market.
From time to time, proposals have been discussed and new legislation
adopted designed to limit the use of certain High
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Yield-High Risk Securities by issuers in connection with leveraged buy-outs,
mergers and acquisitions, or to limit the deductibility of interest payments on
such securities. Such laws, or proposals, if enacted into law, could reduce the
market for such securities generally, and could negatively affect the financial
condition of issuers of High Yield-High Risk Securities and the high yield
market in general. For example, under a provision of the Internal Revenue Code
("Code") enacted in 1989, a corporate issuer may be limited from deducting all
of the original issue discount on high-yield discount obligations (i.e.,
certain types of debt securities issued at a significant discount to their face
amount).
The market values of High Yield-High Risk Securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower rated securities also tend to be more sensitive to
economic conditions than are higher rated securities. Accordingly, these lower
rated securities are considered predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation and will generally involve more credit risk than
securities in the higher rating categories. Even securities rated BBB or Baa,
ratings which are considered investment grade, possess some speculative
characteristics.
The Funds have no requirements regarding whether the securities they
purchase must be rated. While credit ratings evaluate the safety of principal
and interest payments, they do not evaluate market value risk of High
Yield-High Risk Securities. In addition, credit rating agencies may not change
credit ratings on a timely basis to reflect subsequent events. Accordingly, use
of lower rated securities places more importance on the ability of the Adviser
than does investing in higher quality fixed income securities. The Adviser will
base its investment decisions for the Funds on its own determination of
reasonable investment risk and reward. The Adviser's judgment as to the
"reasonableness" of the risk involved in any particular investment will be a
function of its experience in managing fixed-income investments and its
evaluation of (i) general economic and financial conditions; (ii) a specific
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of
interest and dividends, (d) ability to operate under adverse economic
conditions, and (e) fair market value of assets, and (iii) such other
considerations as the Adviser may deem appropriate.
Participation on Creditors' Committees. The Fixed Income Fund may from
time to time participate on committees formed by creditors to negotiate with
the management of financially troubled issuers of securities held by the Fund.
Such participation may subject the Fund to expenses such as legal fees and may
make the Fund an "insider" of the issuer for purposes of the federal securities
laws, and therefore may restrict the Fund's ability to purchase or sell a
particular security when it might otherwise desire to do so. Participation by
the Fund on such committees also may expose the Fund to potential liabilities
under the federal bankruptcy laws or other laws governing the rights of
creditors and debtors. The Fund will participate on such committees only when
the Adviser believes that such participation is necessary or desirable to
enforce the Fund's rights as a creditor or to protect the value of securities
held by the Fund.
Foreign Securities
Less public information may be available to the Adviser concerning issuers
of foreign securities as compared to equivalent domestic issuers. In certain
instances, there may be less government regulation of stock exchanges, brokers
and banks in foreign countries than in the United States. In addition,
differences exist among U.S. and foreign issuers with respect to growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions. In investing in bonds
denominated in foreign currencies, the Funds will be subject to the risk of
currency fluctuations. Foreign currencies may be affected by revaluation,
future adverse political and economic developments, and governmental
restrictions. The values of foreign investments and the investment income
derived from them also may be adversely affected by changes in currency
exchange control regulations.
Certain foreign countries are less stable politically than the United
States. The possibility exists that certain foreign governments may adopt
policies providing for expropriation or nationalization of assets, confiscatory
taxation, currency blockage or limitations on the use or removal of monies or
other assets of an investment company. Finally, the Funds may encounter
difficulty in obtaining and enforcing judgments against issuers of foreign
securities. The economies of developing countries generally are heavily
dependent upon international trade and, accordingly, have been and may continue
to be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been and may continue to be adversely affected by economic conditions
in the countries with which they trade.
Securities Denominated in Foreign Currencies
In investing in securities denominated in foreign currencies, the Funds
will be subject to the additional risk of currency fluctuations. An adverse
change in the value of a particular foreign currency as against the U.S.
dollar, to the extent that such change is not offset by a gain in other foreign
currencies, will result in a decrease in the Funds' assets. Any such change may
also have the effect of decreasing or limiting the income available for
distribution. Foreign currencies may be affected by revaluation, adverse
political and economic developments, and governmental restrictions. Although
the Funds will invest only in securities denominated in foreign currencies that
are fully convertible into U.S. dollars without legal restriction at the time
of investment, no assurance can be given that currency exchange controls will
not be imposed on any particular currency at a later date.
Changes in foreign exchange rates will affect the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar. Exchange rates are
17
<PAGE>
determined by forces of supply and demand in the foreign exchange markets, and
these forces are in turn affected by a range of economic, political, financial,
governmental and other factors. Exchange rate fluctuations can affect the
Funds' net asset value and dividends either positively or negatively depending
upon whether foreign currencies are appreciating or depreciating in value
relative to the U.S. dollar. Exchange rates fluctuate over both the short and
long term.
Securities of U.S. issuers denominated in foreign currencies may be less
liquid and their prices more volatile than securities issued by domestic
issuers and denominated in U.S. dollars. In addition, investing in securities
denominated in foreign currencies often entails costs not associated with
investment in U.S. dollar-denominated securities of U.S. issuers, such as the
cost of converting foreign currency to U.S. dollars, higher brokerage
commissions, custodial expenses and other fees. Non-U.S. dollar denominated
securities may be subject to certain withholding and other taxes of the
relevant jurisdiction, which may reduce the yield on the securities to the
Funds and which may not be recoverable by the Funds or its investors.
Zero Coupon, Step Coupon and PIK Bonds
The Fixed Income Fund may invest up to 15% of its assets in any
combination of zero coupon bonds, step coupon bonds and PIK bonds, in the
aggregate. The Short Term Fund will not invest more than 3% of its assets in
zero coupon bonds. See "Investment Techniques--Zero Coupon, Step Coupon and PIK
Bonds." Zero coupon and step coupon bonds are issued and traded at a discount
from their face amounts. The amount of the discount varies depending on such
factors as the time remaining until maturity of the bonds, prevailing interest
rates, the liquidity of the security and the perceived credit quality of the
issuer. The market prices of zero coupon, step coupon and PIK bonds generally
are more volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a
greater degree than do bonds on which regular cash payments of interest are
being made that have similar maturities and credit quality. In order to satisfy
a requirement for qualification as a "regulated investment company" under the
Code, the Funds must distribute their investment company taxable income,
including the original issue discount accrued on zero coupon or step coupon
bonds or interest paid in additional debt obligations on PIK bonds. Because the
Funds will not receive on a current basis cash payments in respect of accrued
original issue discount on zero coupon bonds, step coupon bonds during the
period before interest payments commence or interest paid in additional debt
obligations on PIK bonds, the Funds may have to distribute cash obtained from
other sources in order to satisfy the distribution requirement under the Code.
See also "Dividends, Distributions and Taxes."
INVESTMENT RESTRICTIONS
Not more than 25% of the total assets of the Funds will be concentrated in
the securities of any one industry. As a diversified investment company, at
least 75% of each Fund's total assets must be represented by cash or cash
items, government securities, securities of other investment companies and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the value of the total assets of each Fund. See the Statement of
Additional Information for a detailed description of all of the Funds'
investment restrictions.
PORTFOLIO TURNOVER
A change in securities held by each Fund is known as "portfolio turnover"
and may involve the payment by the Funds of dealer mark-up or underwriting
commissions and other transaction costs on the sale of securities, as well as
on the reinvestment of the proceeds in other securities. Portfolio turnover
rate for a fiscal year is the percentage determined by dividing the lesser of
the cost of purchases or proceeds from sales of portfolio securities by the
average of the value of portfolio securities during such year, all excluding
securities whose maturities at acquisition were one year or less. The Funds'
portfolio turnover rate will not be a limiting factor when the Adviser deems it
desirable to sell or purchase securities. Each Fund's portfolio turnover rate
may be higher if the Fund finds it necessary to significantly change its
portfolio to adopt a temporary defensive position. A high turnover rate may
involve greater expenses to the Funds and could involve realization of capital
gains that would be taxable to the shareholders. Portfolio turnover rates for
the fiscal years of the Funds are shown in the section "Financial Highlights."
MANAGEMENT OF THE FUND
Each Fund is an open-end management investment company known as a mutual
fund. The Directors of the Fixed Income Fund ("Directors") and the Trustees of
the Short Term Fund ("Trustees") are responsible for the overall supervision of
the operations of each Fund and perform the various duties imposed on
Directors/Trustees by the 1940 Act, and the Maryland General Corporation Law
and the laws of the Commonwealth of Massachusetts, respectively.
The Adviser
The Funds' investment adviser is National Securities & Research
Corporation, which is located at 56 Prospect Street, Hartford, Connecticut
06115. The Adviser is a subsidiary of Phoenix Duff & Phelps Corporation and an
indirect subsidiary of Phoenix Home Life Mutual Insurance Company ("Phoenix
Home Life") of Hartford, Connecticut. Phoenix Home Life is a majority
shareholder of Phoenix Duff & Phelps Corporation. Phoenix Home Life is in the
business of writing ordinary and group life and health insurance and annuities.
Its principal offices are located at One American Row, Hartford, Connecticut
06102. Phoenix Duff & Phelps Corporation is a New York Stock Exchange traded
company that provides various financial advisory services to institutional
investors, corporations and individuals through operating subsidiaries. The
Adviser also acts as the investment adviser or manager for Phoenix Income and
Growth Fund, Phoenix California Tax-Exempt Bonds, Inc., Phoenix Strategic
Equity Series Fund: Phoenix Equity Opportunities Fund, and the Phoenix
Worldwide Opportunities
18
<PAGE>
Fund. The Adviser currently has approximately $970 million in assets under
management. The Adviser has acted as an investment adviser for over sixty
years.
As compensation for its services, the Adviser receives a fee, which is
accrued daily against the value of each Fund's net assets and is payable
monthly by each Fund. The monthly fee is computed at an annual rate of .55% on
the first $1 billion of each Fund's average daily net assets, .50% on average
daily net assets between $1 billion and $2 billion, and .45% on average daily
net assets in excess of $2 billion. The ratio of management fees to average net
assets for the fiscal year ended October 31, 1997 for each class of shares of
each Fund was .55%.
The Portfolio Manager
Mr. David L. Albrycht is Portfolio Manager of the Funds, and as such, is
primarily responsible for the day-to-day management of the Funds' portfolios.
Mr. Albrycht co-managed the Fixed Income Fund since March 1994, and assumed
full management of the Fund in April 1995. He has been Portfolio Manager of the
Short Term Fund since August 1993.
Mr. Albrycht has also been the Portfolio Manager of the Phoenix Strategic
Income Fund of the Phoenix Multi-Portfolio Fund since August 1993. Mr. Albrycht
is a Managing Director, Fixed Income, of Phoenix Investment Counsel, Inc. and
National. He has held various investment management positions with Phoenix Home
Life from 1989 through 1995.
The Financial Agent
Equity Planning also acts as financial agent of the Funds and, as such,
performs administrative, bookkeeping and pricing functions for the Funds. As
compensation for such services, Equity Planning is entitled to a fee, payable
monthly and based upon (a) the average of the aggregate daily net asset values
of the Funds, at the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
(b) a minimum fee of $70,000 for each Fund; and (c) an annual fee of $12,000
for each class of shares beyond one. For its services during each Fund's fiscal
year ended October 31, 1997, Equity Planning received $145,836 from the Fixed
Income Fund and $70,205 from the Short Term Fund or 0.04% and 0.24%,
respectively, of each Fund's average net assets.
The Custodian and Transfer Agent
The custodian of the assets of the Funds is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts 02101 (the "Custodian"). The Funds
have authorized the custodian to appoint one or more subcustodians for the
assets of the Funds held outside the United States.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Funds (the "Transfer Agent") for
which it is paid $19.25 plus out-of-pocket expenses for each designated
shareholder account. The Transfer Agent has and shall engage sub-agents from
time to time to perform certain shareholder servicing functions for which such
agents shall be paid a fee by Equity Planning.
Brokerage Commissions
Although the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Funds. The Adviser may also
select an affiliated broker-dealer to execute transactions for the Funds,
provided that the commissions, fees or other remuneration paid to such
affiliated broker is reasonable and fair as compared to that paid to
non-affiliated brokers for comparable transactions.
DISTRIBUTION PLANS
The offices of Equity Planning, the national distributor of the Funds'
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Director/Trustee and
President of the Funds and a director and officer of Equity Planning. Michael
E. Haylon, a director of Equity Planning, is an officer of the Funds. G.
Jeffrey Bohne, Nancy G. Curtiss, William E. Keen, III, William R. Moyer,
Leonard J. Saltiel, and Thomas N. Steenburg are officers of the Funds and
officers of Equity Planning.
Equity Planning and the Funds have entered into amended and restated
distribution agreements under which Equity Planning has agreed to use its best
efforts to find purchasers each Funds' shares sold subject to an initial sales
charge and those sold subject to a contingent deferred sales charge. The Funds
have granted Equity Planning the exclusive right to purchase from the Funds and
resell, as principal, shares needed to fill unconditional orders for Fund
shares. Equity Planning may sell Fund shares through its registered
representatives or through securities dealers with whom it has sales
agreements. Equity Planning may also sell Fund shares pursuant to sales
agreements entered into with banks or bank affiliated securities brokers who,
acting as agent for their customers, place orders for Fund shares with Equity
Planning. Although the Glass-Steagall Act prohibits banks and bank affiliates
from engaging in the business of underwriting, distributing or selling
securities (including mutual fund shares), banking regulators have not
indicated that such institutions are prohibited from purchasing mutual fund
shares upon the order and for the account of their customers. If, because of
changes in law or regulations, or because of new interpretations of existing
law, it is determined that agency transactions of banks or bank affiliated
securities brokers are not permitted under the Glass-Steagall Act, the
Directors/ Trustees will consider what action, if any, is appropriate. It is
not anticipated that termination of sales agreements with
19
<PAGE>
banks or bank affiliated securities brokers would result in a loss to their
customers or a change in the net asset value per share of the Fund.
The sale of Fund shares through a bank or a securities broker affiliated
with a bank is not expected to preclude the Funds from borrowing from such bank
or from availing itself of custodial or transfer agency services offered by
such bank.
The Directors/Trustees have adopted separate amended and restated
distribution plans under Rule 12b-1 of the 1940 Act for each class of shares of
the Funds (the "Class A Plan," the "Class B Plan," the "Class C Plan," the
"Class M Plan" and collectively the "Plans"). The Plans permit the Funds to
reimburse the Distributor for expenses incurred in connection with the sale and
promotion of Fund shares and to pay for the furnishing of shareholder services.
Pursuant to the Class A Plan, the Funds may reimburse the Distributor monthly
for actual expenses of the Distributor up to 0.05% annually of the average
daily net assets of the Funds' Class A Shares. However, the Distributor has
voluntarily agreed to waive reimbursement under the Class A Plan for fiscal
year 1998. Pursuant to the Class B, Class C and Class M Plans adopted by the
Fixed Income Fund, the Fund may reimburse the Distributor monthly for actual
expenses of the Distributor up to 0.75%, 0.75% and 0.25% annually of the
average daily net assets of the Fund's Class B, C and M Shares, respectively.
Pursuant to the Class B and C Plans adopted by the Short Term Fund, the Fund
may reimburse the Distributor monthly for actual expenses of the Distributor up
to 0.50% and 0.25% annually of the average daily net assets of the Fund's Class
B and C Shares, respectively.
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Funds (including underwriting
commissions and finance charges related to the payment of commissions; (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Distributor for services rendered
in connection with the sale and distribution of shares of the Funds; (iv)
payment of expenses incurred in sales and promotional activities including
advertising expenditures related to the Funds; (v) the costs of preparing and
distributing promotional materials; (vi) the costs of printing the Funds'
Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the
Directors/Trustees determine are reasonably calculated to result in the sale of
shares of the Funds. In addition, each Fund will pay the Distributor 0.25%
annually of the average daily net assets of the Funds for providing services to
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee"). From the Service Fee, the Distributor
expects to pay a quarterly fee to qualifying broker-dealer firms, as
compensation for providing personal services and/or the maintenance of
shareholder accounts, with respect to shares sold by such firms. This fee will
not exceed on an annual basis 0.25% of the average annual net asset value of
such shares, and will be in addition to sales charges on Fund shares which are
reallowed to such firms. To the extent that the entire amount of the Service
Fee is not paid to such firms, the balance will serve as compensation for
personal and account maintenance services furnished by the Distributor. The
Distributor also pays to dealers, as additional compensation with respect to
sales of the Fixed Income Fund's Class C and M Shares, 0.75% and 0.25% and with
respect to the Short Term Fund's Class C Shares, 0.25% of the average annual
net asset value of each class, respectively.
In order to receive payments under the Plans, participants must meet such
qualifications as are to be established in the sole discretion of the
Distributor, such as services to the Funds' shareholders; or services providing
the Funds with more efficient methods of offering shares to groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmissions of such purchases or sales by computerized
tape or other electronic equipment; or other batch processing.
Under the Class A Plan, reimbursement or payment of expenses may not be
made unless such payments or reimbursement occurs prior to the earliest of (a)
the last day of the one-year period commencing on the last day of the calendar
quarter during which the specific service or activity was performed, or (b) the
last day of the one-year period commencing on the last day of the calendar
quarter during which payment was made by a third party on behalf of the Fund.
The Class B Plan, Class C Plan and Class M Plan, however, do not limit the
reimbursement of distribution related expenses to expenses incurred in
specified time periods.
For the fiscal year ended October 31, 1997, the Fixed Income Fund paid the
Distributor $463,149 under the Class A Plan, $1,529,736 under the Class B Plan,
$92 under the Class C Plan and $25 under the Class M Plan. For the fiscal year
ended October 31, 1997, the Short Term Fund paid the Distributor $51,494 under
the Class A Plan, $62,254 under the Class B Plan and $162 under the Class C
Plan. The fees were used to compensate broker-dealers for servicing
shareholder's accounts, including $72,223 paid to W.S. Griffith & Co., Inc., an
affiliate, compensating sales personnel and reimbursing the Distributor for
commission expenses and expenses related to preparation of the marketing
material. The Distributor's expenses from selling and servicing Class B Shares
may be more than the payments received from contingent deferred sales charges
collected on redeemed shares and from the Funds under the Class B Plans. Those
expenses may be carried over and paid in future years. At October 31, 1997, the
end of the last Plan year, the Distributor had incurred unreimbursed expenses
under the Fixed Income Fund Class B Plan of $1,710,933 (equal to 0.49% of the
Fund's net assets) and $180,548 under the Short Term Bond Fund's Class B Plan
(equal to 0.46% of the Fund's assets). These amounts have been carried into the
present Class B Plan year for each Fund, respectively.
On a quarterly basis, the Funds' Directors/Trustees review a report on
expenditures under each Plan and the purposes for which expenditures were made.
The Directors/Trustees conduct an additional more extensive review annually in
20
<PAGE>
determining whether each Plan will be continued. By its terms, continuation of
each Plan from year to year is contingent on annual approval by a majority of
the Funds' Directors/Trustees and by a majority of the Directors/Trustees who
are not "interested persons" (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of either Plan or any
related agreements (the "Plan Directors"). Each Plan provides that it may not
be amended to increase materially the costs which the Funds may bear without
approval of the applicable class of shareholders of each Fund and that other
material amendments must be approved by a majority of the Plan Directors by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan further provides that while it is in effect, the
selection and nomination of Directors/Trustees who are not "interested persons"
shall be committed to the discretion of the Directors/Trustees who are not
"interested persons." Each Plan may be terminated at any time by vote of a
majority of the Plan Directors or a majority of the applicable class of
outstanding shares of each Fund.
The Directors/Trustees have concluded that there is a reasonable
likelihood that the Plans will benefit the Funds and all classes of
shareholders.
The NASD regards certain distribution fees as asset-based sales charges
subject to NASD sales load limits. The NASD's maximum sales charge rule may
require the Directors/Trustees to suspend distribution fees or amend some or
all of the Plans.
HOW TO BUY SHARES
How do you invest?
You may open a fund account with an initial investment of $500. This
amount is reduced to $25 for investments made under the "Investo-Matic" plan
(see the New Account Application), individual retirement accounts or under the
systematic exchange privilege described below. The initial investment
requirement is waived for investments made under pension, profit sharing or
employee benefit plans as well as in connection with reinvested dividends and
distributions.
You may make additional investments at any time with at least $25. The
subsequent investment minimum is waived for investments made under pension,
profit sharing or employee benefit plans as well as in connection with
reinvested dividends and distributions.
An application should be completed to open a new Phoenix Funds account. A
check for the amount you wish to invest, made payable to the "Phoenix Funds,"
(along with the completed application if opening a new account), must be sent
to: Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301. See the Statement of Additional Information for more
information regarding the reduction or elimination of the minimum initial or
subsequent investments. You may also write to the Distributor at 100 Bright
Meadow Boulevard, Enfield, Connecticut 06083-2200 or call (800) 243-1574.
Shares are sold at the public offering price based on the net asset value
for the class of shares bought next determined after State Street Bank receives
your order. In most cases, in order to receive that day's public offering
price, State Street Bank must receive your order before the close of trading on
the New York Stock Exchange. Ownership of shares is recorded electronically in
book entry form; no share certificates are available.
What are the classes and how do they differ?
The Funds presently offer investors up to four classes of shares which
bear sales and distribution charges in different amounts. Only the Fixed Income
Fund currently offers Class M shares.
Class A Shares. If you buy Class A Shares of the Fixed Income Fund, you
will pay a sales charge at the time of purchase equal to 4.75% of the offering
price (4.99% of the amount invested). If you purchase Class A Shares of the
Short Term Fund, you will pay a sales charge at the time of purchase equal to
2.25% of the offering price (2.30% of the amount invested). The sales charge
may be reduced or waived under certain conditions. Class A Shares are not
subject to any charges by the Funds when they are sold. Class A Shares have
lower Rule 12b-1 fees and pay higher dividends than any other class.
Class B Shares. If you buy Class B Shares, you will not pay a sales charge
at the time of purchase. If you sell your Fixed Income Fund Class B Shares
within the first five years after they are bought, you will pay a sales charge
of up to 5% of your shares' value. If you sell your Short Term Fund Class B
Shares within the first three years after they are purchased, you will pay a
sales charge of up to 2% of your shares' value. See "Deferred Sales Charge
Alternative--Class B Shares." This charge declines each year to zero and may be
waived under certain conditions. Class B shares have higher Rule 12b-1 fees and
pay lower dividends than Class A and M Shares. Class B Shares automatically
convert to Class A Shares eight years (for the Fixed Income Fund) or six years
(for the Short Term Fund) after purchase. The Distributor intends to limit
investments in Class B Shares to: (a) $250,000 for any person; (b) $1 million
for any unallocated employer sponsored plan; and (c) $250,000 for each
participant in any allocated qualified employer sponsored plan, including
401(k) plans, provided such plan uses an approved participant tracking system.
Class B Shares will not be sold to any qualified employee benefit plan,
endowment fund or foundation if, on the date of the initial investment, such
entity has assets of over $10 million or more than 200 participant employees.
Class B Shares will not be sold to anyone who is over 85 years old.
Class C Shares. If you buy Class C Shares, you will not pay a sales charge
at the time of purchase. If you sell your Fixed Income Fund Class C Shares
within the first year after they are bought, you will pay a sales charge of 1%
of your shares' value. Class C Shares of the Short Term Fund are not subject to
any sales charge when shares are redeemed. See "Deferred Sales Charge
Alternative--Class C Shares." Class C Shares have the same Rule 12b-1 fees and
pay comparable dividends as Class B Shares. Class C Shares do not convert to
any other class of shares. Class C Shares are not currently offered for all
Phoenix Funds.
Class M Shares. If you buy Class M Shares of the Fixed Income Fund, you
will pay a sales charge at the time of
21
<PAGE>
purchase equal to 3.50% of the offering price (3.63% of the amount invested).
Class M Shares are not subject to any charges by the Fund when they are sold.
Class M Shares have lower Rule 12b-1 fees and pay higher dividends than Class B
and C Shares. Class M Shares do not convert to any other class of shares of the
Fund. Class M Shares are not currently offered for all Phoenix Funds.
What arrangement is best for you?
The alternative purchase arrangement permits you to choose the method of
buying shares that is most beneficial to you given the amount of the purchase,
the length of time you expect to hold the shares, whether you wish to receive
distributions in cash or to reinvest them in additional shares, and other
circumstances. You should consider whether, during the anticipated term of your
investment, the accumulated continuing distribution and service fees and
contingent deferred sales charges of one class would be more than the initial
sales charge and accumulated distribution and service fees of another class of
shares bought at the same time. See "Distribution Plans" and "Fund Expenses."
Initial Sales Charge Alternative--Class A and M Shares
The public offering price of Class A and M Shares is the net asset value
plus a sales charge that varies depending on the size of any "person's" (see
"How To Obtain Reduced Initial Sales Charges--Class A and M Shares: Combination
Purchase Privilege") purchase. Shares issued based on the automatic
reinvestment of income dividends or capital gains distributions are not subject
to any sales charges. The sales charge is divided between your investment
dealer and the Distributor as shown on the following tables.
Class A Shares--Fixed Income Fund
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
-----------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ------------------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Under $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 4.50 4.71 4.00
$100,000 but under $250,000 3.50 3.63 3.00
$250,000 but under $500,000 3.00 3.09 2.75
$500,000 but under $1,000,000 2.00 2.04 1.75
$1,000,000 or more None None None
</TABLE>
Class A Shares--Short Term Fund
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
-----------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ------------------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Under $50,000 2.25% 2.30% 2.00%
$50,000 but under $100,000 1.25 1.27 1.00
$100,000 but under $500,000 1.00 1.01 1.00
$500,000 but under $1,000,000 0.75 0.76 0.75
$1,000,000 or more None None None
</TABLE>
Class M Shares (Fixed Income Fund Only)
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
-----------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ----------------------------- ------------- ------------- -------------------
<S> <C> <C> <C>
Under $50,000 3.50% 3.63% 3.00%
$50,000 but under $100,000 2.50 2.56 2.00
$100,000 but under $250,000 1.50 1.52 1.00
$250,000 but under $500,000 1.00 1.01 1.00
$500,000 or more None None None
</TABLE>
Deferred Sales Charge Alternative--
Class B and C Shares
Class B Shares of both Funds and C Shares of the Fixed Income Fund are
purchased without an initial sales charge; however, shares sold within a
specified time period are subject to a declining contingent deferred sales
charge (the "CDSC") at the rates set forth below. Class C Shares of the Short
Term Fund are purchased without an initial sales charge and are not subject to
any sales charge when shares are redeemed. The charge will be multiplied by the
then current market value or the initial cost of the Shares being redeemed,
whichever is less. No sales charge will be imposed on increases in net asset
value. In addition, shares issued based on the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
To minimize the CDSC, shares not subject to any charge will be redeemed first,
followed by shares held the longest time. The Distributor will add up all
shares bought in any month and use the last day of the preceding month in
calculating the amount of shares owned and time period held for Class B Shares.
The trade date will be used for purposes of aging Class C Share investments.
Class B Shares--Fixed Income Fund
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6+
- ------ ---- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 3% 2% 2% 0%
</TABLE>
Class B Shares--Short Term Fund
<TABLE>
<CAPTION>
Year 1 2 3 4+
- ------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CDSC 2% 1.5% 1% 0% -- --
</TABLE>
Class C Shares--Fixed Income Fund
<TABLE>
<CAPTION>
Year 1 2+
- ------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CDSC 1% 0% -- -- -- --
</TABLE>
Dealer Concessions
In addition to the dealer discount on purchases of Class A and M Shares,
the Distributor intends to pay investment dealers: a sales commission of 4% of
the sale price of Fixed Income Fund Class B Shares, a sales commission of 2% of
the sale price of Short Term Fund Class B Shares and a sales commission of 1%
of the sale price of Fixed Income Fund Class C Shares sold by such dealers.
Your broker, dealer or investment adviser may also charge you additional
commissions or fees for their services in selling shares to you provided they
notify the Distributor of their intention to do so.
22
<PAGE>
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of
the Funds and/or for providing other shareholder services. Depending on the
nature of the services, these fees may be paid either from the Funds through
distribution fees, service fees or transfer agent fees or, in some cases, the
Distributor may pay certain fees from its own profits and resources. From its
own profits and resources, the Distributor does intend to: (a) sponsor sales
contests, training and educational meetings and provide additional compensation
to qualifying dealers in the form of trips, merchandise or expense
reimbursements; (b) from time to time pay special incentive and retention fees
to qualified wholesalers, registered financial institutions and third party
marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million
of Class A Share purchases by an account held in the name of a qualified
employee benefit plan with at least 100 eligible employees, 0.50% on the next
$3 million, plus 0.25% on the amount in excess of $6 million; and (d) excluding
purchases as described in (c) above, pay broker/dealers an amount equal to 1%
of the amount of Class A Shares sold above $1 million but under $3 million,
0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million;
(e) subject to certain exclusions, pay broker/dealers an amount equal to 0.50%
of the amount of Short Term Fund Class C Shares sold above $250,000 but under
$3 million plus 0.25% on the amount in excess of $3 million. If part or all of
such investment, including investments by qualified employee benefit plans, is
subsequently redeemed within one year of the investment date, the broker-dealer
will refund to the Distributor such amounts paid with respect to the
investment. In addition, the Distributor may pay the entire applicable sales
charge on purchases of Class A Shares to selected dealers and agents. Any
dealer who receives more than 90% of a sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933.
How To Obtain Reduced Initial Sales Charges--Class A and M Shares
Investors choosing Class A or M Shares may be entitled to reduced sales
charges. The five ways in which sales charges may be avoided or reduced are
described below.
Qualified Purchasers. If you fall within any one of the following
categories, you will not have to pay a sales charge on your purchase of Class A
or M Shares: (1) trustee, director or officer of the Phoenix Funds, the
Phoenix-Engemann Funds, Phoenix-Seneca Funds or any other mutual funds advised,
subadvised or distributed by the Adviser, Distributor or any of their corporate
affiliates (an "Affiliated Phoenix Fund"); (2) any director or officer, or any
full-time employee or sales representative (for at least 90 days), of the
Adviser or Distributor; (3) registered representatives and employees of
securities dealers with whom Distributor has sales agreements; (4) any
qualified retirement plan exclusively for persons described above; (5) any
officer, director or employee of a corporate affiliate of the Adviser or
Distributor; (6) any spouse, child, parent, grandparent, brother or sister of
any person named in (1), (2), (3) or (5) above; (7) employee benefit plans for
employees of the Adviser, Distributor and/or their corporate affiliates; (8)
any employee or agent who retires from Phoenix Home Life, Distributor and/or
their corporate affiliates; (9) any account held in the name of a qualified
employee benefit plan, endowment fund or foundation if, on the date of the
initial investment, the plan, fund or foundation has assets of $10,000,000 or
more or at least 100 eligible employees; (10) any person with a direct rollover
transfer of shares from an established Phoenix Fund or any other Affiliated
Phoenix Fund qualified plan; (11) any Phoenix Home Life separate account which
funds group annuity contracts offered to qualified employee benefit plans; (12)
any state, county, city, department, authority or similar agency prohibited by
law from paying a sales charge; (13) any fully matriculated student in any U.S.
service academy; (14) any unallocated account held by a third party
administrator, registered investment adviser, trust company, or bank trust
department which exercises discretionary authority and holds the account in a
fiduciary, agency, custodial or similar capacity, if in the aggregate such
accounts held by such entity equal or exceed $1,000,000; (15) any person who is
investing redemption proceeds from investment companies other than the Phoenix
Funds or any other Affiliated Phoenix Fund if, in connection with the purchases
or redemption of the redeemed shares, the investor paid a prior sales charge
provided such investor supplies verification that the redemption occurred
within 90 days of the Phoenix Fund purchase and that a sales charge was paid;
(16) any deferred compensation plan established for the benefit of any Phoenix
Fund or any other Affiliated Phoenix Fund trustee or director; provided that
sales to persons listed in (1) through (15) above are made upon the written
assurance of the purchaser that the purchase is made for investment purposes
and that the shares so acquired will not be resold except to the Fund; (17)
purchasers of Class A or M Shares bought through investment advisors and
financial planners who charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients; (18) retirement plans and deferred compensation plans and trusts used
to fund those plans (including, for example, plans qualified or created under
sections 401(a), 403(b) or 457 of the Internal Revenue Code), and "rabbi
trusts" that buy shares for their own accounts, in each case if those purchases
are made through a broker or agent or other financial intermediary that has
made special arrangements with the Distributor for such purchases; or (19)
clients of investment advisors or financial planners who buy shares for their
own accounts but only if their accounts are linked to a master account of their
investment advisor or financial planner on the books and records of the broker,
agent or financial intermediary with which the Distributor has made such
special arrangements (each of the investors described in (17) through (19) may
be charged a fee by the broker, agent or financial intermediary for purchasing
shares).
Combination Purchase Privilege. Your purchase of any class of shares of
the Funds or any other Affiliated Phoenix Fund (other than Phoenix Money Market
Fund Series Class A Shares), if made at the same time by the same "person,"
will be added together to determine whether the combined sum entitles you to an
immediate reduction in sales charges. A "person" is defined in this and the
following sections as (a) any individual, their spouse and minor children
purchasing shares for his or their own account (including an IRA account)
23
<PAGE>
including his or their own trust; (b) a trustee or other fiduciary purchasing
for a single trust, estate or single fiduciary account (even though more than
one beneficiary may exist); (c) multiple employer trusts or Section 403(b)
plans for the same employer; (d) multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party administrator;
or (e) trust companies, bank trust departments, registered investment advisers,
and similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial or similar capacity,
provided all shares are held of record in the name, or nominee name, of the
entity placing the order.
Letter of Intent. If you sign a Letter of Intent, your purchase of any
class of shares of the Funds or any other Affiliated Phoenix Fund (other than
Phoenix Money Market Fund Series Class A Shares), if made by the same person
within a thirteen month period, will be added together to determine whether you
are entitled to an immediate reduction in sales charges. Sales charges are
reduced based on the overall amount you indicate that you will buy under the
Letter of Intent. The Letter of Intent is a mutually non-binding arrangement
between you and the Distributor. Since the Distributor doesn't know whether you
will ultimately fulfill the Letter of Intent, shares worth 5% of the amount of
each purchase will be set aside until you fulfill the Letter of Intent. When
you buy enough shares to fulfill the Letter of Intent, these shares will no
longer be restricted. If, on the other hand, you do not satisfy the Letter of
Intent, or otherwise wish to sell any restricted shares, you will be given the
choice of either buying enough shares to fulfill the Letter of Intent or paying
the difference between any sales charge you previously paid and the otherwise
applicable sales charge based on the intended aggregate purchases described in
the Letter of Intent. You will be given 20 days to make this decision. If you
do not exercise either election, the Distributor will automatically redeem the
number of your restricted shares needed to make up the deficiency in sales
charges received. The Distributor will redeem restricted Class A or M Shares
before Class C or B Shares, respectively. Oldest shares will be redeemed before
selling newer shares. Any remaining shares will then be deposited to your
account.
Right of Accumulation. Your purchase of any class of shares of the Funds
or any other Affiliated Phoenix Fund, if made over time by the same person may
be added together to determine whether the combined sum entitles you to a
prospective reduction in sales charges. You must provide certain account
information to the Distributor to exercise this right.
Associations. Certain groups or associations may be treated as a "person"
and qualify for reduced Class A Share sales charges. The group or association
must: (1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge;
(3) work through an investment dealer; or (4) not be a group whose sole reason
for existing is to consist of members who are credit card holders of a
particular company, policyholders of an insurance company, customers of a bank
or a broker-dealer or clients of an investment adviser.
How To Obtain Reduced Deferred Sales Charges--
Class B and C Shares
The CDSC is waived on the redemption (sale) of Class B and C Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section
72(m)(7); (c) as a mandatory distribution upon reaching age 701/2 under any
retirement plan qualified under Code Sections 401, 408 or 403(b) or resulting
from the tax-free return of an excess contribution to an IRA; (d) by 401(k)
plans using an approved participant tracking system for participant hardships,
death, disability or normal retirement, and loans which are subsequently
repaid; (e) based on the exercise of exchange privileges among Class B and C
Shares of the Funds or any other Affiliated Phoenix Fund; (f) based on any
direct rollover transfer of shares from an established Phoenix Fund qualified
plan into a Phoenix Fund IRA by participants terminating from the qualified
plan; and (g) based on the systematic withdrawal program (Class B Shares only).
If, as described in condition (a) above, an account is transferred to an
account registered in the name of a deceased's estate, the CDSC will be waived
on any redemption from the estate account occurring within one year of the
death. If the Class B or C Shares are not redeemed within one year of the
death, they will remain subject to the applicable CDSC. Class C Shares of the
Short Term Fund are not subject to any sales charge when redeemed.
Conversion Feature--Class B Shares
Fixed Income Fund Class B Shares will automatically convert to Class A
Shares of the same Fund eight years after they are purchased. Short Term Fund
Class B Shares will automatically convert to Class A Shares of the same Fund
six years after they are purchased. Conversion will be on the basis of the then
prevailing net asset value of Class A and B Shares. There is no sales load, fee
or other charge for this feature. Class B Shares acquired through dividend or
distribution reinvestments will be converted into Class A Shares at the same
time that other Class B Shares are converted based on the proportion that the
reinvested shares bear to purchased Class B Shares. The conversion feature is
subject to the continuing availability of an opinion of counsel or a ruling of
the Internal Revenue Service that the assessment of the higher distribution
fees and associated costs with respect to Class B Shares does not result in any
dividends or distributions constituting "preferential dividends" under the
Code, and that the conversion of shares does not constitute a taxable event
under federal income tax law. If the conversion feature is suspended, Class B
Shares would continue to be subject to the higher distribution fee for an
indefinite period. Even if a Fund was unable to obtain such assurances, it
might continue to make distributions if doing so would assist in complying with
its general practice of distributing sufficient income to reduce or eliminate
federal taxes otherwise payable by the Fund.
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<PAGE>
INVESTOR ACCOUNT SERVICES
The Funds mail periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one
copy of most Fund reports will be mailed to households for multiple accounts
with the same surname at the same household address. Please contact Equity
Planning to request additional copies of shareholder reports toll free at (800)
243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to
the shareholder account services can be found in the Funds' Statement of
Additional Information ("SAI").
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, you may authorize the
bank named in the form to draw $25 or more from your personal checking or
savings account to be used to purchase additional shares for your account. The
amount you designate will be made available, in form payable to the order of
the Transfer Agent, by the bank on the date the bank draws on your account and
will be used to purchase shares at the applicable offering price.
Distribution Option. The Funds currently declare all income dividends and
all capital gain distributions, if any, payable in shares of the Funds at net
asset value or, at your option, in cash. By exercising the distribution option,
you may elect to: (1) receive both dividends and capital gain distributions in
additional shares or (2) receive dividends in cash and capital gain
distributions in additional shares or (3) receive both dividends and capital
gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed that the proceeds are undeliverable.
Additional shares will be purchased in your account at the then current net
asset value. Dividends and capital gain distributions received in shares are
taxable to you and credited to your account in full and fractional shares
computed at the closing net asset value on the next business day after the
record date. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows
you to periodically redeem a portion of your account on a predetermined
monthly, quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to your bank account. In addition to the limitations
stated below, withdrawals may not be less than $25 and minimum account balance
requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Fund worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. Participants
in the Program redeeming Class C Shares will be subject to any applicable
contingent deferred sales charge. The purchase of shares while participating in
the withdrawal program will ordinarily be disadvantageous to the Class A or M
Shares investor since a sales charge will be paid by the investor on the
purchase of Class A or M Shares at the same time as other shares are being
redeemed. For this reason, investors in Class A or M Shares may not participate
in an automatic investment program while participating in the Systematic
Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
Accordingly, the purchase of Class B Shares will generally not be suitable for
an investor who anticipates withdrawing sums in excess of the above limits
shortly after purchase.
Tax Sheltered Retirement Plans. Shares of the Funds are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE IRA, SIMPLE 401(k), Profit-Sharing and Money
Purchase Pension Plans which can be adopted by self-employed persons ("Keogh")
and by corporations and 403(b) Retirement Plans. Write or call Equity Planning
at (800) 243-4361 for further information about the plans.
Exchange Privileges
You may exchange shares of one Phoenix Fund for shares of another Phoenix
Fund or any other Affiliated Phoenix Fund that extends reciprocal privileges to
shareholders of the Phoenix Funds without paying any fees or sales charges.
Class A Shares of the Short Term Fund held less than six months are not
eligible for the Exchange Privilege. On exchanges with share classes that carry
a contingent deferred sales charge, the CDSC schedule of the original shares
purchased continues to apply. Exchanges of shares held in book-entry form may
be exchanged for shares of the same class of other Phoenix Funds or Affiliated
Phoenix Funds, provided the following conditions are met: (1) the shares that
will be acquired in the exchange (the "Acquired Shares") are available for
sale; (2) the Acquired Shares are the same class as the shares to be
surrendered (the "Exchanged Shares"); (3) the Acquired Shares will be
registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the fund whose shares are to be acquired must equal or exceed
the minimum initial investment amount required by that Fund after the exchange
is made; and (5) if you have elected not to use the telephone exchange
privilege (see below), a properly executed exchange request must be received by
the Distributor.
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<PAGE>
Exchanges may be made over the telephone or in writing and may be made at one
time or systematically over a period of time. Note, each Affiliated Phoenix
Fund has different investment objectives and policies. You should read the
prospectus of the fund into which the exchange is to be made before making any
exchanges. This privilege may be modified or terminated at any time on 60 days'
notice.
Market Timer Restrictions. Because excessive trading can hurt Fund
performance and harm shareholders, the Funds reserve the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These
privileges are limited under those agreements. The Distributor has the right to
reject or suspend these privileges upon reasonable notice.
Telephone Exchanges. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Funds and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk if the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by the registered shareowner(s).
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close
of trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The net asset value per share of each Fund is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the total number of outstanding shares
of each Fund. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of each
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
The Funds' investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Directors/Trustees or their delegates. Foreign and domestic fixed income
securities (other than short-term investments) are valued on the basis of
broker quotations or valuations provided by a pricing service approved by the
Directors/Trustees when such prices are believed to reflect the fair value of
such securities. Short-term investments having a remaining maturity of less
than sixty-one days are valued at amortized cost, which the Directors/Trustees
have determined approximates market value. Foreign and domestic equity
securities are valued at the last sale price or, if there has been no sale that
day, at the last bid price, generally. For further information about security
valuations, see the Statement of Additional Information.
HOW TO REDEEM SHARES
You have the right to have the Funds buy back shares at the net asset
value next determined after receipt of a redemption order, and any other
required documentation in proper form, by Phoenix Funds c/o State Street Bank
and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. In the case of a Class
B or C Share redemption, you will be subject to the applicable deferred sales
charge, if any, for such shares (see "Deferred Sales Charge Alternative--Class
B and C Shares," above). Subject to certain restrictions, shares may be
redeemed by telephone or in writing. In addition, shares may be sold through
securities dealers, brokers or agents who may charge customary commissions or
fees for their services. The Funds do not charge any redemption fees. Payment
for shares redeemed is made within seven days, provided that redemption
proceeds will not be disbursed until each check used for purchases of shares
has been cleared for payment by your bank, which may take up to 15 days after
receipt of the check.
The requirements to redeem shares are outlined in the following table.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRA's or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Funds at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
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<PAGE>
How can I sell my Shares?
<TABLE>
<S> <C> <C>
[telephone graphic] By Phone [bullet] Sales up to $50,000
[bullet] Not available on most retirement accounts
(800) 243-1574 [bullet] Requests received after 4PM will be
executed on the following business day
[check graphic] By Check [bullet] Select checkwriting on your New Account
Application
[bullet] $500 or more per check
[bullet] Cannot be used to close an account
[envelope graphic] In Writing [bullet] Letter of instruction from the registered
owner including the fund and account
number and the number of shares or dollar
amount you wish to sell
[bullet] No signature guarantee is required if
your shares are registered individually,
jointly, or as custodian under the
Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act, the proceeds of
the redemption do not exceed $50,000, and
the proceeds are payable to the
registered owner(s) at the address of
record
</TABLE>
Shares previously issued in certificate form cannot be redeemed until the
certificated shares have been deposited to your account.
Telephone Redemptions
The Funds and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to you. If
there has been an address change within the past 60 days, a telephone
redemption will not be authorized. To the extent that procedures reasonably
designed to prevent unauthorized telephone redemptions are not followed, the
Funds and/or the Transfer Agent may be liable for following telephone
instructions for redemption transactions that prove to be fraudulent. Broker/
dealers other than Equity Planning have agreed to bear the risk of any loss
resulting from any unauthorized telephone redemption instruction from the firm
or its registered representatives. However, you would bear the risk of loss
resulting from instructions entered by an unauthorized third party that the
Funds and/or the Transfer Agent reasonably believe to be genuine. The Telephone
Redemption Privilege may be modified or terminated at any time on 60 days'
notice to shareholders. In addition, during times of drastic economic or market
changes, the Telephone Redemption Privilege may be difficult to exercise or may
be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
Written Redemptions
If you elect not to use the telephone redemption or telephone exchange
privileges, you must submit your request in writing. If the shares are being
exchanged between accounts that are not identically registered, the signature
on such request must be guaranteed by an eligible guarantor institution as
defined by the Transfer Agent in accordance with its signature guarantee
procedures. Currently, such procedures generally permit guarantees by banks,
broker dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Account Reinstatement Privilege
You have a one time privilege of using redemption proceeds from Class A,
B, C and M Shares to purchase Class A Shares of any Affiliated Phoenix Fund
with no sales charge (at net asset value next determined after the request for
reinvestment is made). For Federal income tax purposes, a redemption and
reinvestment will be treated as a sale and purchase of shares. Special rules
may apply in computing the amount of gain or loss in these situations. (See
"Dividends, Distributions and Taxes" for information on the Federal income tax
treatment of a disposition of shares.) A written request to reinstate your
account must be received by the Transfer Agent within 180 days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption value). Class B shareholders who have had the contingent deferred
sales charge waived through participation in the Systematic Withdrawal Program
are not eligible to use the Reinstatement Privilege.
Redemption in Kind
To the extent consistent with state and federal law, the Funds may make
payment of the redemption price either in cash or in kind. However, the Funds
have elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90 day period to the
lesser of $250,000 or 1% of the net asset value of the Funds at the beginning
of such period. This election has been made pursuant to Rule 18f-1 under the
Investment Company Act of 1940 Act and is irrevocable while the Rule is in
effect unless the Securities and Exchange Commission, by order, permits the
withdrawal thereof. In case of a redemption in kind, securities delivered in
payment for shares would be readily marketable and valued at the same value
assigned to them in computing the net asset value per share of the Funds. A
shareholder receiving such securities would incur brokerage costs when selling
such securities.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Funds
reserve the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Funds redeem these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be
allowed 30 days to make an additional investment in an amount which will
increase the value of the account to at least $200.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds intend to continue to qualify annually as a regulated investment
company under Subchapter M of the Code and to distribute annually to
shareholders all or substantially all of its net investment income and net
realized capital gains, after utilization of any capital loss carryovers. If
the Funds so qualify, they generally will not be subject to Federal income tax
on the income it distributes.
Income dividends will be declared daily and paid monthly. Capital gain
distributions, if any, will be paid at least annually. An additional capital
gain distribution may be paid after the end of the Funds' fiscal year.
The Funds will be subject to a nondeductible 4% excise tax if it fails to
meet certain annual distribution requirements. In order to prevent imposition
of the excise tax, it may be necessary for the Funds to make distributions more
frequently than described in the previous paragraph.
Unless a shareholder elects to receive distributions in cash, dividends
will be paid in additional shares of the Funds credited at the next asset value
per share on the ex-dividend date. Dividends and distributions, whether
received in cash or in additional shares of the Funds, generally are subject to
Federal income tax and may be subject to state, local and other taxes.
Shareholders will be notified annually about the amount and character of
distributions made to them by each Fund.
Capital gains, if any, distributed to shareholders and designated by the
Funds as long-term capital gain dividends are taxable to shareholders as
long-term capital gain distributions regardless of the length of time shares of
the Funds have been held by the shareholder. Distributions of short-term
capital gains and net investment income, if any, are taxable to shareholders as
ordinary income.
Dividends and distributions generally will be taxable to shareholders in
the taxable year of the shareholder in which they are received. However,
dividends and distributions declared by a Fund in October, November or December
of any calendar year, with a record date in such a month, and paid during the
following January will be treated as if they were paid by the Fund and received
by shareholders on December 31 of the calendar year in which they were
declared.
A redemption or other disposition (including an exchange) of shares of a
Fund generally will result in the recognition of a taxable gain or loss, which
will be a long- or short-term capital gain or loss (assuming the shares were a
capital asset in the hands of the shareholder), depending upon the
shareholder's holding period for his or her shares. In addition, if shares of a
Fund are disposed of at a loss and are replaced (either through purchases or
through reinvestment of dividends) within a period commencing thirty days
before and ending thirty days after the disposition of such shares, the
realized loss will be disallowed and appropriate adjustments to the tax basis
of the new shares will be made. In addition, special rules may apply to
determine the amount of gain or loss realized on an exchange.
Investment income received by the Funds from sources within foreign
countries may be subject to foreign income taxes withheld at the source.
The Funds may recognize interest attributable to them from holding zero
coupon securities. Current federal law requires that for most zero coupon
securities, a holder (such as the Funds) must accrue a portion of the discount
at which the security was purchased as income each year even though the Funds
receive no interest payment in cash on the security during the year. As a
regulated investment company, each Fund must pay out substantially all of its
net investment income each year. Accordingly, the Funds may be required to pay
out as an income distribution each year an amount which is greater than the
total amount of cash interest the Funds actually received. Such distributions
will be made from the cash assets of each Fund or by liquidation of portfolio
securities, if necessary. If a distribution of cash necessitates the
liquidation of portfolio securities, the Adviser will select which securities
to sell. The Funds may realize a gain or loss from such sales.
Investors are urged to consult their attorney or tax adviser regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
shareholders may be subject to U.S. Federal income tax rules that differ from
those described above. For more information regarding distributions and taxes,
see "Dividends, Distributions and Taxes" in the Statement of Additional
Information.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Funds may be required to withhold 31% of
all reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds, for any account which does not have
a taxpayer identification number or social security number and certain required
certifications. The Funds reserve the right to refuse to open an account for
any person failing to provide a taxpayer identification number along with the
required certifications.
The Funds send to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing Federal income tax returns. Investors are urged to consult their
attorney or tax advisor regarding specific questions as to Federal, foreign,
state or local taxes.
28
<PAGE>
ADDITIONAL INFORMATION
Organization of the Funds
Phoenix Multi-Sector Fixed Income Fund, Inc. The Fixed Income Fund was
organized as a corporation under the laws of the State of Maryland on September
20, 1989. On December 23, 1993 shareholders approved a change in the name of
the Fund, effective January 1, 1994, to reflect the Fund's affiliation with
Phoenix Home Life, which resulted from the transfer of ownership of the Fund's
Adviser to Phoenix Home Life on May 14, 1993. Prior to January 1, 1994, the
Fund's name was "National Multi-Sector Fixed Income Fund, Inc."
The Articles of Incorporation, as amended, provide for the issuance of up
to 500,000,000 Shares. The Fund's Shares are divided equally among four
classes, each consisting of 125,000,000 Shares. The Fund issues Class A, Class
B, Class C and Class M Common Stock. The shares of the Fund, when issued, will
be fully paid and non-assessable, have no preference, preemptive, exchange or
similar rights, and will be freely transferable. There is no requirement or
intention to hold annual meetings of shareholders. Accordingly, there will
normally be no meetings of shareholders for the purpose of electing Directors
unless and until such time as less than a majority of the Directors holding
office have been elected by shareholders, at which time the Directors then in
office will call a meeting for the election of Directors. Shareholders may, in
accordance with the Articles of Incorporation, cause a meeting of shareholders
to be held for the purpose of voting on the removal of a Director or Directors.
Meetings of the shareholders will be called upon written request of
shareholders holding in the aggregate at least 10% of the Fund's outstanding
shares. The Directors will provide appropriate assistance to shareholders, in
compliance with the provisions of the 1940 Act, if such a request for a meeting
is received. Except as set forth above, the Directors will continue to hold
office and appoint successor Directors. Shares do not have cumulative voting
rights and the holders of more than 50% of the shares of the Fund voting for
the election of Directors can elect all of the Directors of the Fund if they
choose to do so and in such event the holders of the remaining shares would not
be able to elect any Directors. Shareholders are entitled to redeem their
shares as set forth under "How to Redeem Shares."
Phoenix Multi-Sector Short Term Bond Fund. The Short Term Fund was
organized under Massachusetts law on February 20, 1992 as a business trust. On
December 23, 1993, shareholders of the Fund approved a change in the name of
the Fund, to reflect the Fund's affiliation with Phoenix Home Life, which
resulted from the transfer of ownership of the Adviser to Phoenix Home Life on
May 14, 1993. On February 22, 1996, the Trustees approved another change in the
Fund's name to more accurately reflect its present investment policies and
objectives. Prior to this revision, the Fund's name was "Phoenix Asset
Reserve." The Declaration of Trust, as amended, provides that the Trustees are
authorized to create an unlimited number of series and, with respect to each
series, to issue an unlimited number of full and fractional shares of
beneficial interest of one or more classes and to divide or combine the shares
into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the series. All shares have equal voting
rights, except that only shares of the respective series or separate classes
within a series are entitled to vote on matters concerning only that series or
class. At the date of this Prospectus, there is only one existing series of the
Fund, having three classes of shares.
The shares of the Fund, when issued, will be fully paid and
non-assessable, have no preference, preemptive, or similar rights, and will be
freely transferable. There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the election
of Trustees. Shareholders may, in accordance with the Declaration of Trust,
cause a meeting of shareholders to be held for the purpose of voting on the
removal of Trustees. Meetings of the shareholders may be called upon written
request of shareholders holding in the aggregate not less than 10% of the
outstanding shares having voting rights. The Trustees will provide appropriate
assistance to shareholders, in compliance with the provisions of the 1940 Act,
if such a request for a meeting is received. Except as set forth above and
subject to the 1940 Act, the Trustees will continue to hold office and appoint
successor Trustees. Shares do not have cumulative voting rights and the holders
of more than 50% of the shares of the Fund voting for the election of Trustees
can elect all of the Fund's Trustees if they choose to do so and in such event
the holders of the remaining shares would not be able to elect any Trustees.
Shareholders are entitled to redeem their shares as set forth under "How to
Redeem Shares."
The Declaration of Trust establishing the Fund (a copy of which, together
with all amendments thereto, is on file in the office of the Secretary of the
Commonwealth of Massachusetts), provides that the name "Phoenix Multi-Sector
Short Term Bond Fund" refers to the Trustees under the Declaration of Trust
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of the Fund shall be held to any
personal liability, nor shall resort be had to their personal property for the
satisfaction of any obligation or claim of said Fund but the "Trust Property"
only shall be liable.
Registration Statement
This Prospectus does not contain all the information included in each
Fund's Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 and the 1940 Act. A copy of the Registration
Statements may be obtained from the Securities and Exchange Commission in
Washington, D.C. upon payment of the prescribed fee.
29
<PAGE>
APPENDIX
Description of Certain Bond Ratings
Moody's Investor's Service, Inc.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Standard & Poor's Corporation
BB, B, CCC--Bonds rated BB, B and CCC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with terms of the obligation. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties of major risk exposures to adverse
conditions. Ability to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and financial alternatives
can be identified which could assist the obligor in satisfying its debt service
requirement.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
30
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<S> <C>
Account Type Give Social Security Number or Tax Identification Number of:
- -------------------------------------------------------------------------------------------------------
Individual Individual
- -------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- -------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- -------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- -------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- -------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- -------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- -------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- -------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you will
be treated as negligent and subject to an IRS 5% penalty tax on any
resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix
Multi-Sector Fixed Income Fund, Inc. and the Phoenix Multi-Sector Short Term
Bond Fund (the "Funds") which you should know before investing. Please read it
carefully and retain it for future reference.
Each Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information about each Fund, dated February 27, 1998. The Statements
contain more detailed information about the Funds and are incorporated into
this Prospectus by reference. You may obtain a free copy of the Statements by
writing the Funds c/o Phoenix Equity Planning Corporation, 100 Bright Meadow,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Funds is contained in the Annual Report
to Shareholders for the year ended October 31, 1997 for each Fund and are
incorporated into the Statements of Additional Information by reference.
[Recycle logo] Printed on recycled paper using soybean ink
<PAGE>
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[BACK COVER]
Phoenix Funds -------------------
PO Box 2200 BULK RATE MAIL
Enfield CT 06083-2200 U.S. POSTAGE
PAID
SPRINGFIELD, MA
PERMIT NO. 444
-------------------
[LOGOTYPE] PHOENIX
DUFF & PHELPS
PDP 694 (2/98)
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
February 27, 1998
This Statement of Additional Information is not the Prospectus, but
expands upon and supplements the information contained in the current
Prospectus of Phoenix Multi-Sector Short Term Bond Fund (the "Fund") dated
February 27, 1998 and should be read in conjunction with it. The Fund's
Prospectus may be obtained by calling Phoenix Equity Planning Corporation
("Equity Planning") at (800) 243-4361 or by writing to Phoenix Funds, c/o State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE FUND ...................................... 2
INVESTMENT OBJECTIVE AND POLICIES ............. 2
INVESTMENT RESTRICTIONS ....................... 2
INVESTMENT TECHNIQUES ......................... 3
PERFORMANCE INFORMATION ....................... 9
PORTFOLIO TRANSACTIONS AND BROKERAGE .......... 10
SERVICES OF THE ADVISER ....................... 11
NET ASSET VALUE ............................... 12
HOW TO BUY SHARES ............................. 12
INVESTOR ACCOUNT SERVICES ..................... 14
TAX SHELTERED RETIREMENT PLANS ................ 15
REDEMPTION OF SHARES .......................... 15
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 16
THE DISTRIBUTOR ............................... 18
PLANS OF DISTRIBUTION ......................... 19
TRUSTEES AND OFFICERS ......................... 20
OTHER INFORMATION ............................. 27
APPENDIX ...................................... 28
</TABLE>
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device TTY: (800) 243-1926
PDP 694B (2/98)
1
<PAGE>
THE FUND
Phoenix Multi-Sector Short Term Bond Fund is a diversified open-end,
management investment company, consisting currently of one series, with three
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 the Fund's investment
adviser to Phoenix Home Life on May 14, 1993. On February 22, 1996, the
Trustees approved another change in the Fund's name to more accurately reflect
its present investment policies and objectives. Prior to this revision, the
Fund's name was "Phoenix Asset Reserve." On August 27, 1997, the Trustees
approved an amendment to the Trust creating a third class of shares ("Class C
Shares").
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide high current income relative
to other short-term investment alternatives, while attempting to limit
fluctuations in the net asset value of Fund shares resulting from movements in
interest rates. There is no assurance that the Fund will achieve its investment
objective.
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions are fundamental policies that cannot
be changed without 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
2
<PAGE>
(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 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 are not deemed liquid;
(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.
INVESTMENT TECHNIQUES
The Fund may utilize the following practices or techniques in pursuing its
investment objective.
Mortgage-Related 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.
3
<PAGE>
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.
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 Funds 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-Related 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
4
<PAGE>
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 pledged
account with its Custodian consisting of any asset, including equity securities
and non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, equal to 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) 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 pledged 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 liquid 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.
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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.
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 last bid 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.
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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, 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
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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 any asset, including equity securities and non-investment
grade debt so long as the asset is liquid, unencumbered and marked to market
daily 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 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 any asset, including equity securities and non-investment
grade debt so long as the asset is liquid, unencumbered and marked to market
daily 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
8
<PAGE>
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.
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, Class B
and Class C Shares in accordance with the formulas specified by the Commission.
The yield will be computed by dividing the Fund's net investment income over a
30-day period by an average value (using the average number of shares entitled
to receive dividends and the maximum offering price per share at the end of the
period), all in accordance with applicable regulatory requirements. Such amount
will be compounded for six months and then annualized for a 12-month period to
derive the Fund's yield. For the 30-day period ending October 31, 1997, the
Class A Shares yield, calculated pursuant to this formula, was 6.01%. The Class
B Shares yield was 5.61% and the Class C shares yield was 5.43%, calculated
pursuant to this formula.
Average annual total return quotations will be computed by finding the
average annual compounded rates of return over the 1, 5 and 10 year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1 + T)(n) = ERV
Where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5,
or 10 year periods (or fractional portion thereof).
Performance quoted for Class C Shares covering periods prior to the
inception of Class C Shares will reflect historical performance of Class A
Shares adjusted for the higher operating expenses applicable to Class C Shares.
Advertisements, sales literature and other communications may contain
information about the Fund and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Fund to
respond quickly to changing market and economic conditions. From time to time
the Fund may include specific portfolio holdings or industries, in such
communications. To illustrate components of overall performance, the Fund may
separate its cumulative and average annual returns into income and capital
gains components; or cite separately as a return figure the equity or bond
portion of the Fund's portfolio; or compare the Fund's equity or bond figures
to well-known indices of market performance, including, but not limited to: the
S&P 500 Index, Dow Jones Industrial Average, Lehman Brothers Aggregate Bond
Index, CS First Boston High Yield Index, Merrill Lynch Medium Quality Corporate
Short-Term Bond Index, and Salomon Brothers Corporate Bond and Government Bond
Indices.
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For the one year and five year periods ended October 31, 1997, the average
annual total return of the Class A Shares was 7.67% and 7.47%, respectively,
and from inception, July 6, 1992 through October 31, 1997 was 7.09%. For the
one year and five year periods ended October 31, 1997 and since inception, July
6, 1992 for the Class B Shares, the average annual total return was 8.02%,
7.45% and 6.99%, respectively. Since inception, October 1, 1997, through
October 31, 1997 the Class C Shares average annual total return was -1.30%.
The Fund may also compute aggregate total return for specified periods
based on a hypothetical Class A, Class B or Class C account with an assumed
initial investment of $10,000. The aggregate total return is determined by
dividing the net asset value of this account at the end of the specified period
by the value of the initial investment and is expressed as a percentage.
Calculation of aggregate total return reflects payment of the Class A Share's
maximum sales charge of 2.25% and assumes reinvestment of all income dividends
and capital gain distributions during the period.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, for each class of shares of the
Fund, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted above. Such data
will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate
rate of return calculations.
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 Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to
lower commission costs on a per-share and per-dollar basis. According to the
bunching procedures, the Adviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is inconsistent with its
duty to seek best execution (which shall include the duty to seek best price)
for the Fund. No advisory account of the Adviser is to be favored over any
other account and each account that participates in an aggregated order is
expected to participate at the average share price for all transactions of the
Adviser in that security on a given business day, with all transaction costs
shared pro rata based on the Fund's participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
Adviser's accounts in accordance with the allocation order, and if the order is
partially filled, it shall be allocated pro rata based on the allocation order.
Notwithstanding the foregoing, the order may be allocated on a basis different
from that specified in the allocation order if all accounts of the Adviser
whose orders are allocated receive fair and equitable treatment and the reason
for such different allocation is explained in writing and is approved in
writing by the Adviser's compliance officer as soon as practicable after the
opening of the markets on the trading day following the day on which the order
is executed. If an aggregated order is partially filled and allocated on a
basis different from that specified in the allocation order, no account that is
benefited
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by such different allocation may intentionally and knowingly effect any
purchase or sale for a reasonable period following the execution of the
aggregated order that would result in it receiving or selling more shares than
the amount of shares it would have received or sold had the aggregated order
been completely filled. The Trustees will annually review these procedures or
as frequently as shall appear appropriate.
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 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 is considered by the Adviser in the
allocation of brokerage business, but there is no formula by which such
business is allocated. The Adviser does so in accordance with its judgment of
the best interest of the Fund and its shareholders.
The Fund paid no brokerage commissions for the fiscal years ended October
31, 1997, 1996, and 1995.
SERVICES OF THE ADVISER
The Adviser, National Securities & Research Corporation, provides certain
services and facilities required to carry on the day-to-day operations of the
Fund (for which it receives a management fee) other than the costs of printing
and mailing proxy materials, reports and notices to shareholders; outside legal
and auditing services; regulatory filing fees and expenses of printing the
Fund's registration statements (but the Distributor purchases such copies of
the Fund's prospectuses and reports and communications to shareholders as it
may require for sales purposes); insurance expense; association membership
dues; brokerage fees; and taxes.
The Adviser is a direct subsidiary of Phoenix Duff & Phelps Corporation
whose majority shareholder is Phoenix Home Life Mutual Insurance Company
("Phoenix Home Life"). Phoenix Home Life's principal place of business is
located at One American Row, Hartford, Connecticut. The Adviser also serves as
investment adviser to Phoenix Worldwide Opportunities Fund, Phoenix
Multi-Sector Fixed Income Fund, Inc., Phoenix California Tax Exempt Bonds,
Inc., Phoenix Income and Growth Fund, and Phoenix Strategic Equity Series Fund:
Phoenix Equity Opportunities Fund. The Adviser currently has $970 million in
assets under management and has acted as an investment adviser for over sixty
years.
The current Management Agreement was approved by the 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 it will continue in
effect until lapsed or terminated. The Management Agreement will continue in
effect from year to year if specifically approved annually by a majority of the
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.
As compensation for its services the Adviser receives a fee which is
accrued daily against the value of the Fund's net assets and is paid by the
Fund monthly. The fee is computed 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 from $1 billion to $2 billion; and 0.45% of the Fund's average daily
net assets in excess of $2 billion. Total management fees for the fiscal years
ended October 31, 1995, 1996, and 1997 amounted to $78,929, $86,482 and
$159,118, respectively, a portion of which amounts were waived by the Adviser.
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 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.
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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 Distributor purchases), accounting services fees, insurance
expenses, litigation expenses, association membership dues, all charges of
custodians, transfer agents, registrars, auditors and legal counsel, expenses
of preparing, printing and distributing all proxy material, reports and notices
to shareholders, and all costs incident to the Fund's existence as a
Massachusetts business trust.
The Adviser has agreed to reimburse the Fund's operating expenses other
than Management Fees and Rule 12b-1 Fees related to each Class of Shares for
the amount, if any, by which such operating expenses for the fiscal year ended
October 31, 1998, exceed 0.20% of the average net assets. The Total Fund
Operating Expenses for Class A, Class B and Class C Shares would have been
1.86%, 2.36% and 2.11%, respectively, absent such waiver or reimbursement for
the fiscal year ended October 31, 1997. The Adviser has not undertaken to
extend the reimbursement beyond fiscal year 1998.
The Adviser has 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 payments made pursuant to a Rule 12b-1
distribution plan, taxes, brokerage fees, interest, and extraordinary charges
such as litigation costs, exceed the most restrictive expense limitations
imposed by any state in which the Fund's shares are qualified for offer or
sale. Currently, the most restrictive expense limitations applicable to the
Fund, which provides that aggregate annual expenses of an investment company
(which excludes interest, taxes, certain annual distribution plan expenses,
litigation costs, and capital items such as brokerage costs) shall not exceed
2.5% of the first $30,000,000 of the Fund's average net assets, 2% of the next
$70,000,000 of the Fund's average net assets, and 1.5% of the remaining average
net assets of the Fund for any fiscal year. To the extent that the Fund's
expenses exceed this limitation, the Adviser would be required to reduce or
rebate its management fee. The Adviser would not be required to absorb any
other Fund expenses in excess of its fees. In the event legislation were to be
adopted in each state so as to eliminate this restriction, the Fund would take
such action necessary to eliminate this expense limitation. See the "Fund
Expenses" Table in the Fund's current Prospectus for further information.
NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Since the Fund does not price securities on
weekends or United States national holidays, the net asset value of the Fund's
foreign assets may be significantly affected on days when the investor has no
access to the Fund. The net asset value per share of the Fund is determined by
adding the values of all securities and other assets of the Fund, subtracting
liabilities, and dividing by the total number of outstanding shares of the
Fund. Assets and liabilities are determined in accordance with generally
accepted accounting principles and applicable rules and regulations of the
Securities and Exchange Commission. The total liability allocated to a class,
plus that class's distribution fee and any other expenses allocated solely to
that class, are deducted from the proportionate interest of such class in the
assets of the Fund, and the resulting amount of each is divided by the number
of shares of that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world,
the calculation of net asset value may not take place for the Fund if it
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of the Fund. All assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time the Fund has investments where market quotations are
not readily available, such investments are valued at the fair value thereof as
determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25. However, both the minimum initial and subsequent investment
amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank
draft investing program administered by Distributor, or pursuant to the
Systematic Exchange privilege or for an individual retirement account (IRA). In
addition, there are no subsequent investment minimum amounts in connection with
the reinvestment of dividend or capital gain distributions. Completed
applications for the purchase of shares should be mailed to: Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
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The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts
the order. Customer orders will be priced at the Fund's net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
Alternative Purchase Arrangements
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Fund, and other circumstances. Dividends paid by the
Fund, if any, with respect to each Class will be calculated in the same manner
at the same time on the same day, except that the higher distribution and
services fee relating to Class B and C shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
Shares of the Fund may be purchased from investment dealers at a price
equal to their net asset value per share ("Class C Shares"), or with a sales
charge which, at the election of the purchaser, may be imposed either (i) at
the time of the purchase ("Class A Shares"), or (ii) on a contingent deferred
basis ("Class B Shares"). Orders received by dealers prior to the close of
trading on the New York Stock Exchange are confirmed at the offering price
effective at that time, provided the order is received by the Distributor prior
to its close of business.
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 and services fee at an
annual rate of up to 0.30% of the Fund's aggregate average daily net assets
attributable to the Class A shares. However for the fiscal year 1998, the
Distributor has voluntarily agreed to limit the distribution and services fee
for Class A Shares to 0.25%. In addition, certain purchases of Class A shares
qualify for reduced initial sales charges. See the Fund's current Prospectus
for additional information.
Class B Shares
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
three years of purchase. The deferred sales charge may be waived in connection
with certain qualifying redemptions. See the Fund's current Prospectus for
additional information.
Class B shares are subject to an ongoing distribution and services fee at
an annual rate of up to .75% of the Fund's aggregate average daily net assets
attributable to the Class B shares. Class B shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment
is made. The higher ongoing distribution and services fee paid by Class B
shares will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related to Class A
shares. Class B shares will automatically convert to Class A shares six years
after the end of the calendar month in which the shareholder's order to
purchase was accepted. The purpose of the conversion feature is to relieve the
holders of the Class B shares that have been outstanding for a period of time
sufficient for the Adviser and the Distributor to have been compensated for
distribution expenses related to the Class B shares from most of the burden of
such distribution related expenses.
Class B shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
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 and services fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
in a shareholder's 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.
Class C Shares
Class C Shares are purchased without an initial sales charge and are not
subject to any sales charge when shares are redeemed. All purchases, including
reinvestments of dividend and capital gain distributions, and redemptions are
made at the net asset value per share of the Fund. Class C Shares are subject
to an ongoing distribution and services fee at an annual rate of 0.50% of the
Fund's aggregate average daily net assets attributable to the Class C Shares.
Class C Shares do not convert to another Class of Shares and long term
investors may therefore pay more through accumulated distribution fees than the
economic equivalent of any applicable sales charge and accumulated distribution
fees in the other classes.
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The distribution expenses incurred by the Distributor in connection with
the sale of the shares will be paid, in the case of Class A shares, from the
proceeds of the initial sales charge and the ongoing distribution and services
fee. In the case of Class B shares, distribution expenses incurred by the
Distributor in connection with the sale of the shares will be paid from the
proceeds of the ongoing distribution and services fee and the contingent
deferred sales charge incurred upon redemption within three years of purchase.
For Class C Shares, the ongoing distribution and services fee will be used to
pay for the distribution expenses incurred by the Distributor. Sales personnel
of broker-dealers distributing the Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares. Investors should
understand that the purpose and function of the contingent deferred sales
charge and ongoing distribution and services fee with respect to the Class B
shares are the same as those of the initial sales charge and ongoing
distribution and services fees with respect to the Class A shares.
INVESTOR ACCOUNT SERVICES
The Fund offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges.
Certain privileges may not be available in connection with all classes. In most
cases, changes to account services may be accomplished over the phone.
Inquiries regarding policies and procedures relating to shareholder account
services should be directed to Shareholder Services at (800) 243-1574.
Exchanges. Class A Shares of the Fund held under six months are not
eligible for the exchange privilege. Under certain circumstances, shares of any
Phoenix Fund may be exchanged for shares of the same class of any other
Affiliated Phoenix Fund on the basis of the relative net asset values per share
at the time of the exchange. Exchanges are subject to minimum initial
investment requirements of the designated Series, Fund, or Portfolio, except if
made in connection with the Systematic Exchange privilege. Shareholders may
exchange shares held in book-entry form for an equivalent number (value) of the
same class of shares of any other Affiliated Phoenix Fund, if currently
offered. On exchanges with share classes that carry a contingent deferred sales
charge, the CDSC schedule of the original shares purchased continues to apply.
The exchange of shares is treated as a sale and purchase for federal income tax
purposes (see also "Dividends, Distributions and Taxes").
Systematic Exchanges. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Affiliated Phoenix Fund automatically on a
monthly, quarterly, semi-annual or annual basis or may cancel this privilege at
any time. If you maintain an account balance of at least $5,000, or $2,000 for
tax qualified retirement benefit plans (calculated on the basis of the net
asset value of the shares held in a single account), you may direct that shares
be automatically exchanged at predetermined intervals for shares of the same
class of another Affiliated Phoenix Fund. This requirement does not apply to
Phoenix "Self Security" program participants. Systematic exchanges will be
executed upon the close of business on the 10th day of each month or the next
succeeding business day. Systematic exchange forms are available from the
Distributor. Exchanges will be based upon each Fund's net asset value per share
next computed after the close of business on the 10th day of each month (or
succeeding business day), without sales charge.
Dividend Reinvestment Across Accounts. If you maintain an account balance
of at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Phoenix Funds or any other Affiliated Phoenix Fund at net
asset value. You should obtain a current prospectus and consider the objectives
and policies of each Fund carefully before directing dividends and
distributions to another Fund. Reinvestment election forms and prospectuses are
available from Equity Planning. Distributions may also be mailed to a second
payee and/or address. Requests for directing distributions to an alternate
payee must be made in writing with a signature guarantee of the registered
owner(s). To be effective with respect to a particular dividend or
distribution, notification of the new distribution option must be received by
the Transfer Agent at least three days prior to the record date of such
dividend or distribution. If all shares in your account are repurchased or
redeemed or transferred between the record date and the payment date of a
dividend or distribution, you will receive cash for the dividend or
distribution regardless of the distribution option selected.
Invest-By-Phone. This expedited investment service allows you to make an
investment in an account by requesting a transfer of funds from the balance of
your bank account. Once a request is phoned in, Equity Planning will initiate
the transaction by wiring a request for monies to your commercial bank, savings
bank or credit union via Automated Clearing House (ACH). Your bank, which must
be an ACH member, will in turn forward the monies to Equity Planning for credit
to your account. ACH is a computer based clearing and settlement operation
established for the exchange of electronic transactions among participating
depository institutions. This service may also be used to sell shares of the
Fund and direct proceeds of sale through ACH to your bank account.
To establish this service, please complete the Invest-by-Phone Application
and attach a voided check. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) you may call toll free (800)
367-5877 prior to 3:00 p.m. (Eastern Time) to place your purchase request.
Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact your bank
via ACH with appropriate instructions. The purchase is normally
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credited to your account the day following receipt of the verbal instructions.
The Fund may delay the mailing of a check for redemption proceeds of Fund
shares purchased with a check or via Invest-by-Phone service until the Fund has
assured itself that good payment has been collected for the purchase of the
shares, which may take up to 15 days.
The Fund and 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 the Adviser and its affiliates provide to the
Phoenix Funds, and may receive compensation therefor. For information on the
terms and conditions applicable to employee participation in such plans,
including information on applicable plan administrative charges and expenses,
prospective investors should consult the plan documentation and employee
enrollment information which is available from participating employers.
REDEMPTION OF SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the New York Stock Exchange is restricted or during any emergency which makes
it impracticable for the Fund to dispose of its securities or fairly value its
net assets during any other period permitted by order of the Securities and
Exchange Commission. Furthermore, the Transfer Agent will not mail redemption
proceeds until checks received for shares purchased have cleared, which may
take up to 15 days after receipt of the check. Redemptions by Class B
shareholders will be subject to the applicable deferred sales charge, if any.
See the Fund's current Prospectus for more information.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts
the order. Customer orders will be priced at the Fund's net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
By Mail
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. See the Fund's
current Prospectus for more information.
By Check
You may elect to redeem shares held in your account by check. Checks will
be sent to you upon receipt by Equity Planning of a completed application and
signature card (attached to the application). If the signature card accompanies
your initial account application, the signature guarantee section of the form
may be disregarded. However, the Fund reserves the right to require that all
signatures be guaranteed prior to the establishment of a check writing service
account. When an authorization form is submitted after receipt of the initial
account application, all signatures must be guaranteed regardless of account
value.
Checks may be drawn payable to any person in an amount of not less than
$500, provided that immediately after the payment of the redemption proceeds
the balance in your account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient
number of full and fractional shares in your account will be redeemed to cover
the amount of the check. The number of shares to be redeemed will be determined
on the date the check is received by the Transfer Agent. Presently there is no
charge to you for the check writing service, but this may be changed or
modified in the future upon two weeks written notice to shareholders. Checks
drawn from Class B accounts are subject to the applicable deferred sales
charge, if any.
The checkwriting procedure for redemption enables you to receive income
accruing on the shares to be redeemed until such time as the check is presented
to Equity Planning for payment. Inasmuch as canceled checks are returned to
shareholders monthly, no confirmation statement is issued at the time of
redemption.
Shareholders utilizing withdrawal checks will be subject to Equity
Planning's rules governing checking accounts. You should make sure that there
are sufficient shares in your account to cover the amount of any check drawn.
If insufficient shares are in the account and the check is presented to Equity
Planning on a banking day on which the Fund does not redeem shares (for
example,
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a day on which the New York Stock Exchange is closed), or if the check is
presented against redemption proceeds of an investment made by check which has
not been in the account for at least fifteen calendar days, the check may be
returned marked "Non-sufficient Funds" and no shares will be redeemed. You may
not close your account by a withdrawal check because the exact value of the
account will not be known until after the check is received by Equity Planning.
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.
Telephone redemption orders received and accepted by the Transfer Agent on
any day when the Transfer Agent is open for business will be entered at the
next determined net asset value. However telephone redemption orders received
and accepted by the Transfer Agent after the close of trading hours on the
Exchange will be executed on the following business day. If the amount of the
redemption is $500 or more, the proceeds 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. With respect to the telephone redemption of
shares purchased by check, such redemption requests will be effected only after
the Fund has assured itself that good payment has been collected for the
purchase of shares, which may take up to 15 days after receipt of the check.
See the Fund's current Prospectus for more information. This expedited
redemption privilege is not available to HR-10, IRA and 403(b)(7) Plans. In
addition to the Telephone Redemption Privilege, 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
("RIC") 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; and (b) meet certain diversification
requirements imposed under the Code at the end of each quarter of the taxable
year. Under certain state tax laws, the Fund must also comply with the
"short-short" test to qualify for treatment as a RIC for state tax purposes.
Under the "short-short" test the Fund must derive less than 30% of its gross
income each taxable year as gains (without deduction for losses) from the sale
or other disposition of securities for less than three months. If in any
taxable year the Fund does not qualify as a regulated investment company, all
of its taxable income will be taxed at corporate rates. In addition, if in any
tax year the Fund does not qualify as a RIC for state tax purposes a capital
gain dividend may not retain its character in the hands of the shareholder for
state tax purposes.
Dividends paid by the Fund will be taxable to shareholders as ordinary
income, except for (a) such portion as may exceed a shareholder's ratable share
of the Fund's earnings and profits, which excess will be applied against and
reduce the shareholder's cost or other tax basis for his shares and (b) amounts
representing a distribution of net capital gains, if any, which are designated
by the Fund as capital gain dividends. If the amount described in (a) above
exceeds the shareholder's tax basis for his shares, the excess over basis will
be treated as gain from the sale or exchange of such shares. The excess of any
net long-term capital gains over net short-term capital losses recognized and
distributed by the Fund and designated by the Fund as a capital gain dividend,
is taxable to shareholders as long-term capital gain regardless of the length
of time a particular shareholder may have held his shares in the Fund.
Dividends and distributions are taxable as described, whether received in cash
or reinvested in additional shares of the Fund.
The Code imposes a 4% nondeductible excise tax on 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
16
<PAGE>
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.
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.
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 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.
17
<PAGE>
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 31% with
respect to dividends and capital gains distributions paid to shareholders or
reinvested by the Fund and other amounts distributed by it including proceeds
of redemptions, unless such shareholder provides a certified social security 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 DISTRIBUTOR
Phoenix Equity Planning Corporation ("Equity Planning") acts as the
Distributor for the Fund and as such will conduct a continuous offering
pursuant to a "best efforts" arrangement requiring it to take and pay for only
such securities as may be sold to the public. Equity Planning is an indirect
less than wholly-owned subsidiary of Phoenix Home Life and an affiliate of the
Adviser. Shares of the Fund may be purchased through investment dealers who
have sales agreements with the Distributor. During the fiscal years ended
October 31, 1995, 1996, and 1997, purchasers of shares of the Fund paid
aggregate sales charges of $53,927, $57,335, and $127,340, respectively, of
which the principal underwriter received net commissions of $34,673, $19,570,
and $19,763, respectively, for its services, the balance being paid to dealers.
The Underwriting Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Fund, or by vote
of a majority of the Fund's Trustees who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Distribution Plan or in any related agreements. The Underwriting Agreement
will terminate automatically in the event of its assignment.
18
<PAGE>
Equity Planning also acts as administrative agent of the Fund and as such
performs administrative, bookkeeping and pricing functions for the Fund. As
compensation for such services Equity Planning is entitled to a fee, payable
monthly and based upon the average of the aggregate daily net asset values of
the Fund, at the following incremental annual rates:
First $100 million .05% subject to a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum charge of $70,000 is applicable. In addition, Equity Planning is
paid $12,000 for each class of shares beyond one. For its services during the
Fund's fiscal year ended October 31, 1997, Equity Planning received $70,205.
PLANS OF DISTRIBUTION
The Fund has adopted separate amended and restated distribution plans
under Rule 12b-1 of the 1940 Act for each class of shares of the Fund (the
"Class A Plan," the "Class B Plan," the "Class C Plan," and collectively the
"Plans"). The Plans permit the Fund to reimburse the Distributor for expenses
incurred in connection with activities intended to promote the sale of shares
of each class of shares of the Fund. For the fiscal year 1998, the Distributor
has voluntarily agreed to waive reimbursement for Class A Shares.
Pursuant to the Plans, the Fund may reimburse the Distributor for actual
expenses of the Distributor up to 0.05% annually of the average daily net
assets of the Fund's Class A shares, up to 0.75% annually of the average daily
net assets of the Fund's Class B shares, and up to 0.25% annually of the
average daily net assets of the Fund's Class C shares. Expenditures under the
Plans shall consist of: (i) commissions to sales personnel for selling shares
of the Fund (including underwriting commissions and financing expenses incurred
in connection with the payment of commissions); (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into agreements with the Distributor in the form of the Dealer Agreement for
Phoenix Funds for services rendered in connection with the sale and
distribution of shares of the Fund; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Fund; (v) the costs of preparing and distributing promotional materials; (vi)
the cost of printing the Fund's Prospectus and Statement of Additional
Information for distribution to potential investors; and (vii) such other
similar services that the Trustees of the Fund determine are reasonably
calculated to result in the sale of shares of the Fund. In addition, the Fund
will pay 0.25% annually of the average daily net assets of the Fund's shares
for providing services to shareholders, including assistance in connection with
inquiries related to shareholder accounts (the "Service Fee").
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 Distributor
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 the Plans terminate.
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor,
such as services to the Fund's shareholders; or services providing the Fund
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment; or other processing.
In addition to the amount paid to dealers pursuant to the sales charge
table in the Prospectus, the Distributor may from time to time pay, from its
own resources or pursuant to the Plan, a bonus or other incentive to dealers
(other than the Distributor) which employ a registered representative who sells
a minimum dollar amount of the shares of the Fund during a specific period of
time. Such bonus or other incentive may take the form of payment for travel
expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and members of their families to places
within or without the United States or other bonuses such as gift certificates
or the cash equivalent of such bonuses. The Distributor may, from time to time,
reallow the entire portion of the sales charge on Class A shares which it
normally retains to individual selling dealers. However, such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
For the fiscal year ended October 31, 1997, the Fund paid 12b-1 fees in
the amount of $113,910 ($51,494 under the Distribution Plan for Class A shares;
$62,254 under the Distribution Plan for Class B shares and $162 under the
Distribution Plan for Class C shares), of which the Distributor of the Fund
received $65,002. The 12b-1 payments were used for (1) compensating dealers,
$125,076, (2) compensating sales personnel, $281,831, (3) advertising,
$157,544, (4) printing and mailing of prospectuses to other than current
shareholders, $13,689, (5) service costs, $38,101 and (6) other, $54,309.
19
<PAGE>
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 that class 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 the Plan Trustees or a majority of the
outstanding shares of the relevant class of the Fund.
The National Association of Securities Dealers, Inc. (the "NASD") regards
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend the Plans.
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.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ------------------------ ---------------- --------------------------------------------------------------
<S> <C> <C>
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-1994),
49 Old Post Road Phoenix Funds. Trustee, Phoenix-Aberdeen Series Fund and
Wethersfield, CT 06109 Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Vice President, Common Stock, Phoenix
Home Life Mutual Insurance Company (1980-1994). Director/
Trustee, the National Affiliated Investment Companies (until
1993).
E. Virgil Conway (68) Trustee Chairman, Metropolitan Transportation Authority
9 Rittenhouse Road (1992-present). Trustee/Director, Consolidated Edison
Bronxville, NY 10708 Company of New York, Inc. (1970-present), Pace University
(1978-present), Atlantic Mutual Insurance Company
(1974-present), HRE Properties (1989-present), Greater New
York Councils, Boy Scouts of America (1985-present), Union
Pacific Corp. (1978-present), Blackrock Freddie Mac
Mortgage Securities Fund (Advisory Director) (1990-present),
Centennial Insurance Company (1974-present), Josiah Macy,
Jr., Foundation (1975-present) ,The Harlem Youth
Development Foundation (1987-present), Accuhealth
(1994-present), Trism, Inc. (1994-present), Realty Foundation
of New York (1972-present), New York Housing Partnership
Development Corp. (Chairman) (1981-present) and Fund
Directions (Advisory Director) (1993-present). Director/
Trustee, Phoenix Funds (1993-present). Trustee, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present).
Member, Audit Committee of the City of New York
(1981-1996). Advisory Director, Blackrock Fannie Mae
Mortgage Securities Fund (1989-1996). Member (1990-1995),
Chairman (1992-1995), Financial Accounting Standards
Advisory Council. Director/Trustee, the National Affiliated
Investment Companies (until 1993).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- -------------------------------------------------------------
<S> <C> <C>
Harry Dalzell-Payne (68) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York. NY 10016 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present).
Director, Farragut Mortgage Co., Inc. (1991-1994). Director/
Trustee, the National Affiliated Investment Companies
(1983-1993). Formerly a Major General of the British Army.
*Francis E. Jeffries (67) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff &
Naples, FL 33963 Phelps Utilities Income Inc. (1987-present), Duff & Phelps
Utilities Tax-Free Income Inc. (1991-present) and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1993-present).
Director, The Empire District Electric Company
(1984-present). Director (1989-1997), Chairman of the Board
(1993-1997), President (1989-1993), and Chief Executive
Officer (1989-1995), Phoenix Duff & Phelps Corporation.
Leroy Keith, Jr. (59) Trustee Chairman and Chief Executive Officer, Carson Products
Chairman and Chief Company (1995-present). Director/Trustee, Phoenix Funds
Executive Officer (1980-present). Trustee, Phoenix-Aberdeen Series Fund and
Carson Product Company Phoenix Duff & Phelps Institutional Mutual Funds
64 Ross Road (1996-present). Director, Equifax Corp. (1991-present) and
Savannah, GA 30750 Evergreen International Fund, Inc. (1989-present). Trustee,
Evergreen Liquid Trust, Evergreen Tax Exempt Trust,
Evergreen Tax Free Fund, Master Reserves Tax Free Trust,
and Master Reserves Trust. President, Morehouse College
(1987-1994). Chairman and Chief Executive Officer, Keith
Ventures (1992-1994). Director/Trustee, the National
Affiliated Investment Companies (until 1993).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ---------------------------- --------------- ---------------------------------------------------------------
<S> <C> <C>
*Philip R. McLoughlin (51) Trustee and Chairman (1997-present), Director (1995-present), Vice
56 Prospect Street President Chairman (1995-1997) and Chief Executive Officer
Hartford, CT 06115 (1995-1997), Phoenix Duff & Phelps Corporation. Director
(1994-present) and Executive Vice President, Investments
(1988-present), Phoenix Home Life Mutual Insurance
Company. Director/Trustee and President, Phoenix Funds
(1989-present). Trustee and President, Phoenix-Aberdeen
Series Fund and Phoenix Duff & Phelps Institutional Mutual
Funds (1996-present). Director, Duff & Phelps Utilities
Tax-Free Income Inc. (1995-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present). Director
(1983-present) and Chairman (1995--present), Phoenix
Investment Counsel, Inc. Director (1984-present) and
President (1990-present), Phoenix Equity Planning
Corporation. Director (1993-present), Chairman (1993-
present) and Chief Executive Officer (1993-1995), National
Securities & Research Corporation. Director, Phoenix Realty
Group, Inc. (1994-present), Phoenix Realty Advisors, Inc.
(1987-present), Phoenix Realty Investors, Inc.
(1994-present), Phoenix Realty Securities, Inc.
(1994-present), PXRE Corporation (Delaware) (1985-present),
and World Trust Fund (1991-present). Director and Executive
Vice President, Phoenix Life and Annuity Company
(1996-present). Director and Executive Vice President, PHL
Variable Insurance Company (1995-present). Director,
Phoenix Charter Oak Trust Company (1996-present). Director
and Vice President, PM Holdings, Inc. (1985-present).
Director and President, Phoenix Securities Group, Inc.
(1993-1995). Director (1992-present) and President
(1992-1994), W.S. Griffith & Co., Inc. Director
(1992-present) and President (1992-1994), Townsend
Financial Advisers, Inc. Director/Trustee, the National
Affiliated Investment Companies (until 1993).
Everett L. Morris (69) Trustee Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee, Duff
Colts Neck, NJ 07722 & Phelps Mutual Funds (1994-present). Trustee, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. (1991-present) and
Duff & Phelps Utility and Corporate Bond Trust Inc.
(1993-present). Director, Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings, Incorporated
( 1989-1993).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------------------- --------------- --------------------------------------------------------------
<S> <C> <C>
*James M. Oates (51) Trustee Chairman, IBEX Capital Markets LLC (1997-present).
Managing Director Managing Director, Wydown Group (1994-present). Director,
The Wydown Group Phoenix Duff & Phelps Corporation (1995-present). Director/
IBEX Capital Markets LLC Trustee, Phoenix Funds (1987-present). Trustee, Phoenix-
60 State Street Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 950 Institutional Mutual Funds (1996-present). Director, AIB
Boston, MA 02109 Govett Funds (1991-present), Blue Cross and Blue Shield of
New Hampshire (1994-present), Investors Financial Service
Corporation (1995-present), Investors Bank & Trust
Corporation (1995-present), Plymouth Rubber Co.
(1995-present), Stifel Financial (1996-present) and Command
Systems, Inc. (1998-present), Vice Chairman, Massachusetts
Housing Partnership (1992-present). Member, Chief
Executives Organization (1996-present). Director
(1984-1994), President (1984-1994) and Chief Executive
Officer (1986-1994), Neworld Bank. Director/Trustee, the
National Affiliated Investment Companies (until 1993).
*Calvin J. Pedersen (56) Trustee Director (1986-present), President (1993-present) and
Phoenix Duff & Phelps Corporation Executive Vice President (1992-1993), Phoenix Duff
55 East Monroe Street & Phelps Corporation. Director/Trustee, Phoenix Funds
Suite 3600 (1995-present). Trustee, Phoenix-Aberdeen Series Fund and
Chicago, IL 60603 Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). President and Chief Executive Officer, Duff &
Phelps Utilities Tax-Free Income Inc. (1995-present), Duff &
Phelps Utilities Income Inc. (1994-present) and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1995 present).
**Herbert Roth, Jr. (69) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-present), Phoenix Home Life Mutual
Insurance Company (1972-present), Landauer, Inc. (medical
services) (1970-present),Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), and Mark IV Industries
(diversified manufacturer) (1985-present). Director,
Key Energy Group (oil rig service) (1988-1994). Director/
Trustee, the National Affiliated Investment Companies (until
1993).
Richard E. Segerson (52) Trustee Managing Director, Mullin Associates (1993-present).
102 Valley Road Director/Trustee, Phoenix Funds, (1993-present). Trustee,
New Canaan, CT 06840 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Vice President and
General Manager, Coats & Clark, Inc. (previously Tootal
American, Inc.) (1991-1993). Director/Trustee, the National
Affiliated Investment Companies (1984-1993).
Lowell P. Weicker, Jr. (66) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), HPSC Inc. (1995-present), Compuware
(1996-present) and Burroughs Wellcome Fund
(1966-present). Visiting Professor, University of Virginia
(1997-present). Director, Duty Free International (1997).
Chairman, Dresing, Lierman, Weicker (1995-1996). Governor
of the State of Connecticut (1991-1995).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ------------------------ --------------- -------------------------------------------------------------
<S> <C> <C>
Michael E. Haylon (40) Executive Director and Executive Vice President-Investments, Phoenix
Vice Duff & Phelps Corporation (1995-present). Senior Vice
President President, Securities Investments, Phoenix Home Life Mutual
Insurance Company (1993-1995). Director (1994-present),
President (1996-present), and Executive Vice President
(1994-1996), National Securities & Research Corporation.
Executive Vice President, Phoenix Funds (1995-present)
Phoenix-Aberdeen Series Fund (1996-present). Executive
Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds. Director
(1994-present), President (1995-present) and Executive Vice
President (1994-1995), Phoenix Investment Counsel, Inc.
Director (1994-present), President (1996-present) and
Executive Vice President (1994-1996), National Securities &
Research Corporation. Director, Phoenix Equity Planning
Corporation (1995-present). Various other positions with
Phoenix Home Life Mutual Insurance Company (1990-1993).
James D. Wehr (40) Senior Vice Managing Director, Fixed Income, (1996-present), Vice
President President (1991-1996), Phoenix Investment Counsel, Inc.
Managing Director, Fixed Income, (1996-present), Vice
President (1993-1996), National Securities & Research
Corporation. Senior Vice President (1997- present), Vice
President (1988-1997), Phoenix Multi-Portfolio Fund; Senior
Vice President (1997-present), Vice President (1990-1997),
Phoenix Series Fund; Senior Vice President (1997-present),
Vice President (1991-1997), The Phoenix Edge Series Fund;
Senior Vice President (1997-present), Vice President (1993-
1997), Phoenix California Tax Exempt Bonds, Inc.; Senior
Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds; and Senior
Vice President, Phoenix Multi-Sector Short Term Bond Fund,
Phoenix Multi-Sector Fixed Income Fund, Phoenix Income
and Growth Fund and Phoenix Strategic Allocation Fund, Inc.
(1997-present). Senior Vice President and Chief Investment
Officer, Duff & Phelps Utilities Tax Free Income Inc.
(1997-present). Managing Director, Public Fixed Income,
Phoenix Home Life Insurance Company (1991-1995). Various
positions with Phoenix Home Life Insurance Company
( 1981-1991).
David L. Albrycht (36) Vice Managing Director, Fixed Income (1996-present), Vice
President President (1995-1996), Phoenix Investment Counsel, Inc.
Managing Director, Fixed Income (1996-present), Investment
Officer (1994-1996), National Securities & Research
Corporation. Vice President, Phoenix Multi-Portfolio Fund
(1993-present), Phoenix Multi-Sector Short Term Bond Fund
(1993-present), Phoenix Multi-Sector Fixed Income Fund, Inc.
(1994-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1989-1995).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------------- --------------- ------------------------------------------------------------------
<S> <C> <C>
William E. Keen, III (34) Vice Assistant Vice President (1996-present), Director of Mutual
100 Bright Meadow Blvd. President Fund Compliance (1995-1996), Phoenix Equity Planning
P.O. Box 2200 Corporation. Vice President, Phoenix Funds, Phoenix-
Enfield, CT 06083-2200 Aberdeen Series Fund, and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Assistant Vice
President, USAffinity Investments LP, (1994-1995). Treasurer
and Secretary, USAffinity Funds (1994-1995). Manager, Fund
Administration, SEI Corporation (1991-1994).
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff
100 Bright Meadow Blvd. President & Phelps Corporation (1995-present). Senior Vice President
P.O. Box 2200 (1990-present), Chief Financial Officer (1996- present), Finance
Enfield, CT 06083-2200 (until 1996) and Treasurer (1994-1996), Phoenix Equity
Planning Corporation. Senior Vice President (1990-present),
Chief Financial Officer (1996- present), Finance (until 1996) and
Treasurer (1994- present), Phoenix Investment Counsel, Inc.
Senior Vice President (1994-present), Chief Financial Officer
(1996- present), Finance (until 1996) and Treasurer (1994-
present), National Securities & Research Corporation. Vice
President, Phoenix Funds (1990-present), Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present) and Phoenix-
Aberdeen Series Fund (1996-present). Senior Vice President and
Chief Financial Officer, Phoenix Duff & Phelps Investment
Management Co. (1996-present). Vice President, Investment
Products Finance, Phoenix Home Life Mutual Insurance
Company (1990-1995). Senior Vice President and Chief
Financial Officer (1993-1995) and Treasurer (1994-1995), W.S.
Griffith & Co., Inc. and Townsend Financial Advisors, Inc.
Senior Vice President, Finance, Phoenix Securities Group, Inc.
(1993-1995). Vice President, the National Affiliated Companies
(until 1993).
Leonard J. Saltiel (44) Vice Managing Director, Operations and Service (1996- present),
President Senior Vice President (1994-1996), Phoenix Equity Planning
Corporation. Vice President, Phoenix Funds (1994-present),
Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present), and National
Securities & Research Corporation (1994-1996). Vice
President, Investment Operations, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with
Home Life Insurance Company and Phoenix Home Life
Mutual Insurance Company (1987-1994).
Nancy G. Curtiss (45) Treasurer Treasurer (1996-present), Vice President, Fund Accounting
(1994-1996), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix-Aberdeen Series
Fund (1996-present) and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Second Vice President and
Treasurer, Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with
Phoenix Home Life Insurance Company (1987-1994).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- ----------------------- --------------- ---------------------------------------------------------------
<S> <C> <C>
G. Jeffrey Bohne (50) Secretary Vice President, Mutual Fund Customer Service (1996- present),
101 Munson Street Vice President, Transfer Agent Operations (1993-1996), Phoenix
Greenfield, MA 01301 Equity Planning Corporation. Secretary/Clerk, Phoenix Funds
(1993-present), Phoenix-Aberdeen Series Fund and Phoenix Duff
& Phelps Institutional Mutual Funds (1996-present). Vice
President and General Manager, Phoenix Home Life Mutual
Insurance Co. (1993-present). Vice President, Home Life of New
York Insurance Company (1984-1992).
</TABLE>
- ---------------
*Messrs. Jeffries, McLoughlin, Oates and Pedersen are "interested persons" of
the Fund within the meaning of the definition set forth in Section 2(a)(19) of
the 1940 Act.
**Pursuant to the retirement policy of Phoenix Funds, Messrs. Morris and Roth
will retire from the Board of Trustees effective January 1, 1999.
Principal Shareholders
The following table sets forth information as of January 30, 1998 with
respect to each person who owns of record or is known by the Fund to own of
record or beneficially own 5% or more of any class of the Fund's equity
securities.
<TABLE>
<CAPTION>
Name of Shareholder Class Number of Shares Percent of Class
- ------------------------------------------------- --------- ------------------ -----------------
<S> <C> <C> <C>
Advest Inc. Class A 382,222.851 6.56%
ATTN: Mutual Fund Operations
90 State House Sq.
Hartford, CT 06103-3702
Prudential Securities Inc. Class A 612,573.985 10.52%
FBO Virtual World Entertainment Group
676 N. Saint Clair St. Ste. 1000
Chicago, IL 60611-2927
Trustees of Phoenix Savings and Investment Plan Class A 312,423.942 5.36%
100 Bright Meadow Blvd.
P.O. Box 1900
Enfield, CT 06083-1900
MLPF&S for the sole benefit of its customers Class B 199,321.292 9.12%
ATTN: Fund Administration
4800 Deer Lake Dr. E 3rd Fl.
Jacksonville, FL 32246-6484
Mary Ann Krausz Class C 50,503.648 8.02%
7739 Lycoming Ave.
Melrose Park, PA 19027
John S. Swift Jr. Class C 145,184.079 23.05%
P.O. Box 1725
Bodega Bay, CA 94923
Wheat First Securities, Inc. Class C 53,639.992 8.52%
Georgian Court College Plant Fund
900 Lakewood Ave.
Lakewood, NJ 08701
</TABLE>
For services rendered to the Fund for the fiscal year ended October 31,
1997, the Trustees received aggregate remuneration of $20,288. For services on
the Boards of Directors/Trustees of the Phoenix Funds, each Trustee who is not
a full-time employee of the Adviser or any of its affiliates currently receives
a retainer at the annual rate of $40,000 and a fee of $2,500 per joint meeting
of the Boards. Each Trustee who serves on the Audit Committee receives a
retainer at the annual rate of $2,000 and a fee of $2,000 per joint Audit
Committee meeting attended. Each Trustee who serves on the Nominating Committee
receives a retainer at the annual rate of $1,000 and a fee of $1,000 per joint
Nominating Committee meeting attended. Each Trustee who serves on the Executive
Committee and who is not an interested person of the Fund receives a retainer
at the annual rate of $1,000 and $1,000 per joint Executive Committee meeting
attended. The function of the Executive Committee is to serve as a contract
review,
26
<PAGE>
compliance review and performance review delegate of the full Board of
Trustees. Trustees costs are allocated equally to each of the Series and Funds
within the Fund complex. The foregoing fees do not include the reimbursement of
expenses incurred in connection with meeting attendance. Officers and employees
of the Adviser who are interested persons are compensated by the Adviser and
receive no compensation from the Fund.
For the Fund's last fiscal year ending October 31, 1997, the Trustees
received the following compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (13 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ -------------- --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert Chesek $ 1,583 $59,000
E. Virgil Conway+ $ 1,980 $73,250
Harry Dalzell-Payne+ $ 1,755 $65,000
Francis E. Jeffries $ 1,125* $37,500
Leroy Keith, Jr. $ 1,583 None None $59,000
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $ 1,673* Trustee Trustee $63,000
James M. Oates+ $ 1,673 $62,250
Calvin J. Pedersen $ 0 $ 0
Herbert Roth, Jr.+ $ 2,093* $76,250
Richard E. Segerson $ 1,755 $65,500
Lowell P. Weicker, Jr. $ 1,688 $62,500
</TABLE>
- -----------
*This compensation (and the earnings thereon) was deferred pursuant to the
Trustees' Deferred Compensation Plan. At October 31, 1997, the total amount of
deferred compensation (including interest and other accumulation earned on the
original amounts deferred) accrued for Messrs. Jeffries, Morris and Roth was
$49,350, $108,675 and $135,965, respectively. At present, by agreement among
the Fund, the Distributor and the electing trustee, trustee fees that are
deferred are paid by the Fund to the Distributor. The liability for the
deferred compensation obligation appears only as a liability of the
Distributor.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
On January 30, 1998, the 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, 160 Federal Street, Boston, MA 02110, has been
selected as independent accountants for the Fund. Price Waterhouse LLP audits
the Fund's annual financial statements and expresses an opinion thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301,
serves as the Fund's custodian. Phoenix Equity Planning Corporation, 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200, serves as the Fund's
transfer agent.
Reports to Shareholders
The fiscal year of the Fund ends on October 31. The Fund will send 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, 1997 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 for the year ended October 31, 1997 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.
27
<PAGE>
APPENDIX
Description of Certain Bond Ratings
Moody's Investor's Service, Inc.
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
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, CCC: Bonds rated BB, B, CCC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with terms of the obligation. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties of major risk exposure to adverse conditions.
Duff & Phelps Credit Rating Co.
Duff & Phelps Credit Rating Co. ("D&P") is an unaffiliated 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.
28
<PAGE>
Rating Scale:
D&P 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
Short-Term Ratings
- --------------------------------------------------------------------------
Duff 1+
Duff 1 X 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.
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 (+) Minus (-): Plus and minus signs are used with a rating symbol 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.
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.
Credit Trend: Credit Trend indicators show whether credit fundamentals are
improving, stable, declining or uncertain, as follows:
Improving
Stable
Declining
Uncertain
29
<PAGE>
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.
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.
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, and D: Bonds are in default on interest and/or 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 (+) Minus (-): Plus and minus signs are used with a rating 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.
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:
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.
30
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
INVESTMENTS AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- -------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--15.0%
U.S. Treasury Notes--14.4%
U.S. Treasury Notes WI
5.75%, 11/15/00 (g) ......... Aaa $5,140 $ 5,150,280
U.S. Treasury Notes 6.125%,
8/15/07 (f) .................. Aaa 500 510,938
-----------
5,661,218
-----------
Agency Non Mortgage-Backed Securities--0.6%
Overseas Private Investment
6.58%, 12/15/01 ............ NR 250 253,550
-----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $5,895,660) ........................ 5,914,768
-----------
NON-CONVERTIBLE BONDS--51.2%
Airlines--0.4%
AMR Corp. Notes 7.75%,
12/1/97 ..................... Baa 155 155,217
-----------
Asset-Backed Securities--11.3%
AESOP Funding II LLC 144A
97-1, A2 6.40%, 10/20/03
(b) (f) ..................... Aaa 500 503,594
Banc One Auto Trust 95-A,
Class CTFS 7.25%,
10/15/01 (f) ............... A 500 503,285
Case Equipment Loan Trust
6.45%, 9/15/02 (f) ......... A 500 504,062
Continental Airlines 144A
7.522%, 6/30/01 (b) ......... Ba 400 402,048
Countrywide Funding Corp.
93-12, B3 6.625%, 2/25/24 ... Baa 81 81,072
First Sierra Receivables 96-2,
A 6.29%, 11/10/04 ............ Aaa 250 250,713
Fleetwood Credit Corp. 96-A,
B 6.95%, 10/17/11 (f) ...... A 194 195,652
Ford Credit Auto Owner Trust
96-B, 6.55%, 2/15/02 (f) ... A 250 252,500
Green Tree Financial Corp.
96-1, A2 5.85%, 3/15/27 (f) Aaa 500 496,875
NationsBank Auto Owner Trust
96-A, B2 6.875%, 5/15/03 ... A 500 508,915
Premier Auto Trust 97-3, B
6.52%, 1/6/03 ............... A 250 252,734
Team Fleet Financing Corp.
96-1, B 144A 7.10%,
12/15/02 (b) (f) ............ BBB(c) 500 500,312
-----------
4,451,762
-----------
Automobiles--1.2%
Titan Tire Loan Participation
7%, 2/11/00 .................. NR 500 480,000
-----------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- -------- ------------
<S> <C> <C> <C>
Banks--2.9%
Banponce Financial Corp.
5.48%, 10/26/98 ............ A $ 375 $ 373,094
NationsBank Capital Trust III
6.308%, 1/15/27 (d) ......... A 300 295,135
Wachovia Capital Trust II
6.258%, 1/15/27 (d) (f) ...... Aa 500 489,971
-----------
1,158,200
-----------
Building & Materials--1.4%
Neenah Corp. Series B
11.125%, 5/1/07 ............ B 500 540,000
-----------
Consumer Finance--1.3%
ITT Publimedia 144A 9.375%,
9/15/07 (b) (f) ............ B 500 511,250
-----------
Electric Companies--0.2%
Coso Funding Corp. Notes
144A 7.99%, 12/31/97 (b) ... Baa 65 65,195
-----------
Health Care (Hospital Management)--1.0%
Tenet Healthcare Corp. Sr.
Note 9.625%, 9/1/02 ......... Ba 375 411,563
-----------
Industrial--0.7%
Polymer Group, Inc. 9%,
7/1/07 ..................... B 250 253,125
-----------
Leasing/Rental--0.6%
Williams Scotsman, Inc. 144A
9.875%, 6/1/07 (b) ......... B-(c) 225 231,188
-----------
Metals Mining--0.6%
USX Corp. Sr. Notes 6.375%,
7/15/98 (f) .................. Baa 250 250,498
-----------
Non-Agency Mortgage-Backed Securities--23.5%
Bear Stearns Mortgage
Securities, Inc. 95-1, 2B3
144A 7.40%, 7/25/10 (b) ...... NR 289 282,335
Criimi Mae Trust I 96-C1, A2
144A 7.56%, 6/30/33 (b) ...... BBB(c) 400 411,125
EQCC Home Equity Loan
Trust 96-4, A4 6.47%,
8/15/10 ..................... Aaa 530 535,077
G.E. Capital Mortgage
Services, Inc. 94-26, B2
7.03%, 7/25/09 ............... Baa 259 260,488
Kidder Peabody Acceptance
Corp. 94-C2, D 7.18%,
10/1/05 ..................... BBB(c) 350 366,516
Merrill Lynch Mortgage, Inc.
95-C2, C 7.83%, 6/15/21 ...... A 286 295,966
Oregon Commercial Mortgage,
Inc. 95-1, B 144A 7.35%,
6/25/23 (b) (f) ............ AA(c) 500 506,953
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- -------- ------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
PNC Mortgage Securities Corp.
97-6, 1A 6.49%, 10/25/26 ... Aaa $ 488 $ 490,093
Prudential Home Mortgage
Securities 93L, 3B2 144A
6.641%, 12/25/23 (b) ...... NR 250 247,656
Prudential Home Mortgage
Securities 96-A, B1
7.958%, 5/28/26 ............ NR 500 470,625
Residential Asset
Securitization Trust 96-A8,
A1 8%, 12/25/26 ............ AAA(c) 364 371,560
Residential Funding Mortgage
Securities, Inc. I 93-S29,
M3 7%, 8/25/08 ............ NR 543 546,949
Residential Funding Mortgage
Securities, Inc. I 96-S8, A4
6.75%, 3/25/11 ............ AAA(c) 94 94,841
Resolution Trust Corp. 92-C3,
B 9.05%, 8/25/23 ............ AA(c) 139 141,543
Resolution Trust Corp. 92-CHF,
B 7.15%, 12/25/20 ......... AA(c) 346 344,441
Resolution Trust Corp. 93-C1,
B 8.75%, 5/25/24 ............ Aa 400 400,098
Resolution Trust Corp. 93-C2,
B 7.75%, 3/25/25 ............ AA(c) 500 501,883
Resolution Trust Corp. 94-C1,
C 8%, 6/25/26 ............... A(c) 500 517,812
Resolution Trust Corp. 95-1,
C2 7.50%, 10/25/28 ......... A 232 234,964
Resolution Trust Corp. 95-2,
B2 7.009%, 5/25/29 ......... Baa 230 231,667
Resolution Trust Corp. 95-2,
C1 7.45%, 5/25/29 ......... Baa 351 356,857
Resolution Trust Corp. 95-2,
M1 7.15%, 5/25/29 ......... Aa 800 814,114
Structured Asset Securities
Corp. 95-C1, D 7.375%,
9/25/24 ..................... BBB(c) 500 505,625
Structured Asset Securities
Corp. 96-C3, C 144A
7.375%, 6/25/30 (b) ......... BBB(c) 350 354,484
-----------
9,283,672
-----------
Oil--2.2%
Benton Oil & Gas Co. 144A
9.375%, 11/1/07 (b) ......... B 500 503,750
Lomak Petroleum, Inc. 8.75%,
1/15/07 (f) ............... B 375 377,812
-----------
881,562
-----------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- -------- ------------
<S> <C> <C> <C>
Oil Service & Equipment--0.7%
Noble Drilling Corp. 9.125%,
7/1/06 (f) .................. Baa $ 250 $ 271,563
-----------
Publishing, Broadcasting, Printing & Cable--3.2%
Century Communications
8.75%, 10/1/07 ............ Ba 500 497,500
Comcast Cellular 144A 9.50%,
5/1/07 (b) .................. Ba 250 258,750
Tele-Communications, Inc.
7.375%, 2/15/00 (f) ......... BBB-(c) 500 509,485
-----------
1,265,735
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $19,858,886) ......................... 20,210,530
-----------
FOREIGN GOVERNMENT SECURITIES--10.4%
Algeria--0.5%
Algeria Tranch A Loans
6.688%, 3/4/00 ............ NR 136 109,091
Algeria Tranch 1 Unaffected
Loans 7.375%, 3/4/00 ...... NR 114 90,909
-----------
200,000
-----------
Argentina--2.6%
Republic of Argentina Bearer
FRB 6.688%, 3/31/05 (d) ... Ba 1,152 1,010,880
-----------
Brazil--0.9%
Republic of Brazil DCB-L
Euro 6.75%, 4/15/12 (d) ... BB-(c) 525 362,250
-----------
Bulgaria--0.6%
Republic of Bulgaria IAB PDI
Euro 6.688%, 7/28/11 (d) ... B 350 231,000
-----------
Ecuador--0.8%
Ecuador Bearer PDI Euro, PIK
interest capitalization,
6.688%, 2/27/15 (d) ......... B 547 323,089
-----------
Peru--0.4%
Peru PDI 144A 4%, 3/7/17
(b) (d) ..................... NR 250 141,250
-----------
Poland--2.4%
Poland Discount Euro 6.688%,
10/27/24 (d) ............... Baa 1,000 940,000
-----------
Russia--1.1%
Vnesheconombank Loans
Yankee (e) .................. NR 500 444,688
-----------
Venezuela--1.1%
Republic of Venezuela DCB
Euro 6.75%, 12/18/07 (d) ... Ba 500 437,500
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $4,389,595) ............................ 4,090,657
-----------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- ------- ------------
<S> <C> <C> <C>
FOREIGN NON-CONVERTIBLE BONDS--9.0%
Bermuda--0.6%
AES China Generating Co.
Yankee 10.125%, 12/15/06 ..... Ba $250 $ 251,250
-----------
Brazil--1.2%
Arisco Prod Alimenticios 144A
10.75%, 5/22/05 (b) ......... NR 250 231,250
Tevecap SA RegS 12.625%,
11/26/04 ..................... B 250 255,000
-----------
486,250
-----------
Colombia--1.2%
Financiera Energ Nacional
EMTN Euro 9%, 11/8/99 ...... BBB-(c) 450 455,625
-----------
Ecuador--0.9%
Consorcio Ecuatoriano TE
RegS 14%, 5/1/02 ............ NR 350 353,500
-----------
Mexico--5.1%
Altos Hornos de Mexico 144A
11.375%, 4/30/02 (b) ......... NR 600 612,000
Banco Nacional de Mexico
144A 7.57%, 12/31/00 (b) .... NR 500 501,550
Empresas ICA Sociedad
11.875%, 5/30/01 ............ B 250 271,250
Grupo Elektra SA de C.V.
12.75%, 5/15/01 ............ B(c) 250 272,910
Vicap SA 10.25%, 5/15/02 ...... Ba 350 357,000
-----------
2,014,710
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $3,663,262) ........................ 3,561,335
-----------
MUNICIPAL BONDS--5.4%
Chicago O'Hare Taxable
Revenue 6.47%, 1/1/00 (f) ... Aaa 150 151,239
Mississippi Taxable Series T
7.50%, 11/1/00 ............... Aa 855 887,011
New York State Dormitory
Authority Revenues, Taxable
6.45%, 10/1/99 (f) ......... Baa 400 402,880
Orange County Pension
Taxable Series A 6.16%,
9/1/98 (f) .................. Aaa 500 502,130
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- ------- ------------
<S> <C> <C> <C>
University of Miami
Exchangeable Revenue,
Series A Taxable 5.95%,
4/1/98 (f) .................. Aaa $185 $ 185,100
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $2,117,058) ............................ 2,128,360
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C>
PREFERRED STOCKS--1.9%
REITS--1.9%
Home Ownership Funding 2, Step-down
Pfd.
144A 13.338% (b) ............... 750 743,509
----------
TOTAL PREFERRED STOCKS
(Identified cost $724,277) .................... 743,509
----------
TOTAL LONG-TERM INVESTMENTS--92.9%
(Identified cost $36,648,738) ................. 36,649,159
----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- --------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--16.0%
Commercial Paper--7.6%
Coca-Cola Co. 5.50%,
11/17/97 ............... A-1+ $1,500 1,496,333
Emerson Electric Co. 5.50%,
11/17/97 ............... A-1+ 1,500 1,496,333
-------------
2,992,666
-------------
Federal Agency Securities--8.4%
FHLMC 5.65%, 11/3/97 .................. 3,310 3,308,961
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $6,301,627) ..................... 6,301,627
-------------
TOTAL INVESTMENTS--108.9%
(Identified cost $42,950,365) .................. 42,950,786(a)
Cash and receivables, less liabilities--(8.9%) ... (3,501,283)
-------------
NET ASSETS--100.0% .............................. $ 39,449,503
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $418,336 and gross
depreciation of $507,145 for income tax purposes. At October 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$43,039,595.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities amounted to a value of $7,008,199 or 17.8% of net
assets.
(c) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(d) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(e) Non-income producing.
(f) All or a portion segregated as collateral.
(g) When issued.
See Notes to Financial Statements
5
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $42,950,365) $42,950,786
Cash 671,678
Receivables
Interest 461,590
Investment securities sold 5,802,715
Receivable from adviser 3,195
Fund shares sold 413,490
-----------
Total assets 50,303,454
-----------
Liabilities
Payables
Investment securities purchased 10,684,377
Fund shares repurchased 52,087
Income distribution payable 37,203
Distribution fee 12,237
Financial agent fee 7,951
Transfer agent fee 6,853
Trustees' fee 3,497
Accrued expenses 49,746
-----------
Total liabilities 10,853,951
-----------
Net Assets $39,449,503
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $38,625,459
Undistributed net investment income 12,416
Accumulated net realized gain 811,207
Net unrealized appreciation 421
-----------
Net Assets $39,449,503
===========
Shares of Class A common stock outstanding,
$0.01 par value, unlimited authorization
(Net Assets $28,556,789) 5,646,378
Net asset value per share $ 5.06
Offering price per share $5.06/(1-2.25%) $ 5.18
Shares of Class B common stock outstanding,
$0.01 par value, unlimited authorization
(Net Assets $10,317,863) 2,038,316
Net asset value and offering price per share $ 5.06
Shares of Class C common stock outstanding,
$0.01 par value, unlimited authorization
(Net Assets $574,851) 113,529
Net asset value and offering price per share $ 5.06
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $2,133,514
Dividends 48,467
----------
Total investment income 2,181,981
----------
Expenses
Investment advisory fee 159,118
Distribution fee--Class A 51,494
Distribution fee--Class B 62,254
Distribution fee--Class C 162
Financial agent fee 70,205
Registration 53,243
Transfer agent 51,887
Printing 41,009
Professional 37,788
Custodian 19,084
Trustees 15,262
Amortization of deferred organization expense 11,897
Miscellaneous 10,453
----------
Total expenses 583,856
Less expense borne by investment adviser (252,968)
----------
Net expenses 330,888
----------
Net investment income 1,851,093
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 863,600
Net change in unrealized appreciation (depreciation) on
investments (213,559)
----------
Net gain on investments 650,041
----------
Net increase in net assets resulting from
operations $2,501,134
==========
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1997 October 31, 1996
------------------ -----------------
<S> <C> <C>
From Operations
Net investment income $ 1,851,093 $ 1,057,251
Net realized gain 863,600 475,148
Net change in unrealized appreciation (depreciation) (213,559) 68,949
------------- ------------
Increase in net assets resulting from operations 2,501,134 1,601,348
------------- ------------
From Distributions to Shareholders
Net investment income--Class A (1,358,917) (737,150)
Net investment income--Class B (500,332) (311,273)
Net investment income--Class C (2,174) --
------------- ------------
Decrease in net assets resulting from distributions to shareholders (1,861,423) (1,048,423)
------------- ------------
From Share Transactions
Class A
Proceeds from sales of shares (5,033,530 and 1,883,600 shares, respectively) 25,379,012 9,085,891
Net asset value of shares issued from reinvestment of distributions
(229,749 and 119,182 shares, respectively) 1,158,643 573,651
Cost of shares repurchased (2,409,066 and 1,171,859 shares, respectively) (12,117,223) (5,645,597)
------------- ------------
Total 14,420,432 4,013,945
------------- ------------
Class B
Proceeds from sales of shares (1,104,864 and 439,768 shares, respectively) 5,561,801 2,129,724
Net asset value of shares issued from reinvestment of distributions
(69,536 and 42,139 shares, respectively) 350,687 202,745
Cost of shares repurchased (346,945 and 253,126 shares, respectively) (1,753,224) (1,216,818)
------------- ------------
Total 4,159,264 1,115,651
------------- ------------
Class C
Proceeds from sales of shares (113,197 and 0 shares, respectively) 583,290 --
Net asset value of shares issued from reinvestment of distributions
(334 and 0 shares, respectively) 1,698 --
Cost of shares repurchased (2 and 0 shares, respectively) (10) --
------------- ------------
Total 584,978 --
------------- ------------
Increase in net assets from share transactions 19,164,674 5,129,596
------------- ------------
Net increase in net assets 19,804,385 5,682,521
Net Assets
Beginning of period 19,645,118 13,962,597
------------- ------------
End of period (including undistributed net investment income and
distributions in excess of net investment income of $12,416 and
($16,157), respectively) $ 39,449,503 $ 19,645,118
============= ============
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83
Income from investment operations
Net investment income 0.34(2) 0.33(2) 0.33(2) 0.29(2) 0.32(2)
Net realized and unrealized gain (loss) 0.14 0.17 0.13 (0.26) 0.08
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.48 0.50 0.46 0.03 0.40
---------- ---------- ---------- ---------- ----------
Less distributions
Dividends from net investment income (0.33) (0.33) (0.33) (0.29) (0.32)
Dividends from net realized gains -- -- -- (0.03) --
Tax return of capital -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.33) (0.33) (0.33) (0.33) (0.32)
---------- ---------- ---------- ---------- ----------
Change in net asset value 0.15 0.17 0.13 (0.30) 0.08
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91
========== ========== ========== ========== ==========
Total return(1) 10.08% 10.91% 10.27% 0.40% 8.49%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 28,557 $ 13,702 $ 9,303 $ 9,371 $ 6,829
Ratio to average net assets of:
Operating expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income 6.54% 6.88% 7.07% 5.99% 6.39%
Portfolio turnover 246% 232% 344% 121% 128%
</TABLE>
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------------------
Year Ended October 31,
1997 1996 1995 1994 1993
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 4.83
Income from investment operations
Net investment income 0.31(3) 0.31(3) 0.30(3) 0.27(3) 0.30(3)
Net realized and unrealized gain (loss) 0.15 0.17 0.13 (0.26) 0.08
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.46 0.48 0.43 0.01 0.38
---------- ---------- ---------- ---------- ----------
Less distributions
Dividends from net investment income (0.31) (0.31) (0.30) (0.27) (0.30)
Dividends from net realized gains -- -- -- (0.03) --
Tax return of capital -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Total distributions (0.31) (0.31) (0.30) (0.31) (0.30)
---------- ---------- ---------- ---------- ----------
Change in net asset value 0.15 0.17 0.13 (0.30) 0.08
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91
========== ========== ========== ========== ==========
Total return(1) 9.51% 10.36% 9.71% (0.03)% 8.02%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 10,318 $ 5,943 $ 4,659 $ 6,418 $ 3,968
Ratio to average net assets of:
Operating expenses 1.50% 1.50% 1.50% 1.45% 1.45%
Net investment income 6.05% 6.38% 6.59% 5.74% 5.79%
Portfolio turnover 246% 232% 344% 121% 128%
</TABLE>
(1) Maximum sales charges are not included in total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.06, $0.08, $0.08 and $0.09, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.04, $0.06, $0.08, $0.08 and $0.09, respectively.
See Notes to Financial Statements
8
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class C
------------------
From
Inception
10/1/97 to
10/31/97
------------------
<S> <C>
Net asset value, beginning of period $5.15
Income from investment operations
Net investment income 0.03 (2)
Net realized and unrealized gain (loss) (0.09)
-----------
Total from investment operations (0.06)
-----------
Less distributions
Dividends from net investment income (0.03)
Dividends from net realized gains --
Tax return of capital --
-----------
Total distributions (0.03)
-----------
Change in net asset value (0.09)
-----------
Net asset value, end of period $5.06
===========
Total return(1) (1.30)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $575
Ratio to average net assets of:
Operating expenses 1.25%(3)
Net investment income 5.51%(3)
Portfolio turnover 246%
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.04.
(3) Annualized
(4) Not annualized
See Notes to Financial Statements
9
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Multi-Sector Short Term Bond Fund (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's investment objective is to provide 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
offers Class A, Class B and Class C 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. Class C shares are sold with no sales
charge. All classes of shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. Income and expenses of the Fund are borne pro rata by
the holders of all classes of shares, except that each class bears distribution
expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. Security valuation:
Debt securities are valued on the basis of broker quotations or valuations
provided by a pricing service which utilizes information with respect to recent
sales, market transactions in comparable securities, quotations from dealers,
and various relationships between securities in determining value. Short-term
investments having a remaining maturity of 60 days or less are valued at
amortized cost which approximates market. All other securities and assets are
valued at their fair value as determined in good faith by or under the
direction of the 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. Realized gains and losses are determined
on the identified cost basis.
C. Income taxes:
It is the policy of the Fund to comply with the requirements of the
Internal Revenue Code (the "Code") applicable to regulated investment companies
and to distribute substantially all of its taxable income to its shareholders.
In addition, the Fund intends to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Code. Therefore, no
provision for federal income taxes or excise taxes has been made.
D. Distributions to shareholders:
Distributions to shareholders are declared and recorded daily. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of expiring capital loss carryforwards,
foreign currency gain/loss, and losses deferred due to wash sales and excise
tax regulations. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to paid in capital.
E. Foreign currency translation:
Foreign securities, other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the trade date. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement dates of a portfolio transaction is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates between the date income is
accrued and paid is treated as a gain or loss on foreign currency. The Fund
does not separate that portion of the results of operations arising from
changes in exchange rates and that portion arising from changes in the market
prices of securities.
F. Organization expense:
In 1992 the Fund incurred organizational expenses in the amount of
$82,967. The Fund has deferred these expenses and has amortized such expenses
on a straight line basis over five years from the date of commencement of
operations.
G. When-issued and delayed delivery transactions:
The Fund may engage in when-issued or delayed delivery transactions. The
Fund records when-issued securities on the trade date and maintains collateral
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
National Securities and Research Corporation, an indirect majority-owned
subsidiary of Phoenix Home Life Mutual
10
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 (Continued)
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%, 1.50% and 1.25% of the average
aggregate daily net asset value of Class A, Class B and Class C shares,
respectively. For the year ended October 31, 1997, the Adviser has reimbursed
the Fund $252,968 for such expenses.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of $8,311 for Class A shares and
deferred sales charges of $11,452 for Class B shares for the year ended October
31, 1997. In addition, the Fund pays PEPCO a distribution fee at an annual rate
of 0.25% for Class A shares, 0.75% for Class B shares and 0.50% for Class C
shares of the average daily net assets of the Fund. The Distribution Plan for
Class A shares provides for fees to be paid up to a maximum on an annual basis
of 0.30%; the Distributor has voluntarily agreed to limit the fee to 0.25%. The
Distributor has advised the Fund that of the total amount expensed for the year
ended October 31, 1997, $65,002 was earned by the Distributor, $36,364 was paid
to unaffiliated participants, and $12,544 was paid to W.S. Griffith, an
indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO received a fee for bookkeeping,
administration, and pricing services at an annual rate of 0.03% of the average
daily net assets of the Fund through December 31, 1996, and starting on January
1, 1997, at an annual rate of 0.05% of average daily net assets up to $100
million, 0.04% of average daily net assets of $100 million to $300 million,
0.03% of average daily net assets of $300 million through $500 million, and
0.015% of average daily net assets greater than $500 million; a minimum fee may
apply. PEPCO serves as the Fund's Transfer Agent with State Street Bank and
Trust as sub-transfer agent. For the year ended October 31, 1997, transfer
agent fees were $51,887 of which PEPCO retained $901 which is net of the fees
paid to State Street.
At October 31, 1997, PHL and affiliates held 28,048 Class A shares of the
Fund with a value of $141,922.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities, for
the year ended October 31, 1997, aggregated $86,025,460 and $68,718,211,
including $32,077,074 and $26,195,390, respectively, of U.S. Government and
agency securities.
4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risk than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts.
5. LOAN AGREEMENTS
The Fund may invest in direct debt instruments which are interests in
amounts owned by a corporate, governmental, or other borrower to lenders or
lending syndicates. The Fund's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from third
parties. A loan is often administered by a bank or other financial institution
(the lender) that acts as agent for all holders. The agent administers the
terms of the loan, as specified in the loan agreement. When investing in a loan
participation, the Fund has the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
loan agreement and only upon receipt by the lender of payments from the
borrower. The Fund generally has no right to enforce compliance with the terms
of the loan agreement with the borrower. As a result, the Fund may be subject
to the credit risk of both the borrower and the lender that is selling the loan
agreement. For loans which the Fund is a participant, the Fund may not sell
it's participation in the loan without the lender's prior consent. When the
Fund purchases assignments from lenders it acquires direct rights against the
borrower of the loan. Direct indebtedness of emerging countries involves a risk
that the government entities responsible for the repayment of the debt may be
unable, or unwilling to pay the principal and interest when due.
6. CAPITAL LOSS CARRYFORWARDS
For the year ended October 31, 1997, the Fund was able to utilize losses
deferred in the prior year against current year capital gains in the amount of
$36,672.
7. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Fund has recorded
several reclassifications in the capital accounts. These reclassifications have
no impact on the net asset value of the Fund and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of October 31, 1997,
the Fund increased undistributed net investment income by $38,903, decreased
accumulated net realized gain by $10,924 and decreased capital paid in on
shares of capital stock by $27,979.
This report is not authorized for distribution to prospective investors in the
Phoenix Multi-Sector Short Term Bond Fund unless preceded or accompanied by an
effective prospectus which includes information concerning the sales charge,
Fund's record and other pertinent information.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGOTYPE] Price Waterhouse LLP
To the Trustees and Shareholders of
Phoenix Multi-Sector Short Term Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments (except for bond ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix Multi-Sector Short Term Bond Fund (the "Fund") at October 31, 1997, and
the results of its operations, the changes in its net assets and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
December 12, 1997
12
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A: Financial Highlights
Included in Part B: Financial Statements and Notes thereto, and Report of
Independent Accountants included in the Annual Report
to Shareholders for the year ended October 31, 1997,
incorporated by reference.
(b) Exhibits:
<TABLE>
<S> <C>
1. Declaration of Trust as amended of the Registrant, filed via EDGAR with Post-Effective Amendment No. 6
on February 25, 1997, and 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 filed via EDGAR with Post-Effective Amendment No. 6 on February 25, 1997, and
incorporated by reference.
1.2 Amendment to Declaration of Trust changing name of Trust, filed via EDGAR with Post-effective
Amendment No. 5 on February 28, 1996, and incorporated by reference.
1.3 Amendment to Declaration of Trust establishing Class C Shares, filed via EDGAR with Post-Effective
Amendment No. 9 on February 25, 1998.
2. By-laws of the Registrant, filed via EDGAR with Post-Effective Amendment No. 6 on February 25, 1997,
and 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 filed via EDGAR with
Post-Effective Amendment No. 6 on February 25, 1997, and incorporated by reference.
5.1 Amendment to Management Agreement dated January 1, 1994, filed with Post-Effective Amendment No. 4
on February 27, 1995 and filed via EDGAR with Post-Effective Amendment No. 6 on February 25, 1997,
and incorporated by reference.
6.1 Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation ("Equity Planning")
dated November 19, 1997, filed herewith via EDGAR with Post-Effective Amendment No. 9 on February
25, 1998.
6.2 Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers, filed via EDGAR
herewith.
6.3 Form of Supplement to Phoenix Family of Funds Sales Agreement filed via EDGAR herewith.
6.4 Form of Financial Institution Sales Contract for the Phoenix Family of Funds filed via EDGAR herewith.
7. None.
8.1 Custodian Contract between Registrant and State Street Bank and Trust Company dated May 1, 1997, filed
herewith via EDGAR.
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 filed via
EDGAR with Post-Effective Amendment No. 6 on February 25, 1997, and incorporated by reference.
9.2 Sub-Transfer Agent Agreement between Phoenix Equity Planning Corporation and State Street Bank and
Trust Company filed via EDGAR herewith.
9.3 Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation dated November 19, 1997, filed via EDGAR herewith.
10. Opinion as to legality of the shares, filed with Pre-Effective Amendment No. 3 on July 6, 1992, filed via
EDGAR with Post-Effective Amendment No. 6 on February 25, 1997, and incorporated by reference.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
11. Consent of Independent Accountants filed herewith.
12. Not applicable.
13. None.
14. None.
15.1 Amended and Restated Distribution Plan for Class A Shares, filed herewith via EDGAR with Post-
Effective Amendment No. 9 on February 25, 1998, and incorporated by reference.
15.2 Amended and Restated Distribution Plan for Class B Shares, filed herewith via EDGAR with Post-Effective
Amendment No. 9 on February 25, 1998, and incorporated by reference.
15.3 Amended and Restated Distribution Plan for Class C Shares, filed herewith via EDGAR with Post-Effective
Amendment No. 9 on February 25, 1998.
16. Schedule for computation of yield and effective yield quotations, filed with Post-Effective Amendment No.
4 on February 27, 1995 and filed via EDGAR with Post-Effective Amendment No. 6 on February 25,
1997, and incorporated by reference.
17. Financial Data Schedule filed herewith and reflected on EDGAR as Exhibit 27.
18.1 Amended and Restated Rule 18f-3 Dual Distribution Plan effective November 1, 1997, filed herewith via
EDGAR with Post-Effective Amendment No. 9 on February 25, 1998.
19. Powers of attorney, filed via EDGAR with Post-Effective Amendment No. 6 on February 25, 1997, and
incorporated by reference.
</TABLE>
Item 25. Persons Controlled by or Under Common Control With Registrant
No person is controlled by, or under common control with, the Registrant.
Item 26. Number of Holders of Securities
As of December 31, 1997, the number of record holders of each class of
securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
---------------------------------------- ---------------
<S> <C>
Shares of Beneficial Interest--Class A 884
Shares of Beneficial Interest--Class B 578
Shares of Beneficial Interest--Class C 44
</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 Funds" 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 to the
Registration Statement.
For information as to the business, profession, vocation or employment of
a substantial nature of directors and officers of National Securities &
Research Corporation, the Adviser, reference is made to the Adviser's current
Form ADV (SEC File No. 801-8177) filed under the Investment Advisers Act of
1940 and incorporated herein by reference.
Item 29. Principal Underwriter
(a) Equity Planning also serves as the principal underwriter for the
following other registrants: Phoenix Strategic Allocation Fund, Inc., Phoenix
Series Fund, Phoenix Multi-Sector Fixed Income Fund, Inc., Phoenix
Multi-Portfolio Fund, Phoenix California Tax Exempt Bonds, Inc., Phoenix Income
and Growth Fund, Phoenix Worldwide Opportunities Fund, Phoenix Strategic Equity
Series Fund, Phoenix Equity Series Fund, Phoenix-Engemann Funds, Phoenix
Investment Trust 97, Phoenix Duff & Phelps Institutional Mutual Funds,
Phoenix-Aberdeen Series Fund, Phoenix Home Life Variable Universal Life
Account, Phoenix Home Life Variable Accumulation Account, PHL Variable
Accumulation Account, Phoenix Life and Annuity Variable Universal Life Account
and PHL Variable Separate Account MVA1.
(b) Directors and Executive Officers of Phoenix Equity Planning Corporation
are as follows:
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Distributor with Registrant
- ------------------------- --------------------------------------- -------------------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, Vice President
56 Prospect Street Infrastructure
P.O. Box 150480
Hartford, CT 06115-0480
Paul A. Atkins Senior Vice President and None
56 Prospect Street Sales Manager
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Senior Vice President and Vice President
100 Bright Meadow Blvd. Chief Financial Officer
P.O. Box 2200
Enfield, CT 06083-2200
John F. Sharry Managing Director, None
100 Bright Meadow Blvd. Mutual Fund Sales and Operations
P.O. Box 2200
Enfield, CT 06083-2200
G. Jeffrey Bohne Vice President, Secretary
101 Munson Street Mutual Fund
Greenfield, MA 01301 Customer Service
Eugene A. Charon Vice President and None
100 Bright Meadow Blvd. Controller
P.O. Box 2200
Enfield, CT 06083-2200
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Elizabeth Sadowinski Vice President, Administration None
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Counsel and Secretary Assistant Secretary
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 2200
Enfield, CT 06083-2200
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an affiliated
person of the Registrant or an affiliated person of such affiliated person,
directly or indirectly, from the Registrant during the Registrant's last fiscal
year.
C-3
<PAGE>
Item 30. Location of Accounts and Records
The account books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of the Fund, 100 Bright
Meadow Boulevard, Enfield, Connecticut 06083-1900; at the 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 06082-1900.
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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Hartford, and State of Connecticut on
the 25th day of February, 1998.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
ATTEST: /s/ Thomas N. Steenburg By: /s/ Philip R. McLoughlin
------------------------------- -----------------------------------
Thomas N. Steenburg Philip R. McLoughlin
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated, on the 25th day of February, 1998.
<TABLE>
<CAPTION>
Signature Title
- ------------------------------- -----------------------------------
<S> <C>
Trustee
- ----------------------------
Robert Chesek*
Trustee
- ----------------------------
E. Virgil Conway*
Treasurer (Principal Financial and
- ----------------------------
Accounting Officer)
Nancy G. Curtiss*
Trustee
- ----------------------------
Harry Dalzell-Payne*
Trustee
- ----------------------------
Francis E. Jeffries*
Trustee
- ----------------------------
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin President and Trustee (Principal
- ----------------------------
Executive Officer)
Philip R. McLoughlin
Trustee
- ----------------------------
Everett L. Morris*
Trustee
- ----------------------------
James M. Oates*
Trustee
- ----------------------------
Calvin J. Pedersen*
Trustee
- ----------------------------
Herbert Roth, Jr.*
Trustee
- ----------------------------
Richard E. Segerson*
Trustee
- ----------------------------
Lowell P. Weicker, Jr.*
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
Signature Title
- ------------------------------ ------
<S> <C>
By: /s/ Philip R. McLoughlin
-------------------------
Philip R. McLoughlin
</TABLE>
*Philip R. McLoughlin, Attorney-in-fact pursuant to powers of attorney
filed previously.
S-2
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
Amended and Restated Establishment and Designation
of Series and Classes of Shares of Beneficial
Interest, Par Value $0.01 Per Share
The undersigned, individually as Trustee of Phoenix Multi-Sector Short
Term Bond Fund, a Massachusetts business trust organized under a Declaration of
Trust dated February 20, 1992, as amended June 29, 1992, June 16, 1994 and March
14, 1996 (the "Trust"), and as attorney-in-fact for each of the other Trustees
of the Trust pursuant to a certain Delegation and Power of Attorney dated August
27, 1997, executed by each of such Trustees, a copy of which is attached hereto,
does hereby certify that at a duly held meeting of the Board of Trustees of the
Trust held August 27, 1997, at which a quorum was present, the Board of
Trustees, acting pursuant to ARTICLE V, Section 5.13 of said Declaration of
Trust for the purpose of establishing a new Class of Shares denominated "Phoenix
Multi-Sector Short Term Bond Fund Class C Shares" unanimously voted to amend
said Trust, effective August 27, 1997, by amending and restating the
Establishment and Designation of Series and Classes of Shares of Beneficial
Interest, Par Value $0.01 Per Share, as follows:
1. The Fund shall be designated as Phoenix Multi-Sector Short Term
Bond Fund, and each Class thereof shall be designated as follows:
Phoenix Multi-Sector Short Term Bond Fund Class A; Phoenix
Multi-Sector Short Term Bond Fund Class B; and Phoenix
Multi-Sector Short Term Bond Fund Class C.
2. The Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in
the Fund's then currently effective prospectus and registration
statement under the Securities Act of 1933. Each share of
beneficial interest of the Fund ("Share") shall be redeemable,
shall represent a pro rata beneficial interest in the assets
allocated to the Fund, and shall be entitled to receive a pro
rata share of net assets of the Fund upon liquidation of the
Fund, all as provided in the Declaration of Trust. The proceeds
of sales of Shares of the Fund, together with any income and gain
thereon, less any diminution or expenses thereof, shall
irrevocably belong to Fund, unless otherwise required by law.
3. Each Share of beneficial interest of the Fund shall be entitled
to one vote (or fraction thereof in respect of a fractional
share) on matters on which such Shares of the Fund shall be
entitled to vote. Shareholders of the Fund shall vote together as
a single class on any matter, except to the extent otherwise
required by the Investment Company Act of 1940 or when the
Trustees have determined that the
<PAGE>
matter affects only the interests of Shareholders of certain
Classes, in which case only the Shareholders of such Classes
shall be entitled to vote thereon. Any matter shall be deemed to
have been effectively acted upon with respect to the Classes if
acted upon as provided in Rule 18f-2 under the Act or any
successor rule and in the Declaration of Trust.
4. The liabilities of the Trust shall be allocated to the
above-referenced Fund, as set forth in Section 5.11 of the
Declaration of Trust, except as described below.
(a) Liabilities, expenses, costs, charges or reserves relating
to the distribution of, and other identified expenses that
should properly be allocated to the Shares of a particular
Class may be charged to and borne solely by such Class and
the bearing of expenses solely by a Class of Shares may be
appropriately reflected and cause differences in net asset
value attributable to and the dividend, redemption and
liquidation rights of, the Shares of different Classes.
(b) Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding
upon the Shareholder of all Classes for all purposes.
5. Shares of the Fund shall vary between the different Classes as to
rights of redemption and conversion rights, as set out in the
Fund's then current prospectus.
6. The Trustees (including any successor Trustees) shall have the
right at any time and from time to time to reallocate assets and
expenses or to change the designation of any Fund or Class
thereof now or hereafter created, or to otherwise change the
special and relative rights of any such Fund or Class, provided
that such change shall not adversely affect the rights of the
Shareholders of such Fund or Class.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of
August, 1997.
/s/ Philip R. McLoughlin
-------------------------------------------------
Philip R. McLoughlin, individually and as
attorney-in-fact for C. Duane Blinn, Robert
Chesek, E. Virgil Conway, Harry Dalzell-Payne,
Francis E. Jeffries, Leroy Keith, Jr., Everett L.
Morris, James M. Oates, Calvin J. Pedersen,
Philip R. Reynolds, Herbert Roth, Jr., Richard E.
Segerson and Lowell P. Weicker, Jr.
2
<PAGE>
DELEGATION AND POWER OF ATTORNEY
PHOENIX EQUITY SERIES FUND
PHOENIX-ABERDEEN SERIES FUND
THE PHOENIX EDGE SERIES FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX MULTI-PORTFOLIO FUND
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX SERIES FUND
PHOENIX STRATEGIC EQUITY SERIES FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
The undersigned, being all of the Trustees of Phoenix Equity Series Fund,
Phoenix-Aberdeen Series Fund, The Phoenix Edge Series Fund, Phoenix Income and
Growth Fund, Phoenix Multi-Portfolio Fund, Phoenix Multi-Sector Short Term Bond
Fund, Phoenix Series Fund, Phoenix Strategic Equity Series Fund, and Phoenix
Worldwide Opportunities Fund (sometimes hereafter collectively, the "Funds"),
other than Philip R. McLoughlin, do hereby declare, delegate and certify as
follows:
1. Pursuant to Section 2.2 of that certain Agreement and Declaration of Trust
dated May 30, 1997, establishing Phoenix Equity Series Fund, pursuant to
Section 2.2 of that certain Agreement and Declaration of Trust dated May
31, 1996, as amended, establishing Phoenix-Aberdeen Series Fund, pursuant
to Section 2.2 of that certain Agreement and Declaration of Trust dated
February 18, 1986, as amended, establishing The Big Edge Series Fund, now
known as The Phoenix Edge Series Fund, pursuant to Section 2.2 of that
certain Declaration of Trust of Phoenix-Chase Series Fund, as amended and
restated July 28, 1980, as further amended, now known as Phoenix Series
Fund, and Section 2.2 of that certain Agreement and Declaration of Trust
dated October 15, 1987, as amended, establishing the Phoenix
Multi-Portfolio Fund, the undersigned, and each of them, hereby appoints
PHILIP R. MCLOUGHLIN, his agent and attorney-in-fact for a period of one
(1) year from the date hereof, to execute any and all instruments including
specifically but without limitation amendments of either of said trust
instruments and appointments of trustee(s), provided that such action as
evidenced by such instrument shall have been adopted by requisite vote of
the Trustees and, where necessary, the Shareholders of such funds, such
vote or votes to be conclusively presumed by the execution of such
instrument by such attorney-in-fact.
2. Pursuant to Section 3.6 of that certain Declaration of Trust dated June 25,
1986, as amended, establishing National Total Income Fund, now known as
Phoenix Income and Growth Fund, pursuant to Section 3.6 of that certain
Declaration of Trust dated June 25, 1986, as amended, establishing National
Stock Fund, now known as Phoenix Strategic Equity Series Fund, and pursuant
<PAGE>
DELEGATION AND POWER OF ATTORNEY
AUGUST 27, 1997
to Section 2.5 of that certain Declaration of Trust dated February 20,
1992, as amended, establishing National Short-Term Income Series, now known
as Phoenix Multi-Sector Short Term Bond Fund, and pursuant to Section 2.5
of that certain Declaration of Trust of National Worldwide Opportunities
Fund dated November 4, 1991, as amended, now known as Phoenix Worldwide
Opportunities Fund, the undersigned, and each of them, hereby delegates to
and appoints PHILIP R. MCLOUGHLIN, his agent and attorney-in-fact for a
period of one (1) year from the date hereof, to execute any and all
instruments, including specifically but without limitation amendments of
each and every said trust instrument and appointments of trustee(s),
provided that such action as evidenced by such instrument shall have been
adopted by requisite vote of the Trustees and, where necessary, the
Shareholders of such funds, such vote or votes to be conclusively presumed
by the execution of such instrument by such attorney-in-fact.
3. The undersigned Trustees, and each of them, hereby further declare that a
photostatic, xerographic or other similar copy of this original instrument
shall be as effective as the original, and that, as to any such amendment
of any of the aforementioned trust agreements or declarations, such copy
shall be filed with such instrument of amendment in the records of the
Office of the Secretary of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, we have hereunto subscribed this Delegation and Power of
Attorney this 27th day of August, 1997.
/s/ C. Duane Blinn
- -----------------------
C. Duane Blinn
/s/ Robert Chesek
- -----------------------
Robert Chesek
/s/ E. Virgil Conway
- -----------------------
E. Virgil Conway
/s/ Harry Dalzell-Payne
- -----------------------
Harry Dalzell-Payne
/s/ Francis E. Jeffries
- -----------------------
Francis E. Jeffries
/s/ Leroy Keith, Jr.
- -----------------------
Leroy Keith, Jr.
/s/ Everett L. Morris
- -----------------------
Everett L. Morris
/s/ James M. Oates
- -----------------------
James M. Oates
/s/ Calvin J. Pedersen
- -----------------------
Calvin J. Pedersen
/s/ Philip R. Reynolds
- -----------------------
Philip R. Reynolds
<PAGE>
DELEGATION AND POWER OF ATTORNEY
AUGUST 27, 1997
/s/ Herbert Roth, Jr.
- -----------------------
Herbert Roth, Jr.
/s/ Richard E. Segerson
- -----------------------
Richard E. Segerson
/s/ Lowell P. Weicker, Jr.
- -----------------------
Lowell P. Weicker, Jr.
UNDERWRITING AGREEMENT
THIS AGREEMENT made as of this 19th day of November, 1997, by and
between Phoenix Multi-Sector Short Term Bond Fund, a Massachusetts business
trust having a place of business located at 101 Munson Street, Greenfield,
Massachusetts (the "Fund") and Phoenix Equity Planning Corporation, a
Connecticut corporation having a place of business located at 100 Bright Meadow
Boulevard, Enfield, Connecticut (the "Underwriter").
WITNESSETH THAT:
1. The Fund hereby grants to the Underwriter the right to purchase shares of
beneficial interest of each class of each series of the Fund established and
designated as of the date hereof and of any additional series and classes
thereof which the Board of Directors or Board of Trustees, as applicable
("Trustees") may establish and designate during the term of this Agreement
(called the "Series" and "Classes", respectively) and to resell shares of
various Classes, as applicable, of each Series (collectively called the
"Shares") as principal and not as agent. The Underwriter accepts such
appointment and agrees to render the services described in this Agreement for
the compensation herein provided.
2. The Underwriter's right to purchase Shares shall be exclusive except that the
terms of this Agreement shall not apply to Shares issued or transferred:
a) pursuant to an offer of exchange exempted under Section 22(d)
of the Investment Company Act of 1940, as amended (the "Act")
by reason of the fact that said offer is permitted by Section
11 of the Act, including any offer made pursuant to clause (1)
or (2) of Section 11(b);
b) upon the sale to a registered unit investment trust which is
the issuer of periodic payment plan certificates the net
proceeds of which are invested in redeemable securities;
c) pursuant to an offer made solely to all registered holders of
Shares, or all registered holders of Shares of any Series,
proportionate to their holdings or proportionate to any cash
distribution made to them by the Fund (subject to appropriate
qualifications designed solely to avoid issuance of fractional
securities);
d) in connection with any merger or consolidation of the Fund or
of any Series with any other investment company or the
acquisition by the Fund, by purchase or otherwise, of any
other investment company;
<PAGE>
e) pursuant to sales exempted from Section 22(d) of the Act, by
rule or regulation or order of the Securities and Exchange
Commission as provided in the then current registration
statement of the Fund; or
f) in connection with the reinvestment by Fund shareholders of
dividend and capital gains distributions.
3. The "Net Asset Value" and the "Public Offering Price" of the Shares as
referred to in this Agreement shall be computed in accordance with the
provisions of the then current registration statement of the Fund. The
Underwriter shall be notified promptly by the Fund of such computations.
4. The Underwriter has and shall enter into written sales agreements with
broker/dealers ("dealers") and with banks as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, (Exchange Act) that are not
required to register as a broker/dealer under the Exchange Act or the
regulations thereunder ("Banks"). Such sales agreements shall provide that
dealers or Banks shall use their best efforts to promote the sale of Shares.
Such sales agreements shall include such terms and conditions as Underwriter may
determine not inconsistent with this Agreement; provided, however, that such
sales agreements shall specify a) that the dealer is registered as a
broker/dealer under the Exchange Act and a member of the National Association of
Securities Dealers, Inc. or, in the alternative, that the Bank is exempt from
broker/dealer registration under the Exchange Act; and b) that such dealers and
Banks agree that they will comply with all applicable state, and federal laws
and the rules and regulations of applicable regulatory agencies.
5. Each day the Underwriter shall have the right to purchase from the Fund, as
principal, the amount of Shares needed to fill unconditional orders for such
Shares received by the Underwriter from dealers, Banks, or investors, but no
more than the Shares needed, at a price equal to the Net Asset Value of the
Shares. Any purchase of Shares by the Underwriter under this Agreement shall be
subject to reasonable adjustment for clerical errors, delays and errors of
transmission and cancellation of orders.
6. With respect to transactions other than with dealers or Banks, the
Underwriter will sell Shares only at the Public Offering Price then in effect,
except to the extent that sales at less than the Public Offering Price may be
allowed by the Act, any rule or regulation promulgated thereunder or by order of
the Securities and Exchange Commission, provided, however, that any such sales
at less than the Public Offering Price shall be consistent with the terms of the
then current registration statement of the Fund. The Underwriter will sell at
Net Asset Value Shares of any Classes which are offered by the then current
registration statement or prospectus of the Fund for sale at such Net Asset
Value or at Net Asset Value with a contingent deferred sales charge ("CDSC
Shares"). The Underwriter shall receive from the Fund all contingent deferred
sales charges applied on redemptions of CDSC Shares.
2
<PAGE>
7. Sales at a discount from the Public Offering Price shall be made in
accordance with the terms and conditions of the terms of the current
registration statement of the Fund allowing such discounts. Such discounts shall
not exceed the difference between the Net Asset Value and the Public Offering
Price; however, the Underwriter may offer compensation in excess of the
difference between the Net Asset Value and the Public Offering Price, at its
discretion and from its own profits and resources, and only as described in the
current registration statement of the Fund. With respect to sales of CDSC
Shares, the Underwriter, in accordance with the terms of the current
registration statement of the Fund, shall pay dealers a commission on such sales
from its own profits and resources.
8. As reimbursement for expenditures made in connection with providing certain
distribution-related services, the Underwriter may receive from the Fund a
distribution service fee under the terms and conditions set forth in the Fund's
distribution plan adopted under Rule 12b-1 under the Investment Company Act of
1940, as amended, as the plan may be amended from time to time and subject to
any further limitations on such fees as the Trustees may impose. The Underwriter
may receive from the Fund a service fee to be retained by the Underwriter as
compensation for providing services to shareholders of the Fund or to be paid to
dealers and Banks for providing services to their clients who are also
shareholders of the Fund.
9. The Fund shall furnish the Underwriter with copies of its organizational
documents, as amended from time to time. The Fund shall also furnish the
Underwriter with any other documents of the Fund which will assist the
Underwriter in the performance of its duties hereunder.
10. The Underwriter agrees to use its best efforts (in states where it may
lawfully do so) to obtain from investors unconditional orders for Shares
authorized for issue by the Fund and registered under applicable Federal
securities laws, and, so long as it does so, nothing herein contained shall
prevent the Underwriter from entering into similar arrangements with other
registered investment companies. The Underwriter may, in the exercise of its
discretion, refuse to accept orders for Shares from any person.
11. Upon receipt by the Fund of a purchase order from the Underwriter,
accompanied by proper delivery instructions, the Fund shall, as promptly as
practicable thereafter, cause evidence of ownership of Shares to be delivered as
indicated in such purchase order. Payment for such Shares shall be made by the
Underwriter to the Fund in a manner acceptable to the Fund, provided that the
Underwriter shall pay for such Shares no later than the third business day after
the Underwriter shall have contracted to purchase such shares.
12. In connection with offering for sale and selling Shares, the Fund authorizes
the Underwriter to give only such information and to make only such statements
or representations as are contained in the then current registration statement
of the Fund. The Underwriter shall be responsible for the approval and filing of
sales material as required under SEC and NASD regulations.
3
<PAGE>
13. The Fund agrees to pay the following expenses:
a) the cost of mailing stock certificates representing Shares;
b) fees and expenses (including legal expenses) of registering
and maintaining registrations of the Fund and of each Series
and Class with the Securities and Exchange Commission
including the preparation and printing of registration
statements and prospectuses for filing with said Commission;
c) fees and expenses (including legal expenses) incurred in
registering and qualifying Shares for sale with any state
regulatory agency and fees and expenses of maintaining,
renewing, increasing or amending such registrations and
qualifications;
d) the expense of any issue or transfer taxes upon the sale of
Shares to the Underwriter by the Fund;
e) the cost of preparing and distributing reports and notices to
shareholders; and
f) fees and expenses of the transfer agent, including the cost of
preparing and mailing notices to shareholders pertaining to
transactions with respect to such shareholders accounts.
14. The Underwriter agrees to pay the following expenses:
a) all expenses of printing prospectuses and statements of
additional information used in connection with the sale of
Shares and printing and preparing all other sales literature;
b) all fees and expenses in connection with the qualification of
the Underwriter as a dealer in the various states and
countries;
c) the expense of any stock transfer tax required in connection
with the sale of Shares by the Underwriter as principal to
dealers or to investors; and
d) all other expenses in connection with offering for sale and
the sale of Shares which have not been herein specifically
allocated to the Fund.
15. The Fund hereby appoints the Underwriter its agent to receive requests to
accept the Fund's offer to repurchase Shares upon such terms and conditions as
may be described in the Fund's then current registration statement. The agency
granted in this paragraph 15 is terminable at the discretion of the Fund. As
compensation for acting as such agent and as part of the
4
<PAGE>
consideration for acting as underwriter, Underwriter shall receive from the Fund
all contingent deferred sales charges imposed upon the redemption of Shares.
Whether and to what extent a contingent deferred sales charge will be imposed
shall be determined in accordance with, and in the manner set forth in, the
Fund's prospectus.
16. The Fund agrees to indemnify and hold harmless the Underwriter, its officers
and directors and each person, if any, who controls the Underwriter within the
meaning of section 15 of the Securities Act of 1933, as amended, against any
losses, claims, damages, liabilities and expenses (including the cost of any
legal fees incurred in connection therewith) which the Underwriter, its
officers, directors or any such controlling person may incur under said Act,
under any other statute, at common law or otherwise, arising out of or based
upon
a) any untrue statement or alleged untrue statement of a material
fact contained in the Fund's registration statement or
prospectus (including amendments and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement or
prospectus or necessary to make the statements in either not
misleading, provided, however, that insofar as losses, claims,
damages, liabilities or expenses arise out of or are based
upon any such untrue statement or omission or alleged untrue
statement or omission made in reliance and in conformity with
information furnished to the Fund by the Underwriter for use
in the Fund's registration statement or prospectus, such
indemnification is not applicable. In no case shall the Fund
indemnify the Underwriter or its controlling persons as to any
amounts incurred for any liability arising out of or based
upon any action for which the Underwriter, its officers and
directors or any controlling person would otherwise be subject
to liability by reason of willful misfeasance, bad faith, or
gross negligence in the performance of its duties or by reason
of the reckless disregard of its obligations and duties under
this Agreement.
17. The Underwriter agrees to indemnify and hold harmless the Fund, its officers
and trustees and each person, if any, who controls the Fund within the meaning
of Section 15 of the Securities Act of 1933, as amended, against any losses,
claims, damages, liabilities and expenses (including the cost of any legal fees
incurred in connection therewith) which the Fund, its officers, trustees or any
such controlling person may incur under said Act, under any other statute, at
common law or otherwise arising out of the acquisition of any shares by any
person which
a) may be based upon any wrongful act by the Underwriter or any
of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's
registration statement, prospectus (including
5
<PAGE>
amendments and supplements thereto) or sales material, or any
omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made
in reliance upon information furnished or confirmed in writing
to the Fund by the Underwriter.
18. It is understood that:
a) trustees, officers, employees, agents and shareholders of the
Fund are or may be interested persons, as that term is defined
in the Act ("Interested Persons"), of the Underwriter as
directors, officers, stockholders or otherwise;
b) directors, officers, employees, agents and stockholders of the
Underwriter are or may be Interested Persons of the Fund as
trustees, officers, shareholders or otherwise;
c) the Underwriter may be an Interested Person of the Fund as
shareholder or otherwise; and
d) the existence of any such dual interest shall not offset the
validity hereof or of any transactions hereunder.
19. The Fund may terminate this Agreement by 60 days written notice to the
Underwriter at any time, without the payment of any penalty, by vote of the
Trustees or by a vote of a majority of the outstanding voting securities, as
that term is defined in the Act, of the Fund. The Underwriter may terminate this
Agreement by 60 days written notice to the Fund, without the payment of any
penalty. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in the Act.
20. Subject to prior termination as provided in paragraph 19, this Agreement
shall continue in force for one year from the date of execution and from year to
year thereafter so long as the continuance after such one year period shall be
specifically approved at least annually by vote of the Trustees, or by a vote of
a majority of the appropriate class of outstanding voting securities, as that
term is defined in the Act, of the Fund. Additionally, each annual renewal of
this Agreement must be approved by the vote of a majority of the Trustees who
are not parties to the Agreement or Interested Persons of any such party, cast
in person at a meeting of the Trustees called for the purpose of voting on such
approval.
21. It is expressly agreed that the obligations of the Fund hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Fund personally, but bind only the trust property of the Fund,
as provided in the Declaration of Trust. The execution and delivery of this
Agreement by the President of the Fund has been authorized by the Trustees
acting as such, and neither such execution and delivery by such officer nor such
6
<PAGE>
authorization by such Trustees shall be deemed to have been made by any of them
individually or be binding upon or impose any liability on any of them
personally, but shall bind only the trust property of the Fund as provided in
the Declaration of Trust. The Declaration of Trust is on file with the Secretary
of the Commonwealth of Massachusetts.
22. This Agreement shall become effective upon the date first set forth above.
This Agreement shall be governed by the laws of the State of Connecticut and
shall be binding on the successors and assigns of the parties to the extend
permitted by law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX MULTI-SECTOR
SHORT TERM BOND FUND
By: /s/ Philip R. McLoughlin
----------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ David R. Pepin
----------------------------
David R. Pepin
Executive Vice President
[logo]PHOENIX Phoenix Funds
DUFF&PHELPS Sales Agreement
- --------------------------------------------------------------------------------
PHOENIX EQUITY PLANNING CORPORATION
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, Connecticut 06083-2200
Dealer Name:
Address:
Phoenix Equity Planning Corporation ("PEPCO", "we", "us", or "our") invites you
to participate in the sale and distribution of shares of registered investment
companies (which shall collectively be referred to hereinafter as the "Funds")
for which we are national distributor or principal underwriter, and which may be
listed in Annex A hereto which such Annex may be amended by us from time to
time. Upon acceptance of this agreement by PEPCO, you may offer and sell shares
of each of the Funds (hereafter "Shares") subject, however, to the terms and
conditions hereof including our right to suspend or cease the sale of such
shares. For the purposes hereof, the above referenced dealer shall be referred
to as "you".
1. You understand and agree that in all sales of Shares to the public, you
shall act as dealer for your own account. All purchase orders and
applications are subject to acceptance or rejection by us in our sole
discretion and are effective only upon confirmation by us. Each purchase
will be deemed to have been consummated in our principal office subject to
our acceptance and effective only upon confirmation to you by us.
2. You agree that all purchases of Shares by you shall be made only for the
purpose of covering purchase orders already received from your customers
(who may be any person other than a securities dealer or broker) or for
your own bona-fide investment.
3. You shall offer and sell Shares pursuant to this agreement for the purpose
of covering purchase orders of your customers, to the extent applicable,
(a) at the current public offering price ("Offering Price") for Class A
Shares or (b) at the Net Asset Value for Class B shares as set forth in the
current prospectus of each of the funds. The offer and sale of Class B
Shares by you is subject to Annex B hereto, "Compliance Standards for the
Sale of the Phoenix Funds Under Their Alternative Purchase Arrangements".
4. You shall pay us for Shares purchased within three (3) business days of the
date of our confirmation to you of such purchase or within such time as
required by applicable rule or law. The purchase price shall be (a) the
Offering Price, less only the applicable dealer discount (Dealer Discount)
for Class A Shares, if applicable, or (b) the Net Asset Value, less only
the applicable sales commission (Sales Commission) for Class B Shares, if
applicable, as set forth in the current prospectus at the time the purchase
is received by us. We have the right, without notice, to cancel any order
for which payment of good and sufficient funds has not been received by us
as provided in this paragraph, in which case you may be held responsible
for any loss suffered resulting from your failure to make payment as
aforesaid.
5. You understand and agree that any Dealer Discount, Sales Commission or fee
is subject to change from time to time without prior notice. Any orders
placed after the effective date of any such change shall be subject to the
Dealer Discount or Sales Commission in effect at the time such order is
received by us.
6. You understand and agree that Shares purchased by you under this Agreement
will not be delivered until payment of good and sufficient funds has been
received by us. Delivery of Shares will be made by credit to a shareholder
open account unless delivery of certificates is specified in the purchase
order. In order to avoid unnecessary delay, it is understood that, at your
request, any Shares resold by you to one of your customers will be
delivered (whether by credit to a shareholder open account or by delivery
of certificates) in the name of your customer.
<PAGE>
7. You understand that on all purchases of Shares to which the terms of this
Agreement are applicable by a shareholder for whom you are dealer of
record, we will pay you an amount equal to the Dealer Discount, Sales
Commission or fees which would have been paid to you with respect to such
Shares if such Shares had been purchased through you. You understand and
agree that the dealer of record for this purpose shall be the dealer
through whom such shareholder most recently purchased Shares of such fund,
unless the shareholder or you have instructed us otherwise. You understand
that all amounts payable to you under this paragraph and currently payable
under this agreement will be paid as of the end of the month unless
specified otherwise for the total amount of Shares to which this paragraph
is applicable but may be paid more frequently as we may determine in our
discretion. Your request for Dealer Discount or Sales Commission reclaims
will be considered if adequate verification and documentation of the
purchase in question is supplied to us, and the reclaim is requested within
three years of such purchase.
8. We appoint the transfer agent (or identified sub-transfer agent) for each
of the Funds as our agent to execute the purchase transaction of Shares and
to confirm such purchases to your customers on your behalf, and you
guarantee the legal capacity of your customers so purchasing such Shares.
You further understand that if a customer's account is established without
the customer signing the application form, you hereby represent that the
instructions relating to the registration and shareholder options selected
(whether on the application form, in some other document or orally) are in
accordance with the customer's instructions and you agree to indemnify the
Funds, the transfer agent (or identified sub-transfer agent) and us for any
loss or liability resulting from acting upon such instructions.
9. Upon the purchase of Class A Shares pursuant to a Letter of Intent, you
will promptly return to us any excess of the Dealer Discount previously
allowed or paid to you over that allowable in respect to such larger
purchases.
10. Unless at the time of transmitting a purchase order you advise us to the
contrary, we may consider that the investor owns no other Shares and may
further assume that the investor is not entitled to any lower sales charge
than that accorded to a single transaction in the amount of the purchase
order, as set forth in the current prospectus.
11. You understand and agree that if any Shares purchased by you under the
terms of this Agreement are, within seven (7) business days after the date
of our confirmation to you of the original purchase order for such Shares,
repurchased by us as agent for such fund or are tendered to such fund for
redemption, you shall forfeit the right to, and shall promptly pay over to
us the amount of any Dealer Discount or Sales Commission allowed to you
with respect to such Shares. We will notify you of such repurchase or
redemption within ten (10) days of the date upon which certificates are
delivered to us or to such fund or the date upon which the holder of Shares
held in a shareholder open account places or causes to be placed with us or
with such fund an order to have such shares repurchased or redeemed.
12. You agree that, in the case of any repurchase of any Shares made more than
seven (7) business days after confirmation by us of any purchase of such
Shares, except in the case of Shares purchased from you by us for your own
bona fide investment, you will act only as agent for the holders of such
Shares and will place the orders for repurchase only with us. It is
understood that you may charge the holder of such Shares a fair commission
for handling the transaction.
13. Our obligations to you under this Agreement are subject to all the
provisions of the respective distribution agreements entered into between
us and each of the Funds. You understand and agree that in performing your
services under this agreement you are acting in the capacity of an
independent contractor, and we are in no way responsible for the manner of
your performance or for any of your acts or omissions in connection
therewith. Nothing in the Agreement shall be construed to constitute you or
any of your agents, employees, or representatives as our agent, partner or
employee, or the agent, partner of employee of any of the Funds.
In connection with the sale and distribution of shares of Phoenix Funds,
you agree to indemnify and hold us and our affiliates, employees, and/or
officers harmless from any damage or expense as a result of (a) the
negligence, misconduct or wrongful act by you or any employee,
representative, or agent of yours and/or (b) any actual or alleged
violation of any securities laws, regulations or orders. Any indebtedness
or obligation of yours to us whether arising hereunder or otherwise, and
any liabilities incurred or moneys paid by us to any person as a result of
any misrepresentation, wrongful or unauthorized act or omission, negligence
of, or failure of you or your employees, representatives or agents to
comply with the Sales Agreement, shall be set off against any compensation
payable under this agreement. Any differential between such expenses and
compensation payable hereunder shall be payable to us upon demand. The
terms of this provision shall not be impaired by the termination of this
agreement.
In connection with the sale and distribution of shares of Phoenix Funds, we
agree to indemnify and hold you, harmless from any damage or expense on
account of the gross and willful negligence, misconduct or wrongful act of
us or any employee, representative, or agent of ours which arises out of or
is based upon any untrue statement or alleged untrue statement of material
fact, or the omission or alleged omission of a material fact in: (i) any
registration statement, including any prospectus or any post-effective
amendment thereto; or (ii) any material prepared and/or supplied by us for
use in conjunction with the offer or sale of Phoenix Funds; or (iii) any
state registration or other document filed in any state or jurisdiction in
order to qualify any Fund under the securities laws of such state or
jurisdiction. The terms of this provision shall not be impaired by the
termination of this agreement.
<PAGE>
14. We will supply you with reasonable quantities of the current prospectus,
periodic reports to shareholders, and sales materials for each of the
Funds. You agree not to use any other advertising or sales material
relating to the sale of shares of any of the Funds unless such other
advertising or sales material is pre-approved in writing by us.
15. You agree to offer and sell Shares only in accordance with the terms and
conditions of the then current prospectus of each of the Funds and subject
to the provisions of this Agreement, and you will make no representations
not contained in any such prospectus or any authorized supplemental sales
material supplied by us. You agree to use your best efforts in the
development and promotion of sales of the Shares covered by this Agreement,
and agree to be responsible for the proper instruction, training and
supervision of all sales representatives employed by you in order that such
Shares will be offered in accordance with the terms and conditions of this
Agreement and all applicable laws, rules and regulations. All expenses
incurred by you in connection with your activities under this Agreement
shall be borne by you. In consideration for the extension of the right to
exercise telephone exchange and redemption privileges to you and your
registered representatives, you agree to bear the risk of any loss
resulting from any unauthorized telephone exchange or redemption
instructions from you or your registered representatives. In the event we
determine to refund any amounts paid by any investor by reason of such
violation on your part, you shall forfeit the right to, and pay over to us,
the amount of any Dealer Discount or Sales Commission allowed to you with
respect to the transaction for which the refund is made.
16. You represent that you are properly registered as a broker or dealer under
the Securities and Exchange Act of 1934 and are member of the National
Association of Securities Dealers, Inc. (NASD) and agree to maintain
membership in the NASD or in the alternative, that you are a foreign dealer
not eligible for membership in the NASD. You agree to notify us promptly of
any change, termination or suspension of the foregoing status. You agree to
abide by all the rules and regulations of the NASD including Section 26 of
Article III of the Rules of Fair Practice, which is incorporated herein by
reference as if set forth in full. You further agree to comply with all
applicable state and Federal laws and the rules and regulations of
applicable regulatory agencies. You further agree that you will not sell,
or offer for sale, Shares in any jurisdiction in which such Shares have not
been duly registered or qualified for sale. You agree to promptly notify us
with respect to (a) the initiation and disposition of any formal
disciplinary action by the NASD or any other agency or instrumentality
having jurisdiction with respect to the subject matter hereof against you
or any of your employees or agents; (b) the issuance of any form of
deficiency notice by the NASD or any such agency regarding your training,
supervision or sales practices; and (c) the effectuation of any consensual
order with respect thereto.
17. Either party may terminate this agreement for any reason by written or
electronic notice to the other party which termination shall become
effective fifteen (15) days after the date of mailing or electronically
transmitting such notice to the other party. We may also terminate this
agreement for cause or as a result of a violation by you, as determined by
us in our discretion, of any of the provisions of this Agreement, said
termination to be effective on the date of mailing written or transmitting
electronic notice to you of the same. Without limiting the generality of
the foregoing, your own expulsion from the NASD will automatically
terminate this Agreement without notice. Your suspension from the NASD or
violation of applicable state or Federal laws or rules and regulations of
applicable regulatory agencies will terminate this Agreement effective upon
the date of our mailing written notice or transmitting electronic notice to
you of such termination. Our failure to terminate this Agreement for any
cause shall not constitute a waiver of our right to so terminate at a later
date.
18. All communications and notices to you or us shall be sent to the addresses
set forth at the beginning of this Agreement or to such other address as
may be specified in writing from time to time.
19. This agreement shall become effective upon the date of its acceptance by us
as set forth herein. This agreement may be amended by PEPCO from time to
time. This Agreement and all rights and obligations of the parties
hereunder shall be governed by and construed under the laws of the State of
Connecticut. This agreement is not assignable or transferable, except that
we may assign or transfer this agreement to any successor distributor of
the Shares described herein.
ACCEPTED ON BEHALF OF ACCEPTED ON BEHALF OF
PHOENIX EQUITY PLANNING DEALER FIRM:
CORPORATION:
Date ______________________________ Date __________________________________
By /s/ John F. Sharry By
________________________________ ____________________________________
Print Name John F. Sharry Print Name
_________________________ ____________________________
Managing Director, Retail Sales
Print Title _______________________ Print Title ___________________________
NASD CRD Number _______________________
<PAGE>
[logo]PHOENIX Amended Annex A, Dealer Agreement with
DUFF&PHELPS Phoenix Equity Planning Corporation, Nov. 5, 1997
- --------------------------------------------------------------------------------
I. Phoenix Family of Funds
- --------------------------------------------------------------------------------
Phoenix Series Fund
Balanced Fund Series
Convertible Fund Series
Growth Fund Series
Aggressive Growth Fund Series
High Yield Fund Series
Money Market Fund Series
U.S. Government Securities Fund Series
Phoenix-Aberdeen Series Fund
Aberdeen New Asia Fund
Aberdeen Global Small Cap Fund
Phoenix Multi-Portfolio Fund
Tax-Exempt Bond Portfolio
Mid Cap Portfolio
International Portfolio
Real Estate Securities Portfolio
Emerging Markets Bond Portfolio
Phoenix Strategic Equity Series Fund
Equity Opportunities Fund
Strategic Theme Fund
Small Cap Fund
Phoenix Equity Series Fund
Core Equity Fund
Growth and Income Fund
Phoenix California Tax Exempt Bonds, Inc.
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Worldwide Opportunities Fund
Phoenix Strategic Allocation Fund, Inc.
Phoenix Income and Growth Fund
Phoenix Value Equity Fund
Phoenix Small Cap Value Fund
(effective 11-20-97)
- --------------------------------------------------------------------------------
Equity Planning may sponsor, to all qualifying dealers, on non-discriminatory
basis, sales contests, training and educational meetings and provide to all
qualifying broker/dealers, from its own profits and resources, additional
compensation in the form of trips, merchandise or expense reimbursement. Brokers
or dealers other than Equity Planning may also make customary additional charges
for their services in effecting purchases, if they notify the Fund of their
intention to do so. Applicable waivers of Class A sales loads and Class B
contingent deferred sales charges are described in the prospectus.
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares (Except Multi-Sector Short Term Multi-Sector Short Term
Bond Fund & Money Market) Bond Fund Class A Shares
Dealer Discount Dealer Discount
Sales Charge or Agency Fee Sales Charge or Agency Fee
Amount of as Percentage of as Percentage of as Percentage of as Percentage of
Transaction Offering Price Offering Price Offering Price Offering Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.25% 2.25% 2.00%
- -------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.50 4.00 1.25 1.00
- -------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.50 3.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 3.00 2.75 1.00 1.00
- -------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00 1.75 0.75 0.75
- -------------------------------------------------------------------------------------------------------------------------------
$1,000,000 or more None None None None
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Shares of the Money Market Series are offered to the public at their constant
net asset value of $1.00 per share with no sales charge on Class A shares.
Finders Fee: In connection with Class A Share purchases of $1,000,000 or more
(or subsequent purchases in any amount), Equity Planning may pay broker/dealers,
from its own profits and resources, a percentage of the net asset value of
shares sold (excluding Money Market shares) as set forth in the table below. If
part or all of such investment, is subsequently redeemed within one year of the
investment date, the broker/dealer will refund to Equity Planning any such
amounts paid with respect to the investment.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchase Amount $1,000,000 to $3,000,000 $3,000,001 to $6,000,000 $6,000,001 or more
- -------------------------------------------------------------------------------------------------------------------------------
Payment to Broker/Dealers 1% 0.50 of 1% 0.25 of 1%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*In the case of accounts held in the name of qualified employees, 1% is paid on
the first $1 million.
Trail: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of Class A shares sold by such broker/dealers (except
Money Market Series) and remaining outstanding on the Funds' books during the
period in which the fee is calculated. Dealers must have an aggregate value of
$50,000 or more in one Fund to qualify for payment in that Fund.
<PAGE>
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Shares
(Except Multi-Sector Short Term Bond Fund) Multi-Sector Short Term Bond Fund Class B
<S> <C>
Sales Commission 4.00% Sales Commission 2.00%
</TABLE>
Broker/Dealer firms maintaining house/omnibus accounts, upon redemption of a
customer account within the time frames specified below, shall forward to Equity
Planning the indicated contingent deferred sales charge.
<TABLE>
<CAPTION>
Years Since Purchase Contingent Deferred Contingent Deferred
Sales Charges Sales Charges
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First 5.00% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------
Second 4.00 1.50
- ---------------------------------------------------------------------------------------------------------------------------
Third 3.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------
Fourth and Fifth 2.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------
Sixth 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Trail: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of shares sold by such broker/dealers (except Money Market
Series) and remaining outstanding on the Funds' books during the period in which
the fee is calculated, commencing one year after the investment date. Dealers
must have an aggregate value of $50,000 or more in one Fund to qualify for
payment in that Fund.
- --------------------------------------------------------------------------------
Class C Shares - Multi-Sector Short Term Bond Fund Only
- --------------------------------------------------------------------------------
Trail: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
Finders Fee:
In connection with Class C Share purchases of $250,000 or more (or subsequent
purchases in any amount) excluding purchases by qualified employee benefit plans
with at least 100 eligible employees, Equity Planning may pay broker-dealers,
from its own resources, an amount equal to 0.50% of purchases above $250,000
but under $3 million plus 0.25% on purchases in excess of $3 million.
If all or part of the investment is subsequently redeemed, except for exchanges
or purchases of other Phoenix funds, within one year of the investment date, the
broker-dealer will refund to the Distributor such amount paid with respect to
the investment.
- --------------------------------------------------------------------------------
Class C Shares - Available only for the Funds listed below:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Core Equity Fund Multi-Sector Fixed Income Fund Value Equity Fund
Growth and Income Fund Strategic Theme Fund Small Cap Value Fund
(effective 11-20-97)
</TABLE>
Sales Commission: 1%. Contingent deferred sales charge: 1% for one year from the
date of each purchase. Broker/Dealer firms maintaining house/omnibus accounts,
upon redemption of a customer account within one year of purchase date, shall
forward to Equity Planning the indicated contingent deferred sales charge.
Trail and Service Fee: Equity Planning intends to pay a fee after the first year
to qualifying broker/dealer firms at the equivalent of 0.75% annually, and a
Service Fee at the equivalent of 0.25% annually, based on the average daily net
asset value of shares sold by such broker/dealers and remaining outstanding on
the Funds' books during the period in which the fee is calculated. Dealers must
have an aggregate value of $50,000 or more in the Fund to qualify for payment.
<PAGE>
- --------------------------------------------------------------------------------
Class M Shares - Available only for the Funds listed below:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Core Equity Fund Multi-Sector Fixed Income Fund Value Equity Fund
Growth and Income Fund Strategic Theme Fund Small Cap Value Fund
(effective 11-20-97)
</TABLE>
<TABLE>
<CAPTION>
Dealer Discount
Sales Charge or Agency Fee
Amount of as Percentage of as Percentage of
Offering Price Offering Price Offering Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 3.50% 3.00%
- ----------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 2.50 2.00
- ----------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 1.50 1.00
- ----------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 1.00 1.00
- ----------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 None None
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Trail: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
- --------------------------------------------------------------------------------
II. A. Phoenix Duff & Phelps Institutional Mutual Funds
- --------------------------------------------------------------------------------
Balanced Portfolio Growth Stock Portfolio
Enhanced Reserves Portfolio Money Market Portfolio
Managed Bond Portfolio U.S. Government Securities Portfolio
Finder's Fee: Equity Planning may pay broker/dealers, from its own profits and
resources, a percentage of the net asset value of Class X and Class Y shares
sold as set forth in the table below. If part of any investment is subsequently
redeemed within one year of the investment date, the broker/dealer will refund
to Equity Planning any such amounts paid with respect to the investment.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchase Amount 0 to $5,000,000 $5,000,001 to $10,000,000 $10,000,001 or more
- -----------------------------------------------------------------------------------------------------------------------------------
Payment to Broker/Dealers 0.50% 0.25% 0.10%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Trail: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold (except Money Market Portfolio) by
such broker/dealers and remaining outstanding on the Funds' books during the
period in which the fee is calculated, subject to future amendment or
termination.
- --------------------------------------------------------------------------------
II. B. Phoenix Duff & Phelps Institutional Mutual Funds
- --------------------------------------------------------------------------------
Phoenix Real Estate Equity Securities Portfolio
Trail: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sales Promotion:
- --------------------------------------------------------------------------------
In connection with net purchases of any combination of classes of eligible Funds
between October 1, 1997 and December 31, 1997, Equity Planning may pay
participating broker/dealers, from its profits and resources, an additional
dealer discount or sales commission equal to 0.50% of the purchase price. This
promotion will not apply to shares acquired through non-commissionable
exchanges.
Eligible Funds:
Phoenix Value Equity Fund Phoenix Small Cap Value Fund
(effective 11-20-97)
Phoenix-Engemann Funds:
Growth Fund Nifty Fifty Fund
Balanced Return Fund Global Growth Fund
Small & Mid-Cap Growth Fund Value 25 Fund
Phoenix Equity Series Fund:
Core Equity Fund Growth and Income Fund
<PAGE>
- --------------------------------------------------------------------------------
III. Phoenix - Engemann Funds
- --------------------------------------------------------------------------------
Nifty Fifty Fund Growth Fund
Small & Mid-Cap Growth Fund Global Growth Fund
Balanced Return Fund Value 25 Fund
Equity Planning at its expense, may from time to time also provide additional
compensation to dealers who sell shares of any of the Funds. Compensation may
include financial assistance to dealers in connection with conferences, sales
training or promotional programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the Funds and/ or other
dealer-sponsored special events.
Service Fees: Dealers may be eligible to receive a continuing service fee equal
to 0.25% per annum of the average net asset value of the Funds' shares held by
such persons in order to compensate them for providing certain services to their
clients, including processing redemption transactions and providing account
maintenance and certain information and assistance with respect to the Funds,
and responding to shareholder inquiries.
Class B and C CDSC: Broker/Dealer firms maintaining house/omnibus accounts, upon
redemption of a customer account within the time frames specified below, shall
forward to Equity Planning the indicated contingent deferred sales charge.
- --------------------------------------------------------------------------------
III. A. Phoenix - Engemann Funds: Class A Shares
- --------------------------------------------------------------------------------
Class A Shares for Initial Sales Charge Alternative
The public offering price of Class A shares for purchasers choosing the initial
sales charge alternative is the net asset value per share plus a sales charge
depending upon the amount purchases as described in the following table.
<TABLE>
<CAPTION>
Dealer Commission
Sales Charge as of Percentage of as percentage of
Amount of Purchase Public the Public
at the Public Offering Price Offering Price Offering Price
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 5.50% 5.00%
- ---------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.75 4.25
- ---------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.75 3.25
- ---------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 2.50 2.00
- ---------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00 1.75
- ---------------------------------------------------------------------------------------------------------------------------------
$1,000,000 or more None *
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Finders Fee: On purchases made at net asset value, as described in the
prospectus, dealers may receive a one-time fee, as follows: 1% on purchases up
through $2 million, plus 0.80% on the next $1 Million, plus 0.20% on the next $2
million, and 0.10% on the excess over $5 million.
- --------------------------------------------------------------------------------
III. B. Phoenix - Engemann Funds: Class B Shares
- --------------------------------------------------------------------------------
Class B Shares for Deferred Sales Charge Alternative
Equity Planning may pay out of its own resources to the selling dealer a
commission equal to 4.25% of the amount of the purchase.
Years Since Purchase CDSC as a Percentage of
Dollar Amount
Subject to Charge
- --------------------------------------------------------------------------------
First 5.00%
- --------------------------------------------------------------------------------
Second 4.00
- --------------------------------------------------------------------------------
Third 3.00
- --------------------------------------------------------------------------------
Fourth 3.00
- --------------------------------------------------------------------------------
Fifth and Thereafter None
- --------------------------------------------------------------------------------
III. C. Phoenix - Engemann Funds: Class C Shares
- --------------------------------------------------------------------------------
Equity Planning may pay out of its own resources to the selling dealer a
commission equal to 1% of the amount of the purchase.
Trail: To the extent dealer provides distribution, marketing or administrative
services in connection with the sale of the Shares of a Fund, dealer may receive
a fee based on the average net asset value of such Shares which are attributable
to customers of dealer, at the rate of 0.75% per annum.
Global Growth Fund, Small & Mid-Cap Growth Fund, Value 25 Fund only: 1% CDSC for
1 year.
PDP80A (11-97) Distributed by Phoenix Equity Planning Corporation,
Enfield, CT, 06083
<PAGE>
[logo]PHOENIX Annex B To Dealer Agreement With
DUFF&PHELPS Phoenix Equity Planning Corporation
- --------------------------------------------------------------------------------
Compliance Standards for
the Sale of the Phoenix Funds
Under Their Alternative Purchase Arrangements
As national distributor or principal underwriter of the Phoenix Funds, which
offer their shares on both a front-end and deferred sales charge basis, Phoenix
Equity Planning Corporation ("PEPCO") has established the following compliance
standards which set forth the basis upon which shares of the Phoenix Funds may
be sold. These standards are designed for those broker/dealers ("dealers") that
distribute shares of the Phoenix Funds and for each dealer's financial
advisors/registered representatives.
As shares of the Phoenix Funds are offered with two different sales arrangements
for sales and distribution fees, it is important for an investor not only to
choose a mutual fund that best suits his investment objectives, but also to
choose the sales financing method which best suits his particular situation. To
assist investors in these decisions and to ensure proper supervision of mutual
fund purchase recommendations, we are instituting the following compliance
standards to which dealers must adhere when selling shares of the Phoenix Funds:
1. Any purchase of a Phoenix Fund for less than $250,000 may be either of
shares subject to a front-end load (Class A shares) or subject to deferred
sales charge (Class B shares).
2. Any purchase of a Phoenix Fund by an unallocated qualified employer
sponsored plan for less than $1,000,000 may be either of shares subject to
a front-end load (Class A shares) or subject to deferred sales charge
(Class B shares). Class B shares sold to allocated qualified employer
sponsored plans will be limited to a maximum total value of $250,000 per
participant.
3. Any purchase of a Phoenix Fund for $250,000 or more (except as noted above)
or which qualifies under the terms of the prospectus for net asset value
purchase of Class A shares should be for Class A shares.
General Guidelines
These are instances where one financing method may be more advantageous to an
investor than the other. Class A shares are subject to a lower distribution fee
and, accordingly, pay correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase, such
investors would not have all of their funds invested initially and, therefore,
would initially own fewer shares. Investors not qualifying for reduced initial
sales charges who expect to maintain their investment for an extended period of
time might consider purchasing Class A Shares because the accumulated continuing
distribution charges on Class B Shares may exceed the initial sales charge on
Class A Shares during the life of the investment.
Again, however, such investors must weigh this consideration against the fact
that, because of such initial sales charge, not all of their funds will be
invested initially. However, other investors might determine that it would be
more advantageous to purchase Class B Shares to have all of their funds invested
initially, although remaining subject to higher continuing distribution charges
and, for a five-year period, being subject to a contingent deferred sales charge
(three years for Asset Reserve).
A National Association of Securities Dealers rule specifically prohibits
"breakpoint sales" of front-end load shares. A "breakpoint sale" is a sale to
the client of an amount of front-end load (Class A) shares just below the amount
which would be subject to the next breakpoint on the fund's sales charge
schedule. Because the deferred sales charge on Class B shares is reduced by 1%
for each year the shares are held, a redemption of Class B shares just before an
"anniversary date" is in some ways analogous to a breakpoint sale. A client
might wish to redeem just before an anniversary date for tax or other reasons,
and a client who chose to wait would continue to be at market risk.
Nevertheless, investment executives should inform clients intending to redeem
Class B shares near an anniversary date that, if the redemption were delayed,
the deferred sales charge would be reduced.
Responsibilities of Branch Office Manager (or other appropriate reviewing
officer).
A dealer's branch manger or other appropriate reviewing officer ("the Reviewing
Officer") must ensure that the financial advisor/registered representative has
advised the client of the available financing methods offered by the Phoenix
Funds, and the impact of choosing one method over another. In certain instances,
it may be appropriate for the Reviewing Officer to discuss the purchase directly
with the client. The reviewing officer should review purchases for Class A or
Class B shares given the relevant facts and circumstances, including but not
limited to: (a) the specific purchase order dollar amount; (b) the length of
time the investor expects to hold his shares; and (c) any other relevant
circumstances, such as the availability of purchases under letters of intent or
pursuant to rights of accumulation and distribution requirements. The foregoing
guidelines, as well as the examples cited above, should assist the Reviewing
Officer in reviewing and supervising purchase recommendations and orders.
Effectiveness
These compliance guidelines are effective immediately with respect to any order
for shares of those Phoenix Funds which offer their shares pursuant to the
alternative purchase arrangement.
Questions relating to these compliance guidelines should be directed by the
dealer to its national mutual fund sales and market group or its legal
department or compliance director. PEPCO will advise dealers in writing of any
future changes in these guidelines.
PEP80B 11/95
PHOENIX EQUITY PLANNING CORPORATION
SUPPLEMENT TO PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
It is hereby agreed that this AGREEMENT, dated this __________ day
of __________, 19__, between ________________________________________ ("Dealer")
and Phoenix Equity Planning Corporation ("Distributor"), supplements and amends
the Sales Agreement between Dealer and Distributor dated by Distributor
_______________________ 19__ ("Sales Agreement').
WHEREAS, Dealer wishes to use shares of the Funds in a fee-based
program made available by Dealer to clients of Dealer (the "Fee-Based Program");
WHEREAS, Dealer wishes to afford its fee-based clients the
opportunity to qualify for the ability to purchase shares of the Funds at net
asset value; and
WHEREAS, Distributor is willing to allow Dealer to purchase shares
of the Funds for clients in the Fee-Based Program subject to the provisions of
this agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by both parties, Dealer
and Distributor hereby agree as follows:
1. Dealer may sell shares of any Funds made available by
Distributor, from time to time, at net asset value to bona fide clients of
Dealer for use solely in their Fee-Based Program. Dealer will earn no concession
or commission on any such sale.
2. Distributor, after consulting Dealer, will determine, from time
to time, which Funds it will make available to Dealer for use in the Fee-Based
Program. Dealer will comply with all provisions of the Prospectus and Statement
of Additional Information of each Fund.
1
<PAGE>
3. All shares made available to Dealer under the Fee-Based Program
must be purchased by Dealer for the benefit of Dealer's clients participating in
its Fee-Based Program under which Dealer provides portfolio management and other
services to such clients for a fee. Such fee to be paid in connection with
investment in the Funds shall at all times be at a level acceptable to
Distributor. Dealer acknowledges that it has sent the Distributor the current
fee schedule for the Fee-Based Program and Dealer agrees to notify Distributor
at least thirty (30) days in advance in writing of any amendment to such fee
schedule. The current fee schedule is attached. Dealer shall not prepare, use or
distribute brochures, written materials or advertising in any form that refers
to sales of the Funds as no-load or at net asset value except, in the case of
brochures, it may refer to the Funds as available at net asset value under the
Fee-Based Program if the fees and expenses of the Fee-Based Program are given at
least equal prominence. Notwithstanding the foregoing, in connection with
explaining the fees and expenses of the Fee-Based Program, representatives of
Dealer may describe to customers the option of purchasing Fund shares through
the Fee-Based Program at net asset value.
4. Distributor warrants that all necessary disclosures regarding
the sale of shares at net asset value will be set forth in the Prospectus and
Statement of Additional Information of the Funds available under this Agreement.
5. Dealer may maintain either an omnibus account(s) solely for the
clients of its Fee-Based program or may maintain separate accounts for each
client of its Fee-Based Program with the Fund's transfer agent. If an omnibus
account(s) is maintained, Dealer shall be solely responsible for meeting all
legal obligations with respect to each beneficial owner including, but not
limited to, the delivery of proxies, annual and semi-annual reports and other
materials.
6. This Agreement shall be governed and interpreted in accordance
with the laws of the State of Connecticut. This Agreement shall not relieve
Dealer or Distributor from any obligations either may have under any other
agreements between them (except with respect to the payment of service fees),
including but not limited to the Sales Agreement, which is incorporated by
reference herein and shall control in case of any conflict with this Agreement.
7. Distributor is not endorsing, recommending or otherwise involved
in providing any investment product or advisory service of Dealer (including but
not limited to the Fee-Based Program). Distributor is merely affording Dealer
the opportunity to use shares of the Funds distributed by Distributor as an
investment medium for the Fee-Based Program.
8. This Agreement is not exclusive and may be terminated by either
party upon sixty (60) days prior written notice to the other party. It shall
terminate automatically upon termination of the Sales Agreement between the
parties. This Agreement may be amended only by a written instrument, signed by
both parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the date set
forth above by a duly authorized officer of each party.
2
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
By: _______________________________________
John F. Sharry
Managing Director, Retail Sales
Dealer: _____________________________
By: _________________________________
Name: _______________________________
Title: ______________________________
Address: ____________________________
____________________________
____________________________
Phone: ______________________________
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P O Box 2200
Enfield, CT 06083-2200
(230) 253-1000
3
FINANCIAL INSTITUTION SALES CONTRACT
FOR THE PHOENIX FAMILY OF FUNDS
Between: and
PHOENIX EQUITY PLANNING CORPORATION
Distributor of: The Phoenix Family of Funds
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
As distributor of The Phoenix Family of Funds (the "Funds"), we agree that you
may make available to your customers, under an agency relationship with your
customers, shares of beneficial interest issued by the Funds (the "Shares"),
subject to any limitation imposed by the Funds and to confirmation by us of each
transaction. By your acceptance hereof, you agree to all of the following terms
and conditions:
I. Offering Prices and Fees
The public offering price at which you may make Shares available to your
customers is the net asset value thereof, as computed from time to time, plus
any applicable sales charge described in the then current prospectus of the
applicable Fund. In the case of purchases by you, as agent for your customers,
of shares sold with a sales charge, you will receive an agency fee consisting of
a portion of the public offering price, determined on the same basis as the
"dealer discount" described in the then current Prospectus of the Funds, and
such other compensation to dealers as may be described therein, which shall be
payable to you at the same time and on the same basis as the same is paid to
such dealers, consistent with applicable law, rules and regulations. In
determining the amount of any agency fee payable to you hereunder, we reserve
the right to revise the agency fee referred to herein upon written notice to
you. We will furnish you upon request with the public offering prices for the
Shares and you agree to quote such prices in connection with any Shares made
available by you as agent for your customers. Each purchase of Shares by your
customers is made subject to confirmation by us at the public offering price
next computed after receipt of the order. There is no sales charge or agency fee
to you on the reinvestment of dividends and distributions.
II. Manner of Making Shares Available for Purchase
We will, upon request, deliver to you a copy of each Fund's then current
Prospectus and will provide you with such number of copies of each Fund's
current Prospectus, Statement of Additional Information and shareholder reports
and of supplementary sales materials prepared by us, as you may reasonably
request. It shall be your obligation to ensure that all such information and
materials are distributed to your customers who own Shares in accordance with
securities and/or banking law and regulations and any other applicable
regulations. Neither you nor any other person is authorized to give any
information or make any representations other than those contained in such
prospectuses, Statements of Additional Information and shareholder reports or in
such supplemental sales materials. You shall not furnish or cause to be
furnished to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional materials and
sales literature, advertisements, press releases, announcements, statements,
posters, signs or similar material), except such information and materials as
may be furnished to you by us or the Fund, and such other information and
materials as may be approved in writing by us. We reserve the right to reject
any purchases for any accounts which we reasonably determine are not made in
accordance with the terms of the applicable Fund Prospectus and the provisions
of this Agreement.
You hereby agree:
(i) to not purchase any Shares as agent for any customer, unless you
deliver or cause to be delivered to such customer, at or prior to the
time of such purchase, a copy of the then-current Prospectus of the
applicable Fund unless such customer has acknowledged receipt of the
Prospectus of such Fund. You hereby represent that you understand your
obligation to deliver a prospectus to customers who purchase Shares
pursuant to federal securities laws and you have taken all necessary
steps to comply with such prospectus delivery requirements;
PEP 613 12-92
<PAGE>
(ii) to transmit to us promptly upon receipt any and all orders received by
you, it being understood that no conditional orders will be accepted;
(iii) to obtain from each customer for whom you act as agent for the
purchase of Shares any taxpayer identification number certification
and backup withholding information required under the Internal Revenue
Code, as amended from time to time (the "Code"), and the regulations
set forth thereunder, or other sections of the Code which may become
applicable and to provide us or our designee with timely written
notice of any failure to obtain such taxpayer identification number
certification or information in order to enable the implementation of
any required backup withholding in accordance with the Code and the
regulations thereunder;
(iv) to pay to us the offering price, less any agency fee to which you are
entitled, within five (5) business days of our confirmation of your
customer's order, or such shorter time as may be required by law. You
may, subject to our approval, remit the total public offering price to
us, and we will return to you your agency fee. If such payment is not
received within said time period, we reserve the right, without prior
notice, to cancel the sale, or at our option to return the Shares to
the issuer for redemption or repurchase. In the latter case, we shall
have the right to hold you responsible for any loss resulting to us.
Should payment be made by local bank check, liquidation of Shares may
be delayed pending clearance of your check; and
(v) to offer and sell Shares, and execute telephone transactions only in
accordance with the terms and conditions of the then current
prospectuses of the relevant Funds and to make no representations not
contained in any such prospectus or in any authorized supplemental
material supplied to you. In addition, in consideration for the
extension of the right to exercise telephone transaction privileges,
you acknowledge that neither the Funds nor the Transfer Agent nor
Equity Planning will be liable for any loss, injury or damage incurred
as a result of acting upon, nor will they be responsible for the
authenticity of, any telephone instructions, and you agree to
indemnify and hold harmless the Funds, Equity Planning and the
Transfer Agent against any loss, injury or damage resulting from any
unauthorized telephone transaction instruction from you or your
representatives. (Telephone instructions will be recorded on tape).
Unless otherwise mutually agreed in writing or except as provided below, each
transaction placed by you shall be promptly confirmed by us in writing to you,
and shall be confirmed to the customer promptly upon receipt by us of
instructions from you as to such customer. In the case of a purchase order by
customer's application, each transaction shall be promptly confirmed in writing
directly to the customer and a copy of each confirmation shall be sent
simultaneously to you. You understand that in the case of an Omnibus Account we
shall send a confirmation to you as the shareholder of record only. We reserve
the right, at our discretion and without notice, to suspend the sale of Shares
or withdraw entirely the sale of Shares of any or all of the Funds. All orders
are subject to acceptance or rejection by us in our sole discretion, and by the
Funds in their sole discretion. The procedure stated herein relating to the
pricing and handling of orders shall be subject to instructions which we may
forward to you from time to time.
III. Compliance With Law
You hereby represent that you are either (1) a "bank" as defined in Section
3(a)(6) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and at the time of each transaction in shares of the Funds, are not required to
register as a broker-dealer under the Exchange Act or regulations thereunder; or
(2) registered as a broker-dealer under the Exchange Act, a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
affiliated with a bank.
(i) If you are a bank, not required to register as a broker-dealer under
the Exchange Act, you further represent and warrant to us that with
respect to any sales in the United States, you will use your best
efforts to ensure that any purchase of Shares by your customers
constitutes a suitable investment for such customers. You shall not
effect any transaction in, or induce any purchase or sale of, any
Shares by means of any manipulative deceptive or other fraudulent
device or contrivance and shall otherwise deal equitable and fairly
with your customers with respect to transactions in Shares of a Fund.
-2-
<PAGE>
(ii) If you are a NASD member broker-dealer affiliated with a bank and
registered under the Exchange Act, you further represent and warrant
to us that with respect to any sales in the United States, you agree
to abide by all of the applicable laws, rules and regulations
including applicable provisions of the Securities Act of 1933 as
amended, and the applicable rules and regulations of the NASD,
including, without limitation, its Rules of Fair Practice, and the
applicable rules and regulations of any jurisdiction in which you make
Shares available for sale to your customers. You agree not to make
available for sale to your customers the Shares in any jurisdiction in
which the Shares are not qualified for sale or in which you are not
qualified as a broker-dealer. We shall have no obligation or
responsibility as to your right to make Shares of any Fund available
to your customers in any jurisdiction. You agree to notify us
immediately in the event of (a) your expulsion or suspension from the
NASD or your becoming subject to any enforcement action by the
Securities and Exchange Commission, NASD, or any other self-regulatory
organization, or (b) your violation of any applicable federal or state
law, rule or regulation including, but not limited to, those of the
SEC, NASD, or other self-regulatory organization, arising out of or in
connection with this Agreement, or which may otherwise affect in any
material way your ability to act in accordance with the terms of this
Agreement.
You shall not make Shares of any Fund available to your customers, including
your fiduciary customers, except in compliance with all federal and state laws
and rules and regulations of regulatory agencies or authorities applicable to
you, or any of your affiliates engaging in such activity, which may affect your
business practices. You confirm that you are not in violation of any banking law
or regulations to which you are subject. You agree to hold us and the Funds
harmless and indemnify us in the event that you or any of your representatives
should violate any law, rule or regulation or any provisions of this Agreement.
In the event that we determine to refund any amounts paid by a customer in
connection with any such violation on your part, you shall forfeit the right to
the amount of any agency fee allowed by us with respect to the transaction for
which the refund is made. All expenses which you incur in connection with your
activities under this Agreement shall be borne by you.
IV. Relationship With Customer
With respect to any and all transactions in the Shares of any Fund pursuant to
this Agreement, it is understood and agreed in each case that: (i) you shall be
acting solely as agent for the account of your customer; (ii) each transaction
shall be initiated solely upon the order of your customer; (iii) we shall
execute transactions only upon receiving instructions from you acting as agent
for your customer or upon receiving instructions directly from your customer;
(iv) as between you and your customer, your customer will have full beneficial
ownership of all Shares; and (v) each transaction shall be for the account of
your customer and not for your account.
Subject to the foregoing, however, you may maintain record ownership of such
customers' Shares in an "Omnibus Account" or an account registered in your name
or the name of your nominee, for the benefit of such customers. You understand
that such Shares must be held in a separate account for each shareholder of such
Funds. You represent and warrant to us that you will have full right, power and
authority to effect transactions (including, without limitation, any purchases
and redemptions) in Shares on behalf of all customer accounts provided by you.
V. Relationship With Financial Institutions
Your obligations to us under this Agreement are subject to all the provisions of
the respective distribution agreements entered into between us and each of the
Funds. You understand and agree that in performing your services under this
Agreement you are acting in the capacity of an independent contractor, and we
are in no way responsible for the manner of your performance or for any of your
acts or omissions in connection therewith. It is further understood that neither
this Agreement nor the performance of the services of the respective parties
hereunder shall be considered to constitute an exclusive arrangement, or to
create a partnership, association or joint venture between you and us. In making
available Shares of the Funds under this Agreement, nothing herein shall be
construed to constitute you or any of your agents, employees or representatives
as our agent or employee, or as an agent or employee of the Funds, and you shall
not make any representations to the contrary. As distributor of the Funds, we
shall have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the distribution of the Shares. We shall
not be under any obligation to you, except for obligations expressly assumed by
us in this Agreement.
-3-
<PAGE>
VI. Termination
Either party hereto may terminate this Agreement, without cause, upon ten days'
written notice to the other party. We may terminate this Agreement for cause
upon the violation by you of any of the provisions hereof, such termination to
become effective on the date such notice of termination is mailed to you. If you
are registered as a broker-dealer and affiliated with a bank, this Agreement
shall terminate automatically if either Party ceases to be a member of the NASD.
VII. Assignability
This Agreement is not assignable or transferable, except that we may assign or
transfer this Agreement to any successor distributor of the Funds.
VIII. Miscellaneous
(i) All communications mailed to us should be sent to the above address.
Any notice to you shall be duly given if mailed or delivered to you at
the address specified by you below.
(ii) This Agreement constitutes the entire agreement and understanding
between the parties and supersedes any and all prior agreements
between the parties.
(iii) This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of
Connecticut.
Very truly yours,
PHOENIX EQUITY PLANNING CORPORATION
By _________________________________________
Authorized Signature
____________________________________________
Name and Title
We accept and agree to the foregoing Agreement as of the date set forth below
Financial Institution: __________________________________
By _________________________________________
Authorized Signature, Title
____________________________________________
____________________________________________
Address
(NASD CRD # if applicable _________________ )
Date: ______________________________________
Please return the signed copy of this Sales Contract to Phoenix Equity Planning
Corporation at the above address.
Exhibit 8.1
Custodian Contract
<PAGE>
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX 1
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By It....................................................1
2. Duties of the Custodian with Respect to Property
of each Fund Held by the Custodian in the United States..................................................2
2.1 Holding Securities..............................................................................2
2.2 Delivery of Securities..........................................................................2
2.3 Registration of Securities......................................................................4
2.4 Bank Accounts...................................................................................4
2.5 Availability of Federal Funds...................................................................5
2.6 Collection of Income............................................................................5
2.7 Payment of Fund Moneys..........................................................................5
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.............................6
2.9 Appointment of Agents...........................................................................7
2.10 Deposit of Fund Assets in U.S. Securities System................................................7
2.11 Fund Assets Held in the Custodian's Direct Paper System.........................................8
2.12 Segregated Account..............................................................................9
2.13 Ownership Certificates for Tax Purposes.........................................................9
2.14 Proxies.........................................................................................9
2.15 Communications Relating to Fund Securities.....................................................10
3. Duties of the Custodian with Respect to Property of
each Fund Held Outside of the United States.............................................................10
3.1 Appointment of Foreign Sub-Custodians..........................................................10
3.2 Assets to be Held..............................................................................10
3.3 Foreign Securities Systems.....................................................................10
3.4 Holding Securities.............................................................................11
3.5 Agreements with Foreign Banking Institutions...................................................11
3.6 Access of Independent Accountants of each Fund.................................................11
3.7 Reports by Custodian...........................................................................11
3.8 Transactions in Foreign Custody Account........................................................12
3.9 Liability of Foreign Sub-Custodians............................................................12
3.10 Liability of Custodian.........................................................................12
3.11 Reimbursement for Advances.....................................................................13
3.12 Monitoring Responsibilities....................................................................13
3.13 Branches of U.S. Banks.........................................................................13
3.14 Tax Law........................................................................................13
4. Payments for Sales or Repurchase or Redemptions
of Shares of each Fund..................................................................................14
5. Proper Instructions.....................................................................................14
6. Actions Permitted Without Express Authority.............................................................15
7. Evidence of Authority...................................................................................15
8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value
and Net Income..........................................................................................15
9. Records ................................................................................................16
10. Opinion of Fund's Independent Accountants...............................................................16
11. Reports to Fund by Independent Public Accountants.......................................................16
12. Compensation of Custodian...............................................................................16
13. Responsibility of Custodian.............................................................................16
14. Effective Period, Termination and Amendment.............................................................18
15. Successor Custodian.....................................................................................18
16. Interpretive and Additional Provisions..................................................................19
17. Additional Funds........................................................................................19
18. Massachusetts Law to Apply..............................................................................20
19. Prior Contracts.........................................................................................20
20. Shareholder Communications..............................................................................20
21. Limitation of Liability................................................................................21
</TABLE>
<PAGE>
MASTER CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on Appendix 1
which evidences its agreement to be bound hereby by executing a copy of this
Contract (each such fund, any and all separate series or portfolios thereof and
any additional portfolios or separate series thereof which become subject to
this Contract pursuant to Section 17 hereof, are individually hereafter referred
to as a "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, each of the Funds has previously entered into a Custodian Contract
with the Custodian;
WHEREAS, the Custodian and each of the Funds desire to replace such
existing Custodian Contracts with this Master Custodian Contract between the
Custodian and all of the Funds;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
Each Fund hereby employs the Custodian as the custodian of the assets of
such Fund, including securities which such Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of such Fund's governing documents (domestic securities and foreign securities
are sometimes collectively referred to herein as "Securities"). Each Fund agrees
to deliver to the Custodian all securities and cash of such Fund, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by such Fund from time to time, and the
cash consideration received by it for such new or treasury shares each class of
capital stock or beneficial interest, as applicable, of such Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Fund held or received by such Fund and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Fund from time to time employ
one or more sub-custodians, located in the United States but only in accordance
with an applicable vote by the Board of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Fund shall approve in writing the
terms of any subcustodian agreement with a United States subcustodian. The
Custodian may employ as sub-custodian for each Fund's foreign securities the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. Duties of the Custodian with Respect to Property of each Fund Held By the
Custodian in the United States
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2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Fund all non-cash property, to be held by it in the
United States including all domestic securities owned by such Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury (each, a "U.S.
Securities System") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper System of
the Custodian (the "Direct Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Fund held by the Custodian or in a U.S. Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from such Fund, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of such Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by such Fund;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of such Fund;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
such Fund or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
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<PAGE>
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of such Fund, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by such
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and such Fund, which may be in the
form of cash or obligations issued by the United States government,
its agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S. Department of
the Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by such Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any borrowings by such
Fund requiring a pledge of assets by such Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
such Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by such Fund ;
3
<PAGE>
13) For delivery in accordance with the provisions of any agreement among
such Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by such Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for such Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of such Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from such Fund, a certified copy of a
resolution of the Board or of the Executive Committee of such Fund
signed by an officer of such Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of such Fund to be
delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such securities shall
be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of each Fund
or in the name of any nominee of each Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to each Fund, unless
a Fund has authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as such Fund, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian under the terms of this Contract shall be in "street name"
or other good delivery form. If, however, a Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize
commercially reasonable means to timely collect income due such Fund on
such securities and to timely notify each Fund of relevant corporate
actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund , subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of such
Fund, other than cash maintained by such Fund in a bank account established
and used
4
<PAGE>
in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for each Fund may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company Act
of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Fund be approved by vote of a majority of the Board of such
Fund. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between a Fund and the
Custodian, the Custodian shall, upon the receipt of Proper Instructions
from such Fund, make federal funds available to such Fund as of specified
times agreed upon from time to time by such Fund and the Custodian in the
amount of checks received in payment for Shares of such Fund which are
deposited into such Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to Securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to such Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and
present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when
due on securities held hereunder. Unless otherwise agreed to by the
parties, income due each Fund on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith,
other than to provide each Fund with such information or data as may be
necessary to assist each Fund in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from a Fund,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the following
cases only:
1) Upon the purchase of Securities, options, futures contracts or options
on futures contracts for the account of such Fund but only (a) against
the delivery of such securities or evidence of title to such options,
futures contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
5
<PAGE>
Company Act of 1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose) registered
in the name of such Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for transfer; (b)
in the case of a purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.11; (d) in the
case of repurchase agreements entered into between such Fund and the
Custodian, or another bank, or a broker-dealer which is a member of
NASD, (i) against delivery of the securities either in certificate
form or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against delivery of
the receipt evidencing purchase by such Fund of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from such Fund or (e) for
transfer to a time deposit account of such Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to receipt of
a confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from such Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of Securities
owned by such Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by such Fund as set
forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by such Fund,
including but not limited to the following payments for the account of
such Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of such Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of such Fund declared
pursuant to the governing documents of such Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions from such Fund, a certified copy of a resolution
of the Board or of the Executive Committee of such Fund signed by an
officer of such Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
6
<PAGE>
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of Securities for the account of such Fund is
made by the Custodian in advance of receipt of the securities purchased in
the absence of specific Proper Instructions from such Fund to so pay in
advance, the Custodian shall be absolutely liable to such Fund for such
securities to the same extent as if the securities had been received by the
Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times, subject to
the applicable Fund's prior approval, in its discretion appoint (and may at
any time remove) any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of this Article
2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Exchange Act, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "U.S.
Securities System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of each Fund in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of each Fund
which are maintained in a U.S. Securities System shall identify by
book-entry those securities belonging to each Fund;
3) The Custodian shall pay for securities purchased for the account of
each Fund upon (i) receipt of advice from the U.S. Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of each Fund. The Custodian shall
transfer securities sold for the account of each Fund upon (i) receipt
7
<PAGE>
of advice from the U.S. Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and
payment for the account of each Fund. Copies of all advices from the
U.S. Securities System of transfers of securities for the account of
each Fund shall identify each Fund, be maintained for each Fund by the
Custodian and be provided to each Fund at its request. Upon request,
the Custodian shall furnish each Fund confirmation of each transfer to
or from the account of each Fund in the form of a written advice or
notice and shall furnish to each Fund copies of daily transaction
sheets reflecting each day's transactions in the U.S. Securities
System for the account of each Fund.
4) The Custodian shall provide each Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from each Fund the initial
certificate required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to each Fund for the benefit of such Fund
for any loss or damage to such Fund resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the affected Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss or
damage if and to the extent that such Fund has not been made whole for
any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by each Fund in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from each Fund ;
2) The Custodian may keep securities of each Fund in the Direct Paper
System only if such securities are represented in an account of the
Custodian in the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
8
<PAGE>
3) The records of the Custodian with respect to securities of each Fund
which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to each Fund;
4) The Custodian shall pay for securities purchased for the account of
each Fund upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of securities to the account of
each Fund. The Custodian shall transfer securities sold for the
account of each Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for the
account of each Fund;
5) The Custodian shall furnish each Fund confirmation of each transfer to
or from the account of each Fund, in the form of a written advice or
notice, of Direct Paper on the next business day following such
transfer and shall furnish to each Fund copies of daily transaction
sheets reflecting each day's transactions in the Direct Paper System
for the account of each Fund;
6) The Custodian shall provide each Fund with any report on its system of
internal accounting control as each Fund may reasonably request from
time to time.
2.12 Pledged Account. The Custodian shall upon receipt of Proper
Instructions from a Fund establish and maintain a pledged account or
accounts for and on behalf of such Fund, into which account or accounts
may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any agreement among
such Fund , the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by such Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by such Fund or commodity
futures contracts or options thereon purchased or sold by such Fund,
(iii) for the purposes of compliance by such Fund with the procedures
required by Investment Company Act Release No. 10666, and subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions from such Fund , a certified copy of a resolution of the
Board or of the Executive Committee of such Fund signed by an
9
<PAGE>
officer of such Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of each Fund held by it and in connection with
transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
such Fund or a nominee of such Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
the applicable Fund such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions of
Section 2.3, the Custodian shall transmit promptly to each Fund all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by such
Fund and the maturity of futures contracts purchased or sold by such Fund)
received by the Custodian from issuers of the securities being held for
such Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to each Fund all written information received by the
Custodian from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange offer. If
a Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, such Fund shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of each Fund Held Outside
of the United States
--------------------------------------------------------------------------
3.1 Appointment of Foreign Sub-Custodians. Each Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for such Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of such Fund's Board, the Custodian and such Fund may
agree to amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, a Fund may instruct the
Custodian to cease the employment of any one or more such sub-custodians
for maintaining custody of such Fund's assets.
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<PAGE>
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or each Fund may determine to be reasonably
necessary to effect such Fund's foreign securities transactions. The
Custodian shall identify on its books as belonging to each Fund, the
foreign securities of each Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and each Fund, assets of each Fund shall be
maintained in a clearing agency which acts as a securities depository or in
a book-entry system for the central handling of securities located outside
of the United States (each a "Foreign Securities System") only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein as the
"Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.6
hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including each Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of each Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
each Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign
banking institution shall provide that: (a) the assets of each Fund will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the assets of each Fund will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each Fund; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for each
Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Custodian;
and (e) assets of each Fund held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents. Agreements
with
11
<PAGE>
foreign banking institutions shall contain those provisions required by
subparagraph (c) of Section 17f-5 under the Investment Company Act of 1940.
3.6 Access of Independent Accountants of each Fund. Upon request of each Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of each Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to each Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of each Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of such Fund's
securities and other assets and advices or notifications of any transfers
of securities to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of such Fund indicating, as
to securities acquired for such Fund, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provisions of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of each Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the account of
each Fund and delivery of securities maintained for the account of each
Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 2.3 of this Contract, and each Fund
agrees to hold any such nominee harmless from any liability as a holder of
record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of a Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that such Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
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<PAGE>
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by Section 3.13 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this Section
3.10, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to each Fund for any
loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 Reimbursement for Advances. If, pursuant to Proper Instructions, a Fund
requires the Custodian to advance cash or securities for any purpose for
the benefit of a Fund including the purchase or sale of foreign exchange or
of contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Contract, except such as may arise from events or circumstances for
which the Custodian or a sub-custodian are liable pursuant to Sections 3.9
and 3.10 above, or from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Fund shall be security therefor and
should such Fund fail to repay the Custodian promptly, the Custodian shall
upon prior written notice be entitled to utilize available cash and to
dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to each
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian and such other information needed
to permit the Fund to comply with Section 17f-5 under the 1940 Act. Such
information shall be similar in kind and scope to that furnished to each
Fund in connection with the initial approval of this Contract. In addition,
the Custodian will promptly inform each Fund in the event that the
Custodian learns of a material adverse change in the financial condition of
a foreign sub-custodian or any material loss of the assets of each Fund or
in the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity
13
<PAGE>
will decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract,
the provisions hereof shall not apply where the custody of a Fund's assets
are maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
Article 1 of this Contract. (b) Cash held for each Fund in the United
Kingdom shall be maintained in an interest bearing account established for
each Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on any Fund or the Custodian as
custodian of such Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of each Fund to notify the Custodian of the obligations imposed on each
Fund or the Custodian as custodian of each Fund by the tax law of
jurisdictions other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist each Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which each Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of each Fund
-----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of each Fund and deposit into the account of each Fund such
payments as are received for Shares of each Fund issued or sold from time to
time by each Fund. The Custodian will provide timely notification to each Fund
and the Transfer Agent of any receipt by it of payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of each Fund's governing documents and any applicable votes of the
Board of each Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of each Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of each Fund, the Custodian shall honor checks drawn on
the
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<PAGE>
Custodian by a holder of Shares, which checks have been furnished by such
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between each Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing signed
or initialed by one or more person or persons as the Board of each Fund shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. Each Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of each Fund
accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for such
Fund's assets. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from each
Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the applicable Fund;
1) surrender securities in temporary form for securities in definitive
form;
2) endorse for collection, in the name of each Fund, checks, drafts and
other negotiable instruments; and
3) in general, attend to all ministerial details in connection with the
sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of each Fund except as otherwise
directed by the Board of each Fund.
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<PAGE>
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of each Fund. The Custodian may receive and accept a certified copy of a vote of
the Board of each Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the governing documents of each Fund as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income
---------------------------------------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of each Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if directed in writing to do so by each Fund
, shall itself keep such books of account and/or compute such net asset value
per share. If so directed, the Custodian shall also calculate daily the net
income of each Fund as described in each Fund's currently effective Prospectus
and shall advise each Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of each Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of each Fund shall be made at the time or times
described from time to time in each Fund's currently effective Prospectus.
9. Records
-------
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of each Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of each Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the applicable
Fund and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the request of any Fund, supply such Fund with a tabulation
of securities owned by such Fund and held by the Custodian and shall, when
requested to do so by a Fund and for such compensation as shall be agreed upon
between such Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as each Fund may from time
to time request, to obtain from year to year favorable opinions from each Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of each Fund's Form N-1A,
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<PAGE>
and Form N-SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
--------------------------------------------------
The Custodian shall provide each Fund, at such times as each Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
each Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, determine in accordance with the fee
schedule attached hereto as Schedule B, as amended from time to time as agreed
by each Fund and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to any Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for a Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to any Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
17
<PAGE>
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts provided Custodian has maintained an adequate
disaster recovery plan; (ii) errors by a Fund or its investment advisor in their
instructions to the Custodian provided such instructions have been in accordance
with this Contract; (iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or intermediary, central
bank or other commercially prevalent payment or clearing system to deliver to
the Custodian's sub-custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any delay or failure of
any company, corporation, or other body in charge or registering or transferring
securities in the name of the Custodian, a Fund, the Custodian's sub-custodians,
nominees or agents or any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vi) delays or inability to perform
its duties due to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any provision of any present
or future law or regulation or order of the United States of America, or any
state thereof, or any other country, or political subdivision thereof or of any
court of competent jurisdiction.
Except as expressly provided in Section 3.9, the Custodian shall be liable
for the acts or omissions of a foreign banking institution appointed pursuant to
the provisions of Article 3 to the same extent as set forth in Article 1 hereof
with respect to sub-custodians located in the United States.
If a Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to a Fund being liable for the payment of money or incurring liability
of some other form, such Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If a Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlements)
or in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of such Fund shall be security
therefor and should such Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Fund's assets to the extent necessary to obtain reimbursement.
18
<PAGE>
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to each Fund act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of each Fund has approved the initial use of
a particular Securities System by each Fund, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not with
respect to a Fund act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board
has approved the initial use of the Direct Paper System by each Fund; provided
further, however, that a Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of its governing documents, and further provided, that a Fund may at any time by
action of its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, each Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination as provided
herein.
15. Successor Custodian
-------------------
If a successor custodian for a Fund shall be appointed by the Board of such
Fund, the Custodian shall, upon termination, and upon receipt of a certified
copy of such vote, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of such
Fund then held by it hereunder and shall transfer to an account of the successor
custodian all of the securities of such Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of the
applicable Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the Custodian
on or before the date when such
19
<PAGE>
termination shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian on behalf of such Fund and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract on behalf
of such Fund and to transfer to an account of such successor custodian all of
the securities of such Fund held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of a Fund to procure the certified copy of the vote referred to above or
of the Board to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and each
Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing documents of any Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
17. Additional Funds
----------------
In the event that any mutual funds in addition to the Funds are hereafter
established which desire to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references to the "Fund"
are to each of the Funds listed on Appendix 1 individually, as if this Contract
were between each such individual Fund and the Custodian.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
20
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19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between each of the Funds and the Custodian relating to the custody of
such Fund's assets.
20. Shareholder Communications
--------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs each Fund to indicate whether such Fund authorizes
the Custodian to provide such Fund's name, address, and share position to
requesting companies whose stock each Fund owns. If a Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If a Fund tells the Custodian "yes" or do not check either "yes" or "no" below,
the Custodian is required by the rule to treat such Fund as consenting to
disclosure of this information for all securities owned by such Fund or any
funds or accounts established by each Fund. For each Fund's protection, the Rule
prohibits the requesting company from using such Fund's name and address for any
purpose other than corporate communications. Please indicate below whether each
Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name,
address, and share positions of each Fund listed on
Appendix 1.
NO [X] The Custodian is not authorized to release the
name, address, and share positions of each Fund listed
on Appendix 1.
21. Limitation of Liability.
------------------------
The execution of this Contract has been authorized by each Fund's Board.
This Contract is executed on behalf of each Fund or, in the case of a Fund
organized as a business trust, the trustees of such Fund as trustees and not
individually and the obligations of each Fund under this Contract are not
binding upon any of such Fund's trustees, officers or shareholders individually
but are binding only upon the assets and property of such Fund. A Certificate of
Trust in respect of each Fund organized as a business trust is on file with the
Secretary of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of May, 1997.
EACH OF THE FUNDS LISTED ON APPENDIX 1
By: /s/ Michael E. Haylon
--------------------------
Michael E. Haylon
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
--------------------------
Executive Vice President
Ronald E. Logue
<PAGE>
APPENDIX 1
Fund Names
(as of May 1, 1997)
Phoenix California Tax Exempt Bonds, Inc.
The Phoenix Edge Series Fund
Real Estate Securities Series
Phoenix Income and Growth Fund
Phoenix Multi-Portfolio Fund
Phoenix Diversified Income Portfolio
Phoenix Emerging Markets Bond Portfolio
Phoenix Endowment Equity Portfolio
Phoenix Real Estate Securities Portfolio
Phoenix Mid Cap Portfolio
Phoenix Tax-Exempt Bond Portfolio
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Series Fund
Phoenix Aggressive Growth Fund Series
Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Growth Fund Series
Phoenix High Yield Fund Series
Phoenix Money Market Series
Phoenix U.S. Government Securities Fund Series
Phoenix Strategic Allocation Fund, Inc.
Phoenix Strategic Equity Series Fund
Phoenix Equity Opportunities Fund
Phoenix Micro Cap Fund
Phoenix Small Cap Fund
Phoenix Strategic Theme Fund
Phoenix Duff & Phelps Institutional Mutual Funds
Enhanced Reserves Portfolio
Real Estate Equity Securities Portfolio
<PAGE>
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of each Fund for use as
sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
- ----------------------------
Fund's Authorized Officer
Date:
-------------------------
<PAGE>
[LOGO]State Street
SCHEDULE B
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
Effective June 1, 1996
Phoenix Duff and Phelps Funds
- --------------------------------------------------------------------------------
I. Administration
Domestic Custody - Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash transactions.
Monitor corporate actions. Report portfolio positions. The custody fee
shown below is an annual charge, billed and payable monthly, based on
average monthly net assets.
Average Monthly Net Assets Annual Fees in Basis Points
-------------------------- ---------------------------
First $3 Billion .5
Next $2 Billion .375
Thereafter .25
II. Domestic Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $ 6.00
New York Physical Settlements $25.00
Physical Maturities-delivery and collection fee $33.00
All other trades $16.00
III. International Custody - Maintain custody of funds assets. Settle portfolio
purchases and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash transactions in
local and base currency. Report foreign taxes. File foreign tax reclaims.
Monitor corporate actions. Report portfolio positions.
<PAGE>
[LOGO]State Street
A. Country Grouping
- ---------------------
Group A Group B Group C Group D Group E
- ------- ------- ------- ------- -------
Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Euroclear Hong Kong France Mexico Brazil
Germany Netherlands Ireland Portugal Chile
Japan New Zealand Italy South Korea China
Singapore Luxembourg Spain Columbia
Switzerland Norway Sri Lanka Cyprus
Philippines Sweden Greece
Thailand Taiwan Hungary
United Kingdom India
Israel
Pakistan
Peru
Turkey
Uruguay
Venezuela
B. Transaction Charges
- ------------------------
Group A Group B Group C Group D Group E
- ------- ------- ------- ------- -------
$26 $30 $45 $60 $75
C. Holding Charges in Basis Points (Annual Fee)
- -------------------------------------------------
Assets Group A Group B Group C Group D Group E
- ------ ------- ------- ------- ------- -------
First $100 MM 5.0 8.0 13.0 15.0 25.0
Next $100 MM 4.0 6.0 10.0 13.0 25.0
Excess 3.0 5.0 8.0 13.0 25.0
IV. Options
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
<PAGE>
[LOGO]State Street
V. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of
loaned securities $25.00
Loan administration -- mark-to-market per day, per loan $ 3.00
VI. Interest Rate Futures
Transactions -- no security movement $ 8.00
VII. Coupon Bonds
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
VIII. Holdings Charge
For each issue maintained -- monthly charge $ 5.00
IX. Principal Reduction Payments Per Paydown $10.00
<PAGE>
[LOGO]State Street
X. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments
and the preparation of special reports will be subject to negotiation.
Fees for tax accounting/recordkeeping for options, financial futures,
and other special items will be negotiated separately.
Account Position Appraisal
--------------------------
Special appraisal by industry classification:
Monthly fee - per portfolio $50.00
XI. Out-of-Pocket Expenses
----------------------
A billing for the recovery of applicable out-of-pocket expenses will
be made as of the end of each month. Out-of-pocket expenses include,
but are not limited to the following:
Telephone
Wire Charges ($4.70 per wire in and $4.55 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
GNMA Transfer - $15 each
PTC Deposit/Withdrawal for same day turnarounds - $50.00
XII. Payment
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's
offices.
<PAGE>
[LOGO]State Street
PHOENIX DUFF AND PHELPS FUNDS STATE STREET BANK & TRUST CO.
By /s/ Nancy G. Curtiss By /s/ Charles R. Whittemore, Jr.
------------------------------ ------------------------------
Title Treasurer Title Vice President
------------------------------ ------------------------------
Date June 13, 1997 Date June 11, 1996
------------------------------ ------------------------------
Exhibit 9.2
Sub-Transfer Agent Agreement
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
between
PHOENIX EQUITY PLANNING CORPORATION
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Terms of Appointment; Duties of the Bank and 1-4
Transfer Agent
2. Fees and Expenses 4
3. Bank as Trustee or Custodian of Retirement Plans 4-5
4. Wire Transfer Operating Guidelines 5-7
5. Data Access and Proprietary Information 7-8
6. Indemnification 8-9
7. Standard of Care 10
8. Covenants of the Transfer Agent and the Bank 10
9. Representations and Warranties of the Bank 11
10. Representations and Warranties of the Transfer Agent 11
11. Termination of Agreement 12
12. Assignment 12
13. Amendment 12
14. Massachusetts Law to Apply 13
15. Force Majeure 13
16. Consequential Damages 13
17. Limitation of Shareholder Liability 13
18. Merger of Agreement 13
19. Counterparts 13
<PAGE>
AGREEMENT effective as of the 1st day of June, 1994, by and between
PHOENIX EQUITY PLANNING CORPORATION, a Connecticut corporation, having its
principal office and place of business at 100 Bright Meadow Boulevard, Enfield,
Connecticut, 06083, (the "Transfer Agent"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank");
WHEREAS, the Transfer Agent has been appointed by each of the investment
companies (including each series thereof) listed on Schedule A (the "Fund(s)"),
each an open-end diversified management investment company registered under the
Investment Company Act of 1940 as amended, as transfer agent, dividend
disbursing agent and shareholder servicing agent in connection with certain
activities, and the Transfer Agent has accepted each such appointment;
WHEREAS, the Transfer Agent has entered into a Transfer Agency and Service
Agreement with each of the Funds (including each series thereof) listed on
Schedule A pursuant to which the Transfer Agent is responsible for certain
transfer agency and dividend disbursing functions for each Fund's shares
("Shares") and each Fund's shareholders ("Shareholders") and the Transfer Agent
is authorized to subcontract for the performance of its obligations and duties
thereunder in whole or in part with the Bank;
WHEREAS, the Transfer Agent desires to appoint the Bank as sub-transfer
agent, and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenant herein contained,
the parties hereto agree as follows:
1. Duties of the Bank and the Transfer Agent
1.1 Subject to the terms and conditions set forth in this Agreement, the
Bank shall act as the Transfer Agent's non-exclusive sub-transfer agent for
Shares in connection with any accumulation plan, open-account, dividend
reinvestment plan, retirement plan or similar plan provided to Shareholders and
set out in each Fund's currently effective prospectus and statement of
additional information ("Prospectus"), including without limitation any
periodic investment plan or periodic withdrawal program. As used herein the
term "Shares" means the authorized and issued shares of common stock, or shares
of beneficial interest, as the case may be, for each Fund listed in Schedule A.
In accordance with procedures established from time to time by agreement
between the Transfer Agent and the Bank, the Bank and Transfer Agent shall
provide the services listed in this Section 1.
(a) According to the service responsibility schedule attached hereto
for Shareholder accounts and record-keeping the Bank or the
Transfer Agent shall:
(i) receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the custodian of each Fund authorized pursuant
to the articles of incorporation or organization of each
Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) in respect to the transactions in items (i), (ii), and
(iii) above, the Bank shall execute transactions directly
with broker-dealers authorized by each Fund;
(v) at the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
(vi) effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) prepare and transmit payments for dividends and
distributions declared by each Fund;
<PAGE>
(viii) issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to the
Bank and protecting the Bank and each Fund, and the Bank
at its option, may issue replacement certificates in place
of mutilated stock certificates upon presentation thereof
and without such indemnity;
(ix) maintain records of account for and advise the Transfer
Agent and its Shareholders as to the foregoing;
(x) record the issuance of Shares of each Fund and maintain
pursuant to Rule 17Ad-10 (e) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act") a record of
the total number of Shares of each Fund that are
authorized, based upon data provided to it by each Fund or
the Transfer Agent and issued and outstanding, the Bank
shall also provide each Fund on a regular basis with the
total number of Shares which are authorized and issued and
outstanding and shall have no obligation, when recording
the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the
issues or sale of such Shares, which functions shall be
the sole responsibility of each Fund or the Transfer
Agent.
1.2 (a) For reports, the Bank shall:
(i) maintain all Shareholder accounts, prepare meeting, proxy,
and mailing lists, withhold taxes on U.S. resident and
non-resident alien accounts, prepare and file U.S.
Treasury reports required with respect to dividends and
distributions by federal authorities for all Shareholders,
prepare confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other confirmable transactions in Shareholder account
information.
(b) For blue sky reporting the Bank shall provide a system that will
enable each Fund or the Transfer Agent to monitor the total
number of Shares sold in each State, and each Fund or the
Transfer Agency shall:
(i) identify to the Bank in writing those transactions and
assets to be treated as exempt from blue sky reporting for
each State; and
(ii) verify the establishment of transactions for each State on
the system prior to activity for each State, the
responsibility of the Bank for each Fund's blue sky State
registration status is solely limited to the initial
establishment of transactions subject to blue sky
compliance by the Fund or the Transfer Agent and the
reporting of such transactions to the Fund as provided
above.
1.3 Per the attached service responsibility schedule procedures as to who
shall provide certain of the services in Section 1 may be established from time
to time by agreement between the Transfer Agent and the Bank. The Bank may at
times perform only a portion of these services and the Transfer Agent may
perform these services on each Fund's behalf.
1.4 The Bank shall provide additional services on behalf of the Transfer
Agent (i.e., escheat services) as may be agreed upon in writing between the Bank
and the Transfer Agent.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the
Transfer Agent agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section 2.2 below
may be changed from time to time subject to mutual written agreement between the
Transfer Agent and the Bank. For purposes hereof the term account should refer
to any Shareholder account designated as such on the DST mutual fund system (or
any replacement system) provided further that so called omnibus accounts shall
be considered to be a single account.
2.2 In addition to the fees paid under Section 2.1 above, the Transfer
Agent agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by the Bank at the request or with the consent of the
Transfer Agent, will be reimbursed by the Transfer Agent.
<PAGE>
2.3 The Transfer Agent agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to all
accounts shall be advanced to the Bank by the Transfer Agent at least seven (7)
days prior to the mailing date of such materials.
3. Bank as Trustee or Custodian of Retirement Plans
As agreed upon in writing between the parties, the Bank and Transfer Agent
agree that the Bank may serve as the named custodian or trustee of individual
retirement accounts established under section 408 of the Internal Revenue Code
(the "Code"), tax-sheltered plans established under section 403 (b) of the Code,
qualified plans under section 401(a) of the Code, or money purchase plans,
pension plans or profit sharing plans with a cash deferred arrangement under
section 401(k) of the Code (collectively "Retirement Plans").
3.1 The Bank shall provide certain recordkeeping services as more fully
described in the TRAC-2000 Procedures manual provided to the Fund for
Shareholders who become plan participants of Retirement Plans using TRAC-2000
System.
3.2 The Bank shall:
(a) have no investment responsibility for the selection of
investments, no liability for any investments made for Retirement
Plans other than to maintain custody and provide recordkeeping of
the investments subject to the terms of the Agreement; and
(b) not serve as "Plan Administrator" (as defined in the Employee
Retirement Income Securities Act of 1974, as amended) of any
Retirement Plan, or in any other administrative capacity or other
capacity except as trustee or custodian thereof, the Bank shall
not keep records of Retirement Plan accounts except as provided
herein.
3.3 The Transfer Agent agrees that in any communications from the Transfer
Agent or the Funds to any prospective or actual Shareholder, neither the Funds
nor the Transfer Agent shall state or represent that the Bank has any investment
discretion or other power concerning investments of any Retirement Plan or the
Bank shall serve as plan administrator or have any administrative or other
responsibility for the administration or operation of any Retirement Plan. The
Funds, the Funds' designee, or the Transfer Agent as may be required to comply
with the Code and all other applicable federal and state laws shall:
(a) serve as third party administrators of all Retirement Plans; and
(b) provide all Retirement Plan prototype document design, tax form
preparation (excluding services performed by the Bank under
section 1.2 of this Agreement), discrimination testing and
consulting about Retirement Plan qualification and maintenance.
4. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial Code
4.1 The Bank is authorized to promptly debit the appropriate Transfer Agent
account(s) upon the receipt of a payment order in compliance with the selected
security procedure (the "Security Procedure") chosen for funds transfer and in
the amount of money that the Bank has been instructed to transfer. The Bank
shall execute payment orders in compliance with the Security Procedure and with
the Transfer Agent instructions on the execution date provided that such payment
order is received by the customary deadline for processing such a request,
unless the payment order specifies a later time. All payment orders and
communications received after this time-frame will be deemed to have been
received the next business day.
4.2 The Transfer Agent acknowledges that the Security Procedure it has
designated on the Transfer Agent Selection Form was selected by the Transfer
Agent from Security Procedures offered by the Bank. The Transfer Agent shall
restrict access to confidential information relating to the Security Procedure
to authorized persons as communicated to the Bank in writing. The Transfer Agent
must notify the Bank immediately if it has reason to believe unauthorized
persons may have obtained access to such information or of any change in the
Transfer Agent's authorized personnel. The Bank shall verify the authenticity of
all such instructions according to the Security Procedure.
<PAGE>
4.3 The Bank shall process all payment orders on the basis of the account
number contained in the payment order. In the event of a discrepancy between any
name indicated on the payment order and the account number, the account number
shall take precedence and govern.
4.4 When the Transfer Agent initiates or receives Automated Clearing House
("ACH") credit and debit entries pursuant to these guidelines and the rules of
the National Automated Clearing House Association and the New England Clearing
House Association, the Bank will act as an Originating Depository Financial
Institution and/or receiving depository Financial Institution, as the case may
be, with respect to such entries. Credits given by the Bank with respect to an
ACH credit entry are provisional until the Bank receives final settlement for
such entry from the Federal Reserve Bank. If the Bank does not receive such
final settlement, the Transfer Agent agrees that the Bank shall receive a refund
of the amount credited to the Transfer Agent in connection with such entry, and
the party making payment to the Transfer Agent via such entry shall not be
deemed to have paid the amount of the entry.
4.5 The Bank reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of the Bank's receipt of such payment
order; (b) if initiating such payment order would cause the Bank, in the Bank's
sole judgement, to exceed any volume, aggregate dollar, network, time, credit or
similar limits upon wire transfers which are applicable to the Bank; or (c) if
the Bank, in good faith, is unable to satisfy itself that the transaction has
been properly authorized.
4.6 The Bank shall use reasonable efforts to act on all authorized requests
to cancel or amend payment orders received in compliance with the Security
Procedure provided that such requests are received in a timely manner affording
the Bank reasonable opportunity to act. However, the Bank assumes liability if
the request for amendment or cancellation cannot be satisfied.
4.7 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the payment order
instructions as received and the Bank complies with the Security Procedure. The
Security Procedure is established for the purpose of authenticating payment
orders only and not for the detection of errors in payment orders.
4.8 The Bank shall assume no responsibility for lost interest with respect
to the refundable amount of any unauthorized payment order unless the Bank is
notified of the unauthorized payment order within (30) days or notification by
the Bank of the acceptance of such payment order. In no event (including failure
to execute a payment order) shall the Bank be liable for special, indirect or
consequential damages, even if advised of the possibility of such damages.
4.9 Confirmation of Bank's execution of payment orders shall ordinarily be
provided within 24 hours notice of which may be delivered through the Bank's
proprietary information systems, or by facsimile or call-back. Client must
report any objections to the execution of an order within 30 days.
5. Data Access and Proprietary Information
5.1 The Transfer Agent acknowledges that the data bases, computer programs,
screen formats, report formats, interactive design techniques, and other
information furnished to the Transfer Agent by the Bank are provided solely in
connection with the services rendered under this Agreement and constitute
copyrighted trade secrets or proprietary information of substantial value to the
Bank. Such databases, programs, formats, designs, techniques and other
information are collectively referred to below as "Proprietary Information". The
Transfer Agent agrees that it shall treat all Proprietary Information as
proprietary to the Bank and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as expressly
permitted hereunder. The Transfer Agent agrees for itself and its employees and
agents:
(a) to use such programs and databases (i) solely on the Transfer
Agent's computers, or (ii) solely from equipment at the locations
agreed to between the Transfer Agent and the Bank and (iii) in
accordance with the Bank's applicable user documentation;
<PAGE>
(b) to refrain from copying or duplicating in any way (other than in
the normal course of performing processing on the Transfer Agents
computers) any part of any Proprietary Information;
(c) to refrain from obtaining unauthorized access to any programs,
data or other information not owned by the Transfer Agent, and if
such access if accidently obtained, to respect and safeguard the
same Proprietary Information;
(d) to refrain from causing or allowing information transmitted from
the Bank's computer to the Transfer Agent's terminal to be
retransmitted to any other computer terminal or other device
except as expressly permitted by the Bank, such permission not to
be unreasonably withheld;
(e) that the Transfer Agent shall have access only to those
authorized transactions as agreed to between the Transfer Agent
and the Bank; and
(f) to honor reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law and under applicable statutes.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section 5 shall
survive any earlier termination of this Agreement.
6. Indemnification
6.1 The Bank shall not be responsible for, and the Transfer Agent shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payment, expenses and liability arising
out of or attributable to:
(a) all actions of the Bank or its agent or subcontractors required
to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without negligence or willful
misconduct;
(b) the Transfer Agents' lack of good faith, negligence or willful
misconduct;
(c) the reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services
which (i) are received by the Bank or its agents or
subcontractors from the Transfer Agent or its duly authorized
representative, and (ii) have been prepared, maintained or
performed by the Transfer Agent including but not limited to any
previous transfer agent or registrar excluding the Bank;
(d) the reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Transfer
Agent;
(e) the offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
6.2 At any time the Bank may apply to any officer of the Transfer Agent for
instructions, and may consult with legal counsel acceptable to the Transfer
Agent with respect to any matter arising in connection with the services to be
performed by the Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Transfer
Agent for any action taken or omitted by it in reliance upon such instructions
or upon the opinion of such counsel.
The Bank, its agents and subcontractors shall be protected and indemnified
in acting upon any paper or document furnished by or on behalf of the Transfer
Agent, reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine readable
input, telex, tape, CRT data entry or other similar means authorized by the
Transfer Agent, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Transfer Agent.
The Bank, its agents and subcontractors shall also be protected and indemnified
in recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former registrar, or of
a co-transfer agent or co-registrar.
<PAGE>
6.3 In order that the indemnification provisions contained in this Section
6 shall apply, upon the assertion of a claim for which the Transfer Agent may be
required to indemnify the Bank, the Bank shall promptly notify the Transfer
Agent of such assertion, and shall keep the Transfer Agent advised with respect
to all developments concerning such claim. The Transfer Agent shall have the
option to participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank.
The Bank shall in no case confess any claim or make any compromise in any
case in which the Transfer Agent may be required to indemnify the Bank except
with the Transfer Agent's prior written consent.
6.4 The indemnity provisions of Section 6 shall survive any earlier
termination of this Agreement.
7. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best
efforts to insure the accuracy of all services performed under this Agreement,
but assumes no responsibility and shall not be liable for loss or damage due to
errors unless said errors are caused by its negligence, bad faith, or willful
misconduct or that of its employees.
8. Covenants of the Transfer Agent and the Bank
8.1 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Transfer Agent for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
8.2 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of each Fund or the Transfer Agent and will be
preserved, maintained and made available in accordance with such section and
rules, for monitoring by the Transfer Agent, and will be surrendered promptly to
the Transfer Agent on and in accordance with its request. The Bank shall furnish
adequate resources and office space in order to allow the Transfer Agent or any
governmental authority to inspect all books, procedures, information and records
required hereby.
8.3 The Bank and the Transfer Agent agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
8.4 In case of any requests or demands for the inspection of the
Shareholder records of the Transfer Agent, the Bank will endeavor to notify the
Transfer Agent and to secure instructions from an authorized officer of the
Transfer Agent as to such inspection. The Bank reserves the right, however, to
exhibit the Shareholder records to any person, whenever it is advised by counsel
that it may be held liable for the failure to exhibit the Shareholder records to
such person.
9. Representations and Warranties of the Bank
The Bank represents and warrants to the Transfer Agent that:
(a) it is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts;
(b) it is duly qualified to carry on its business in the Commonwealth of
Massachusetts;
(c) it is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement;
(d) all requisite corporation proceedings have been taken to authorize it
to enter into and perform this Agreement;
(e) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement;
<PAGE>
(f) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act.
10. Representations and Warranties of the Transfer Agent
The Transfer Agent represents and warrants to the Bank that:
(a) it is a Connecticut corporation duly organized and existing and in
good standing under the laws of Connecticut;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all corporate proceedings required by said articles of incorporation
and by-law have been taken to authorize it to enter into and perform
this Agreement;
(d) it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act.
11. Termination of Agreement
11.1 This Agreement shall continue for a period of three years (the
"Initial Term") and be renewed or terminated as stated below.
11.2 This Agreement shall terminate upon the termination of the Transfer
Agency Agreement between the Funds and the Transfer Agent.
11.3 This Agreement may be terminated or renewed after the Initial Term by
either party upon ninety (90) days written notice to the other.
11.4 Should either party exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the party exercising its right to terminate. Additionally, the party receiving
the notice to terminate reserves the right to charge the terminating party for
any other reasonable expenses associated with such termination.
12. Assignment
12.1 Except as provided in Section 12.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
12.3 The Bank may, without further consent on the part of the Transfer
Agent, subcontract for the performance hereof with (a) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A (c)(2) of the Exchange Act ("Section
17A (c)(2); (b) National Financial Data Services, Inc., a subsidiary of BFDS
duly registered as a transfer agent pursuant to Section 17A (c)(2) or (c) a BFDS
affiliate; provided, however, that the Bank shall be as fully responsible to the
Transfer Agent for the acts and omissions of any subcontractor as it is for its
own acts and omissions.
13. Amendment
This Agreement may be amended or modified by a written agreement executed
by both parties.
14. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
15. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
<PAGE>
16. Consequential Damages
Neither party to this agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
17. Limitations of Shareholder Liability
The Bank hereby expressly acknowledges that recourse against the Funds
shall be subject to those limitations provided by governing law and the
Declaration of Trust of the Funds, as applicable, and agrees that obligations
assumed by the Funds pursuant to the Transfer Agency Agreement shall be limited
in all cases to the Funds and their respective assets. The Bank shall not seek
satisfaction from the Shareholders or any Shareholders of the Funds, nor shall
the Bank seek satisfaction of any obligations from the Trustees/Directors or any
individual Trustee/Director of the Funds.
18. Merger of Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written.
19. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the 21st day of July 1994.
PHOENIX EQUITY PLANNING CORPORATION
BY: /s/ William R. Moyer
---------------------------------------
William R. Moyer
Senior Vice President, Finance
ATTEST:
/s/Patricia O. McGlaughlin
- -----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/Donald E. Logue
---------------------------
Executive Vice President
ATTEST:
/s/S. Cesso
- -------------------------------
<PAGE>
STATE STREET BANK & TRUST COMPANY
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS PLAN
TRANSFER AND DIVIDEND DISBURSEMENT AGENT
THE PHOENIX FUNDS
PHOENIX SERIES FUNDS
PHOENIX HIGH YIELD FUND SERIES--A & B SHARES
*NATIONAL BOND FUND MERGED WITH A SHARES
PHOENIX U.S. GOVERNMENT SECURITIES FUND SERIES--A & B SHARES
*NATIONAL FEDERAL SECURITIES TRUST MERGED WITH A SHARES
PHOENIX BALANCED FUND SERIES--A & B SHARES
PHOENIX CONVERTIBLE FUND SERIES--A & B SHARES
PHOENIX GROWTH FUND SERIES--A & B SHARES
PHOENIX MONEY MARKET FUND SERIES--A & B SHARES
PHOENIX MULTI PORTFOLIO FUNDS
PHOENIX TAX EXEMPT BOND PORTFOLIO--A & B SHARES
*NATIONAL SECURITIES TAX EXEMPT BONDS MERGED WITH A SHARES
PHOENIX CAPITAL APPRECIATION PORTFOLIO--A & B SHARES
PHOENIX INTERNATIONAL PORTFOLIO--A & B SHARES
PHOENIX ENDOWMENT EQUITY PORTFOLIO
PHOENIX ENDOWMENT FIXED-INCOME PORTFOLIO
OTHER PHOENIX FUNDS
PHOENIX TOTAL RETURN FUND, INC.--A & B SHARES
*NATIONAL TOTAL RETURN MERGED WITH A SHARES
PHOENIX MULTI-SECTOR FIXED INCOME FD, INC.--A & B SHARES
*PHOENIX HIGH QUALITY MERGED WITH A SHARES
PHOENIX EQUITY OPPORTUNITIES FUND--A & B SHARES
*A SHARES FORMERLY NATIONAL STOCK FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND--A & B SHARES
PHOENIX INCOME AND GROWTH FUND--A & B SHARES
PHOENIX CALIFORNIA TAX EXEMPT BOND FUND--A & B SHARES
PHOENIX ASSET RESERVE--A & B SHARES
<PAGE>
STATE STREET BANK & TRUST COMPANY
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS PLAN
TRANSFER AND DIVIDEND DISBURSEMENT AGENT
THE PHOENIX FUNDS
State Street shall charge PEPCO an annual fee based on a per shareholder
account per fund class for the next three (3) years equal to the following:
PHOENIX FEE SCHEDULE
Annual Per Account Fee
1994 $6.75
1995-1996* 1-600,000 ACCTS $7.00
600,000-1,000,000 ACCTS $6.75
OVER 1,000,000 ACCTS $6.60
Monthly Minimum/Fund Applied to Acct. Fee $1,500.00
Annual Closed Account Fee $1.20
Checkwriting Fees:
Per Check Cleared $1.00
Privilege Set-Up $5.00
Annual 12(B)1 Fee (Billed Quarterly) $1.00
Annual Investor Processing Fee
(Per Investor) $1.80
Other Fees: (1994-1996)
Management $27.00-$37.00 Per Hr. Per FTE
Fund Administrator $29.00 Per Hr. Per FTE
All Transfer Agent Functions $22.50 Per Hr. Per FTE
Liaisons Over 4,000/mth $26.00 Per Item
[bullet] This schedule is based on 700K accounts, 26 funds, and 4,000 liaison
items.
[bullet] If the account base decreases significantly, the per account fee will
be reviewed by both parties.
[bullet] If 12(B)1 product is discontinued the annual per account fee will be
increased by $1.00 [bullet]
[bullet] Additional Fund Administrators will be added as new funds are opened
(ratio 1:8) and charged as detailed above.
[bullet] This schedule does not include fees for Image terminals, conversions,
acquisitions, customer service, audio response, 401 recordkeeping, new product
lines, and out-of-pockets.
In witness whereof, Phoenix Equity Planning Corporation and State Street
Bank and Trust Company have agreed upon this fee schedule and have caused this
fee schedule to be executed in their names and on their behalf through their
duly authorized officers for the next three years.
PHOENIX EQUITY PLANNING CORPORATION STATE STREET BANK & TRUST CO.
By /s/Edward P. Hourihan By /s/ Mark Toomey
------------------------ --------------------------
Title Vice President Title Vice President
Date 7/15/94 Date 7/12/74
*The fee for this period shall be adjusted by the parties to reflect then
prevailing levels of service furnished by State Street.
<PAGE>
SUB-TRANSFER AGENCY AND SERVICE AGREEMENT
SERVICE RESPONSIBILITY SCHEDULE
<TABLE>
<CAPTION>
FUNCTIONAL PEPCO BFDS
RESPONSIBILITIES (Transfer Agent) (Sub Transfer Agent)
<S> <C> <C>
A. Transmission Processing:
Remittance Cash Processing X
New Account Setup
[bullet] Regular X
[bullet] Fiduciary X
[bullet] Quality Assurance X
Transfers
[bullet] Regular X
[bullet] Fiduciary X
[bullet] Dealer X
[bullet] Quality Assurance X
Redemptions
[bullet] Regular X
[bullet] Fiduciary X
[bullet] Quality Assurance X
Wire Order
[bullet] Set-Up X
[bullet] Settlement X
[bullet] Quality Assurance X
[bullet] Monitoring of Outstanding Trades X
Maintenance
[bullet] Registration X
[bullet] Rep/Dealer File X *X
[bullet] Sub Files X
[bullet] Quality Assurance X
[bullet] ACH Prenote Reject X
[bullet] All Account Options X
Adjustments (through 12/94)
[bullet] Account Corrections *X
[bullet] LOI Processing *X
[bullet] Year-End Accounts Adjustments *X
[bullet] Sharelot Adjustments *X
[bullet] Bounced Checks *X
[bullet] ACH Cancellations *X
[bullet] Quality Assurance *X
B. Customer Service:
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Telephones X
[bullet] Customer Inquiry X
[bullet] Transaction Line
[bullet] Timer Exchanges *X
[bullet] Liaison Support (Through 12/4) *X
Correspondence X
[bullet] Shareholder/Dealer Letters X
[bullet] Transfer of Assets Letters/Followup X
[bullet] Notice of Levy X
Dealer Services
[bullet] FundsServ/Networking Implementation X
[bullet] Dealer Security Access X
[bullet] Enhancements-Communications/Testing X
???ent Services
[bullet] Product Development/Implementation X
[bullet] Mailings X
[bullet] Year End Reporting X
C. Support:
Image/AWD
[bullet] Scanning X X
[bullet] Work Distribution X
[bullet] Retrieval X
[bullet] Technical Support X
Microfilm/Research Prior Agent X *X
[bullet] Media Production
[bullet] Design/Printing X
[bullet] Marketing Materials X
[bullet] Forms Development X
Corporate Actions
[bullet] Report Generation X
[bullet] Proxy Solicitation X
[bullet] Periodic Financial Activities (DIVs, PACs,
SWPs, etc.) X
Compliance/Regulatory
[bullet] Escheatment X
[bullet] Tax Filings X
[bullet] Lost Shareholder Recovery X
[bullet] BNotice/CNotice Reporting *X
</TABLE>
<PAGE>
<TABLE>
<S> <C>
[bullet] Lost Certificate Processing/SIC *X
[bullet] Reporting
Recon/Control
[bullet] Cash Settlement X
[bullet] Account Reconcilement X
[bullet] Commission Payment X
[bullet] Automated Trade Settlement X
[bullet] Balance Credit Review X
[bullet] Reclaims *X
[bullet] Dividend Processing X
Financial Reporting
[bullet] Billing to the Fund X
Will be internalized to PEPCO
</TABLE>
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 19th day of November, 1997
by and between Phoenix Equity Planning Corporation, a Connecticut corporation
having a place of business located at 100 Bright Meadow Boulevard, Enfield,
Connecticut (the "Financial Agent") and each of the undersigned mutual funds
(hereinafter collectively and singularly referred to as the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the
daily net asset value of shares of the Trust in accordance with instructions
received from time to time from the Board of Trustees of the Trust; which
instructions shall be certified to Financial Agent by the Trust's Secretary.
Financial Agent shall report such net asset value so determined to the Trust and
shall perform such other services as may be requested from time to time by the
Trust as are reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and
in the places required by Rule 31a-2 under the Investment Company Act of 1940,
as amended, those books and records maintained by Financial Agent. Such books
and records are the property of the Trust and shall be surrendered promptly to
the Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of
the Trust, Financial Agent shall receive, within eight days after the end of
each month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted by
it in the exercise of due care in discharging its duties specifically described
hereunder and shall be answerable and accountable only for its own acts and
omissions and not for those of any agent employed by it nor for those of any
bank, trust company, broker, depository, correspondent or other person.
Financial Agent shall be protected in acting upon any instruction, notice,
request, consent, certificate, resolution, or other instrument or paper believed
by Financial Agent to be genuine, and to have been properly executed, and shall,
unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by Financial
Agent hereunder a certificate signed by the Secretary of the Trust. Financial
Agent shall be entitled, with respect to questions of law relating to its duties
hereunder, to advice of counsel (which may be counsel for the Trust) and, with
respect to anything done or omitted by it in good
<PAGE>
faith hereunder in conformity with the advice of or based upon an opinion of
counsel, to be held harmless by the Trust from all claims of loss or damage.
Nothing herein shall protect Financial Agent against any liability to the Trust
or to its respective shareholders to which Financial Agent would otherwise be
subject by reason of its willful misfeasance, bad faith, gross negligence or
reckless disregard of its duties hereunder. Except as provided in this
paragraph, Financial Agent shall not be entitled to any indemnification by the
Trust.
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. Additional funds may become party to this Agreement by notifying the
Financial Agent in writing, and if the Financial agent agrees in writing to
provide its services, such fund shall become a Trust subject to the terms of the
Agreement. Such notification shall include a revised Schedule A reflecting the
new fund(s) as added to the appropriate fund classification(s).
<PAGE>
9. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX CALIFORNIA TAX EXEMPT
BONDS, INC.
PHOENIX EQUITY SERIES FUND
PHOENIX INCOME AND GROWTH FUND
PHOENIX INVESTMENT TRUST 97
PHOENIX MULTI-PORTFOLIO FUND
PHOENIX MULTI-SECTOR FIXED
INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT
TERM BOND FUND
PHOENIX SERIES FUND
PHOENIX STRATEGIC ALLOCATION
FUND, INC.
PHOENIX STRATEGIC EQUITY SERIES FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
By: /s/ Michael E. Haylon
--------------------------------
Michael E. Haylon
Executive Vice President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ Philip R. McLoughlin
--------------------------------
Philip R. McLoughlin
President
<PAGE>
SCHEDULE A
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
Annual Financial Agent Fees shall be based on the following formula:
(1) An incremental schedule applies as follows:
<TABLE>
<S> <C>
Up to $100 million: 5 basis points on average daily net assets
$100 million to $300 million: 4 basis points on average daily net assets
$300 million through $500 million: 3 basis points on average daily net assets
Greater than $500 million: 1.5 basis points on average daily net assets
</TABLE>
A minimum fee will apply as follows:
Money Market $35,000
Equity $50,000
Balanced $60,000
Fixed Income $70,000
International $70,000
REIT $70,000
(2) An additional charge of $12,000 applies for each additional class
of shares above one, over and above the minimum asset-based fee previously
noted.
The following tables indicates the classification and effective date
for each of the applicable fund/series/portfolio:
Classification Series Name
-------------- -----------
Money Market Phoenix Money Market Fund Series
Equity Phoenix Aggressive Growth Fund Series
Phoenix Core Equity Fund
Phoenix Equity Opportunities Fund
Phoenix Growth and Income Fund
Phoenix Growth Fund Series
Phoenix Micro Cap Fund
Phoenix Mid Cap Portfolio
Phoenix Small Cap Fund
Phoenix Small Cap Value Fund
Phoenix Strategic Theme Fund
Phoenix Value Equity Fund
<PAGE>
Classification Series Name
-------------- -----------
Balanced Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Income and Growth Fund
Phoenix Strategic Allocation Fund, Inc.
Fixed Income Phoenix California Tax Exempt Bonds, Inc.
Phoenix Strategic Income Fund
Phoenix Emerging Markets Bond Portfolio
Phoenix High Yield Fund Series
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Tax-Exempt Bond Portfolio
Phoenix U.S. Government Securities Fund Series
International Phoenix International Portfolio
Phoenix Worldwide Opportunities Fund
REIT Phoenix Real Estate Securities Portfolio
Exhibit 11
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. 9 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 12, 1997, relating to the financial
statements and financial highlights appearing in the October 31, 1997 Annual
Report to Shareholders of the Phoenix Multi-Sector 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 "Other Information -- Independent Accountants"
in the Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 25, 1998
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
(the "Fund")
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class A shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class A shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up
to a maximum on an annual basis of .05% the average daily value of the net
assets of the Fund's Class A shares, subject to any applicable restrictions
imposed by rules of the National Association of Securities Dealers, Inc., for
distribution expenditures incurred by Distributor subsequent to the
effectiveness of this Plan, in connection with the sale and promotion of the
Class A shares of the Fund and the furnishing of services to Class A
shareholders of the Fund. Such expenditures shall consist of: (i) commissions to
sales personnel for selling Class A shares of the Fund (including underwriting
commissions and finance charges related to the payment of commissions); (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into selling agreements with the Distributor for services
rendered in connection with the sale and distribution of Class A shares of the
Fund; (iv) payment of expenses incurred in sales and promotional activities,
including advertising expenditures related to the Class A shares of the Fund;
(v) the costs of preparing and distributing promotional materials; (vi) the cost
of printing the Fund's Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Fund determine are reasonably calculated to result in the
sale of Class A shares of the Fund. The Fund shall also pay the Distributor, at
the end of each month, an amount on an annual basis equal to 0.25% of the
average daily value of the net assets of the Fund's Class A shares, as
compensation for providing personal service to shareholders, including
assistance in connection with inquiries relating to shareholder accounts, and
for maintaining shareholder accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement
with any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class A shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its
adoption and may be continued thereafter if specifically approved at least
annually by a vote of at least a majority of the Trustees of the Fund as well as
a majority of the Disinterested Trustees. This Plan may be amended at any time,
provided that (a) the Plan may not be amended to increase materially the amount
of the distribution expenses provided in Paragraph 2 hereof (including the
Service Fee) without the approval of at least a majority of the outstanding
voting securities (as defined in the Act) of the Class A shares of the Fund and
(b) all material amendments to this Plan must be approved by a majority vote of
the Trustees of the Fund and of the Disinterested Trustees cast in person at a
meeting called for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
------------------------------------
While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a)
such agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class A shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class A shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
------------
The Fund's Declaration of Trust dated February 20, 1992, a copy of
which, together with the amendments thereto ("Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, 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 may be held to any personal liability, nor may any resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund but the Fund property only
shall be liable.
[Adopted at a duly held meeting of the Board of Trustees on August 27, 1997.]
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
(the "Fund")
CLASS B SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class B shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class B shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up
to a maximum on an annual basis of .50% of the average daily value of the net
assets of the Fund's Class B shares, subject to any applicable restrictions
imposed by rules of the National Association of Securities Dealers, Inc., for
distribution expenditures incurred by Distributor subsequent to the
effectiveness of this Plan, in connection with the sale and promotion of the
Class B shares of the Fund and the furnishing of services to Class B
shareholders of the Fund. Such expenditures shall consist of: (i) commissions to
sales personnel for selling Class B shares of the Fund (including underwriting
commissions and finance charges related to the payment of commissions); (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into selling agreements with the Distributor for services
rendered in connection with the sale and distribution of Class B shares of the
Fund; (iv) payment of expenses incurred in sales and promotional activities,
including advertising expenditures related to the Class B shares of the Fund;
(v) the costs of preparing and distributing promotional materials; (vi) the cost
of printing the Fund's Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Fund determine are reasonably calculated to result in the
sale of Class B shares of the Fund. The Fund shall also pay the Distributor, at
the end of each month, an amount on an annual basis equal to 0.25% of the
average daily value of the net assets of the Fund's Class B shares, as
compensation for providing personal service to shareholders, including
assistance in connection with inquiries relating to shareholder accounts, and
for maintaining shareholder accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement
with any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class B shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its
adoption and may be continued thereafter if specifically approved at least
annually by a vote of at least a majority of the Trustees of the Fund as well as
a majority of the Disinterested Trustees. This Plan may be amended at any time,
provided that (a) the Plan may not be amended to increase materially the amount
of the distribution expenses provided in Paragraph 2 hereof (including the
Service Fee) without the approval of at least a majority of the outstanding
voting securities (as defined in the Act) of the Class B shares of the Fund and
(b) all material amendments to this Plan must be approved by a majority vote of
the Trustees of the Fund and of the Disinterested Trustees cast in person at a
meeting called for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
------------------------------------
While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a)
such agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class B shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class B shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
------------
The Fund's Declaration of Trust dated February 20, 1992, a copy of
which, together with the amendments thereto ("Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, 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 may be held to any personal liability, nor may any resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund but the Fund property only
shall be liable.
[Adopted at a duly held meeting of the Board of Trustees on August 27, 1997.]
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
(the "Fund")
CLASS C SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class C shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class C shareholders.
2. Rule 12b-1 Fees
---------------
The Fund shall reimburse the Distributor, at the end of each month, up
to a maximum on an annual basis of .25% of the average daily value of the net
assets of the Fund's Class C shares, subject to any applicable restrictions
imposed by rules of the National Association of Securities Dealers, Inc., for
distribution expenditures incurred by Distributor subsequent to the
effectiveness of this Plan, in connection with the sale and promotion of the
Class C shares of the Fund and the furnishing of services to Class C
shareholders of the Fund. Such expenditures shall consist of: (i) commissions to
sales personnel for selling Class C shares of the Fund (including underwriting
commissions and finance charges related to the payment of commissions); (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into selling agreements with the Distributor for services
rendered in connection with the sale and distribution of Class C shares of the
Fund; (iv) payment of expenses incurred in sales and promotional activities,
including advertising expenditures related to the Class C shares of the Fund;
(v) the costs of preparing and distributing promotional materials; (vi) the cost
of printing the Fund's Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Fund determine are reasonably calculated to result in the
sale of Class C shares of the Fund. The Fund shall also pay the Distributor, at
the end of each month, an amount on an annual basis equal to 0.25% of the
average daily value of the net assets of the Fund's Class C shares, as
compensation for providing personal service to shareholders, including
assistance in connection with inquiries relating to shareholder accounts, and
for maintaining shareholder accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement
with any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
-------
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
-----------------
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class C shares (as
such phrase is defined in the Act).
5. Term
----
This Plan shall remain in effect for one year from the date of its
adoption and may be continued thereafter if specifically approved at least
annually by a vote of at least a majority of the Trustees of the Fund as well as
a majority of the Disinterested Trustees. This Plan may be amended at any time,
provided that (a) the Plan may not be amended to increase materially the amount
of the distribution expenses provided in Paragraph 2 hereof (including the
Service Fee) without the approval of at least a majority of the outstanding
voting securities (as defined in the Act) of the Class C shares of the Fund and
(b) all material amendments to this Plan must be approved by a majority vote of
the Trustees of the Fund and of the Disinterested Trustees cast in person at a
meeting called for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
------------------------------------
While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
------------------
Any related agreement shall be in writing and shall provide that (a)
such agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class C shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
-----------
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class C shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
-------
The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
------------
The Fund's Declaration of Trust dated February 20, 1992, a copy of
which, together with the amendments thereto ("Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, 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 may be held to any personal liability, nor may any resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund but the Fund property only
shall be liable.
[Adopted by the sole initial Class C shareholder on October 1, 1997]
PHOENIX FUNDS
(the "Funds")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
------------
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Funds shall offer
multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this
Plan.
2. The Multi-Class Structure
-------------------------
The portfolios of the Funds listed on Schedule A hereto shall offer up
to four classes of shares as indicated on Schedule A: Class A, Class B, Class C
and Class M ("Multi-Class Portfolios"). Shares of the Multi-Class Portfolios
shall represent an equal pro rata interest in the respective Multi-Class
Portfolio and, generally, shall have identical voting, dividend, liquidation,
and other rights, preferences, powers, restrictions, limitations, qualifications
and terms and conditions, except that: (a) each class shall have a different
designation; (b) each class shall bear any Class Expenses, as defined by Section
2(b), below; (c) each class shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its distribution arrangement;
and (d) each class shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. In addition, Class A, Class B, Class C and Class M shares shall
have the features described in Sections a, b, c and d, below.
a. Distribution Plans
The Funds have adopted Distribution Plans pursuant to Rule 12b-1 with
respect to each Multi-Class Portfolio, containing substantially the following
terms:
i. Class A shares of each Multi-Class Portfolio shall
reimburse Phoenix Equity Planning Corporation (the "Distributor") for costs and
expenses incurred in connection with distribution and marketing of shares
thereof, as provided in the Class A Distribution Plan and any supplements
thereto, subject to an annual limit of 0.25%, or in some cases 0.30%, of the
average daily net assets of a Multi-Class Portfolio's Class A shares.
<PAGE>
-2-
ii. Class B shares of each Multi-Class Portfolio shall
reimburse the Distributor for costs and expenses incurred in connection with
distribution and marketing of shares thereof, as provided in the Class B
Distribution Plan and any supplements thereto, subject to an annual limit of
1.00% of the average daily net assets of a Multi-Class Portfolio's Class B
shares.
iii. Class C shares of each Multi-Class Portfolio shall
reimburse the Distributor for costs and expenses incurred in connection with
distribution and marketing of shares thereof, as provided in the Class C
Distribution Plan and any supplements thereto, subject to an annual limit of
1.00%, or in some cases 0.50%, of the average daily net assets of a Multi-Class
Portfolio's Class C shares.
iv. Class M shares of each Multi-Class Portfolio shall
reimburse the Distributor for costs and expenses incurred in connection with
distribution and marketing of shares thereof, as provided in the Class M
Distribution Plan and any supplements thereto, subject to an annual limit of
0.50% of the average daily net assets of a Multi-Class Portfolio's Class M
shares.
b. Allocation of Income and Expenses
i. General.
The gross income, realized and unrealized capital gains and
losses and expenses (other than Class Expenses, as defined below) of each
Multi-Class Portfolio shall be allocated to each class on the basis of its net
asset value relative to the net asset value of the Multi-Class Portfolio.
Expenses to be so allocated include expenses of the Funds that are not
attributable to a particular Multi-Class Portfolio or class of a Multi-Class
Portfolio but are allocated to a Multi-Class Portfolio ("Fund Expenses") and
expenses of a particular Multi-Class Portfolio that are not attributable to a
particular class of that Multi-Class Portfolio ("Portfolio Expenses"). Fund
Expenses include, but are not limited to, trustees' fees, insurance costs and
certain legal fees. Portfolio Expenses include, but are not limited to, certain
state registration fees, custodial fees, advisory fees and other expenses
relating to the management of the Multi-Class Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (1) transfer agency fees; (2) stationery, printing,
postage, and delivery expenses relating to preparing and distributing
shareholder reports, prospectuses, and proxy statements; (3) state Blue Sky
registration fees; (4) SEC registration fees; (5) expenses of administrative
personnel and services to the extent related to another category of
class-specific expenses; (6) trustees' fees and expenses; (7) accounting
expenses, auditors' fees, litigation expenses, and legal fees and expenses; and
(8) expenses incurred in connection with shareholder meetings. Expenses
described in subsection (a) (i) and (ii) above of this paragraph must be
allocated to the class for which they are incurred. All other expenses described
in this paragraph will be allocated as Class
<PAGE>
-3-
Expenses, if a Fund's President and Treasurer have determined, subject to Board
approval or ratification, which of such categories of expenses will be treated
as Class Expenses, consistent with applicable legal principles under the 1940
Act and the Internal Revenue Code of 1986, as amended ("Code"). The difference
between the Class Expenses allocated to each share of a class during a year and
the Class Expenses allocated to each share of any other class during such year
shall at all times be less than .50% of the average daily net asset value of the
class of shares with the smallest average net asset value. The afore-described
description of Class Expenses and any amendment thereto shall be subject to the
continuing availability of an opinion of counsel or a ruling from the Internal
Revenue Service to the effect that any such allocation of expenses or the
assessment of higher distribution fees and transfer agency costs on any class of
shares does not result in any dividends or distributions constituting
"preferential dividends" under the Code.
In the event that a particular expense is no longer reasonably
allocable by class or to a particular class, it shall be treated as a Fund
Expense or Portfolio Expense as applicable, and in the event a Fund Expense or
Portfolio Expense becomes allocable as a Class Expense, it shall be so
allocated, subject to compliance with Rule 1 8f-3 and Board approval or
ratification.
The initial determination of expenses that will be allocated
as Class Expenses and any subsequent changes thereto as set forth in this Plan
shall be reviewed by the Board of Trustees and approved by such Board and by a
majority of the Trustees who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Trustees").
iii. Waivers or Reimbursements of Expenses.
Investment Advisor may waive or reimburse its management fee
in whole or in part provided that the fee is waived or reimbursed to all shares
of the Fund in proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a
Class Expense may waive or reimburse that fee in whole or in part only if the
revised fee more accurately reflects the relative cost of providing to each
Multi-Class Portfolio the service for which the Class Expense is charged.
Distributor may waive or reimburse a Rule 12b-1 Plan fee
payment in whole or in part.
c. Exchange Privileges
Shareholders of a Multi-Class Portfolio may exchange shares of a
particular class for shares of the same class in another Multi-Class Portfolio,
at the relative net asset values of the respective shares to be exchanged and
with no sales charge, provided the shares to be acquired in the exchange are, as
may be necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount. Each
Multi-Class
<PAGE>
-4-
Portfolio reserves the right to temporarily or permanently terminate exchange
privileges, impose conditions upon the exercision of exchange privileges, or
reject any specific order for any dealer, shareholder or person whose
transactions seem to follow a timing pattern, including those who request more
than one exchange out of a Multi-Class Portfolio within any thirty (30) day
period. Each Multi-Class Portfolio reserves the right to terminate or modify
these exchange privileges at any time upon giving prominent notice to
shareholders at least 60 days in advance.
d. Conversion Feature
Class B Shares of a Multi-Class Portfolio will automatically convert to
Class A Shares of that portfolio, without sales charge, at the relative net
asset values of each such classes, not later than eight years from the
acquisition of the Class B Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of an opinion of counsel or a
ruling from the Internal Revenue Service to the effect that the conversion of
shares does not constitute a taxable event under federal income tax law.
3. Board Review
------------
a. Approval of Amended and Restated Plan
The Board of Trustees, including a majority of the Independent
Trustees, at a meeting held on November 19, l997, approved the Amended and
Restated Plan based on a determination that the Plan, including the expense
allocation, is in the best interests of each class and Multi-Class Portfolio
individually and of the Funds. Their determination was based on their review of
information furnished to them which they deemed reasonably necessary and
sufficient to evaluate the Plan.
b. Approval of Amendments
The Plan may not be amended materially unless the Board of Trustees,
including a majority of the Independent Trustees, have found that the proposed
amendment, including any proposed related expense allocation, is in the best
interests of each class and Multi-Class Portfolio individually and of the Funds.
Such funding shall be based on information required by the Board and furnished
to them that the Board deems reasonably necessary to evaluate the proposed
amendment.
c. Periodic Review
The Board shall review reports of expense allocations and such other
information as they request at such times, or pursuant to such schedule, as they
may determine consistent with applicable legal requirements.
<PAGE>
-5-
4. Contracts
---------
Any agreement related to the Multi-Class System shall require the
parties thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
--------------
The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of the
first day of each Fund's current fiscal year.
6. Amendments
----------
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3(b) of this
Plan.
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Class A Class B Class C Class M
------- ------- ------- -------
<S> <C> <C> <C> <C>
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC. X X __ __
PHOENIX EQUITY SERIES FUND:
PHOENIX CORE EQUITY FUND X X X X
PHOENIX GROWTH AND INCOME FUND X X X X
PHOENIX INCOME AND GROWTH FUND X X __ __
PHOENIX INVESTMENT TRUST 97:
PHOENIX SMALL CAP VALUE FUND X X X X
PHOENIX VALUE EQUITY FUND X X X X
PHOENIX MULTI-PORTFOLIO FUND:
EMERGING MARKETS BOND PORTFOLIO X X X X
INTERNATIONAL PORTFOLIO X X __ __
MID CAP PORTFOLIO X X __ __
REAL ESTATE SECURITIES PORTFOLIO X X __ __
STRATEGIC INCOME PORTFOLIO X X X X
TAX-EXEMPT BOND PORTFOLIO X X __ __
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC. X X X X
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND X X X __
PHOENIX SERIES FUND:
AGGRESSIVE GROWTH FUND SERIES X X __ __
BALANCED FUND SERIES X X __ __
CONVERTIBLE FUND SERIES X X __ __
GROWTH FUND SERIES X X __ __
HIGH YIELD FUND SERIES X X X X
MONEY MARKET FUND SERIES X X X X
U.S. GOVERNMENT SECURITIES FUND
SERIES X X __ __
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND X X __ __
MICRO CAP FUND X X __ __
SMALL CAP FUND X X __ __
STRATEGIC THEME FUND X X X X
PHOENIX STRATEGIC ALLOCATION FUND, INC. X X __ __
PHOENIX WORLDWIDE OPPORTUNITIES FUND X X __ __
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 42950
<INVESTMENTS-AT-VALUE> 42951
<RECEIVABLES> 6681
<ASSETS-OTHER> 672
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50304
<PAYABLE-FOR-SECURITIES> 10684
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 170
<TOTAL-LIABILITIES> 10854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38626
<SHARES-COMMON-STOCK> 5646
<SHARES-COMMON-PRIOR> 2792
<ACCUMULATED-NII-CURRENT> 12
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 811
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1
<NET-ASSETS> 39450
<DIVIDEND-INCOME> 48
<INTEREST-INCOME> 2134
<OTHER-INCOME> 0
<EXPENSES-NET> (331)
<NET-INVESTMENT-INCOME> 1851
<REALIZED-GAINS-CURRENT> 864
<APPREC-INCREASE-CURRENT> (214)
<NET-CHANGE-FROM-OPS> 2501
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1359
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5034
<NUMBER-OF-SHARES-REDEEMED> (2409)
<SHARES-REINVESTED> 230
<NET-CHANGE-IN-ASSETS> 14855
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 16
<OVERDIST-NET-GAINS-PRIOR> 41
<GROSS-ADVISORY-FEES> 159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 584
<AVERAGE-NET-ASSETS> 28930
<PER-SHARE-NAV-BEGIN> 4.91
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> (0.33)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.06
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 42950
<INVESTMENTS-AT-VALUE> 42951
<RECEIVABLES> 6681
<ASSETS-OTHER> 672
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50304
<PAYABLE-FOR-SECURITIES> 10684
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 170
<TOTAL-LIABILITIES> 10854
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38626
<SHARES-COMMON-STOCK> 2038
<SHARES-COMMON-PRIOR> 1211
<ACCUMULATED-NII-CURRENT> 12
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 811
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1
<NET-ASSETS> 39450
<DIVIDEND-INCOME> 48
<INTEREST-INCOME> 2134
<OTHER-INCOME> 0
<EXPENSES-NET> (331)
<NET-INVESTMENT-INCOME> 1851
<REALIZED-GAINS-CURRENT> 864
<APPREC-INCREASE-CURRENT> (214)
<NET-CHANGE-FROM-OPS> 2501
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 500
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1105
<NUMBER-OF-SHARES-REDEEMED> (347)
<SHARES-REINVESTED> 70
<NET-CHANGE-IN-ASSETS> 4375
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 16
<OVERDIST-NET-GAINS-PRIOR> 41
<GROSS-ADVISORY-FEES> 159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 584
<AVERAGE-NET-ASSETS> 28930
<PER-SHARE-NAV-BEGIN> 4.91
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.06
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
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