As filed with the Securities and Exchange Commission on March 1, 1999
Registration No. 33-45758
File No. 811-6566
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 11 [X]
and/or
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes.)
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Phoenix Multi-Sector Short Term Bond Fund
(Exact Name of Registrant as Specified in Charter)
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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)
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Pamela S. Sinofsky
Compliance Officer
Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective
(check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
Cross Reference Sheet Pursuant to Rule 495
PART A
<TABLE>
<CAPTION>
Item Number Form N-1A, Part A Prospectus Caption
- ----------------------------- ------------------
<S> <C> <C>
1. Front and Back Cover Pages .................................. Cover Page, Back Cover Page
2. Risk/Return Summary: Investments, Risk Performance .......... Investment Risk and Return Summary
3. Risk/Return Summary: Fee Table .............................. Fund Expenses
4. Investment Objectives, Principal Investment Strategies Investment Risk and Return Summary; Investment
and Related Risks ........................................... Strategies; Risks Related to Investment Strategies
5. Management's Discussion of Fund Performance ................. Performance Tables
6. Management, Organization, and Capital Structure ............. Management of the Fund
7. Shareholder Information ..................................... Pricing of Fund Shares; Sales Charges; Your Account;
How to Buy Shares; How to Sell Shares; Things to
Know When Selling Shares; Account Policies; Investor
Services; Tax Status
8. Distribution Arrangements ................................... Sales Charges
9. Financial Highlight Information ............................. Financial Highlights
</TABLE>
PART B
<TABLE>
<CAPTION>
Item Number Form N-1A, Part B Statement of Additional Information Caption
- ----------------------------- -------------------------------------------
<S> <C> <C>
10. Cover Page and Table of Contents ............................. Cover Page, Table of Contents
11. Fund History ................................................. The Fund
12. Description of the Fund and Its Investment Risks ............. Investment Objectives and Policies; Investment
Restrictions
13. Management of the Fund ....................................... Management of the Fund
14. Control Persons and Principal Holders of Securities .......... Management of the Fund
15. Investment Advisory and Other Services ....................... Services of the Adviser, The Distributor; Distribution
Plans; Other Information
16. Brokerage Allocation and Other Practices ..................... Portfolio Transactions and Brokerage
17. Capital Stock and Other Securities ........................... Other Information
18. Purchase, Redemption, and Pricing of Shares .................. Net Asset Value; How to Buy Shares; Investor Account
Services; Redemption of Shares; Tax Sheltered
Retirement Plans
19. Taxation of the Fund ......................................... Dividends, Distributions and Taxes
20. Underwriters ................................................. The Distributor
21. Calculation of Performance Data .............................. Performance Information
22. Financial Statements ......................................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this registration statement.
<PAGE>
[FRONT COVER]
Phoenix Investment Partners
March 1, 1999
Prospectus
Phoenix Multi-Sector
Fixed Income Fund
Phoenix Multi-Sector
Short Term Bond Fund
Neither the Securities and Exchange
Commission nor any state securities
commission has approved or
disapproved of these securities or
determined if this prospectus is
truthful or complete. Any representation
to the contrary is a criminal offense.
This prospectus contains important
information that you should know
before investing in the Phoenix
Multi-Sector Fixed Income Fund, Inc.
and the Phoenix Multi-Sector Short Term
Bond Fund. Please read it carefully
and retain it for future reference.
[LOGO] PHOENIX
INVESTMENT PARTNERS, LTD.
<PAGE>
Table of Contents
- -----------------------------------------------------
<TABLE>
<S> <C> <C>
Phoenix Multi-Sector Fixed Income Fund, Inc.
Investment Risk and Return Summary ................ 1
Fund Expenses ..................................... 5
Investment Strategies ............................. 6
Risks Related to Investment Strategies ............ 8
Phoenix Multi-Sector Short Term Bond Fund
Investment Risk and Return Summary ................ 13
Fund Expenses ..................................... 17
Investment Strategies ............................. 18
Risks Related to Investment Strategies ............ 20
Management of the Funds ............................. 24
Pricing of Fund Shares .............................. 25
Sales Charges ....................................... 26
Your Account ........................................ 29
How to Buy Shares ................................... 31
How to Sell Shares .................................. 31
Things You Should Know When Selling Shares .......... 32
Account Policies .................................... 33
[arrow] Multi- Investor Services ................................... 35
Sector Tax Status of Distributions ......................... 35
Funds Financial Highlights ................................ 36
Additional Information .............................. 42
</TABLE>
<PAGE>
Phoenix Multi-Sector Fixed Income Fund, Inc.
Investment Risk and Return Summary
- -------------------------------------------------------
Investment Objective
Phoenix Multi-Sector Fixed Income Fund has a primary objective
to maximize current income while preserving capital. There is no
guarantee that the fund will achieve its objective.
Principal Investment Strategies
[arrow] The fund uses a "sector rotation" approach to select
investments. The adviser will seek to adjust the
proportions of the fund's investment in the various
sectors and the selection of investments within sectors
to obtain higher relative returns. In selecting
investments to buy and sell for the fund, the adviser
will evaluate general economic and financial conditions
and the specific issuer's business, management, cash,
assets, earnings and stability.
[arrow] The fund will invest at least 65% of its total assets in
the following sectors of fixed income securities:
o Securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies,
authorities or instrumentalities, including CMOs,
REMICs and other pass-through securities with
maturities of 30 years or less;
o Debt securities issued by foreign issuers with
maturities of 15 years or less, including foreign
governments and their political subdivisions;
o Investment grade securities with maturities of 25
years or less, including short-term securities; and
o High yield, high risk fixed income securities of U.S.
issuers (so called "junk bonds") with maturities of 25
years or less.
[arrow] The fund may invest up to 50% of its assets in "junk
bonds."
[arrow] The fund may invest any amount of its assets in any
sector (other than "junk bonds"), or may not invest in a
particular sector at all.
[arrow] The dollar weighted average maturity of securities in
each sector will vary significantly from time to time
based on the adviser's interest rate expectations, the
maturity and prepayment of securities currently held in
the fund and maturities of securities available for
purchase.
[arrow] The fund may invest up to 25% of its net assets in
securities purchased on a when-issued or delayed-
delivery basis.
Phoenix Multi-Sector Fixed Income Fund, Inc. 1
<PAGE>
[arrow] The fund may invest up to 15% of its assets in a
combination of zero coupon, step coupon and payment in
kind ("PIK") bonds.
{arrow] The fund's portfolio turnover rate will not be a
limiting factor when the adviser deems it desirable to
sell or purchase securities.
Principal Risks
If you invest in this fund you risk that you may lose your
investment.
If the adviser misjudges the return potential, or the ability of
issuers to make scheduled principal and interest payments, the
fund's returns may be lower than prevailing returns and the
fund's income available for distribution may be less than other
funds. Neither the fund nor the adviser can assure you that a
particular level of income will consistently be achieved. In
addition, the value of fund assets is inversely related to
interest rates. If interest rates rise, generally the value of
fund investments will fall.
The fund may invest up to 50% of its assets in high risk, high
yield securities (so called "junk bonds"). High risk high yield
securities present a greater risk that the issuer will not be
able to make interest or principal payments on time. If this
happens, the fund would lose income and could expect a decline
in the market value of the securities. Likewise, the value of
junk bonds is inversely related to interest rates. If interest
rates rise, the value of securities generally falls.
Obligations issued or guaranteed by the U.S. government,
agencies, authorities and instrumentalities only guarantee
principal and interest will be timely paid to holders of the
securities. The entities do not guarantee that the value of fund
shares will increase.
The value of CMOs, REMICs and other pass-through securities may
fluctuate to a greater degree than other debt securities in
response to changes in interest rates. The market for these
securities can be less liquid. These mortgage backed type
securities may also be subject to prepayment risk.
Unrated securities may not have as broad a market as rated
securities and it can be more difficult to assess their risk as
compared to rated securities.
The fund may invest in issuers in foreign countries including
"emerging market" countries (countries with markets that are not
fully developed). Political and economic uncertainty as well as
less public information about investments may negatively impact
the fund's portfolio. Some investments may be made in currencies
other than U.S. dollars that will fluctuate in value as a result
of changes in the currency exchange rate. Foreign markets and
currencies may not perform as well as U.S. markets. Emerging
market countries and companies doing business in emerging
markets may not have the same range of opportunities as
countries and their companies in developed nations. They may
also have more obstacles to financial success.
Although the fund intends to invest in all four market sectors,
it may invest all of its assets in only one market sector.
Conditions which negatively affect this one sector will have a
greater impact on the fund as compared to when the fund invests
in more than one sector.
2 Phoenix Multi-Sector Fixed Income Fund, Inc.
<PAGE>
The fund may invest in securities with long-term maturities.
Long-term maturities present a greater risk that economic and
market conditions may negatively impact expected returns of the
security and typically, securities with long-term maturities are
more sensitive to interest rate movements than shorter term
securities.
Securities purchased on a when-issued or delayed-delivery basis
risk that the value of the security on settlement date may be
more or less than the price paid. If it is less, the value of
your shares may decline.
The fund may invest in zero coupon, step coupon and PIK bonds.
The market prices of these securities generally are more
volatile than the market prices of securities that pay interest
at regular intervals. The fund may still have to distribute, on
a current basis, interest earned on these securities but not yet
paid to the fund. The fund may have to distribute cash obtained
from other sources in order to satisfy its distribution
requirements.
Phoenix Multi-Sector Fixed Income Fund, Inc. 3
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix Multi-Sector Fixed Income
Fund, Inc. The bar chart shows changes in the fund's Class A
Shares performance from year to year over the life of the
fund.(1) The table below shows how the fund's average annual
returns for one and five years and life of the fund compare to
those of a broad-based securities market index. The fund's past
performance is not necessarily an indication of how the fund
will perform in the future.
[TABULAR REPRESENTATION OF BAR CHART]
Multi-Sector Fixed Income Fund
Annual Return (%)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5.29% 28.25% 12.06% 15.56% -6.71% 19.81% 13.55% 8.99% -6.87%
Calendar Year
</TABLE>
(1) The fund's average annual returns in the chart above do not
reflect the deduction of any sales charges. The returns would
have been less than those shown if sales charges were deducted.
During the period shown in the chart above, the highest return
for a quarter was 9.95% (quarter ending June 30, 1995) and the
lowest return for a quarter was (11.70)% (quarter ending
September 30, 1998).
<TABLE>
<CAPTION>
Life of the fund(2)
--------------------------------------
Average Annual Total Returns
(for the periods ending 12/31/98)(1) One Year Five Years Class A Class B Class C
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares (11.29)% 4.17% 8.79% -- --
Class B Shares (10.88)% 4.40% -- 6.72% --
Class C Shares (7.36)% N/A -- -- 8.15%
Lehman Brothers Aggregate Bond Index(3) 8.69% 7.27% 8.62% 8.33% 9.30%
</TABLE>
(1) The fund's average annual returns in the table above reflect
the deduction of the maximum sales charge for an investment in
the fund's Class A Shares and a full redemption in the fund's
Class B and C Shares.
(2) Class A Shares since December 18, 1989, Class B Shares since
January 3, 1992, and Class C Shares since October 14, 1997.
(3) 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. The index's
performance does not include sales charges.
4 Phoenix Multi-Sector Fixed Income Fund, Inc.
<PAGE>
Fund Expenses
- -------------------------------
This table illustrates all fees and expenses that you may pay if
you buy and hold shares of the fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- -------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 4.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of the lesser None 5%(a) 1% during the
of the value redeemed or the amount invested) first year
Maximum Sales Charge (load) Imposed on Reinvested Dividends None None None
Redemption Fee None None None
Exchange Fee None None None
---------------------------------------
Class A Class B Class C
Shares Shares Shares
------- ------- -------
Annual Fund Operating Expenses (expenses that are
deducted from fund assets)
Management Fees 0.55% 0.55% 0.55%
Distribution and Service (12b-1) Fees(b) 0.25% 1.00% 1.00%
Other Expenses 0.28% 0.28% 0.28%
---- ---- ----
Total Annual Fund Operating Expenses 1.08% 1.83% 1.83%
==== ==== ====
</TABLE>
- ----------------
(a) The maximum deferred sales charge is imposed on Class B Shares redeemed
during the first year; thereafter, it decreases 1% annually to 2% during the
fourth and fifth years and to 0% after the fifth year.
(b) Distribution and Service 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").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Class 1 year 3 years 5 years 10 years
- ---------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
Class A $580 $802 $1,042 $1,730
Class B $586 $776 $ 990 $1,951
Class C $286 $576 $ 990 $2,148
</TABLE>
Phoenix Multi-Sector Fixed Income Fund, Inc. 5
<PAGE>
You would pay the following expenses if you did not redeem your
shares:
<TABLE>
<CAPTION>
Class 1 year 3 years 5 years 10 years
- ---------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A $580 $802 $1,042 $1,730
Class B $186 $576 $ 990 $1,951
Class C $186 $576 $ 990 $2,148
</TABLE>
Investment Strategies
- --------------------------------------
Investment Objective
The fund has an investment objective to maximize current income
while preserving capital. There is no guarantee that the fund
will achieve its objective.
Principal Investment Strategies
The fund uses a "sector rotation" approach to selecting
investments. The adviser will diversify investments among
several categories or "sectors" of fixed income securities.
While the adviser cannot control either the general interest
rate environment or levels of return of securities on an
absolute basis, the adviser will seek to adjust the proportions
of the fund's investment in the various sectors and the
selection of investments within sectors to obtain higher returns
on a relative basis.
At least 65% of the fund's total assets will be invested in one
or more of the following four sectors of fixed income
securities:
o U.S. Government Securities. Securities issued or guaranteed as
to principal and interest by the U.S. Government, its
agencies, authorities or instrumentalities. Securities in this
sector include U.S. Treasury obligations, securities issued by
the Government National Mortgage Association (GNMA), the
Federal Home Loan Mortgage Corporation (FHLMC), the Federal
National Mortgage Association (FNMA) and Student Loan
Marketing Association (SLMA), as well as CMOs, REMICs and
other securities collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC or FNMA.
o Foreign Securities. Debt securities issued by foreign issuers,
including foreign governments and their political subdivisions
and issuers and non-government issuers considered creditworthy
by the adviser. Issuers may be in developed countries as well
as emerging market countries. Investments in non-U.S. dollar
securities and currency will be evaluated on the basis of
fundamental economic criteria, inflation level and trends,
growth rate forecasts and technical and political data.
6 Phoenix Multi-Sector Fixed Income Fund, Inc.
<PAGE>
o Investment Grade Securities. Securities of U.S. issuers of all
types of long or short-term debt obligations including bonds,
debentures, municipal bonds, equipment lease and trust
certificates, asset-backed securities, pass-through
securities, REMICs and CMOs, sales contracts and commercial
paper.
o High Yield-High Risk Securities ("Junk Bonds"). Securities of
U.S. issuers of preferred and preference stock and debt
obligations including convertible securities which are in the
lower rating categories, or if unrated, of comparable, lower
quality. The adviser uses its own investment and credit
analysis and the ratings assigned by a Nationally Recognized
Statistical Rating Organization (NRSRO) to determine whether
to buy securities of this type. The high yields on these
securities often reflect the greater risks associated with
investing in these type of securities. The fund may invest up
to 50% of its assets in junk bonds.
The fund generally will be invested in each of the four market
sectors. However, the fund may invest any amount of its assets
in any one sector except the fund will not invest more than 50%
of its assets in high yield, high risk securities. The fund may
choose not to invest in a sector in order to achieve its
objective. The adviser believes that the fund's net asset value
is likely to be more stable following this investment strategy
than that of a fund which invests in only one of these sectors.
Greater stability would occur because, in general, broad
diversification over several market sectors tends to reduce
volatility.
In selecting investments to buy and sell for the fund, the
adviser will evaluate general economic and financial conditions
and a specific issuer's:
o business and management,
o cash flow,
o earnings coverage of interest and dividends,
o ability to operate under adverse economic conditions, and
o fair market value of assets
as well as any other considerations the adviser deems
appropriate.
The dollar weighted average maturity of securities in the
sectors 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 characteristics and
maturities of securities available for purchase by the fund at
certain times in the future. The adviser may seek to adjust the
fund's dollar weighted average through the sale of portfolio
holdings and reinvestment of sale proceeds in securities of
different maturities. This may cause the fund's portfolio
turnover rate to be higher than if the fund had held its
securities until maturity. High turnover rates may increase
costs to the fund, may negatively affect fund performance, and
may increase capital gains distributions, resulting in greater
tax liability to you.
Phoenix Multi-Sector Fixed Income Fund, Inc. 7
<PAGE>
The fund may invest up to 25% of its net assets in securities
purchased on a when-issued or delayed-delivery basis. The price
of these securities is fixed at the time of commitment but
settlement occurs after the customary settlement period for the
particular security.
The fund may invest in any combination of zero coupon bonds,
step coupon bonds and PIK bonds, provided that the total of all
securities of these types held by the fund is not more than 15%
of fund assets.
Temporary Defensive Strategy. During periods of rising interest
rates, unstable pricing and currency exchange or in response to
extreme market fluctuations, the adviser, at its discretion, may
invest part or all of the fund's assets in cash or cash
equivalents. When this happens, the fund may not achieve its
investment objective.
Please refer to the Statement of Additional Information for more
detailed information about these and other investment techniques
of the fund.
Risks Related to Investment Strategies
- -------------------------------------------------------
General
If the adviser misjudges the return potential of one sector
relative to another the fund's returns may be lower than
prevailing returns, and the fund's income available for
distribution to shareholders may be less, on a relative basis,
than other fixed income opportunities. Similarly, if the adviser
misjudges the ability of the issuer of a portfolio security to
make scheduled interest or other income payments to the fund,
the fund's income available for distribution to shareholders may
decrease. Neither the fund nor the adviser can assure you that a
particular level of income will consistently be achieved.
The value of your shares is based on the market value of the
fund's investments. In the case of fixed income securities and
other securities that have relatively fixed levels of return,
the value of the security will be directly affected by trends in
interest rates and the overall condition of credit markets. For
example, in times of rising interest rates, the value of these
types of securities tends to decrease. When interest rates fall,
the value of these securities tends to rise.
In addition to these general risks of investing in the fund,
there are several specific risks of investing in the fund that
you should note.
High Yield-High Risk Securities
The fund may invest a relatively high proportion of fund assets,
up to 50%, in securities that will ordinarily be in the lower
rating categories of NRSROs or be of comparable, lower quality.
Although these securities provide greater income and opportunity
for capital appreciation than investments in higher grade
securities, they also typically entail greater price volatility
and principal and interest risk. There is a greater risk that an
issuer will not be able to make principal and interest
8 Phoenix Multi-Sector Fixed Income Fund, Inc.
<PAGE>
payments on time. If this happens, the fund would lose income
and could expect a decline in the market value of the
securities. Likewise, the value of junk bonds is inversely
related to interest rates. If interest rates rise, the value of
the securities generally falls.
Unrated Securities
The fund may invest in unrated securities. Unrated securities
may not be lower in quality than rated securities but due to
their perceived risk they may not have as broad a market as
rated securities. Analysis of unrated securities is more complex
than for rated securities, making it more difficult for the
adviser to accurately predict risk.
U.S. Government Securities
Obligations issued or guaranteed by the U.S. government,
agencies, authorities and instrumentalities only guarantee
principal and interest will be timely paid to holders of the
securities. The entities do not guarantee that the value of fund
shares will increase.
Pass-Through Securities
It is difficult to predict cash flows from pass-through
securities. Payments of principal and interest on the underlying
mortgages may be allocated among classes in a variety of ways
and the inability to determine specific amounts and timing of
prepayments of the underlying loans makes it difficult to
accurately predict cash flow. In the event of high prepayments,
the fund may be required to invest these proceeds at a lower
interest rate, causing the fund to earn less than if the
prepayments had not occurred. In addition, the value of
pass-through securities varies inversely to interest rates. When
rates increase, the value of the security decreases.
Foreign Investing
The fund may invest in non-U.S. issuers. Investing in the
securities of non-U.S. issuers involves special risks and
considerations not typically associated with investing in U.S.
issuers. These include:
o differences in accounting, auditing and financial reporting
standards,
o generally higher commission rates on foreign portfolio
transactions,
o differences and inefficiencies in transaction settlement
systems,
o the possibility of expropriation or confiscatory taxation,
o adverse changes in investment or exchange control
regulations,
o political instability, and
o potential restrictions on the flow of international
capital.
Political and economic uncertainty as well as less public
information about investments may negatively impact the fund's
portfolio.
Phoenix Multi-Sector Fixed Income Fund, Inc. 9
<PAGE>
Foreign securities often trade with less frequency and volume
than domestic securities and therefore may exhibit greater price
volatility. Additionally, dividends and interest payable on
foreign securities may be subject to foreign taxes withheld
prior to receipt by the fund. Many of the foreign securities
held by the fund will not be registered with, nor will the
issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission.
Accordingly, there may be less publicly available information
about the securities and about the foreign company or government
issuing them than is available about a domestic company or
government entity. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of
payment positions.
Foreign Currency
Portions of the fund's assets may be invested in securities
denominated in foreign currencies. Changes in foreign exchange
rates will affect the value of those securities denominated or
quoted in currencies other than the U.S. dollar. The forces of
supply and demand in the foreign exchange markets determine
exchange rates, and these forces are in turn affected by a range
of economic, political, financial, governmental and other
factors. Exchange rate fluctuations can affect the fund's net
asset value (share price) 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 long and short
terms.
On January 1, 1999, eleven European countries began converting
from their sovereign currency to the European Union common
currency called the "Euro." This conversion may expose the fund
to certain risks, including the reliability and timely reporting
of pricing information of the fund's portfolio holdings. In
addition, one or more of the following may adversely affect
specific securities in the fund's portfolio:
o known trends or uncertainties related to the Euro
conversion that an issuer reasonably expects will have a
material impact on revenues, expenses or income from its
operations;
o competitive implications of increased price transparency of
European Union markets (including labor markets) resulting
from adoption of a common currency and issuers' plans for
pricing their own products and services in the Euro;
o issuers' ability to make required information technology
updates on a timely basis, and costs associated with the
conversion (including costs of dual currency operations
through January 1, 2002);
o currency exchange rate risk and derivatives exposure
(including the disappearance of price sources, such as
certain interest rate indices); and
o potential tax consequences.
10 Phoenix Multi-Sector Fixed Income Fund, Inc.
<PAGE>
Emerging Market Investing
The fund may invest in companies located in emerging market
countries and regions. Investments in less-developed countries
whose markets are still emerging generally present risks in
greater degree than those presented by investment in foreign
issuers based in countries with developed securities markets and
more advanced regulatory systems. Prior governmental approval of
foreign investments may be required under certain circumstances
in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitations
in other developing countries. The charters of individual
companies in developing countries may impose limitations on
foreign ownership to prevent, among other concerns, violation of
foreign investment limitations.
Single Sector Investing
Although the fund intends to invest in all four market sectors,
it may invest all of its assets in only one market sector.
Securities of companies in other sectors may provide greater
investment return in certain market conditions as compared to
securities in this sector. Conditions which negatively affect
this one sector will have a greater impact on the fund as
compared to when the fund invests in more than one sector or as
compared to other funds.
Long-Term Maturities
Long-term maturities present a greater risk that economic and
market conditions may negatively impact expected returns of a
security. Typically, securities with long-term maturities are
more sensitive to interest rate movements than shorter term
securities. Small increases or decreases in interest rates will
have a greater effect on securities with longer maturities than
on shorter term maturities because the change will effect the
security for a longer period of time.
When-Issued and Delayed-Delivery Securities
Securities purchased on a when-issued or delayed-delivery basis
are subject to the risk that the value of the security on
settlement date may be more or less than the price paid as a
result of changes in the level of interest rates or other market
changes. If the value on settlement day is less, the value of
your shares may decline.
Zero Coupon, Step Coupon and PIK Bonds
The market prices of zero coupon, step coupon, and PIK bonds
generally are more volatile than the market prices of securities
that pay interest on a regular basis. Because the fund will not
receive cash payments earned on these securities on a current
basis, the fund may have to distribute cash obtained from other
sources in order to satisfy distribution requirements. This may
require that certain securities be sold to supply cash for
distributions at a time that is less favorable than if the fund
were not required to sell such securities, and such sales may
adversely affect the dollar weighted average of the fund and the
fund's turnover rate.
Phoenix Multi-Sector Fixed Income Fund, Inc. 11
<PAGE>
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of a
company's computer programs that have date-sensitive software
may recognize a date using "00" as the year 1900 rather than the
year 2000. If a company whose securities are held by the fund
does not "fix" its Year 2000 issue, it is possible that its
operations and financial results would be hurt. Also, the cost
of modifying computer programs to become Year 2000 compliant may
hurt the financial performance and market price of companies
whose securities are held by the fund.
12 Phoenix Multi-Sector Fixed Income Fund, Inc.
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
Investment Risk and Return Summary
- -------------------------------------------------------
Investment Objective
Phoenix Multi-Sector Short Term Bond Fund has a primary
objective to provide high current income while attempting to
limit changes in the fund's net asset value per share caused by
interest rate changes. There is no guarantee that the fund will
achieve its objective.
Principal Investment Strategies
[arrow] The fund uses a "sector rotation" approach to selecting
investments. The adviser focuses on identifying
undervalued sectors to take advantage of market
inefficiencies. In selecting investments to buy and sell
for the fund, the adviser will evaluate general economic
and financial conditions and the specific issuer's
business, management, cash, assets, earnings and
stability.
[arrow] The fund seeks to achieve its objective by investing in
a diversified portfolio of primarily fixed income
securities that have an expected remaining weighted
average maturity of three years or less and that are in
one of the following three market sectors:
o Securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies,
authorities or instrumentalities including CMOs,
REMICs and other pass-through securities;
o Debt securities issued by foreign issuers, including
foreign governments and their political subdivisions ;
and
o High yield and investment grade securities.
[arrow] Under normal circumstances, the fund will invest at
least 65% of its assets in investment grade securities
which are rated BBB or above by Standard and Poor's
Corporation (S&P) or Duff & Phelps Credit Rating Company
(D&P) or Baa or above by Moody's Investor's Services,
Inc. (Moody's) or unrated securities determined by the
adviser to be of the same comparable, limited quality.
[arrow] The fund may invest up to 35% of its assets in foreign
debt securities of issuers in both developed and
emerging market countries.
[arrow] The fund may invest any amount of its assets in any
sector (other than "junk bonds"), or may not invest in a
particular sector at all.
[arrow] The fund may invest up to 35% of its assets in high
yield-high risk securities (so called "junk bonds") of
domestic issuers, including preferred and preference
stock and debt obligations.
Phoenix Multi-Sector Short Term Bond Fund 13
<PAGE>
[arrow] The fund may invest up to 35% of its assets in non-short
term securities of differing maturities.
[arrow] The fund may invest up to 35% of its assets in preferred
stocks.
[arrow] The fund may invest up to 25% of its net assets in
securities purchased on a when-issued or delayed-
delivery basis.
[arrow] The fund's portfolio turnover rate will not be a
limiting factor when the adviser deems it desirable to
sell or purchase securities.
Principal Risks
If you invest in this fund you risk that you may lose your
investment.
If the adviser misjudges the return potential, or the ability of
issuers to make scheduled principal and interest payments, the
fund's returns may be lower than prevailing returns and the
fund's income available for distribution may be less than other
funds. Neither the fund nor the adviser can assure you that a
particular level of income will consistently be achieved. In
addition, the value of fund assets is inversely related to
interest rates. If interest rates rise, generally the value of
fund investments will fall.
The fund may invest up to 35% of its assets in high risk, high
yield securities (so called "junk bonds"). High risk, high yield
securities present a greater risk that the issuer will not be
able to make interest or principal payments on time. If this
happens, the fund would lose income and could expect a decline
in the market value of the securities.
The fund may invest in issuers in foreign countries including
"emerging market" countries (countries with markets that are not
fully developed). Political and economic uncertainty as well as
less public information about investments may negatively impact
the fund's portfolio. Some investments may be made in currencies
other than U.S. dollars that will fluctuate in value as a result
of changes in the currency exchange rate. Foreign markets and
currencies may not perform as well as U.S. markets. Emerging
market countries and companies doing business in emerging
markets may not have the same range of opportunities as
countries and their companies in developed nations. They may
also have more obstacles to financial success.
Obligations issued or guaranteed by the U.S. government,
agencies, authorities and instrumentalities only guarantee
principal and interest will be timely paid to holders of the
securities. The entities do not guarantee that the value of fund
shares will increase.
The value of CMOs, REMICs and other pass-through securities may
fluctuate to a greater degree than other debt securities in
response to changes in interest rates. The market for these
securities can be less liquid. These mortgage backed type
securities may also be subject to prepayment risk.
Although the fund intends to invest in all three market sectors,
it may invest all of its assets in only one market sector.
Conditions which negatively affect this one sector will have a
greater impact on the fund's net asset value per share as
compared to when the fund invests in more than one sector.
14 Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Securities purchased on a when-issued or delayed-delivery basis
risk that the value of the security on settlement date may be
more or less than the price paid. If it is less, the value of
your shares may decline.
The fund may invest in securities with long-term maturities.
Long-term maturities present a greater risk that economic and
market conditions may negatively impact expected returns of the
security and typically, securities with long-term maturities are
more sensitive to interest rate movements than shorter term
securities.
The fund may invest in unrated securities. Unrated securities
may not have as broad a market as rated securities and it can be
more difficult to assess their risk as compared to rated
securities.
The fund may experience a high portfolio turnover rate. Frequent
and active trading may increase transaction costs for the fund
and may increase capital gain distributions, which may result in
greater tax liability to you.
Phoenix Multi-Sector Short Term Bond Fund 15
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix Multi-Sector Short Term Bond
Fund. The bar chart shows changes in the fund's Class A Shares
performance from year to year over the life of the fund.(1) The
table below shows how the fund's average annual returns for one
and five years and life of the fund compare to those of a
broad-based securities market index. The fund's past performance
is not necessarily an indication of how the fund will perform in
the future.
[TABULAR REPRESENTATION OF BAR CHART]
Multi-Sector Short Term Bond Fund
Annual Return (%)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
8.95% -1.86% 13.64% 11.30% 9.49% 1.30%
Calendar Year
</TABLE>
(1) The fund's average annual returns in the chart above do not
reflect the deduction of any sales charges. The returns would
have been less than those shown if sales charges were deducted.
During the period shown in the chart above, the highest return
for a quarter was 5.38% (quarter ending June 30, 1995) and the
lowest return for a quarter was (5.50)% (quarter ending September
30, 1998).
<TABLE>
<CAPTION>
Life of the Fund(2)
Average Annual Total Returns -----------------------------------
(for the periods ending 12/31/98)(1) One Year Five Years Class A Class B Class C
- ---------------------------------------- --------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Class A Shares (0.89)% 6.13% 6.28% -- --
Class B Shares (1.02)% 6.03% -- 6.07% --
Class C Shares (0.56)% N/A -- -- 0.08%
Merrill Lynch Medium Quality Corporate
Short-Term Bond Index(3) 7.18% 6.53% 6.69%(4) 6.69%(4) 6.95%
</TABLE>
(1) The fund's average annual returns in the table above reflect
the deduction of the maximum sales charge for an investment in
the fund's Class A Shares and a full redemption in the fund's
Class B and C Shares.
(2) Class A and Class B Shares since July 6, 1992 and Class C
Shares since October 1, 1997.
(3) The Merrill Lynch Medium Quality Corporate Short-Term Bond
Index is an unmanaged but commonly used index that tracks the
returns of corporate issues rated between BBB and A by Standard &
Poor's, with maturities from 1 to 3 years. The index's
performance does not reflect sales charges.
(4) The Merrill Lynch Medium Quality Corporate Short-Term Bond
Index does not calculate performance daily; therefore, the return
shown is from June 30, 1992.
16 Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Fund Expenses
- -------------------------------
This table illustrates all fees and expenses that you may pay if
you buy and hold shares of the fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- -------- ----
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 2.25% None None
Maximum Deferred Sales Charge (load) (as a percentage of None 2%(b) None
the lesser of the value redeemed or the amount invested)
Maximum Sales Charge (load) Imposed on Reinvested
Dividends None None None
Redemption Fee None None None
Exchange Fee None None None
--------------------------------------
Class A Class B Class C
Shares Shares Shares
------- ------- ----
Annual Fund Operating Expenses (expenses that are
deducted from fund assets)
Management Fees 0.55% 0.55% 0.55%
Distribution and Service (12b-1) Fees(c) 0.25% 0.75% 0.50%
Other Expenses 0.75% 0.75% 0.75%
---- ---- ----
Total Annual Fund Operating Expenses(a) 1.55% 2.05% 1.80%
==== ==== ====
</TABLE>
----------------
(a) The fund's investment adviser has agreed to reimburse through
December 31, 1999 the Phoenix Multi-Sector Short Term Bond
Fund's operating expenses, other than Management Fees and
Distribution and Service Fees, to the extent that such expenses
exceed 0.20% for each class of shares. Total Annual Operating
Expenses for the fund, after expense reimbursement, are: 1.00%
for Class A Shares, 1.50% for Class B Shares, and 1.25% for
Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
0.50% annually to 1% during the third year and to 0% after the
third year.
(c) Distribution and Service 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").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after six years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
Phoenix Multi-Sector Short Term Bond Fund 17
<PAGE>
<TABLE>
<CAPTION>
Class 1 year 3 years 5 years 10 years
- ---------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A $379 $704 $1,051 $2,029
Class B $358 $643 $1,103 $2,135
Class C $183 $566 $ 975 $2,116
</TABLE>
You would pay the following expenses if you did not redeem your
shares:
<TABLE>
<CAPTION>
Class 1 year 3 years 5 years 10 years
- ---------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
Class A $379 $704 $1,051 $2,029
Class B $208 $643 $1,103 $2,135
Class C $183 $566 $ 975 $2,116
</TABLE>
Note: Your actual expenses may be lower than those shown in the
tables above since the expense levels used to calculate the
figures shown do not include the reimbursement of expenses over
certain levels by the fund's investment adviser. Refer to the
section "Management of the Fund" for information about expense
reimbursement.
Investment Strategies
- --------------------------------------
Investment Objective
The fund has a primary objective to provide high current income
while attempting to limit changes in the fund's net asset value
per share caused by interest rate changes. There is no guarantee
that the fund will achieve its objective.
Principal Investment Strategies
The fund uses a "sector rotation" approach to selecting
investments. The adviser will diversify investments among
several categories or "sectors" of fixed income securities.
While the adviser cannot control either the general interest
rate environment or levels of return of securities on an
absolute basis, the adviser will seek to adjust the proportions
of the fund's investment in the various sectors and the
selection of investments within sectors to obtain higher returns
on a relative basis.
The fund will primarily invest in fixed income securities that
have an expected remaining weighted average maturity of three
years or less and that are in the following three categories:
o U.S. Government Securities. Securities issued or guaranteed as
to principal and interest by the U.S. Government, its
agencies, authorities or instrumentalities. Securities in this
sector include U.S. Treasury obligations, securities issued by
the Government National Mortgage Association (GNMA), the
Federal Home Loan Mortgage Corporation (FHLMC), the Federal
National
18 Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Mortgage Association (FNMA) and Student Loan Marketing
Association (SLMA), CMOs, REMICs and other securities
collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA.
o Foreign Securities. Debt securities issued by foreign issuers,
including foreign governments and their political subdivisions
and issuers and non-government issuers considered creditworthy
by the adviser. Issuers may be in developed countries as well
as emerging market countries. Investments in non-U.S. dollar
securities and currency will be evaluated on the basis of
fundamental economic criteria, inflation level and trends,
growth rate forecasts and technical and political data.
o High Yield and Investment Grade Securities. Securities of U.S.
issuers of all types of long or short term debt obligations
including bonds, debentures, municipal bonds, equipment lease
and trust certificates, asset-backed securities, pass-through
securities, REMICs and CMOs, sales contracts and commercial
paper.
At least 65% of the fund's assets will be invested in investment
grade securities which are rated BBB or above by S&P or D&P; or
Baa or above by Moody's or unrated securities determined by the
adviser to be of the same comparable, lower quality. The fund is
not obligated to dispose of debt securities whose credit quality
falls below investment grade.
The fund generally will be invested in each of the three market
sectors. However, the fund may invest any amount of its assets
in any one sector except the fund will not invest more than 35%
of its assets in foreign debt securities in both developed and
emerging market countries. The fund may choose not to invest in
a sector in order to achieve its objective. The adviser believes
that the fund's net asset value is likely to be more stable
following this investment strategy than that of a fund which
invests in only one of these sectors. Greater stability would
occur because, in general, broad diversification over several
market sectors tends to reduce volatility.
The fund may invest up to 35% of its assets in high yield-high
risk securities (so called "junk bonds") of domestic issuers,
including preferred and preference stock and debt obligations.
High risk-high yield securities generally pay higher current
income but may present a greater risk that the issuer will not
be able to make principal and interest payments on time.
In selecting investments to buy and sell for the fund, the
adviser will evaluate general economic and financial conditions
and a specific issuer's:
o business and management,
o cash flow,
o earnings coverage of interest and dividends,
o ability to operate under adverse economic conditions, and
o fair market value of assets
as well as any other considerations the adviser deems
appropriate.
Phoenix Multi-Sector Short Term Bond Fund 19
<PAGE>
The fund may invest up to 35% of its assets in each of the
following categories:
o foreign debt securities of issuers in both developed and
emerging market countries;
o securities with long term maturities; and
o preferred stocks.
Preferred stocks are paid dividends before common stock
dividends are paid and they have a set dividend payment rate.
The fund may invest up to 25% of its net assets in securities
purchased on a when-issued or delayed-delivery basis. The price
of these securities is fixed at the time of commitment but
settlement occurs after the customary settlement period for the
particular security.
The fund's portfolio turnover rate will not be a limiting factor
when the adviser deems it desirable to sell or purchase
securities. High turnover rates may increase costs to the fund,
may negatively affect fund performance, and may increase capital
gains distributions, resulting in greater tax liability to you.
Please refer to the Statement of Additional Information for more
detailed information about these and other investment techniques
of the fund.
Risks Related to Investment Strategies
- -------------------------------------------------------
General
If the adviser misjudges the return potential of one sector
relative to another the fund's returns may be lower than
prevailing returns, and the fund's income available for
distribution to shareholders may be less, on a relative basis,
than other fixed income opportunities. Similarly, if the adviser
misjudges the ability of the issuer of a portfolio security to
make scheduled interest or other income payments to the fund,
the fund's income available for distribution to shareholders may
decrease. Neither the fund nor the adviser can assure you that a
particular level of income will consistently be achieved.
The value of your shares is based on the market value of the
fund's investments. In the case of fixed income securities and
other securities that have relatively fixed levels of return,
the value of the security will be directly affected by trends in
interest rates and the overall condition of credit markets. For
example, in times of rising interest rates, the value of these
types of securities tends to decrease. When interest rates fall,
the value of these securities tends to rise.
In addition to these general risks of investing in the fund,
there are several specific risks of investing in the fund that
you should note.
20 Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
High Yield-High Risk Securities
The fund may invest in securities that will ordinarily be in the
lower rating categories of NRSROs or be non-rated securities
that the adviser believes to be of comparable, lower quality.
Although these securities provide greater income and opportunity
for capital appreciation than investments in higher grade
securities, they also typically entail greater price volatility
and principal and interest risk. There is a greater risk that an
issuer will not be able to make principal and interest payments
on time. If this happens, the fund would lose income and could
expect a decline in the market value of securities. Likewise,
the value of junk bonds is inversely related to interest rates.
If interest rates rise, the value of securities generally falls.
Unrated Securities
The fund may invest in unrated securities. Unrated securities
may not be lower in quality than rated securities but due to
their perceived risk they may not have as broad a market as
rated securities. Analysis of unrated securities is more complex
than for rated securities, making it more difficult for the
adviser to accurately predict risk.
U.S. Government Securities
Obligations issued or guaranteed by the U.S. government,
agencies, authorities and instrumentalities only guarantee
principal and interest will be timely paid to holders of the
securities. The entities do not guarantee that the value of fund
shares will increase.
Pass-Through Securities
It is difficult to predict cash flows from mortgage backed and
asset backed securities. Payments of principal and interest on
the underlying assets may be allocated among classes in a
variety of ways and the inability to determine specific amounts
and timing of prepayments of the underlying loans makes it
difficult to accurately predict cash flow. In the event of high
prepayments, the fund may be required to invest these proceeds
at a lower interest rate, causing the fund to earn less than if
the prepayments had not occurred. In addition, the value of
pass-through securities varies inversely to interest rates. When
rates increase, the value of the security decreases.
Foreign Investing
The fund may invest in non-U.S. issuers. Investing in the
securities of non-U.S. issuers involves special risks and
considerations not typically associated with investing in U.S.
issuers. These include:
o differences in accounting, auditing and financial reporting
standards,
o generally higher commission rates on foreign portfolio
transactions,
o differences and inefficiencies in transaction settlement
systems,
o the possibility of expropriation or confiscatory taxation,
o adverse changes in investment or exchange control
regulations,
Phoenix Multi-Sector Short Term Bond Fund 21
<PAGE>
o political instability, and
o potential restrictions on the flow of international
capital.
Political and economic uncertainty as well as less public
information about investments may negatively impact the fund's
portfolio.
Foreign securities often trade with less frequency and volume
than domestic securities and therefore may exhibit greater price
volatility. Additionally, dividends and interest payable on
foreign securities may be subject to foreign taxes withheld
prior to receipt by the fund.
Many of the foreign securities held by the fund will not be
registered with, nor will the issuers of those securities be
subject to the reporting requirements of, the U.S. Securities
and Exchange Commission. Accordingly, there may be less publicly
available information about the securities and about the foreign
company or government issuing them than is available about a
domestic company or government entity. Moreover, individual
foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
Foreign Currency
Portions of the fund's assets may be invested in securities
denominated in foreign currencies. Changes in foreign exchange
rates will affect the value of those securities denominated or
quoted in currencies other than the U.S. dollar. The forces of
supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range
of economic, political, financial, governmental and other
factors. Exchange rate fluctuations can affect the fund's net
asset value (share price) 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 long and short
terms.
On January 1, 1999, eleven European countries began converting
from their sovereign currency to the European Union common
currency called the "Euro". This conversion may expose the fund
to certain risks including the reliability and timely reporting
of pricing information of the fund's portfolio holdings. In
addition, one or more of the following may adversely affect
specific securities in the fund's portfolio:
o known trends or uncertainties related to the Euro
conversion that an issuer reasonably expects will have a
material impact on revenues, expenses or income from its
operations;
o competitive implications of increased price transparency of
European Union markets (including labor markets) resulting
from adoption of a common currency and issuers' plans for
pricing their own products and services in the Euro;
o issuers' ability to make required information technology
updates on a timely basis, and costs associated with the
conversion (including costs of dual currency operations
through January 1, 2002);
22 Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
o Currency exchange rate risk and derivatives exposure
(including the disappearance of price sources, such as
certain interest rate indices); and
o Potential tax consequences.
Emerging Market Investing
The fund may invest in companies located in emerging market
countries and regions. Investments in less-developed countries
whose markets are still emerging generally present risks in
greater degree than those presented by investment in foreign
issuers based in countries with developed securities markets and
more advanced regulatory systems. Prior governmental approval of
foreign investments may be required under certain circumstances
in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in
other developing countries. The charters of individual companies
in developing countries may impose limitations on foreign
ownership to prevent, among other concerns, violation of foreign
investment limitations.
Single Sector Investing
Although the fund intends to invest in all four market sectors,
it may invest all of its assets in only one market sector.
Securities of companies in other sectors may provide greater
investment return in certain market conditions as compared to
securities in this sector. Conditions which negatively affect
this one sector will have a greater impact on the fund as
compared to when the fund invests in more than one sector or as
compared to other funds.
Long-Term Maturities
Long-term maturities present a greater risk that economic and
market conditions may negatively impact expected returns of a
security. Typically, securities with long-term maturities are
more sensitive to interest rate movements than shorter term
securities. Small increases or decreases in interest rates will
have a greater effect on securities with longer maturities than
on shorter term maturities because the change will effect the
security for a longer period of time.
When-Issued and Delayed-Delivery Securities
Securities purchased on a when-issued or delayed-delivery basis
are subject to the risk that the value of the security on
settlement date may be more or less than the price paid as a
result of changes in the level of interest rates or other market
changes. If the value on settlement day is less, the value of
your shares may decline.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of a
company's computer programs that have date-sensitive software
may recognize a date using "00" as the year 1900 rather than the
year 2000. If a company whose securities are held by the fund
does
Phoenix Multi-Sector Short Term Bond Fund 23
<PAGE>
not "fix" its Year 2000 issue it is possible that its operations
and financial results would be hurt. Also the cost of modifying
computer programs to become Year 2000 compliant may hurt the
financial performance and market price of companies whose
securities are held by the fund.
Management of the Funds
- -------------------------------------------
The Adviser
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment
adviser to the funds and is located at 56 Prospect Street,
Hartford, CT 06115. Phoenix also acts as the investment adviser
for 14 other mutual funds, as subadviser to three additional
mutual funds and as adviser to institutional clients. As of
December 31, 1998, Phoenix had $23.9 billion in assets under
management. Phoenix has acted as an investment adviser for over
sixty years.
Subject to the direction of the funds' Board of
Directors/Trustees, Phoenix is responsible for managing the
funds' investment programs and the day-to-day management of each
fund's portfolio. Phoenix manages each fund's assets to conform
with the investment policies as described in this prospectus.
Each fund pays Phoenix a monthly investment management fee that
is accrued daily against the value of the fund's net assets at
the following rates.
<TABLE>
<CAPTION>
1st billion $1+ billion through $2 billion $2+ billion
- ----------------------------------- ----------- ------------------------------ -----------
<S> <C> <C> <C>
Multi-Sector Fixed Income Fund 0.55% 0.50% 0.45%
Multi-Sector Short Term Bond Fund 0.55% 0.50% 0.45%
</TABLE>
Phoenix has voluntarily agreed to assume operating expenses of
the Multi-Sector Short Term Bond Fund (excluding management
fees, distribution and service fees, interest, taxes, brokerage
fees, commissions and extraordinary expenses) until December 31,
1999, to the extent that such expenses exceed 0.20% of the
average annual net asset values for the fund.
During the last fiscal year, the Multi-Sector Fixed Income Fund
paid total management fees of $1,875,258; the Multi-Sector Short
Term Bond Fund paid total management fees of $270,259. The ratio
of management fees to average net assets for the fiscal year
ended October 31, 1998 was 0.55% for the Multi-Sector Fixed
Income Fund and 0.55% for the Multi-Sector Short Term Bond Fund.
On June 1, 1998, National Securities & Research Corporation
("National") assigned its investment management agreement for
each of the funds to Phoenix Investment Counsel, Inc. Phoenix
and National are subsidiaries of Phoenix Investment Partners,
Ltd. (formerly Phoenix Duff & Phelps Corporation). Of the total
management fees paid by the funds during the last fiscal year,
National was paid $1,134,357 and Phoenix was paid $740,901 by
the Multi-Sector Fixed Income Fund; National was paid $144,626
and Phoenix was paid $125,633 by the Multi-Sector Short Term
Bond Fund.
24 Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Portfolio Management
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 Multi-Sector
Fixed Income Fund since March 1994, and assumed full management
of that fund in April 1995. He has been portfolio manager of the
Multi-Sector Short Term Bond 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. He held various investment management positions with
Phoenix Home Life Mutual Insurance Company, an affiliate of
Phoenix, from 1989 through 1995.
Impact of the Year 2000 Issue on Fund Operations
The Trustees have directed management to ensure that the systems
used by service providers (Phoenix and its affiliates) in
support of the funds' operations be assessed and brought into
Year 2000 compliance. Based upon preliminary assessments,
Phoenix has determined that it will be required to modify or
replace portions of its software so that its computer systems
will properly utilize dates beyond December 31, 1999. Phoenix
management believes that the majority of these systems are
already Year 2000 compliant. Phoenix believes that with
modifications to existing software and conversions to new
software, the Year 2000 issue will be mitigated. It is
anticipated that such modifications and conversions will be
completed on a timely basis. It is not known at this time if
there could be a material impact on the operations of Phoenix or
its affiliates or the fund if such modifications and conversions
are not completed timely.
Phoenix will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000
modifications. Certain systems are already in the process of
being converted due to previous initiatives and it is expected
that all core systems will be remediated and tested by June
1999. The total cost to become Year 2000 compliant is not an
expense of the fund and is not expected to have a material
impact on the operating results of Phoenix.
Pricing of Fund Shares
- ---------------------------------------
How is the Share Price determined?
The fund calculates a share price for each class of its shares.
The share price is based on the net assets of the fund and the
number of outstanding shares. In general, the fund calculates
net asset value by:
o adding the values of all securities and other assets of the
fund,
o subtracting liabilities, and
o dividing by the total number of outstanding shares of the
fund.
Phoenix Multi-Sector Fixed Income Fund, Inc. 25
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Asset Value: The fund's investments are valued at market value.
If market quotations are not available, the fund determines a
"fair value" for an investment according to rules and procedures
approved by the Trustees. Foreign and domestic debt securities
(other than short-term investments) are valued on the basis of
broker quotations or valuations provided by a pricing service
approved by the Trustees when such prices are believed to
reflect the fair value of such securities. Foreign and domestic
equity securities are valued at the last sale price or, if there
has been no sale that day, at the last bid price, generally.
Short-term investments having a remaining maturity of sixty days
or less are valued at amortized cost, which the Directors/
Trustees have determined approximates market value.
Liabilities: Class specific expenses, distribution fees, service
fees and other liabilities are deducted from the assets of each
class. Expenses and liabilities that are not class specific
(such as management fees) are allocated to each class in
proportion to each class's net assets, except where an
alternative allocation can be more fairly made.
Net Asset Value: The liability allocated to a class plus any
other expenses are deducted from the proportionate interest of
such class in the assets of the fund. The resulting amount for
each class is then divided by the number of shares outstanding
of that class to produce each class's net asset value per share.
The net asset value per share of each class of the fund is
determined on days when the New York Stock Exchange (the "NYSE")
is open for trading as of the close of trading (normally 4:00 PM
eastern time). The fund will not calculate its net asset values
per share on days when the NYSE is closed for trading. Trading
of securities held by the fund in foreign markets may negatively
or positively impact the value of such securities on days when
the fund neither trades securities nor calculates its net asset
values (i.e., weekends and certain holidays).
At what price are shares purchased?
All investments received by the fund's authorized agents prior
to the close of regular trading on the NYSE (normally 4:00 PM
eastern time) will be executed based on that day's net asset
value. Shares credited to your account from the reinvestment of
fund distributions will be in full and fractional shares that
are purchased at the closing net asset value on the next
business day on which the fund's net asset value is calculated
following the dividend record date.
Sales Charges
- ------------------------------
What are the classes and how do they differ?
Each fund presently offers three classes of shares that have
different sales and distribution charges (see "Fund Expenses"
previously in this prospectus). Each fund has adopted
distribution and service plans allowed under Rule 12b-1 of the
Investment Company Act of 1940 that authorize the fund to pay
distribution and service fees for the sale of its shares and
26 Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
for services provided to shareholders. Because these fees are
paid out of the Fund's assets on an on-going basis, over time
these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges.
What arrangement is best for you?
The different classes permit you to choose the method of
purchasing shares that is most beneficial to you. In choosing a
class, consider the amount of your investment, the length of
time you expect to hold the shares, whether you decide to
receive distributions in cash or to reinvest them in additional
shares, and any other personal circumstances. Depending upon
these considerations, the accumulated distribution and service
fees and contingent deferred sales charges of one class may be
more or less than the initial sales charge and accumulated
distribution and service fees of another class of shares bought
at the same time. Because distribution and service fees are paid
out of the fund's assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
Class A Shares. If you purchase Class A Shares of the
Multi-Sector 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
Multi-Sector Short Term Bond 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 fund when redeemed. Class A Shares
have lower distribution and service fees (0.25%) and pay higher
dividends than any other class.
Class B Shares. If you purchase Class B Shares, you will not pay
a sales charge at the time of purchase. If you sell your Class B
Shares of the Multi-Sector Fixed Income Fund within the first 5
years after they are purchased, you will pay a sales charge of
up to 5% of your shares' value. If you sell your Class B Shares
of the Multi-Sector Short Term Bond Fund within the first 3
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 and C Shares" below. These charges decline
to 0% over a period of 5 years for the Multi-Sector Fixed Income
Fund and a period of 3 years for the Multi-Sector Short Term
Bond Fund. The sales charge may be waived under certain
conditions. Class B shares have higher distribution and service
fees (1.00% for the Multi-Sector Fixed Income Fund and 0.75% for
the Multi-Sector Short Term Bond Fund) and pay lower dividends
than Class A Shares. Class B Shares automatically convert to
Class A Shares 8 years after purchase for the Multi-Sector Fixed
Income Fund and 6 years after purchase for the Multi-Sector
Short Term Bond Fund. Purchases of Class B Shares may be
inappropriate for any investor who may qualify for reduced sales
charges of Class A Shares and anyone who is over 85 years of
age. The underwriter may decline purchases in such situations.
Class C Shares. If you purchase Class C Shares, you will not pay
a sales charge at the time of purchase. If you sell your Class C
Shares of the Multi-Sector Fixed Income Fund within the first
year after they are purchased, you will pay a sales charge of
1%. You will not pay any sales charges on Class C Shares of the
Multi-Sector Short Term Bond Fund when you sell them. See
"Deferred
Phoenix Multi-Sector Fixed Income Fund, Inc. 27
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Sales Charge Alternative--Class B and C Shares" below. Class C
Shares of the Multi-Sector Fixed Income Fund have the same
distribution and service fees (1.00%) and pay comparable
dividends as Class B Shares. Class C Shares of the Multi-Sector
Short Term Bond Fund have lower distribution and service fees
and pay higher dividends than Class C Shares. Class C Shares do
not convert to any other class of shares of the fund.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase (see "Class A Shares--Reduced Sales Charges:
Combination Purchase Privilege" in the Statement of Additional
Information). Shares purchased 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 fund's
underwriter (Phoenix Equity Planning Corporation or "PEPCO").
Sales Charge you may pay to purchase Class A Shares
<TABLE>
<CAPTION>
Sales Charge as
Multi-Sector Fixed Income Fund a percentage of
---------------------------
Amount of Net
Transaction Offering Amount
at Offering Price Price Invested
- ------------------------------------ -------- --------
<S> <C> <C>
Under $50,000 4.75% 4.99%
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 3.00 3.09
$500,000 but under $1,000,000 2.00 2.04
$1,000,000 or more None None
</TABLE>
<TABLE>
<CAPTION>
Sales Charge as
Multi-Sector Short Term Bond Fund a percentage of
--------------------------
Amount of Net
Transaction Offering Amount
at Offering Price Price Invested
- --------------------------------------- -------- --------
<S> <C> <C>
Under $50,000 2.25% 2.30%
$50,000 but under $100,000 1.25 1.27
$100,000 but under $500,000 1.00 1.01
$500,000 but under $1,000,000 0.75 0.76
$1,000,000 or more None None
</TABLE>
Deferred Sales Charge Alternative--
Class B and C Shares
Class B and C Shares are purchased without an initial sales
charge; however, shares sold within a specified time period are
subject to a declining contingent deferred sales charge ("CDSC")
at the rates listed below. Class C Shares of the Multi-Sector
Short Term Bond Fund are purchased without an initial sales
charge and are not subject to a deferred sales charge. The sales
charge will be multiplied by the then current market value or
the initial cost of the shares being redeemed,
28 Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
whichever is less. No sales charge will be imposed on increases
in net asset value or on shares purchased through the
reinvestment of income dividends or capital gains distributions.
To minimize the sales charge, shares not subject to any charge
will be redeemed first, followed by shares held the longest
time. To calculate the amount of shares owned and time period
held, all Class B Shares purchased in any month are considered
purchased on the last day of the preceding month, and all Class
C Shares are considered purchased on the trade date.
Deferred Sales Charge you may pay to sell Class B Shares
Multi-Sector Fixed Income Fund
Year 1 2 3 4 5 6+
----------------------------------------------------------------
CDSC 5% 4% 3% 2% 2% 0%
Multi-Sector Short Term Bond Fund
Year 1 2 3 4+
----------------------------------------------------------------
CDSC 2% 1.5% 1% 0%
Deferred Sales Charge you may pay to sell Class C Shares
Multi-Sector Fixed Income Fund
Year 1 2+
----------------------------------------------------------------
CDSC 1% 0%
You will not pay any deferred sales charge to sell Class C
Shares of the Multi-Sector Short Term Bond Fund.
Your Account
- -----------------------------
Opening an Account
Your financial advisor can assist you with your initial purchase
as well as all phases of your investment program. If you are
opening an account by yourself, please follow the instructions
outlined below.
Step 1.
Your first choice will be the initial amount you intend to
invest.
Phoenix Multi-Sector Fixed Income Fund, Inc. 29
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Minimum initial investments:
o $25 for individual retirement accounts, or accounts that
use the systematic exchange privilege, or accounts that use
the Investo-Matic program (see below for more information
on the Investo-Matic program).
o There is no initial dollar requirement for defined
contribution plans, profit-sharing plans, or employee
benefit plans. There is also no minimum for reinvesting
dividends and capital gains into another account.
o $500 for all other accounts.
Minimum additional investments:
o $25 for any account.
o There is no minimum for defined contribution plans,
profit-sharing plans, or employee benefit plans. There is
also no minimum for reinvesting dividends and capital gains
into an existing account.
Step 2.
Your second choice will be what class of shares to buy. The
funds offer three classes of shares for individual investors.
Each has different sales and distribution charges. Because all
future investments in your account will be made in the share
class you choose when you open your account, you should make
your decision carefully. Your financial advisor can help you
pick the share class that makes the most sense for your
situation.
Step 3.
Your next choice will be how you want to receive any dividends
and capital gain distributions. Your options are:
o Receive both dividends and capital gain distributions in
additional shares
o Receive dividends in cash and capital gain distributions in
additional shares
o Receive both dividends and capital gain distributions in
cash
No interest will be paid on uncashed distribution checks.
30 Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
How To Buy Shares
- ------------------------------------
<TABLE>
<CAPTION>
To Open An Account
- ------------------------------- --------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
Complete a New Account Application and send it with a check payable
Through the mail to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston,
MA 02266-8301.
By Federal Funds wire Call us at (800) 243-1574 (press 1, then 0).
Complete the appropriate section on the application and send it with your
By Investo-Matic initial investment payable to the fund. Mail them to: State Street Bank,
P.O. Box 8301, Boston, MA 02266-8301.
By telephone exchange Call us at (800) 243-1574 (press 1, then 0).
</TABLE>
How to Sell 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
by the fund's Transfer Agent or an authorized agent. 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.
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; however, 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.
Phoenix Multi-Sector Fixed Income Fund, Inc. 31
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
<TABLE>
<CAPTION>
To Sell Shares
- ------------------------------- ---------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
Send a letter of instruction and any share certificates (if you hold
certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA
Through the mail 02266-8301. Be sure to include the registered owner's name, fund and
account number, number of shares or dollar value you wish to sell.
For sales up to $50,000, requests can be made by calling
By telephone (800) 243-1574.
By telephone exchange Call us at (800) 243-1574 (press 1, then 0).
If you selected the checkwriting feature, you may write checks for
By check amounts of $500 or more. Checks may not be used to close an account.
</TABLE>
Things You Should Know When Selling Shares
- ---------------------------------------------------------------
You may realize a taxable gain or loss (for federal income tax
purposes) if you redeem shares of the funds. The funds reserve
the right to pay large redemptions "in-kind" (in securities
owned by the fund rather than in cash). Large redemptions are
those over $250,000 or 1% of the fund's net assets. Additional
documentation will be required for redemptions by organizations,
fiduciaries, or retirement plans, or if redemption is requested
by anyone but the shareholder(s) of record. Transfers between
broker-dealer "street" accounts are governed by the accepting
broker-dealer. Questions regarding this type of transfer should
be directed to your financial advisor. Redemption requests will
not be honored until all required documents in proper form have
been received. To avoid delay in redemption or transfer,
shareholders having questions about specific requirements should
contact the fund's Transfer Agent at (800) 243-1574.
Redemptions by Mail
[arrow] If you are selling shares held individually, jointly, or
as custodian under the Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act.
Send a clear letter of instructions if all of these
apply:
o The proceeds do not exceed $50,000.
o The proceeds are payable to the registered owner at
the address on record.
Send a clear letter of instructions with a signature
guarantee when any of these apply:
o You are selling more than $50,000 worth of shares.
32 Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
o The name or address on the account has changed within
the last 60 days.
o You want the proceeds to go to a different name or
address than on the account.
[arrow] If you are selling shares held in a corporate or
fiduciary account, please contact the fund's Transfer
Agent at (800) 243-1574.
The signature on your request must be guaranteed by an eligible
guarantor institution as defined by the fund's Transfer Agent in
accordance with its signature guarantee procedures. Currently,
such procedures generally permit guarantees by banks, broker
dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and
savings associations.
Selling Shares by Telephone
The Transfer Agent will use reasonable procedures to confirm
that telephone instructions are genuine. Address and bank
account information are verified, redemption instructions are
taped, and all redemptions are confirmed in writing.
The individual investor bears the risk from instructions given
by an unauthorized third party that the Transfer Agent
reasonably believed to be genuine.
The Transfer Agent may modify or terminate the telephone
redemption privilege at any time with 60 days notice to
shareholders.
During times of drastic economic or market changes, telephone
redemptions may be difficult to make or temporarily suspended.
Account Policies
- --------------------------------
Account Reinstatement Privilege
For 180 days after you sell your Class A, B, or C Shares, you
can purchase Class A Shares of any fund at net asset value, with
no sales charge, by reinvesting all or part of your proceeds,
but not more. Send your written request to State Street Bank,
P.O. Box 8301, Boston, MA 02266-8301. You can call us at (800)
243-1574 for more information.
Please remember, a redemption and reinvestment are considered to
be a sale and purchase for tax-reporting purposes. Class B
shareholders who have had the contingent deferred sales charge
waived because they are in the Systematic Withdrawal Program are
not eligible for this reinstatement privilege.
Phoenix Multi-Sector Fixed Income Fund, Inc. 33
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Redemption of Small Accounts
Due to the high cost of maintaining small accounts, if your
account balance is less than $200, you may receive a notice
requesting you to bring the balance up to $200 within 60 days.
If you do not, the shares in the account will be sold at net
asset value, and a check will be mailed to the address of
record.
Exchange Privileges
You should read the prospectus carefully before deciding to make
an exchange. You can obtain a prospectus from your financial
advisor or by calling us at (800) 243-4361 or accessing our Web
site at www.phoenixinvestments.com.
o You may exchange shares for another fund in the same class
of shares; e.g., Class A for Class A.
o Exchanges may be made by phone ((800) 243-1574) or by mail
(State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).
o The amount of the exchange must be equal to or greater than
the minimum initial investment required.
o The exchange of shares is treated as a sale and purchase
for federal income tax purposes.
o Because excessive trading can hurt fund performance and
harm other shareholders, the Fund reserves the right to
temporarily or permanently end exchange privileges or
reject an order from anyone who appears to be attempting to
time the market, including investors who request more than
one exchange in any 30-day period. The fund's underwriter
has entered into agreements with certain market timing
firms permitting them to exchange by telephone. These
privileges are limited, and the fund distributor has the
right to reject or suspend them.
Retirement Plans
Shares of the fund may be used as investments under the
following qualified prototype retirement plans: traditional IRA,
rollover IRA, SIMPLE IRA, Roth IRA, 401(k) plans,
profit-sharing, money purchase plans, and 403(b) plans. For more
information, call (800) 243-4361.
34 Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Investor Services
- ---------------------------------
Investo-Matic is a systematic investment plan that allows you to
have a specified amount automatically deducted from your
checking or savings account and then deposited into your mutual
fund account. Just complete the Investo-Matic Section on the
application and include a voided check.
Systematic Exchange allows you to automatically move money from
one Phoenix Fund to another on a monthly, quarterly, semi-annual
or annual basis. Shares of one Phoenix Fund will be exchanged
for shares of the same class of another fund at the interval you
select. To sign up, just complete the Systematic Exchange
Section on the application.
Telephone Exchange lets you exchange shares of one fund for the
same class of shares in another fund, using our customer service
telephone service. See the Telephone Exchange Section on the
application.
Systematic Withdrawal Program allows you to periodically redeem
a portion of your account on a predetermined monthly, quarterly,
semiannual, or annual basis. Sufficient shares will be redeemed
on the 15th of the month at the closing net asset value so that
the payment is made about the 20th of the month. The program
also provides for redemptions on or about the 10th, 15th, or
25th with proceeds directed through Automated Clearing House
(ACH) to your bank. The minimum withdrawal is $25, and minimum
account balance requirements continue. Shareholders in the
program must own fund shares worth at least $5,000.
Tax Status of Distributions
- -------------------------------------------
Distributions from net investment income will be declared daily
and paid monthly. The fund will distribute net realized capital
gains, if any, at least annually. Distributions of short-term
capital gains and net investment income are taxable to
shareholders as ordinary income. Long-term capital gains, if
any, distributed to shareholders and which are designated by the
fund as capital gain distributions, are taxable to shareholders
as long-term capital gain distributions regardless of the length
of time you have owned your shares.
Unless you elect to receive distributions in cash, dividends and
capital gain distributions are paid in additional shares. All
distributions, cash or additional shares, are subject to federal
income tax and may be subject to state, local and other taxes.
Phoenix Multi-Sector Fixed Income Fund, Inc. 35
Phoenix Multi-Sector Short Term Bond Fund
<PAGE>
Financial Highlights
- ------------------------------------
This table is intended to help you understand the fund's
financial performance for the past five years. Certain
information reflects financial results for a single fund share.
The total returns in the table represent the rate that an
investor would have earned on an investment in the fund
(assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP,
independent accountants. Their report, together with the fund's
financial statements, are included in the fund's most recent
Annual Report, which is available upon request.
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net asset value, beginning of period $ 13.50 $ 13.27 $ 12.56 $ 11.94 $ 14.13
Income from investment operations:
Net investment income 1.07 1.03 0.94 0.96 0.76
Net realized and unrealized gain (loss) (1.88) 0.18 0.72 0.61 (1.35)
---------- -------- -------- -------- -------
Total from investment operations (0.81) 1.21 1.66 1.57 (0.59)
---------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (1.07) (0.98) (0.95) (0.95) (0.77)
Dividends from net realized gains (0.36) -- -- -- (0.63)
In excess of net investment income -- -- -- -- (0.05)
In excess of net realized gains (0.06) -- -- -- --
Tax return of capital -- -- -- -- (0.15)
---------- -------- -------- -------- -------
Total distributions (1.49) (0.98) (0.95) (0.95) (1.60)
---------- -------- -------- -------- -------
Change in net asset value (2.30) 0.23 0.71 0.62 (2.19)
---------- -------- -------- -------- -------
Net asset value, end of period $ 11.20 $ 13.50 $ 13.27 $ 12.56 $ 11.94
========== ======== ======== ======== =======
Total return(1) (6.86)% 9.22% 13.75% 13.83% (4.57)%
Ratios/supplemental data:
Net assets, end of period (thousands) $156,317 $191,486 $169,664 $168,875 $172,966
Ratio to average net assets of:
Operating expenses 1.08% 1.04%(2) 1.07% 1.10% 1.13%
Net investment income 8.17% 7.28% 7.56% 8.10% 7.05%
Portfolio turnover 157% 295% 255% 201% 123%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not
significantly differ.
36
<PAGE>
Financial Highlights (continued)
- ---------------------------------------------
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended October 31,
1998 1997 1996 1995 1994
Net asset value, beginning of period $ 13.48 $ 13.25 $ 12.54 $ 11.93 $ 14.10
Income from investment operations:
Net investment income 0.96 0.92 0.85 0.86 0.68
Net realized and unrealized gain (loss) (1.87) 0.18 0.71 0.61 (1.36)
---------- -------- -------- -------- -------
Total from investment operations (0.91) 1.10 1.56 1.47 (0.68)
---------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.97) (0.87) (0.85) (0.86) (0.67)
Dividends from net realized gains (0.36) -- -- -- (0.63)
In excess of net investment income -- -- -- -- (0.05)
In excess of net realized gains (0.06) -- -- -- --
Tax return of capital -- -- -- -- (0.14)
---------- -------- -------- -------- -------
Total distributions (1.39) (0.87) (0.85) (0.86) (1.49)
---------- -------- -------- -------- -------
Change in net asset value (2.30) 0.23 0.71 0.61 (2.17)
---------- -------- -------- -------- -------
Net asset value, end of period $ 11.18 $ 13.48 $ 13.25 $ 12.54 $ 11.93
========== ======== ======== ======== =======
Total return(1) (7.51)% 8.42% 12.84% 12.96% (5.21)%
Ratios/supplemental data:
Net assets, end of period (thousands) $124,075 $154,989 $142,869 $144,020 $156,629
Ratio to average net assets of:
Operating expenses 1.84% 1.79%(2) 1.82% 1.85% 1.78%
Net investment income 7.36% 6.52% 6.80% 7.30% 6.46%
Portfolio turnover 157% 295% 255% 201% 123%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
37
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix Multi-Sector Fixed Income Fund, Inc.
<TABLE>
<CAPTION>
Class C
---------------------------------
Year Ended From Inception
October 31, 10/14/97 to
1998 10/31/97
<S> <C> <C>
Net asset value, beginning of period $ 13.48 $ 14.22
------- -------
Income from investment operations:
Net investment income 0.97 0.04
Net realized and unrealized gain (loss) (1.85) (0.74)
------- -------
Total from investment operations (0.88) (0.70)
------- -------
Less distributions:
Dividends from net investment income (0.97) (0.04)
Dividends from net realized gains (0.36) --
In excess of net investment income -- --
In excess of net realized gains (0.06) --
Tax return of capital -- --
------- -------
Total distributions (1.39) (0.04)
------- -------
Change in net asset value (2.27) (0.74)
------- -------
Net asset value, end of period $ 11.21 $ 13.48
======= =======
Total return(1) (7.36)% (5.00)%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 5,937 $ 284
Ratio to average net assets of:
Operating expenses 1.88% 1.62%(2)(4)
Net investment income 7.46% 4.75%(4)
Portfolio turnover 157% 295%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) For the year ended October 31, 1997, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
(3) Not annualized.
(4) Annualized.
38
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net asset value, beginning of period $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91
Income from investment operations:
Net investment income 0.34(2) 0.34(2) 0.33(2) 0.33(2) 0.29(2)
Net realized and unrealized gain (loss) (0.29) 0.14 0.17 0.13 (0.26)
------- ------- ------- ------- -------
Total from investment operations 0.05 0.48 0.50 0.46 0.03
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.34) (0.33) (0.33) (0.33) (0.29)
Dividends from net realized gains (0.11) -- -- -- (0.03)
Tax return of capital -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions (0.45) (0.33) (0.33) (0.33) (0.33)
------- ------- ------- ------- -------
Change in net asset value (0.40) 0.15 0.17 0.13 (0.30)
------- ------- ------- ------- -------
Net asset value, end of period $ 4.66 $ 5.06 $ 4.91 $ 4.74 $ 4.61
======= ======= ======= ======= =======
Total return(1) 0.85% 10.08% 10.91% 10.27% 0.40%
Ratios/supplemental data:
Net assets, end of period (thousands) 33,212 $28,557 $13,702 $ 9,303 $ 9,371
Ratio to average net assets of:
Operating expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income 6.90% 6.54% 6.88% 7.07% 5.99%
Portfolio turnover 126% 246% 232% 344% 121%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.03, $0.04, $0.06, $0.08 and $0.08, respectively.
39
<PAGE>
Financial Highlights (continued)
- ---------------------------------------------
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
Class B
--------------------------------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Net asset value, beginning of period $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91
------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.31(2) 0.31(2) 0.31(2) 0.30(2) 0.27(2)
Net realized and unrealized gain (loss) (0.29) 0.15 0.17 0.13 (0.26)
------- ------- ------- ------- -------
Total from investment operations 0.02 0.46 0.48 0.43 0.01
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.32) (0.31) (0.31) (0.30) (0.27)
Dividends from net realized gains (0.11) -- -- -- (0.03)
Tax return of capital -- -- -- -- (0.01)
------- ------- ------- ------- -------
Total distributions (0.43) (0.31) (0.31) (0.30) (0.31)
------- ------- ------- ------- -------
Change in net asset value (0.41) 0.15 0.17 0.13 (0.30)
------- ------- ------- ------- -------
Net asset value, end of period $ 4.65 $ 5.06 $ 4.91 $ 4.74 $ 4.61
======= ======= ======= ======= =======
Total return(1) 0.12% 9.51% 10.36% 9.71% (0.03)%
Ratios/supplemental data:
Net assets, end of period (thousands) 12,225 $10,318 $ 5,943 $ 4,659 $ 6,418
Ratio to average net assets of:
Operating expenses 1.50% 1.50% 1.50% 1.50% 1.45%
Net investment income 6.44% 6.05% 6.38% 6.59% 5.74%
Portfolio turnover 126% 246% 232% 344% 121%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.03, $0.04, $0.06, $0.08 and $0.08, respectively.
40
<PAGE>
Financial Highlights (continued)
- ---------------------------------------------
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
Class C
-----------------------------------
Year Ended From Inception
October 31, 10/1/97 to
1998 10/31/97
<S> <C> <C>
Net asset value, beginning of period $ 5.06 $ 5.15
------- ------
Income from investment operations:
Net investment income 0.34(2) 0.03(2)
Net realized and unrealized gain (loss) (0.30) (0.09)
------- ------
Total from investment operations 0.04 (0.06)
------- ------
Less distributions:
Dividends from net investment income (0.33) (0.03)
Dividends from net realized gains (0.11) --
Tax return of capital -- --
------- ------
Total distributions (0.44) (0.03)
------- ------
Change in net asset value (0.40) (0.09)
------- ------
Net asset value, end of period $ 4.66 $ 5.06
======= ======
Total return(1) 0.59% (1.30)%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) 10,665 $ 575
Ratio to average net assets of:
Operating expenses 1.25% 1.25%(3)
Net investment income 6.70% 5.51%(3)
Portfolio turnover 126% 246%
</TABLE>
- ----------------
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.04, respectively.
(3) Annualized.
(4) Not annualized.
41
<PAGE>
Additional Information
- ---------------------------------------
Statement of Additional Information
Each fund has filed a Statement of Additional Information about the fund,
dated March 1, 1999 with the Securities and Exchange Commission. The
Statement contains more detailed information about the fund. Each is
incorporated into this prospectus by reference and is legally part of the
prospectus. You may obtain a free copy of the Statements:
o by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
o by calling (800) 243-4361.
You may also obtain information about the funds from the Securities and
Exchange Commission:
o through its internet site (http://www.sec.gov),
o by visiting its Public Reference Room in Washington, DC or
o by writing to its Public Reference Section, Washington, DC 20549-6009
(a fee may be charged).
Information about the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330.
Shareholder Reports
Each fund semiannually mails to its shareholders detailed reports
containing information about the fund's investments. Each fund's Annual
Report contains a detailed discussion of the market conditions and
investment strategies that significantly affected the fund's performance
from November 1 through October 31. You may request a free copy of the
fund's Annual and Semiannual Reports:
o by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
o by calling (800) 243-4361.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device (TTY): (800) 243-1926
Multi-Sector Fixed Income Fund SEC File Nos. 33-31243 and 811-5909
Multi-Sector Short Term Bond Fund SEC File Nos. 33-45758 and 811-6566
[recycle logo] Printed on recycled paper using soybean ink
42
<PAGE>
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43
<PAGE>
[This page intentionally left blank]
44
<PAGE>
[This page intentionally left blank]
45
<PAGE>
[BACK PAGE]
Phoenix Equity Planning Corporation ---------------
PO Box 2200 PRSRT STD
Enfield CT 06083-2200 U.S. Postage
PAID
Springfield, MA
Permit No. 444
---------------
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 694 (3/99)
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
March 1, 1999
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 March 1, 1999 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 ..................... 15
TAX SHELTERED RETIREMENT PLANS ................ 17
HOW TO REDEEM SHARES .......................... 17
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 18
THE DISTRIBUTOR ............................... 20
PLANS OF DISTRIBUTION ......................... 22
MANAGEMENT OF THE FUND ........................ 23
OTHER INFORMATION ............................. 30
APPENDIX ...................................... 32
</TABLE>
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device TTY: (800) 243-1926
PXP 694B (3/99)
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 February 22, 1996, the Trustees
approved change in the Fund's name to more accurately reflect its present
investment policies and objectives. Prior to this revision, the Fund's name was
"Phoenix Asset Reserve."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide high current income 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
(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.
2
<PAGE>
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 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. 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
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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
The Fund may, from time to time, quote its "yield" and/or its "total
return" in advertisements, sales literature or reports to shareholders or
prospective investors. 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. Calculated pursuant
to this formula, for the 30-day period ending October 31, 1998, the Class A
Shares yield was 9.28%, the Class B Shares yield was 9.00% and the Class C
shares yield was 9.24%.
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, 1998, the average
annual total return of the Class A Shares was (1.48)% and 5.92%, respectively,
and from inception, July 6, 1992 through October 31, 1998 was 6.08%. For the one
year and five year periods ended October 31, 1998 and since inception, July 6,
1992 for the Class B Shares, the average annual total return was (1.24)%, 5.83%
and 5.88%, respectively. For the one year period ended October 31, 1998 and
since inception October 1, 1997, the Class C Shares average annual total return
was 0.59% and (0.66)%, respectively.
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, 1996, 1997, and 1998.
SERVICES OF THE ADVISER
Phoenix Investment Counsel, Inc. ("PIC" or "Adviser") serves as investment
adviser to the Fund. Effective June 1, 1998, National Securities & Research
Corporation ("National") assigned its investment advisory contract to PIC.
National and PIC are both subsidiaries of Phoenix Investment Partners, Ltd.
(formerly Phoenix Duff & Phelps Corporation). PIC, which is located at 56
Prospect Street, Hartford, Connecticut 06115, has served as an investment
adviser for over sixty years. As of December 31, 1998, PIC managed over $23.9
billion in assets (including mutual funds and institutional accounts).
The Adviser is a direct subsidiary of Phoenix Investment Partners, Ltd.
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.
Phoenix Investment Partners, Ltd. is the 10th largest publicly traded
investment company in the nation, and has served investors for over 70 years.
It manages approximately $50 billion in assets through its investment partners:
Aberdeen Fund Managers, Inc. (Aberdeen) in Aberdeen, London, Singapore and Fort
Lauderdale; Duff & Phelps Investment Management Co. (Duff & Phelps) in Chicago
and Cleveland; Roger Engemann & Associates, Inc. (Engemann) in Pasadena; Seneca
Capital Management LLC (Seneca) in San Francisco; and Phoenix Investment
Counsel, Inc. (Goodwin, Hollister, and Oakhurst divisions) in Hartford,
Sarasota, and Scotts Valley, CA, respectively.
The Adviser provides certain services and facilities required to carry on
the day-to-day operations of the Fund (for which it receives a management fee)
other than the costs of printing and mailing proxy materials, reports and
notices to shareholders; outside legal and auditing services; regulatory filing
fees and expenses of printing the Fund's registration statements (but the
Distributor purchases such copies of the Fund's prospectuses and reports and
communications to shareholders as it may require for sales purposes); insurance
expense; association membership dues; brokerage fees; and taxes.
The 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.
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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, 1996, 1997, and 1998 amounted to $86,482, $159,118, and $270,259,
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.
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, 1999, 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
1.55%, 2.05% and 1.80%, respectively, absent such waiver or reimbursement for
the fiscal year ended October 31, 1998. The Adviser has not undertaken to extend
the reimbursement beyond December 31, 1999.
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
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 0.25% of the Fund's aggregate average daily net assets attributable to
the Class A shares. In addition, certain purchases of Class A shares qualify for
reduced initial sales charges.
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.
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.
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
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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.
Class A Shares--Reduced Sales Charges
Investors choosing Class A Shares may be entitled to reduced sales charges.
The circumstances under 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
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 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)
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
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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 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.
Class B Shares--Waiver of Sales Charges
The CDSC is waived on the redemption (sale) of Class B Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section 72(m)(7);
(c) as a mandatory distribution upon reaching age 70 1/2 under any retirement
plan qualified under Code Sections 401, 408 or 403(b) or resulting from the
tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using
an approved participant tracking system for participant hardships, death,
disability or normal retirement, and loans which are subsequently repaid; (e)
based on the exercise of exchange privileges among Class B Shares of the Funds
or any other Affiliated Phoenix Fund; (f) based on any direct rollover transfer
of shares from an established Affiliated Phoenix Fund qualified plan into an
Affiliated Phoenix Fund IRA by participants terminating from the qualified plan;
and (g) based on the systematic withdrawal program. 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 Shares are
not redeemed within one year of the death, they will remain subject to the
applicable CDSC when redeemed. Class C Shares are not subject to any sales
charge when redeemed.
Automatic Conversion of Class B Shares
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 the 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.
INVESTOR ACCOUNT SERVICES
The Fund offers 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").
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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 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.
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 Shares
investor since a sales charge will be paid by the investor on the purchase of
Class A Shares at the same time as other shares are being redeemed. For this
reason, investors in Class A Shares may not participate in an automatic
investment program while participating in the Systematic Withdrawal Program.
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
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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 the purchase.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund and other Affiliated 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.
HOW TO REDEEM SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other 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.
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,
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-
17
<PAGE>
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. 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.
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 Fund at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the
Investment Company Act of 1940 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 Fund. A shareholder receiving
such securities would incur brokerage costs when selling the securities.
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.
18
<PAGE>
The Code imposes a 4% nondeductible excise tax on regulated investment
companies, such as the Fund, if the Fund does not distribute to its shareholders
(or is deemed not to have distributed) during the calendar year an amount equal
to 98% of the Fund's ordinary income, with certain adjustments, for such
calendar year, plus 98% of the Fund's capital gains net income (adjusted for
certain losses, as prescribed in the Code) for the 12-month period ending on
October 31 of such calendar year. In addition, an amount equal to any
undistributed investment company taxable income or capital gain net income from
the previous calendar year must also be distributed to avoid the excise tax. The
excise tax is imposed on the amount by which each regulated investment company
does not meet the foregoing distribution requirements.
The Code provides that any dividends declared by the Fund in October,
November or December of any calendar year to shareholders of record on a date in
such month will be deemed to have been received by a shareholder on December 31
of that calendar year, provided that the dividend is actually paid by the Fund
during January of the following year.
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.
19
<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,
1996, 1997, and 1998, purchasers of shares of the Fund paid aggregate sales
charges of $57,335, $127,340, and $95,205, respectively, of which the principal
underwriter received net commissions of $19,570, $19,763, and $21,888,
respectively, for its services, the balance being paid to dealers. For the
fiscal year ended October 31, 1998, the Distributor received net commissions of
$6,286 for Class A Shares and deferred sales charges of $15,602 for Class B and
C Shares.
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.
20
<PAGE>
Dealers with whom the Distributor has entered into sales agreements receive
a discount or commission as set forth below:
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
----------------------------------------
Amount of Transaction at Dealer Discount Percentage
Offering Price Offering Price Net Amount Invested of 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>
Dealer Concessions
In addition to the dealer discount on purchases of Class A Shares, the
Distributor intends to pay investment dealers a sales commission of 2% of the
sale price of Class B Shares sold by such dealers. Your broker, dealer or
investment adviser may also charge you additional commissions or fees for their
services in selling shares to you provided they notify the Distributor of their
intention to do so.
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of the
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 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 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.
Administrative Services
Equity Planning also acts as administrative agent of the Fund and as such
performs administrative, bookkeeping and pricing functions for the Fund. For its
services, Equity Planning will be paid a fee equal to the sum of (1) the
documented cost of fund accounting and related services provided by PFPC Inc.,
as subagent, plus (2) the documented cost to Equity Planning to provide
financial reporting and tax services and to oversee the subagent's performance.
The current fee schedule of PFPC Inc. is based upon the average of the aggregate
daily net asset values of the Fund, at the following incremental annual rates.
<TABLE>
<S> <C>
First $200 million .085%
$200 million to $400 million .05%
$400 million to $600 million .03%
$600 million to $800 million .02%
$800 million to $1 billion .015%
Greater than $1 billion .0125%
</TABLE>
Percentage rates are applied to the aggregate daily net asset values of the
Fund. PFPC Inc. also charges minimum fees and additional fees for each
additional class of fund shares. Equity Planning retains PFPC Inc. as subagent
for each of the funds for which Equity Planning serves as administrative agent.
PFPC Inc. agreed to a modified fee structure and waived certain charges. Because
PFPC Inc.'s arrangement would have favored smaller funds over larger funds,
Equity Planning reallocates PFPC Inc.'s overall asset-based charges among all
funds for which it serves as administrative agent on the basis of the relative
net assets of each fund. As a result, the PFPC Inc. charges to the Fund are
expected to be slightly less than the amount that would be found through direct
application of the table illustrated above. For its services during the Fund's
fiscal year ended October 31, 1998, Equity Planning received $83,489.
21
<PAGE>
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.
Pursuant to the Plans, the Fund may reimburse the Distributor for actual
expenses of the Distributor 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").
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 Class C Shares, 0.25% of the average annual net asset value of
each class, respectively.
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.
From its own resources or pursuant to the Plan, and subject to the dealers'
prior approval, the Distributor may provide additional compensation to
registered representatives of dealers in the form of travel expenses, meals, and
lodging associated with training and educational meetings sponsored by the
Distributor. The Distributor may also provide gifts amounting in value to less
than $100, and occasional meals or entertainment, to registered representatives
of dealers. Any such travel expenses, meals, lodging, gifts or entertainment
paid will not be preconditioned upon the registered representatives' or dealers'
achievement of a sales target. 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, 1998, the Fund paid 12b-1 fees in the
amount of $198,418 ($76,534 under the Distribution Plan for Class A shares;
$87,785 under the Distribution Plan for Class B shares and $34,099 under the
Distribution Plan for Class C shares), of which the Distributor of the Fund
received $82,753. The 12b-1 payments were used for (1) compensating dealers,
$155,367, (2) compensating sales personnel, $388,234, (3) advertising, $187,131,
(4) printing and mailing of prospectuses to other than current shareholders,
$8,472, (5) service costs, $40,058 and (6) other, $73,614. 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 Fund under the Class B Plan. Those expenses may be carried over and
paid in future years. At October 31, 1998, the end of the last Plan year,
Distributor had incurred unreimbursed expenses under the Class B Plan of
$322,145 (equal to 0.57% of the Fund's net assets) which have been carried over
into the present Class B Plan year.
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
22
<PAGE>
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.
MANAGEMENT OF THE FUND
The Trustees are responsible for the overall supervision of the operations
of the Fund and perform the duties imposed on Trustees by the 1940 Act and
Massachusetts business trust law.
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 (64) 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).
E. Virgil Conway (69) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York,
Bronxville, NY 10708 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)
(Chairman (1998-present)), Accuhealth (1994-present), Trism,
Inc. (1994-present), Realty Foundation of New York
(1972-present) and New York Housing Partnership Development
Corp. (Chairman) (1981-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). Advisory Director, Fund Directions
(1993-1998). Chairman/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.
</TABLE>
23
<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 (69) 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). Formerly a
Major General of the British Army.
*Francis E. Jeffries (68) 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 Investment Partners, Ltd.
Leroy Keith, Jr. (60) 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).
</TABLE>
24
<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 (52) 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 Investment Partners, Ltd. 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, PHL
Associates, Inc. (1995-present).
Everett L. Morris (70) 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).
</TABLE>
25
<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 (52) Trustee Chairman, IBEX Capital Markets, Inc., formerly IBEX Capital
Managing Director Markets LLC (1997-present). Managing Director, Wydown
The Wydown Group Group (1994-present). Director, Phoenix Investment Partners,
IBEX Capital Markets LLC Ltd. (1995-present). Director/Trustee, Phoenix Funds (1987-
60 State Street present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Suite 950 Duff & Phelps Institutional Mutual Funds (1996-present).
Boston, MA 02109 Director, AIB Govett Funds (1991-present), Blue Cross and
Blue Shield of New Hampshire (1994-present), Investors
Financial Service Corporation (1995-present), Investors Bank
& Trust Corporation (1995-present), Plymouth Rubber Co.
(1995-present), Stifel Financial (1996-present), Command
Systems, Inc. (1998-present), Connecticut River Bancorp
(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.
*Calvin J. Pedersen (57) Trustee Director (1986-present), President (1993-present) and
Phoenix Duff & Phelps Corporation Executive Vice President (1992-1993), Phoenix Investment
55 East Monroe Street Partners, Ltd. 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. (1997-present), Duff &
Phelps Utilities Income Inc. (1994-present) and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1995 present).
Herbert Roth, Jr. (70) 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), Landauer, Inc. (medical
services) (1970-present), Tech Ops./Sevcon, Inc. (electronic
controllers) (1987-present), and Mark IV Industries
(diversified manufacturer) (1985-present). Member, Directors
Advisory Council, Phoenix Home Life Mutual Insurance
Company (1998-present). Director, Key Energy Group (oil rig
service) (1988-1994) and Phoenix Home Life Mutual and
Insurance Company (1972-1998).
Richard E. Segerson (53) Trustee Management Director, Northway Management Company
102 Valley Road (1998-present). Director/Trustee, Phoenix Funds,
New Canaan, CT 06840 (1993-present). Trustee, Phoenix-Aberdeen Series Fund and
Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Managing Director, Mullin Associates (1993-1998).
Lowell P. Weicker, Jr. (67) 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>
26
<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 (41) Executive Director and Executive Vice President-Investments, Phoenix
Vice Investment Partners, Ltd. (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).
John F. Sharry (46) Executive Managing Director, Retail Distribution, Phoenix Equity
Vice Planning Corporation (1995-present). Executive Vice
President President, Phoenix Funds and Phoenix-Aberdeen Series Funds
(1998-present). Managing Director, Director and National
Sales Manager, Putnam Mutual Funds (until 1995).
James D. Wehr (41) Senior Vice Senior Vice President, Fixed Income (1998-present),
President Managing Director, Fixed Income, (1996-1998), Vice
President (1991-1996), Phoenix Investment Counsel, Inc. Senior
Vice President, Fixed Income (1998-present), Managing Director,
Fixed Income, (1996-1998), 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 (37) 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>
27
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
<S> <C> <C>
William R. Moyer (54) Vice Senior Vice President and Chief Financial Officer, Phoenix
100 Bright Meadow Blvd. President Investment Partners, Ltd. (1995-present). Director
P.O. Box 2200 (1998-present), Senior Vice President (1990-present), Chief
Enfield, CT 06083-2200 Financial Officer (1996-present), Finance (until 1996) and
Treasurer (1994-1996 and 1998-present), Phoenix Equity
Planning Corporation. Director (1998-present), Senior Vice
President (1990-present), Chief Financial Officer (1996-present),
Finance (until 1996) and Treasurer (1994-present), Phoenix
Investment Counsel, Inc. Director (1998-present), 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). Senior
Vice President and Chief Financial Officer and W.S. Griffith &
Co., Inc. (1992-1995) and Townsend Financial Advisers, Inc.
(1993-1995).
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 (46) 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 (1995-present). Second Vice President and
Treasurer, Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with
Phoenix Home Life Insurance Company (1987-1994).
G. Jeffrey Bohne (51) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Mutual Fund
Greenfield, MA 01301 Customer Service (1996-present), Vice President, Transfer Agent
Operations (1993-1996), Phoenix Equity Planning Corporation.
Secretary/Clerk, Phoenix Funds (1993-present), Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present).
</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.
28
<PAGE>
For services rendered to the Fund for the fiscal year ended October 31,
1998, the Trustees received aggregate remuneration of $17,385. 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 $2,000 and $2,000 per joint Executive Committee meeting attended.
The function of the Executive Committee is to serve as a contract review,
compliance review and performance review delegate of the full Board of Trustees.
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, 1998, 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 (14 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ -------------- --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert Chesek $1,440 $59,750
E. Virgil Conway+ $1,887 $78,000
Harry Dalzell-Payne+ $1,678 $69,500
Francis E. Jeffries $1,441 $60,000
Leroy Keith, Jr. $1,498 None None $62,250
Philip R. McLoughlin+ $ 0 for any for any 0
Everett L. Morris+ $1,621 Trustee Trustee $68,000
James M. Oates+ $1,621 $67,250
Calvin J. Pedersen $ 0 0
Herbert Roth, Jr.+ $1,945 $79,500
Richard E. Segerson $1,707 $70,750
Lowell P. Weicker, Jr. $1,707 $70,000
</TABLE>
- -----------
*This compensation (and the earnings thereon) was deferred pursuant to the
Trustees' Deferred Compensation Plan. At December 31, 1998 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
$175,029, $151,807 and $147,653, 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 February 9, 1999, the Trustees and officers of the Fund beneficially
owned less than 1% of the outstanding shares of the Fund.
29
<PAGE>
Principal Shareholders
The following table sets forth information as of February 9, 1999 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>
James E. Andrews Exec Class A 432,920.213 6.29%
Est Raoul Kann
737 Mandarin Ln
Walnut Creek, CA 94598-1707
Donaldson, Lufkin & Jenrette Class A 364,432.881 5.29%
Securities Corporation Inc
P.O. Box 2052
Jersey City, NJ 07303-2052
MLPF&S for the sole benefit of its customers Class B 207,245.332 7.82%
ATTN: Fund Administration
4800 Deer Lake Dr. E 3rd Fl.
Jacksonville, FL 32246-6484
Trustees of Phoenix Savings and Investment Plan Class A 447,920.055 6.51%
100 Bright Meadow Blvd.
P.O. Box 1900
Enfield, CT 06083-1900
NFSC FEBO # APO-135372 Class A 422,594.021 6.14%
Janie L. Scott
P.O. Box 315
Simonton, TX 77476-0315
Darrell D. Vore Class C 148,151.278 6.29%
Marilyn J. Vore, TTEES
8005 Tiburon Pl
Johnston, IA 50131-8741
</TABLE>
OTHER INFORMATION
Capital Stock
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,
30
<PAGE>
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.
Independent Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, has been
selected as independent accountants for the Fund. PricewaterhouseCoopers 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. As compensation, Equity Planning receives a fee equivalent to
$22.25 for each designated shareholder account plus out-of-pocket expenses.
Transfer Agent fees are also utilized to offset costs and fees paid to
subtransfer agents employed by Equity Planning. State Street Bank and Trust
Company serves as a subtransfer agent pursuant to a Subtransfer Agency
Agreement.
Reports to Shareholders
The fiscal year of the Fund ends on October 31. The Fund will send
financial statements to the shareholders at least semiannually. An annual
report, containing financial statements audited by the Fund's independent
accountants, will be sent to shareholders each year.
Financial Statements
The financial statements for the Fund's fiscal year ended October 31, 1998
appearing in the Fund's Annual Report to Shareholders, are incorporated herein
by reference.
31
<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.
32
<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
33
<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.
34
<PAGE>
INVESTMENTS AT OCTOBER 31, 1998
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--3.7%
U.S. TREASURY NOTES--3.7%
U.S. Treasury Notes 5.625%, 5/15/01..... Aaa $ 750 $ 774,887
U.S. Treasury Notes 5.25%, 8/15/03(g)... Aaa 1,250 1,303,842
-------------
2,078,729
-------------
- - --------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $2,084,948) 2,078,729
- - --------------------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED SECURITIES--1.4%
GNMA Pool #447976 6.50%, 6/15/28........ Aaa 795 803,552
- - --------------------------------------------------------------------------------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $790,377) 803,552
- - --------------------------------------------------------------------------------------
MUNICIPAL BONDS--5.5%
CALIFORNIA--0.8%
San Diego County Pension Taxable Series
A 6.24%, 8/15/02........................ Aaa 400 415,000
ILLINOIS--1.7%
Chicago O'Hare Taxable Revenue 6.47%,
1/1/00.................................. Aaa 150 152,625
Chicago Tax Increment Taxable 6.25%,
6/1/02.................................. Aaa 750 776,250
-------------
928,875
-------------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
MASSACHUSETTS--0.7%
Massachusetts State Port Authority
Revenue Series C Taxable 6.05%, 7/1/02.. Aa $ 400 $ 411,500
MISSISSIPPI--1.6%
Mississippi State Taxable Series T
7.50%, 11/1/00.......................... Aa 855 897,750
NEW YORK--0.7%
New York State Dormitory Authority
Revenue, Taxable 6.45%, 10/1/99......... Baa 400 405,384
- - --------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $2,974,657) 3,058,509
- - --------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--11.1%
AESOP Funding II LLC 97-1, A2 144A
6.40%, 10/20/03(b)...................... Aaa 500 519,844
Capita Equipment Receivables Trust 97-1,
B 6.45%, 8/15/02........................ Aa 250 255,547
Case Equipment Loan Trust 95-B, CTFS
6.45%, 9/15/02.......................... Aaa 500 503,125
Continental Airlines Series 972D 7.522%,
6/30/01................................. Ba 308 310,018
Copelco Capital Funding Corp. 98-A, A3
5.78%, 8/15/01.......................... AAA(c) 950 958,312
First U.S.A. 98-1, C 6.50%, 1/18/06..... NR 750 766,172
</TABLE>
4 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
Fleetwood Credit Corp. 96-A, B 6.95%,
10/17/11................................ A $ 230 $ 233,824
Ford Credit Auto Owner Trust 96-B, CTFS
6.55%, 2/15/02.......................... A 250 253,594
Green Tree Financial Corp. 96-1, A2
5.85%, 3/15/27.......................... Aaa 500 502,969
MBNA Master Credit Card Trust 98-C, C
144A 6.35%, 11/15/05(b)................. NR 525 532,875
NationsBank Auto Owner Trust 96-A, B2
6.875%, 5/15/03......................... A 500 516,987
Premier Auto Trust 97-3, B 6.52%,
1/6/03.................................. A 250 257,753
Team Fleet Financing Corp. 96-1, B 144A
7.10%, 12/15/02(b)...................... BBB(c) 500 496,094
Team Fleet Financing Corp. 98-2A, C 144A
6.53%, 7/25/02(b)....................... BBB(c) 150 150,094
- - --------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $6,150,071) 6,257,208
- - --------------------------------------------------------------------------------------
CORPORATE BONDS--22.7%
AEROSPACE/DEFENSE--1.4%
BE Aerospace 144A 9.50%,
11/1/08(b)(h)........................... B 250 257,500
Raytheon Co. 5.95%, 3/15/01............. Baa 500 506,250
-------------
763,750
-------------
AUTO PARTS & EQUIPMENT--0.9%
Collins & Aikman Products 11.50%,
4/15/06................................. B 500 517,500
AUTOMOBILES--0.9%
Titan Tire 7%, 2/11/00.................. NR 500 480,000
BANKS (MAJOR REGIONAL)--0.5%
First Union Institutional Capital I
8.04%, 12/1/26.......................... A 250 264,687
BROADCASTING (TELEVISION, RADIO & CABLE)--1.8%
Century Communications 8.75%, 10/1/07... Ba 500 525,000
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE)--CONTINUED
Tele-Communications, Inc. 7.375%,
2/15/00................................. Baa $ 500 $ 515,625
-------------
1,040,625
-------------
COMPUTERS (SOFTWARE & SERVICES)--0.6%
Computer Associates International Series
B 6.375%, 4/15/05....................... Baa 320 317,600
CONSUMER FINANCE--0.9%
Ford Motor Credit 6%, 1/14/03........... A 500 512,500
ELECTRIC COMPANIES--0.9%
Niagara Mohawk Power 7.375%, 7/1/03..... Ba 500 516,250
GAMING, LOTTERY & PARIMUTUEL COMPANIES--2.1%
Horseshoe Gaming LLC Series B 12.75%,
9/30/00................................. B 475 503,500
Majestic Star Casino LLC 12.75%,
5/15/03................................. B 250 257,500
Station Casinos, Inc. 10.125%,
3/15/06................................. B 400 398,000
-------------
1,159,000
-------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--0.8%
Schein Pharmaceutical, Inc. 8.467%,
12/15/04(d)............................. B 510 433,500
INVESTMENT BANKING/BROKERAGE--0.9%
Merrill Lynch & Co., Inc. 6%, 7/15/05... Aa 500 495,625
MANUFACTURING (DIVERSIFIED)--1.3%
Polymer Group, Inc. 9%, 7/1/07.......... B 250 234,375
Tyco International Group SA 6.125%,
6/15/01................................. Baa 500 508,750
-------------
743,125
-------------
MANUFACTURING (SPECIALIZED)--0.8%
Indesco International, Inc. 9.75%,
4/15/08................................. B 500 461,875
METALS MINING--1.2%
AK Steel Corp. 10.75%, 4/1/04........... Ba 600 625,500
NSM Steel, Inc. 144A 12%, 2/1/06(b)..... Caa 100 27,000
-------------
652,500
-------------
OIL & GAS (DRILLING & EQUIPMENT)--0.5%
Noble Drilling Corp. 9.125%, 7/1/06..... Baa 250 255,000
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)--1.2%
Benton Oil & Gas Co. 9.375%, 11/1/07.... B $ 500 $ 350,000
Lomak Petroleum, Inc. 8.75%, 1/15/07.... B 375 337,969
-------------
687,969
-------------
PERSONAL CARE--0.6%
Bally Total Fitness Holding Corp. Series
B 9.875%, 10/15/07...................... B 350 322,000
PUBLISHING--0.9%
News America, Inc. 6.625%, 1/9/08....... Baa 500 495,625
RETAIL (FOOD CHAINS)--0.9%
Meyer (Fred), Inc. 7.45%, 3/1/08........ Ba 500 525,000
RETAIL (GENERAL MERCHANDISE)--0.9%
Wal-Mart Stores, Inc. 5.85%, 6/1/00..... Aa 500 508,125
SERVICES (COMMERCIAL & CONSUMER)--0.8%
Anthony Crane Rentals 144A 10.375%,
8/1/08(b)............................... B 250 232,187
Williams Scotsman, Inc. 9.875%, 6/1/07.. B 225 226,688
-------------
458,875
-------------
TELECOMMUNICATIONS (LONG DISTANCE)--0.4%
RCN Corp. Series B 0%, 2/15/08(d)....... B 500 240,000
TELEPHONE--1.5%
Cox Communcations, Inc. 6.15%,
8/1/03(d)............................... Baa 375 383,438
Global Crossing Holding Ltd. 144A
9.625%, 5/15/08(b)...................... NR 500 490,000
-------------
873,438
-------------
- - --------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $13,005,308) 12,724,569
- - --------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES--19.7%
BTC Mortgage Investors Trust 97-S1, D
144A 6.95%, 12/31/09(b)................. BBB(c) 750 750,000
Bear Stearns Mortgage Securities, Inc.
95-1, 1B3 144A 6.471%, 5/25/10(b)....... NR 580 563,607
Bear Stearns Mortgage Securities, Inc.
95-1, 2B3 144A 7.40%, 7/25/10(b)........ NR 464 466,082
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
CS First Boston Mortgage Securities
Corp. 98-C1, A1B 6.48%, 5/17/08......... Aaa $ 500 $ 507,344
ContiMortgage Home Equity Loan Trust
98-1, B 7.86%, 4/15/29.................. Baa 952 957,950
Criimi Mae Trust I 96-C1, A2 144A 7.56%,
6/30/33(b).............................. BBB(c) 400 398,000
EQCC Home Equity Loan Trust 96-4, A4
6.47%, 8/15/10.......................... Aaa 530 542,984
G.E. Capital Mortgage Services, Inc.
94-26, B2 6.951%, 7/25/09............... Baa 242 246,096
IMPAC CMB Trust 98-2, M3 7.25%,
4/25/28................................. A(c) 904 918,648
Merrill Lynch Mortgage Investors, Inc.
95-C3, A2 6.822%, 12/26/25.............. AAA(c) 1,400 1,452,500
PNC Mortgage Securities Corp. 97-6, A1
6.49%, 10/25/26......................... Aaa 283 283,622
Prudential Home Mortgage Securities
93-L, 3B2 144A 6.641%, 12/25/23(b)...... NR 250 245,937
Prudential Securities Secured Financing
Corp. 98-C1, A1A1 6.105%, 11/15/02...... Aaa 968 974,336
Residential Asset Securitization Trust
96-A8, A1 8%, 12/25/26.................. AAA(c) 108 108,614
Residential Funding Mortgage Securities,
Inc. I 93-S29, M3 7%, 8/25/08........... AA(c) 509 520,989
Residential Funding Mortgage Securities,
Inc. I 96-S8, A4 6.75%, 3/25/11......... AAA(c) 89 89,089
Resolution Trust Corp. 92-C3, B 9.05%,
8/25/23................................. AA(c) 108 105,244
Resolution Trust Corp. 93-C2, B 7.75%,
3/25/25................................. AA(c) 99 98,519
Resolution Trust Corp. 94-C1, C 8%,
6/25/26................................. A(c) 500 503,750
Structured Asset Securities Corp. 95-C1,
D 7.375%, 9/25/24....................... BBB(c) 500 499,219
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
Triangle Funding Ltd. 98-2A, 3 144A
7.163%, 10/15/04(b)..................... BBB(c) $ 800 $ 801,375
- - --------------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $10,885,080) 11,033,905
- - --------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES--24.1%
ARGENTINA--4.0%
Republic of Argentina 8.75%, 7/10/02.... Ba 250 197,441
Republic of Argentina 11%, 10/9/06...... Ba 250 249,375
Republic of Argentina Bearer FRB 6.188%,
3/31/05(d).............................. Ba 2,186 1,816,697
-------------
2,263,513
-------------
BRAZIL--1.1%
Republic of Brazil 6.125%, 4/15/06...... B 984 638,985
BULGARIA--3.0%
Republic of Bulgaria IAB PDI Euro
6.688%, 7/28/11(d)...................... B 1,100 738,375
Republic of Bulgaria FLIRB Series A
Bearer Euro 2.50%, 7/28/12(d)........... B 1,700 943,500
-------------
1,681,875
-------------
CROATIA--1.1%
Croatia Series B 6.563%, 7/31/06(d)..... Baa 452 370,959
Croatia Series A 6.563%, 7/31/10(d)..... Baa 300 234,000
-------------
604,959
-------------
ECUADOR--1.5%
Ecuador Bearer PDI Euro, PIK interest
capitalization, 6.625% 2/27/15(d)....... B 1,867 814,579
KOREA--2.4%
Republic of Korea 0%, 4/26/99........... NR 455,000(e) 325,975
Republic of Korea 8.75%, 4/15/03........ Ba 1,050 1,010,625
-------------
1,336,600
-------------
MEXICO--1.3%
United Mexican States Global Bond
11.375%, 9/15/16........................ Ba 250 250,625
United Mexican States Global Bond
11.50%, 5/15/26......................... Ba 470 484,100
-------------
734,725
-------------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
PANAMA--2.1%
Panama PDI Euro 6.6875%, 7/17/16(d)..... Baa $ 264 $ 195,442
Republic of Panama Reg S 7.875%,
2/13/02................................. Baa 1,000 965,000
Republic of Panama 8.875%, 9/30/27...... Ba 35 32,288
-------------
1,192,730
-------------
PERU--0.6%
Peru PDI 144A 4%, 3/7/17(b)(d).......... BB(c) 250 143,750
Peru PDI 4%, 3/7/17(d).................. BB(c) 300 172,500
-------------
316,250
-------------
POLAND--5.9%
Poland Discount Euro 6.78%,
10/27/24(d)............................. Baa 500 498,750
Poland PDI Bearer 5%, 10/27/14(d)....... Baa 2,125 1,935,078
Poland Treasury Bill 0%, 1/13/99........ NR 2,150(f) 605,454
Poland Treasury Bill 0%, 2/17/99........ NR 1,040(f) 287,744
-------------
3,327,026
-------------
SOUTH AFRICA--0.3%
Republic of South Africa 8.50%,
6/23/17................................. Baa 200 137,750
VENEZUELA--0.8%
Venezuela FLIRB Series B 6.125%,
3/31/07(d).............................. B 810 455,463
- - --------------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $13,893,509) 13,504,455
- - --------------------------------------------------------------------------------------
FOREIGN CORPORATE BONDS--9.0%
ARGENTINA--2.1%
Cia Transporte Energia 144A 8.625%,
4/1/03(b)............................... BBB(c) 500 447,500
Telefonica De Argentina 144A 9.125%,
5/7/08(b)............................... Ba 250 221,250
Transportadora de Gas del Sur 10.25%,
4/25/01................................. Ba 500 490,000
-------------
1,158,750
-------------
BERMUDA--0.1%
AES China Generating Co. Yankee 10.125%,
12/15/06................................ Ba 140 79,100
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
BRAZIL--0.5%
Arisco Produtos Alimenticios 144A
10.75%, 5/22/05(b)...................... NR $ 250 $ 140,000
Globo Communicacoes Co. 144A 10.625%,
12/5/08(b).............................. B 250 135,937
-------------
275,937
-------------
COLOMBIA--1.3%
Financiera Energ Nacional EMTN Euro 9%,
11/8/99................................. BBB(c) 750 742,500
JAPAN--0.2%
IBJ Preferred Capital Co. LLC 144A
8.79%, 12/29/49(b)(d)................... Baa 125 100,179
MEXICO--2.7%
Altos Hornos de Mexico Series A 11.375%,
4/30/02................................. B 600 294,000
Banco Nacional de Mexico 144A 7.57%,
12/31/00(b)............................. NR 500 498,203
Empresas ICA Sociedad 144A 11.875%,
5/30/01(b).............................. B 250 248,750
Grupo Elektra SA de C.V. 12.75%,
5/15/01................................. B(c) 250 201,250
Vicap SA 10.25%, 5/15/02................ Ba 350 283,500
-------------
1,525,703
-------------
TURKEY--0.3%
Kazkommertsbank International 144A
11.25%, 5/8/01(b)....................... B 400 190,000
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ----------- -------------
<S> <C> <C> <C>
UNITED KINGDOM--0.9%
Bridas Corp 12.50%, 11/15/99............ Ba $ 500 $ 507,500
VENEZUELA--0.9%
PDVSA Finance Ltd. 98-1, 144A 6.45%,
2/15/04(b).............................. A 500 482,075
- - --------------------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $6,116,071) 5,061,744
- - --------------------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--97.2%
(IDENTIFIED COST $55,900,021)
54,522,671
- - --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR's
RATING
(Unaudited)
------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--1.4%
COMMERCIAL PAPER--1.4%
Anheuser-Busch Companies, Inc. 5.55%,
11/2/98................................. A-1+ 780 779,880
- - --------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $779,880) 779,880
- - --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--98.6%
(IDENTIFIED COST $56,679,901) 55,302,551(a)
Cash and receivables, less liabilities--1.4% 798,988
-------------
NET ASSETS--100.0% $ 56,101,539
-------------
-------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $785,345 and gross
depreciation of $2,472,999 for federal income tax purposes. At October 31,
1998, the aggregate cost of securities for federal income tax purposes was
$56,990,205.
(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,
1998, these securities amounted to a value of $8,538,239 or 15.2% 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) Par value represents South Korean Won.
(f) Par value represents Polish Zloty.
(g) All or a portion segregated as collateral.
(h) When issued.
8 See Notes to Financial Statements
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $56,679,901) $ 55,302,551
Cash 10,301
Receivables
Investment securities sold 2,454,874
Interest and dividends 816,165
Fund shares sold 611,787
Receivable from adviser 37,967
--------------
Total assets 59,233,645
--------------
LIABILITIES
Payables
Investment securities purchased 2,830,411
Fund shares repurchased 102,788
Income distribution payable 56,103
Distribution fee 18,937
Transfer agent fee 16,016
Financial agent fee 5,604
Trustees' fee 3,600
Accrued expenses 98,647
--------------
Total liabilities 3,132,106
--------------
NET ASSETS $ 56,101,539
--------------
--------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 59,732,229
Undistributed net investment income 96,898
Accumulated net realized loss (2,350,238)
Net unrealized depreciation (1,377,350)
--------------
NET ASSETS $ 56,101,539
--------------
--------------
CLASS A
Shares of beneficial interest outstanding, $0.01 par value,
unlimited authorization (Net Assets $33,211,892) 7,127,624
Net asset value per share $4.66
Offering price per share $4.66/(1-2.25%) $4.77
CLASS B
Shares of beneficial interest outstanding, $0.01 par value,
unlimited authorization (Net Assets $12,224,821) 2,629,626
Net asset value and offering price per share $4.65
CLASS C
Shares of beneficial interest outstanding, $0.01 par value,
unlimited authorization (Net Assets $10,664,826) 2,289,972
Net asset value and offering price per share $4.66
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 3,835,291
Dividends 55,170
--------------
Total investment income 3,890,461
--------------
EXPENSES
Investment advisory fee 270,259
Distribution fee, Class A 76,534
Distribution fee, Class B 87,785
Distribution fee, Class C 34,099
Financial agent fee 83,489
Transfer agent 77,808
Registration 67,365
Professional 43,714
Printing 37,969
Custodian 28,289
Trustees 17,519
Miscellaneous 12,313
--------------
Total expenses 837,143
Less expenses borne by investment adviser (270,586)
--------------
Net expenses 566,557
--------------
NET INVESTMENT INCOME 3,323,904
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (2,200,430)
Net realized loss on foreign currency transactions (6,844)
Net change in unrealized appreciation (depreciation) on
investments (1,377,771)
--------------
NET LOSS ON INVESTMENTS (3,585,045)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (261,141)
--------------
--------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Phoenix Multi-Sector Short Term Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
10/31/98 10/31/97
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 3,323,904 $ 1,851,093
Net realized gain (loss) (2,207,274) 863,600
Net change in unrealized appreciation
(depreciation) (1,377,771) (213,559)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (261,141) 2,501,134
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (2,076,744) (1,358,917)
Net investment income, Class B (750,987) (500,332)
Net investment income, Class C (439,980) (2,174)
Net realized gains, Class A (623,397) --
Net realized gains, Class B (231,491) --
Net realized gains, Class C (40,577) --
------------ ------------
DECREASE IN NET ASSETS RESULTING FROM
DISTRIBUTIONS TO SHAREHOLDERS (4,163,176) (1,861,423)
------------ ------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares
(6,014,412 and 5,033,530 shares,
respectively) 29,551,389 25,379,012
Net asset value of shares issued from
reinvestment of distributions
(481,339 and 229,749 shares,
respectively) 2,357,562 1,158,643
Cost of shares repurchased (5,014,505
and 2,409,066 shares, respectively) (24,593,058) (12,117,223)
------------ ------------
Total 7,315,893 14,420,432
------------ ------------
CLASS B
Proceeds from sales of shares
(1,098,057 and 1,104,864 shares,
respectively) 5,370,293 5,561,801
Net asset value of shares issued from
reinvestment of distributions
(150,247 and 69,536 shares,
respectively) 735,674 350,687
Cost of shares repurchased (656,994
and 346,945 shares, respectively) (3,148,967) (1,753,224)
------------ ------------
Total 2,957,000 4,159,264
------------ ------------
CLASS C
Proceeds from sales of shares
(3,178,002 and 113,197 shares,
respectively) 15,654,043 583,290
Net asset value of shares issued from
reinvestment of distributions
(90,036 and 334 shares,
respectively) 436,654 1,698
Cost of shares repurchased (1,091,595
and 2 shares, respectively) (5,287,237) (10)
------------ ------------
Total 10,803,460 584,978
------------ ------------
INCREASE IN NET ASSETS FROM SHARE
TRANSACTIONS 21,076,353 19,164,674
------------ ------------
NET INCREASE IN NET ASSETS 16,652,036 19,804,385
NET ASSETS
Beginning of period 39,449,503 19,645,118
------------ ------------
END OF PERIOD [INCLUDING UNDISTRIBUTED
NET INVESTMENT INCOME OF
$96,898 AND $12,416, RESPECTIVELY] $ 56,101,539 $ 39,449,503
------------ ------------
------------ ------------
</TABLE>
10 See Notes to Financial Statements
<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
------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.34(2) 0.34(2) 0.33(2) 0.33(2) 0.29(2)
Net realized and unrealized gain
(loss) (0.29) 0.14 0.17 0.13 (0.26)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS 0.05 0.48 0.50 0.46 0.03
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net investment
income (0.34) (0.33) (0.33) (0.33) (0.29)
Dividends from net realized gains (0.11) -- -- -- (0.03)
Tax return of capital -- -- -- -- (0.01)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.45) (0.33) (0.33) (0.33) (0.33)
----- ----- ----- ----- -----
CHANGE IN NET ASSET VALUE (0.40) 0.15 0.17 0.13 (0.30)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 4.66 $ 5.06 $ 4.91 $ 4.74 $ 4.61
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Total return(1) 0.85% 10.08% 10.91% 10.27% 0.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $33,212 $28,557 $13,702 $9,303 $9,371
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income 6.90% 6.54% 6.88% 7.07% 5.99%
Portfolio turnover 126% 246% 232% 344% 121%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------------ ------------------------------
YEAR ENDED OCTOBER 31 YEAR FROM INCEPTION
------------------------------------------------------------------ ENDED 10/1/97 TO
1998 1997 1996 1995 1994 10/31/98 10/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.91 $ 5.06 $ 5.15
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.31(2) 0.31(2) 0.31(2) 0.30(2) 0.27(2) 0.34(3) 0.03(3)
Net realized and
unrealized gain (loss) (0.29) 0.15 0.17 0.13 (0.26) (0.30) (0.09)
----- ----- ----- ----- ----- ----- -----
TOTAL FROM
INVESTMENT
OPERATIONS 0.02 0.46 0.48 0.43 0.01 0.04 (0.06)
----- ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
Dividends from net
investment income (0.32) (0.31) (0.31) (0.30) (0.27) (0.33) (0.03)
Dividends from net
realized gains (0.11) -- -- -- (0.03) (0.11) --
Tax return of capital -- -- -- -- (0.01) -- --
----- ----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.43) (0.31) (0.31) (0.30) (0.31) (0.44) (0.03)
----- ----- ----- ----- ----- ----- -----
CHANGE IN NET ASSET VALUE (0.41) 0.15 0.17 0.13 (0.30) (0.40) (0.09)
----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD $ 4.65 $ 5.06 $ 4.91 $ 4.74 $ 4.61 $ 4.66 $ 5.06
----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- -----
Total return(1) 0.12% 9.51% 10.36% 9.71% (0.03)% 0.59% (1.30)%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $12,225 $10,318 $5,943 $4,659 $6,418 $10,665 $575
RATIO TO AVERAGE NET
ASSETS OF:
Operating expenses 1.50% 1.50% 1.50% 1.50% 1.45% 1.25% 1.25%(4)
Net investment income 6.44% 6.05% 6.38% 6.59% 5.74% 6.70% 5.51%(4)
Portfolio turnover 126% 246% 232% 344% 121% 126% 246%
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Includes reimbursement of operating expenses by investment adviser of
$0.03, $0.04, $0.06, $0.08 and $0.08, respectively for Class A and B.
(3) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.04, respectively.
(4) Annualized
(5) Not annualized
See Notes to Financial Statements 11
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
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. 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.
12
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (CONTINUED)
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
Effective June 1, 1998, National Securities and Research Corporation assigned
its investment advisory agreement to Phoenix Investment Counsel, Inc. ("PIC"),
both an indirect majority-owned subsidiary of Phoenix Home Life Mutual Insurance
Company ("PHL"). PIC 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, 1998, the Adviser has reimbursed the Fund $270,586 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 $6,286 for Class A shares and deferred sales
charges of $15,602 for Class B shares for the year ended October 31, 1998. 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, 1998, $82,753 was earned by the Distributor, $98,625 was paid to
unaffiliated participants, and $17,040 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 through May 31, 1998, 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 applied. Effective June 1, 1998 PEPCO
receives a financial agent fee equal to the sum of (1) the documented cost of
fund accounting and related services provided by PFPC Inc. (subagent to PEPCO),
plus (2) the documented cost to PEPCO to provide financial reporting, tax
services and oversight of subagent's performance. The current fee schedule of
PFPC Inc. ranges from 0.085% to 0.0125% of the average daily net asset values of
the Fund. Certain minimum fees and fee waivers 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, 1998, transfer agent fees
were $77,808 of which PEPCO retained $2,342 which is net of the fees paid to
State Street.
At October 31, 1998, PHL and affiliates held 30,711 Class A shares and 21,302
Class C shares of the Fund with a combined value of $242,381.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities, excluding short-term securities, for the
year ended October 31, 1998, aggregated $82,322,459 and $59,791,594, including
$22,036,705 and $25,721,480, 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. CAPITAL LOSS CARRYFORWARDS
At October 31, 1998, the Fund had a capital loss carryover of $2,039,934,
expiring in 2006, which may be used to offset future capital gains.
6. 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, 1998, the Fund increased
undistributed net investment income by $28,289, decreased accumulated net
realized gain by $58,706, and increased capital paid in on shares of capital
stock by $30,417.
TAX INFORMATION NOTICE (UNAUDITED)
LONG-TERM CAPITAL GAINS
The Fund hereby designates $89,590, including $39,092 of 28% rate-gain
distributions, as a long-term capital gain dividend for purposes of the dividend
paid deduction on its federal income tax return.
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.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICEWATERHOUSECOOPERS LOGO]
To the Trustees and Shareholders of
Phoenix Multi-Sector Short Term Bond Fund
In our opinion, the accompanying statements 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, 1998, 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 Funds' 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
December 17, 1998
14
<PAGE>
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PART C--OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C>
a.1. Declaration of Trust as amended of the Registrant, filed via EDGAR as Exhibit 1 with Post-Effective
Amendment No. 6 on February 25, 1997, and incorporated by reference.
a.2. Amendment to Declaration of Trust changing name of Trust, filed with Post-Effective Amendment No. 4 on
February 27, 1995 and filed via EDGAR as Exhibit 1.1 with Post-Effective Amendment No. 6 on February
25, 1997, and incorporated by reference.
a.3. Amendment to Declaration of Trust changing name of Trust, filed via EDGAR as Exhibit 1.2 with Post-
effective Amendment No. 5 on February 28, 1996, and incorporated by reference.
a.4. Amendment to Declaration of Trust establishing Class C Shares, filed via EDGAR as Exhibit 1.3 with
Post-Effective Amendment No. 9 on February 25, 1998 and incorporated by reference.
b. By-laws of the Registrant, filed via EDGAR as Exhibit 2 with Post-Effective Amendment No. 6 on
February 25, 1997, and incorporated by reference.
c. 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 a.1
d.1. 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 as
Exhibit 5 with Post-Effective Amendment No. 6 on February 25, 1997, and incorporated by reference.
d.2. Amendment to Management Agreement dated January 1, 1994, filed with Post-Effective Amendment No. 4
on February 27, 1995 and filed via EDGAR as Exhibit 5.1 with Post-Effective Amendment No. 6 on
February 25, 1997, and incorporated by reference.
e.1. Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation ("Equity Planning")
dated November 19, 1997, filed via EDGAR as Exhibit 6.1 with Post-Effective Amendment No. 9 on
February 25, 1998 and incorporated by reference.
e.2. Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers, filed via EDGAR as
Exhibit 6.2 with Post Effective Amendment No. 9 on February 25, 1998 and incorporated herein by
reference.
e.3. Form of Supplement to Phoenix Family of Funds Sales Agreement filed via EDGAR as Exhibit 6.3 with
Post Effective Amendment No. 9 on February 25, 1998 and incorporated herein by reference.
e.4. Form of Financial Institution Sales Contract for the Phoenix Family of Funds filed via EDGAR as Exhibit 6.4
with Post Effective Amendment No. 9 on February 25, 1998 and incorporated herein by reference.
f. None.
g.1. Custodian Contract between Registrant and State Street Bank and Trust Company dated May 1, 1997,
filed via EDGAR as Exhibit 8.1 with Post Effective Amendment No. 9 on February 25, 1998 and
incorporated herein by reference.
h.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 as Exhibit 9.1 with Post-Effective Amendment No. 6 on February 25, 1997, and incorporated by
reference.
h.2. Sub-Transfer Agent Agreement between Phoenix Equity Planning Corporation and State Street Bank and
Trust Company filed via EDGAR as Exhibit 9.2 with Post Effective Amendment No. 9 on February 25,
1998 and incorporated herein by reference.
h.3. Amended and Restated Financial Agent Agreement between Registrant and Phoenix Equity Planning
Corporation dated November 19, 1997, filed via EDGAR as Exhibit 9.3 with Post Effective
Amendment No. 9 on February 25, 1998 and incorporated herein by reference.
h.4.* First Amendment to the Amended and Restated Financial Agent Agreement between Registrant and Phoenix
Equity Planning Corporation effective as of February 27, 1998 filed via EDGAR herewith.
h.5.* Second Amendment to Amended and Restated Financial Agent Agreement between Registrant and
Phoenix Equity Planning Corporation dated July 31, 1998 filed via EDGAR herewith.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
i. Opinion as to legality of the shares, filed with Pre-Effective Amendment No. 3 on July 6, 1992,
filed via EDGAR as Exhibit 10 with Post-Effective Amendment No. 6 on February 25, 1997, and
incorporated by reference.
j.* Consent of Independent Accountants.
k. Not applicable.
l. None.
m.1. Amended and Restated Distribution Plan for Class A Shares, filed herewith via EDGAR as Exhibit 15.1
with Post-Effective Amendment No. 9 on February 25, 1998, and incorporated by reference.
m.2. Amended and Restated Distribution Plan for Class B Shares, filed herewith via EDGAR as Exhibit 15.2
with Post-Effective Amendment No. 9 on February 25, 1998, and incorporated by reference.
m.3. Amended and Restated Distribution Plan for Class C Shares, filed herewith via EDGAR as Exhibit 15.3
with Post-Effective Amendment No. 9 on February 25, 1998 and incorporated by reference.
n.* Financial Data Schedules, reflected on EDGAR as Exhibit 27.
o.1. Amended and Restated Rule 18f-3 Multi-Class Distribution Plan effective November 1, 1997, filed
via EDGAR as Exhibit 18.1 with Post-Effective Amendment No. 9 on February 25, 1998 and incorporated
by reference.
o.2.* First Amendment to Amended and Restated Plan pursuant to Rule 18f-3 effective August 26, 1998.
p.1. Powers of attorney, filed via EDGAR with Post-Effective Amendment No. 10 on December 30, 1998 and
incorporated by reference.
</TABLE>
*Filed herewith.
Item 24. Persons Controlled by or Under Common Control With the Fund
No person is controlled by, or under common control with, the Fund.
Item 25. 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 26. Business and Other Connections of Investment Adviser
See "Management of the Funds" in the Prospectus and "Services of the
Adviser" and "Management of the Fund" 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 Phoenix Investment Counsel, Inc.
the Adviser, reference is made to the Adviser's current Form ADV (SEC File No.
801-5995) filed under the Investment Advisers Act of 1940 and incorporated
herein by reference.
Item 27. Principal Underwriter
(a) Equity Planning also serves as the principal underwriter for the
following other registrants: Phoenix-Aberdeen Series Fund, Phoenix-Aberdeen
Worldwide Opportunities Fund, Phoenix California Tax Exempt Bonds, Inc., Phoenix
Duff & Phelps Institutional Mutual Funds, Phoenix-Engemann Funds, 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 Series Fund, Phoenix Strategic Allocation Fund, Inc., Phoenix Strategic
Equity 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
William R. Moyer Director, Senior Vice President and Vice President
100 Bright Meadow Blvd. Chief Financial Officer
P.O. Box 2200
Enfield, CT 06083-2200
John F. Sharry Executive Vice President, Executive Vice President
100 Bright Meadow Blvd. Retail Distributions
P.O. Box 2200
Enfield, CT 06083-2200
Leonard J. Saltiel Managing Director, Vice President
56 Prospect Street Operations and Service
P.O. Box 150480
Hartford, CT 06115-0480
G. Jeffrey Bohne Vice President, Secretary
101 Munson Street Mutual Fund
Greenfield, MA 01301 Customer Service
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect Street Fund Accounting
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
Jacqueline M. Porter Assistant Vice President, Assistant Treasurer
56 Prospect Street Financial Reporting
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an affiliated
person of the Registrant or an affiliated person of such affiliated person,
directly or indirectly, from the Registrant during the Registrant's last fiscal
year.
Item 28. 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, Phoenix Investment Counsel, Inc., 56 Prospect Street,
Hartford, CT 06115; at the offices of the Fund's Custodian, State Street Bank
and Trust Company, P.O. Box 8301, Boston, Massachusetts 02266-8301 and at the
offices of the Transfer Agent, Financial Agent and Principal Underwriter,
Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard, Enfield,
Connecticut 06082-1900.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund certifies that it meets all of the
requirements for effectiveness of this registration statement under rule 485(b)
of the Securities Act and has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Hartford, and State of Connecticut on the 1st day of March, 1999.
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 1st day of March, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Trustee
- ----------------------------
Robert Chesek*
Trustee
- ----------------------------
E. Virgil Conway*
/s/ Nancy G. Curtiss 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.*
By: /s/ Philip R. McLoughlin
------------------------
Philip R. McLoughlin
</TABLE>
*Philip R. McLoughlin, Attorney-in-fact pursuant to powers of attorney
filed previously.
S-1
FIRST AMENDMENT TO
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AMENDMENT made effective as of the 27th day of February, 1998 amends that
certain Amended and Restated Financial Agent Agreement dated November 19, 1997
by and among the following parties (the "Agreement") as hereinbelow provided.
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the Agreement to eliminate the
provision that states that Financial Agent is not responsible for the acts or
omissions of any agent appointed by it:
NOW, THEREFORE, in consideration of the foregoing premise, the first
sentence of Paragraph 4 of the Agreement is amended to read as follows:
"Financial Agent shall not be liable for anything done or omitted to be
done by it in the exercise of due care in discharging its duties
specifically described hereunder."
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized officers on this 23rd day of March, 1998.
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
SECOND AMENDMENT TO
AMENDED AND RESTATED FINANCIAL AGENT AGREEMENT
THIS AMENDMENT made effective as of the 1st day of June, 1998 amends that
certain Amended and Restated Financial Agent Agreement dated November 19, 1997,
as amended March 23, 1998, by and among the following parties (the "Agreement")
as hereinbelow provided.
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend Schedule A of the Agreement to
reflect the recently approved fee structure:
NOW, THEREFORE, in consideration of the foregoing premise, Schedule A is
hereby replaced with the Schedule A attached hereto and made a part hereof.
Except as hereinabove provided, the Agreement shall be and remain unmodified and
in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized officers on this 31st day of July, 1998.
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
REVISED FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
For its services hereunder Financial Agent shall be paid a fee equal to the sum
of (1) the documented cost of fund accounting and related services provided by
PFPC, Inc., as subagent, to Financial Agent, plus (2) the documented cost to
Financial Agent to provide financial reporting and tax services and oversight of
subagent's performance.
The current PFPC fees are attached hereto and made a part hereof.
<PAGE>
PFPC FEE SCHEDULE
- --------------------------------------------------------------------------------
ASSETS UNDER MANAGEMENT FEES
- --------------------------------------------------------------------------------
$0 - $200,000,000 0.0850%
- --------------------------------------------------------------------------------
$200 - $400,000,000 0.0500%
- --------------------------------------------------------------------------------
$400 - $600,000,000 0.0300%
- --------------------------------------------------------------------------------
$600 - $800,000,000 0.0200%
- --------------------------------------------------------------------------------
$800 - $1,000,000,000 0.0150%
- --------------------------------------------------------------------------------
> $1,000,000,000 0.0125%
- --------------------------------------------------------------------------------
Minimum Fund Fee $84,000
- --------------------------------------------------------------------------------
Additional Class $12,000
- --------------------------------------------------------------------------------
EXISTING PORTFOLIOS:
- --------------------
Asset Based Fees - $50MM WAIVED
Class Fees - WAIVED
Minimum Fund Fees - WAIVED
NEW PORTFOLIOS (FIRST YEAR):
- ----------------------------
Asset Based Fees [less than] $50MM - 50% WAIVED
Class Fees [less than] $25MM per Class - WAIVED
Minimum Fund Fees - WAIVED
NEW PORTFOLIOS (THERE AFTER):
- -----------------------------
Asset Based Fees [less than] $50MM - 25% WAIVED
Class Fees [less than] $25 MM per Class - 50% WAIVED
Minimum Fund Fees [less than] $50 MM - 50% WAIVED
Minimum Fund Fees [less than] $50-100 MM - 25% WAIVED
VARIABLE UNIT INVESTMENT TRUST VALUATION AND REPORTING
- ------------------------------------------------------
$1,500 per Unit Investment Trust
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. 11 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated December 17, 1998, relating to the financial
statements and financial highlights appearing in the October 31, 1998 Annual
Report to Shareholders of the Phoenix Multi-Sector Short Term Bond Fund, which
are also incorporated by reference into the Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Other Information - Independent Accountants"
in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 1999
PHOENIX FUNDS
(the "Funds")
FIRST AMENDMENT TO THE
AMENDED AND RESTATED PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
That certain Amended and Restated Plan Pursuant to Rule 18f-3 under the
Investment Company Act of 1940 duly adopted by the Board of Directors/Trustees
of the Funds on November 19, 1997, is hereby amended as follows:
The Board of Directors/Trustees has granted authority for the following
additional Funds to issue Class C Shares:
Phoenix Income and Growth Fund
Phoenix Multi-Portfolio Fund: Phoenix International Fund
Phoenix Worldwide Opportunities Fund
Accordingly, Schedule A is amended as attached hereto.
This Amendment was approved by the Board of Directors/Trustees at a meeting
held on August 26, 1998.
/s/ Thomas N. Steenburg
------------------------------------
Assistant Secretary
<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 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 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 X X -- --
SERIES
<PAGE>
<S> <C> <C> <C> <C>
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 X --
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000884122
<NAME> PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 56680
<INVESTMENTS-AT-VALUE> 55303
<RECEIVABLES> 3921
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59234
<PAYABLE-FOR-SECURITIES> 2830
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302
<TOTAL-LIABILITIES> 3132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59732
<SHARES-COMMON-STOCK> 7128
<SHARES-COMMON-PRIOR> 5646
<ACCUMULATED-NII-CURRENT> 97
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2350)
<ACCUM-APPREC-OR-DEPREC> (1377)
<NET-ASSETS> 56102
<DIVIDEND-INCOME> 55
<INTEREST-INCOME> 3835
<OTHER-INCOME> 0
<EXPENSES-NET> (566)
<NET-INVESTMENT-INCOME> 3324
<REALIZED-GAINS-CURRENT> (2207)
<APPREC-INCREASE-CURRENT> (1378)
<NET-CHANGE-FROM-OPS> (261)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2077)
<DISTRIBUTIONS-OF-GAINS> (623)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6015
<NUMBER-OF-SHARES-REDEEMED> (5014)
<SHARES-REINVESTED> 481
<NET-CHANGE-IN-ASSETS> 4655
<ACCUMULATED-NII-PRIOR> 12
<ACCUMULATED-GAINS-PRIOR> 811
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 837
<AVERAGE-NET-ASSETS> 49138
<PER-SHARE-NAV-BEGIN> 5.06
<PER-SHARE-NII> .34
<PER-SHARE-GAIN-APPREC> (.29)
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> (.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.66
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000884122
<NAME> PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 56680
<INVESTMENTS-AT-VALUE> 55303
<RECEIVABLES> 3921
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59234
<PAYABLE-FOR-SECURITIES> 2830
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302
<TOTAL-LIABILITIES> 3132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59732
<SHARES-COMMON-STOCK> 2630
<SHARES-COMMON-PRIOR> 2038
<ACCUMULATED-NII-CURRENT> 97
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2350)
<ACCUM-APPREC-OR-DEPREC> (1377)
<NET-ASSETS> 56102
<DIVIDEND-INCOME> 55
<INTEREST-INCOME> 3835
<OTHER-INCOME> 0
<EXPENSES-NET> (566)
<NET-INVESTMENT-INCOME> 3324
<REALIZED-GAINS-CURRENT> (2207)
<APPREC-INCREASE-CURRENT> (1378)
<NET-CHANGE-FROM-OPS> (261)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (751)
<DISTRIBUTIONS-OF-GAINS> (231)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1098
<NUMBER-OF-SHARES-REDEEMED> (657)
<SHARES-REINVESTED> 150
<NET-CHANGE-IN-ASSETS> 1907
<ACCUMULATED-NII-PRIOR> 12
<ACCUMULATED-GAINS-PRIOR> 811
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 837
<AVERAGE-NET-ASSETS> 49138
<PER-SHARE-NAV-BEGIN> 5.06
<PER-SHARE-NII> .31
<PER-SHARE-GAIN-APPREC> (.29)
<PER-SHARE-DIVIDEND> (.32)
<PER-SHARE-DISTRIBUTIONS> (.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.65
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000884122
<NAME> PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
<SERIES>
<NUMBER> 003
<NAME> CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 56680
<INVESTMENTS-AT-VALUE> 55303
<RECEIVABLES> 3921
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 59234
<PAYABLE-FOR-SECURITIES> 2830
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302
<TOTAL-LIABILITIES> 3132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59732
<SHARES-COMMON-STOCK> 2290
<SHARES-COMMON-PRIOR> 114
<ACCUMULATED-NII-CURRENT> 97
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2350)
<ACCUM-APPREC-OR-DEPREC> (1377)
<NET-ASSETS> 56102
<DIVIDEND-INCOME> 55
<INTEREST-INCOME> 3835
<OTHER-INCOME> 0
<EXPENSES-NET> (566)
<NET-INVESTMENT-INCOME> 3324
<REALIZED-GAINS-CURRENT> (2207)
<APPREC-INCREASE-CURRENT> (1378)
<NET-CHANGE-FROM-OPS> (261)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (440)
<DISTRIBUTIONS-OF-GAINS> (41)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3178
<NUMBER-OF-SHARES-REDEEMED> (1092)
<SHARES-REINVESTED> 90
<NET-CHANGE-IN-ASSETS> 10090
<ACCUMULATED-NII-PRIOR> 12
<ACCUMULATED-GAINS-PRIOR> 811
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 270
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 837
<AVERAGE-NET-ASSETS> 49138
<PER-SHARE-NAV-BEGIN> 5.06
<PER-SHARE-NII> .34
<PER-SHARE-GAIN-APPREC> (.30)
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> (.11)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.66
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
