As filed with the Securities and Exchange Commission on January 29, 2004
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 |X|
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 15 |X|
(Check appropriate box or boxes)
----------------
|
PHOENIX-SENECA FUNDS
(Exact Name of Registrant as Specified in Charter)
909 Montgomery Street, San Francisco, California 94133
(Address of Principal Executive Offices) (Zip Code)
800-828-1212
(Registrant's Telephone Number, including Area Code)
Richard J. Wirth, Esq.
Vice President and Insurance and Investment Products Counsel
Phoenix Life Insurance Company
One American Row
Hartford, CT 06102-5056
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 or at such later date as the Commission shall order pursuant to
paragraph (a)(3)
[ ] 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.
PHOENIX SENECA FUNDS
CROSS REFERENCE SHEET PURSUANT TO Rule 495(a)
PART A
INFORMATION REQUIRED IN PROSPECTUS
ITEM NUMBER FORM N-1A, PART A PROSPECTUS CAPTION
----------------------------- ------------------
1. Front and Back Cover Pages............................... Cover Page, Back Cover Page
2. Risk/Return Summary: Investments, Risks, Performance..... Investment Risk and Return Summary
3. Risk/Return Summary: Fee Table........................... Fund Expenses
4. Investment Objectives, Principal Investment Strategies,..
and Related Risks........................................ Investment Risk and Return Summary
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 of
Distributions
8. Distribution Arrangements................................ Sales Charges
9. Financial Highlights Information......................... Financial Highlights
PART B
INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
ITEM NUMBER FORM N-1A, PART B STATEMENT OF ADDITIONAL INFORMATION CAPTION
----------------------------- -------------------------------------------
10. Cover Page and Table of Contents......................... Cover Page, Table of Contents
11. Fund History............................................. The Trust
12. Description of the Fund and Its Investment Risks......... Investment Techniques and Risks; Investment
Restrictions
13. Management of the Fund................................... Management of the Trust
14. Control Persons and Principal Holders of Securities...... Management of the Trust
15. Investment Advisory and Other Services................... Advisory and Administrative Services;
The Distributor; Distribution Plans; Other
Information
16. Brokerage Allocation and Other Practices................. Portfolio Brokerage; Portfolio Turnover
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, How to Redeem Shares
19. Taxation of the Fund..................................... Dividends, Distributions and Taxes
20. Underwriters............................................. The Distributor
21. Calculation of Performance Data.......................... Calculation of the Funds' Performance
22. Financial Statements..................................... Financial Statements
INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET
FORTH UNDER THE APPROPRIATE ITEM, SO NUMBERED, IN PART C OF
THIS REGISTRATION STATEMENT.
|
Prospectus
> JANUARY 29, 2004
o SENECA o
Phoenix-Seneca Bond Fund
Phoenix-Seneca Equity Income Fund
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Do you want to stop receiving prospectuses by mail?
Go to PhoenixInvestments.com, log in and sign up for E-Delivery
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 Phoenix-Seneca
Bond Fund, Phoenix-Seneca Equity
[LOGO] PHOENIX Income Fund and Phoenix-Seneca
INVESTMENT PARTNERS, LTD. Mid-Cap "EDGE"(SM) Fund. Please read
it carefully and retain it for future
Committed to Investor Success(SM) reference.
|
TABLE OF CONTENTS
Phoenix-Seneca Bond Fund
Investment Risk and Return Summary...................................... 1
Fund Expenses........................................................... 4
Phoenix-Seneca Equity Income Fund
Investment Risk and Return Summary................................... 6
Fund Expenses........................................................ 10
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Investment Risk and Return Summary................................... 12
Fund Expenses........................................................ 15
Additional Investment Techniques........................................ 17
Management of the Funds................................................. 19
Pricing of Fund Shares.................................................. 22
Sales Charges........................................................... 23
Your Account............................................................ 26
How to Buy Shares....................................................... 28
How to Sell Shares...................................................... 29
Things You Should Know When Selling Shares.............................. 30
Account Policies........................................................ 31
Investor Services....................................................... 32
Tax Status of Distributions............................................. 33
Financial Highlights.................................................... 34
|
INVESTMENT OBJECTIVES
Phoenix-Seneca Bond Fund has an investment objective of high total return from both current income and capital appreciation. There is no guarantee that the fund will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
> The fund invests in a diversified portfolio of debt securities,
primarily a mix of corporate bonds, mortgage-backed and other
asset-backed securities, and U.S. Government securities, that may be
either publicly traded or privately placed.
> Under normal circumstances, the fund invests at least 80% of its assets
in bonds, at least 65% of which are rated at the time of investment
Baa3 or higher by Moody's Investors Service or BBB- or higher by
Standard and Poor's Corporation. However, the fund may invest in high
yield-high risk securities. "Bonds" includes bonds and short-term
instruments.
> The adviser manages the fund's investment program and general operation
of the fund and the subadviser manages the investments of the fund. The
subadviser uses a value-driven style that focuses on issue and sector
selection, measured interest rate anticipation and trading
opportunities.
> Securities selected for fund investment may be of any maturity or
duration. Duration measures the interest rate sensitivity of a fixed
income security by assessing and weighting the present value of a
security's payment pattern. Normally the fund maintains a
dollar-weighted average maturity of between two and ten years and a
dollar-weighted average duration of between two and eight years. During
periods of rising interest rates, the subadviser may shorten the
portfolio's average maturity to reduce the effect of bond price
declines on the fund's net asset value. Conversely, when interest rates
are falling and bond prices rising, the fund may lengthen its average
maturity. Sales of securities can result from anticipated changes in
interest rates, changes in the creditworthiness of issuers, or general
financial or market developments.
|
Temporary Defensive Strategy: When the subadviser determines that market conditions warrant, the fund may invest without limit in cash and cash equivalents. In such instances, the fund may not achieve its stated objective.
Please see "Additional Investment Techniques" for other investment techniques of the fund.
RISKS RELATED TO PRINCIPAL INVESTMENT STRATEGIES
If you invest in this fund, you risk losing your investment.
Phoenix-Seneca Bond Fund 1
GENERAL
The value of your shares and the level of income you receive are subject to risks associated with the types of securities selected for fund investment. Neither the fund nor the adviser can assure you that a particular level of income will consistently be achieved or that the value of the fund's investments that supports your share value will increase. If the value of fund investments decreases, your share value will decrease.
CREDIT RISK
Credit risk pertains to the issuer's ability to make scheduled interest or principal payments. Generally, the lower the credit rating of a security the greater chance that the issuer will be unable to make such payments when due. Credit risk is determined at the date of investment. If after the date of purchase the rating declines, the fund is not obligated to sell the security.
HIGH YIELD-HIGH RISK SECURITIES
High yield-high risk securities (junk bonds) typically entail greater price volatility and principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield securities may be complex, and as a result, it may be more difficult for the subadviser to accurately predict risk.
INTEREST RISK RATE
Interest rate trends can have an effect on the value of your shares. If interest rates rise, the value of debt securities generally will fall. Because the fund may hold securities with longer maturities or durations, the net asset value of the fund may experience greater price fluctuations in response to changes in interest rates than funds that hold only securities with short-term maturities or durations. Prices of longer-term securities are affected more by interest rate changes than prices of shorter-term securities.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The value of mortgage-backed and other asset-backed securities, including pass-through type securities and Collateralized Mortgage Obligations (CMOs) may fluctuate to a greater degree than other debt securities in response to interest rate changes. It is difficult to predict cash flows from mortgage-backed and asset-backed securities due to the variability of prepayments. Prepayments also tend to limit price gains when interest rates drop and exaggerate price declines when interest rates rise. In the event of high prepayments, the fund may be required to invest proceeds at lower interest rates than if such prepayment had not occurred.
U.S. GOVERNMENT SECURITIES
Obligations issued or guaranteed by the U.S. Government, its 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. In addition, not all U.S. Government securities are backed by the full faith and credit of the United States.
2 Phoenix-Seneca Bond Fund
PERFORMANCE TABLES
The bar chart and table below provide some indication of the risks of investing in the Phoenix-Seneca Bond Fund. The bar chart shows changes in the fund's Class X Shares performance from year to year over the life of the fund.(1) The table shows how the fund's average annual returns compare to those of a broad-based securities market index. The fund's past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1997 12.83
1998 7.66
1999 1.57
2000 8.67
2001 5.60
2002 9.70
2003 6.99
|
(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 4.23% (quarter ending December 31, 1997) and the lowest return for a quarter was -0.98% (quarter ending December 31, 2001).
----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION(2)
AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------
(FOR THE PERIODS ENDING 12/31/03)(1) 1 YEAR 5 YEARS CLASS A CLASS B CLASS C CLASS X
----------------------------------------------------------------------------------------------------------------
Class X
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 6.99% 6.47% -- -- -- 7.64%
----------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(3) 5.05% 3.94% -- -- -- 4.97%
----------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions 4.51% 3.92% -- -- -- 4.86%
and Sale of Fund Shares(3)
----------------------------------------------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 1.72% 5.04% 5.07% -- --
----------------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 1.92% 5.26% -- 5.21% --
----------------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 5.91% 5.25% -- -- 5.19%
----------------------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index(4) 4.10% 6.62% 6.85% 6.85% 6.85% 7.15%
----------------------------------------------------------------------------------------------------------------
|
(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 Shares and Class C Shares.
(2) Class X Shares since March 7, 1996, Class A Shares, Class B Shares and Class C Shares since July 1, 1998.
(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class X); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
(4) The Lehman Brothers Aggregate Bond Index is an unmanaged, commonly used measure of broad bond market total return performance. Index performance does not reflect sales charges.
Phoenix-Seneca Bond Fund 3
This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------ ------ ------ ------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) None 4.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of
the lesser of the value redeemed or the amount invested) None None 5%(b) 1%(c)
Maximum Sales Charge (load) Imposed on Reinvested
Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None None None
--------------------------------------------------------
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------ ------ ------ ------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.50% 0.50% 0.50% 0.50%
Distribution and Service (12b-1) Fees(d) None 0.25% 1.00% 1.00%
Other Expenses 0.36% 0.46% 0.60% 0.91%
---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES(a) 0.86% 1.21% 2.10% 2.41%
==== ==== ==== ====
|
(a) The fund's investment adviser has agreed to reimburse through January 31, 2005 the Phoenix-Seneca Bond Fund's operating expenses to the extent that such expenses exceed 0.90% for Class X Shares, 1.15% for Class A Shares and 1.90% for Class B Shares and Class C Shares. Total Annual Fund Operating Expenses after expense reimbursement (if applicable) were: 0.86% for Class X Shares, 1.15% for Class A Shares, 1.90% for Class B Shares and 1.90% for Class C Shares.
(b) 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.
(c) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.
(d) 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 Shares after eight years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
4 Phoenix-Seneca Bond Fund
----------------------------------------------------------------------------------------------------------------- CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------------------------------------------- Class X $88 $274 $477 $1,061 ----------------------------------------------------------------------------------------------------------------- Class A $592 $841 $1,108 $1,871 ----------------------------------------------------------------------------------------------------------------- Class B $613 $858 $1,129 $2,204 ----------------------------------------------------------------------------------------------------------------- Class C $344 $751 $1,285 $2,746 ----------------------------------------------------------------------------------------------------------------- |
You would pay the following expenses if you did not redeem your shares:
----------------------------------------------------------------------------------------------------------------- CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------------------------------------------- Class B $213 $658 $1,129 $2,204 ----------------------------------------------------------------------------------------------------------------- Class C $244 $751 $1,285 $2,746 ----------------------------------------------------------------------------------------------------------------- |
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 Funds" for information about expense reimbursement.
Phoenix-Seneca Bond Fund 5
PHOENIX-SENECA EQUITY INCOME FUND
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
Phoenix-Seneca Equity Income Fund has an investment objective of high total return in both current income and long-term capital appreciation. There is no guarantee that the fund will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
> Under normal circumstances, the fund invests at least 65% of its assets
in equity and debt securities of issuers that are principally engaged
in real estate or related industry businesses in the United States. An
issuer is considered principally engaged in such business if at least
50% of the issuer's assets or income is attributable to ownership,
construction, management or sale of real estate in the United States or
to products or services related to the real estate industry, including
the financing of real estate.
> Under normal circumstances, the fund invests at least 80% of its assets
in income producing equity securities. The fund's policy of investing
at least 80% of its assets in income producing equity securities may be
changed only upon 60 days written notice to shareholders.
> The fund is non-diversified and concentrates its assets in real
estate-related industries such as apartments, financial, office,
manufactured homes and regional malls. The fund, however, will not
intentionally make direct investments in real estate.
> The fund invests primarily in common stocks of real estate investment
trusts (REITs). Generally REITs are publicly-traded companies that
manage portfolios of real estate to earn profits for shareholders
through investments in commercial and residential real estate. Equity
REITs own real estate directly. Mortgage REITs make short-term
construction or real estate development loans or invest in long-term
mortgages or mortgage pools.
> The adviser is responsible for managing the fund's investment program
and the general operation of the fund. The subadviser manages the
investments of the fund. The subadviser utilizes a fundamental analysis
of value approach to select common stocks of REITs and other issuers.
In making investment decisions, the subadviser focuses on fundamentals
such as net asset value, net operating income and the premium or
discount to net asset value and industry multiples.
|
Temporary Defensive Strategy: When the subadviser determines that market conditions warrant, the fund may invest without limit in cash and cash equivalents. In such instances, the fund may not achieve its stated objective.
Please see "Additional Investment Techniques" for other investment techniques of the fund.
6 Phoenix-Seneca Equity Income Fund
RISKS RELATED TO PRINCIPAL INVESTMENT STRATEGIES
If you invest in this fund, you risk losing your investment.
GENERAL
The value of the fund's investments that supports your share value may decrease. If between the time you purchase shares and the time you sell shares the value of the fund's investments decreases, you will lose money.
Investment values can decrease for a number of reasons. Conditions affecting the overall economy, the real estate industry and specific companies in which the fund invests can be worse than expected and investments may fail to perform as the adviser expects. As a result, the value of your shares may decrease.
EQUITY SECURITIES
Conditions affecting the overall economy, specific industries or companies in which the fund invests can be worse than expected and investments may fail to perform as the adviser expects. Companies with smaller capitalizations may also be subject to greater performance volatility due to the potential impact of cultural, economic, regulatory or technology developments. Equity investments in emerging markets countries are subject to the risks described under "Emerging Market Investing" and "Foreign Investing" in this section.
INDUSTRY CONCENTRATION
Concentrating its investments in real estate-related industries presents additional risk. Securities of companies in other industries may provide greater investment return in certain market conditions as compared to companies in real estate-related industries. Moreover, conditions that negatively impact the real estate industry will have a greater impact on this fund as compared to a fund that does not concentrate in one industry.
The value of investments in issuers that hold real estate may be affected by changes in the values of real properties owned by the issuers. Likewise, investments in businesses related to the real estate industry may also be affected by the value of real estate generally or in particular geographical areas in which the businesses operate. A decline in real estate value may have a negative impact on the value of your shares.
Interest rates also can be a significant factor for issuers that hold real estate and those in related businesses. Increases in interest rates can cause or contribute to declines in real estate prices and can cause "slowdowns" in such related businesses as real estate sales and constructions.
NON-DIVERSIFICATION
As a non-diversified investment company, the fund is not limited in the proportion of assets that it may invest in the securities of any one issuer. Diversifying a fund's portfolio can reduce the risks of investing. As a non-diversified investment company, the fund may be subject to greater risk since it can invest a greater proportion of its assets in the securities of a small
Phoeix-Seneca Equity Income Fund 7
number of issuers. If the fund takes concentrated positions in a small number of issuers, changes in the price of those securities may cause the fund's return to fluctuate more than that of a diversified investment company.
REIT SECURITIES
REIT securities often are not diversified and may only finance a limited number of projects or properties, which may subject REITs to abrupt and large price movements. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs. Mortgage REITs may be affected by the quality of any credit extended and are affected by changes in interest rates. REITs are heavily dependent on cash flow from properties and, at times, the market price of a REIT's securities may be less than the value of the underlying real estate investment which may result in a lower price when the fund sells its shares in the REIT. REITs may trade less frequently and in lower volume than securities of other larger companies which may also contribute to REIT securities losing value. REITs are dependent on management skills, are not diversified, and are subject to the possibilities of failing to qualify for the federal tax exemption on distributed income and failing to maintain their exemptions under the 1940 Act. Assets invested in REITs incur a layering of expenses paid by the REIT that you, as a shareholder in the fund, indirectly bear.
8 Phoenix-Seneca Equity Income Fund
PERFORMANCE TABLES
The bar chart and table below provide some indication of the risks of investing in the Phoenix-Seneca Equity Income 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 shows how the fund's average annual returns for one year, five years and for the life of the fund compare to those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund's past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1997 16.68
1998 -21.85
1999 -4.33
2000 29.02
2001 11.31
2002 -4.38
2003 39.82
|
(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 18.89% (quarter ending June 30, 2003) and the lowest return for a quarter was -12.35% (quarter ending September 30, 1998).
----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION(2)
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------
(FOR THE PERIODS ENDING 12/31/03)(1) 1 YEAR 5 YEARS CLASS A CLASS B CLASS C CLASS X
----------------------------------------------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 31.78% 11.60% 9.37% -- -- --
----------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(3) 29.40% 10.23% 7.80% -- -- --
----------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions
and Sale of Fund Shares(3) 21.60% 9.26% 7.19% -- -- --
----------------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 34.34% 11.97% -- 7.44% -- --
----------------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 38.42% 12.01% -- -- 7.45% --
----------------------------------------------------------------------------------------------------------------
Class X
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 41.50% 14.41% -- -- -- 11.56%
----------------------------------------------------------------------------------------------------------------
S&P 500 Index(4) 28.71% -0.57% 9.13% 0.88% 0.88% 9.13%
----------------------------------------------------------------------------------------------------------------
The Wilshire Real Estate Securities Index(5) 37.07% 14.49% 12.93% 10.30% 10.30% 12.93%
----------------------------------------------------------------------------------------------------------------
|
(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 Shares and Class C Shares.
(2) Class A Shares and Class X Shares since March 12, 1996; Class B Shares and Class C Shares since July 1, 1998.
(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
(4) The S&P 500 Index is a measure of stock market total return performance. Index performance does not reflect sales charges. Index performance does not reflect sales charges.
(5) The Wilshire Real Estate Securities Index is an unmanaged commonly used measure of real estate equity market total return performance. Index performance does not reflect sales charges.
Phoenix-Seneca Equity Income Fund 9
This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------ ------ ------ ------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) None 5.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of
the lesser of the value redeemed or the amount invested) None None 5%(b) 1%(c)
Maximum Sales Charge (load) Imposed on Reinvested None None None None
Dividends
Redemption Fee None None None None
Exchange Fee None None None None
---------------------------------------------------------
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------ ------ ------ ------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and Service (12b-1) Fees(d) None 0.25% 1.00% 1.00%
Other Expenses 0.76% 1.82% 3.76% 2.73%
---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES(a) 1.61% 2.92% 5.61% 4.58%
==== ==== ==== ====
|
(a) The fund's investment adviser has agreed to reimburse through January 31, 2005 the Phoenix-Seneca Equity Income Fund's operating expenses to the extent that such expenses exceed 2.35% for Class X Shares, 3.05% for Class A Shares and 3.80% for Class B Shares and Class C Shares. Total Annual Fund Operating Expenses after expense reimbursement (if applicable) were: 1.61% for Class X Shares, 2.92% for Class A Shares, 3.80% for Class B Shares and 3.80% for Class C Shares.
(b) 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.
(c) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.
(d) 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 Shares after eight years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
10 Phoenix-Seneca Equity Income Fund
----------------------------------------------------------------------------------------------------------------- CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------------------------------------------- Class X $164 $508 $876 $1,911 ----------------------------------------------------------------------------------------------------------------- Class A $853 $1,427 $2,024 $3,631 ----------------------------------------------------------------------------------------------------------------- Class B $959 $1,868 $2,763 $4,948 ----------------------------------------------------------------------------------------------------------------- Class C $559 $1,383 $2,314 $4,677 ----------------------------------------------------------------------------------------------------------------- |
You would pay the following expenses if you did not redeem your shares:
----------------------------------------------------------------------------------------------------------------- CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------------------------------------------- Class B $559 $1,668 $2,763 $4,948 ----------------------------------------------------------------------------------------------------------------- Class C $459 $1,383 $2,314 $4,677 ----------------------------------------------------------------------------------------------------------------- |
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 manager. Refer to the section "Management of the Funds" for information about expense reimbursement.
Phoenix-Seneca Equity Income Fund 11
INVESTMENT OBJECTIVE
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund has an investment objective of capital appreciation. There is no guarantee that the fund will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
> Under normal circumstances, the fund invests at least 80% of its assets
in common stocks of companies with market capitalizations between $500
million and $10 billion. The fund may invest in companies with higher
or lower market capitalizations.
> The adviser is responsible for managing the fund's investment program
and the general operation of the fund. The subadviser manages the
investments of the fund. The subadviser uses a screening process to
select stocks of companies that it believes are:
o growing earnings at accelerated rates;
o producing quality, sustainable earnings;
o reasonably valued relative to their growth rate and to the market;
o well managed; and
o have potential to exceed earnings expectations (so called "earnings
surprisers").
> Stocks are reviewed for sale if:
o earnings reports disappoint;
o fundamentals deteriorate; or
o valuation levels reach the top of their historic levels.
> The fund may invest in both U.S. and foreign (non-U.S.) stocks of any
type, with any capitalization and from any industry.
> Any income derived from investments will be incidental.
> To enable the fund to invest effectively in companies with small to
medium market capitalizations, the fund will not offer shares to the
public when the net assets of the fund exceed $500 million. This limit
is subject to change.
|
Temporary Defensive Strategy: When the subadviser determines that market conditions warrant, the fund may invest without limit in cash and cash equivalents. In such instances, the fund may not achieve its stated objective.
Please see "Additional Investment Techniques" for other investment techniques of the fund.
12 Phoenix-Seneca Mid Cap "EDGE"(SM) Fund
RISKS RELATED TO PRINCIPAL INVESTMENT STRATEGIES
If you invest in this fund, you risk losing your investment.
GENERAL
The value of the fund's investments that supports your share value may decrease. If between the time you purchase shares and the time you sell shares the value of the fund's investments decreases, you will lose money.
Investment values can decrease for a number of reasons. Conditions affecting the overall economy, specific industries or companies in which the fund invests can be worse than expected and investments may fail to perform as the adviser expects. As a result, the value of your shares may decrease.
FOREIGN INVESTING
Foreign markets and currencies may not perform as well as U.S. markets. Political and economic uncertainty in foreign countries, as well as less public information about foreign investments, may negatively impact the fund's portfolio. Dividends and other income payable on foreign securities may be subject to foreign taxes. Some investments may be made in currencies other than the U.S. dollar that will fluctuate in value as a result of changes in the currency exchange rate.
GROWTH STOCKS
Because growth stocks typically make little or no dividend payments to shareholders, investment return is based on a stock's capital appreciation, making return more dependent on market increases and decreases. Growth stocks are therefore more volatile than non-growth stocks to market changes, tending to drop more sharply when markets fall.
LIMITED NUMBER OF INVESTMENTS
Conditions which negatively affect securities in the portfolio will have a greater impact on the fund as compared to a fund that holds a greater number of security positions. In addition, the fund may be more sensitive to changes in the market value of a single issuer in its portfolio and therefore the value of your shares may be more volatile.
SMALL AND MEDIUM CAPITALIZATIONS
Companies with smaller capitalizations are often companies with a limited operating history or companies in industries that have recently emerged due to cultural, economic, regulatory or technological developments. Such developments can have a significant impact or negative effect on small and medium capitalization companies and their stock performance and can make investment returns highly volatile. Product lines are often less diversified and subject to competitive threats. Smaller capitalization stocks are subject to varying patterns of trading volume and may, at times, be difficult to sell.
Phoenix-Seneca Mid-Cap "EDGE"(SM) 13
PERFORMANCE TABLES
The bar chart and table below provide some indication of the risks of investing in the Phoenix-Seneca Mid-Cap "EDGE"(SM) 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 shows how the fund's average annual returns compare to those of a broad-based securities market index and a more narrowly-based benchmark that reflects the market sectors in which the fund invests. The fund's past performance, before and after taxes, is not necessarily an indication of how the fund will perform in the future.
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1997 16.22
1998 20.21
1999 44.58
2000 13.00
2001 -23.82
2002 -32.10
2003 29.01
|
(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 44.83% (quarter ending December 31, 1999) and the lowest return for a quarter was -26.02% (quarter ending September 30, 2001).
----------------------------------------------------------------------------------------------------------------
SINCE INCEPTION(2)
AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------
(FOR THE PERIODS ENDING 12/31/03)(1) 1 YEAR 5 YEARS CLASS A CLASS B CLASS C CLASS X
----------------------------------------------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 21.60% 0.55% 10.31% -- -- --
----------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions(3) 21.60% -0.70% 8.62% -- -- --
----------------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions 14.04% -0.09% 8.15% -- -- --
and Sale of Fund Shares(3)
----------------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 23.93% 0.91% -- 1.87% -- --
----------------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 28.04% 0.92% -- -- 1.87% --
----------------------------------------------------------------------------------------------------------------
Class X
----------------------------------------------------------------------------------------------------------------
Return Before Taxes 29.37% 2.05% -- -- -- 11.52%
----------------------------------------------------------------------------------------------------------------
S&P 500 Index(4) 28.71% -0.57% 9.20% 0.88% 0.88% 9.20%
----------------------------------------------------------------------------------------------------------------
Russell MidCap Growth Index(5) 42.71% 2.01% 7.86% 2.66% 2.66% 7.86%
----------------------------------------------------------------------------------------------------------------
|
(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 Shares and Class C Shares.
(2) Class A Shares and Class X Shares since March 8, 1996; Class B Shares and Class C Shares since July 1, 1998.
(3) After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. The after-tax returns shown in the table above are for only one class of shares offered by the prospectus (Class A); after-tax returns for other classes will vary. Actual after-tax returns depend on the investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
(4) The S&P 500 Index is a measure of stock market total return performance and is provided for general, comparative purposes. Index performance does not reflect sales charges.
(5) The Russell Mid Cap Growth Index is an unmanaged commonly used measure of total return performance of mid-capitalization, growth-oriented stocks. The stocks are also members of the Russell 1000 Growth Index. Index performance does not reflect sales charges.
14 Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
This table illustrates all fees and expenses that you may pay if you buy and hold shares of the fund.
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------ ------ ------ ------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) None 5.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of
the lesser of the value redeemed or the amount invested) None None 5%(b) 1%(c)
Maximum Sales Charge (load) Imposed on Reinvested
Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None None None
---------------------------------------------------------
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
------ ------ ------ ------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
Management Fees 0.80% 0.80% 0.80% 0.80%
Distribution and Service (12b-1) Fees(d) None 0.25% 1.00% 1.00%
Other Expenses 0.44% 0.50% 0.66% 0.46%
---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES(a) 1.24% 1.55% 2.46% 2.26%
==== ==== ==== ====
|
(a) The fund's investment adviser has agreed to reimburse through January 31, 2005 the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund's operating expenses to the extent that such expenses exceed 1.15% for Class X Shares, 1.40% for Class A Shares and 2.15% for Class B Shares and Class C Shares. Total Annual Fund Operating Expenses after expense reimbursement were: 1.15% for Class X Shares, 1.40% for Class A Shares, 2.15% for Class B Shares and 2.15% for Class C Shares.
(b) 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.
(c) The deferred sales charge is imposed on Class C Shares redeemed during the first year only.
(d) 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 Shares after eight years. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Phoenix-Seneca Mid-Cap "EDGE"(SM) 15
-----------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 10 YEARS
-----------------------------------------------------------------------------------------------------------------
Class X $126 $393 $681 $1,500
-----------------------------------------------------------------------------------------------------------------
Class A $724 $1,036 $1,371 $2,314
-----------------------------------------------------------------------------------------------------------------
Class B $649 $967 $1,311 $2,572
-----------------------------------------------------------------------------------------------------------------
Class C $329 $706 $1,210 $2,595
-----------------------------------------------------------------------------------------------------------------
|
You would pay the following expenses if you did not redeem your shares:
----------------------------------------------------------------------------------------------------------------- CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------------------------------------------- Class B $249 $767 $1,311 $2,572 ----------------------------------------------------------------------------------------------------------------- Class C $229 $706 $1,210 $2,595 ----------------------------------------------------------------------------------------------------------------- |
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.
16 Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
In addition to the Principal Investment Strategies and Risks Related to Principal Investment Strategies, the funds may engage in the following investment techniques:
BORROWING
Each fund may obtain fixed interest rate loans in amounts up to one-third the value of its net assets and invest the loan proceeds in other assets. If the securities purchased with such borrowed money decrease in value or do not increase enough to cover interest and other borrowing costs, the funds will suffer greater losses than if no borrowing took place.
DEBT SECURITIES
The Mid-Cap "EDGE"(SM) Fund and Equity Income Fund may also invest in debt securities, primarily investment grade, of any maturity. Debt securities with lower credit ratings have a higher risk of default on payment of principal and interest and securities with longer maturities are subject to greater price fluctuations in response to changes in interest rates. If interest rates rise, the value of debt securities generally will fall.
DERIVATIVES
Each fund may buy and write call and put options on securities, securities indices, and foreign currencies, and may enter into futures contracts and related options. The funds may also enter into swap agreements relating to interest rates, foreign currencies, and securities indices and forward foreign currency contracts. The funds may use these techniques to hedge against changes in interest rates, foreign currency exchange rates, changes in securities prices or other factors affecting the value of their investments, or as part of their overall investment technique. If the subadviser fails to correctly predict these changes, the funds can lose money. Derivatives transactions may be less liquid than other securities and the counterparty to such transactions may not perform as expected. In addition, futures and options involve market risk in excess of their value.
FOREIGN INVESTING
The funds may invest in securities of foreign (non-U.S.) issuers, including foreign debt securities. Foreign equity investments are generally limited to securities traded on U.S. exchanges or in the NASDAQ Stock Market and American Depository Receipts (ADRs).
Investments in non-U.S. securities involve additional risks and conditions, including differences in accounting standards, generally higher commission rates, differences in transaction settlement systems, political instability and the possibility of confiscatory or expropriation taxes, all of which may negatively impact the funds. Dividends and other income payable on foreign securities may also be subject to foreign taxes.
Phoenix-Seneca Funds 17
Some foreign investments may be made in currencies other than the U.S. dollar that will fluctuate in value as a result of changes in the currency exchange rate. In addition, foreign markets and currencies may not perform as well as U.S. markets.
HIGH YIELD-HIGH RISK SECURITIES
The Mid-Cap "EDGE"(SM) Fund and Equity Income Fund may invest in high yield-high risk securities. A fund will invest in securities that are rated higher than B- by S&P or B3 by Moody's, or if unrated are judged by the subadviser to be of similar quality. High yield-high risk securities (junk bonds) typically entail greater price volatility and principal and interest rate risk. There is a greater chance that an issuer will not be able to make principal and interest payments on time. Analysis of the creditworthiness of issuers of high yield-high risk securities may be complex, and as a result, it may be more difficult for the subadviser to accurately predict risk.
ILLIQUID SECURITIES
The funds may invest in illiquid securities. Illiquid and restricted securities may be difficult to sell or may be sold only pursuant to certain legal restrictions. Difficulty in selling securities may result in a loss to the funds or entail expenses not normally associated with the sale of a security.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The funds may invest in mortgage-backed and other asset-backed securities, including pass-through type securities and Collateralized Mortgage Obligations (CMOs). It is difficult to predict cash flows from mortgage-backed and asset-backed securities due to the variability of prepayments. Prepayments also tend to limit price gains when interest rates drop and exaggerate price declines when interest rates rise. In the event of high prepayments, a fund may be required to invest proceeds at lower interest rates than if such prepayment had not occurred.
MUTUAL FUND INVESTING
The funds may invest in shares of other mutual funds. Assets invested in other mutual funds incur a layering of expenses including operating costs, advisory fees and administrative fees that you, as a shareholder in the funds, indirectly bear.
NON-REAL ESTATE RELATED INDUSTRIES
Although the Equity Income Fund will invest principally in the real estate industry and related businesses, it may invest in equity and debt securities outside of such industry and businesses.
PORTFOLIO TURNOVER RATE
The rate of portfolio turnover generally is not important in making investment decisions; therefore, the funds may experience a high portfolio turnover rate. High portfolio turnover rates may increase costs to the funds, may negatively affect fund performance, and may increase capital gain distributions, resulting in greater tax liability to you.
18 Phoenix-Seneca Funds
REPURCHASE AGREEMENTS
The funds may invest in repurchase agreements. Default or insolvency of the other party presents a risk to the funds.
SECURITIES LENDING
Each fund may loan portfolio securities with a value up to one-third of its total assets to increase investment returns. If the borrower is unwilling or unable to return the borrowed securities when due, the fund can suffer losses.
UNRATED SECURITIES
The funds 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 subadviser to accurately predict risk.
VARIABLE RATE, FLOATING RATE OR VARIABLE AMOUNT SECURITIES
The funds may invest in variable rate, floating rate, or variable amount securities which are generally short-term, unsecured, fluctuating, interest-bearing notes of private issuers.
The funds may buy other types of securities or employ other portfolio management techniques. Please refer to the Statement of Additional Information for more detailed information about these and other investment techniques of the fund.
THE ADVISERS
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment adviser to each of the funds and is located at 56 Prospect Street, Hartford, CT 06115. Phoenix acts as the investment adviser for 13 fund companies totaling 39 mutual funds and as adviser to institutional clients. As of September 30, 2003, Phoenix had $23.3 billion in assets under management. Phoenix has acted as an investment adviser for over sixty years.
Seneca Capital Management LLC ("Seneca") is the investment subadviser to each of the funds and is located at 909 Montgomery Street, San Francisco, California 94133. Seneca acts as a subadviser to nine mutual funds and acts as investment adviser to institutions and individuals. As of September 30, 2003, Seneca had $13.3 billion in assets under management. Seneca has been (with its predecessor, GMG/Seneca Capital Management LP) an investment adviser since 1989.
Phoenix-Seneca Funds 19
Subject to the direction of the funds' Board of Trustees, Phoenix is responsible for managing the funds' investment program and the general operations of the funds. Seneca, as subadviser, is responsible for day-to-day management of the funds' portfolios. Seneca 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 that fund's net assets at the following rates:
---------------------------------------------------------- ----------------------------------------------------- Bond Fund 0.50% ---------------------------------------------------------- ----------------------------------------------------- Equity Income Fund 0.85% ---------------------------------------------------------- ----------------------------------------------------- Mid-Cap "EDGE"(SM) Fund 0.80% ---------------------------------------------------------- ----------------------------------------------------- |
Phoenix pays Seneca a subadvisory fee at the following rates:
---------------------------------------------------------------------------------------------------------------- Bond Fund 0.25% ---------------------------------------------------------------------------------------------------------------- Equity Income Fund 0.425% ---------------------------------------------------------------------------------------------------------------- Mid-Cap "EDGE"(SM) Fund 0.40% ---------------------------------------------------------------------------------------------------------------- |
The adviser has voluntarily agreed to assume total operating expenses of each fund excluding interest, taxes, brokerage fees, commissions and extraordinary expenses, until January 31, 2005, to the extent that such expenses exceed the following percentages of the average annual net asset values for the fund:
----------------------------------------------------------------------------------------------------------------
CLASS X CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES
----------------------------------------------------------------------------------------------------------------
Bond Fund 0.90% 1.15% 1.90% 1.90%
----------------------------------------------------------------------------------------------------------------
Equity Income Fund 2.35% 3.05% 3.80% 3.80%
----------------------------------------------------------------------------------------------------------------
Mid-Cap "EDGE"(SM) Fund 1.15% 1.40% 2.15% 2.15%
----------------------------------------------------------------------------------------------------------------
|
During the fund's last fiscal year, the funds paid management fees as follows:
Bond Fund, $373,661; Equity Income Fund, $189,026; Mid-Cap "EDGE"(SM) Fund,
$1,076,676. The ratio of management fees to average net assets for the fiscal
year ended September 30, 2003 was 0.50% for the Bond Fund, 0.85% for the Equity
Income Fund and 0.80% for the Mid-Cap "EDGE"(SM) Fund.
PORTFOLIO MANAGEMENT
Investment and trading decisions for each fund are made by a team of managers and analysts headed by one or more team leaders. The team leaders for each fund are primarily responsible
20 Phoenix-Seneca Funds
for the day-to-day decisions related to that fund. The team leader of any one fund may be on another fund team.
Gail P. Seneca. Ms. Seneca is a team leader for each of the funds. Ms. Seneca also serves as Co-Manager of Phoenix-Seneca Growth Fund and Phoenix-Seneca Strategic Theme Fund of Phoenix Strategic Equity Series Fund, and Phoenix Duff & Phelps Institutional Growth Stock Portfolio of Phoenix Duff & Phelps Institutional Mutual Funds. Ms. Seneca has been the Chief Executive and Investment Officer of Seneca, including its predecessor, GMG/Seneca Capital Management, L.P., since October 1989. From October 1987 until October 1989, she was Senior Vice President of the Asset Management Division of Wells Fargo Bank and from October 1983 to September 1987, she was Investment Strategist and Portfolio Manager for Chase Lincoln Bank, heading the fixed income division.
Richard D. Little. Mr. Little is a Portfolio Manager for the Mid-Cap "EDGE"(SM) Fund. Mr. Little also serves as Co-Manager of Phoenix-Seneca Growth Fund and Phoenix-Seneca Strategic Theme Fund of Phoenix Strategic Equity Series Fund and Phoenix Duff & Phelps Institutional Growth Stock Portfolio of Phoenix Duff & Phelps Institutional Mutual Funds. He has been Director of Equities with Seneca, including its predecessor, GMG/Seneca Capital Management, L.P., since September 1989. Before joining GMG/Seneca, Mr. Little held positions as an analyst, board member, and regional manager with Smith Barney, NatWest Securities, and Montgomery Securities.
Ronald K. Jacks. Mr. Jacks is a Portfolio Manager for the Mid-Cap "EDGE" (SM) Fund. Mr. Jacks also serves as Co-Manager of Phoenix-Seneca Growth Fund and Phoenix-Seneca Strategic Theme Fund of Phoenix Strategic Equity Series Fund and Phoenix Duff & Phelps Institutional Growth Stock Portfolio of Phoenix Duff & Phelps Institutional Mutual Funds. He was Secretary of the Phoenix-Seneca Funds from February 1996 through February 1998 and was a Trustee of Seneca Funds from February 1996 through June 1997. Mr. Jacks has been a Portfolio Manager with Seneca, including its predecessor, GMG/Seneca Capital Management, L.P., since July 1990.
Albert Gutierrez. Mr. Gutierrez is a team leader for the Bond Fund. He has been Chief Investment Officer, Fixed Income of Seneca since April 2002. Prior to joining Seneca, Mr. Gutierrez was Executive Vice President and Head of Portfolio Management and Trading at American General Investment Management, where he was responsible for management of $75 billion in fixed income assets, from 2000 to 2001. He served in an almost identical role from 1988 to 2000 with Conseco Capital Management. Mr. Gutierrez began his fixed income career in research and trading at Kidder, Peabody & Co. in New York in 1983. He earned the right to use the Chartered Financial Analyst designation in 1990.
David Shapiro. Mr. Shapiro is a team leader for the Equity Income Fund. He has been a Portfolio Manager with Seneca, including its predecessor, GMG/Seneca Capital Management, L.P., since April 1996. Before joining GMG/Seneca, he was a Portfolio Manager with Genesis Realty since May 1995. Prior to that, he was a managing director of The ADCO Group from 1992 to 1995.
Phoenix-Seneca Funds 21
HOW IS THE SHARE PRICE DETERMINED?
Each 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, each 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 the result by the total number of outstanding shares of the fund.
Asset Value: The funds' investments are valued at market value. If market quotations are not available, the funds determine 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 official closing price (typically last sale) on the exchange on which the securities are principally traded, or, if no closing price is available, at the last bid price. Short-term investments having a remaining maturity of sixty days or less are valued at amortized cost, which the 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' 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' net asset value per share.
The net asset value per share of each class of each 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). A fund will not calculate its net asset values per share on days when the NYSE is closed for trading. If a fund holds securities that are traded on foreign exchanges that trade on weekends or other holidays when the funds do not price their shares, the net asset value of the fund's shares may change on days when shareholders will not be able to purchase or redeem the fund's shares.
22 Phoenix-Seneca Funds
AT WHAT PRICE ARE SHARES PURCHASED?
All investments received by the funds' 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.
WHAT ARE THE CLASSES AND HOW DO THEY DIFFER?
Each fund presently offers four classes of shares that have different sales and distribution charges. See "Fund Expenses" previously in this prospectus. For certain classes of shares, the funds have adopted distribution and service plans allowed under Rule 12b-1 of the Investment Company Act of 1940 that authorize the funds to pay distribution and service fees for the sale of their shares and for services provided to shareholders.
WHAT ARRANGEMENT IS BEST FOR YOU?
Your financial representative should recommend only those arrangements that are suitable for you based on known information. In certain instances, you may be entitled to a reduction or waiver of sales charges. For instance, you may be entitled to a sales charge discount on Class A Shares if you purchase more than certain breakpoint amounts. You should inform or inquire of your financial representative whether or not you may be entitled to a sales charge discount attributable to your total holdings in a fund or related funds. To determine eligibility for a sales charge discount, you may aggregate all of your accounts (including joint accounts, IRAs, non-IRAs, etc.) and those of your spouse and minor children. The financial representative may request you to provide an account statement or other holdings information to determine your eligibility for a breakpoint and to make certain all involved parties have the necessary data. Additional information about the classes of shares offered, sales charges, breakpoints and discounts follows in this section and also may be found in the Statement of Additional Information in the section entitled "How to Purchase Shares." This information, the Fund's Prospectus and the Statement of Additional Information may be obtained from the Individual Investors portion of Phoenix Funds' web site at PhoenixInvestments.com. Please be sure that you fully understand these choices before investing. If you or your financial representative require additional assistance, you may also contact Mutual Fund Services by calling toll-free (800) 253-1574.
CLASS X SHARES. Class X Shares are offered primarily to institutional investors, such as pension and profit sharing plans, other employee benefit trusts, investment advisers, endowments, foundations and corporations. If you are eligible to purchase and do purchase Class X Shares, you will pay no sales charge at any time. There are no distribution and services fees applicable
Phoenix-Seneca Funds 23
to Class X Shares. For additional information about purchasing Class X Shares, please contact Customer Service by calling (800) 243-1574.
CLASS A SHARES. If you purchase Class A Shares, you will pay a sales charge at the time of purchase equal to 5.75% of the offering price (6.10% of the amount invested) for the Mid-Cap "EDGE"(SM) Fund and the Equity Income Fund and 4.75% of the offering price (4.99% of the amount invested) for the Bond Fund. The sales charge may be reduced or waived under certain conditions. See "Initial Sales Charge Alternative--Class A Shares" below. 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 Class B Shares and Class C Shares.
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 within the first five years after they are purchased, you will pay a sales charge of up to 5% of your shares' value. See "Deferred Sales Charge Alternative--Class B Shares and Class C Shares" below. This charge declines to 0% over a period of five years and may be waived under certain conditions. Class B Shares have higher distribution and service fees (1.00%) and pay lower dividends than Class A Shares. Class B Shares automatically convert to Class A Shares eight years after purchase. 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 within the first year after they are purchased, you will pay a sales charge of 1%. See "Deferred Sales Charge Alternative--Class B Shares and Class C Shares" below. Class C Shares have the same distribution and service fees (1.00%) and pay comparable dividends as Class B 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 Initial Sales Charges: Combination Purchase Privilege" in the Statement of Additional Information. Shares purchased based on the automatic reinvestment of income dividends or capital gain distributions are not subject to any sales charges. The sales charge is divided between your investment dealer and the funds' underwriter (Phoenix Equity Planning Corporation or "PEPCO").
24 Phoenix-Seneca Funds
SALES CHARGE YOU MAY PAY TO PURCHASE CLASS A SHARES
BOND FUND
SALES CHARGE AS
A PERCENTAGE OF
AMOUNT OF -------------------------------------------------------------------
TRANSACTION OFFERING NET AMOUNT
AT OFFERING PRICE PRICE INVESTED
----------------------------------------------- -------------------------------------------------------------------
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 2.75 2.83
$500,000 but under $1,000,000 2.00 2.04
$1,000,000 or more None None
|
MID-CAP "EDGE"(SM) FUND AND EQUITY INCOME FUND
SALES CHARGE AS
A PERCENTAGE OF
AMOUNT OF -------------------------------------------------------------------
TRANSACTION OFFERING NET AMOUNT
AT OFFERING PRICE PRICE INVESTED
----------------------------------------------- -------------------------------------------------------------------
Under $50,000 5.75% 6.10%
$50,000 but under $100,000 4.75 4.99
$100,000 but under $250,000 3.75 3.90
$250,000 but under $500,000 2.75 2.83
$500,000 but under $1,000,000 2.00 2.04
$1,000,000 or more None None
|
DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES AND CLASS C SHARES
Class B Shares and Class 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. The sales charge will be multiplied by the then current market value or the initial cost of the shares being redeemed, whichever is less. No sales charge will be imposed on increases in net asset value or on shares purchased through the reinvestment of income dividends or capital gain 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 number 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.
Phoenix-Seneca Funds 25
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS B SHARES YEAR 1 2 3 4 5 6+ ---------------------------------------------------------------------------------------------------- CDSC 5% 4% 3% 2% 2% 0% DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS C SHARES YEAR 1 2+ ---------------------------------------------------------------------------------------------------- CDSC 1% 0% |
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. These procedures do not apply to purchases of Class X Shares.
The funds have established the following preferred methods of payment for fund shares:
o Checks drawn on an account in the name of the investor and made payable to Phoenix Funds;
o Checks drawn on an account in the name of the investor's company or employer and made payable to Phoenix Funds; or
o Wire transfers or Automatic Clearing House (ACH) transfers from an account in the name of the investor, or the investor's company or employer.
Payment in other forms may be accepted at the discretion of the funds.
STEP 1.
Your first choice will be the initial amount you intend to invest.
Minimum INITIAL investments:
o $25 for individual retirement accounts (IRAs), 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.
26 Phoenix-Seneca Funds
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.
The funds reserve the right to refuse any purchase order for any reason.
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 additional shares and capital gain distributions in cash;
o Receive dividends in cash and capital gain distributions in additional shares; or
o Receive both dividends and capital gain distributions in cash.
No interest will be paid on uncashed distribution checks.
Phoenix-Seneca Funds 27
----------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT
(CLASS A, CLASS B AND CLASS C SHARES)
----------------------------------------------------------------------------------------------------------------
Through a financial advisor Contact your advisor. Some advisors may charge a fee and may set
different minimum investments or limitations on buying shares.
----------------------------------- ----------------------------------------------------------------------------
Complete a New Account Application and send it with a check payable to the
Through the mail 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 a New Account Application and send it with a check payable to the
Through express delivery fund. Send them to: Boston Financial Data Services, Attn: Phoenix Funds,
66 Brooks Drive, Braintree, MA 02184.
----------------------------------- ----------------------------------------------------------------------------
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).
----------------------------------- ----------------------------------------------------------------------------
|
28 Phoenix-Seneca Funds
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 funds' Transfer Agent or an authorized agent. In the case of a Class B Share or Class 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.
------------------------------------------------------------------------------------------------------------------
TO SELL SHARES
(CLASS A, CLASS B AND CLASS C SHARES)
------------------------------------------------------------------------------------------------------------------
Through a financial advisor Contact your advisor. Some advisors may charge a fee and may set
different minimums on redemptions of accounts.
------------------------------------ -----------------------------------------------------------------------------
Through the mail Send a letter of instruction and any share certificates (if you hold
certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA
02266-8301. Be sure to include the registered owner's name, fund and
account number and number of shares or dollar value you wish to sell.
------------------------------------ -----------------------------------------------------------------------------
Through express delivery Send a letter of instruction and any share certificates (if you hold
certificate shares) to: Boston Financial Data Services, Attn: Phoenix
Funds, 66 Brooks Drive, Braintree, MA 02184. Be sure to include the
registered owner's name, fund and account number and number of shares
or dollar value you wish to sell.
------------------------------------ -----------------------------------------------------------------------------
By telephone For sales up to $50,000, requests can be made by calling (800) 243-1574.
------------------------------------ -----------------------------------------------------------------------------
By telephone exchange Call us at (800) 243-1574 (press 1, then 0).
------------------------------------ -----------------------------------------------------------------------------
|
Phoenix-Seneca Funds 29
You may realize a taxable gain or loss (for federal income tax purposes) if you redeem shares of the funds. Each fund reserves 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 a 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 funds' Transfer Agent at (800) 243-1574.
REDEMPTIONS BY MAIL
> 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 instruction 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 instruction with a signature guarantee when any
of these apply:
o You are selling more than $50,000 worth of shares.
o The name or address on the account has changed within the last 30
days.
o You want the proceeds to go to a different name or address than on
the account.
> If you are selling shares held in a corporate or fiduciary account,
please contact the funds' Transfer Agent at (800) 243-1574.
|
If required, the signature guarantee must be a STAMP 2000 Medallion guarantee and be made by an eligible guarantor institution as defined by the funds' Transfer Agent in accordance with its signature guarantee procedures. Guarantees using previous technology medallions will not be accepted. Currently, the Transfer Agent's signature guarantee procedures generally permit guarantees by banks, broker-dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations.
30 Phoenix-Seneca Funds
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 REINSTATEMENT PRIVILEGE
For 180 days after you sell your Class A Shares, Class B Shares, or Class C Shares, you may 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 and Class C 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.
REDEMPTION OF SMALL ACCOUNTS
Due to the high cost of maintaining small accounts, if your redemption activity causes your account balance to fall below $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.
DISTRIBUTIONS OF SMALL AMOUNTS AND UNCASHED CHECKS
Distributions in amounts less than $10 will automatically be reinvested in additional shares of the fund. If you have elected to receive distributions in cash, and the postal or other delivery service is unable to deliver checks to your address of record, or you do not respond to mailings from the fund with regard to uncashed distribution checks, your distribution options will automatically be converted to having all distributions reinvested in additional shares.
Phoenix-Seneca Funds 31
EXCHANGE PRIVILEGES
You should read the prospectus of the fund into which you want to exchange 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 PhoenixInvestments.com.
o You may exchange shares of one fund for the same class of shares of another fund; e.g., Class A Shares for Class A Shares. Exchange privileges may not be available for all Phoenix Funds, and may be rejected or suspended.
o Exchanges may be made by telephone ((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 a purchase for federal income tax purposes.
o These funds are not suitable for market timers and market timers are discouraged from becoming investors. Excessive trading and market timing can hurt fund performance and therefore be detrimental to all shareholders. We will discourage any investor we detect or have reason to believe is engaging in excessive trading or market timing from investing in these funds. We reserve the right, in our sole and absolute discretion, to temporarily or permanently terminate exchange privileges or reject any specific order from anyone whose transactions seem to follow a timing pattern, including those who request more than one exchange out of a fund within a 30-day period. If we reject a transfer for any of these reasons, we will notify you of our decision in writing.
RETIREMENT PLANS
Shares of the funds 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.
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.
32 Phoenix-Seneca Funds
SYSTEMATIC EXCHANGE allows you to automatically move money from one Phoenix Fund
to another on a monthly, quarterly, semiannual 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. Exchange privileges may not be available for all
Phoenix Funds and may be rejected or suspended.
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. Exchange privileges may not be available for all Phoenix Funds, and may be rejected or suspended.
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 the 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.
The funds plan to make distributions from net investment income at intervals stated in the table below, and to distribute net realized capital gains, if any, at least annually.
------------------------------------------------------------------------------------------------------------------ FUND DIVIDEND PAID ------------------------------------------------------------------------------------------------------------------ Bond Fund Monthly ------------------------------------------------------------------------------------------------------------------ Equity Income Fund Quarterly ------------------------------------------------------------------------------------------------------------------ Mid-Cap "EDGE"(SM) Fund Semiannually ------------------------------------------------------------------------------------------------------------------ |
Distributions of short-term capital gains and net investment income are taxable to shareholders as ordinary income. Under the 2003 Tax Act, certain distributions of long term capital gains and certain dividends are taxable at a lower rate than ordinary income. Long-term capital gains, if any, distributed to shareholders and which are designated by a 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-Seneca Funds 33
These tables are intended to help you understand the funds' financial performance over the past five years. Certain information reflects financial results for a single fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by the funds' independent auditors, PricewaterhouseCoopers LLP. The report of PricewaterhouseCoopers LLP, together with the funds' financial statements, are included in the funds' most recent Annual Report, which is available upon request.
PHOENIX-SENECA BOND FUND
CLASS X
--------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002(5) 2001 2000 1999
-------- --------- -------- -------- --------
Net asset value, beginning of period $10.39 $10.44 $10.16 $10.35 $10.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.41 0.48 0.70 0.77 0.69
Net realized and unrealized gain (loss) 0.46 0.12 0.26 (0.18) (0.31)
-------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.87 0.60 0.96 0.59 0.38
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.42) (0.49) (0.68) (0.71) (0.62)
Dividends from net realized gains (0.06) (0.16) -- (0.07) (0.09)
-------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.48) (0.65) (0.68) (0.78) (0.71)
-------- -------- ------- ------- -------
Change in net asset value 0.39 (0.05) 0.28 (0.19) (0.33)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.78 $10.39 $10.44 $10.16 $10.35
======== ======== ======= ======= =======
Total return 8.57% 5.94% 9.84% 6.17% 3.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $35,966 $48,606 $48,448 $39,981 $34,853
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 0.86%(3) 0.82%(4) 0.84%(4) 0.90%(2)(4) 1.06%(2)(3)
Net investment income (loss) 3.93% 4.75% 6.79% 7.67% 6.60%
Portfolio turnover 244% 410% 170% 74% 95%
|
34 Phoenix-Seneca Funds
PHOENIX-SENECA BOND FUND
CLASS A
------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002(6) 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $10.29 $10.37 $10.11 $10.29 $10.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.38 0.44 0.67 0.75 0.59
Net realized and unrealized gain (loss) 0.45 0.11 0.26 (0.18) (0.33)
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.83 0.55 0.93 0.57 0.26
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.38) (0.47) (0.67) (0.68) (0.56)
Dividends from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.44) (0.63) (0.67) (0.75) (0.65)
------- ------- ------- ------- -------
Change in net asset value 0.39 (0.08) 0.26 (0.18) (0.39)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.68 $10.29 $10.37 $10.11 $10.29
======= ======= ======= ======= =======
Total return(2) 8.28% 5.50% 9.54% 5.84% 2.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $21,263 $21,127 $15,376 $7,335 $2,732
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 1.15%(4) 1.15%(4) 1.15%(5) 1.15%(5) 1.88%(4)
Net investment income (loss) 3.65% 4.38% 6.42% 7.60% 5.80%
Portfolio turnover 244% 410% 170% 74% 95%
|
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.21%,
1.22%, 1.27%, 1.81% and 4.08% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(4) 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.
(5) The ratio of operating expenses to average net assets includes the effect of
expense offset for custodian fees; if expense offsets were excluded, the
ratio would have been 1.16%.
(6) As required, effective October 1, 2001, the Fund has adopted the provisions
of AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the year ended September 30, 2002, was to decrease the ratio of
net investment income to average net assets from 4.44% to 4.38%; to decrease
net investment income (loss) per share from 0.45 to 0.44 per share and to
increase net realized and unrealized gain (loss) from 0.10 to 0.11 per
share. Per share ratios and supplemental data for prior periods have not
been restated to reflect this change.
Phoenix-Seneca Funds 35
PHOENIX-SENECA BOND FUND
CLASS B
------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002(7) 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $10.13 $10.25 $10.04 $10.27 $10.67
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.30 0.36 0.57 0.68 0.52
Net realized and unrealized gain (loss) 0.44 0.11 0.28 (0.20) (0.33)
------- -------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.74 0.47 0.85 0.48 0.19
------- -------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.31) (0.43) (0.64) (0.64) (0.50)
Dividends from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------- -------- ------- -------- -------
TOTAL DISTRIBUTIONS (0.37) (0.59) (0.64) (0.71) (0.59)
------- -------- ------- -------- -------
Change in net asset value 0.37 (0.12) 0.21 (0.23) (0.40)
------- -------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD $10.50 $10.13 $10.25 $10.04 $10.27
======= ======== ======= ======== =======
Total return(2) 7.43% 4.83% 8.67% 5.06% 1.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $10,218 $10,093 $7,713 $3,086 $1,593
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 1.90%(5) 1.90%(5) 1.90%(6) 1.90%(6) 2.62%(5)
Net investment income (loss) 2.91% 3.63% 5.64% 6.83% 5.09%
Portfolio turnover 244% 410% 170% 74% 95%
CLASS C
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002(7) 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $10.15 $10.26 $10.06 $10.27 $10.67
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.30 0.36 0.58 0.69 0.49
Net realized and unrealized gain (loss) 0.44 0.12 0.26 (0.20) (0.30)
-------- -------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.74 0.48 0.84 0.49 0.19
-------- -------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.31) (0.43) (0.64) (0.63) (0.50)
Dividends from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.37) (0.59) (0.64) (0.70) (0.59)
------- -------- ------- ------- -------
Change in net asset value 0.37 (0.11) 0.20 (0.21) (0.40)
------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.52 $10.15 $10.26 $10.06 $10.27
======= ======== ======= ======= =======
Total return(2) 7.42% 4.83% 8.65% 5.12% 1.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $4,754 $5,052 $3,842 $1,957 $444
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 1.90%(5) 1.90%(5) 1.90%(6) 1.90%(6) 2.91%(5)
Net investment income (loss) 2.91% 3.63% 5.69% 6.88% 4.71%
Portfolio turnover 244% 410% 170% 74% 95%
|
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.10%,
2.16%, 2.35%, 3.08% and 5.67% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.41%,
2.50%, 2.78%, 4.08% and 9.50% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(5) 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.
(6) The ratio of operating expenses to average net assets includes the effect of
expense offset for custodian fees; if expense offsets were excluded, the
ratio would have been 1.91%.
(7) As required, effective October 1, 2001, the Fund has adopted the provisions
of AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the year ended September 30, 2002, was to decrease the ratio of
net investment income to average net assets from 3.69% to 3.63% for Class B
and Class C; to decrease net investment income (loss) per share from 0.37 to
0.36 per share for Class B and Class C; and, to increase net realized and
unrealized gain (loss) from 0.10 to 0.11 per share from 0.11 to 0.12 per
share for Class B and Class C, respectively. Per share ratios and
supplemental data for prior periods have not been restated to reflect this
change.
36 Phoenix-Seneca Funds
PHOENIX-SENECA EQUITY INCOME FUND
CLASS X
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $12.07 $12.62 $11.89 $9.69 $11.11
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.27 0.49 0.42 0.34 0.47
Net realized and unrealized gain (loss) 3.46 (0.51) 0.69 2.35 (1.20)
------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.73 (0.02) 1.11 2.69 (0.73)
------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.26) (0.53) (0.38) (0.49) (0.44)
Dividends from net realized gains (0.28) -- -- -- (0.25)
------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) (0.53) (0.38) (0.49) (0.69)
------- -------- ------- ------- -------
Change in net asset value 3.19 (0.55) 0.73 2.20 (1.42)
------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $15.26 $12.07 $12.62 $11.89 $9.69
======= ======== ======= ======= =======
Total return 31.60% (0.42)% 9.52% 29.00% (6.66)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $17,754 $17,584 $17,349 $16,713 $17,346
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.61%(6) 1.55%(5) 1.59%(4) 1.79% 1.66%
Net investment income (loss) 2.06% 3.73% 3.49% 3.35% 4.50%
Portfolio turnover 91% 111% 40% 65% 5%
CLASS A
--------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $11.78 $12.32 $11.67 $9.54 $11.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.11 0.32 0.25 0.21 0.32
Net realized and unrealized gain (loss) 3.36 (0.51) 0.67 2.30 (1.19)
------- ------- ------- ------ -------
TOTAL FROM INVESTMENT OPERATIONS 3.47 (0.19) 0.92 2.51 (0.87)
------- ------- ------- ------ -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.12) (0.35) (0.27) (0.38) (0.34)
Dividends from net realized gains (0.25) -- -- -- (0.25)
------- ------- ------- ------ -------
TOTAL DISTRIBUTIONS (0.37) (0.35) (0.27) (0.38) (0.59)
------- ------- ------- ------ -------
Change in net asset value 3.10 (0.54) 0.65 2.13 (1.46)
------- ------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD $14.88 $11.78 $12.32 $11.67 $9.54
======= ======= ======= ======= =======
Total return(2) 29.90% (1.73)% 7.96% 27.40% (7.97)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $2,979 $2,515 $2,410 $1,437 $919
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.92%(5) 2.83%(5) 3.05%(3)(5) 3.05%(3) 3.05%(3)
Net investment income (loss) 0.89% 2.50% 2.11% 2.11% 3.13%
Portfolio turnover 91% 111% 40% 65% 5%
|
(6) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would have been 1.62%.
Phoenix-Seneca Funds 37
PHOENIX-SENECA EQUITY INCOME FUND
CLASS B
------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $11.74 $12.28 $11.66 $9.55 $11.01
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.01) 0.20 0.17 0.12 0.29
Net realized and unrealized gain (loss) 3.36 (0.50) 0.65 2.31 (1.22)
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.35 (0.30) 0.82 2.43 (0.93)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.07) (0.24) (0.20) (0.32) (0.28)
Dividends from net realized gains (0.18) -- -- -- (0.25)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.25) (0.24) (0.20) (0.32) (0.53)
------- ------- ------- ------- -------
Change in net asset value 3.10 (0.54) 0.62 2.11 (1.46)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $14.84 $11.74 $12.28 $11.66 $9.55
======= ======= ======= ======= =======
Total return(2) 28.82% (2.63)% 7.21% 26.37% (8.59)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,117 $987 $554 $287 $197
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 3.80%(6) 3.80%(6) 3.80%(5) 3.80% 3.80%
Net investment income (loss) (0.09) 1.59% 1.43% 1.19% 2.79%
Portfolio turnover 91% 111% 40% 65% 5%
CLASS C
------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $11.75 $12.28 $11.66 $9.55 $11.01
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.02) 0.21 0.16 0.14 0.29
Net realized and unrealized gain (loss) 3.37 (0.50) 0.66 2.29 (1.22)
------- ------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 3.35 (0.29) 0.82 2.43 (0.93)
------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.07) (0.24) (0.20) (0.32) (0.28)
Dividends from net realized gains (0.18) -- -- -- (0.25)
------- ------- -------- ------- -------
TOTAL DISTRIBUTIONS (0.25) (0.24) (0.20) (0.32) (0.53)
------- ------- -------- ------- -------
Change in net asset value 3.10 (0.53) 0.62 2.11 (1.46)
------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $14.85 $11.75 $12.28 $11.66 $9.55
======= ======= ======= ======= =======
Total return(2) 28.80% (2.47)% 7.12% 26.37% (8.58)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,778 $1,175 $525 $329 $200
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 3.80%(6) 3.80%(6) 3.80%(5) 3.80% 3.80%
Net investment income (loss) (0.18)% 1.63% 1.38% 1.36% 2.80%
Portfolio turnover 91% 111% 40% 65% 5%
|
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 5.61%,
6.17%, 9.33%, 15.48% and 18.50% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 4.58%,
6.10%, 9.18%, 13.58% and 19.95% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(5) For the year ended September 30, 2001, the ratio of operating expenses to
average net assets includes the effect of expense offsets for custodian
fees; if expense offsets were excluded, the ratio would have been 3.81%.
(6) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratios would not significantly differ.
38 Phoenix-Seneca Funds
PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND
CLASS X
-----------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- --------- -------- -------- ---------
Net asset value, beginning of period $12.51 $15.70 $31.18 $17.78 $13.81
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (1) (0.11) (0.13) (0.14) (0.19) (0.21)
Net realized and unrealized gain (loss) 2.48 (3.06) (12.91) 15.65 4.72
-------- -------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.37 (3.19) (13.05) 15.46 4.51
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains -- -- (2.43) (2.06) (0.54)
-------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
-------- -------- ------- ------- -------
Change in net asset value 2.37 (3.19) (15.48) 13.40 3.97
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $14.88 $12.51 $15.70 $31.18 $17.78
======== ======== ======= ======= =======
Total return 18.94% (20.32)% (44.25)% 91.81% 33.02%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $18,005 $11,219 $14,198 $23,016 $10,640
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.15%(3)(5) 1.15%(3) 1.15%(3)(5) 1.27%(3) 1.96%
Net investment income (loss) (0.77)% (0.75)% (0.61)% (0.72)% (1.27)%
Portfolio turnover 164% 135% 96% 124% 192%
CLASS A
-----------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $12.25 $15.41 $30.75 $17.60 $13.75
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (1) (0.13) (0.16) (0.19) (0.24) (0.31)
Net realized and unrealized gain (loss) 2.42 (3.00) (12.72) 15.45 4.70
-------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.29 (3.16) (12.91) 15.21 4.39
-------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains -- -- (2.43) (2.06) (0.54)
-------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
-------- ------- ------- ------- -------
Change in net asset value 2.29 (3.16) (15.34) 13.15 3.85
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $14.54 $12.25 $15.41 $30.75 $17.60
======== ======= ======= ======= =======
Total return(2) 18.69% (20.51)% (44.42)% 91.30% 32.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $63,365 $66,384 $66,411 $50,150 $6,457
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.40%(4)(5) 1.40%(4) 1.40%(4)(5) 1.47%(4) 2.51%
Net investment income (loss) (1.01)% (0.99)% (0.86)% (0.91)% (1.81)%
Portfolio turnover 164% 135% 96% 124% 192%
|
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.24%,
1.24%, 1.22% and 1.43% for the periods ended September 30, 2003, 2002, 2001
and 2000, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.55%,
1.46%, 1.40% and 1.59% for the periods ended September 30, 2003, 2002, 2001
and 2000, respectively.
(5) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees, if expense offsets were excluded, the ratio would not significantly differ.
Phoenix-Seneca Funds 39
PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND
CLASS B
------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $11.78 $14.93 $30.09 $17.41 $13.73
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.23) (0.28) (0.34) (0.45) (0.47)
Net realized and unrealized gain (loss) 2.32 (2.87) (12.39) 15.19 4.69
-------- ------- ------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS 2.09 (3.15) (12.73) 14.74 4.22
-------- ------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains -- -- (2.43) (2.06) (0.54)
-------- ------- ------- ------- --------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
-------- ------- ------- ------- --------
Change in net asset value 2.09 (3.15) (15.16) 12.68 3.68
-------- ------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $13.87 $11.78 $14.93 $30.09 $17.41
======== ======= ======= ======= ========
Total return(2) 17.74% (21.10)% (44.83)% 89.49% 31.05%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $24,172 $22,577 $23,519 $15,879 $1,676
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 2.15%(5) 2.15% 2.15%(5) 2.29% 3.45%
Net investment income (loss) (1.76)% (1.74)% (1.61)% (1.73)% (2.78)%
Portfolio turnover 164% 135% 96% 124% 192%
CLASS C
----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value, beginning of period $11.78 $14.93 $30.08 $17.40 $13.72
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.22) (0.28) (0.34) (0.45) (0.47)
Net realized and unrealized gain (loss) 2.32 (2.87) (12.38) 15.19 4.69
-------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 2.10 (3.15) (12.72) 14.74 4.22
-------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- --
Dividends from net realized gains -- -- (2.43) (2.06) (0.54)
-------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
-------- ------- ------- ------- -------
Change in net asset value 2.10 (3.15) (15.15) 12.68 3.68
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $13.88 $11.78 $14.93 $30.08 $17.40
======== ======= ======= ======= =======
Total return(2) 17.83% (21.10)% (44.81)% 89.54% 31.07%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $32,118 $31,317 $30,874 $18,218 $975
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 2.15%(5) 2.15% 2.15%(5) 2.25% 3.45%
Net investment income (loss) (1.76)% (1.74)% (1.61)% (1.68)% (2.78)%
Portfolio turnover 164% 135% 96% 124% 192%
|
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.46%,
2.43%, 2.34%, 2.70% and 6.33% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.26%,
2.21%, 2.20%, 2.65% and 9.03% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(5) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees, if expense offsets were excluded, the
ratio would not significantly differ.
40 Phoenix-Seneca Funds
PHOENIX EQUITY PLANNING CORPORATION
P.O. Box 150480
Hartford, CT 06115-0480
[LOGO] PHOENIX INVESTMENT PARTNERS, LTD.
A member of The Phoenix Companies, Inc.
ADDITIONAL INFORMATION
You can find more information about the funds in the following documents:
ANNUAL AND SEMIANNUAL REPORTS
Annual and semiannual reports contain more information about the funds' investments. The annual report discusses the market conditions and investment strategies that significantly affected the funds' performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information about the funds. It is incorporated by reference and is legally part of the prospectus.
You may obtain a free copy of these documents by writing to Phoenix Equity Planning Corporation, 56 Prospect Street, P.O. Box 150480, Hartford, CT 06115-0480, by calling 1-800-243-4361, or by visiting PhoenixInvestments.com to send an email request.
Information about the funds (including the SAI) can be reviewed and copied at the Securities and Exchange Commission's (SEC) Public Reference Room in Washington, DC. For information about the operation of the Public Reference Room, call 1-202-942-8090. This information is also available on the SEC's Internet site at sec.gov. You may also obtain copies upon payment of a duplicating fee by writing the Public Reference Section of the SEC, Washington, DC 20549-6009 or by electronic request at publicinfo@sec.gov.
Mutual Fund Services: 1-800-243-1574
Advisor Consulting Group: 1-800-243-4361
Text Telephone: 1-800-243-1926
Investment Company Act File No. 811-7455 PXP 2069 (1/04)
PHOENIX-SENECA FUNDS
Phoenix-Seneca Bond Fund
Phoenix-Seneca Equity Income Fund
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
STATEMENT OF ADDITIONAL INFORMATION
January 29, 2004
This Statement of Additional Information is not a prospectus, but expands upon and supplements the information contained in the current prospectus of the Phoenix-Seneca Funds (the "Trust"), dated January 29, 2004, and should be read in conjunction with it. Additionally, the Statement of Additional Information incorporates by reference certain information that appears in the funds' annual and semiannual reports, which are delivered to all investors. You may obtain a free copy of the funds' Prospectus, annual or semiannual reports by calling Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or by writing Equity Planning at 56 Prospect Street, P.O. Box 150480, Hartford, CT 06115-0480.
TABLE OF CONTENTS
PAGE
The Trust ................................................................ 1 Investment Restrictions .................................................. 1 Investment Techniques and Risks .......................................... 2 Performance Information................................................... 13 Portfolio Turnover ....................................................... 15 Portfolio Brokerage ...................................................... 16 Services of the Adviser................................................... 17 Net Asset Value .......................................................... 20 How To Buy Shares ........................................................ 21 Alternative Purchase Arrangements ........................................ 21 Investor Account Services ................................................ 24 How To Redeem Shares ..................................................... 25 Tax Sheltered Retirement Plans ........................................... 26 Dividends, Distributions and Taxes ....................................... 27 The Distributor .......................................................... 29 Distribution Plans ....................................................... 31 Management of the Trust .................................................. 32 Additional Information ................................................... 38 Appendix ................................................................. 40 Glossary ................................................................. 41 |
Mutual Fund Services: (800) 243-1574 Adviser Consulting Group: (800) 243-4361 Telephone Orders: (800) 367-5877 Text Telephone - (800) 243-1926
PXP 2069B (1/04)
THE TRUST
The Trust is an open-end management company which was organized under Delaware law in 1995 as a business trust. The Trust consists of three separate Funds: the Phoenix-Seneca Bond Fund ("Bond Fund"); the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund ("Mid-Cap "EDGE" Fund"); and the Phoenix-Seneca Equity Income Fund ("Equity Income Fund"), (each a "Fund" and collectively, the "Funds"). Each Fund offers four classes of shares: Class X Shares, Class A Shares, Class B Shares and Class C Shares. Class X Shares are offered to institutional investors, such as pension and profit sharing plans, employee benefit trusts, endowments, foundations, and corporations, and others who purchase in certain minimum amounts. The three additional classes of shares may be purchased at a price equal to their net asset value per share, plus a sales charge which, at the election of the purchaser, may be imposed (i) at the time of purchase (Class A Shares) or (ii) on a contingent deferred basis (Class B Shares and Class C Shares).
The Trust (formerly called the "Seneca Funds") was renamed the Phoenix-Seneca Funds in connection with the effectiveness of new investment advisory agreements with Phoenix Investment Counsel, Inc. ("PIC") and Seneca Capital Management LLC ("Seneca"). At the same time, the Seneca Bond Fund was renamed the Phoenix-Seneca Bond Fund, the Seneca Mid-Cap "EDGE"(SM) Fund was renamed the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and the Seneca Real Estate Securities Fund was renamed the Phoenix-Seneca Real Estate Securities Fund (subsequently renamed Phoenix-Seneca Equity Income Fund).
The Fund's Prospectus describes the investment objectives of the Fund and the strategies that the Fund will employ in seeking to achieve its investment objective. The Fund's investment objective is a fundamental policy of the Fund and may not be changed without the vote of a majority of the outstanding voting securities of the Fund. The following discussion supplements the disclosure in the Prospectus.
INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted by the Trust with respect to each of the Funds. Except as otherwise stated, these investment restrictions are "fundamental" policies. A "fundamental" policy is defined in the 1940 Act to mean that the restriction cannot be changed without the vote of a "majority of the outstanding voting securities" of the Fund. A majority of the outstanding voting securities is defined in the 1940 Act as the lesser of (a) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities are present or represented by proxy, or (b) more than 50% of the outstanding voting securities.
With respect to the Bond Fund and Mid-Cap "EDGE" Fund, each Fund may not:
(1) With respect to 75% of its total assets, purchase securities of an issuer (other than the U.S. Government, its agencies, instrumentalities or authorities or repurchase agreements collateralized by U.S. Government securities and other investment companies), if: (a) such purchase would, at the time, cause more than 5% of the Fund's total assets taken at market value to be invested in the securities of such issuer; or (b) such purchase would, at the time, result in more than 10% of the outstanding voting securities of such issuer being held by the Fund.
(2) Purchase securities if, after giving effect to the purchase, more than 25% of its total assets would be invested in the securities of one or more issuers conducting their principal business activities in the same industry (excluding the U.S. Government or its agencies or instrumentalities).
With respect to all of the Funds, each Fund may not:
(3) Borrow money, except (i) in amounts not to exceed one third of the value of the Fund's total assets (including the amount borrowed) from banks, and (ii) up to an additional 5% of its total assets from banks or other lenders for temporary purposes. For purposes of this restriction, (a) investment techniques such as margin purchases, short sales, forward commitments, and roll transactions, (b) investments in instruments such as futures contracts, swaps, and options and (c) short-term credits extended in connection with trade clearance and settlement, shall not constitute borrowing.
(4) Issue "senior securities" in contravention of the 1940 Act. Activities permitted by SEC exemptive orders or staff interpretations shall not be deemed to be prohibited by this restriction.
(5) Underwrite the securities issued by other persons, except to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed to be an underwriter under applicable law.
(6) Purchase or sell real estate, except that the Fund may (i) acquire or lease office space for its own use, (ii) invest in securities of issuers that invest in real estate or interests therein, (iii) invest in mortgage-related securities and other securities that are secured by real estate or interests therein, (iv) hold and sell real estate acquired by the Fund as a result of the ownership of securities.
(7) Purchase or sell commodities or commodity contracts, except the Fund may purchase and sell derivatives (including, but not limited to, options, futures contracts and options on futures contracts) whose value is tied to the value of a financial index or a
financial instrument or other asset (including, but not limited to, securities indexes, interest rates, securities, currencies and physical commodities).
(8) Make loans, except that the Fund may (i) lend portfolio securities, (ii) enter into repurchase agreements, (iii) purchase all or a portion of an issue of debt securities, bank loan participation interests, bank certificates of deposit, bankers' acceptances, debentures or other securities, whether or not the purchase is made upon the original issuance of the securities and (iv) participate in an interfund lending program with other registered investment companies.
If any percentage restriction described above for the Fund is adhered to at the time of investment, a subsequent increase or decrease in the percentage resulting from a change in the value of the Fund's assets will not constitute a violation of the restriction.
INVESTMENT TECHNIQUES AND RISKS
The Funds may each utilize the following investment techniques in pursuing its investment objectives.
CORPORATE DEBT SECURITIES
A Fund's investments in debt securities of domestic or foreign corporate issuers are limited to bonds, debentures, notes and other similar corporate debt instruments, including convertible securities that meet the Fund's minimum ratings criteria or if unrated are, in the Subadviser's opinion, comparable in quality to corporate debt securities that meet those criteria. The rate of return or return of principal on some debt obligations may be linked or indexed to the level of exchange rates between the U.S. Dollar and a foreign currency or currencies or to the value of commodities, such as gold.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note, or other security that entitles the holder to acquire common stock or other equity securities of the same or a different issuer. It generally entitles the holder to receive interest paid or accrued until the security matures or is redeemed, converted, or exchanged. Before conversion, convertible securities have characteristics similar to nonconvertible debt securities. Convertible securities rank senior to common stock in a corporation's capital structure and, therefore, generally entail less risk than the corporation's common stock, although the extent to which this is true depends in large measure on the degree to which the convertible security sells above its value as a fixed-income security.
A convertible security may be subject to redemption or conversion at the option of the issuer at a predetermined price. If a convertible security held by a Fund is called for redemption, the Fund could be required to permit the issuer to redeem the security and convert it to the underlying common stock. The Bond Fund generally would invest in convertible securities for their favorable price characteristics and total return potential and would normally not exercise an option to convert. The Mid-Cap "EDGE"(SM) Fund might be more willing to convert such securities to common stock.
HIGH YIELD-HIGH RISK SECURITIES. Investments in below-investment grade securities (see Appendix for an explanation of the various ratings) generally provide greater income (leading to the name "high-yield" securities) and opportunity for capital appreciation than investments in higher quality securities, but they also typically entail greater price volatility and principal and income risk. These securities are regarded as predominantly speculative as to the issuer's continuing ability to meet principal and interest payment obligations. The markets for these securities are relatively new and many of the outstanding high-yield securities have not endured a major business recession. A long-term track record on default rates, such as that for investment-grade corporate bonds, does not exist for these securities. Analysis of the creditworthiness of issuers of lower-quality debt securities may be more complex than for issuers of higher-quality debt securities.
High-yield securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment-grade securities. The prices of high-yield securities have been found to be less sensitive to interest-rate changes than higher-quality investments, but more sensitive to adverse economic developments or individual corporate developments. A projection of an economic downturn or of a period of rising interests rates, for example, could cause a decline in high-yield securities prices because the advent of a recession could lessen the ability of a highly-leveraged company to make principal and interest payments. If an issuer of high-yield securities defaults, in addition to risking payment of all or a portion of interest and principal, the Funds may incur additional expenses to seek recovery. Market prices of high-yield securities structured as zero-coupon or pay-in-kind securities are affected to a greater extent by interest rate changes, and therefore tend to be more volatile than securities that pay interest periodically and in cash.
The secondary market on which high-yield securities are traded may be less liquid than the market for higher-grade securities. Less liquidity could adversely affect the price at which a Fund could sell a high-yield security and could adversely affect the daily net asset value of the Fund's shares. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high-yield securities, especially in a thinly-traded market. When secondary markets for these securities are less liquid than the market for higher-grade securities, it may be more difficult to value the high-yield securities because the valuation may require more research and judgment may play a greater role in valuation because of the lack of reliable, objective data.
DELAYED-DELIVERY TRANSACTIONS
Each Fund may purchase securities on a when-issued or forward commitment basis. These transactions are also know as delayed-delivery transactions. (The phrase "delayed delivery" is not intended to include purchases where a delay in delivery involves only a brief period required by the selling party solely to locate appropriate certificates and prepare them for submission for clearance and settlement in the customary way.) Delayed-delivery transactions involve a commitment by a Fund to purchase or sell securities at a future date (ordinarily up to 90 days later). The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitments are negotiated directly with the selling party.
When-issued purchases and forward commitments enable a Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. For example, in periods of rising interest rates and falling bond prices, a Fund might sell debt securities it owns on a forward commitment basis to limit its exposure to falling prices. In periods of falling interest rates and rising prices, a Fund might sell securities it owns and purchase the same or similar securities on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher yields. A Fund will not enter into such transactions for the purpose of leverage.
The value of securities purchased on a when-issued or forward commitment basis and any subsequent fluctuations in their value will be reflected in the Fund's net asset value starting on the date of the agreement to purchase the securities, and the Fund will be subject to the rights and risks of ownership of the securities on that date. A Fund will not earn interest on securities it has committed to purchase until they are paid for and received.
When a Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement will be included in the Fund's assets. Fluctuations in the market value of the underlying securities will not be reflected in the Fund's net asset value as long as the commitment to sell remains in effect. Settlement of when-issued purchases and forward commitment transactions generally takes place up to 90 days after the date of the transaction, but a Fund may agree to a longer settlement period.
A Fund will make commitments to purchase securities on a when-issued basis or to purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, a Fund may dispose of or renegotiate a commitment after it is entered into. A Fund also may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Fund may realize a capital gain or loss in connection with these transactions.
When a Fund purchases securities on a when-issued or forward-commitment basis, the custodian will maintain in a segregated account securities having a value (determined daily) at least equal to the amount of the Fund's purchase commitments. These procedures are designed to ensure that each Fund will maintain sufficient assets at all times to cover its obligations under when- issued purchases and forward commitments.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS
The Funds may enter into interest rate, foreign currency and index futures contracts and purchase and sell options on such futures contracts ("futures options"). Each Fund may purchase and sell futures contracts for hedging purposes and in an attempt to increase total return. A futures contract is an agreement between two parties to buy and sell a security for a set price at a future time. Each Fund may also enter into index-based futures contracts and interest rate futures contracts. Futures contracts on indices provide for a final cash settlement on the expiration date based on changes in the relevant index. All futures contracts are traded on designated "contract markets" licensed and regulated by the Commodity Futures Trading Commission (the "CFTC") which, through their clearing corporations, guarantee performance of the contracts.
Generally, while market interest rates increase, the value of outstanding debt securities declines (and vice versa). If a Fund holds long-term debt securities and the Subadviser anticipates a rise in long-term interest rates, it could, in lieu of disposing of its portfolio securities, enter into futures contracts for the sale of similar long-term securities. If rates increased and the value of a Fund's portfolio securities declined, the value of that Fund's futures contract would increase, thereby preventing net asset value from declining as much as it otherwise would have. If the Subadviser expects long-term interest rates to decline, a Fund might enter into futures contracts for the purchase of long-term securities, so that it could offset anticipated increases in the cost of such securities it intends to purchase while continuing to hold higher-yielding short-term securities or waiting or the long-term market to stabilize. Similar techniques may be used by the Funds to hedge stock market risk.
Each Fund also may purchase and sell listed put and call options on futures contracts. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put), at a specified exercise price at any time during the option period. When an option on a futures contract is exercised, settlement is effected by the payment of cash representing the difference between the current market price of the futures contract and the exercise price of the option. The risk of loss to a Fund purchasing an option on a futures contract is limited to the premium paid for the option.
A Fund may purchase put options on futures contracts in lieu of, and for the same purpose as, its sale of a futures contract: to hedge a long position in the underlying futures contract. The purchase of call options on futures contracts is intended to serve the same purpose as the actual purchase of the futures contract.
A Fund would write a call option on a futures contract in order to hedge against a decline in the prices of the securities underlying the futures contracts. If the price of the futures contract at expiration is below the exercise price, the applicable Fund would retain the option premium, which would offset, in part, any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the purchase of the futures contract, except that, if market price declines, a Fund would pay more than the market price for the underlying securities. The net cost to a Fund will be reduced, however, by the premium received on the sale of the put, less any transaction costs.
Each Fund may engage in "straddle" transactions, which involve the purchase or sale of combinations of call and put options on the same underlying securities or futures contracts.
In purchasing and selling futures contracts and related options, each Fund intends to comply with rules and interpretations of the CFTC and of the SEC.
LIMITATIONS ON FINANCIAL FUTURES AND RELATED OPTIONS. Each Fund will engage in futures and related options transactions only for bona fide hedging purposes in accordance with CFTC regulations or in an attempt to increase total return to the extent permitted by such regulations. In hedging transactions, a Fund will seek to invest in futures contracts and futures options the prices of which are substantially related to price fluctuations in securities held by the Fund or which it expects to purchase. Except as stated below, a Fund's futures transactions will be entered into for traditional hedging purposes--that is, futures contracts will be sold to protect against a decline in the price of securities that the Fund owns, or futures contracts will be purchased to protect the Fund against an increase in the price of securities it intends to purchase. As evidence of this hedging intent, the Fund expects that on 75% or more of the occasions on which it takes a long futures (or option) position (involving the purchase of futures contracts), a Fund will have purchased, or will be in the process of purchasing, equivalent amounts of related securities in the cash market at the time when the futures (or option) position is closed out. However, in particular cases, when it is economically advantageous for a Fund to do so, a long futures position may be terminated (or an option may expire) without the corresponding purchase of securities. As an alternative to compliance with the bona fide hedging definition, a CFTC regulation permits a Fund to elect to comply with a different test, under which the sum of the amounts of initial margin deposits and premiums on its futures positions entered into for the purpose of seeking to increase total return (net of the amount the positions were "in the money" at the time of purchase) would not exceed 5% of that Fund's net assets, after taking into account unrealized gains and losses on such positions. A Fund will engage in transactions in futures contracts and related options only to the extent such transactions are consistent with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification as a regulated investment company for Federal income tax purposes (see "Dividends, Distributions, and Tax Status").
A Fund will be required, in connection with transactions in futures contracts and the writing of options on futures contracts, to make margin deposits, which will be held by the Fund's custodian (or a subcustodian) for the benefit of the merchant through whom a Fund engages in such futures and options transactions. In the case of futures contracts or options thereon requiring the Fund to purchase securities, the Fund must segregate liquid assets in an account maintained by the Custodian to cover such contracts and options that is marked to market daily.
FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES
The Funds may invest in foreign currency exchange-related securities.
FOREIGN CURRENCY WARRANTS. Foreign currency warrants such as Currency Exchange Warrants ("CEWs") are warrants that entitle the holder to receive from the issuer an amount of cash (generally, for warrants issued in the United States, in U.S. dollars) that is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time. Foreign currency warrants have been issued in connection with U.S. dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk that, from the point of view of prospective purchasers of the securities, is inherent in the international fixed-income marketplace. Foreign currency warrants may be used to reduce the foreign exchange risk assumed by purchasers of a security by, for example, providing for a supplemental payment in the event the U.S. dollar depreciates against the value of a major foreign currency such as the Japanese yen or German deutschemark. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (e.g., unless the U.S. dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges. Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. Upon exercise of warrants, there may be a delay between the time the holder gives instructions to exercise and the time the exchange rate relating to exercise is determined, thereby affecting both the market and
cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining "time value" of the warrants (i.e., the difference between the current market value and the exercise value of the warrants), and, if the warrants were "out-of-the-money," in a total loss of the purchase price of the warrants. Warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the OCC. Unlike foreign currency options issued by OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to significant foreign exchange risk, including risks arising from complex political or economic factors.
PRINCIPAL EXCHANGE RATE LINKED SECURITIES. Principal exchange rate linked securities (or "PERLS") are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. dollar and a particular foreign currency at or about that time. The return on "standard" principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. dollar, and is adversely affected by increases in the foreign exchange value of the U.S. dollar; "reverse" PERLS are like the "standard" securities, except that their return is enhanced by increases in the value of the U.S. dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. dollars at rates that reflect the degree of foreign currency risk assumed or given up by the purchaser of the notes (i.e., at relatively higher interest rates if the purchaser has assumed some of the foreign exchange risk, or relatively lower interest rates if the issuer has assumed some of the foreign exchange risk, based on the expectations of the current market). PERLS may in limited cases be subject to acceleration of maturity (generally, not without the consent of the holders of the securities), which may have an adverse impact on the value of the principal payment to be made at maturity.
PERFORMANCE INDEXED PAPER. Performance indexed paper (or "PIPs") is U.S. dollar-denominated commercial paper the yield of which is linked to certain foreign exchange rate movements. The yield to the investor on performance indexed paper is established at maturity as a function of spot exchange rates between the U.S. dollar and a designated currency as of or about that time (generally, the index maturity two days prior to maturity). The yield to the investor will be within a range stipulated at the time of purchase of the obligation, generally with a guaranteed minimum rate of return that is below, and a potential maximum rate of return that is above, market yields on U.S. dollar-denominated commercial paper, with both the minimum and maximum rates of return on the investment corresponding to the minimum and maximum values of the spot exchange rate two business days prior to maturity.
FOREIGN SECURITIES
Each of the Funds may invest in U.S. dollar- or foreign currency-denominated corporate debt securities of foreign issuers (including preferred or preference stock), certain foreign bank obligations and U.S. dollar- or foreign currency-denominated obligations of foreign governments or their subdivisions, agencies and instrumentalities, international agencies and supranational entities.
Investing in the securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies. These include differences in accounting, auditing and financial reporting standards, generally higher commission rates on foreign portfolio transactions, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations (which may include suspension of the ability to transfer currency from a country), political instability which may affect U.S. investments in foreign countries and potential restrictions on the flow of international capital. In addition, foreign securities and dividends and interest payable on those securities may be subject to foreign taxes, including taxes withheld from payments on those securities. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Changes in foreign exchange rates will affect the value of those securities which are denominated or quoted in currencies other than the U.S. dollar.
ADRs are dollar-denominated receipts issued generally by domestic banks and representing the deposit with the bank of a security of a foreign issuer, and are publicly traded on exchanges or over-the-counter in the United States. ADRs may be issued as sponsored or unsponsored programs. In sponsored programs, an issuer has made arrangements to have its securities trade in the form of ADRs. In unsponsored programs, the issuer may not be directly involved in the creation of the program. Although regulatory requirements with respect to sponsored and unsponsored programs are generally similar, in some cases it may be easier to obtain financial information from an issuer that has participated in the creation of a sponsored program.
Each of the Funds also may purchase and sell foreign currency options and foreign currency futures contracts and related options and enter into forward foreign currency exchange contracts in order to protect against uncertainty in the level of future foreign exchange rates in the purchase and sale of securities. The Funds may also use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.
A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts may be bought or sold to protect a Fund against a possible loss resulting from an adverse change in the relationship between foreign currencies and the U.S. dollar or to increase exposure to a particular foreign currency. Open positions in such forward contracts are covered by the segregation with the Trust's custodian of high quality short-term investments and are marked to market daily. Although such contracts are intended to minimize the risk of loss due to a decline in the value of the currencies being hedged against, at the same time, they tend to limit any potential gain which might result should the value of such currencies increase.
ILLIQUID AND RESTRICTED SECURITIES
Each Fund may invest in "illiquid investments," including "restricted securities" (i.e., securities that would be required to be registered prior to distribution to the public), securities that are not readily marketable, repurchase agreements maturing in more than seven days and privately issued stripped mortgage-backed securities.
Certain "restricted" securities may be resold to qualified institutional buyers without restriction pursuant to Rule 144A under the Securities Act of 1933. If a sufficient dealer or institutional trading market exists for such a security, it may not be considered "illiquid." The Trustees have adopted guidelines and delegated to the Subadviser the daily function of determining and monitoring the liquidity of restricted securities and determining whether a Rule 144A security restricted security should be considered "illiquid." The Trustees, however, retain oversight and are ultimately responsible for the determinations. Please see the non-fundamental investment restrictions for further limitations regarding the Funds' investments in restricted and illiquid securities.
LENDING PORTFOLIO SECURITIES
Each Fund may seek to increase its income by lending portfolio securities. Under present regulatory policies, such loans may be made to financial institutions, such as broker-dealers, and must be collateralized continuously with cash, cash equivalents, irrevocable letters of credit, or U.S. Government securities maintained on a current basis at an amount at least equal to the market value of the securities lent. For the duration of a loan, the Fund would receive the equivalent of the interest or dividends paid by the issuer on the securities lent and would also receive compensation from the investment of the collateral. The Fund would not have the right to vote any securities having voting rights during the existence of the loan, but the Fund could call the loan in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of their consent on a material matter affecting the investment. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. However, the loans would be made only to firms considered by the Subadviser to be qualified, and when, in the judgment of the Subadviser, the consideration that can be earned currently from securities loans of this type justifies the attendant risk. The value of the securities lent may not exceed one-third of the value of the total assets of the Fund.
A Fund may pay reasonable negotiated fees to the Custodian in connection with loaned securities as long as such fees are pursuant to a contract approved by the Trustees.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES
The Funds may each invest in mortgage-related and other asset-backed securities.
MORTGAGE PASS-THROUGH SECURITIES. These are interests in pools of mortgage loans, assembled and issued by various governmental, government-related, and private organizations. Unlike other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates, these securities provide a monthly payment consisting of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their residential or commercial mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs. "Modified pass-through" securities (such as securities issued by the Government National Mortgage Association ("GNMA")) entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payment dates regardless of whether or not the mortgagor actually makes the payment.
The principal governmental guarantor of mortgage-related securities is GNMA. GNMA is a wholly owned United States Government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of Federal Housing Administration insured or Veterans Administration guaranteed mortgages.
Government-related guarantors whose obligations are not backed by the full faith and credit of the United States Government include the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. FHLMC is a government-sponsored corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by private stockholders. FHLMC issues Participation Certificates ("PCs") that represent interests in conventional mortgages from FHLMC's national portfolio. FNMA and FHLMC guarantee the timely payment of interest and ultimate collection of principal on securities they issue, but their guarantees are not backed by the full faith and credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments for such securities. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Fund's investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. Funds may buy mortgage-related securities without insurance or guarantees if, through an examination of the loan experience and practices of the originator/servicers and poolers, the Subadviser determines that the securities meet the Funds' quality standards. Securities issued by certain private organizations may not be readily marketable.
Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Funds'
industry concentration restrictions, set forth below under "Investment
Restrictions," by virtue of the exclusion from the test available to all U.S.
Government securities. The Funds will take the position that privately-issued
mortgage-related securities do not represent interests in any particular
"industry" or group of industries. The assets underlying such securities may be
represented by a portfolio of first lien residential mortgages (including both
whole mortgage loans and mortgage participation interests) or portfolios of
mortgage pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC.
Mortgage loans underlying a mortgage-related security may in turn be insured or
guaranteed by the Federal Housing Administration or the Department of Veterans
Affairs. In the case of private issue mortgage-related securities whose
underlying assets are neither U.S. Government securities nor U.S.
Government-insured mortgages, to the extent that real properties securing such
assets may be located in the same geographical region, the security may be
subject to a greater risk of default than other comparable securities in the
event of adverse economic, political or business developments that may affect
such region and, ultimately, the ability of residential homeowners to make
payments of principal and interest on the underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs). A CMO is similar to a bond in that interest and prepaid principal is paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage loans or by portfolios of mortgage pass-through securities guaranteed by entities such as GNMA, FHLMC, or FNMA, and their income streams.
CMOs are typically structured in multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes typically receive principal only after the first class has been retired. An investor may be partially guarded against a sooner than desired return of principal because of the sequential payments.
FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates and are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are made semiannually rather than monthly. The amount of principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule. Sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payments of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking-fund payments. Because of the "pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date. If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds.
CMO RESIDUALS. CMO residuals are derivative mortgage securities issued by agencies or instrumentalities of the U.S. Government or by private originators of, or investors in, mortgage loans. As described above, the cash flow generated by the mortgage assets underlying a series of CMOs is applied first to make required payments of principal and interest on the CMOs and second to pay the related administrative expenses of the issuer. The "residual" in a CMO structure generally represents the interest
in any excess cash flow remaining after making the foregoing payments. Each payment of such excess cash flow to a holder of the related CMO residual represents income and/or a return of capital. The amount of residual cash flow resulting from a CMO will depend on, among other things, the characteristics of the mortgage assets, the coupon rate of each class of CMO, prevailing interest rates, the amount of administrative expenses and, in particular, the prepayment experience on the mortgage assets. In addition, if a series of a CMO includes a class that bears interest at an adjustable rate, the yield to maturity on the related CMO residual will also be extremely sensitive to changes in the level of the index upon which interest rate adjustments are based. As described below with respect to stripped mortgage-backed securities, in certain circumstances a Fund may fail to recoup fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers. The CMO residual market has only very recently developed and CMO residuals currently may not have the liquidity of other more established securities trading in other markets. CMO residuals may be subject to certain restrictions on transferability, may be deemed "illiquid," and may be subject to a Fund's limitations on investment in illiquid securities.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage securities. They may be issued by agencies or instrumentalities of the U.S. Government, or by private originators of, or investors in, mortgage loans. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class security is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund's yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may fail to recoup fully its initial investment in these securities even if the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be deemed "illiquid" and subject to a Fund's limitations on investment in illiquid securities.
A Fund may invest in other mortgage-related securities with features similar to those described above, to the extent consistent with the Fund's investment objectives and policies.
OTHER ASSET-BACKED SECURITIES. Through trusts and other special purpose entities, various types of securities based on financial assets other than mortgage loans are increasingly available, in both pass-through structures similar to mortgage pass-through securities described above and in other structures more like CMOs. As with mortgage-related securities, these asset-backed securities are often backed by a pool of financial assets representing the obligations of a number of different parties. They often include credit- enhancement features similar to mortgage-related securities.
Financial assets on which these securities are based include automobile receivables; credit card receivables; loans to finance boats, recreational vehicles, and mobile homes; computer, copier, railcar, and medical equipment leases; and trade, healthcare, and franchise receivables. In general, the obligations supporting these asset-backed securities are of shorter maturities than mortgage loans and are less likely to experience substantial prepayments. However, obligations such as credit card receivables are generally unsecured and the obligors are often entitled to protection under a number of state and federal consumer credit laws granting, among other things, rights to set off certain amounts owed on the credit cards, thus reducing the balance due. Other obligations that are secured, such as automobile receivables, may present issuers with difficulties in perfecting and executing on the security interests, particularly where the issuer allows the servicers of the receivables to retain possession of the underlying obligations, thus increasing the risk that recoveries on defaulted obligations may not be adequate to support payments on the securities.
The Subadviser expects additional assets will be "securitized" in the future. A Fund may invest in any such instruments or variations on them to the extent consistent with the Fund's investment objectives and policies.
OPTIONS
The Funds may purchase and sell (write) both put options and call options on securities, securities indexes, and foreign currencies. The purpose of writing covered put and call options generally is to hedge against fluctuations in the market value of a Fund's portfolio securities. Each Fund may purchase or sell call and put options on securities indices for a similar purpose. Such a hedge is limited to the degree that the extent of the price change of the underlying security is less than the difference between the option premium received by the Fund and the option strike price. To the extent the underlying security's price change exceeds this amount, written put and call options will not provide an effective hedge.
WRITING CALL OPTIONS. Each Fund may write (sell) covered call options on securities ("calls") when the Subadviser considers such sales appropriate. When a Fund writes a call, it receives a premium and grants the purchaser the right to buy the underlying security at any time during the call period (usually between three and nine months) at a fixed exercise price regardless of market
price changes during the call period. If the call is exercised, the Fund forgoes any gain but is not subject to any loss on any change in the market price of the underlying security relative to the exercise price. A Fund will write such options subject to any applicable limitations or restrictions imposed by law.
A written call option is covered if the Fund owns the security underlying the option. A written call option may also be covered by purchasing an offsetting option or any other option which, by virtue of its exercise price or otherwise, reduces the Fund's net exposure on its written option position. In addition, the Fund may cover such options with any assets, including equity securities and non-investment grade debt so long as the assets are liquid, unencumbered and marked to market daily ("liquid assets"), in a segregated account in amounts sufficient to ensure that it is able to meet its obligations under the written call should it be exercised. This method does not reduce the potential loss to the Fund should the value of the underlying security increase and the option be exercised.
PURCHASING CALL OPTIONS. Each Fund may purchase a call option when the
Subadviser believes the value of the underlying security will rise or to effect
a "closing purchase transaction" as to a call option the Fund has written
(sold). A Fund will realize a profit (or loss) from a closing purchase
transaction if the amount paid to purchase a call is less (or more) than the
amount received from the sale thereof.
WRITING PUT OPTIONS. A put option written by a Fund obligates the Fund to purchase the specified security at a specified price if the option is exercised at any time before the expiration date. A written put option may be covered with liquid assets in a segregated account. While this may help ensure that a Fund will have sufficient assets to meet its obligations under the option contract should it be exercised, it will not reduce the potential loss to the Fund should the value of the underlying security decrease and the option be exercised.
PURCHASING PUT OPTIONS. A Fund may purchase a put option when the Subadviser believes the value of the underlying security will decline. A Fund may purchase put options on securities in its portfolio in order to hedge against a decline in the value of such securities ("protective puts") or to effect closing purchase transactions as to puts it has written. A Fund will realize a profit (or loss) from a closing purchase transaction if the amount paid to purchase a put is less (or more) than the amount received from the sale thereof.
OPTIONS ON SECURITIES INDICES. Unlike a stock option, which gives the holder the right to purchase or sell a specified stock at a specified price, an option on a securities index gives the holder the right to receive a cash "exercise settlement amount" equal to (i) the difference between the exercise price of the option and the value of the underlying securities index on the exercise date multiplied by (ii) a fixed "index multiplier." Like an option on a specific security, when a Fund purchases a put or a call option on an index, it places the entire amount of the premium paid at risk, for if, at the expiration date, the value of the index has decreased below the exercise price (in the case of a call) or increased above the exercise price (in the case of a put), the option will expire worthless.
A securities index fluctuates with changes in the market values of the stocks included in the index. For example, some securities index options are based on a broad market index such as the S&P 500 Index. Others are based on a narrower market index such as the Standard & Poor's 100 Stock Index. Indices may also be based on an industry or market segment such as the AMEX Oil and Gas Index or the Computer and Business Equipment Index. Options on securities indices are currently traded on the Chicago Board Options Exchange, the New York Stock Exchange ("NYSE") and the American Stock Exchange.
Funds may purchase put options on securities indices to hedge against an anticipated decline in stock market prices that might adversely affect the value of a Fund's portfolio securities. If a Fund purchases such a put option, the amount of the payment it would receive upon exercising the option would depend on the extent of any decline in the level of the securities index below the exercise price. Such payments would tend to offset a decline in the value of the Fund's portfolio securities. However, if the level of the securities index increases and remains above the exercise price while the put option is outstanding, a Fund will not be able to profitably exercise the option and will lose the amount of the premium and any transaction costs. Such loss may be partially or wholly offset by an increase in the value of a Fund's portfolio securities.
A Fund may purchase call options on securities indices in order to participate in an anticipated increase in stock market prices or to offset anticipated price increases on securities that it intends to buy in the future. If a Fund purchases a call option on a securities index, the amount of the payment it would receive upon exercising the option would depend on the extent of any increase in the level of the securities index above the exercise price. Such payments would in effect allow the Fund to benefit from stock market appreciation even though it may not have had sufficient cash to purchase the underlying stocks. Such payments may also offset increases in the prices of stocks that the Fund intends to purchase. If, however, the level of the securities index declines and remains below the exercise price while the call option is outstanding, a Fund will not be able to exercise the option profitably and will lose the amount of the premium and transaction costs. Such loss may be partially or wholly offset by a reduction in the price a Fund pays to buy additional securities for its portfolio.
Each of the Funds may write (sell) covered call or put options on a securities index. Such options may be covered by purchasing an offsetting option which, by virtue of its exercise price or otherwise, reduces the Fund's net exposure on its written option position or by owning securities whose price changes are expected to be similar to those of the underlying index or by having an absolute and immediate right to acquire such securities without additional cash consideration or for additional cash consideration (held in a
segregated account by its custodian) upon conversion or exchange of other securities in their respective portfolios. In addition, the Fund may cover such options by maintaining liquid assets with a value equal to the exercise price in a segregated account with the Custodian or by using the other methods described above.
The extent to which options on securities indices will provide a Fund with an effective hedge against interest rate or stock market risk will depend on the extent to which the stocks comprising the indices correlate with the composition of the Fund's portfolio. Moreover, the ability to hedge effectively depends upon the ability to predict movements in interest rates or the stock market. Some options on securities indices may not have a broad and liquid secondary market, in which case options purchased by the Fund may not be closed out and the Fund could lose more than its option premium when the option expires.
The purchase and sale of option contracts is a highly specialized activity that involves investment techniques and risks different from those ordinarily associated with investment companies. Transaction costs relating to options transactions may tend to be higher than the costs of transactions in securities. In addition, if a Fund were to write a substantial number of option contracts that are exercised, the portfolio turnover rate of that Fund could increase.
FOREIGN CURRENCY OPTIONS. A Fund may buy or sell put and call options on foreign currencies either on exchanges or in the over-the-counter market. A call option on a foreign currency gives the purchaser of the option the right to buy a foreign currency at the exercise price until the option expires. A put option gives the option-holder a similar right to sell the underlying currency. Currency options traded on U.S. or other exchanges may be subject to position limits which may limit the ability of a Fund to reduce foreign currency risk using such options. Over-the-counter options differ from exchange-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.
PARTICIPATION INTERESTS
The Bond Fund may purchase from banks participation interests in all or part of specific holdings of debt obligations. Each participation interest is backed by an irrevocable letter of credit or guarantee of the selling bank that the Subadviser has determined meets the prescribed quality standards of each Fund. Thus, even if the credit of the issuer of the debt obligation does not meet the quality standards of the Fund, the credit of the selling bank will.
REITs AND OTHER REAL ESTATE-RELATED INVESTMENTS
The value of investments in issuers that hold real estate, particularly equity REITs, may be affected by changes in the values of real properties owned by the issuers, and the value of investments in mortgage REITs may also be affected by the quality of the credit they have extended. Investments in businesses related to the real estate industry may also be affected by changes in the value of real estate generally or in particular geographical areas in which the businesses operate primarily. Interest rates can be a significant factor both in real estate values and in related businesses. Increases in interest rates can cause or contribute to declines in real estate prices and can cause or contribute to declines in real estate prices and can cause slowdowns in such related businesses as real estate sales and construction.
Investing in REITs, particularly equity REITs, may also involve risks similar to those associated with small-capitalization companies, in that their securities may trade less frequently and in a lower volume than those of larger-capitalization companies and may be subject to abrupt and large price movements. At times, the market price of a REIT's securities may be less than the value of its investments in real estate. REITs often are not diversified and are therefore subject to the risk of financing a limited number of projects or properties. REITs depend on the skills of their management and are often heavily dependent on cash flow from properties. Mortgage REITs are subject to risks of default by borrowers. Some REITs are "self-liquidating"--i.e., their existence is limited to a specific term--and present the risk of liquidating at a time that is not economically opportune for their investors. REITs also run the risks of failing to qualify for special tax treatment under the Code and of maintaining exemptions under the 1940 Act.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with banks, broker-dealers or other financial institutions in order to generate additional current income. Under a repurchase agreement, a Fund acquires a security from a seller subject to resale to the seller at an agreed upon price and date. The resale price reflects an agreed upon interest rate effective for the time period the security is held by the Fund. The repurchase price may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase price may be the same, with interest payable to the Fund at a stated rate together with the repurchase price on repurchase. In either case, the income to the Fund is unrelated to the interest rate on the security. Typically, repurchase agreements are in effect for one week or less, but may be in effect for longer periods of time. Repurchase agreements of more than one week's duration are subject to each Fund's limitation on investments in illiquid securities.
Repurchase agreements are considered by the Securities and Exchange Commission (the "SEC") to be loans by the purchaser collateralized by the underlying securities. In an attempt to reduce the risk of incurring a loss on a repurchase agreement, the Funds will generally enter into repurchase agreements only with domestic banks with total assets in excess of one billion dollars, primary dealers in U.S. Government securities reporting to the Federal Reserve Bank of New York or broker-dealers approved by the
Trustees of the Trust. The Subadviser will monitor the value of the underlying securities throughout the term of the agreement to attempt to ensure that their market value always equals or exceeds the agreed-upon repurchase price to be paid to a Fund. Each Fund will maintain a segregated account with its custodian, or a subcustodian for the securities and other collateral, if any, acquired under a repurchase agreement for the term of the agreement.
In addition to the risk of the seller's default or a decline in value of the underlying security (see "Investment Practices and Risk Considerations--Repurchase Agreements" in the prospectus), a Fund also might incur disposition costs in connection with liquidating the underlying securities. If the seller becomes insolvent and subject to liquidation or reorganization under the Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by a Fund not within the control of that Fund and therefore subject to sale by the seller's trustee in bankruptcy. Finally, it is possible that a Fund may not be able to perfect its interest in the underlying security and may be deemed an unsecured creditor of the seller.
SHORT SALES
The Funds may sell securities short as part of their overall portfolio management strategies involving the use of derivative instruments and to offset potential declines in long positions in similar securities. A short sale is a transaction in which a Fund sells a security it does not own or have the right to acquire (or that it owns but does not wish to deliver) in anticipation that the market price of that security will decline.
When a Fund makes a short sale, the broker-dealer through which the short sale is made must borrow the security sold short and deliver it to the party purchasing the security. The Fund is required to make a margin deposit in connection with such short sales; the Fund may have to pay a fee to borrow particular securities and will often be obligated to pay over any dividends and accrued interest on borrowed securities.
If the price of the security sold short increases between the time of the short sale and the time the Fund covers its short position, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.
To the extent a Fund sells securities short, it will provide collateral to the broker-dealer and (except in the case of short sales "against the box") will maintain additional asset coverage in the form of liquid assets with its custodian in a segregated account in an amount at least equal to the difference between the current market value of the securities sold short and any amounts required to be deposited as collateral with the selling broker (not including the proceeds of the short sale). A short sale is "against the box" to the extent the Fund contemporaneously owns, or has the right to obtain at no added cost, securities identical to those sold short.
SPECIAL CONSIDERATIONS AND RISKS RELATED TO OPTIONS AND FUTURES TRANSACTIONS
Exchange markets in options on certain securities are a relatively new and untested concept. It is impossible to predict the amount of trading interest that may exist in such options, and there can be no assurance that viable exchange markets will develop or continue.
The exchanges will not continue indefinitely to introduce new expirations to replace expiring options on particular issues because trading interest in many issues of longer duration tends to center on the most recently auctioned issues. The expirations introduced at the commencement of options trading on a particular issue will be allowed to run out, with the possible addition of a limited number of new expirations as the original expirations expire. Options trading on each issue of securities with longer durations will thus be phased out as new options are listed on more recent issues, and a full range of expirations will not ordinarily be available for every issue on which options are traded.
In the event of a shortage of the underlying securities deliverable on exercise of an option, the Options Clearing Corporation ("OCC") has the authority to permit other, generally comparable, securities to be delivered in fulfillment of option exercise obligations. It may also adjust the exercise prices of the affected options by setting different prices at which otherwise ineligible securities may be delivered. As an alternative to permitting such substitute deliveries, the OCC may impose special exercise settlement procedures.
The hours of trading for options on securities may not conform to the hours during which the underlying securities are traded. To the extent the markets for underlying securities close before the options markets, significant price and rate movements can take place in the options markets that cannot be reflected in the underlying markets. In addition, to the extent that the options markets close before the markets for the underlying securities, price and rate movements can take place in the underlying markets that cannot be reflected in the options markets.
Prior to exercise or expiration, an option position can be terminated only by entering into a closing purchase or sale transaction. This requires a secondary market on an exchange for call or put options of the same series. Similarly, positions in futures may be closed out only on an exchange which provides a secondary market for such futures. There can be no assurance that a liquid secondary market will exist for any particular call or put option or futures contract at any specific time. Thus, it may not be possible to close an option or futures position. In the event of adverse price movements, a Fund would continue to be required to make daily
payments of maintenance margin for futures contracts or options on futures contracts position written by that Fund. A Fund may have to sell portfolio securities at a time when it may be disadvantageous to do so if it has insufficient cash to meet the daily maintenance margin requirements. In addition, a Fund may be required to take or make delivery of the instruments underlying futures contracts it holds. The inability to close options and futures positions also could have an adverse impact on a Fund's ability to effectively hedge its portfolios.
Each of the exchanges has established limitations governing the maximum number of call or put options on the same underlying security (whether or not covered) that may be written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one or more brokers). An exchange may order the liquidation of positions found to be in violation of applicable trading limits and it may impose other sanctions or restrictions. The Trust and other clients advised by the Subadviser and its affiliates may be deemed to constitute a group for these purposes. In light of these limits, the Trustees may determine at any time to restrict or terminate the Funds' transactions in options. The Subadviser does not believe that these trading and position limits will have any adverse investment techniques for hedging the Trust's portfolios.
Over-the-counter ("OTC") options are purchased from or sold to securities dealers, financial institutions or other parties ("Counterparties") through direct agreement with the counterparty. In contrast to exchange-listed options, which generally have standardized terms and performance mechanics, all the terms of an OTC option, including such terms as method of settlement, term, exercise price, premium, guarantees and security, are set by negotiation of the parties.
Unless the parties provide for it, there is no central clearing or guaranty function in the OTC option market. As a result, if the counterparty fails to make delivery of the security or other instrument underlying an OTC option it has entered into with a Fund or fails to make a cash settlement payment due in accordance with the terms of that option, the Fund will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Accordingly, the Subadviser must assess the creditworthiness of each such counterparty or any guarantor or credit enhancement of the counterparty's credit to determine the likelihood that the terms of the OTC option will be satisfied. The staff of the SEC currently takes the position that OTC options purchased by a Fund, and portfolio securities "covering" the amount of a Fund's obligation pursuant to an OTC option sold by it (the cost of the sell-back plus the in-the-money amount, if any) are illiquid, and are subject to each Fund's limitation on investing no more than 15% of its assets in illiquid securities. However, for options written with "primary dealers" in U.S. Government securities pursuant to an agreement requiring a closing transaction at a formula price, the amount considered to be illiquid may be calculated by reference to a formula price.
The loss from investing in futures transactions is potentially unlimited. Gains and losses on investments in options and futures depend on the Subadviser's ability to predict correctly the direction of stock prices, interest rates and other economic factors. In addition, utilization of futures in hedging transactions may fail where there is an imperfect correlation in movements in the price of futures contracts and movements in the price of the securities which are the subject of the hedge. If the price of the futures contract moves more or less than the price of the security, a Fund will experience a gain or loss that will not be completely offset by movements in the price of the securities which are the subject of the hedge. There is also a risk of imperfect correlation where the securities underlying futures contracts have different maturities than the portfolio securities being hedged. Transactions in options on futures contracts involve similar risks.
SWAP AGREEMENTS
The Funds may enter into interest rate, index and currency exchange rate swap agreements in attempts to obtain a particular desired return at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. The "notional amount" of the swap agreement is only a fictive basis on which to calculate the obligations the parties to a swap agreement have agreed to exchange. A Fund's obligations (or rights) under a swap agreement will generally be equal only to the amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). A Fund's obligations under a swap agreement will be accrued daily (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of liquid assets to avoid leveraging of the Fund's portfolio.
Whether a Fund's use of swap agreements enhance the Fund's total return will depend on the Subadviser's ability correctly to predict whether certain types of investments are likely to produce greater returns than other investments. Because they are two-party contracts and may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The Subadviser will cause a Fund to enter into swap agreements only with counterparties that would be eligible for consideration as repurchase agreement counterparties under the Funds' repurchase agreement guidelines.
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit the Funds' ability to use swap agreements. The swaps market is a relatively new market and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect a Fund's ability to terminate existing swap agreements or to realize amounts to be received under such agreements.
Certain swap agreements are exempt from most provisions of the Commodity Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity option transactions under the CEA, pursuant to regulations of the CFTC. To qualify for this exemption, a swap agreement must be entered into by "eligible participants," which include the following, provided the participants' total assets exceed established levels: a bank or trust company, savings association or credit union, insurance company, investment company subject to regulation under the Investment Company Act of 1940 (the "1940 Act"), commodity pool, corporation, partnership, proprietorship, organization, trust or other entity, employee benefit plan, governmental entity, broker-dealer, futures commission merchant, natural person, or regulated foreign person. To be eligible, natural persons and most other entities must have total assets exceeding $10 million; commodity pools and employees benefit plans must have assets exceeding $5 million. In addition, an eligible swap transaction must meet three conditions. First, the swap agreement may not be part of a fungible class of agreements that are standardized as to their material economic terms. Second, the creditworthiness of parties with actual or potential obligations under the swap agreement must be a material consideration in entering into or determining the terms of the swap agreement, including pricing, cost or credit enhancement terms. Third, swap agreements may not be entered into and traded on or through a multilateral transaction execution facility.
WARRANTS TO PURCHASE SECURITIES
The Funds may invest in or acquire warrants to purchase equity or fixed income securities. Bonds with warrants attached to purchase equity securities have many characteristics of convertible bonds and their prices may, to some degree, reflect the performance of the underlying stock. Bonds also may be issued with warrants attached to purchase additional fixed income securities at the same coupon rate. A decline in interest rates would permit a Fund to buy additional bonds at the favorable rate or to sell the warrants at a profit. If interest rates rise, the warrants would generally expire with no value.
PERFORMANCE INFORMATION
TOTAL RETURN
The average annual total return on shares of each class of each Fund is determined for a particular period by calculating the actual dollar amount of the investment return on a $1,000 investment in shares of that class of the Fund made at the net asset value of such shares at the beginning of the period, and then calculating the annual compounded rate of return that would produce that amount. Total return for a period of one year is equal to the actual return of shares of that class of the Fund during that period. The following formula describes the calculation:
ERV = P(1+T)(n)
Where:
P = a hypothetical initial investment in the Fund of $1,000
T = average annual total return
n = number of years in period
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 investment made at the beginning of
the period.
This calculation assumes that (i) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period and
(ii) all recurring fees are included for applicable periods.
Each Fund may illustrate in advertisements and sales literature the average annual total return and cumulative total return for several time periods throughout the Fund's life based on an assumed initial investment of $1,000. Any such cumulative total return for a Fund will assume the reinvestment of all income dividends and capital gain distributions for the indicated periods and will include all recurring fees.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 2003
The average annual compounded rates of return, or total return, for the Class A Shares, Class B Shares, Class C Shares and Class X Shares of each of the Funds for the indicated periods ended September 30, 2003 were as follows:
YEAR ENDED 5 YEARS ENDED COMMENCEMENT OF OPERATIONS
BOND FUND 09/30/03 09/30/03 TO 09/30/03 (1)
-------- -------- ---------------
Class X
Return Before Taxes 8.57% 6.78% 7.76%
Return After Taxes on Distribution 6.69% 4.18% 5.08%
Return After Taxes on Distributions 5.22% 4.12% 4.89%
and Sale of Fund Shares
Class A Return Before Taxes 3.14% 5.27% 5.11%
Class B Return Before Taxes 3.43% 5.51% 5.29%
Class C Return Before Taxes 7.42% 5.51% 5.29%
EQUITY INCOME FUND
Class A
Return Before Taxes 22.43% 8.78% 8.46%
Return After Taxes on Distribution 21.04% 7.37% 6.98%
Return After Taxes on Distributions 13.61% 6.40% 6.18%
and Sale of Fund Shares
Class B Return Before Taxes 24.82% 9.21% 6.14%
Class C Return Before Taxes 28.80% 9.22% 6.15%
Class X Return Before Taxes 31.60% 11.56% 10.68%
MID-CAP "EDGE" FUND
Class A
Return Before Taxes 11.87% 4.57% 9.44%
Return After Taxes on Distribution 11.87% 3.14% 7.71%
Return After Taxes on Distributions 7.29% 3.43% 7.27%
and Sale of Fund Shares
Class B Return Before Taxes 13.74% 4.94% 0.36%
Class C Return Before Taxes 17.83% 4.97% 0.37%
Class X Return Before Taxes 18.94% 6.16% 10.67%
|
(1) The Bond Fund Class X inception since March 7, 1996, Class A Shares, Class B, Shares and Class C Shares as of July 1, 1998. The Mid-Cap "Edge Fund Class X Shares and Class A Shares inception since March 8, 1996, Class B Shares and Class C Shares since July 1, 1998. The Equity Income Fund Class X Shares and Class A Shares since March 12, 1996, Class B Shares and Class C Shares since July 1, 1998.
YIELD
The 30-day yield quotation as to a class of shares of the Phoenix-Seneca Bond Fund and the Phoenix-Seneca Equity Income Fund may be computed by dividing the net investment income for the period as to shares of that class by the net asset value of each share of that class on the last day of the period, according to the following formula:
Where:
a = dividends and interest earned during the period.
b = net expenses accrued for the period.
c = the average daily number of shares of the class outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share of the class (net asset value
per share) on the last day of the period.
The yields for the 30-day period ended September 30, 2003 were as follows:
CLASS X SHARES CLASS A SHARES CLASS B SHARES CLASS C SHARES
Phoenix-Seneca Bond Fund 2.95% 2.61% 2.00% 2.00%
Phoenix-Seneca Equity Income Fund 1.90% 0.72% -0.12% -0.15%
|
Return for a Fund is not fixed or guaranteed and will fluctuate from time to time, unlike bank deposits or other investments which pay a fixed yield or return for a stated period of time, and do not provide a basis for determining future returns. Return is a function of portfolio quality, composition, maturity and market conditions as well as the expenses allocated to each class of each Fund. The return of a class may not be comparable to other investment alternatives because of differences in the foregoing variables and differences in the methods used to value portfolio securities, compute expenses and calculate return.
OTHER QUOTATIONS, COMPARISONS, AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to shareholders, the past performance of a Fund may be illustrated and/or compared with that of other mutual funds with similar investment objectives, and to stock or other relevant indices. For example, total return of a Fund's classes may be compared to averages or rankings prepared by Lipper Analytical Services, Inc., a widely recognized independent service that monitors mutual fund performance; the Lehman Brothers Government/ Corporate Index, an unmanaged index of consisting of a mixture of government and corporate bonds rated within "investment grade" categories by S&P or Moody's; the Morgan Stanley Europe, Australia, Far East Index ("EAFE"), an unmanaged index of international stock markets, the S&P Mid-Cap Index, an unmanaged index of common stocks; the S&P 500 Index, an unmanaged index of common stocks; the Russell 2000 Index (the "Russell 2000"), an unmanaged index of common stocks; the Russell 3000 Index (the "Russell 3000"), an unmanaged index of common stocks; or the Dow Jones Industrial Average, an unmanaged index of common stocks of 30 industrial companies listed on the NYSE. The performance of the Equity Income Fund may be compared to the Wilshire Real Estate Securities Index, an unmanaged index consisting of publicly-traded REITs and real estate operating companies.
The S&P 500 Index is an unmanaged index of 500 common stocks traded on the NYSE, American Stock Exchange and the Nasdaq National Market. The S&P 500 Index represents approximately 70% of the total domestic U.S. equity market capitalization. The S&P Mid-Cap Index is an unmanaged index of common stocks of 400 companies with mid-size market capitalizations--$300 million to $5 billion. The S&P 500 Index and the S&P Mid-Cap Indices are market value-weighted indices (shares outstanding times stock price) in which each company's influence on the respective index is directly proportional to its market value. The companies in the S&P 500 Index and the S&P Mid-Cap Index are selected from four major industry sectors: industrials, utilities, financials and transportation. The 500 companies chosen for the S&P 500 Index are not the 500 largest companies in terms of market value. Rather, the companies chosen by S&P for inclusion in the S&P 500 Index tend to be leaders in important industries within the U.S. economy. The Russell 2000 is an unmanaged index of 2000 common stocks of small capitalization companies. The Russell 2000 is composed of the 2000 smallest companies with respect to capitalization in the Russell 3000 and represents approximately 70% of the Russell 3000 total market capitalization. The Russell 3000 is an unmanaged index of 3000 common stocks of large United States companies with market capitalizations ranging from approximately $60 million to $80 billion. The Russell 3000 represents approximately 98% of the United States equity market. The Wilshire Real Estate Securities Index is an unmanaged, market-capitalization-weighted index consisting of publicly-traded REITs and real estate operating companies. It excludes healthcare and other "special-purpose" REITs. It is rebalanced monthly and reconstituted quarterly.
In addition, the performance of the classes of a Fund may be compared to alternative investment or savings vehicles and/or to indexes or indicators of economic activity, e.g., inflation or interest rates. Performance rankings and listings reported in newspapers or national business and financial publications, such as Changing Times, Forbes, Fortune, Money, Barrons, Business Week, Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street Journal, The New York Times, Consumer Reports, Registered Representative, Financial Planning, Financial Services Weekly, Financial World, U.S. News and World Report, Standard & Poor's The Outlook, and Personal Investor may also be cited (if a Fund is listed in such a publication) or used for comparison, as well as performance listings and rankings from various other sources, including Bloomberg Financial Systems, CDA/Wiesenberger Investment Companies Service, Donoghue's Mutual Fund Almanac, Investment Company Data, Inc., Johnson's Charts, Kanon Bloch Carre & Co., Micropal, Inc., Morningstar, Inc., Schabacker Investment Management and Towers Data Systems.
In addition, from time to time, quotations from articles from financial publications, such as those listed above, may be used in advertisements, in sales literature or in reports to shareholders of the Funds. The Trust may also present, from time to time, historical information depicting the value of a hypothetical account in one or more classes of a Fund since the Fund's inception.
In presenting investment results, the Trust may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
and when to invest; and (c) his need to analyze his time frame for future
capital needs to determine how to invest. The investor controls these three
factors, all of which affect the use of investments in building assets. The
Adviser's and Administrator's agreement to limit each Fund's operating expenses
will increase investment performance.
PORTFOLIO TURNOVER
The Funds pay brokerage commissions for purchases and sales of portfolio securities. A high rate of portfolio turnover generally involves a correspondingly greater amount of brokerage commissions and other costs which must be borne directly by a Fund and thus indirectly by its shareholders. It may also result in the realization of larger amounts of short-term capital gains, which are
taxable to shareholders as ordinary income. If such rate of turnover exceeds 100%, the Funds will pay more in brokerage commissions than would be the case if they had lower portfolio turnover rates. Historical turnover rates can be found under the heading "Financial Highlights" located in the Trust's Prospectus.
PORTFOLIO BROKERAGE
It is the general policy of the Trust not to employ any broker in the purchase or sale of securities for a Fund's portfolio unless the Trust believes that the broker will obtain the best results for the Fund, taking into consideration such relevant factors as price, the ability of the broker to effect the transaction and the broker's facilities, reliability and financial responsibility. Commission rates, being a component of price, are considered together with such factors. The Trust is not obligated to deal with any broker or group of brokers in the execution of transactions in portfolio securities.
In selecting brokers to effect transactions on securities exchanges, the
Trust considers the factors set forth in the first paragraph under this heading
and any investment products or services provided by such brokers, subject to the
criteria of Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Section 28(e) specifies that a person with investment
discretion shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay a
higher commission than the lowest rate available. To obtain the benefit of
Section 28(e), the person so exercising investment discretion must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided viewed in terms of either
that particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion." Accordingly, if the
Trust determines in good faith that the amount of commissions charged by a
broker is reasonable in relation to the value of the brokerage and research
products and services provided by such broker, the Trust may pay commissions to
such broker in an amount greater than the amount another firm might charge.
Research products and services provided to the Trust include research reports on
particular industries and companies, economic surveys and analyses,
recommendations as to specific securities and other products or services (e.g.,
quotation equipment and computer related costs and expenses) providing lawful
and appropriate assistance to the Subadviser and its affiliates in the
performance their decision-making responsibilities.
Each year, the Subadviser will consider the amount and nature of the research products and services provided by other brokers as well as the extent to which such products and services are relied upon, and attempt to allocate a portion of the brokerage business of their clients, such as the Trust, on the basis of such considerations. In addition, brokers sometimes suggest a level of business they would like to receive in return for the various services they provide. Actual brokerage business received by any broker may be less than the suggested allocations, but can (and often does) exceed the suggestions, because total brokerage is allocated on the basis of all the considerations described above. In no instance is a broker excluded from receiving business because it has not been identified as providing research services. As permitted by Section 28(e), the investment information received from other brokers may be used by the Investment Adviser (and its affiliates) in servicing all its accounts and not all such information may be used by the Subadviser, in its capacity as the Subadviser, in connection with the Trust. Nonetheless, the Trust believes that such investment information provides the Trust with benefits by supplementing the research otherwise available to the Trust.
In certain instances there may be securities that are suitable for a Fund's portfolio as well as for that of another Fund or one or more of the other clients of the Subadviser. Investment decisions for a Fund and for the Subadviser's other clients are made with a view to achieving their respective investment objectives. It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security in a particular transaction as far as a Fund is concerned. The Trust believes that over time its ability to participate in volume transactions will produce better executions for the Funds. When appropriate, orders for the account of the Funds are combined with orders for other investment companies or other clients advised by the Subadviser, including accounts (such as investment limited partnerships) in which the Investment Adviser or affiliated or associated persons of the Subadviser are investors or have a financial interest, in order to obtain a more favorable commission rate. When the same security is purchased for a Fund and one or more other funds or other clients on the same day, each party pays the average price and commissions paid are allocated in direct proportion to the number of shares purchased.
The Adviser may use its broker/dealer affiliates, or other firms that sell shares of the Funds, to buy and sell securities for the Funds, provided they have the execution capability and that their commission rates are comparable to those of other unaffiliated broker/dealers. Directors of PXP Securities Corp. or its affiliates receive indirect benefits from the Funds as a result of its usual and customary brokerage commissions that PXP Securities Corp. may receive for acting as broker to the Funds in the purchase and sale of portfolio securities. The investment advisory agreement does not provide for a reduction of the advisory fee by any portion of the brokerage fees generated by portfolio transactions of the Funds that PXP Securities Corp. may receive.
For the fiscal years ended September 30, 2001, 2002 and 2003, brokerage commissions paid by the Trust on portfolio transactions totaled $429,851, $780,474 and $821,952, respectively. In the fiscal years ended September 30, 2001, 2002 and 2003, the Trust paid brokerage commissions of $49,748, $6,965 and $0, respectively, to PXP Securities Corp., an affiliate of its Distributor. For the fiscal year ended September 30, 2003, the amount paid to PXP Securities Corp. was 0.0% of the total brokerage commission paid by the Trust and was paid on transactions amounting to 0.0% of the aggregate dollar amount of transactions involving the payment of commissions.
SERVICES OF THE ADVISER
Overall responsibility for the management and supervision of the Trust and the Funds rests with the Trustees of Phoenix-Seneca Funds (the "Trustees"). Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser for the Phoenix-Seneca Funds pursuant to an Investment Advisory Agreement. The Funds' Subadviser is Seneca Capital Management, LLC ("Seneca"). Its principal offices are located at 909 Montgomery Street, San Francisco, California 94133. Seneca's services under the Subadvisory Agreement are subject to the direction of both the Trustees and PIC. PIC is located at 56 Prospect Street, Hartford, Connecticut 06115-0480. PIC was originally organized in 1932 as John P. Chase, Inc. As of September 30, 2003, PIC had approximately $23.3 billion in assets under management. William R. Moyer is an executive officer of the fund and an executive officer and director of PIC. All other officers of the fund are not officers of PIC.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning Corporation ("PEPCO" or "Equity Planning") which acts as Distributor and Financial Agent for the Trust and is a subsidiary of Phoenix Investment Partners, Ltd. ("PXP"). PXP is the investment management subsidiary of The Phoenix Companies, Inc. ("PNX") and has served investors for over 70 years. PNX is a leading provider of wealth management products and services to individuals and businesses. Equity Planning, a mutual fund distributor, acts as the national distributor of the Trust's shares and as Financial Agent of the Trust. The principal office of Phoenix is located at One American Row, Hartford, Connecticut, 06115. The principal office of Equity Planning is located at 56 Prospect Street, Hartford, Connecticut 06115.
As of September 30, 2003, PXP had approximately $57.3 billion in assets under
management through its investment partners: Aberdeen Fund Managers, Inc.
(Aberdeen) in Aberdeen, London, Singapore and Fort Lauderdale; Capital West
Asset Management, LLC (Capital West) in Denver, CO; Duff & Phelps Investment
Management Co. (Duff & Phelps) in Chicago; Kayne Anderson Rudnick Investment
Management, LLC (Kayne) in Los Angeles; Engemann Asset Management (Engemann) in
Pasadena; Seneca Capital Management LLC (Seneca) in San Francisco; Walnut Asset
Management, LLC (Walnut) in Philadelphia; Phoenix/Zweig Advisers LLC in New York
(Zweig); and Phoenix Investment Counsel, Inc. (Goodwin and Oakhurst divisions)
in Hartford, CT, and Scotts Valley, CA, respectively.
Pursuant to the Investment Advisory Agreement, the Adviser: (a) supervises and assists in the management of the assets of each Fund, furnishes each Fund with research, statistical and advisory services and provides regular reports to the Trustees; (b) provides advice and assistance with the operations of the Trust, compliance support, preparation of the Trust's registration statements, proxy materials and other documents and advice and assistance of the Adviser's General Counsel; and (c) furnishes office facilities, personnel necessary to provide advisory services to the Funds, personnel to serve without salaries as officers or agents of the Trust and compensation and expenses of any Trustees who are also full-time employees of the Adviser or any of its affiliates. Pursuant to the Subadvisory Agreement, PIC has delegated to Seneca the responsibility for making investment decisions for the Funds and selecting brokers and dealers to execute transactions for each Fund.
Under a Subadvisory Agreement with PIC and the Trust, Seneca's duties to each Fund include: (1) supervising and managing the investments of that Fund and directing the purchase and sale of its investments; and (2) ensuring that investments follow the investment objective, strategies, and policies of that Fund and comply with government regulations. Seneca has approximately 103 full-time employees and acts as investment adviser or manager for approximately $13.3 billion of institutional and private investment accounts as of September 30, 2003.
In managing the assets of the Funds, the Subadviser furnishes continuously an investment program for each Fund consistent with the investment objectives and policies of that Fund. More specifically, the Subadviser determines from time to time what securities shall be purchased for the Fund, what securities shall be held or sold by the Fund and what portion of the Fund's assets shall be held uninvested as cash, subject always to the provisions of the Trust's Agreement and Declaration of Trust, By-Laws and its registration statement under the 1940 Act and under the 1933 Act covering the Trust's shares, as filed with the SEC, and to the investment objectives, policies and restrictions of the Fund, as each of the same shall be from time to time in effect, and subject, further, to such policies and instructions as the Trustees of the Trust may from time to time establish. To carry out such determinations, the Subadviser places orders for the investment and reinvestment of each Fund's assets (see "Portfolio Brokerage").
For its investment advisory services under the Investment Advisory Agreement, the Adviser receives a fee, payable monthly, from the Mid-Cap "EDGE" Fund equal to 0.80% per annum of such Fund's average daily net assets, from the Bond Fund equal to 0.50% per annum of such Fund's average daily net assets, and from the Equity Income Fund equal to 0.85% per annum of such Fund's average daily net assets. The Adviser pays the Subadviser a fee of 0.40% for the Mid-Cap "EDGE" Fund, 0.25% for the Bond Fund, and 0.425% for the Equity Income Fund, respectively, of such Fund's average daily net assets.
For the fiscal years ended September 2001, 2002 and 2003, PIC earned investment management fees of $312,478, $392,487 and $373,661, respectively, for services to the Bond Fund; $1,089,030, $1,348,427 and $1,076,676, respectively, for services to the Mid-Cap "EDGE" Fund; and $165,301, $200,545 and $189,026, respectively, for services to the Equity Income Fund.
For the fiscal years ended September 30, 2001, 2002 and 2003, PIC reimbursed $61,964, $60,097 and $60,889, respectively, for the Bond Fund; $75,077, $168,354 and $215,880, respectively, for the Mid-Cap "EDGE" Fund; and $46,126, $38,353 and $27,463, respectively, for the Equity Income Fund.
The Adviser and the Administrator have voluntarily agreed to reimburse the Funds' operating expenses through January 31, 2005 to prevent total operating expenses from exceeding, on an annualized basis, the following:
Fund Class X Class A Class B Class C ---- ------- ------- ------- ------- Bond Fund 0.90% 1.15% 1.90% 1.90% Mid-Cap "EDGE" Fund 1.15% 1.40% 2.15% 2.15% Equity Income Fund 2.35% 3.05% 3.80% 3.80% |
The Adviser and the Administrator may discontinue or modify any such waivers or reimbursements it may provide in the future at its discretion.
Under the Investment Advisory Agreement, PIC is not liable to the Trust or any shareholder for any error of judgment or mistake of law or any loss suffered by the Trust or any shareholder in connection with the Investment Advisory Agreement, except a loss resulting from PIC's willful misfeasance, bad faith, gross negligence or reckless disregard of duty. Under the Subadvisory Agreement, Seneca is not liable for actions taken in its best professional judgment, in good faith and believed by it to be authorized, provided such actions are not in breach of the Funds' investment objectives, policies and restrictions or the result of willful misfeasance, bad faith, gross negligence or breach of duty or obligations.
The Investment Advisory Agreement may be modified or amended only with the approval of the holders of a majority of the applicable Fund's outstanding shares and by a vote of the majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) (the "Independent Trustees"). The Subadvisory Agreement may be amended at any time by written agreement among the Subadviser, the Adviser and the Trust, except that any changes to the duties of and fees payable to the Subadviser will also be subject to the approval of the Trustees and a majority of the applicable Fund's outstanding shares. Unless terminated, the Investment Advisory Agreement and the Subadvisory Agreement continue in full force and effect until June 30, 2000, and for successive periods of one year thereafter, but only as long as each such continuance is approved annually by a majority vote of the Trustees or by a vote of the holders of a majority of the outstanding shares of the applicable Fund, but in either event it also must be approved by a vote of a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement and the Subadvisory Agreement may be terminated without penalty by any party upon 60 days' written notice and automatically terminates in the event of its assignment. In the event of termination, or at the request of PIC, the Trust and the Funds will eliminate all reference to "Phoenix" from their names. Upon such request, PIC has agreed to submit the question of continuing the Investment Advisory Agreement to a vote of the shareholders of the Trust. In the event of termination, or at the request of Seneca, the Trust and the Funds will eliminate all references to "Seneca" from their names. Upon such request, Seneca has agreed to submit the question of continuing the Subadvisory Agreement to a vote of the shareholders of the Trust.
In the management of the Trust and their other accounts, the Subadviser allocates investment opportunities to all accounts for which they are, in the Subadviser's judgment, appropriate, subject to the availability of cash in any particular account and the final decision of the individual or individuals in charge of such accounts. Where market supply is inadequate for a distribution to all such accounts, securities are generally allocated in proportion to net assets. In some cases this procedure may have an adverse effect on the price or volume of the security as far as the Funds are concerned. See also "Portfolio Brokerage."
Each Fund bears all expenses of its own operation (subject to the expense
limitations described above), which expenses include: (i) fees and expenses of
any investment adviser or administrator of the Fund; (ii) organization expenses
of the Trust; (iii) fees and expenses incurred by the Fund in connection with
membership in investment company organizations; (iv) brokers' commissions; (v)
payment for portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses; (vii) interest, insurance premiums, taxes or
governmental fees; (viii) fees and expenses of the transfer agent of the Funds;
(ix) the cost of preparing stock certificates or any other expenses, including,
without limitation, clerical expenses of issue, redemption or repurchase of
shares of the Fund; (x) the expenses of and fees for registering or qualifying
shares of the Funds for sale and of maintaining the registration of the Funds;
(xi) a portion of the fees and expenses of Trustees who are not affiliated with
the Adviser or Subadviser; (xii) the cost of preparing and distributing reports
and notices to existing shareholders, the SEC and other regulatory authorities;
(xiii) fees or disbursements of custodians of the Funds' assets, including
expenses incurred in the performance of any obligations enumerated by the
Agreement and Declaration of Trust or By-Laws of the Trust insofar as they
govern agreements with any such custodian; (xiv) costs in connection with annual
or special meetings of shareholders, including proxy material preparation,
printing and mailing; (xv) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Funds'
business; and (xvi) distribution fees and service fees applicable to each class
of shares.
The Funds' Investment Advisory and Subadvisory Agreements each provide that the Adviser and Subadviser may render similar services to others so long as the services provided thereunder are not impaired thereby.
The Trust, its Adviser and Subadvisers, and its Distributor have each adopted a Code of Ethics pursuant to Rule 17-j1 under the Investment Company Act of 1940. Personnel subject to the Codes of Ethics may purchase and sell securities for their personal accounts, including securities that may be purchased, sold or held by the Funds, subject to certain restrictions and conditions. Generally, personal securities transactions are subject to preclearance procedures, reporting requirements and holding period rules. The Codes also restrict personal securities transactions in private placements, initial public offerings and securities in which the Funds have a pending order.
BOARD OF TRUSTEES' CONSIDERATION OF ADVISORY AND SUBADVISORY AGREEMENTS
The Board of Trustees is responsible for overseeing the performance of the Funds' investment advisers and subadvisers and determining whether to approve and renew the Funds' investment advisory arrangements. In approving the agreements, the Board primarily considered, with respect to each Fund, the nature and quality of the services provided under the agreements and the overall fairness of the agreements to the Funds. A report from the Adviser that addressed specific factors designed to inform the Board's consideration on these and other issues was supplied to Board members in advance of the annual contract review meeting and reviewed with them at that meeting.
With respect to the nature and quality of the services provided, the Board regularly reviews information comparing the performance of each Fund with a peer group of funds and a relevant market index, the allocation of each Fund's brokerage commissions, including any allocations to affiliates, the adviser's record of compliance with its investment policies and restrictions on personal securities transactions. The Board noted that the Bond Fund's and Equity Income Fund's performance was reasonably aligned with that of its respective peer group for the periods reviewed. It noted that the Mid-Cap EDGE Fund's one year performance was well below the peer group average, although its year to date performance as well as its three year and five year returns were better with respect to the peer group average. Furthermore, the Board found no evidence of material or systemic compliance violations for either fund. The Board also reviews data relating to the quality of brokerage execution received by the Funds, including the adviser's use of brokers or dealers in fund transactions that provided research and other services to the adviser and the potential benefits derived by the Funds from such services. Additionally, the Funds' portfolio managers meet with the Board from time to time to discuss the management and performance of their Fund(s) and respond to the Board's questions concerning performance of the advisers.
With respect to the overall fairness of the advisory and subadvisory agreements, the Board primarily considered information relating to each Fund's fee structures, including a comparative analysis of each Fund's management fees, total expenses and 12b-1 fees with its respective peer group. The Board noted that the Funds were close to or below the median in each category reviewed, except non-management expenses for each of the Bond Funds which were higher than the median. For those instances in which a Fund had significantly higher fees or total expenses, the Board considered the specific portfolio management issues and/or expense structures that contributed to the higher fees. The Board also considered the existence of any economies of scale and whether those were passed along to the Funds' shareholders through a graduated advisory fee schedule or other means, including any fee waivers by the advisor and/or its affiliates. They also considered the voluntary waiver of management and other fees to prevent total fund expenses from exceeding a specified cap.
The Board did not identify any particular information that was all-important or controlling. Based on the Board's deliberation and its evaluation of the information described above, the Board, including all of the Independent Trustees, unanimously approved the agreements. It concluded that the compensation under the agreements is fair and reasonable in light of such services and expenses and such other matters as the trustees have considered to be relevant in the exercise of their reasonable judgment.
DESCRIPTION OF PROXY VOTING POLICY
The Funds have adopted a Statement of Policy with Respect to Proxy Voting (the "Policy") stating the Funds' intention to exercise stock ownership rights with respect to portfolio securities in a manner that is reasonably anticipated to further the best economic interests of shareholders of the Funds. The Funds have committed to analyze and vote all proxies that are likely to have financial implications, and where appropriate, to participate in corporate governance, shareholder proposals, management communications and legal proceedings. The Funds must also identify potential or actual conflicts of interest in voting proxies and must address any such conflict of interest in accordance with the Policy.
The Policy stipulates that the Funds' investment adviser will vote proxies or delegate such responsibility to a subadviser. The adviser or subadviser will vote proxies in accordance with this Policy, or its own policies and procedures, which in no event will conflict with the Funds' Policy. Any adviser or subadviser may engage a qualified, independent organization to vote proxies on its behalf (a "delegate"). Matters that may affect substantially the rights and privileges of the holders of securities to be voted will be analyzed and voted on a case-by-cases basis taking into consideration such relevant factors as enumerated in the Policy. The views of management of a portfolio company will be considered.
The Policy specifies certain factors that will be considered when analyzing and voting proxies on certain issues, including, but not limited to:
o Corporate Governance Matters--tax and economic benefits of changes in the state of incorporation; dilution or improved accountability associated with anti-takeover provisions such as staggered boards, poison pills and supermajority provisions.
o Changes to Capital Structure--dilution or improved accountability associated with such changes.
o Stock Option and Other Management Compensation Issues--executive pay and spending on perquisites, particularly in conjunction with sub-par performance and employee layoffs.
o Social and Corporate Responsibility Issues--the adviser or subadviser will generally vote against shareholder social and environmental issue proposals.
The Funds and their delegates seek to avoid actual or perceived conflicts of interest of Fund shareholders, on the one hand, and those of the adviser, subadviser, delegate, principal underwriter, or any affiliated person of the Funds, on the other hand. Depending on the type and materiality, any conflicts of interest will be handled by (i) relying on the recommendations of an established, independent third party proxy voting vendor; (ii) voting pursuant to the recommendation of the delegate; (iii) abstaining; or (iv) where two or more delegates provide conflicting requests, voting shares in proportion to the assets under management of each delegate. The Policy requires each adviser, subadviser or delegate to notify the President of the Funds of any actual or potential conflict of interest. No adviser, subadviser or delegate may waive any conflict of interest or vote any conflicted proxies without the prior written approval of the Board of Trustees or the President of the Funds.
The Policy further imposes certain record keeping and reporting requirements on each adviser, subadviser or delegate. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ending June 30, beginning with the period ending June 30, 2004, will be available free of charge by calling, toll-free, 800-243-1574, or on the Securities and Exchange Commission's website at http://www.sec.gov.
NET ASSET VALUE
Under the 1940 Act, the Trustees are responsible for determining in good
faith the fair value of securities of the Funds. The net asset value per share
of each class of each Fund is determined once daily, Monday through Friday as of
the close of trading on the NYSE (normally 4:00 P.M. New York City time) on each
day the Trust is "open for business" (as defined in the Prospectus). A Fund need
not determine its net asset value on any day during which its shares were not
tendered for redemption and the Trust did not receive any order to purchase or
sell shares of that Fund. In accordance with procedures approved by the
Trustees, the net asset value per share of each class of each Fund is calculated
by determining the value of the net assets attributable to each class of that
Fund and dividing by the number of outstanding shares of that class. The NYSE is
not open for trading on weekends or on the following observed national holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The public offering price per share of a class of a Fund is the net asset value per share of that class of that Fund next determined after receipt of an order. Orders for shares that have been received by the Trust or the Transfer Agent before the close of regular trading of the NYSE are confirmed at the offering price effective at the close of regular trading of the NYSE on that day, while orders received subsequent to the close of regular trading of the NYSE will be confirmed at the offering price effective at the close of regular trading of the NYSE on the next day on which the net asset value is calculated.
Bonds and other fixed-income securities (other than short-term obligations but including listed issues) in a Fund's portfolio are valued on the basis of valuations furnished by a pricing service that uses both dealer-supplied valuations and electronic data processing techniques that take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices or exchange or over-the-counter prices, when such valuations are believed to reflect the fair value of such securities.
In determining the net asset value, unlisted securities for which market quotations are available are valued at the last reported sales price or, if no sales are reported or such pricing is not provided, the mean between the most recent bid and asked prices. Securities, options on securities, futures contracts and options thereon that are listed or admitted to trading on a national exchange, are valued at their last sale on such exchange prior to the time of determining net asset value; or if no sales are reported on such exchange on that day, at the mean between the most recent bid and asked price. Securities listed on more than one exchange shall be valued on the exchange the security is most extensively traded. Quotations of foreign securities in foreign currency will be converted to U.S. Dollar equivalents using foreign exchange quotations received from independent dealers. Short-term investments having a maturity of 60 days or less will be valued at amortized cost, when the Trustees determine that amortized cost is their fair market value. Certain debt securities for which daily market quotations are not available may be valued, pursuant to guidelines established by the Trustees, with reference to fixed income securities whose prices are more readily obtainable and whose durations are comparable to the securities being valued. Subject to the foregoing, other securities for which market quotations are not readily available will be valued at fair value as determined in good faith by the Trustees.
For purposes of determining the net asset value of the Funds' shares, options transactions will be treated as follows: When a Fund sells an option, an amount equal to the premium received by that Fund will be included in that Fund's accounts as an asset and a deferred liability will be created in the amount of the option. The amount of the liability will be marked to the market to reflect the current market value of the option. If the option expires or if that Fund enters into a closing purchase transaction, that Fund will realize a gain (or a loss if the cost of the closing purchase exceeds the premium received), and the related liability will be extinguished. If a call option contract sold by a Fund is exercised, that Fund will realize the gain or loss from the sale of the underlying security and the sale proceeds will be increased by the premium originally received.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent investment
is $25 for Class A Shares, Class B Shares and Class C Shares. 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. The minimum initial investment for Class X Shares is
$250,000, and the minimum subsequent investment for Class X Shares is $10,000.
Completed applications for the purchase of shares should be mailed to:
Phoenix-Seneca Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301.
The Trust has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Trust's behalf. The Trust will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Customer orders will be priced at the Funds' net asset values next computed after they are accepted by an authorized broker or the broker's authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their net asset value per share, plus a sales charge which, at the election of the purchaser, may be imposed either (i) at the time of the purchase (the "initial sales charge alternative") or (ii) on a contingent deferred basis (the "deferred sales charge alternative"). Each Fund also offers one class of shares (Class X Shares) that may be purchased by certain institutional investors at a price equal to their net asset value per share. Orders received by dealers prior to the close of trading on the New York Stock Exchange are confirmed at the offering price effective at that time, provided the order is received by the Distributor prior to its close of business.
The alternative purchase arrangements permit an investor to choose the method of purchasing shares that is more beneficial given the amount of the purchase, the length of time the investor expects to hold the shares, whether the investor wishes to receive distributions in cash or to reinvest them in additional shares of the Funds, and other circumstances. Investors should consider whether, during the anticipated life of their investment in the Trust, the accumulated continuing distribution and services fees and contingent deferred sales charges on Class B Shares or Class C Shares would be less than the initial sales charge and accumulated distribution and services fees on Class A Shares purchased at the same time.
Dividends paid by the Funds, if any, with respect to each class of shares will be calculated in the same manner at the same time on the same day, except that fees such as higher distribution and service fees relating to each class of shares will be borne exclusively by that class. See "Dividends, Distributions and Tax Status."
CLASS A SHARES
Class A Shares incur a sales charge when they are purchased and enjoy the benefit of not being subject to any sales charge when they are redeemed. Class A Shares are subject to ongoing service fees at an annual rate of 0.25% of the Trust'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 five years of purchase. The deferred sales charge may be waived in connection with certain qualifying redemptions.
Class B Shares are subject to ongoing distribution and service fees at an annual rate of up to 1.00% of the Fund's aggregate average daily net assets attributable to the Class B Shares. Class B Shares enjoy the benefit of permitting all of the investor's dollars to work from the time the investment is made. The higher ongoing distribution and service fees paid by Class B Shares will cause such shares to have a higher expense ratio and to pay lower dividends, to the extent any dividends are paid, than those related to Class A Shares. Class B Shares will automatically convert to Class A Shares eight years after the end of the calendar month in which the shareholder's order to purchase was accepted. 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 Distributor to have been compensated for distribution expenses related to the Class B Shares from most of the burden of such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales charge alternative which have been outstanding for less than the period ending eight years after the end of the month in which the shares were issued. At the end of this period, Class B Shares will automatically convert to Class A Shares and will no longer be subject to the higher distribution and service fees. Such conversion will be on the basis of the relative net asset value of the two classes without the imposition of any sales load, fee or other charge.
For purposes of conversion, Class B Shares purchased through the reinvestment of dividends and distributions paid in respect of Class B Shares in a shareholder's account will be considered to be held in a separate subaccount. Each time any Class B Shares in the shareholder's Trust account (other than those in the subaccount) convert to Class A Shares, a pro rata portion of the Class B Shares in the subaccount will also convert to Class A Shares.
CLASS C SHARES
Class C Shares are purchased without an initial sales charge but are subject to a deferred sales charge if redeemed within one year of purchase. The deferred sales charge may be waived in connection with certain qualifying redemptions. Shares issued in conjunction with the automatic reinvestment of income distributions and capital gain distributions are not subject to any sales charges. Class C Shares are subject to ongoing distribution and services fees of up to 1.00% of the Funds' aggregate average daily net assets attributable to Class C Shares.
CLASS X SHARES
Class X Shares are offered without any sales charges to institutional investors, such as pension and profit sharing plans, other employee benefit trusts, investment advisers, endowments, foundations and corporations, and others who purchase the minimum amounts.
CLASS A SHARES--REDUCED INITIAL SALES CHARGES
Investors choosing Class A Shares may be entitled to reduced sales charges. The ways in which sales charges may be avoided or reduced are described below.
QUALIFIED PURCHASERS. If you fall within any one of the following categories,
you will not have to pay a sales charge on your purchase of Class A Shares: (1)
any trustee, director or officer of the Phoenix Funds, Phoenix-Engemann Funds,
Phoenix-Seneca Funds or any other mutual fund advised, subadvised or distributed
by the Adviser, Distributor or any corporate affiliate of either or both the
Adviser and Distributor (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 PNX, the Distributor and/or their corporate
affiliates; (9) any account held in the name of a qualified employee benefit
plan, endowment fund or foundation if, on the date of the initial investment,
the plan, fund or foundation has assets of $10,000,000 or more or at least 100
eligible employees; (10) any person with a direct rollover transfer of shares
from an established Phoenix Fund, Phoenix-Engemann Fund, or Phoenix-Seneca Fund
qualified plan; (11) any PNX separate account which funds group annuity
contracts offered to qualified employee benefit plans; (12) any state, county,
city, department, authority or similar agency prohibited by law from paying a
sales charge; (13) any fully matriculated student in any U.S. service academy;
(14) any unallocated account held by a third party administrator, registered
investment adviser, trust company, or bank trust department which exercises
discretionary authority and holds the account in a fiduciary, agency, custodial
or similar capacity, if in the aggregate such accounts held by such entity equal
or exceed $1,000,000; (15) any person who is investing redemption proceeds from
investment companies other than the Phoenix Funds, Phoenix-Engemann Funds, or
Phoenix-Seneca Funds if, in connection with the purchase 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
Funds, Phoenix-Engemann Funds, or Phoenix-Seneca Funds purchase and that a sales
charge was paid; (16) any deferred compensation plan established for the benefit
of any Phoenix Fund, Phoenix-Engemann Funds, or Phoenix-Seneca Funds 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; (19) 401(k) participants
in the Merrill Lynch Daily K Plan (the "Plan") if the Plan has at least $3
million in assets or 500 or more eligible employees; (20) 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 (20) may be charged a fee by the
broker, agent or financial intermediary for purchasing shares); or (21)
investors who
purchase shares through mutual fund supermarkets and other sponsors or similar strategic arrangements provided that such investors owned shares purchased through such supermarkets or strategic arrangements on July 1, 1998, and continue to own such shares.
COMBINATION PURCHASE PRIVILEGE. Your purchase of any class of shares of the Phoenix-Seneca Funds or any other Affiliated Phoenix Fund, (other than Phoenix-Goodwin Money Market Fund Class A Shares), if made at the same time by the same "person," will be added together with any existing Phoenix Fund account values 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 Phoenix-Seneca Funds or any other Affiliated Phoenix Fund (other than Phoenix-Goodwin Money Market Fund Class A Shares), if made by the same person within a thirteen month period, will be added together to determine whether you are entitled to an immediate reduction in sales charges. Sales charges are reduced based on the overall amount you indicate that you will buy under the Letter of Intent. The Letter of Intent is a mutually non-binding arrangement between you and the Distributor. Since the Distributor doesn't know whether you will ultimately fulfill the Letter of Intent, shares worth 5% of the amount of each purchase will be set aside until you fulfill the Letter of Intent. When you buy enough shares to fulfill the Letter of Intent, these shares will no longer be restricted. If, on the other hand, you do not satisfy the Letter of Intent, or otherwise wish to sell any restricted shares, you will be given the choice of either buying enough shares to fulfill the Letter of Intent or paying the difference between any sales charge you previously paid and the otherwise applicable sales charge based on the intended aggregate purchases described in the Letter of Intent. You will be given 20 days to make this decision. If you do not exercise either election, the Distributor will automatically redeem the number of your restricted shares needed to make up the deficiency in sales charges received. The Distributor will redeem restricted Class A Shares before Class C Shares or Class 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. The value of your account(s) in 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 at the time of purchase 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 AND CLASS C SHARES--HOW TO OBTAIN REDUCED DEFERRED SALES CHARGES
The CDSC is waived on the redemption (sale) of Class B Shares and Class C
Shares if the redemption is made (a) within one year of death (i) of the sole
shareholder on an individual account, (ii) of a joint tenant where the surviving
joint tenant is the deceased's spouse, or (iii) of the beneficiary of a Uniform
Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other
custodial account; (b) within one year of disability, as defined in Code Section
72(m)(7); (c) as a mandatory distribution upon reaching age 701/2 under any
retirement plan qualified under Code Sections 401, 408 or 403(b) or resulting
from the tax-free return of an excess contribution to an IRA; (d) by 401(k)
plans using an approved participant tracking system for participant hardships,
death, disability or normal retirement, and loans which are subsequently repaid;
(e) from the Merrill Lynch Daily K Plan ("Plan") invested in Class B Shares, on
which such shares the Distributor has not paid the dealer the Class B sales
commission; (f) based on the exercise of exchange privileges among Class B
Shares and Class C Shares of the Phoenix-Seneca Funds or any other Affiliated
Phoenix Fund; (g) based on any direct rollover transfer of shares from an
established Phoenix-Seneca Fund or any other Affiliated Phoenix Fund qualified
plan into a Phoenix-Seneca Fund or any other Affiliated Phoenix Fund IRA by
participants terminating from the qualified plan; and (h) 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.
CONVERSION FEATURE--CLASS B SHARES
Class B Shares will automatically convert to Class A Shares of the same Fund eight years after they are purchased. Conversion will be on the basis of the then prevailing net asset value of Class A Shares and Class 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 and service 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 and service fees for an indefinite period. Even if the Funds were unable to obtain such assurances, it might continue to make distributions if doing so would assist in complying with its general practice of distributing sufficient income to reduce or eliminate federal taxes otherwise payable by the Funds.
INVESTOR ACCOUNT SERVICES
The Funds offer accumulation plans, withdrawal plans and reinvestment and exchange privileges as described in the Funds' current Prospectus. Certain privileges may not be available in connection with all classes. In most cases, changes to account services may be accomplished over the phone. Inquiries regarding policies and procedures relating to shareholder account services should be directed to Shareholder Services at (800) 243-1574. Broker/dealers may impose their own restrictions and limits on accounts held through the broker/dealer. Please consult with your broker/dealer for account restrictions and limit information.
EXCHANGES
Under certain circumstances, shares of any Phoenix-Seneca Fund may be exchanged for shares of the same class of another Phoenix-Seneca Fund or any other Affiliated Phoenix Fund on the basis of the relative net asset values per share at the time of the exchange. Class C Shares are also exchangeable for Class T Shares of those funds offering them. Exchanges are subject to the minimum initial investment requirement of the designated Fund, except if made in connection with the systematic exchange privilege described below. 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 "Dividends, Distributions and Tax Status"). Exchange privileges may not be available for all Phoenix Funds, and may be rejected or suspended.
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 next succeeding business day), without sales charge.
DIVIDEND REINVESTMENT ACROSS ACCOUNTS
If you maintain an account balance of at least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated on the basis of the net asset value of the shares held in a single account), you may direct that any dividends and distributions paid with respect to shares in that account be automatically reinvested in a single account of one of the other Affiliated Phoenix Funds 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 the Transfer Agent. Distributions may also be mailed to a second payee and/or address. Requests for directing distributions to an alternate payee must be made in writing with a signature guarantee of the registered owner(s). To be effective with respect to a particular dividend or distribution, notification of the new distribution option must be received by the Transfer Agent at least three days prior to the record date of such dividend or distribution. If all shares in your account are repurchased or redeemed or transferred between the record date and the payment date of a dividend or distribution, you will receive cash for the dividend or distribution regardless of the distribution option selected.
INVEST-BY-PHONE
This expedited investment service allows a shareholder to make an investment in an account by requesting a transfer of funds from the balance of their bank account. Once a request is phoned in, Equity Planning will initiate the transaction by wiring a request for monies to the shareholder's commercial bank, savings bank or credit union via Automated Clearing House (ACH). The shareholder's bank, which must be an ACH member, will in turn forward the monies to Equity Planning for credit to the
shareholder's account. ACH is a computer based clearing and settlement operation established for the exchange of electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application and
attach a voided check if applicable. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) shareholders may call toll free
(800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. The 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 Series worth $5,000 or more, as determined by the then current net asset value per share, and elect to have all dividends reinvested. 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 and Class C 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 and Class C shareholders redeeming more shares than the percentage permitted by the withdrawal program will be subject to any applicable contingent deferred sales charge on all shares redeemed. Accordingly, the purchase of Class B Shares or Class C Shares will generally not be suitable for an investor who anticipates withdrawing sums in excess of the above limits shortly after purchase.
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 Exchange is restricted or during any emergency which makes it impracticable for a Fund to dispose of its securities or to determine fairly the value of its net assets or during any other period permitted by order of the Securities and Exchange Commission for the protection of investors. Furthermore, the Transfer Agent will not mail redemption proceeds until checks received for shares purchased have cleared, which may take up to 15 days or more.
The Trust has authorized one or more brokers to accept on its behalf purchase and redemption orders. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the Trust's behalf. The Trust will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Customer orders will be priced at the Funds' net asset values next computed after they are accepted by an authorized broker or the broker's authorized designee.
Redemptions by Class B and Class C shareholders will be subject to the applicable deferred sales charge, if any.
A shareholder should contact his/her broker/dealer if he/she wishes to transfer shares from an existing broker/dealer street name account to a street name account with another broker/dealer. The Fund has no specific procedures governing such account transfers.
REDEMPTION OF SMALL ACCOUNTS
Each shareholder account in the Funds which has been in existence for at least one year and which has a value of less than $200, due to redemption activity, may be redeemed upon the giving of not less than 30 days written notice to the shareholder mailed to the address of record. During the 30 day period the shareholder has the right to add to the account to bring its value to $200 or more. See the Funds' current Prospectus for more information.
BY MAIL
Shareholders may redeem shares by making written request, executed in the full name of the account, directly to Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates for shares are in the possession of the shareholder, they must be mailed or presented, duly endorsed in the full name of the account, with a written request to Equity Planning that the Trust redeem the shares. See the Funds' current Prospectus for more information.
TELEPHONE REDEMPTIONS
Shareholders may redeem up to $50,000 worth of their shares by telephone. See the Funds' current Prospectus for additional information.
BY CHECK (PHOENIX-SENECA BOND FUND ONLY)
Any shareholder of this Fund may elect to redeem shares held in his account by check. Checks will be sent to an investor upon receipt by the Transfer Agent of a completed application and signature card (attached to the application). If the signature card accompanies an individual's initial account application, the signature guarantee section of the form may be disregarded. However, the Trust reserves the right to require that all signatures be guaranteed prior to the establishment of a check writing service account. When an authorization form is submitted after receipt of the initial account application, all signatures must be guaranteed regardless of account value.
Checks may be drawn payable to any person in an amount of not less than $500, provided that immediately after the payment of the redemption proceeds the balance in the shareholder's account is $500 or more.
When a check is presented to the Transfer Agent for payment, a sufficient number of full and fractional shares in the shareholder's account will be redeemed to cover the amount of the check. The number of shares to be redeemed will be determined on the date the check is received by the Transfer Agent. Presently there is no charge to the shareholder for the check writing service, but this may be changed or modified in the future upon two weeks written notice to shareholders. Checks drawn from Class B and Class C accounts are subject to the applicable deferred sales charge, if any.
The checkwriting procedure for redemption enables a shareholder to receive income accruing on the shares to be redeemed until such time as the check is presented to the Transfer Agent 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 the Transfer Agent's rules governing checking accounts. A shareholder should make sure that there are sufficient shares in his account to cover the amount of any check drawn. If insufficient shares are in the account and the check is presented to the Transfer Agent on a banking day on which the Trust does not redeem shares (for example, a day on which the New York Stock Exchange is closed), or if the check is presented against redemption proceeds of an investment made by check which has not been in the account for at least fifteen calendar days, the check may be returned marked "Non-sufficient Funds" and no shares will be redeemed. A shareholder may not close his account by a withdrawal check because the exact value of the account will not be known until after the check is received by the Transfer Agent.
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.
ACCOUNT REINSTATEMENT PRIVILEGE
Shareholders who may have overlooked features of their investment at the time they redeemed have a privilege of reinvestment of their investment at net asset value. See the Funds' current prospectus for more information.
TAX SHELTERED RETIREMENT PLANS
Shares of the Funds are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA,
401(k), Profit-Sharing, Money Purchase Pension Plans and 403(b) Retirement
Plans. Write or call Equity Planning (800) 243-4361 for further information
about the plans.
MERRILL LYNCH DAILY K PLAN
Class A Shares of a Fund are made available to Merrill Lynch Daily K Plan (the "Plan") participants at NAV without an initial sales charge if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch and, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or more in assets invested in broker/dealer funds not advised or managed by Merrill Lynch Asset Management L.P. ("MLAM") that are made available pursuant to a Service Agreement between Merrill Lynch and the fund's principal underwriter or distributor and in funds advised or managed by MLAM (collectively, the "Applicable Investments");
(ii) the Plan is recordkept on a daily valuation basis by an independent recordkeeper whose services are provided through a contract or alliance arrangement with Merrill Lynch, and, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the Plan has $3 million or more in assets, excluding money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by a Merrill Lynch plan conversion manager, on the date the Plan Sponsor signs the Merrill Lynch Recordkeeping Service Agreement.
Alternatively, Class B Shares of a Fund are made available to Plan participants at NAV without a CDSC if the Plan conforms with the requirements for eligibility set forth in (i) through (iii) above but either does not meet the $3 million asset threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an independent recordkeeper under a contract with Merrill Lynch that are currently investing in Class B Shares of a Fund convert to Class A Shares once the Plan has reached $5 million invested in Applicable Investments, or after the normal holding period of seven years from the initial date of purchase.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund within the Trust is separate for investment and accounting purposes and is treated as a separate entity for federal income tax purposes.
A regulated investment company qualifying under Subchapter M of the Code is not subject to federal income tax on distributed amounts to the extent that it distributes annually its taxable and, if any, tax-exempt net investment income and net realized capital gains in accordance with the timing requirements of the Code. For each taxable year, each Fund intends to qualify as a regulated investment company under Subchapter M of the Code. If in any taxable year a Fund does not qualify as a regulated investment company, all of its taxable income will be taxed at corporate rates.
Qualification of a Fund for treatment as a regulated investment company under
the Code requires, among other things, that (a) at least 90% of a Fund's annual
gross income, without offset for losses from the sale or other disposition of
stock or securities or other transactions, be derived from interest, payments
with respect to securities loans, dividends and gains from the sale or other
disposition of stock or securities or foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) the Fund distribute at least annually to its shareholders as
dividends at least 90% of its taxable and tax-exempt net investment income, the
excess of net short-term capital gain over net long-term capital loss earned in
each year and any other net income (except for the excess, if any, of net
long-term capital gain over net short-term capital loss, which need not be
distributed in order for the Fund to be treated as a regulated investment
company but such amount is taxed to the Fund if it is not distributed); and (c)
the Fund diversify its assets so that, at the close of each quarter of its
taxable year, (i) at least 50% of the fair market value of its total (gross)
assets is comprised of cash, cash items, U.S. Government securities, securities
of other regulated investment companies and other securities limited in respect
of any one issuer to no more than 5% of the fair market value of the Fund's
total assets and 10% of the outstanding voting securities of such issuer and
(ii) no more than 25% of the fair market value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies) or of two or more issuers
controlled by the Fund and engaged in the same, similar, or related trades or
businesses.
Each Fund is subject to a 4% nondeductible federal excise tax on amounts required to be but not distributed, as determined under a prescribed formula. The formula requires that a Fund distribute (or be deemed to have distributed) to shareholders during a calendar year at least 98% of the Fund's ordinary income (not including tax-exempt interest) for the calendar year, at least 98% of the excess of its capital gains over the capital losses realized during the one-year period ending October 31 during such year, as well as any income or gain (as so computed) from the prior calendar year that was not distributed for such year and on which the Fund paid no federal income tax. Each Fund has distribution policies that should generally enable it to avoid liability for this tax.
Net investment income for each Fund is the Fund's investment income less its expenses. Dividends from taxable net investment income and the excess, if any, of net short-term capital gain over net long-term capital loss of a Fund are treated under the Code as ordinary income, and dividends from net long-term capital gain in excess of net short-term capital loss ("capital gain dividends") are treated under the Code as long-term capital gain, for federal income tax purposes. These dividends are paid after taking into account, and reducing the distribution to the extent of, any available capital loss carryforwards. Distributions from a Fund's current or accumulated earnings and profits, as computed for Federal income tax purposes, will be treated as described above whether taken in shares or in cash. Certain distributions received in January may be treated as if paid by a Fund and received by a shareholder on December 31 of the prior year.
Dividends, including capital gain dividends, paid by a Fund shortly after a shareholder's purchase of shares have the effect of reducing the net asset value per share of his shares by the amount per share of the dividend distribution. Although such dividends are, in effect, a partial return of the shareholder's purchase price to the shareholder, they may be characterized as ordinary income or capital gain as described above.
Equity options (including options on stock and options on narrow-based stock
indices) and over-the-counter options on debt securities written or purchased by
a Fund are subject to tax the character of which will be determined under
Section 1234 of the Code. In general, no loss is recognized by a Fund upon
payment of a premium in connection with the purchase of a put or call option.
The character of any gain or loss recognized (i.e., long-term or short-term)
will generally depend, in the case of a lapse or sale of such option, on the
Fund's holding period for such option, and in the case of an exercise of a put
option, on the Fund's holding period for the underlying security. The purchase
of a put option may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying stock or security
or a substantially identical stock or security in the Fund's portfolio. The
exercise of a call option purchased by a Fund is not a taxable transaction for
the Fund. If a Fund writes a put or call option, no gain is recognized upon its
receipt of a premium. If such option lapses or is closed out, any gain or loss
is treated as a short-term capital gain or loss. If a call option is exercised,
whether the gain or loss is long-term or short-term depends on the holding
period of the underlying stock or security. The exercise of a put option written
by a Fund is not a taxable transaction for the Fund.
All futures contracts and foreign currency contracts entered into by a Fund and all listed nonequity options written or purchased by a Fund (including options on debt securities, options on futures contracts, options on securities indices and options on broad-based stock indices) are governed by Section 1256 of the Code. Absent a tax election to the contrary, gain or loss attributable to the lapse, exercise or closing out of any such position are treated as 60% long-term and 40% short-term capital gain or loss, and on the last trading day of a Fund's taxable year, all outstanding Section 1256 positions are marked to market (i.e., treated as if such positions were closed out at their closing price on such day), and any resulting gain or loss recognized as 60% is long-term and 40% short-term capital gain or loss. Under certain circumstances, entry into a futures contract to sell a security may constitute a short sale for federal income tax purposes, causing an adjustment in the holding period of the underlying security or a substantially identical security in a Fund's portfolio.
Because options, futures and currency activities of a Fund may increase the amount of gains from the sale of securities or investments held or treated as held for less than three months, the Funds may limit these transactions in order to comply with the 30% limitation described above.
Positions of a Fund which consist of at least one stock and at least one stock option or other position with respect to a related security which substantially diminishes the Fund's risk of loss with respect to such stock could be treated as a "straddle" which is governed by Section 1092 of the Code, the operation of which may cause deferral of losses, adjustments in the holding periods of stock or securities and conversion of short-term capital losses into long-term capital losses. An exception to these straddle rules exists for any "qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security not governed by Section 1256 and at least one futures or currency contract or listed nonequity option governed by Section 1256 which substantially diminishes the Fund's risk of loss with respect to such debt security are treated as a "mixed straddle." Although mixed straddles are subject to the straddle rules of Section 1092 of the Code, certain tax elections exist for them which reduce or eliminate the operation of these rules. Each Fund will monitor these transactions and may make certain tax elections in order to mitigate the operation of these rules and prevent disqualification of the Fund as a regulated investment company for federal income tax purposes.
These special tax rules applicable to options, futures and currency transactions could affect the amount, timing and character of a Fund's income or loss and hence of its distributions to shareholders by causing holding period adjustments, converting short-term capital losses into long-term capital losses, and accelerating a Fund's income or deferring its losses.
A Fund's investment in zero coupon securities or other securities having original issue discount (or market discount, if the Fund elects to include market discount in income currently) will generally cause it to realize income prior to the receipt of cash payments with respect to these securities. The mark to market rules described above may also require a Fund to recognize gains without a concurrent receipt of cash. In such case, a Fund will not be able to purchase additional income producing securities with the cash generated by the sale of such securities but will be required to use such cash to make such required distributions, and its current portfolio income may ultimately be reduced accordingly. In order to distribute this income or gains, maintain its qualification as a regulated investment company, and avoid federal income or excise taxes, the Fund may be required to liquidate portfolio securities that it might otherwise have continued to hold.
The Funds may be subject to foreign withholding or other foreign taxes with respect to income (possibly including, in some cases, capital gains) derived from foreign securities. These taxes may be reduced or eliminated under the terms of applicable tax treaties. However, the Funds will not be eligible to pass through to shareholders any foreign tax credits or deductions for foreign taxes paid by the Funds that are not thus reduced or eliminated. Certain foreign exchange gains and losses realized by the Funds with respect to such securities or related currency transactions will generally be treated as ordinary income and losses. Certain uses of foreign
currency and investments by the Funds in certain "passive foreign investment companies" may be limited in order to avoid adverse tax consequences for the Funds (or an election, if available, may be made with respect to such investments).
Different tax treatment, including a penalty on certain distributions, excess contributions or other transactions is accorded to accounts maintained as IRAs or other retirement plans. Investors should consult their tax advisers for more information.
Redemptions, including exchanges, of shares may give rise to recognized gains or losses, except as to those investors subject to tax provisions that do not require them to recognize such gains or losses. All or a portion of a loss realized upon the redemption of shares may be disallowed under "wash sale" rules to the extent shares are purchased (including shares acquired by means of reinvested dividends) within a 61-day period beginning 30 days before and ending 30 days after such redemption. Any loss realized upon a shareholder's sale, redemption or other disposition of shares with a tax holding period of six months or less will be treated as a long-term capital loss to the extent of any distribution of long-term capital gains with respect to such shares.
The Trust is organized as a Delaware business trust, and neither the Trust nor the Funds are subject to any corporate excise or franchise tax in the State of Delaware, nor are they liable for Delaware income taxes provided that each Fund qualifies as a regulated investment company for federal income tax purposes and satisfies certain income source requirements of Delaware law.
The foregoing discussion of U.S. federal income tax law does not address the special tax rules applicable to certain classes of investors, such as insurance companies. Each shareholder who is not a U.S. person should consider the U.S. and foreign tax consequences of ownership of shares of the Funds, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an applicable income tax treaty) on Fund distributions treated as ordinary dividends.
This discussion of the federal income tax treatment of the Funds and their distributions is based on the federal income tax law in effect as of the date of this Statement of Additional Information. Shareholders should consult their tax advisers about the application of the provisions of tax law described in this statement of additional information and about the possible application of state, local and foreign taxes in light of their particular tax situations.
IMPORTANT NOTICE REGARDING TAXPAYER IRS CERTIFICATION
Pursuant to IRS Regulations, the Funds may be required to withhold a percentage of all reportable payments including any taxable dividends, capital gain distributions or share redemption proceeds, at the rate in effect when such payments are made, for an account which does not have a taxpayer identification number or social security number and certain required certifications. The Funds reserve the right to refuse to open an account for any person failing to provide a taxpayer identification number along with the required certifications.
The Funds will furnish shareholders, within 31 days after the end of the calendar year, with information which is required by the Internal Revenue Service for preparing income tax returns. Investors are urged to consult their attorney or tax adviser regarding specific questions as to federal, foreign, state or local taxes.
THE DISTRIBUTOR
PEPCO also acts as the Distributor for the Funds 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. PEPCO is an indirect wholly-owned subsidiary of PNX and an affiliate of the Adviser and Subadviser. Shares of the Funds may be purchased through investment dealers who have sales agreements with the Distributor. William R. Moyer and John F. Sharry are officers of the Fund and of the Distributor.
For its services under the Underwriting Agreement, PEPCO receives sales charges on transactions in Trust shares and retains such charges less the portion thereof allowed to its registered representatives and to securities dealers and securities brokers with whom it has sales agreements. In addition, PEPCO may receive payments from the Trust pursuant to the Distribution Plans described below. For the fiscal years ended September 30, 2001, 2002 and 2003, purchasers of shares of the Funds paid aggregate sales charges of $634,128, $458,734 and $255,451, respectively, of which the distributor received net commissions of $141,256, $190,521 and $158,112, for its services, respectively, the balance being paid to dealers. For the fiscal year ended September 30, 2003, the distributor received net commissions of $35,625 for Class A Shares and deferred sales charges of $122,487 for Class B Shares and Class C Shares. In addition to these amounts, for the fiscal year ended September 30, 2003, W.S. Griffith Securities, Inc., an indirect subsidiary of PNX, was paid net selling commissions of $2,856, $6,084 and $723 on Class A Shares of the Bond Fund, Mid-Cap "EDGE" Fund and Equity Income Fund, respectively.
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 appropriate Class of outstanding voting securities of the Funds, or by vote of a majority of the Funds' Trustees who are not parties to the Underwriting Agreement or "interested persons" of any party and who have no direct or indirect financial interest in the operation of the distribution plans or in any related agreements. The Underwriting Agreement will terminate automatically in the event of its assignment.
DEALERS CONCESSIONS
Dealers with whom the Distributor has entered into sales agreements receive a discount or commission as described below.
BOND FUND
DEALER DISCOUNT
SALES CHARGE SALES CHARGE OR AGENCY FEE
AMOUNT OF TRANSACTION AS PERCENTAGE AS PERCENTAGE AS PERCENTAGE OF
AT OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED OFFERING PRICE
--------------------------------------------------------------------------------------------------------------------------
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 4.50% 4.71% 4.00%
$100,000 but under $250,000 3.50% 3.63% 3.00%
$250,000 but under $500,000 2.75% 2.83% 2.25%
$500,000 but under $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None
|
MID-CAP "EDGE"(SM) FUND AND EQUITY INCOME FUND
DEALER DISCOUNT
SALES CHARGE SALES CHARGE OR AGENCY FEE
AMOUNT OF TRANSACTION AS PERCENTAGE AS PERCENTAGE AS PERCENTAGE OF
AT OFFERING PRICE OF OFFERING PRICE OF AMOUNT INVESTED OFFERING PRICE
--------------------------------------------------------------------------------------------------------------------------
Under $50,000 5.75% 6.10% 5.25%
$50,000 but under $100,000 4.75% 4.99% 4.25%
$100,000 but under $250,000 3.75% 3.90% 3.25%
$250,000 but under $500,000 2.75% 2.83% 2.25%
$500,000 but under $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None
|
In addition to the dealer discount on purchases of Class A Shares, the Distributor intends to pay investment dealers a sales commission of 4% of the sale price of Class B Shares and a sales commission of 1% of the sale price of Class C Shares sold by such dealers. This sales commission will not be paid to dealers for sales of Class B Shares or Class C Shares purchased by 401(k) participants of the Merrill Lynch Daily K Plan due to a waiver of the CDSC for these Plan participants' purchases. 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. Such fees are in addition
to the sales commissions referenced above and may be based upon the amount of
sales of fund shares by a dealer; the provision of assistance in marketing of
fund shares; access to sales personnel and information dissemination services,
provision of recordkeeping and administrative services to qualified employee
benefit plans; and other criteria as established by the Distributor. 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. 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. Equity Planning reserves the right to
discontinue or alter such fee payment plans at any time.
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.
ADMINISTRATIVE SERVICES
Equity Planning also acts as administrative agent of the Trust and as such performs administrative, bookkeeping and pricing functions for the Funds. 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 all funds serviced by PFPC, at the following incremental annual rates.
First $5 billion 0.065% $5 billion to $10 billion 0.061% $10 billion to $15 billion 0.055% $15 billion to $20 billion 0.040% Greater than $20 billion 0.03% |
Percentage rates are applied to the aggregate daily net asset value of all funds serviced by PFPC. Certain minimum fees and fee waivers may apply. Total fees paid by Equity Planning to PFPC are allocated among all funds for which it serves as administrative agent on the basis of the relative net assets of each fund. As compensation for its services prior to January 1, 2003, the PFPC fee schedule used to determine a portion of PFPC's fee was applied at the individual fund level at an annual rate equal to 0.085% of a fund's average daily net assets up to $200 million, which rate was reduced at higher levels of net assets. For administrative services during the fiscal year ended September 30, 2001, 2002 and 2003, PEPCO received $287,633, $340,012 and $269,318, respectively.
DISTRIBUTION PLANS
The Trust has adopted a distribution plan for each class of shares (except Class X Shares) (i.e., a plan for the Class A Shares, a plan for the Class B Shares, and a plan for the Class C Shares; collectively, the "Plans") in accordance with Rule 12b-1 under the Act, to compensate the Distributor for the services it provides and for the expenses it bears under the Underwriting Agreement. Each class of shares pays a service fee at a rate of 0.25% per annum of the average daily net assets of such class of the Fund and a distribution fee based on average daily net assets at a rate of 0.75% per annum for Class B Shares and at a rate of 0.75% per annum for Class C Shares.
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. In the case of shares of the Funds being sold to an affiliated fund of funds, fees payable under the Plans shall be paid to the distributor of the fund of funds. 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 re-allowed 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 an additional compensation with respect to Class C Shares, 0.75% of the average annual net asset value of that class.
On a quarterly basis, the Funds' 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 Funds' 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 provide that they may not be amended to increase materially the costs which the Funds may bear pursuant to the Plans without approval of the shareholders of that Class of the Funds 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 Funds.
For the fiscal year ended September 30, 2003, the Funds paid Rule 12b-1 Fees in the amount of $956,611, of which the Distributor received $513,873, WS Griffith Securities, Inc., an affiliate, received $9,999 and unaffiliated broker-dealers received $432,739. The Rule 12b-1 payments were used for (1) compensation to dealers, $544,717; (2) compensation to sales personnel, $834,610; (3) advertising, $195,960; (4) service costs, $73,622; (5) printing and mailing of prospectuses to other than current shareholders, $8,124; and (6) other, $118,820.
The National Association of Securities Dealers, Inc. ("NASD"), regard 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 TRUST
The Trustees of the Trust are responsible for the overall supervision of the operations of the Trust and perform the various duties imposed on Trustees by the 1940 Act and Delaware business trust law.
TRUSTEES AND OFFICERS
Certain information about the Trustees and executive officers of the Trust is set forth below. Unless otherwise noted, the address of each individual is 56 Prospect Street, Hartford, Connecticut 06115-0480. There is no stated term of office for Trustees of the Trust.
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
LENGTH OF OVERSEEN PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, ADDRESS AND DATE OF BIRTH TIME SERVED BY TRUSTEE AND OTHER DIRECTORSHIPS HELD BY TRUSTEE
------------------------------- ----------- ---------- ---------------------------------------
E. Virgil Conway Served since 35 Chairman, Rittenhouse Advisors, LLC (consulting firm)
Rittenhouse Advisors, LLC 2000. since 2001. Trustee/Director, Pace University
101 Park Avenue (1978-present), Urstadt Biddle Property Corp.
New York, NY 10178 (1989-present), Greater New York Councils, Boy Scouts of
D.O.B. 8/2/29 America (1985-present), Josiah Macy, Jr., Foundation
(1975-present), Realty Foundation of New York
(1972-present), New York Housing Partnership Development
Corp. (Chairman) (1981-present) and Academy of Political
Science (Vice Chairman) (1985 to present). Chairman,
Metropolitan Transportation Authority (1992-2001).
Trustee/Director, Consolidated Edison Company of New
York, Inc. (1970-2002), Atlantic Mutual Insurance
Company (1974-2002), Centennial Insurance Company
(1974-2002), Union Pacific Corp. (1978-2002), Blackrock
Freddie Mac Mortgage Securities Fund (Advisory Director)
(1990-2000), Accuhealth (1994-2002), Trism, Inc.
(1994-2001) and The Harlem Youth Development Foundation
(1998-2002).
Harry Dalzell-Payne Served since 35 Currently retired.
The Flat, Elmore Court 1999.
Elmore, GL05, GL2 3NT U.K.
D.O.B. 8/9/29
Geraldine M. McNamara Served since 35 Managing Director, U.S. Trust Company of New York
United States Trust Company of NY 2001. (private bank) (1982-present).
114 West 47th Street
New York, NY 10036
D.O.B. 4/17/51
Everett L. Morris Served since 35 Vice President, W.H. Reaves and Company (investment
164 Laird Road 2000. management) (1993-2003).
Colts Neck, NJ 07722
D.O.B. 5/26/28
|
The individual listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, ADDRESS, DATE OF BIRTH LENGTH OF OVERSEEN PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND
AND POSITION(S) WITH TRUST TIME SERVED BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
-------------------------- ----------- ---------- -----------------------------------
*Philip R. McLoughlin Served since 78 Consultant, Phoenix Investment Partners, Ltd.
D.O.B. 10/23/46 1999. (2002-present), Director, PXRE Corporation (Delaware)
Chairman (1985-present), World Trust Fund (1991-present).
Chairman (1997-2002), Director (1995-2002), Vice
Chairman (1995-1997) and Chief Executive Officer
(1995-2002), Phoenix Investment Partners, Ltd. Director,
Executive Vice President and Chief Investment Officer,
The Phoenix Companies, Inc. (2001-2002). Director
(1994-2002) and Executive Vice President, Investments
(1988-2002), Phoenix Life Insurance Company. Director
(1983-2002) and Chairman (1995-2002), Phoenix Investment
Counsel, Inc. Director (1984-2002) and President
(1990-2000), Phoenix Equity Planning Corporation.
Chairman and Chief Executive Officer, Phoenix/Zweig
Advisers LLC (1999-2002). Director and President,
Phoenix Investment Management Company (2001-2002).
Director and Executive Vice President, Phoenix Life and
Annuity Company (1996-2002). Director (1995-2002) and
Executive Vice President (1994-2002), PHL Variable
Insurance Company. Director, Phoenix National Trust
Holding Company (2001-2002). Director (1985-2002) and
Vice President (1986-2002), PM Holdings, Inc.
(1985-2002). Director, PHL Associates, Inc. (1995-2002).
Director (1992-2002) and President (1992-1994), WS
Griffith Securities, Inc.
|
* Mr. McLoughlin is an "interested person" by reason of his relationship with Phoenix Investment Partners, Ltd., and its affiliates.
OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
POSITION(S) HELD
NAME, ADDRESS AND WITH TRUST AND PRINCIPAL OCCUPATION(S)
DATE OF BIRTH LENGTH OF TIME SERVED DURING PAST 5 YEARS
------------- --------------------- -------------------
Gail P. Seneca President since 1996. Managing Director, Equities, Phoenix Investment Counsel, Inc.
909 Montgomery St. (1998-present). President (1996 to present ) and Trustee (1996-2001),
San Francisco, CA 94133 Phoenix-Seneca Funds. Chief Investment Officer and Managing Member,
D.O.B. 1953 Seneca Capital Management LLC (1996-present). Chief Investment Officer
and Managing General Partner (1989-present), GMG/Seneca Capital
Management, L.P.
William R. Moyer Executive Vice Executive Vice President and Chief Financial Officer (1999-present),
D.O.B. 8/16/44 President since 2000. Senior Vice President and Chief Financial Officer (1995-1999), Phoenix
Investment Partners, Ltd. Director (1998-present), Senior Vice
President, Finance (1990-present), Chief Financial Officer
(1996-present), and Treasurer (1998-present), Phoenix Equity Planning
Corporation. Director (1998-present), Senior Vice President
(1990-present), Chief Financial Officer (1996-present) and Treasurer
(1994-present), Phoenix Investment Counsel, Inc. Senior Vice President
and Chief Financial Officer, Duff & Phelps Investment Management Co.
(1996-present). Vice President, Phoenix Fund Complex (1990-present).
John F. Sharry Executive Vice President, Private Client Group (1999-present), Executive Vice
D.O.B. 3/28/52 President since 2000. President, Retail Division (1997-1999), Phoenix Investment Partners,
Ltd. President, Private Client Group, Phoenix Equity Planning
Corporation (2000-present). Executive Vice President, Phoenix
Fund Complex (1998-present).
Nancy G. Curtiss Treasurer since 2000. Vice President, Fund Accounting (1994-present) and Treasurer
D.O.B. 11/24/52 (1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Fund Complex (1994-present).
Richard J. Wirth Secretary since 2002. Vice President and Insurance and Investment Products Counsel
One America Row (2002-present), Counsel (1993-2002), Phoenix Life Insurance Company
Hartford, CT 06102 (1993 to 2002). Secretary (2002 to present), Chief Legal Officer
D.O.B. 11/14/58 (2003-present), Phoenix Fund complex. Director (2003-present),
President (2003-present) and Assistant Secretary (2002-present),
Phoenix Variable Advisors, Inc.
|
COMMITTEES OF THE BOARD
The Board of Trustees has established several standing committees to oversee particular aspects of the Fund's management. They are:
The Audit Committee. The Audit Committee is responsible for overseeing the Fund's accounting and auditing policies and practices. The Committee reviews the Fund's financial reporting procedures, their system of internal control, the independent audit process, and the fund's procedures for monitoring compliance with investment restrictions and applicable laws and regulations and with the Code of Ethics. The Audit Committee is composed entirely of Independent Trustees; its members are E. Virgil Conway, Harry Dalzell-Payne, Geraldine M. McNamara and Everett L. Morris. The Committee met four times during the Trust's last fiscal year.
The Executive Committee. 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 as well as act on behalf of the Board when it is not in session, subject to limitations as set by the Board. Its members are E. Virgil Conway, Philip R. McLoughlin, and Geraldine M. McNamara. The Committee met one time during the Trust's last fiscal year.
The Nominating Committee. The Nominating Committee is responsible for evaluating the qualifications of potential candidates and making nominations for Independent Trustee membership, nominating committee members, periodically reviewing committee assignments and making recommendations concerning the responsibilities or the establishment of Board committees. The Nominating Committee is composed entirely of Independent Trustees; its members are E. Virgil Conway, Harry Dalzell-Payne, Geraldine M. McNamara and Everett L. Morris. The Committee does not currently have a policy regarding whether it will consider nominees recommended by shareholders. The Committee did not meet during the Trust's last fiscal year.
COMPENSATION
Trustees who are not interested persons of the Trust receive an annual retainer and fees and expenses for attendance at Board and Committee meetings. Officers of the Trust and Trustees who are interested persons of the Trust receive no compensation directly from the Trust for performing their duties of their offices, but are compensated for their services by the Adviser. The Trust does not have any retirement plan for its Trustees.
For the Trust's fiscal year ended September 30, 2003, the Trustees received the following compensation:
AGGREGATE TOTAL COMPENSATION FROM TRUST
COMPENSATION AND FUND COMPLEX (78 FUNDS)
NAME FROM TRUST PAID TO TRUSTEES
---- ---------- ----------------
E. Virgil Conway $8,438 $172,063
Harry Dalzell-Payne $7,500 $153,125
Philip R. McLoughlin $0 $0
Geraldine M. McNamara $7,500 $101,647
Everett L. Morris $8,188* $173,257
|
TRUSTEE OWNERSHIP OF SECURITIES
Set forth in the table below is the dollar range of equity securities owned by each Trustee as of January 20, 2004:
AGGREGATE DOLLAR RANGE OF
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE OWNERSHIP IN ALL FUNDS
IN ANY OF THE OVERSEEN BY TRUSTEE IN FAMILY OF
NAME OF TRUSTEE FUNDS OF THE TRUST INVESTMENT COMPANIES
--------------- ------------------ --------------------
E. Virgil Conway None $1 - $10,000
Harry Dalzell-Payne None None
Philip R. McLoughlin None Over $100,000
Geraldine M. McNamara None None
Everett L. Morris None Over $100,000
|
At January 20, 2004, the Trustees and officers as a group owned less than 1% of the then outstanding shares of the Fund.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of January 6, 2003 with respect to each person who owns of record or is known by the Trust to own of record or beneficially 5% or more of any class of the Trust's outstanding equity securities:
NAME OF SHAREHOLDER NAME OF FUND AND CLASS NUMBER OF SHARES PERCENT OF CLASS ------------------- ---------------------- ---------------- ---------------- A.G. Edwards & Sons, Inc. Equity Income Fund Class C Shares 5,495.634 5.80% FBO Diana L. Touchstone, TTEE David B. Touchstone IRREV One North Jefferson St. Louis, MO 63013-2287 American Express Trust Company Mid-Cap "EDGE"(SM) Fund Class X Shares 250,290.150 19.68% FBO American Express Trust Retirement Services Plans 996 AXP Financial Center Minneapolis, MN 55474-0009 |
NAME OF SHAREHOLDER NAME OF FUND AND CLASS NUMBER OF SHARES PERCENT OF CLASS ------------------- ---------------------- ---------------- ---------------- Atwell & CO-050 Mid-Cap "EDGE"(SM) Fund Class X Shares 65,748.042 5.17% PO Box 456 Wall Street Station New York, NY 10005 Bear Stearns Securities Corp. Bond Fund Class X Shares 373,165.146 10.51% FBO 120-01048-16 1 Metrotech Center North Brooklyn, NY 11201-3870 Bear Stearns Securities Corp. Bond Fund Class X Shares 191,208.591 5.38% FBO 120-01208-12 1 Metrotech Center North Brooklyn, NY 11201-3870 Bear Stearns Securities Corp. Mid-Cap "EDGE"(SM) Fund Class X Shares 68,992.512 5.42% FBO 120-00796-20 1 Metrotech Center North Brooklyn, NY 11201-3870 Bear Stearns Securities Corp. Equity Income Fund Class X Shares 70,801.098 5.78% FBO 120-00739-12 1 Metrotech Center North Brooklyn, NY 11201-3870 Charles Schwab & Co., Inc. Equity Income Fund Class A Shares 34,735.815 16.10% Special Custody Acct. For the Exclusive Benefit of Our Customers ATTN: Mutual Fund Operation 101 Montgomery Street San Francisco, CA 94104-4122 Charles Schwab & Co., Inc. Mid-Cap "EDGE"(SM) Fund Class A Shares 235,013.589 5.76% Special Custody Acct. For the Exclusive Benefit of Our Customers -PC ATTN: Mutual Funds 101 Montgomery Street San Francisco, CA 94104-4122 First & Co Mid-Cap "EDGE"(SM) Class X Shares 85,152.314 6.69% Attn Trust Operations 160 Main St Oneida, NY 13421-1629 First Clearing Corporation Equity Income Fund Class B Shares 4,854.039 5.27% P & F Hansen Trust 1443 Condor Lane Templeton, CA 93465-9808 First Republic Bank Equity Income Fund Class X Shares 849,473.873 69.31% First Republic Trust Co. 111 Pine Street San Francisco, CA 94111-5602 |
NAME OF SHAREHOLDER NAME OF FUND AND CLASS NUMBER OF SHARES PERCENT OF CLASS
------------------- ---------------------- ---------------- ----------------
First Union National Bank Bond Fund Class A Shares 134,568.350 5.82%
FBO The Phoenix OPT Plan
123 South Broad Street #PA4903
Philadelphia, PA 19109-1029
MCB Trust Services Cust Bond Fund Class A Shares 128,664.107 5.56%
Neumiller & Beardslee 401K Plan
700 17th St Ste 150
Denver, CO 80202-3502
MLPF&S for the Sole Benefit Bond Fund Class B Shares 256,692.952 29.22%
of its Customers Bond Fund Class C Shares 28,042.149 6.89%
Attn: Fund Administration Mid-Cap "EDGE"(SM) Fund Class A Shares 930,059.807 22.80%
4800 Deer Lake Dr. E., 3rd Flr. Mid-Cap "EDGE"(SM) Fund Class B Shares 721,625.824 43.09%
Jacksonville, FL 32246-6484 Mid-Cap "EDGE"(SM) Fund Class C Shares 1,378,674.623 63.26%
Equity Income Fund Class C Shares 15,746.539 12.01%
NFSC FEBO #F2J-000019 Mid-Cap "EDGE"(SM) Fund Class A Shares 480,592.152 11.78%
FIIOC as Agent for
Qualified Employee Benefit
Plans (401K) FINOPS-IC Funds
100 Magellan Way KW1C
Covington, KY 41015-1987
Pershing LLC Equity Income Fund Class B Shares 10,536.253 11.43%
PO Box 2052
Jersey City, NJ 07303-2052
Phoenix Equity Planning Corp. Equity Income Fund Class B Shares 9,687.405 10.51%
ATTN: Corporate Accounting Dept. Equity Income Fund Class C Shares 9,687.494 7.39%
C/O Gene Charon, Controller
56 Prospect St., 1CP8
Hartford, CT 06103-2818
Phoenix-Partner Select Wealth Bond Fund Class A Shares 307,179.862 13.27%
Builder Fund
C/O Phoenix Equity Planning S/O
Services
Attn: Chris Wilkos
101 Munson St
Greenfield, MA 01301-9684
Phoenix-Partner Select Wealth Bond Fund Class A Shares 306,887.572 13.26%
Guardian Fund
C/O Phoenix Equity Planning S/O
Services
Attn: Chris Wilkos
101 Munson St
Greenfield, MA 01301-9684
Prudential Securities, Inc Mid-Cap "EDGE"(SM) Fund Class A Shares 472,571.899 11.59%
Special Custody Account for the
Exclusive Benefit of Customers - PC
Attn: Mutual Funds
One New York Plaza
New York, NY 20005-1901
|
ADDITIONAL INFORMATION
CAPITAL STOCK AND ORGANIZATION
As a Delaware business trust, the Trust's operations are governed by its Agreement and Declaration of Trust dated December 18, 1995 (the "Declaration of Trust"). A copy of the Trust's Certificate of Trust, also dated December 18, 1995, is on file with the Office of the Secretary of State of the State of Delaware. Upon the initial purchase of shares, the shareholder agrees to be bound by the Trust's Declaration of Trust, as amended from time to time. Generally, Delaware business trust shareholders are not personally liable for obligations of the Delaware business trust under Delaware law. The Delaware Business Trust Act (the "Delaware Act") provides that a shareholder of a Delaware business trust shall be entitled to the same limitation of liability extended to shareholders of private for-profit corporations. The Trust's Declaration of Trust expressly provides that the Trust has been organized under the Delaware Act and that the Declaration of Trust is to be governed by Delaware law. It is nevertheless possible that a Delaware business trust, such as the Trust, might become a party to an action in another state whose courts refused to apply Delaware law, in which case the Trust's shareholders could be subject to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides that notice of such disclaimer may be given in each agreement,
obligation and instrument entered into or executed by the Trust or its Trustees,
(ii) provides for the indemnification out of Trust property of any shareholders
held personally liable for any obligations of the Trust or any series of the
Trust and (iii) provides that the Trust shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. Thus, the risk of a Trust shareholder
incurring financial loss beyond his or her investment because of shareholder
liability is limited to circumstances in which all of the following factors are
present: (1) a court refused to apply Delaware law; (2) the liability arose
under tort law or, if not, no contractual limitation of liability was in effect;
and (3) the Trust itself would be unable to meet its obligations. In the light
of Delaware law, the nature of the Trust's business and the nature of its
assets, the risk of personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Trust shall indemnify each of its Trustees and officers against liabilities and expenses reasonably incurred by them, in connection with, or arising out of, any action, suit or proceeding, threatened against or otherwise involving such Trustee or officer, directly or indirectly, by reason of being or having been a Trustee or officer of the Trust. The Declaration of Trust does not authorize the Trust to indemnify any Trustee or officer against any liability to which he or she would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person's duties.
Under the Declaration of Trust, the Trust is not required to hold annual meetings to elect Trustees or for other purposes. It is not anticipated that the Trust will hold shareholders' meetings unless required by law or the Declaration of Trust. The Trust will be required to hold a meeting to elect Trustees to fill any existing vacancies on the Board if, at any time, fewer than a majority of the Trustees have been elected by the shareholders of the Trust. The Board is required to call a meeting for the purpose of considering the removal of persons serving as Trustee if requested in writing to do so by the holders of not less than 10% of the outstanding shares of the Trust.
Shares of the Trust do not entitle their holders to cumulative voting rights, so that the holders of more than 50% of the outstanding shares of the Trust may elect all of the Trustees, in which case the holders of the remaining shares would not be able to elect any Trustees. As determined by the Trustees, shareholders are entitled to one vote for each dollar of net asset value (number of shares held times the net asset value of the applicable class of the applicable Fund).
Pursuant to the Declaration of Trust, the Trustees may create additional funds by establishing additional series of shares in the Trust. The establishment of additional series would not affect the interests of current shareholders in the existing four Funds. As of the date of this Statement of Additional Information, the Trustees have not determined to establish another series of shares in the Trust.
Pursuant to the Declaration of Trust, the Trustees may establish and issue multiple classes of shares for each Fund. As of the date of this Statement of Additional Information, the Trustees have authorized the issuance of four classes of shares for each series, designated Class X Shares, Class A Shares, Class B Shares and Class C Shares.
Each share of each class of a Fund is entitled to such dividends and distributions out of the income earned on the assets belonging to that Fund which are attributable to such class as are declared in the discretion of the Trustees. In the event of the liquidation or dissolution of the Trust, shares of each class of each Fund are entitled to receive their proportionate share of the assets which are attributable to such class of such Fund and which are available for distribution as the Trustees in their sole discretion may determine. Shareholders are not entitled to any preemptive, conversion or subscription rights. All shares, when issued, will be fully paid and non-assessable by the Trust.
Subject to shareholder approval (if then required), the Trustees may authorize each Fund to invest all or part of its investable assets in a single open-end investment company that has substantially the same investment objectives, policies and restrictions as
the Fund. As of the date of this Statement of Additional Information, the Trustees do not have any plan to authorize any Fund to so invest its assets.
"Phoenix-Seneca Funds" is the designation of the Trust for the time being under the Declaration of Trust, and all persons dealing with a Fund must look solely to the property of that Fund for the enforcement of any claims against that Fund as neither the Trustees, officers, agents nor shareholders assume any personal liability for obligations entered into on behalf of a Fund or the Trust. No Fund is liable for the obligations of any other Fund. Since the Funds use combined prospectuses, however, it is possible that one Fund might become liable for a misstatement or omission in its prospectus regarding the other Fund with which its disclosure is combined. The Trustees have considered this factor in approving the use of the combined prospectuses.
FINANCIAL STATEMENTS
The Funds' financial statements for the fiscal years ended September 30, 2003, included in the Funds' 2003 Annual Report to Shareholders are incorporated herein by reference.
REPORTS TO SHAREHOLDERS
The fiscal year of the Trust ends on September 30. The Trust will send financial statements to its shareholders at least semiannually. An annual report containing financial statements audited by the Fund's independent accountants, will be sent to shareholders each year.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP, 125 High Street, Boston, Massachusetts 02110, are the independent auditors for the Trust. Professional services performed by PricewaterhouseCoopers LLP include audits of the financial statements of the Trust, consultation on financial, accounting and reporting matters, review and consultation regarding various filings with the SEC and attendance at the meetings of the Audit Committee and Trustees.
CUSTODIAN AND TRANSFER AGENT
The Custodian of the Funds' assets is State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, 02101. The Trust has authorized the custodians to appoint one or more subcustodians for the assets of the Funds held outside the United States. The securities and other assets of the Funds are held by each Custodian or any subcustodian separate from the securities and assets of each other Fund.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds, Equity Planning acts as transfer agent for the Trust (the "Transfer Agent") for which it is paid $17.95 for each designated shareholder account plus out-of-pocket expenses. The Transfer Agent is authorized to engage subagents to perform certain shareholder servicing functions from time to time for which such agents shall be paid a fee by the Transfer Agent. Fees paid by the Fund, in addition to the fee paid to Equity Planning, will be reviewed and approved by the Board of Trustees.
APPENDIX
DESCRIPTION OF CERTAIN BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group the 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 fluctuations 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 that 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 that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's also provides credit ratings for preferred stocks. Preferred stock occupies a junior position to bonds within a particular capital structure and that these securities are rated within the universe of preferred stocks.
aaa--An issue that is rated "aaa" is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks.
aa--An issue that is rated "aa" is considered a high-grade preferred stock. This rating indicates that there is a reasonable assurance that earnings and asset protection will remain relatively well maintained in the foreseeable future.
a--An issue that is rated "a" is considered to be an upper-medium grade preferred stock. While risks are judged to be somewhat greater than in the "aaa" and "aa" classifications, earnings and asset protections are, nevertheless, expected to be maintained at adequate levels.
baa--An issue that is rated "baa" is considered to be a medium grade preferred stock, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time.
Moody's ratings for municipal notes and other short-term loans are designated Moody's Investment Grade (MIG). This distinction is in recognition of the differences between short-term and long-term credit risk. Loans bearing the designation MIG 1 are of the best quality, enjoying strong protection by establishing cash flows of funds for their servicing or by established and broad-based access to the market for refinancing, or both. Loans bearing the designation MIG 2 are of high quality, with margins of protection ample although not so large as in the preceding group. A short term issue having a demand feature (i.e., payment relying on external liquidity and usually payable on demand rather than fixed maturity dates) is differentiated by Moody's with the use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax-exempt commercial paper. These are promissory obligations (1) not having an original maturity in excess of nine months, and (2) backed by commercial banks. Notes bearing the designation P-1 have a superior capacity for repayment. Notes bearing the designation P-2 have a strong capacity for repayment.
STANDARD & POOR'S CORPORATION
AAA--Bonds rated AAA have the higher rating assigned by Standard & Poor's Corporation. 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 very 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 bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1 and SP-2. The designation SP-1 indicates a very strong capacity to pay principal and interest. A "+" is added for those issues determined to possess overwhelming safety characteristics. An "SP-2" designation indicates a satisfactory capacity to pay principal and interest.
Commercial paper rated A-2 or better by S&P is described as having a very strong degree of safety regarding timeliness and capacity to repay. Additionally, as a precondition for receiving an S&P commercial paper rating, a bank credit line and/or liquid assets must be present to cover the amount of commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity for repayment of short-term promissory obligations.
GLOSSARY
Commercial Paper: Short-term promissory notes of large corporations with excellent credit ratings issued to finance their current operations.
Certificates of Deposit: Negotiable certificates representing a commercial bank's obligations to repay funds deposited with it, earning specified rates of interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a draft which has been drawn on it by a customer. These obligations are backed by large banks and usually are backed by goods in international trade.
Time Deposits: Non-negotiable deposits in a banking institution earning a specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and other business organizations in order to finance their long-term credit needs.
Phoenix-Seneca Bond Fund
INVESTMENTS AT SEPTEMBER 30, 2003
MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- |
U.S. GOVERNMENT SECURITIES--7.1%
U.S. TREASURY BONDS--1.6%
U.S. Treasury Bond 6.25%, 5/15/30 ........... Aaa $ 991 $ 1,175,923
U.S. TREASURY NOTES--5.5%
U.S. Treasury Note 2%, 8/31/05 .............. Aaa 500 505,391
U.S. Treasury Inflationary Note 3.375%,
1/15/07(f) .................................. Aaa 495 631,990
U.S. Treasury Note 4.25%, 8/15/13 ........... Aaa 2,730 2,798,569
-----------
3,935,950
-----------
- -----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $5,132,268) 5,111,873
- -----------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED SECURITIES--18.0%
Fannie Mae 7.50%, 2/1/27 .................... Aaa 779 834,537
Fannie Mae 3.616%, 7/1/33(c) ................ Aaa 983 1,004,393
Fannie Mae 4.316%, 8/1/33(c) ................ Aaa 404 407,825
Fannie Mae 4.23%, 9/1/33(c) ................. Aaa 170 171,510
Fannie Mae 4.367%, 9/1/33(c) ................ Aaa 180 182,250
Fannie Mae 4.638%, 9/1/33(c) ................ Aaa 425 431,282
Freddie Mac 5.50%, '16-'22(e) ............... Aaa 4,699 4,922,090
Freddie Mac 6%, 2/15/30 ..................... Aaa 44 46,514
Freddie Mac 6.50%, 6/15/31 .................. Aaa 55 58,857
Freddie Mac 4.51%, 7/1/33(c) ................ Aaa 671 682,765
GNMA 4%, 10/20/32 ........................... Aaa 1,682 1,691,276
GNMA TBA 3%, 10/20/33 ...................... Aaa 2,550 2,543,625
- -----------------------------------------------------------------------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $12,870,934) 12,976,924
- -----------------------------------------------------------------------------
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
|
NON-AGENCY MORTGAGE-BACKED
SECURITIES--20.8%
Banc of America Commercial Mortgage, Inc. 00-1, A1A 7.109%, 11/15/31 ............. Aaa $ 579 $ 650,086 Bank of America-First Union NB Commercial Mortgage 01-3, A1 4.89%, 4/11/37 ..................................... Aaa 560 588,113 Bear Stearns Adjustable Rate Mortgage Trust 03-7, 7A 4.907%, 10/25/33(c) .......... Aaa 1,690 1,683,662 Bear Stearns Alternative A Trust 03-1, 1A 1.50%, 5/25/33(c) ........................... Aaa 288 288,162 Bear Stearns Commercial Mortgage Securities, Inc. 03-PWR2, A3 4.834%, 5/11/39 ..................................... Aaa 505 521,303 CDC Commercial Mortgage Trust 02-FX1, A1 5.252%, 5/15/19 .......................... Aaa 572 607,312 Countrywide Alternative Loan Trust 02-12, A3 5.40%, 11/25/32 .......................... Aaa 701 713,920 Countrywide Alternative Loan Trust 02-6, A5 6.50%, 7/25/32 ........................... AAA(d) 499 506,115 Countrywide Funding Corp. 94-1, A5 6.875%, 3/25/24 ............................. Aaa 734 733,813 CS First Boston Mortgage Securities Corp. 03-23, 5A1 6%, 9/25/33 ...................... Aaa 860 880,425 CS First Boston Mortgage Securities Corp. 03-AR24, 3A1 4.157%, 10/25/33(c) ............ Aaa 845 869,822 GMAC Mortgage Corporation Loan Trust 03-AR1, A6 4.653%, 10/19/33 ................. Aaa 255 253,446 LB - UBS Commercial Mortgage Trust 03-C3 2.599%, 3/15/08 ....................... Aaa 678 674,940 |
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
Master Asset Securitization Trust
Adjustable Rate Mortgages Trust
03-3, 3A3 4.844%, 9/25/33(c) ................ Aaa $ 960 $ 979,350
Master Asset Securitization Trust
Alternative Loans Trust 03-7, 5A1
6.25%, 11/25/33 ............................. Aaa 1,035 1,065,080
Master Asset Securitization Trust 03-5,
1A1 5.50%, 6/25/33 .......................... AAA(d) 1,403 1,404,726
Master Asset Securitization Trust 03-5, 4A4
5.50%, 6/25/33 .............................. AAA(d) 1,028 1,049,542
Morgan Stanley Dean Witter Capital I
02-IQ3, A1 3.48%, 9/15/37 ................... Aaa 668 683,749
Structured Asset Securities Corp. 03-14,
1A5 1.62%, 5/25/33(c) ....................... Aaa 435 435,793
Washington Mutual 01-WM4, A1 6%,
11/20/29 .................................... Aaa 88 88,423
Washington Mutual MSC Mortgage
Pass-Through Certificates 01-MS14, 1A4
6.25%, 12/25/31 ............................. Aaa 370 382,286
- -----------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $15,064,544) 15,060,068
- -----------------------------------------------------------------------------
|
CORPORATE BONDS--41.0%
AEROSPACE & DEFENSE--2.0%
Goodrich Corp. 7.625%, 12/15/12 ............. Baa 158 182,092
Goodrich Corp. 7%, 4/15/38 .................. Baa 210 206,239
Raytheon Co. 6.30%, 3/15/05(e) .............. Baa 595 631,202
Raytheon Co. 8.30%, 3/1/10 .................. Baa 330 403,858
-----------
1,423,391
-----------
AUTO PARTS & EQUIPMENT--0.3%
Delphi Corp. 6.50%, 8/15/13 ................. Baa 175 180,888
AUTOMOBILE MANUFACTURERS--1.8%
DaimlerChrysler NA Holding Corp. 7.75%,
6/15/05(e) .................................. A 380 414,086
Ford Motor Co. 7.45%, 7/16/31 ............... Baa 335 308,949
General Motors Corp. 8.375%, 7/15/33 ........ Baa 555 580,307
-----------
1,303,342
-----------
BROADCASTING & CABLE TV--5.9%
AMFM, Inc. 8%, 11/1/08(e) ................... Ba 639 731,655
Comcast Corp. 7.05%, 3/15/33 ................ Baa 445 487,708
Continental Cablevision, Inc. 8.875%,
9/15/05(e) .................................. Baa 465 520,460
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
CSC Holdings, Inc. Series B 7.625%,
4/1/11 ...................................... B $ 365 $ 365,912
EchoStar DBS Corp. 144A 5.75%,
10/1/08(b) .................................. Ba 360 362,250
Lenfest Communications, Inc. 10.50%,
6/15/06 ..................................... Ba 231 274,601
Liberty Media Corp. 2.64%, 9/17/06(c) ....... Baa 415 412,804
Liberty Media Corp. 3.50%, 9/25/06 .......... Baa 540 538,243
TCI Communications Financing III 9.65%,
3/31/27 ..................................... Ba 270 320,288
Turner Broadcasting System, Inc. 8.40%,
2/1/24 ...................................... Baa 207 218,932
-----------
4,232,853
-----------
BUILDING PRODUCTS--0.5%
American Standard, Inc. 7.625%, 2/15/10 ..... Ba 328 367,360
CASINOS & GAMING--0.8%
Boyd Gaming Corp. 7.75%, 12/15/12 ........... B 157 162,888
Park Place Entertainment Corp. 7.875%,
12/15/05 .................................... Ba 360 382,950
-----------
545,838
-----------
CONSUMER FINANCE--2.7%
American General Finance Corp. Series H
4.50%, 11/15/07 ............................. A 272 286,157
General Electric Capital Corp. Series A
2.85%, 1/30/06 .............................. Aaa 345 351,924
General Motors Acceptance Corp. 6.125%,
8/28/07 ..................................... A 311 328,810
Household Finance Corp. 7.875%, 3/1/07 ...... A 87 101,096
John Deere Capital Corp. Series D 4.125%,
7/15/05 ..................................... A 25 26,034
MBNA America Bank NA 5.375%, 1/15/08 ........ Baa 479 515,224
MBNA Corp. 5%, 6/15/15 ...................... Baa 335 323,756
-----------
1,933,001
-----------
ELECTRIC UTILITIES--1.7%
Alabama Power Co. 5.70%, 2/15/33 ............ A 315 314,084
Consolidated Edison Co. of New York
5.875%, 4/1/33 .............................. A 135 138,159
Progress Energy, Inc. 6.75%, 3/1/06 ......... Baa 376 412,608
Southern California Edison Co. 144A 8%,
2/15/07(b) .................................. Ba 330 370,425
-----------
1,235,276
-----------
|
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
ENVIRONMENTAL SERVICES--1.1%
Waste Management, Inc. 6.50%,
11/15/08(e) ................................. Baa $ 713 $ 796,288
FOOD RETAIL--0.3%
Kroger Co. 8%, 9/15/29(e) ................... Baa 200 245,546
FOREST PRODUCTS--0.4%
Weyerhaeuser Co. 6.875%, 12/15/33 ........... Baa 245 259,077
GAS UTILITIES--1.0%
NiSource Finance Corp. 7.625%,
11/15/05(e) ................................. Baa 661 730,966
GENERAL MERCHANDISE STORES--0.6%
Target Corp. 7%, 7/15/31 .................... A 375 431,777
HEALTH CARE FACILITIES--0.4%
HCA, Inc. 6.75%, 7/15/13 .................... Ba 245 257,782
HOMEBUILDING--2.8%
D.R. Horton, Inc. 7.50%, 12/1/07 ............ Ba 513 553,399
KB Home 7.75%, 2/1/10 ....................... Ba 445 471,700
NVR, Inc. 5%, 6/15/10 ....................... Ba 239 230,635
Ryland Group 5.375%, 6/1/08 ................. Ba 305 308,431
Toll Corp. 7.75%, 9/15/07 ................... Ba 65 67,031
Toll Corp. 8%, 5/1/09 ....................... Ba 350 369,250
-----------
2,000,446
-----------
HOTELS, RESORTS & CRUISE LINES--0.7%
Hilton Hotels Corp. 7.625%, 12/1/12 ......... Ba 294 322,665
Royal Caribbean Cruises Ltd. 8%, 5/15/10 .... Ba 30 31,800
Royal Caribbean Cruises Ltd. 8.75%,
2/2/11 ...................................... Ba 130 142,350
Royal Caribbean Cruises Ltd. 7.25%,
3/15/18 ..................................... Ba 22 20,460
-----------
517,275
-----------
HOUSEHOLD APPLIANCES--0.1%
Applica, Inc. 10%, 7/31/08 .................. B 48 50,520
HOUSEWARES & SPECIALTIES--0.5%
American Greetings Corp. Class A 6.10%,
8/1/28 ...................................... Ba 389 395,808
INTEGRATED OIL & GAS--0.9%
ConocoPhillips 3.625%, 10/15/07(e) .......... A 630 641,486
INTEGRATED TELECOMMUNICATION SERVICES--4.1%
Citizens Communications 8.50%, 5/15/06 ...... Baa 483 554,270
Sprint Capital Corp. 8.75%, 3/15/32(e) ...... Baa 905 1,075,351
Verizon Global Funding Corp. 7.75%,
12/1/30 ..................................... A 1,087 1,305,711
-----------
2,935,332
-----------
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
INVESTMENT BANKING & BROKERAGE--1.9%
Bear Stearns Co., Inc. 3%, 3/30/06(e) ....... A $ 735 $ 751,920
Goldman Sachs Group, Inc. 6.125%,
2/15/33 ..................................... Aa 440 447,048
Lehman Brothers Holdings, Inc. 4%,
1/22/08 ..................................... A 142 146,192
Morgan Stanley 3.625%, 4/1/08 ............... Aa 41 41,381
-----------
1,386,541
-----------
METAL & GLASS CONTAINERS--1.2%
Ball Corp. 6.875%, 12/15/12 ................. Ba 306 317,092
Owens-Brockway Glass Container, Inc.
8.875%, 2/15/09 ............................. B 298 318,860
Owens-Illinois, Inc. 7.15%, 5/15/05 ........ B 209 214,748
-----------
850,700
-----------
MOVIES & ENTERTAINMENT--0.7%
Time Warner, Inc. 9.125%, 1/15/13 ........... Baa 424 538,782
OIL & GAS EXPLORATION & PRODUCTION--0.2%
XTO Energy, Inc. 6.25%, 4/15/13 ............. Ba 160 166,400
PACKAGED FOODS & MEATS--2.4%
ConAgra Foods, Inc. 7.50%, 9/15/05(e) ....... Baa 715 789,247
Dean Foods Co. 8.15%, 8/1/07(e) ............. Ba 443 483,424
Kraft Foods, Inc. 4%, 10/1/08 ............... A 445 449,183
-----------
1,721,854
-----------
PROPERTY & CASUALTY INSURANCE--0.2%
Fund American Cos., Inc. 5.875%, 5/15/13 .... Baa 170 172,986
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.3%
LNR Property Corp. 144A 7.625%,
7/15/13(b) .................................. Ba 235 243,225
REGIONAL BANKS--0.5%
Colonial Bank 9.375%, 6/1/11 ................ Ba 338 394,224
REITS--0.3%
Archstone-Smith Trust 7.90%, 2/15/16 ........ Baa 191 232,939
RESTAURANTS--1.2%
Yum! Brands, Inc. 7.70%, 7/1/12(e) .......... Ba 748 832,150
THRIFTS & MORTGAGE FINANCE--2.1%
Golden West Financial Corp. 4.75%,
10/1/12 ..................................... A 513 523,912
Sovereign Bank Class A-1 144A 10.20%,
6/30/05(b)(e) ............................... Baa 942 1,019,762
-----------
1,543,674
-----------
|
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
TOBACCO--0.4%
Altria Group, Inc. 7.20%, 2/1/07 ............ Baa $ 175 $ 187,665
DIMON, Inc. Series B 9.625%, 10/15/11 ....... Ba 120 134,100
-----------
321,765
-----------
TRUCKING--1.0%
Avis Group Holdings, Inc. 11%, 5/1/09 ....... Baa 169 187,590
Hertz Corp. 4.70%, 10/2/06 .................. Baa 515 517,384
-----------
704,974
-----------
- -----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $28,142,866) 29,594,466
- -----------------------------------------------------------------------------
|
FOREIGN GOVERNMENT SECURITIES--1.0%
MEXICO--1.0%
United Mexican States 6.375%, 1/16/13 ....... Baa 351 370,305 United Mexican States 8%, 9/24/22 ........... Baa 296 326,340 - ----------------------------------------------------------------------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $639,823) 696,645 - ----------------------------------------------------------------------------- |
FOREIGN CORPORATE BONDS--6.4%
CANADA--3.1%
Abitibi-Consolidated, Inc. 8.30%, 8/1/05 .... Ba 345 365,890
Cascades, Inc. 144A 7.25%, 2/15/13(b) ....... Ba 296 303,400
Corus Entertainment, Inc. 8.75%, 3/1/12 ..... B 82 89,790
IPSCO, Inc. 144A 8.75%, 6/1/13(b) ........... Ba 206 216,300
Norske Skog Canada Ltd. Series D
8.625%, 6/15/11 ............................. Ba 180 188,325
Rogers Cablesystems Series B 10%,
3/15/05 ..................................... Ba 270 290,925
Telus Corp. 7.50%, 6/1/07 ................... Ba 1 1,126
Tembec Industries, Inc. 8.625%, 6/30/09 ..... Ba 190 188,100
Tembec Industries, Inc. 8.50%, 2/1/11 ....... Ba 205 200,900
TransCanada Pipelines Ltd. 4%, 6/15/13 ...... A 470 443,878
-----------
2,288,634
-----------
FRANCE--0.5%
Crown European Holdings SA 144A
9.50%, 3/1/11(b) ............................ B 365 394,200
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------- -----------
NETHERLANDS--1.1%
ABN Amro Bank NV 144A 4.65%,
6/4/18(b) ................................... A $ 240 $ 227,727
Deutsche Telekom International Finance BV
8.25%, 6/15/05 .............................. Baa 495 545,167
-----------
772,894
-----------
UNITED KINGDOM--1.7%
BP Capital Markets plc 2.625%, 3/15/07 ...... Aa 360 362,154
British Sky Broadcasting Group plc 8.20%,
7/15/09(e) .................................. Ba 715 849,521
-----------
1,211,675
-----------
- -----------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $4,640,476) 4,667,403
- -----------------------------------------------------------------------------
|
CONVERTIBLE BONDS--1.0%
SHORT-TERM OBLIGATIONS--13.3%
TOTAL INVESTMENTS--108.6%
(IDENTIFIED COST $76,816,219) 78,445,066(a)
Other assets and liabilities, net--(8.6)% (6,243,698)
-----------
NET ASSETS--100.0% $72,201,368
===========
|
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $1,841,726 and gross
depreciation of $233,860 for federal income tax purposes. At September 30,
2003, the aggregate cost of securities for federal income tax purposes was
$76,837,200.
(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 September 30,
2003, these securities amounted to a value of $3,137,289 or 4.4% of net
assets.
(c) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(d) As rated by Standard & Poor's or Fitch.
(e) All or a portion segregated as collateral for delayed delivery contracts.
(f) Principal amount is adjusted daily pursuant to the change in the Consumer
Price Index.
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
ASSETS
Investment securities at value
(Identified cost $76,816,219) $78,445,066
Cash 63,667
Receivables
Investment securities sold 2,719,981
Interest 661,043
Fund shares sold 47,220
Prepaid expenses 1,708
-----------
Total assets 81,938,685
-----------
LIABILITIES
Payables
Investment securities purchased 9,590,631
Fund shares repurchased 33,401
Transfer agent fee 18,013
Distribution and service fees 16,520
Investment advisory fee 15,518
Financial agent fee 6,972
Trustees' fee 878
Payable to adviser 77
Accrued expenses 55,307
-----------
Total liabilities 9,737,317
-----------
NET ASSETS $72,201,368
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $69,937,584
Undistributed net investment income 431,853
Accumulated net realized gain 203,084
Net unrealized appreciation 1,628,847
-----------
NET ASSETS $72,201,368
===========
CLASS X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $35,966,391) 3,337,408
Net asset value and offering price per share $10.78
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $21,263,023) 1,990,406
Net asset value per share $10.68
Offering price per share $10.68/(1-4.75%) $11.21
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $10,218,398) 972,808
Net asset value and offering price per share $10.50
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $4,753,556) 451,779
Net asset value and offering price per share $10.52
|
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2003
INVESTMENT INCOME
Interest $3,586,424
----------
Total investment income 3,586,424
----------
EXPENSES
Investment advisory fee 373,661
Service fees, Class A 53,609
Distribution and service fees, Class B 108,379
Distribution and service fees, Class C 50,673
Financial agent fee 88,867
Transfer agent 96,610
Professional 42,514
Registration 42,248
Custodian 27,330
Printing 16,399
Trustees 11,086
Miscellaneous 20,519
----------
Total expenses 931,895
Less expenses borne by investment adviser (60,889)
Custodian fees paid indirectly (570)
----------
Net expenses 870,436
----------
NET INVESTMENT INCOME 2,715,988
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 2,948,318
Net change in unrealized appreciation (depreciation) on
investments 166,483
----------
NET GAIN ON INVESTMENTS 3,114,801
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,830,789
==========
|
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
9/30/03 9/30/02
----------- -----------
FROM OPERATIONS
Net investment income (loss) $ 2,715,988 $ 3,519,396
Net realized gain (loss) 2,948,318 (781,445)
Net change in unrealized appreciation (depreciation) 166,483 1,729,657
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,830,789 4,467,608
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (1,492,195) (2,299,950)
Net investment income, Class A (778,490) (840,732)
Net investment income, Class B (318,986) (374,903)
Net investment income, Class C (149,071) (186,987)
Net realized short-term gains, Class X (217,767) (726,361)
Net realized short-term gains, Class A (132,351) (276,722)
Net realized short-term gains, Class B (68,404) (134,769)
Net realized short-term gains, Class C (31,478) (67,218)
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (3,188,742) (4,907,642)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (931,093 and 875,484 shares, respectively) 9,890,760 8,953,585
Net asset value of shares issued from reinvestment of distributions
(149,298 and 286,441 shares, respectively) 1,572,658 2,919,131
Cost of shares repurchased (2,422,700 and 1,123,032 shares, respectively) (25,366,816) (11,438,951)
----------- -----------
Total (13,903,398) 433,765
----------- -----------
CLASS A
Proceeds from sales of shares (952,708 and 1,068,591 shares, respectively) 9,955,589 10,885,294
Net asset value of shares issued from reinvestment of distributions
(65,813 and 67,268 shares, respectively) 688,645 680,360
Cost of shares repurchased (1,080,334 and 566,845 shares, respectively) (11,324,986) (5,743,494)
----------- -----------
Total (680,752) 5,822,160
----------- -----------
CLASS B
Proceeds from sales of shares (292,241 and 385,681 shares, respectively) 3,004,971 3,867,119
Net asset value of shares issued from reinvestment of distributions
(26,320 and 34,119 shares, respectively) 270,800 340,424
Cost of shares repurchased (341,941 and 176,399 shares, respectively) (3,536,816) (1,759,987)
----------- -----------
Total (261,045) 2,447,556
----------- -----------
CLASS C
Proceeds from sales of shares (195,645 and 246,752 shares, respectively) 2,009,923 2,471,471
Net asset value of shares issued from reinvestment of distributions
(13,767 and 20,043 shares, respectively) 141,868 200,275
Cost of shares repurchased (255,505 and 143,299 shares, respectively) (2,625,231) (1,436,614)
----------- -----------
Total (473,440) 1,235,132
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (15,318,635) 9,938,613
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (12,676,588) 9,498,579
NET ASSETS
Beginning of period 84,877,956 75,379,377
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $431,853 AND $454,609, RESPECTIVELY] $72,201,368 $84,877,956
=========== ===========
|
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2003 2002(8) 2001 2000 1999
Net asset value, beginning of period $10.39 $10.44 $10.16 $10.35 $10.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.41 0.48 0.70 0.77 0.69
Net realized and unrealized gain (loss) 0.46 0.12 0.26 (0.18) (0.31)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.87 0.60 0.96 0.59 0.38
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.42) (0.49) (0.68) (0.71) (0.62)
Distributions from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.48) (0.65) (0.68) (0.78) (0.71)
------ ------ ------ ------ ------
Change in net asset value 0.39 (0.05) 0.28 (0.19) (0.33)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.78 $10.39 $10.44 $10.16 $10.35
====== ====== ====== ====== ======
Total return 8.57% 5.94% 9.84% 6.17% 3.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $35,966 $48,606 $48,448 $39,981 $34,853
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 0.86%(5) 0.82%(6) 0.84%(6) 0.90%(3)(6) 1.06%(3)(5)
Net investment income 3.93% 4.75% 6.79% 7.67% 6.60%
Portfolio turnover 244% 410% 170% 74% 95%
CLASS A
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2003 2002(8) 2001 2000 1999
Net asset value, beginning of period $10.29 $10.37 $10.11 $10.29 $10.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.38 0.44 0.67 0.75 0.59
Net realized and unrealized gain (loss) 0.45 0.11 0.26 (0.18) (0.33)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.83 0.55 0.93 0.57 0.26
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.38) (0.47) (0.67) (0.68) (0.56)
Distributions from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.44) (0.63) (0.67) (0.75) (0.65)
------ ------ ------ ------ ------
Change in net asset value 0.39 (0.08) 0.26 (0.18) (0.39)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.68 $10.29 $10.37 $10.11 $10.29
====== ====== ====== ====== ======
Total return(2) 8.28% 5.50% 9.54% 5.84% 2.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $21,263 $21,127 $15,376 $7,335 $2,732
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 1.15%(5) 1.15%(5) 1.15%(7) 1.15%(7) 1.88%(5)
Net investment income 3.65% 4.38% 6.42% 7.60% 5.80%
Portfolio turnover 244% 410% 170% 74% 95%
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.13% and
3.41% for the periods ended September 30, 2000 and 1999, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.21%,
1.22%, 1.27%, 1.81% and 4.08% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(5)The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratio would not significantly differ.
(6) For the periods ended September 30, 2002, 2001 and 2000, the ratio of
operating expenses to average net assets includes the effect of expense
offsets for custodian fees; if expense offsets were excluded, the ratio
would have been 0.83%, 0.85% and 0.91%, respectively.
(7) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratio would have been 1.16%.
(8) As required, effective October 1, 2001, the Fund has adopted the provisions
of AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the year ended September 30, 2002, was to decrease the ratio of
net investment income to average net assets from 4.80% to 4.75% and from
4.44% to 4.38% for Class X and Class A, respectively; to decrease net
investment income (loss) per share from 0.49 to 0.48 per share and from 0.45
to 0.44 per share for Class X and Class A, respectively; and, to increase
net realized and unrealized gain (loss) from 0.11 to 0.12 per share and from
0.10 to 0.11 per share for Class X and Class A, respectively. Per share
ratios and supplemental data for prior periods have not been restated to
reflect this change.
|
See Notes to Financial Statements
Phoenix-Seneca Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2003 2002(7) 2001 2000 1999
Net asset value, beginning of period $10.13 $10.25 $10.04 $10.27 $10.67
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.30 0.36 0.57 0.68 0.52
Net realized and unrealized gain (loss) 0.44 0.11 0.28 (0.20) (0.33)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.74 0.47 0.85 0.48 0.19
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.31) (0.43) (0.64) (0.64) (0.50)
Distributions from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.37) (0.59) (0.64) (0.71) (0.59)
------ ------ ------ ------ ------
Change in net asset value 0.37 (0.12) 0.21 (0.23) (0.40)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.50 $10.13 $10.25 $10.04 $10.27
====== ====== ====== ====== ======
Total return(2) 7.43% 4.83% 8.67% 5.06% 1.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $10,218 $10,093 $7,713 $3,086 $1,593
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 1.90%(5) 1.90%(5) 1.90%(6) 1.90%(6) 2.62%(5)
Net investment income 2.91% 3.63% 5.64% 6.83% 5.09%
Portfolio turnover 244% 410% 170% 74% 95%
CLASS C
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2003 2002(7) 2001 2000 1999
Net asset value, beginning of period $10.15 $10.26 $10.06 $10.27 $10.67
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.30 0.36 0.58 0.69 0.49
Net realized and unrealized gain (loss) 0.44 0.12 0.26 (0.20) (0.30)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.74 0.48 0.84 0.49 0.19
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.31) (0.43) (0.64) (0.63) (0.50)
Distributions from net realized gains (0.06) (0.16) -- (0.07) (0.09)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.37) (0.59) (0.64) (0.70) (0.59)
------ ------ ------ ------ ------
Change in net asset value 0.37 (0.11) 0.20 (0.21) (0.40)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.52 $10.15 $10.26 $10.06 $10.27
====== ====== ====== ====== ======
Total return(2) 7.42% 4.83% 8.65% 5.12% 1.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $4,754 $5,052 $3,842 $1,957 $444
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 1.90%(5) 1.90%(5) 1.90%(6) 1.90%(6) 2.91%(5)
Net investment income 2.91% 3.63% 5.69% 6.88% 4.71%
Portfolio turnover 244% 410% 170% 74% 95%
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.10%,
2.16%, 2.35%, 3.08% and 5.67% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.41%,
2.50%, 2.78%, 4.08% and 9.50% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(5) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratio would not significantly differ.
(6) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratio would have been 1.91%.
(7) As required, effective October 1, 2001, the Fund has adopted the provisions
of AICPA Audit and Accounting Guide for Investment Companies and began
including paydown gains and losses in interest income. The effect of this
change for the year ended September 30, 2002, was to decrease the ratio of
net investment income to average net assets from 3.69% to 3.63% for Class B
and Class C; to decrease net investment income (loss) per share from 0.37 to
0.36 per share for Class B and Class C; and, to increase net realized and
unrealized gain (loss) from 0.10 to 0.11 per share and from 0.11 to 0.12 per
share for Class B and Class C, respectively. Per share ratios and
supplemental data for prior periods have not been restated to reflect this
change.
|
See Notes to Financial Statements
Phoenix-Seneca Mid-Cap "EDGE"SM Fund
INVESTMENTS AT SEPTEMBER 30, 2003
SHARES VALUE
-------- ------------
COMMON STOCKS--87.5%
APPAREL RETAIL--2.4%
TJX Cos., Inc. (The) ............................. 172,240 $ 3,344,901
BIOTECHNOLOGY--9.4%
Chiron Corp.(b) .................................. 89,506 4,626,565
Gilead Sciences, Inc.(b) ......................... 75,470 4,221,037
MedImmune, Inc.(b) ............................... 125,110 4,129,881
------------
12,977,483
------------
COMMUNICATIONS EQUIPMENT--2.1%
Corning, Inc.(b) ................................. 304,860 2,871,781
COMPUTER & ELECTRONICS RETAIL--1.8%
Circuit City Stores, Inc. ........................ 263,150 2,507,819
COMPUTER STORAGE & PERIPHERALS--3.2%
Network Appliance, Inc.(b) ....................... 212,430 4,361,188
CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS--2.3%
PACCAR, Inc. ..................................... 42,800 3,196,732
CONSUMER FINANCE--2.5%
Providian Financial Corp.(b) ..................... 294,700 3,474,513
DATA PROCESSING & OUTSOURCED SERVICES--3.3%
Fiserv, Inc.(b) .................................. 126,820 4,594,689
ELECTRONIC MANUFACTURING SERVICES--5.6%
Jabil Circuit, Inc.(b) ........................... 132,710 3,457,096
Sanmina-SCI Corp.(b) ............................. 441,639 4,283,898
------------
7,740,994
------------
EMPLOYMENT SERVICES--1.7%
Monster Worldwide, Inc.(b) ....................... 92,080 2,318,574
GENERAL MERCHANDISE STORES--3.2%
Dollar Tree Stores, Inc.(b) ...................... 132,510 4,439,085
HEALTH CARE EQUIPMENT--2.1%
Zimmer Holdings, Inc. ............................ 52,300 2,881,730
HEALTH CARE FACILITIES--1.5%
Manor Care, Inc. ................................. 67,300 2,019,000
SHARES VALUE
-------- ------------
HOME FURNISHINGS--2.0%
Mohawk Industries, Inc.(b) ....................... 38,560 $ 2,750,099
HOTELS, RESORTS & CRUISE LINES--1.6%
Starwood Hotels & Resorts Worldwide, Inc. ........ 64,320 2,238,336
INDUSTRIAL MACHINERY--2.9%
Ingersoll-Rand Co. Class A ....................... 74,670 3,990,365
INTERNET SOFTWARE & SERVICES--2.3%
VeriSign, Inc.(b) ................................ 229,600 3,092,712
LEISURE PRODUCTS--0.5%
Hasbro, Inc. ..................................... 34,320 641,098
OIL & GAS EQUIPMENT & SERVICES--2.6%
Cooper Cameron Corp.(b) .......................... 78,270 3,616,857
PHARMACEUTICALS--6.8%
Barr Laboratories, Inc.(b) ....................... 63,690 4,344,295
IVAX Corp.(b) .................................... 213,470 4,184,012
Pharmaceutical Resources, Inc.(b) ................ 12,530 854,796
------------
9,383,103
------------
RESTAURANTS--4.1%
Starbucks Corp.(b) ............................... 96,290 2,773,152
Yum! Brands, Inc.(b) ............................. 94,930 2,811,827
------------
5,584,979
------------
SEMICONDUCTOR EQUIPMENT--2.5%
KLA-Tencor Corp.(b) .............................. 65,480 3,365,672
SEMICONDUCTORS--2.3%
Altera Corp.(b) .................................. 170,510 3,222,639
SOFT DRINKS--2.2%
Coca-Cola Enterprises, Inc. ...................... 157,110 2,994,517
SPECIALTY STORES--7.0%
PETsMART, Inc.(b) ................................ 120,320 2,731,264
Staples, Inc.(b) ................................. 116,270 2,761,413
Williams-Sonoma, Inc.(b) ......................... 153,830 4,150,333
------------
9,643,010
------------
|
See Notes to Financial Statements
Phoenix-Seneca Mid-Cap "EDGE"SM Fund
SHARES VALUE
-------- ------------
SYSTEMS SOFTWARE--4.0%
Adobe Systems, Inc. .............................. 69,420 $ 2,725,429
Symantec Corp.(b) ................................ 44,550 2,807,541
------------
5,532,970
------------
TECHNOLOGY DISTRIBUTORS--2.0%
CDW Corp. ........................................ 48,150 2,780,181
THRIFTS & MORTGAGE FINANCE--3.6%
New York Community Bancorp, Inc. ................. 157,173 4,952,521
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $115,907,521) 120,517,548
- -----------------------------------------------------------------------------
|
FOREIGN COMMON STOCKS--2.9%
TOTAL INVESTMENTS--96.1%
(IDENTIFIED COST $127,829,707) 132,324,679(a)
Other assets and liabilities, net--3.9% 5,334,685
------------
NET ASSETS--100.0% $137,659,364
============
|
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $8,714,323 and gross
depreciation of $4,219,351 for federal income tax purposes. At September 30,
2003, the aggregate cost of securities for federal income tax purposes was
$127,829,707.
(b) Non-income producing.
See Notes to Financial Statements
Phoenix-Seneca Mid-Cap "EDGE"SM Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
ASSETS
Investment securities at value
(Identified cost $127,829,707) $132,324,679
Cash 283
Receivables
Investment securities sold 10,108,052
Fund shares sold 241,792
Dividends and interest 13,173
Prepaid expenses 3,222
------------
Total assets 142,691,201
------------
LIABILITIES
Payables
Investment securities purchased 4,509,155
Fund shares repurchased 212,609
Investment advisory fee 106,820
Transfer agent fee 66,942
Distribution and service fees 63,228
Financial agent fee 10,200
Trustees' fee 878
Accrued expenses 62,005
------------
Total liabilities 5,031,837
------------
NET ASSETS $137,659,364
============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $215,892,795
Accumulated net realized loss (82,728,403)
Net unrealized appreciation 4,494,972
------------
NET ASSETS $137,659,364
============
CLASS X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $18,005,103) 1,210,018
Net asset value and offering price per share $14.88
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $63,365,168) 4,357,336
Net asset value per share $14.54
Offering price per share $14.54/(1-5.75%) $15.43
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $24,171,526) 1,742,118
Net asset value and offering price per share $13.87
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $32,117,567) 2,314,760
Net asset value and offering price per share $13.88
|
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2003
INVESTMENT INCOME
Dividends $ 502,807
Interest 19,253
-----------
Total investment income 522,060
-----------
EXPENSES
Investment advisory fee 1,076,676
Service fees, Class A 161,320
Distribution and service fees, Class B 233,737
Distribution and service fees, Class C 319,694
Financial agent fee 127,974
Transfer agent 357,739
Printing 62,421
Registration 52,511
Professional 40,833
Custodian 16,016
Trustees 11,086
Miscellaneous 18,342
-----------
Total expenses 2,478,349
Less expenses borne by investment adviser (215,880)
Custodian fees paid indirectly (3)
-----------
Net expenses 2,262,466
-----------
NET INVESTMENT LOSS (1,740,406)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (9,256,160)
Net change in unrealized appreciation (depreciation) on
investments 33,021,742
-----------
NET GAIN ON INVESTMENTS 23,765,582
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $22,025,176
===========
|
See Notes to Financial Statements
Phoenix-Seneca Mid-Cap "EDGE"SM Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
9/30/03 9/30/02
------------ ------------
FROM OPERATIONS
Net investment income (loss) $ (1,740,406) $ (2,144,534)
Net realized gain (loss) (9,256,160) (41,965,558)
Net change in unrealized appreciation (depreciation) 33,021,742 3,627,837
------------ ------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 22,025,176 (40,482,255)
------------ ------------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (567,444 and 245,953 shares, respectively) 7,557,348 4,301,629
Cost of shares repurchased (254,379 and 253,619 shares, respectively) (3,346,680) (4,129,658)
------------ ------------
Total 4,210,668 171,971
------------ ------------
CLASS A
Proceeds from sales of shares (1,673,842 and 3,287,089 shares, respectively) 22,497,136 55,903,216
Cost of shares repurchased (2,734,805 and 2,177,539 shares, respectively) (36,063,026) (35,463,581)
------------ ------------
Total (13,565,890) 20,439,635
------------ ------------
CLASS B
Proceeds from sales of shares (251,861 and 720,227 shares, respectively) 3,179,186 11,693,404
Cost of shares repurchased (426,167 and 378,710 shares, respectively) (5,331,313) (5,666,375)
------------ ------------
Total (2,152,127) 6,027,029
------------ ------------
CLASS C
Proceeds from sales of shares (417,888 and 1,318,694 shares, respectively) 5,334,001 21,920,511
Cost of shares repurchased (762,053 and 728,101 shares, respectively) (9,688,751) (11,582,879)
------------ ------------
Total (4,354,750) 10,337,632
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (15,862,099) 36,976,267
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS 6,163,077 (3,505,988)
NET ASSETS
Beginning of period 131,496,287 135,002,275
------------ ------------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY] $137,659,364 $131,496,287
============ ============
|
See Notes to Financial Statements
Phoenix-Seneca Mid-Cap "EDGE"SM Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $12.51 $15.70 $ 31.18 $17.78 $13.81
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.11) (0.13) (0.14) (0.19) (0.21)
Net realized and unrealized gain (loss) 2.48 (3.06) (12.91) 15.65 4.72
------ ------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.37 (3.19) (13.05) 15.46 4.51
------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Distributions from net realized gains -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
Change in net asset value 2.37 (3.19) (15.48) 13.40 3.97
------ ------ ------- ------ ------
NET ASSET VALUE, END OF PERIOD $14.88 $12.51 $ 15.70 $31.18 $17.78
====== ====== ======= ====== ======
Total return 18.94 % (20.32)% (44.25)% 91.81 % 33.02 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $18,005 $11,219 $14,198 $23,016 $10,640
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.15 %(3)(5) 1.15 %(3) 1.15 %(3)(5) 1.27 %(3) 1.96 %
Net investment income (loss) (0.77)% (0.75)% (0.61)% (0.72)% (1.27)%
Portfolio turnover 164 % 135 % 96 % 124 % 192 %
CLASS A
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $12.25 $15.41 $ 30.75 $17.60 $13.75
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.13) (0.16) (0.19) (0.24) (0.31)
Net realized and unrealized gain (loss) 2.42 (3.00) (12.72) 15.45 4.70
------ ------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.29 (3.16) (12.91) 15.21 4.39
------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Distributions from net realized gains -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
Change in net asset value 2.29 (3.16) (15.34) 13.15 3.85
------ ------ ------- ------ ------
NET ASSET VALUE, END OF PERIOD $14.54 $12.25 $ 15.41 $30.75 $17.60
====== ====== ======= ====== ======
Total return(2) 18.69 % (20.51)% (44.42)% 91.30 % 32.27 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $63,365 $66,384 $66,411 $50,150 $6,457
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.40 %(4)(5) 1.40 %(4) 1.40 %(4)(5) 1.47 %(4) 2.51 %
Net investment income (loss) (1.01)% (0.99)% (0.86)% (0.91)% (1.81)%
Portfolio turnover 164 % 135 % 96 % 124 % 192 %
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.24%,
1.24%, 1.22% and 1.43% for the periods ended September 30, 2003, 2002, 2001
and 2000, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.55%,
1.46%, 1.40% and 1.59% for the periods ended September 30, 2003, 2002, 2001
and 2000, respectively.
(5) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratio would not significantly differ.
|
See Notes to Financial Statements
Phoenix-Seneca Mid-Cap "EDGE"SM Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $11.78 $14.93 $ 30.09 $17.41 $13.73
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.23) (0.28) (0.34) (0.45) (0.47)
Net realized and unrealized gain (loss) 2.32 (2.87) (12.39) 15.19 4.69
------ ------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.09 (3.15) (12.73) 14.74 4.22
------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Distributions from net realized gains -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
Change in net asset value 2.09 (3.15) (15.16) 12.68 3.68
------ ------ ------- ------ ------
NET ASSET VALUE, END OF PERIOD $13.87 $11.78 $ 14.93 $30.09 $17.41
====== ====== ======= ====== ======
Total return(2) 17.74 % (21.10)% (44.83)% 89.49 % 31.05 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $24,172 $22,577 $23,519 $15,879 $1,676
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 2.15 %(5) 2.15 % 2.15 %(5) 2.29 % 3.45 %
Net investment income (loss) (1.76)% (1.74)% (1.61)% (1.73)% (2.78)%
Portfolio turnover 164 % 135 % 96 % 124 % 192 %
CLASS C
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $11.78 $14.93 $ 30.08 $17.40 $13.72
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.22) (0.28) (0.34) (0.45) (0.47)
Net realized and unrealized gain (loss) 2.32 (2.87) (12.38) 15.19 4.69
------ ------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 2.10 (3.15) (12.72) 14.74 4.22
------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Distributions from net realized gains -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
TOTAL DISTRIBUTIONS -- -- (2.43) (2.06) (0.54)
------ ------ ------- ------ ------
Change in net asset value 2.10 (3.15) (15.15) 12.68 3.68
------ ------ ------- ------ ------
NET ASSET VALUE, END OF PERIOD $13.88 $11.78 $ 14.93 $30.08 $17.40
====== ====== ======= ====== ======
Total return(2) 17.83 % (21.10)% (44.81)% 89.54 % 31.07 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $32,118 $31,317 $30,874 $18,218 $975
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 2.15 %(5) 2.15 % 2.15 %(5) 2.25 % 3.45 %
Net investment income (loss) (1.76)% (1.74)% (1.61)% (1.68)% (2.78)%
Portfolio turnover 164 % 135 % 96 % 124 % 192 %
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.46%,
2.43%, 2.34%, 2.70% and 6.33% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.26%,
2.21%, 2.20%, 2.65% and 9.03% for the periods ended September 30, 2003,
2002, 2001, 2000 and 1999, respectively.
(5) The ratio of operating expenses to average net assets includes the effect of
expense offsets for custodian fees; if expense offsets were excluded, the
ratio would not significantly differ.
|
See Notes to Financial Statements
Phoenix-Seneca Real Estate Securities Fund
INVESTMENTS AT SEPTEMBER 30, 2003
SHARES VALUE
-------- -----------
COMMON STOCKS--86.6%
REAL ESTATE INVESTMENT TRUSTS--66.7%
DIVERSIFIED--8.3%
Cresent Real Estate Equities Co. ................. 30,000 $ 435,000
iStar Financial, Inc. ............................ 39,450 1,536,578
- -----------------------------------------------------------------------------
TOTAL DIVERSIFIED 1,971,578
- -----------------------------------------------------------------------------
|
INDUSTRIAL/OFFICE--10.1%
MIXED--3.7%
Reckson Associates Realty Corp. .................. 38,050 879,335
OFFICE--6.4%
Equity Office Properties Trust ................... 24,445 672,971
Glenborough Realty Trust, Inc. ................... 10,900 205,574
Trizec Properties, Inc. .......................... 50,900 624,034
-----------
1,502,579
-----------
- -----------------------------------------------------------------------------
TOTAL INDUSTRIAL/OFFICE 2,381,914
- -----------------------------------------------------------------------------
|
MORTGAGE--15.7%
COMMERCIAL FINANCING--7.5%
Newcastle Investment Corp. ....................... 54,100 1,243,759
RAIT Investment Trust ............................ 2,500 57,400
Arbor Realty Trust, Inc. Units 144A(b)(c)(d)(f) .. 6,250 470,313
-----------
1,771,472
-----------
HOME FINANCING--8.2%
Novastar Financial, Inc. ......................... 6,300 362,061
Redwood Trust, Inc. .............................. 36,900 1,564,560
-----------
1,926,621
-----------
- -----------------------------------------------------------------------------
TOTAL MORTGAGE 3,698,093
- -----------------------------------------------------------------------------
SHARES VALUE
-------- -----------
|
RESIDENTIAL--22.8%
APARTMENTS--19.4%
Archstone-Smith Trust ............................ 27,546 $ 726,663
Avalonbay Communities, Inc. ...................... 14,850 694,980
Equity Residential ............................... 24,400 714,432
Essex Property Trust, Inc. ....................... 28,950 1,815,455
Post Properties, Inc. ............................ 22,900 623,567
-----------
4,575,097
-----------
MANUFACTURED HOMES--3.4%
Manufactured Home Communities, Inc. .............. 20,700 811,026
- -----------------------------------------------------------------------------
TOTAL RESIDENTIAL 5,386,123
- -----------------------------------------------------------------------------
|
RETAIL--7.1%
REGIONAL MALLS--5.4%
Simon Property Group, Inc. ....................... 29,115 1,268,832 SHOPPING CENTERS--1.7% Kimco Realty Corp. ............................... 10,000 409,700 - ----------------------------------------------------------------------------- TOTAL RETAIL 1,678,532 - ----------------------------------------------------------------------------- SPECIALTY--2.7% American Financial Realty Trust .................. 45,000 634,500 - ----------------------------------------------------------------------------- TOTAL REAL ESTATE INVESTMENT TRUSTS (IDENTIFIED COST $12,705,127) 15,750,740 - ----------------------------------------------------------------------------- |
REAL ESTATE OPERATING COMPANIES--1.8%
See Notes to Financial Statements
Phoenix-Seneca Real Estate Securities Fund
SHARES VALUE
-------- -----------
BUILDING PRODUCTS--3.8%
Masco Corp. ...................................... 37,000 $ 905,760
(Identified cost $930,650)
DIVERSIFIED COMMERCIAL SERVICES--0.3%
Cendant Corp.(b) ................................. 4,100 76,629
(Identified cost $46,658)
THRIFTS & MORTGAGE FINANCE--14.0%
Fannie Mae ....................................... 20,000 1,404,000
Freddie Mac ...................................... 20,000 1,047,000
Washington Mutual, Inc. .......................... 21,500 846,455
-----------
(Identified cost $3,395,501) 3,297,455
-----------
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $17,798,561) 20,450,584
- -----------------------------------------------------------------------------
|
CONVERTIBLE PREFERRED STOCKS--9.2%
REAL ESTATE INVESTMENT TRUSTS--9.2%
INDUSTRIAL/OFFICE--9.2%
MIXED--4.2%
Reckson Associates Realty Corp. Series A Cv. Pfd.
7.625% ........................................... 40,000 1,002,000
OFFICE--5.0%
Glenborough Realty Trust, Inc. Series A Cv. Pfd.
7.75% ............................................ 49,150 1,178,125
- -----------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $1,837,514) 2,180,125
- -----------------------------------------------------------------------------
TOTAL LONG TERM INVESTMENTS--95.8%
(IDENTIFIED COST $19,636,075) 22,630,709
- -----------------------------------------------------------------------------
PAR
VALUE
(000) VALUE
-------- -----------
|
SHORT-TERM OBLIGATIONS--9.5%
TOTAL INVESTMENTS--105.3%
(IDENTIFIED COST $21,881,075) 24,875,709(a)
Other assets and liabilities, net--(5.3)% (1,248,274)
-----------
NET ASSETS--100.0% $23,627,435
===========
|
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $3,973,070 and gross
depreciation of $1,035,550 for federal income tax purposes. At September 30,
2003, the aggregate cost of securities for federal income tax purposes was
$21,938,189.
(b) Non income-producing.
(c) 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 September 30,
2003, these securities amounted to a value of $890,313 or 3.8% of net
assets. For acquisition information, see Notes to Financial Statements.
(d) Illiquid. At September 30, 2003, these securities amounted to a value of
$890,313 or 3.8% of net assets.
(e) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. At September 30, 2003, this security which is
included in illiquid securities above, amounted to a value of $420,000 or
1.8% of net assets.
(f) Units entitle holder to shares of stock and warrants.
See Notes to Financial Statements
Phoenix-Seneca Real Estate Securities Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
ASSETS
Investment securities at value,
(Identified cost $21,881,075) $24,875,709
Cash 68
Receivables
Dividends and interest 136,319
Fund shares sold 19,270
Prepaid expenses 514
-----------
Total assets 25,031,880
-----------
LIABILITIES
Payables
Investment securities purchased 1,145,375
Fund shares repurchased 177,576
Investment advisory fee 14,362
Transfer agent fee 12,595
Financial agent fee 4,285
Distribution and service fees 2,935
Trustees' fee 878
Accrued expenses 46,439
-----------
Total liabilities 1,404,445
-----------
NET ASSETS $23,627,435
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $20,151,323
Accumulated net realized gain 481,478
Net unrealized appreciation 2,994,634
-----------
NET ASSETS $23,627,435
===========
CLASS X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $17,753,559) 1,163,459
Net asset value and offering price per share $15.26
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,978,623) 200,130
Net asset value per share $14.88
Offering price per share $14.88/(1-5.75%) $15.79
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,117,329) 75,307
Net asset value and offering price per share $14.84
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,777,924) 119,751
Net asset value and offering price per share $14.85
|
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2003
INVESTMENT INCOME
Dividends $ 815,444
Interest 4,394
----------
Total investment income 819,838
----------
EXPENSES
Investment advisory fee 189,026
Service fees, Class A 6,311
Distribution and service fees, Class B 9,365
Distribution and service fees, Class C 13,523
Financial agent fee 52,477
Transfer agent 80,948
Professional 39,185
Registration 36,140
Printing 12,777
Trustees 11,086
Custodian 8,767
Miscellaneous 9,835
----------
Total expenses 469,440
Less expenses borne by investment adviser (27,463)
Custodian fees paid indirectly (33)
----------
Net expenses 441,944
----------
NET INVESTMENT INCOME 377,894
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 1,879,902
Net realized loss on written options (133,229)
Net change in unrealized appreciation (depreciation) on
investments 3,864,630
----------
NET GAIN ON INVESTMENTS 5,611,303
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,989,197
==========
|
See Notes to Financial Statements
Phoenix-Seneca Real Estate Securities Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
9/30/03 9/30/02
----------- -----------
FROM OPERATIONS
Net investment income (loss) $ 377,894 $ 812,174
Net realized gain (loss) 1,746,673 1,276,254
Net change in unrealized appreciation (depreciation) 3,864,630 (2,150,646)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,989,197 (62,218)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (343,679) (799,965)
Net investment income, Class A (22,710) (72,548)
Net investment income, Class B (5,058) (16,495)
Net investment income, Class C (6,447) (16,756)
Net realized short-term gains, Class X (370,029) --
Net realized short-term gains, Class A (49,537) --
Net realized short-term gains, Class B (12,720) --
Net realized short-term gains, Class C (19,415) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (829,595) (905,764)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (35,379 and 410,208 shares, respectively) 465,027 5,303,637
Net asset value of shares issued from reinvestment of distributions
(51,915 and 58,066 shares, respectively) 691,255 760,765
Cost of shares repurchased (380,751 and 386,311 shares, respectively) (5,045,694) (5,169,932)
----------- -----------
Total (3,889,412) 894,470
----------- -----------
CLASS A
Proceeds from sales of shares (216,922 and 177,962 shares, respectively) 2,701,734 2,296,733
Net asset value of shares issued from reinvestment of distributions
(4,966 and 4,974 shares, respectively) 64,703 63,526
Cost of shares repurchased (235,156 and 165,182 shares, respectively) (2,852,530) (2,124,815)
----------- -----------
Total (86,093) 235,444
----------- -----------
CLASS B
Proceeds from sales of shares (75,743 and 51,904 shares, respectively) 1,076,762 674,381
Net asset value of shares issued from reinvestment of distributions
(1,275 and 1,246 shares, respectively) 16,460 15,827
Cost of shares repurchased (85,797 and 14,145 shares, respectively) (1,178,515) (178,481)
----------- -----------
Total (85,293) 511,727
----------- -----------
CLASS C
Proceeds from sales of shares (50,351 and 75,376 shares, respectively) 665,381 978,001
Net asset value of shares issued from reinvestment of distributions
(1,544 and 1,049 shares, respectively) 20,202 13,281
Cost of shares repurchased (32,144 and 19,160 shares, respectively) (418,176) (241,271)
----------- -----------
Total 267,407 750,011
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (3,793,391) 2,391,652
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 1,366,211 1,423,670
NET ASSETS
Beginning of period 22,261,224 20,837,554
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND $0, RESPECTIVELY] $23,627,435 $22,261,224
=========== ===========
|
See Notes to Financial Statements
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $12.07 $12.62 $11.89 $ 9.69 $11.11
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.27 0.49 0.42 0.34 0.47
Net realized and unrealized gain (loss) 3.46 (0.51) 0.69 2.35 (1.20)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.73 (0.02) 1.11 2.69 (0.73)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.26) (0.53) (0.38) (0.49) (0.44)
Distributions from net realized gains (0.28) -- -- -- (0.25)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.54) (0.53) (0.38) (0.49) (0.69)
------ ------ ------ ------ ------
Change in net asset value 3.19 (0.55) 0.73 2.20 (1.42)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.26 $12.07 $12.62 $11.89 $ 9.69
====== ====== ====== ====== ======
Total return 31.60% (0.42)% 9.52% 29.00% (6.66)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $17,754 $17,584 $17,349 $16,713 $17,346
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.61%(6) 1.55 %(5) 1.59%(4) 1.79% 1.66 %
Net investment income 2.06% 3.73 % 3.49% 3.35% 4.50 %
Portfolio turnover 91% 111 % 40% 65% 5 %
CLASS A
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $11.78 $12.32 $11.67 $ 9.54 $11.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) 0.11 0.32 0.25 0.21 0.32
Net realized and unrealized gain (loss) 3.36 (0.51) 0.67 2.30 (1.19)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.47 (0.19) 0.92 2.51 (0.87)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.12) (0.35) (0.27) (0.38) (0.34)
Distributions from net realized gains (0.25) -- -- -- (0.25)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.37) (0.35) (0.27) (0.38) (0.59)
------ ------ ------ ------ ------
Change in net asset value 3.10 (0.54) 0.65 2.13 (1.46)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.88 $11.78 $12.32 $11.67 $ 9.54
====== ====== ====== ====== ======
Total return(2) 29.90% (1.73)% 7.96% 27.40% (7.97)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $2,979 $2,515 $2,410 $1,437 $919
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.92%(5) 2.83 %(5) 3.05%(3)(5) 3.05%(3) 3.05 %(3)
Net investment income 0.89% 2.50 % 2.11% 2.11% 3.13 %
Portfolio turnover 91% 111 % 40% 65% 5 %
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets
would have been 3.18%, 4.28% and 4.27% for the periods ended September 30, 2001, 2000 and 1999, respectively.
(4) For the year ended September 30, 2001, the ratio of operating expenses to average net assets includes the effect of expense
offsets for custodian fees; if expense offsets were excluded, the ratio would have been 1.60%.
(5) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense
offsets were excluded, the ratios would not significantly differ.
(6) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fee; if expense
offsets were excluded, the ratio would have been 1.62%.
|
See Notes to Financial Statements
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $11.74 $12.28 $11.66 $ 9.55 $11.01
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1) (0.01) 0.20 0.17 0.12 0.29
Net realized and unrealized gain (loss) 3.36 (0.50) 0.65 2.31 (1.22)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.35 (0.30) 0.82 2.43 (0.93)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.07) (0.24) (0.20) (0.32) (0.28)
Distributions from net realized gains (0.18) -- -- -- (0.25)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.25) (0.24) (0.20) (0.32) (0.53)
------ ------ ------ ------ ------
Change in net asset value 3.10 (0.54) 0.62 2.11 (1.46)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.84 $11.74 $12.28 $11.66 $ 9.55
====== ====== ====== ====== ======
Total return(2) 28.82 % (2.63)% 7.21% 26.37% (8.59)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,117 $987 $554 $287 $197
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(3) 3.80 %(6) 3.80 %(6) 3.80%(5) 3.80% 3.80 %
Net investment income (0.09)% 1.59 % 1.43% 1.19% 2.79 %
Portfolio turnover 91 % 111 % 40% 65% 5 %
CLASS C
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
2003 2002 2001 2000 1999
Net asset value, beginning of period $11.75 $12.28 $11.66 $ 9.55 $11.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)(1) (0.02) 0.21 0.16 0.14 0.29
Net realized and unrealized gain (loss) 3.37 (0.50) 0.66 2.29 (1.22)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 3.35 (0.29) 0.82 2.43 (0.93)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.07) (0.24) (0.20) (0.32) (0.28)
Distributions from net realized gains (0.18) -- -- -- (0.25)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.25) (0.24) (0.20) (0.32) (0.53)
------ ------ ------ ------ ------
Change in net asset value 3.10 (0.53) 0.62 2.11 (1.46)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.85 $11.75 $12.28 $11.66 $ 9.55
====== ====== ====== ====== ======
Total return(2) 28.80 % (2.47)% 7.12% 26.37% (8.58)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,778 $1,175 $525 $329 $200
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses(4) 3.80 %(6) 3.80 %(6) 3.80%(5) 3.80% 3.80 %
Net investment income (0.18)% 1.63 % 1.38% 1.36% 2.80 %
Portfolio turnover 91 % 111 % 40% 65% 5 %
(1) Computed using average shares outstanding.
(2) Maximum sales charge is not reflected in the total return calculation.
(3) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets
would have been 5.61%, 6.17%, 9.33%, 15.48% and 18.50% for the periods ended September 30, 2003, 2002, 2001, 2000 and 1999,
respectively.
(4) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets
would have been 4.58%, 6.10%, 9.18%, 13.58% and 19.95% for the periods ended September 30, 2003, 2002, 2001, 2000 and 1999,
respectively.
(5) For the year ended September 30, 2001, the ratio of operating expenses to average net assets includes the effect of expense
offsets for custodian fees; if expense offsets were excluded, the ratio would have been 3.81%.
(6) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense
offsets were excluded, the ratios would not significantly differ.
|
See Notes to Financial Statements
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
1. ORGANIZATION
Phoenix-Seneca Funds (the "Trust") is organized as a Delaware business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Currently, three Funds are offered for sale (each a "Fund"). The Bond Fund is diversified and has an investment objective of high total return from both current income and capital appreciation. The Mid-Cap "EDGE"SM Fund is diversified and has an investment objective of capital appreciation. The Real Estate Securities Fund is non-diversified and has an investment objective of high total return in both current income and long-term capital appreciation.
Each Fund offers Class X, Class A, Class B and Class C shares. Class X shares are sold without a sales charge. Class A shares of Bond Fund are sold with a front-end sales charge of up to 4.75%. Class A shares of Mid-Cap "EDGE"SM Fund and Real Estate Securities Fund are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge which declines from 5% to zero depending on the period of time the shares are held. Class C shares are sold with a 1% contingent deferred sales charge if redeemed within one year of purchase. Each class of shares has identical voting, dividend, liquidation and other rights and the same terms and conditions, except that each class bears different distribution and/or service expenses and has exclusive voting rights with respect to its distribution plan. Class X bears no distribution and/or service expenses. Income and expenses and realized and unrealized gains and losses of each Fund are borne pro rata by the holders of each class of shares, except for transfer agent and registration expenses which are unique to each class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities; revenues and expenses. Actual results could differ from those estimates.
A. SECURITY VALUATION:
Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded, or or if no closing price is available, at the last bid price. 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 fair value as determined in good faith by or under the direction of the Trustees.
Certain securities held by the Bond Fund were valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold. At September 30, 2003, the total value of these securities represented approximately 7.33% of net assets.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date or, in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Trust amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
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, each 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 are recorded by each Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences may include the treatment of non-taxable dividends, market premium and discount, non-deductible expenses, expiring capital loss carryovers, foreign currency gain or loss, gain or loss on futures contracts, partnerships, operating losses and losses deferred due to wash sales. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital.
E. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement dates of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust 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.
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 (CONTINUED)
F. OPTIONS:
Each Fund may write covered options or purchase options contracts for the purpose of hedging against changes in the market value of the underlying securities or foreign currencies.
Each Fund will realize a gain or loss upon the expiration or closing of the option transaction. Gains and losses on written options are reported separately in the Statement of Operations. When a written option is exercised, the proceeds on sales or amounts paid are adjusted by the amount of premium received. Options written are reported as a liability in the Statement of Assets and Liabilities and subsequently marked-to-market to reflect the current value of the option. The risk associated with written options is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, or if a liquid secondary market does not exist for the contracts.
Each Fund may purchase options which are included in the Funds' Schedule of Investments and subsequently marked-to-market to reflect the current value of the option. When a purchased option is exercised, the cost of the security is adjusted by the amount of premium paid. The risk associated with purchased options is limited to the premium paid. At September 30, 2003, the Trust had no options outstanding.
G. EXPENSES:
Expenses incurred by the Trust with respect to more than one Fund are allocated in proportion to the net assets of each Fund, except where allocation of direct expense to each Fund or an alternative allocation method can be more fairly made. Fund expenses that are not related to the distribution of shares of a particular class or to services provided specifically to a particular class are allocated among the classes on the basis of relative average daily net assets of each class. Expenses that relate to the distribution of shares or services provided to a particular class are allocated to that class.
H. REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction where a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. Each Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. If the seller defaults and the value of the collateral declines, or if the seller enters insolvency proceedings, realization of collateral may be delayed or limited.
I. WHEN-ISSUED AND DELAYED TRANSACTIONS:
Each Fund may engage in when-issued or delayed delivery transactions. Each Fund records when-issued securities on the trade date and maintains collateral for the securities purchased. Securities purchased on when-issued or delayed delivery basis begin earning interest on the settlement date.
3. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Adviser, Phoenix Investment Counsel, Inc., an indirect, wholly-owned subsidiary of The Phoenix Companies, Inc. ("PNX") is entitled to a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund:
Adviser
Fee
-------
Bond Fund ......................................................... 0.50%
Mid-Cap "EDGE"SM Fund ............................................. 0.80%
Real Estate Securities Fund ....................................... 0.85%
|
The Adviser has voluntarily agreed to reimburse each Fund's operating expenses through January 31, 2004, to the extent that such expenses exceed the following percentages of average annual net assets:
Class X Class A Class B Class C
------- ------- ------- -------
Bond Fund .............................. 0.90% 1.15% 1.90% 1.90%
Mid-Cap "EDGE"SM Fund .................. 1.15% 1.40% 2.15% 2.15%
Real Estate Securities Fund ............ 2.35% 3.05% 3.80% 3.80%
|
Seneca Capital Management LLC ("Seneca") is the subadviser to each of the Funds. A majority of the equity interests of Seneca are owned by Phoenix Investment Partners, Ltd. ("PXP"), an indirect, wholly-owned subsidiary of PNX. The Adviser pays the subadviser a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund:
Bond Fund ............................................................... 0.25% Mid-Cap "EDGE"SM Fund ................................................... 0.40% Real Estate Securities Fund ............................................. 0.425% |
As Distributor of the Trust's shares, Phoenix Equity Planning Corporation ("PEPCO"), an indirect, wholly-owned subsidiary of PNX has advised the Trust that it retained net selling commissions and deferred sales charges for the period ended September 30, 2003, as follows:
Class A Class B Class C
Net Selling Deferred Deferred
Commissions Sales Charges Sales Charges
----------- ------------- -------------
Bond Fund ......................... $7,279 $26,360 $1,986
Mid-Cap "EDGE"SM Fund ............. 8,410 84,505 6,924
Real Estate Securities Fund ....... 1,446 1,621 1,091
|
In addition to these amounts, the following was paid to W.S. Griffith Securities, Inc., an indirect subsidiary of PNX, for Class A net selling commissions:
Bond Fund .............................................................. $2,856 Mid-Cap "EDGE"SM Fund .................................................. 6,084 Real Estate Securities Fund ............................................ 723 |
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 (CONTINUED)
In addition, each Fund pays PEPCO distribution and/or service fees at an annual rate of 0.25% for Class A shares, 1.00% for Class B shares and 1.00% for Class C shares applied to the average daily net assets of each respective class. The Distributor has advised the Trust that the total amount expensed for the period ended September 30, 2003 is as follows:
Distribution Distribution Distribution
and/or and/or Service and/or Service
Service Fees Fees Paid to Fees Paid to
Retained by Unaffiliated W.S. Griffith
Distributor Participants Securities, Inc.
------------ -------------- ----------------
Bond Fund ....................... $109,870 $ 98,838 $3,953
Mid-Cap "EDGE"SM Fund ........... 385,022 324,428 5,301
Real Estate Securities Fund ..... 18,981 9,473 745
|
As Financial Agent of the Trust, 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 tax services and oversight of the subagent's performance. For the period ended September 30, 2003 financial agent fees were $269,318 as reported in the Statement of Operations of which PEPCO received $37,987 per Fund. Effective January 1, 2003, the fee schedule of PFPC Inc. ranges from 0.065% to 0.03% of the average daily net asset values of all the Phoenix funds serviced by PFPC Inc. Prior to that date, the fee schedule ranged from 0.085% to 0.0125%. Certain minimum fees may apply.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust Company as sub-transfer agent. For the period ended September 30, 2003 transfer agent fees were $535,297 as reported in the Statement of Operations, of which PEPCO retained the following:
Transfer Agent
Fee Retained
--------------
Bond Fund ..................................................... $ --
Mid-Cap "EDGE"SM Fund ......................................... 71,696
Real Estate Securities Fund ................................... --
|
At September 30, 2003, PNX and affiliates and the retirement plans of PNX and affiliates held Phoenix-Seneca Funds shares which aggregated the following:
Aggregate
Net Asset
Shares Value
-------- ----------
Bond Fund
Class X .................................. 24,155 $ 260,391
Class A .................................. 220,907 2,359,287
Class B .................................. 12,497 131,219
Class C .................................. 12,476 131,248
Mid-Cap "EDGE"SM Fund
Class B .................................. 7,389 102,485
Class C .................................. 7,390 102,573
Real Estate Securities Fund
Class B .................................. 9,171 136,098
Class C .................................. 9,171 136,189
|
4. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the period ended September 30, 2003 (excluding U.S. Government and agency securities, short-term securities and options) aggregated the following:
Purchases Sales
------------ ------------
Bond Fund ...................................... $ 90,165,270 $ 79,310,307
Mid-Cap "EDGE"SM Fund .......................... 210,311,030 233,156,330
Real Estate Securities Fund .................... 18,937,252 23,170,183
|
Purchases and sales of long-term U.S. Government and agency securities during the period ended September 30, 2003, aggregated the following:
Purchases Sales
------------ ------------
Bond Fund ...................................... $86,984,711 $108,208,037
|
Written call option activity for the period ended September 30, 2003 aggregated the following:
Real Estate Securities Fund
-----------------------------
Number of Amount of
Options Premiums
--------- -----------
Options outstanding at September 30, 2002 ...... $ -- $ --
Options written ................................ 4,638 716,345
Options expired ................................ (839) (59,849)
Options closed ................................. (2,820) (445,406)
Options exercised .............................. (979) (211,090)
------- ---------
Options outstanding at September 30, 2003 ...... -- --
======= =========
|
5. CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a fund's ability to repatriate such amounts.
Certain funds invest a high percentage of their assets in specific sectors of the market in their pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact to the fund, positive or negative, than if the fund did not concentrate its investments in such sectors.
6. OTHER
As of September 30, 2003, certain Funds had a single shareholder and omnibus shareholder accounts (which are each comprised of several individual shareholders), which individually amounted to more
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 (CONTINUED)
than 10% of the total shares outstanding as detailed below. The accounts are not affiliated with PNX.
Number of % of Shares
Accounts Outstanding
------------------ ------------
Mid-Cap "EDGE"SM Fund ...................... 2 Omnibus Accounts 25.9%
Real Estate Securities Fund ................ 1 Account 49.7%
7. RESTRICTED SECURITIES
Acquisition Date Acquisition Cost
---------------- ----------------
Arbor Realty Trust, Inc. Units ........... 6/26/03 $468,750
NorthStar Capital Investment Corp.
Shares 20,000 ......................... 12/17/97 400,000
Shares 15,000 ......................... 3/24/98 320,625
|
The Real Estate Securities Fund will bear any costs, including those involved in registration under the Securities Act of 1933, in connection with the disposition of such securities.
8. FEDERAL INCOME TAX INFORMATION
The Fund has capital loss carryovers which may be used to offset future capital gains, as follows:
Expiration Year
------------------------------------
Fund 2009 2010 2011 Total
- ---- -------- ----------- ----------- ----------
Mid-Cap "EDGE"SM Fund ..... $709,370 $42,302,856 $39,716,177 $82,728,403
|
The Fund may not realize the benefit of these losses to the extent it does not realize gains on investments prior to the expiration of the capital loss carryovers.
For the period ended September 30, 2003, the following Funds utilized losses deferred in the prior year against current year capital gains as follows:
Bond Fund .......................................................... $1,767,986 Real Estate Securities Fund ........................................ 727,379
Under current tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the period ended September 30, 2003, the Bond Fund and the Mid-Cap "EDGE"SM Fund recognized $527,248 and $30,350,458, respectively of post-October capital losses.
The components of distributable earnings on a tax basis (excluding unrealized appreciation (depreciation) which is disclosed in the Schedule of Investments) consist of undistributed ordinary income and undistributed long-term capital gains as follows:
Undistributed Long-Term
Ordinary Income Capital Gains
--------------- -------------
Bond Fund .................................... $655,918 $ --
Mid-Cap "EDGE"SM Fund ........................ -- --
Real Estate Securities Fund .................. 163,486 375,110
|
The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the Statement of Changes in Net Assets, if any, are reported as ordinary income for federal tax purposes.
9. RECLASSIFICATION OF CAPITAL ACCOUNTS
For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Permanent reclassifications can arise from differing treatment of certain income and gain transactions, nondeductible current year net operating losses, expiring capital loss carryovers and investments in passive foreign investment companies. The reclassifications have no impact on the net assets or net asset values of the Fund. As of September 30, 2003, the following Funds recorded reclassifications to increase (decrease) the accounts listed below:
Capital
Paid in
on Shares Undistributed Accumulated
of Beneficial Net Investment Net Realized
Interest Income (Loss) Gain (Loss)
------------- -------------- ------------
Bond Fund .................... $ 2 $ (2) $--
Mid-Cap "EDGE"SM Fund ........ (1,740,405) 1,740,406 (1)
|
10. SUBSEQUENT EVENT
Effective December 3, 2003, Phoenix-Seneca Real Estate Securities Fund will change its name to Phoenix-Seneca Equity Income Fund. The Board of Trustees of the Phoenix-Seneca Funds has approved this name change to coincide with a modification of this Fund's non-fundamental investment strategies.
For Federal income tax purposes, 15% of the current year net income earned dividends paid by the Real Estate Securities Fund will qualify for the dividends received deduction for corporate shareholders when paid.
Effective for the calendar year 2003, qualified dividends will be taxed at a lower rate for individual shareholders. 12% of the ordinary income dividends distributed by the Real Estate Securities Fund and applicable to qualifying dividends received after January 1, 2003, will qualify for the lower tax rate. This Fund plans to designate the maximum amount allowable under the Jobs and Growth Tax Relief Reconciliation Act. The actual percentage for the calendar year will be designated in the year-end tax statements.
REPORT OF INDEPENDENT AUDITORS
(LOGO)
PRICEWATERHOUSECOOPERS
[GRAPHIC OMITTED]
To the Board of Trustees and Shareholders of Phoenix-Seneca Funds:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, 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-Seneca Bond Fund, Phoenix-Seneca Mid Cap "EDGE" Fund, and Phoenix-Seneca Real Estate Securities Fund (constituting the Phoenix-Seneca Funds, hereafter referred to as the "Fund") at September 30, 2003, the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, 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 September 30, 2003, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS Boston, Massachusetts November 14, 2003 |
PHOENIX-SENECA FUNDS
PART C--OTHER INFORMATION
ITEM 23. EXHIBITS
a. Amended and Restated Agreement and Declaration of Trust.(10)
b. Amended and Restated By-Laws.(10)
c. Reference is made to Registrant's Agreement and Declaration of Trust. See Exhibit a.
d.1. Amended and Restated Investment Advisory Agreement between the Registrant, on behalf of Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, Phoenix-Seneca Bond Fund, and Phoenix-Seneca Real Estate Securities Fund, on the one hand, and Phoenix Investment Counsel, Inc. ("PIC") on the other.(12)
d.2. Form of Subadvisory Agreement between PIC and Seneca Capital Management LLC ("Seneca").(5)
d.3. Amendment to Subadvisory Agreement between Phoenix Investment Counsel and Seneca.(12)
e.1. Form of Underwriting Agreement between the Registrant and Phoenix Equity Planning Corporation ("PEPCO").(5)
e.2. Form of Sales Agreement between PEPCO and dealers.(12)
e.3. Form of Supplement to Phoenix Family of Funds Sales Agreement.(5)
e.4. Form of Financial Institution Sales Contract for the Phoenix Family of Funds.(5)
f. None.
g.1. Master Custodian Contract between Registrant and State Street Bank and Trust Company dated May 1, 1997.(7)
g.2. Amendment dated February 10, 2000 to Master Custodian Contract dated May 1, 1997 between Registrant and State Street Bank and Trust Company.(12)
g.3. Amendment dated July 2, 2001 to Master Custodian Contract dated May 1, 1997 between Registrant and State Street Bank and Trust Company.(12)
g.4. Amendment dated May 10, 2002 to Master Custodian Contract dated May 1, 1997 between Registrant and State Street Bank and Trust Company.(12)
h.1. Form of Transfer Agency and Service Agreement (the "Transfer Agency Agreement") between the Registrant and PEPCO.(5)
h.2. Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation, dated July 1, 1998.(7)
i. Opinion and consent of Morris, Nichols, Arsht & Tunnell.(3)
j. Consent of PricewaterhouseCoopers LLP, Independent Public Accountants.(12)
k. None.
l. Form of Share Purchase Agreement (the "Share Purchase Agreement") between Registrant and GMG/Seneca Capital Management, L.P.(3)
m.1. Form of Amended and Restated Distribution Plan Pursuant to Rule 12b-1 for Class A Shares.(5)
m.2. Distribution Plan Pursuant to Rule 12b-1 for Class B Shares.(9)
m.3. Distribution Plan Pursuant to Rule 12b-1 for Class C Shares.(9)
m.4. First Amendment to Class A Shares Amended and Restated Distribution Plan.(12)
n. Financial Data Schedules.
o.1. Third Amended and Restated Rule 18f-3 Plan.(10)
o.2. First Amendment to Fourth Amended and Restated Plan Pursuant to Rule 18f-3.(12)
p. Amended and Restated Codes of Ethics of the Trust, Adviser, Subadviser and Distributor.(12)
q.1 Powers of Attorney.(11)
(2) Incorporated by reference to Pre-effective Amendment No. 1 to Registrant's Registration Statement dated February 13, 1996.
(3) Incorporated by reference to Pre-Effective Amendment No. 2 to Registrant's Registration Statement dated February 29, 1996.
(4) Incorporated by reference to Post-Effective Amendment No. 1 to Registrant's Registration Statement dated October 31, 1996.
(5) Incorporated by reference to Post-Effective Amendment No. 5 to Registrant's Registration Statement filed on May 15, 1998.
(6) Incorporated by reference to Post-Effective Amendment No. 6 to Registrant's Registration Statement filed on November 23, 1998.
(7) Incorporated by reference to Post-Effective Amendment No. 8 filed on January 24, 2000.
(8) Incorporated by reference to Post-Effective Amendment No. 9 filed on July 27, 2000.
(9) Incorporated by reference to Post-Effective Amendment No. 10 filed on September 27, 2000.
(10) Incorporated by reference to Post-Effective Amendment No. 12 filed on January 25, 2002.
(11) Incorporated by reference to Post-Effective Amendment No. 13 filed on January 29, 2003.
(12) Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None.
ITEM 25. INDEMNIFICATION
The Agreement and Declaration of Trust dated December 18, 1995 and the By-Laws of the Registrant provide that no trustee or officer will be indemnified against any liability to which the Registrant would otherwise be subject by reason of or for willful misfeasance, bad faith, gross negligence or reckless disregard of such person's duties. The Financial Agent Agreement (Section 4), Underwriting Agreement (Section 18) and Transfer Agency and Service Agreement (Article 6) each provides that the Trust will indemnify the other party (or parties, as the case may be) to the agreement for certain losses.
Insofar as indemnification for liability arising under the Securities Act of 1933, as amended (the "Act"), may be available to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
All of the information required by this item is set forth in the Form ADV, as currently amended, of PIC and Seneca (SEC File Nos. 801-5995 (PIC) and 801-51559 (Seneca)), which is incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITER
(a) PEPCO also serves as the principal underwriter for the following other investment companies:
Phoenix-Aberdeen Worldwide Opportunities Fund, Phoenix Duff & Phelps Institutional Mutual Funds, Phoenix-Engemann Funds, Phoenix Equity Series Fund, Phoenix-Goodwin California Tax Exempt Bond Fund, Phoenix Investment Trust 97, Phoenix-Kayne Funds, Phoenix Multi-Portfolio Fund, Phoenix Multi-Series Trust, Phoenix-Oakhurst Income & Growth Fund, Phoenix-Oakhurst Strategic Allocation Fund, Phoenix Partner Select Funds, Phoenix Portfolios, Phoenix Strategic Equity Series Fund, Phoenix Series Fund, Phoenix Trust; Phoenix Life Variable Universal Life Account, Phoenix 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 PEPCO are as follows:
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT ---------------- ---------------- --------------- William R. Moyer Director, Executive Vice President, Executive Vice President 56 Prospect St. Chief Financial Officer and Treasurer P.O. Box 150480 Hartford, CT 06115-0480 John F. Sharry President, Executive Vice President 56 Prospect St. Private Client Group P.O. Box 150480 Hartford, CT 06115-0480 |
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT ---------------- ---------------- --------------- Robert S. Driessen Vice President, Compliance Vice President and 56 Prospect Street Assistant Secretary P.O. Box 150480 Hartford, CT 06115-0480 Jacqueline M. Porter Assistant Vice President, Assistant Treasurer 56 Prospect Street Mutual Fund Tax P.O. Box 150480 Hartford, CT 06115-0480 |
(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
All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules thereunder will be maintained at the offices of (1) the Registrant at 909 Montgomery Street, Suite 500, San Francisco, California 94133, (2) Seneca, at 909 Montgomery Street, San Francisco, California, 94133, (3) State Street Bank and Trust Company, at 1776 Heritage Drive, North Quincy, Massachusetts, 02171-2197, (4) Registrant's Transfer Agent, Phoenix Equity Planning Corporation, at 56 Prospect Street, Hartford, CT 06115, and (5) Registrant's Custodian, State Street Bank and Trust Company, P.O. Box 8301, Boston, Massachusetts 02266-8301.
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this registration statement under rule 485(b) under the Securities Act and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of San Francisco, and the State of California on the 29th day of January, 2004.
PHOENIX-SENECA FUNDS
ATTEST: /S/ RICHARD J. WIRTH BY: /S/ GAIL P. SENECA
--------------------------- -------------------------
RICHARD J. WIRTH GAIL P. SENECA
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 29th day of January, 2004.
SIGNATURE TITLE
--------- -----
Trustee
---------------------------------------
E. Virgil Conway*
Treasurer (principal financial
/s/ Nancy G. Curtiss * and accounting officer)
---------------------------------------
Nancy G. Curtiss
Trustee
---------------------------------------
Harry Dalzell-Payne*
/s/ Philip R. McLoughlin Chairman
--------------------------------------- (principal executive officer)
Philip R. McLoughlin
Trustee
---------------------------------------
Geraldine M. McNamara*
Trustee
---------------------------------------
Everett L. Morris*
/s/ Gail P. Seneca President
---------------------------------------
Gail P. Seneca
|
*By /s/ Philip R. McLoughlin
---------------------------------------
*Philip R. McLoughlin as Attorney-in-Fact
|
EXHIBIT d.1
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT effective as of the 20th day of November, 2002 (the "Contract Date") is by and between Phoenix-Seneca Funds, a Delaware business trust (the "Trust") and Phoenix Investment Counsel, Inc., a Connecticut corporation (the "Adviser").
The Trust and Adviser are parties to a certain Investment Advisory Agreement effective as of July 1, 1998, as amended effective July 1, 1998, as amended (collectively, the "Agreement"). The parties mutually desire to amend and restate the Agreement as follows:
WITNESSETH THAT:
1. The Trust has appointed the Adviser to act as investment adviser to the Trust on behalf of the series of the Trust established and designated by the Board of Trustees of the Trust (the "Trustees") on or before the date hereof, as listed on attached Schedule A (collectively, the Existing Series), for the period and on the terms set forth herein. The Adviser has accepted such appointment and has agreed to render the services described in this Agreement for the compensation herein provided.
2. In the event that the Trustees desire to retain the Adviser to render investment advisory services hereunder with respect to one or more additional series (the "Additional Series"), by agreement in writing, the Trust and the Adviser may agree to amend Schedule A to include such Additional Series, whereupon such Additional Series shall become subject to the terms and conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for the Existing Series and any Additional Series which may become subject to the terms and conditions set forth herein (sometimes collectively referred to as the "Series") and shall manage the investment and reinvestment of the assets of each Series, subject to all times to the supervision of the Trustees.
4. With respect to managing the investment and reinvestment of the Series' assets, the Adviser shall provide, at its own expense:
(a) Investment research, advice and supervision;
(b) An investment program for each Series consistent with its investment objectives, policies and procedures;
(c) Implementation of the investment program for each Series including the purchase and sale of securities;
(d) Implementation of an investment program designed to manage cash, cash equivalents and short-term investments for a Series with respect to assets designated from time to time to be managed by a subadviser to such Series;
(e) Advise and assistance on the general operations of the Trust; and
(f) Regular reports to the Trustees on the implementation of each Series' investment program.
5. The Adviser shall, for all purposes herein, be deemed to be an independent contractor.
6. The Adviser shall furnish at its own expense, or pay the expenses of the Trust, for the following:
(a) Office facilities, including office space, furniture and equipment;
(b) Personnel necessary to perform the functions required to manage the investment and reinvestment of each Series' assets (including those required for research, statistical and investment work);
(c) Except as otherwise approved by the Board, Personnel to serve without salaries from the Trust as officers or agents of the Trust. The Adviser need not provide personnel to perform, or pay the expenses of the Trust for, services customarily performed for an open-end management investment company by its national distributor, custodian, financial agent, transfer agent, registrar, dividend disbursing agent, auditors and legal counsel;
(d) Compensation and expenses, if any, of the Trustees who are also full-time employees of the Adviser or any of its affiliates; and
(e) Any subadviser recommended by the Adviser and appointed to act on behalf of the Trust.
7. All costs and expenses not specifically enumerated herein as payable by the Adviser shall be paid by the Trust. Such expenses shall include, but shall not be limited to, all expenses (other than those specifically referred to as being borne by the Adviser) incurred in the operation of the Trust and any public offering of its shares, including, among others, interest, taxes, brokerage fees and commissions, fees of Trustees who are not full-time employees of the Adviser or any of its affiliates, expenses of Trustees' and shareholders' meetings including the cost of printing and mailing proxies, expenses of Adviser personnel attending Trustee meetings as required, expenses of insurance premiums for fidelity and other coverage, expenses of repurchase and redemption of shares, expenses of issue and sale of shares (to the extent not borne by its national distributor under its agreement with the Trust), expenses of printing and mailing stock certificates representing shares of the Trust, association membership dues, charges of custodians, transfer agents, dividend disbursing agents and financial agents, bookkeeping, auditing and legal expenses. The Trust will also pay the fees and bear the expense of registering and maintaining the registration of the Trust and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state or other securities laws and the expense of preparing and mailing prospectuses and reports to shareholders. Additionally, if authorized by the Trustees, the Trust shall pay for extraordinary expenses and expenses of a non-recurring nature which may include, but not be limited to the reasonable and proportionate cost of any reorganization or acquisition of assets and the cost of legal proceedings to which the Trust is a party.
8. The Adviser shall adhere to all applicable policies and procedures as adopted from time to time by the Trustees, including but not limited to the following:
(a) Code of Ethics. The Adviser shall adopt a Code of Ethics designed to prevent "access persons" (as defined therein in accordance with Rule 17j-1 under the Investment Company Act of 1940 (the "Investment Company Act")) from engaging in fraudulent acts or transactions that are, or have the potential of being viewed as, a conflict of interest, and shall monitor for compliance with its Code of Ethics and report any violations to the Trust's Compliance Officer.
(b) Policy with Respect to Brokerage Allocation. The Adviser shall have full trading discretion in selecting brokers for Series transactions on a day to day basis so long as each selection is in conformance with the Trust's Policy with Respect to Brokerage Allocation. Such discretion shall include use of "soft dollars" for certain broker and research services, also in conformance with the Trust's Policy with Respect to Brokerage Allocation. The Adviser may delegate the responsibilities under this section to a Subadviser of a Series.
(c) Procedures for the Determination of Liquidity of Assets. It shall be the responsibility of the Adviser to monitor the Series' assets that are not liquid, making such determinations as to liquidity of a particular asset as may be necessary, in accordance with the Trust's Procedures for the Determination of Liquidity of Assets. The Adviser may delegate the responsibilities under this section to a Subadviser of a Series.
(d) Policy with Respect to Proxy Voting. In the absence of specific direction to the contrary and in a manner consistent with the Trust's Policy with Respect to Proxy Voting, the Adviser shall be responsible for voting proxies with respect to portfolio holdings of the Trust. The Adviser shall review all proxy solicitation materials and be responsible for voting and handling all proxies in relation to the assets under management by the Adviser in accordance with such policies and procedures adopted or approved by each Series'. Unless the Fund gives the Adviser written instructions to the contrary, the Adviser will, in compliance with the proxy voting procedures of the Series then in effect or approved by the series, vote or abstain from voting, all proxies solicited by or with respect to the issuer of securities in which the assets of the Series may be invested. The Adviser shall cause the Custodian to forward promptly to the Adviser (or designee) all proxies upon receipt so as to afford the Adviser a reasonable amount of time in which to determine how to vote such proxies. The Adviser agrees to provide the Trust with quarterly proxy voting reports in such form as the Trust may request from time to time.
The Adviser may delegate the responsibilities under this Section to a Subadviser of a Series.
(e) Procedures for the Valuation of Securities. It shall be the responsibility of the Adviser to fully comply with the Trust's Procedures for the Valuation of Securities. The Adviser may delegate the responsibilities under this section to a Subadviser of a Series.
9. For providing the series and assuming the expenses outlined herein, the Trust agrees that the Adviser shall be compensated as follows:
(a) The Trust shall pay a monthly fee calculated at an annual rate as specified in Schedule A. The amounts payable to the Adviser with respect to the respective Series shall be based upon the average of the values of the net assets of such Series as of the close of business each day, computed in accordance with the Trust's Declaration of Trust.
(b) Compensation shall accrue immediately upon the effective date of this Agreement.
(c) If there is termination of this Agreement with respect to any Series during a month, the Series' fee for that month shall be proportionately computed upon the average of the daily net asset values of such Series for such partial period in such month.
(d) The Adviser agrees to reimburse the Trust for the amount, if any, by which the total operating and management expenses for any Series (including the Adviser's compensation, pursuant to this paragraph, but excluding taxes, interest, costs of portfolio acquisitions and dispositions and extraordinary expenses), for any "fiscal year" exceed the level of expenses which such Series is permitted to bear under the most restrictive expense limitation (which is not waived by the State) imposed on open-end investment companies by any state in which shares of such Series are then qualified. Such reimbursement, if any, will be made by an Adviser to the Trust within five days after the end of each month. For the purpose of this subparagraph (d), the term "fiscal year" shall include the portion of the then current fiscal year which shall have elapsed at the date of termination of this Agreement.
10. The services of the Adviser to the Trust are not to be deemed exclusive, the Adviser being free to render services to others and to engage in other activities. Without relieving the Adviser of its duties hereunder and subject to the prior approval of the Trustees and subject farther to compliance with applicable provisions of the Investment Company Act, as amended, the Adviser may appoint one or more agents to perform any of the functions and services which are to be provided under the terms of this Agreement upon such terms and conditions as may be mutually agreed upon among the Trust, the Adviser and any such agent.
11. The Adviser shall not be liable to the Trust or to any shareholder of the Trust for any error of judgment or mistake of law or for any loss suffered by the Trust or by an shareholder of the Trust in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bath faith, gross negligence or reckless disregard on the part of the Adviser in the performance of its duties hereunder.
12. It is understood that:
(a) Trustees, officers, employees, agents and shareholders of the Trust are or may be "interested persons" of the Adviser as directors, officers, stockholders or otherwise;
(b) Directors, officers, employees, agents and stockholders of the Adviser are or may be "interested persons" of the Trust as Trustees, officers, shareholders or otherwise; and
(c) The existence of any such dual interest shall not affect the validity hereof or any transactions hereunder.
13. This Amended and Restated Agreement shall become effective with respect to the Existing Series as of November 20, 2002, and with respect to any Additional Series, on the date specified in any amendment to this Agreement reflecting the addition of each Additional Series in accordance with paragraph 2 (the "Amendment Date"). Unless terminated as herein provided, this Agreement shall remain in full force and effect until November 30, 2003 with respect to each Existing Series and until November 30 of the first full calendar year following the Amendment Date with respect to each Additional Series, and shall continue in full force and effect for periods of one year thereafter with respect to each Series so long as (a) such continuance with respect to any such Series is approved at least annually by either the Trustees or by a "vote of the majority of the outstanding voting securities" of such Series and (b) the terms and any renewal of this Agreement with respect to this Agreement or "interested persons" of any such party cast in person at a meeting called for the purpose of voting on such approval; provided, however, that the continuance of this Agreement with respect to each Additional Series is subject to its approval by a "vote of a majority of the outstanding voting securities" of any such Additional Series on or before the next anniversary of the Contract Date following the date on which such Additional Series became a Series hereunder.
Any approval of this Agreement by a vote of the holders of a "majority of the outstanding voting securities" of any Series shall be effective to continue this Agreement with respect to such Series notwithstanding (a) that this Agreement has not been approved by a "vote of a majority of the outstanding voting securities" of any other Series of the Trust affected thereby and (b) that this Agreement has not been approved by the holders of a "vote of a majority of the outstanding voting securities" of the Trust, unless either such additional approval shall be required by any other applicable law or otherwise.
14. The Trust may terminate this Agreement with respect to the Trust or to any Series upon 60 days' written notice to the Adviser at any time, without the payment of any penalty, by vote of the Trustees or, as to each Series, by a "vote of the majority of the outstanding voting securities" of such Series. The Adviser may terminate this Agreement upon 60 days' written notice to the Trust, without the payment of any payment. This Agreement shall immediately terminate in the event of its "assignment".
15. The terms "majority of the outstanding voting securities", "interested persons" and "assignment", when used herein, shall have the respective meanings in the Investment Company Act.
16. In the event of termination of this Agreement, or at the request of the Adviser, the Trust will eliminate all reference to "Phoenix" from its name, and will not thereafter transact business in a name using the word "Phoenix" in any form or combination whatsoever, or otherwise use the word "Phoenix" as a part of its name. The Trust will thereafter in all prospectuses, advertising materials, letterheads, and other material designed to be read by investors or prospective investors delete from the name the word "Phoenix" or any approximation thereof. If the Adviser chooses to withdraw the Trust's right to use the word "Phoenix," it agrees to submit the question of continuing this Agreement to a vote of the Trust's shareholders at the time of such withdrawal.
17. It is expressly agreed that the obligations of the Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trust personally, but bind only the trust property of the Trust, as provided in the Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees and shareholders of the Trust and signed by the President of the Trust, acting as such, and neither such authorization by such Trustees and shareholders nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or be binding upon or impose any liability on any of them personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust. The Certificate of Trust, as amended, is or shall be on file with the Secretary of State of Delaware.
18. This Agreement shall be construed and the rights and obligations of the parties hereunder enforced in accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first written above.
PHOENIX-SENECA FUNDS
By: /s/ Philip R. McLoughlin ------------------------------------------ Name: Philip R. McLoughlin Title: President |
PHOENIX INVESTMENT COUNSEL, INC.
By: /s/ Robert S. Driessen ------------------------------------------ Name: Robert S. Driessen Title: Vice President |
SCHEDULE A
Series Investment Advisory Fee
------ -----------------------
Phoenix-Seneca Bond Fund 0.50%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 0.80%
Phoenix-Seneca Real Estate Securities Fund 0.85%
|
EXHIBIT d.3
AMENDMENT TO SUBADVISORY AGREEMENT
This Amendment dated this 20th day of November, 2002 amends that certain Subadvisory Agreement dated as of July 1, 1998 (the "Agreement") by and between Phoenix Investment Counsel, Inc. ("Adviser") and Seneca Capital Management LLC ("Subadviser"), regarding the management of the Phoenix-Seneca Bond Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities Fund (the "Funds") of the Phoenix-Seneca Funds (the "Trust").
1. Section 19 is hereby added as follows:
"Proxies. The Subadviser shall review all proxy solicitation materials and be responsible for voting and handling all proxies in relation to the Assets in accordance with such policies and procedures adopted or approved from time to time by the Trust. Unless the Adviser or the Trust gives the Subadviser written instructions to the contrary, the Subadviser will, in compliance with the proxy voting procedures of the Trust then in effect, vote or abstain from voting, all proxies solicited by or with respect to the issuers of securities in which assets of the Funds may be invested. The Adviser shall cause the Custodian to forward promptly to the Subadviser all proxies upon receipt, so as to afford the Subadviser a reasonable amount of time in which to determine how to vote such proxies. The Subadviser agrees to provide the Adviser with quarterly proxy voting reports in such form as the Adviser may request from time to time."
2. Except as expressly amended hereby, all provisions of the Agreement shall remain in full force and effect and are unchanged in all other respects. All initial capitalized terms used herein shall have such meaning as ascribed thereto in the Agreement, as amended. All terms and phrases in quotations shall have such meaning as ascribed thereto in the Investment Company Act of 1940, as amended.
3. This Amendment shall become effective on the date first accepted by the Subadviser which date is set forth above the Subadviser's name on the signature page hereof.
4. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original and, all of which, when taken together, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound have caused this Amendment to be executed by their duly authorized officers or other representatives.
PHOENIX INVESTMENT COUNSEL, INC.
By: /s/ Robert S. Driessen -------------------------------------- Name: Robert S. Driessen Title: Vice President |
AGREED and ACCEPTED by Subadviser
this 15th day of April, 2003
SENECA CAPITAL MANAGEMENT LLC
By: /s/ Sandra J. Monticelli
-------------------------------
Name: Sandra J. Monticelli
Title: COO
|
EXHIBIT e.2
FORMS OF SALES AGREEMENT
[Logo]PHOENIX
INVESTMENT PARTNERS
PHOENIX EQUITY PLANNING CORPORATION
56 Prospect St.
P.O. Box 150480
Hartford, CT 06115-0480
PHOENIX FUNDS
SALES AGREEMENT
To: Dealer Name _______________________________________________________________
Address ___________________________________________________________________
City, State, Zip __________________________________________________________
Attention _________________________________________________________________
Telephone Number __________________________________________________________
Phoenix Equity Planning Corporation ("PEPCO", "we", "us", or "our") invites you to participate in the sale and distribution of shares of registered investment companies (which shall collectively be referred to hereinafter as the "Funds") for which we are national distributor or principal underwriter, and which may be listed in Annex A hereto which such Annex may be amended by us from time to time. Upon acceptance of this agreement by PEPCO, you may offer and sell shares of each of the Funds (hereafter "Shares") subject, however, to the terms and conditions hereof including our right to suspend or cease the sale of such shares. For the purposes hereof, the above referenced dealer shall be referred to as "you".
1. You understand and agree that in all sales of Shares to the public, you shall act as dealer for your own account. All purchase orders and applications are subject to acceptance or rejection by us in our sole discretion and are effective only upon confirmation by us. Each purchase will be deemed to have been consummated in our principal office subject to our acceptance and effective only upon confirmation to you by us.
2. You agree that all purchases of Shares by you shall be made only for the purpose of covering purchase orders already received from your customers (who may be any person other than a securities dealer or broker) or for your own bona-fide investment.
3. You shall offer and sell Shares purchased pursuant to this agreement for the purpose of covering purchase orders of your customers, to the extent applicable, (a) at the current public offering price ("Offering Price") for Class A Shares or (b) at the Net Asset Value for Class B and Class C shares as set forth in the current prospectus of each of the funds. The offer and sale of Class B Shares by you is subject to Annex B hereto, "Compliance Standards for the Sale of the Phoenix Funds Under Their Alternative Purchase Arrangements".
4. You shall pay us for Shares purchased within three (3) business days of the date of our confirmation to you of such purchase or within such time as required by applicable rule or law. The purchase price shall be (a) the Offering Price, less only the applicable dealer discount (Dealer Discount) for Class A Shares, if applicable, or (b) the Net Asset Value, less only the applicable sales commission (Sales Commission) for Class B or Class C Shares, if applicable, as set forth in the current prospectus at the time the purchase is received by us. We have the right, without notice, to cancel any order for which payment of good and sufficient funds has not been received by us as provided in this paragraph, in which case you may be held responsible for any loss suffered by us resulting from your failure to make payment as aforesaid.
5. You understand and agree that any Dealer Discount, Sales Commission or fee is subject to change from time to time without prior notice. Any orders placed after the effective date of any such change shall be subject to the Dealer Discount or Sales Commission in effect at the time such order is received by us.
6. You understand and agree that Shares purchased by you under this Agreement will not be delivered until payment of good and sufficient funds has been received by us. Delivery of Shares will be made by credit to a shareholder open account unless delivery of certificates is specified in the purchase order. In order to avoid unnecessary delay, it is understood that, at your request, any Shares resold by you to one of your customers will be delivered (whether by credit to a shareholder open account or by delivery of certificates) in the name of your customer.
7. You understand that on all purchases of Shares to which the terms of this Agreement are applicable by a shareholder for whom you are dealer of record, we will pay you an amount equal to the Dealer Discount, Sales Commission or fees which would have been paid to you with respect to such Shares if such Shares had been purchased through you. You understand and agree that the dealer of record for this purpose shall be the dealer through whom such shareholder most recently purchased Shares of such fund, unless the shareholder or you have instructed us otherwise. You understand that all amounts payable to you under this paragraph and currently payable under this agreement will be paid as of the end of the month unless specified otherwise for the total amount of Shares to which this paragraph is applicable but may be paid more frequently as we may determine in our discretion. Your request for Dealer Discount or Sales Commission reclaims will be considered if adequate verification and documentation of the purchase in question is supplied to us, and the reclaim is requested within three years of such purchase.
8. We appoint the transfer agent (or identified sub-transfer agent) for each of the Funds as our agent to execute the purchase transaction of Shares and to confirm such purchases to your customers on your behalf, and you guarantee the legal capacity of your customers so purchasing such Shares. You further understand that if a customer's account is established without the customer signing the application form, you hereby represent that the instructions relating to the registration and shareholder options selected (whether on the application form, in some other document or orally) are in accordance with the customer's instructions and you agree to indemnify the Funds, the transfer agent (or identified sub-transfer agent) and us for any loss or liability resulting from acting upon such instructions.
9. Upon the purchase of Class A Shares pursuant to a Letter of Intent, you will promptly return to us any excess of the Dealer Discount previously allowed or paid to you over that allowable in respect to such larger purchases.
10. Unless at the time of transmitting a purchase order you advise us to the contrary, we may consider that the investor owns no other Shares and may further assume that the investor is not entitled to any lower sales charge than that accorded to a single transaction in the amount of the purchase order, as set forth in the current prospectus.
11. You understand and agree that if any Shares purchased by you under the terms of this Agreement are, within seven (7) business days after the date of our confirmation to you of the original purchase order for such Shares, repurchased by us as agent for such fund or are tendered to such fund for redemption, you shall forfeit the right to, and shall promptly pay over to us the amount of, any Dealer Discount or Sales Commission allowed to you with respect to such Shares. We will notify you of such repurchase or redemption within ten (10) days of the date upon which certificates are delivered to us or to such fund or the date upon which the holder of Shares held in a shareholder open account places or causes to be placed with us or with such fund an order to have such shares repurchased or redeemed.
12. You agree that, in the case of any repurchase of any Shares made more than seven (7) business days after confirmation by us of any purchase of such Shares, except in the case of Shares purchased from you by us for your own bona fide investment, you will act only as agent for the holders of such Shares and will place the orders for repurchase only with us. It is understood that you may charge the holder of such Shares a fair commission for handling the transaction.
13. Our obligations to you under this Agreement are subject to all the provisions of the respective distribution agreements entered into between us and each of the Funds. You understand and agree that in performing your services under this agreement you are acting in the capacity of an independent contractor, and we are in no way responsible for the manner of your performance or for any of your acts
or omissions in connection therewith. Nothing in the Agreement shall be construed to constitute you or any of your agents, employees, or representatives as our agent, partner or employee, or the agent, partner of employee of any of the Funds.
In connection with the sale and distribution of shares of Phoenix Funds, you agree to indemnify and hold us and our affiliates, employees, and/or officers harmless from any damage or expense as a result of (a) the negligence, misconduct or wrongful act by you or any employee, representative, or agent of yours and/or (b) any actual or alleged violation of any securities laws, regulations or orders. Any indebtedness or obligation of yours to us whether arising hereunder or otherwise, and any liabilities incurred or moneys paid by us to any person as a result of any misrepresentation, wrongful or unauthorized act or omission, negligence of, or failure of you or your employees, representatives or agents to comply with the Sales Agreement, shall be set off against any compensation payable under this agreement. Any differential between such expenses and compensation payable hereunder shall be payable to us upon demand. The terms of this provision shall not be impaired by the termination of this agreement.
In connection with the sale and distribution of shares of Phoenix Funds,
we agree to indemnify and hold you harmless from any damage or expense on
account of the gross and willful negligence, misconduct or wrongful act
of us or any employee, representative, or agent of ours which arises out
of or is based upon any untrue statement or alleged untrue statement of
material fact, or the omission or alleged omission of a material fact in:
(i) any registration statement, including any prospectus or any
post-effective amendment thereto; or (ii) any material prepared and/or
supplied by us for use in conjunction with the offer or sale of Phoenix
Funds; or (iii) any state registration or other document filed in any
state or jurisdiction in order to qualify any Fund under the securities
laws of such state or jurisdiction. The terms of this provision shall not
be impaired by the termination of this agreement.
14. We will supply you with reasonable quantities of the current prospectus, periodic reports to shareholders, and sales materials for each of the Funds. You agree not to use any other advertising or sales material relating to the sale of shares of any of the Funds unless other advertising or sales material is pre-approved in writing by us.
15. You agree to offer and sell Shares only in accordance with the terms and conditions of the then current prospectus of each of the Funds and subject to the provisions of this Agreement, and you will make no representations not contained in any such prospectus or any authorized supplemental sales material supplied by us. You agree to use your best efforts in the development and promotion of sales of the Shares covered by this Agreement, and agree to be responsible for the proper instruction, training and supervision of all sales representatives employed by you in order that such Shares will be offered in accordance with the terms and conditions of this Agreement and all applicable laws, rules and regulations. All expenses incurred by you in connection with your activities under this Agreement shall be borne by you. In consideration for the extension of the right to exercise telephone exchange and redemption privileges to you and your registered representatives, you agree to bear the risk of any loss resulting from any unauthorized telephone exchange or redemption instructions from you or your registered representatives. In the event we determine to refund any amounts paid by any investor by reason of such violation on your part, you shall forfeit the right to, and pay over to us, the amount of any Dealer Discount or Sales Commission allowed to you with respect to the transaction for which the refund is made.
16. You represent that you are properly registered as a broker or dealer under the Securities and Exchange Act of 1934 and are member of the National Association of Securities Dealers, Inc. (NASD) and agree to maintain membership in the NASD or in the alternative, that you are a foreign dealer not eligible for membership in the NASD. You agree to notify us promptly of any change, termination or suspension of the foregoing status. You agree to abide by all the rules and regulations of the NASD, including NASD Conduct Rule 2830, which is incorporated herein by reference as if set forth in full. You further agree to comply with all applicable state and Federal laws and the rules and regulations of applicable regulatory agencies. You further agree that you will not sell, or offer for sale, Shares in any jurisdiction in which such Shares have not been duly registered or qualified for sale. You agree to promptly notify us with respect to (a) the initiation and disposition of any formal disciplinary action by the NASD or any other agency or instrumentality having jurisdiction with respect to the subject matter hereof against you or any of your employees or agents; (b) the issuance of any form of deficiency notice by the NASD or any such agency regarding your training, supervision or sales practices; and (c) the effectuation of any consensual order with respect thereto.
17. Either party may terminate this agreement for any reason by written or electronic notice to the other party which termination shall become effective fifteen (15) days after the date of mailing or electronically transmitting such notice to the other party. We may also terminate this agreement for cause or as a result of a violation by you, as determined by us in our discretion, of any of the provisions of this Agreement, said termination to be effective on the date of mailing written or electronic notice to you of the same. Without limiting the generality of the foregoing, your own expulsion from the NASD will automatically terminate this Agreement without notice. Your suspension from the NASD or violation of applicable state or Federal laws or rules and regulations of applicable regulatory agencies will terminate this Agreement effective upon the date of our mailing written notice or transmitting electronic notice to you of such termination. Our failure to terminate this Agreement for any cause shall not constitute a waiver of our right to so terminate at a later date.
18. All communications and notices to you or us shall be sent to the addresses set forth at the beginning of this Agreement or to such other address as may be specified in writing from time to time.
19. PEPCO agrees to comply with all laws, rules, regulations, and ordinances relating to privacy, confidentiality, security, data security, and the handling of customer information which may from time to time be established. PEPCO agrees not to disclose or use any consumer nonpublic personal information (including nonpublic personal financial information and nonpublic personal health information), which may be supplied by you to PEPCO in performance under this Agreement other than to: a) carry out the purpose for which the information was provided; and b) to use or disclose the information as otherwise permitted or required by law. You agree to comply with all laws, rules, regulations, and ordinances relating to privacy, confidentiality, security, data security, and the handling of customer information which may from time to time be established. You agree not to disclose or use any consumer nonpublic personal information (including nonpublic personal financial information and nonpublic personal health information), which may be supplied by PEPCO to you in performance under this Agreement other than to: a) carry out the purpose for which the information was provided; and b) to use or disclose the information as otherwise permitted or required by law. This provision will survive and continue in full force and effect after the termination of this Agreement.
20. This agreement shall become effective upon the date of its acceptance by us as set forth herein. This agreement may be amended by PEPCO from time to time. This Agreement and all rights and obligations of the parties hereunder shall be governed by and construed under the laws of the State of Connecticut. This agreement is not assignable or transferable, except that we may assign or transfer this agreement to any successor distributor of the Shares described herein.
ACCEPTED ON BEHALF OF ACCEPTED ON BEHALF OF
PHOENIX EQUITY PLANNING
CORPORATION: ________________________________
Name of Dealer Firm
Date _________________________________ Date ___________________________
By ___________________________________ By _____________________________
Name John F. Sharry Print Name _____________________
---------------------------------
Title President, Private Client Group Print Title ____________________
---------------------------------
NASD CRD Number ________________
|
[Logo]PHOENIX AMENDED ANNEX A - AUGUST 2003
INVESTMENT PARTNERS PHOENIX FUNDS SALES AGREEMENT
PHOENIX EQUITY PLANNING CORPORATION
|
MUTUAL FUNDS AND AVAILABLE SHARE CLASSES
ABERDEEN KAYNE ANDERSON RUDNICK
Phoenix-Aberdeen International Fund A B C Phoenix-Kayne California Intermediate Tax-Free X
Phoenix-Aberdeen Worldwide Opportunities Fund A B C Bond Fund
Phoenix-Kayne Intermediate Total Return Bond X
DUFF & PHELPS Fund
Phoenix-Duff & Phelps Core Bond Fund A B C Phoenix-Kayne International Fund A B C X
Phoenix-Duff & Phelps Real Estate Securities Fund A B C Phoenix-Kayne Large Cap Fund A B C X
Phoenix-Kayne Small-Mid Cap Fund A B C X
ENGEMANN
Phoenix-Engemann Aggressive Growth Fund A B C OAKHURST(SM)
Phoenix-Engemann Balanced Return Fund A B C Phoenix-Oakhurst Balanced Fund A B
Phoenix-Engemann Capital Growth Fund A B Phoenix-Oakhurst Growth & Income Fund A B C
Phoenix-Engemann Focus Growth Fund A B C Phoenix-Oakhurst Income & Growth Fund A B C
Phoenix-Engemann Nifty Fifty Fund A B C Phoenix-Oakhurst Managed Assets * A B C
Phoenix-Engemann Small & Mid-Cap Growth Fund A B C Phoenix-Oakhurst Strategic Allocation Fund A B
Phoenix-Oakhurst Strategy Fund * A B C
GOODWIN(SM)
Phoenix-Goodwin California Tax Exempt Bond Fund A B PHOENIX DUFF & PHELPS
Phoenix-Goodwin Emerging Markets Bond Fund A B C INSTITUTIONAL MUTUAL FUNDS
Phoenix-Goodwin High Yield Fund A B C Growth Stock Portfolio X Y
Phoenix-Goodwin Money Market Fund A B Managed Bond Portfolio X Y
Phoenix-Goodwin Multi-Sector Fixed Income Fund A B C
Phoenix-Goodwin Multi-Sector Short Term Bond Fund A B C T PHOENIX
Phoenix-Goodwin Tax Exempt Bond Fund A B Phoenix Market Neutral Fund * A B C
PHOENIX PARTNER SELECT FUNDS
SENECA Phoenix Partner Select Wealth Builder Fund ** A C
Phoenix-Seneca Bond Fund A B C X Phoenix Partner Select Wealth Guardian Fund ** A C
Phoenix-Seneca Growth Fund A B C X
Phoenix-Seneca Mid-Cap EDGE(SM) Fund A B C X HOLLISTER(SM)
Phoenix-Seneca Real Estate Securities Fund A B C X Phoenix-Hollister Appreciation Fund * A B C
Phoenix-Seneca Strategic Theme Fund A B C Phoenix-Hollister Small Cap Value Fund A B C
Phoenix-Seneca Tax Sensitive Growth Fund A B C X Phoenix-Hollister Value Equity Fund A B C
PHOENIX EQUITY PLANNING CORPORATION, 56 PROSPECT ST., P.O. BOX 150479, HARTFORD, CT 06115-0479
------------------------------------------------------------------------------------------------------------------------------------
MARKETING: (800) 243-4361 CUSTOMER SERVICE: (800) 243-1574
------------------------------------------------------------------------------------------------------------------------------------
|
Phoenix Equity Planning Corporation ("PEPCO"), principal underwriter of the Phoenix mutual funds, from its own profits and resources, may sponsor training and educational meetings, and may provide additional compensation in the form of trips, merchandise or expense reimbursement. Dealers other than PEPCO may also make customary additional charges for their services in effecting purchases, if they notify the Funds of their intention to do so. Applicable waivers of Class A sales charges and Class B and C contingent deferred sales charges are described in the prospectus.
* The Phoenix Market Neutral Fund, Phoenix-Hollister Appreciation Fund, Phoenix-Oakhurst Managed Assets, and the Phoenix-Oakhurst Strategy Fund currently operate under a separate sales load and dealer compensation schedule for Class B and C shares only. Please refer to the last page of this Annex A for details.
** The Phoenix Partner Select Funds are funds-of-funds. Compensation is only payable on sales or the Partner Select Funds as described herein. No dealer compensation is payable on the underlying funds in which the Partner Select Funds invest.
--------------------------------------------------------------------------------
CLASS A SHARES
--------------------------------------------------------------------------------
DEALER CONCESSION: CLASS A SHARES (ALL EQUITY & BALANCED FUNDS)
DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF
TRANSACTION: OFFERING PRICE OFFERING PRICE
Less than $50,000 5.75% 5.25%
$50,000 but under $100,000 4.75 4.25
$100,000 but under $250,000 3.75 3.25
$250,000 but under $500,000 2.75 2.25
$500,000 but under $1,000,000 2.00 1.75
$1,000,000 or more None None
|
CLASS A SHARES (ALL FIXED INCOME FUNDS GOODWIN MULTI-SECTOR SHORT TERM
EXCEPT GOODWIN MONEY MARKET CLASS A SHARES
FUND* & GOODWIN MULTI-SECTOR ST BOND)
DEALER DISCOUNT DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
TRANSACTION: OFFERING PRICE OFFERING PRICE OFFERING PRICE OFFERING PRICE
Less than $50,000 4.75% 4.25% 2.25% 2.00%
$50,000 but under $100,000 4.50 4.00 1.25 1.00
$100,000 but under $250,000 3.50 3.00 1.00 1.00
$250,000 but under $500,000 2.75 2.25 1.00 1.00
$500,000 but under $1,000,000 2.00 1.75 0.75 0.75
$1,000,000 or more None None None None
|
*Shares of the Phoenix-Goodwin Money Market Fund are offered to the public at their constant net asset value of $1.00 per share with no sales charge or dealer discount.
SERVICE FEE: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class A shares (except Phoenix-Goodwin Money Market Fund) sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 or more in a Fund Class to qualify for payment in that Fund Class.
$1 MILLION NAV SALES FINDER'S FEE: 1% From its own profits and resources, PEPCO intends to pay 1% to dealers who are responsible for Class A share purchases of $1 million or more. If all or part of such purchases are subsequently redeemed within one year of the investment date, the dealer will refund to PEPCO the full $1 Million NAV Sales Finder's Fee paid. The $1 Million NAV Sales Finder's Fee is not paid on purchases eligible for the Qualified Plan Finder's Fee (see below) or on purchases of the Phoenix-Goodwin Money Market Fund.
CDSC: A contingent deferred sales charge of 1% applies on certain redemptions made within 12 months following purchases of Class A shares of the Phoenix-Goodwin Multi-Sector Short Term Bond Fund of $1 million of more made without a sales charge.
QUALIFIED PLAN FINDER'S FEE: 1% From its own profits and resources, PEPCO intends to pay dealers an amount equal to 1% of Class A shares purchases by an account held in the name of a qualified employee benefit plan with at least 100 eligible employees. If all or part of such purchases are subsequently redeemed within one year of the investment date, the dealer will refund to PEPCO the full Qualified Plan Finder's Fee paid. The Qualified Plan Finder's Fee is not paid on purchases eligible for the $1 Million NAV Sales Finder's Fee (see above) or on purchases of the Phoenix-Goodwin Money Market Fund.
PHOENIX MARKET NEUTRAL, PHOENIX-HOLLISTER APPRECIATION, PHOENIX-OAKHURST MANAGED ASSETS, PHOENIX-OAKHURST STRATEGY FUNDS - CLASS A SHARE $1 MILLION DOLLAR NAV SALE FINDER'S FEE: 1% From its own profits and resources, PEPCO intends to pay 1% to dealers who are responsible for Class A share purchases of $1 million or more and for purchases at net asset value made by unallocated accounts held by third party administrators, registered investment advisers, trust companies, and bank trust departments which exercise discretionary authority or hold accounts in fiduciary, agency, custodial or similar capacity if in the aggregate such accounts equal or exceed $1 million and by retirement plans with assets of $1 million or more or at least 50 eligible employees. NO INITIAL SALES CHARGE APPLIES ON THESE INVESTMENTS; HOWEVER, if all or part of such purchases are subsequently redeemed within one year of the investment date, the dealer will refund to PEPCO the full $1 Million NAV Sales Finder's Fee paid.
--------------------------------------------------------------------------------
CLASS B SHARES *
--------------------------------------------------------------------------------
CLASS B SHARES PHOENIX-GOODWIN
(EXCEPT PHOENIX-GOODWIN MULTI-SECTOR
MULTI-SECTOR SHORT TERM BOND FUND) SHORT TERM BOND FUND
SALES COMMISSION: 4.0% 2.0%
|
CDSC: 1% - 5% Dealers maintaining omnibus accounts, upon redemption of a customer account within the time frames specified below, shall charge such customer account the appropriate contingent deferred sales charge as indicated and shall forward the proceeds to PEPCO.
YEARS SINCE CONTINGENT DEFERRED CONTINGENT DEFERRED
EACH PURCHASE: SALES CHARGE: SALES CHARGE:
First 5.0% 2.0%
Second 4.0 1.5
Third 3.0 1.0
Fourth 2.0 0.0
Fifth 2.0 0.0
Sixth 0.0 0.0
|
SERVICE FEE: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class B shares (except Phoenix-Goodwin Money Market Fund) sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 or more in a Fund Class to qualify for payment in that Fund Class. The Class B Service Fee is paid beginning in the 13th month following each purchase.
SALES COMMISSION: 1% for all Class C Funds except Phoenix-Goodwin Multi-Sector Short Term Bond Fund 0% for Phoenix-Goodwin Multi-Sector Short Term Bond Fund For exchanges from Phoenix-Goodwin Multi-Sector Short Term Bond Fund Class C to other Class C shares, the dealer will receive 1% sales commission on the exchanged amount.
CDSC: 1% Dealers maintaining omnibus accounts, upon redemption of a customer account within the time frames specified below, shall charge such customer account the appropriate contingent deferred sales charge as indicated and shall forward the proceeds to PEPCO. The CDSC on Class C shares is 1% for one year from each purchase. There is no CDSC on the Phoenix-Goodwin Multi-Sector Short Term Bond Fund.
DISTRIBUTION FEE: 0.25% - 0.75% PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually for Phoenix-Goodwin Multi-Sector Short Term Bond Fund and 0.75% annually for all other Class C Funds, based on the average daily net asset value of Class C shares sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. The Class C Trail Fee is paid beginning in the 13th month following each purchase except for the Phoenix-Goodwin Multi-Sector Short Term Bond Fund. There is no hold for the Class C Trail Fee for the Phoenix-Goodwin Multi-Sector Short Term Bond Fund.
SERVICE FEE: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class C shares sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. The Class C Service Fee is paid beginning in the 13th month following each purchase. There is no hold for the Class C Service Fee for the Phoenix-Goodwin Multi-Sector Short Term Bond Fund.
FINDER'S FEE (PHOENIX-GOODWIN MULTI-SECTOR SHORT TERM BOND FUND ONLY): 0.25% - 0.50% In connection with Class C share purchases of $250,000 or more, PEPCO, from its own profits and resources, intends to pay dealers an amount equal to 0.50% of shares purchased above $250,000 but under $3 million, plus 0.25% on the amount in excess of $3 million. If all or part of such purchases are subsequently redeemed or exchanged to another C share fund within one year of the investment date, the dealer will refund to PEPCO the full Finder's Fee paid.
* The Phoenix Market Neutral Fund, Phoenix-Hollister Appreciation Fund, Phoenix-Oakhurst Managed Assets, and the Phoenix-Oakhurst Strategy Fund currently operate under a separate sales load and dealer compensation schedule for Class B and C shares only. Please refer to the last page of this Annex A for details.
CLASS B SHARE CONTINGENT DEFERRED SALES CHARGE CLASS B SHARE DEALER
CONCESSION
YEARS SINCE CDSC YEARS SINCE CDSC 4% of purchase amount PURCHASE PURCHASE First 5% Fifth 2% Second 4% Sixth 1% Third 3% Seventh 0% Fourth 3% |
CLASS C SHARE CONTINGENT DEFERRED SALES CHARGE CLASS C SHARE DEALER
CONCESSION
1.25% for one year % OF PURCHASE FUND
AMOUNT
1.00% Market Neutral Fund,
Appreciation Fund,
Managed
Assets Fund and
Strategy Fund
|
A service fee may be paid to financial services firms, for providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders. NASD member firms may also be paid a portion of the asset-based sales charges on Class C Shares, so that these dealers receive such reallowances at the following aggregate annual rates: (i) 0.25% commencing one year after purchase for the Class B Shares and (ii) 0.95% commencing one year after purchase for the Class C Shares.
DEALER CONCESSION: 1%
CDSC: 1% for one year from the date of each purchase.
SERVICE FEE: 0.25% For providing shareholder services such as responding to shareholder inquiries; processing redemptions; changing dividend options, account designations, and addresses; transmitting proxy statements, annual reports, prospectuses and other correspondence from the Funds to shareholders; and providing such other information and assistance to shareholders as may be reasonably requested by such shareholders, PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.25% annually, based on the average daily net asset value of Class T shares sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. The Class T Service Fee is paid beginning in the 13th month following each purchase.
DISTRIBUTION FEE: 0.75% PEPCO intends to pay a quarterly fee to qualifying dealers at the equivalent of 0.75% annually, based on the average daily net asset value of Class T shares sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. The Class T Distribution Fee is paid beginning in the 13th month following each purchase.
FINDER'S FEE (NOT APPLICABLE TO PHOENIX-SENECA FUNDS): 0.10% - 0.50% PEPCO may pay dealers, from its own profits and resources, a percentage of the net asset value of Class X and Class Y shares sold, equal to 0.50% on the first $5 million, 0.25% on the next $5 million, plus 0.10% on the amount in excess of $10 million. If all or part of such purchases are subsequently redeemed within one year of the investment date, the dealer will refund to PEPCO the full Finder's Fee paid.
CLASS Y SERVICE FEE: 0.25% For providing shareholder services, PEPCO intends to pay qualifying dealers a quarterly fee at the equivalent of 0.25% annually, based on the average daily net asset value of Class Y shares sold by such dealers and remaining on the Funds' books during the period in which the fee is calculated. Dealers must have an aggregate value of $50,000 or more in a Fund to qualify for payment in that Fund. No Service Fee is paid on any Class X shares.
PXP 80A (8/03)
[Logo]PHOENIX ANNEX B TO DEALER AGREEMENT WITH
INVESTMENT PARTNERS PHOENIX EQUITY PLANNING CORPORATION
--------------------------------------------------------------------------------
COMPLIANCE STANDARDS FOR
THE SALE OF THE PHOENIX FUNDS
|
UNDER THEIR ALTERNATIVE PURCHASE ARRANGEMENTS
As national distributor or principal underwriter of the Phoenix Funds, which offer their shares on both a front-end and deferred sales charge basis, Phoenix Equity Planning Corporation ("PEPCO") has established the following compliance standards which set forth the basis upon which shares of the Phoenix Funds may be sold. These standards are designed for those broker/dealers ("dealers") that distribute shares of the Phoenix Funds and for each dealer's financial advisors/registered representatives.
As shares of the Phoenix Funds are offered with two different sales arrangements for sales and distribution fees, it is important for an investor not only to choose a mutual fund that best suits his investment objectives, but also to choose the sales financing method which best suits his particular situation. To assist investors in these decisions and to ensure proper supervision of mutual fund purchase recommendations, we are instituting the following compliance standards to which dealers must adhere when selling shares of the Phoenix Funds:
1. Any purchase of a Phoenix Fund for less than $250,000 may be either of shares subject to a front-end load (Class A shares) or subject to deferred sales charge (Class B shares).
2. Any purchase of a Phoenix Fund by an unallocated qualified employer sponsored plan for less than $1,000,000 may be either of shares subject to a front-end load (Class A shares) or subject to deferred sales charge (Class B shares). Class B shares sold to allocated qualified employer sponsored plans will be limited to a maximum total value of $250,000 per participant.
3. Any purchase of a Phoenix Fund for $250,000 or more (except as noted above) or which qualifies under the terms of the prospectus for net asset value purchase of Class A shares should be for Class A shares.
GENERAL GUIDELINES
These are instances where one financing method may be more advantageous to an investor than the other. Class A shares are subject to a lower distribution fee and, accordingly, pay correspondingly higher dividends per share. However, because initial sales charges are deducted at the time of purchase, such investors would not have all of their funds invested initially and, therefore, would initially own fewer shares. Investors not qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time might consider purchasing Class A Shares because the accumulated continuing distribution charges on Class B Shares may exceed the initial sales charge on Class A Shares during the life of the investment.
Again, however, such investors must weigh this consideration against the fact that, because of such initial sales charge, not all of their funds will be invested initially. However, other investors might determine that it would be more advantageous to purchase Class B Shares to have all of their funds invested initially, although remaining subject to higher continuing distribution charges and, for a five-year period, being subject to a contingent deferred sales charge (three years for Asset Reserve).
A National Association of Securities Dealers rule specifically prohibits "breakpoint sales" of front-end load shares. A "breakpoint sale" is a sale to the client of an amount of front-end load (Class A) shares just below the amount which would be subject to the next breakpoint on the fund's sales charge schedule. Because the deferred sales charge on Class B shares is reduced by 1% for each year the shares are held, a redemption of Class B shares just before an "anniversary date" is in some ways analogous to a breakpoint sale. A client might wish to redeem just before an anniversary date for tax or other reasons, and a client who chose to wait would continue to be at market risk. Nevertheless, investment executives should inform clients intending to redeem Class B shares near an anniversary date that, if the redemption were delayed, the deferred sales charge would be reduced.
RESPONSIBILITIES OF BRANCH OFFICE MANAGER (OR OTHER APPROPRIATE REVIEWING OFFICER).
A dealer's branch manager or other appropriate reviewing officer ("the Reviewing Officer") must ensure that the financial advisor/registered representative has advised the client of the available financing methods offered by the Phoenix Funds, and the impact of choosing one method over another. In certain instances, it may be appropriate for the Reviewing Officer to discuss the purchase directly with the client. The reviewing officer should review purchases for Class A or Class B shares given the relevant facts and circumstances, including but not limited to: (a) the specific purchase order dollar amount; (b) the length of time the investor expects to hold his shares; and (c) any other relevant circumstances, such as the availability of purchase under letters of intent or pursuant to rights of accumulation and distribution requirements. The foregoing guidelines, as well as the examples cited above, should assist the Reviewing Officer in reviewing and supervising purchase recommendations and orders.
EFFECTIVENESS
These compliance guidelines are effective immediately with respect to any order for shares of those Phoenix Funds which offer their shares pursuant to the alternative purchase arrangement.
Questions relating to these compliance guidelines should be directed by the dealer to its national mutual fund sales and market group or its legal department or compliance director. PEPCO will advice dealers in writing of any future changes in these guidelines.
PXP80B 10/98
EXHIBIT g.2
AMENDMENT TO MASTER CUSTODIAN CONTRACT - 02-10-2000
AMENDMENT TO MASTER CUSTODIAN CONTRACT
Amendment dated February 10, 2000, to the custody contract, dated May 1, 1997, as amended, by and between State Street Bank and Trust Company (the "Custodian") and EACH OF THE PARTIES LISTED ON APPENDIX 1, on behalf of each of its Portfolios, (each a "Fund") (the "Custodian Contract").
In consideration of the promises and covenants contained herein, the Custodian and the Fund hereby agree to amend and replace Section 5 of the Custodian Contract as follows:
Proper Instructions as used throughout this Contract means a writing signed or initialed by one or more person or persons as the Board of Trustees shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. Each Fund shall cause all oral instructions to be confirmed in writing. PROPER INSTRUCTIONS MAY INCLUDE COMMUNICATIONS EFFECTED DIRECTLY BETWEEN ELECTRO-MECHANICAL OR ELECTRONIC DEVICES; PROVIDED THAT THE FUND HAS FOLLOWED ANY SECURITY PROCEDURES AGREED TO FROM TIME TO TIME BY FUND AND THE CUSTODIAN, INCLUDING, BUT NOT LIMITED TO, THE SECURITY PROCEDURES SELECTED BY THE FUND IN THE FUNDS TRANSFER AGREEMENT. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any MULTI-PARTY agreement which requires a segregated asset account in accordance with Section 2.12.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the 10th day of February, 2000.
EACH OF THE FUNDS LISTED ON APPENDIX 1
By: /s/ Nancy G. Curtiss
------------------------------
Its: Treasurer
------------------------------
|
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
------------------------------
Its: Vice Chairman
------------------------------
|
EXHIBIT g.3
AMENDMENT TO MASTER CUSTODIAN CONTRACT - 07-02-2001
AMENDMENT TO MASTER CUSTODIAN CONTRACT
This Amendment to the Master Custodian Contract is made effective as of July 2, 2001 by and between each party listed on Appendix 1 affixed to the Master Custodian Contract (as amended from time to time, the "Fund") and State Street Bank and Trust Company (the "Custodian" or "Foreign Custody Manager"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Master Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Master Custodian Contract dated as of May 1, 1997 (as amended and in effect from time to time, the "Contract");
WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and the Fund has made each such series subject to the Contract (each such series, together with all other series subsequently established by the Fund and made subject to the Contract in accordance with the terms thereof, shall be referred to as a "Portfolio", and, collectively, the "Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") and the adoption of Rule 17f-7 ("Rule 17f-7") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act").
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows:
I. Articles 3 through 21 of the Contract are hereby renumbered, as of the effective date of this Amendment, as Articles 4 through 22, respectively.
II. New Article 3 is hereby added, as of the effective date of this Amendment, as set forth below.
3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
3.1. DEFINITIONS. Capitalized terms in this Amendment shall have the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule 17f-5.
3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Fund,
by resolution adopted by its Board of Trustees or its Board of Directors, as
applicable (the "Board"), hereby delegates to the Custodian, subject to Section
(b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with
respect to Foreign Assets
of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios.
3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Contract, which list of countries may be amended
from time to time by the Fund with the agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. The Foreign
Custody Manager will provide amended versions of Schedule A in accordance with
Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by the Fund, on behalf of the Portfolios, of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board on behalf of the Portfolios responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Amendment by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in relevant market, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c) MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the performance of the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios, provided that this shall not affect the standard of care set forth in Section 3.2.6.
3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change.
3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of Foreign Assets of management investment companies registered under the 1940 Act would exercise.
3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign Custody
Manager represents to the Fund that it is a U.S. Bank as defined in section
(a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board has
determined that it is reasonable for the Board to rely on the Custodian to
perform the responsibilities delegated pursuant to this Contract to the
Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
3.3 ELIGIBLE SECURITIES DEPOSITORIES.
3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.
III. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the event of any conflict between the provisions of Articles 3 and 4, the provisions of Article 3 shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written.
WITNESSED BY: STATE STREET BANK and TRUST COMPANY
/s/Raelene S. LaPlante By: /s/Joseph L. Hooley ------------------------------------ ------------------------------ Raelene S. LaPlante Name: Joseph L. Hooley V.P. & Senior Counsel Title: Executive Vice President |
FUND SIGNATURE WITNESSED BY: EACH OF THE FUNDS LISTED ON APPENDIX 1:
/s/Pamela S. Sinofsky By: /s/Nancy J. Curtiss ------------------------------------ ------------------------------ Pamela S. Sinofsky Name: Nancy J. Curtiss Assistant Secretary Title: Treasurer |
EXHIBIT g.4
AMENDMENT TO MASTER CUSTODIAN CONTRACT - 05-10-2002
AMENDMENT TO MASTER CUSTODIAN CONTRACT
This Amendment to the Master Custodian Contract is made effective as of May 10, 2002 by and between each party listed on Appendix 1 affixed to the Master Custodian Contract (as amended from time to time, the "Fund") and State Street Bank and Trust Company (the "Custodian" or "Foreign Custody Manager"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Master Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Master Custodian Contract dated as of May 1, 1997 (as amended and in effect from time to time, the "Contract");
WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and the Fund has made each such series subject to the Contract (each such series, together with all other series subsequently established by the Fund and made subject to the Contract in accordance with the terms thereof, shall be referred to as a "Portfolio", and, collectively, the "Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain provisions of the Contract relating to the custody of assets of each of the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows:
I. Articles 4 through 21 of the Contract are hereby renumbered, as of the effective date of this Amendment, as Articles 5 through 22, respectively.
II. New Article 4 of the Contract is hereby added, as of the effective date of this Amendment, as set forth below.
4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD OUTSIDE THE UNITED STATES.
4.1 DEFINITIONS. Capitalized terms in this Article 4 shall have the following meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on Schedule B.
"Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian.
4.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign securities;
(iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other purpose, but only upon receipt of Proper Instructions specifying the foreign securities to be delivered and naming the person or persons to whom delivery of such securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of securities sold short;
(vii) in connection with the borrowing or lending of foreign securities; and
(viii) for any other purpose, but only upon receipt of Proper Instructions specifying the amount of such payment and naming the person or persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder.
4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities, in the absence of the nominee's negligence and willful misconduct. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
4.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.
4.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.
4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Article 4, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights.
4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. Absent negligence and willful misconduct on the part of the Custodian, the Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power.
4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Fund's election, the Portfolios
shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
4.11. TAX LAW.
The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information.
4.12. LIABILITY OF CUSTODIAN.
Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk.
The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in the Contract and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care.
III. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3, in the event of any conflict between the provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written.
WITNESSED BY: STATE STREET BANK and TRUST COMPANY
/s/Jean Carr By: /s/Joseph L. Hooley ------------------------------------ -------------------------------- Jean Carr Name: Joseph L. Hooley Counsel Title: Executive Vice President |
FUND SIGNATURE WITNESSED BY: EACH OF THE FUNDS LISTED ON APPENDIX 1:
/s/Noreen M. O'Connell By: /s/Richard J. Wirth ------------------------------------ -------------------------------- Noreen M. O'Connell Name: Richard J. Wirth Paralegal IV Title: Secretary |
SCHEDULE C
MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
------------------------------- -----------------
(SCHEDULED FREQUENCY)
The Guide to Custody in World Markets An overview of settlement and
(hardcopy annually and regular safekeeping procedures, custody
website updates) practices and foreign investor
considerations for the markets in
which State Street offers
custodial services.
Global Custody Network Review Information relating to Foreign
(annually) Sub-Custodians in State Street's
Global Custody Network. The Review
stands as an integral part of the
materials that State Street
provides to its U.S. mutual fund
clients to assist them in
complying with SEC Rule 17f-5. The
Review also gives insight into
State Street's market expansion
and Foreign Sub-Custodian
selection processes, as well as
the procedures and controls used
to monitor the financial condition
and performance of our Foreign
Sub-Custodian banks.
Securities Depository Review Custody risk analyses of the
(annually) Foreign Securities Depositories
presently operating in Network
markets. This publication is an
integral part of the materials
that State Street provides to its
U.S. mutual fund clients to meet
informational obligations created
by SEC Rule 17f-7.
Global Legal Survey With respect to each market in
(annually) which State Street offers
custodial services, opinions
relating to whether local law
restricts (i) access of a fund's
independent public accountants to
books and records of a Foreign
Sub-Custodian or Foreign
Securities System, (ii) a fund's
ability to recover in the event of
bankruptcy or insolvency of a
Foreign Sub-Custodian or Foreign
Securities System, (iii) a fund's
ability to recover in the event of
a loss by a Foreign Sub-Custodian
or Foreign Securities System, and
(iv) the ability of a foreign
investor to convert cash and cash
equivalents to U.S. dollars
Subcustodian Agreements Copies of the contracts that State
(annually) Street has entered into with each
Foreign Sub-Custodian that
maintains U.S. mutual fund assets
in the markets in which State
Street offers custodial services.
Global Market Bulletin Information on changing settlement
(daily or as necessary) and custody conditions in markets
where State Street offers
custodial services. Includes
changes in market and tax
regulations, depository
developments, dematerialization
information, as well as other
market changes that may impact
State Street's clients.
Foreign Custody Advisories For those markets where State
Street offers custodial services
that (as necessary) exhibit
special risks or infrastructures
impacting custody, State Street
issues market advisories to
highlight those unique market
factors which might impact our
ability to offer recognized
custody service levels.
Material Change Notices Informational letters and
(presently on a quarterly basis or as accompanying materials confirming
otherwise necessary) State Street's foreign custody
arrangements, including a summary
of material changes with Foreign
Sub-Custodians that have occurred
during the previous quarter. The
notices also identify any material
changes in the custodial risks
associated with maintaining assets
with Foreign Securities
Depositories.
|
EXHIBIT j
CONSENT OF PRICEWATERHOUSECOOPERS LLP
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our report dated November 14, 2003 relating to the financial statements and financial highlights which appears in the September 30, 2003 Annual Report to the Board of Trustees and Shareholders of Phoenix Seneca Funds (consisting of Phoenix-Seneca Bond Fund, Phoenix-Seneca Equity Income Fund, and the Phoenix-Seneca Mid-Cap "Edge" Fund), which is also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights" in the Prospectus and "Independent Auditors" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 28, 2004
EXHIBIT m.4
12b-1 AMENDMENT - CLASS A
Effective May 21, 2003
FIRST AMENDMENT OF
PHOENIX-SENECA FUNDS
(the "Trust")
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
The Trust and the requisite percentage of affected shareholders thereof have adopted an amended and restated distribution plan (the "Plan") in accordance with the requirements of Section l2b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect to Class A shares of the Trust.
The Distributor (as such term is defined in the Plan) intends to distribute a fund of funds that is currently expected to be managed by an investment adviser affiliated with the investment adviser to the Trust (the "Fund of Funds"). The Fund of Funds intends to purchase, among other securities, class A shares of certain series in the Trust. The Plan currently permits payment of Rule 12b-1 Fees (as such term is defined in the Plan) only in connection with the sale of shares of the Trust and therefore the purchase of class A shares by the Fund of Funds would not presently result in payment of such fees to the Distributors and others involved in the marketing and servicing of such investments.
On May 21, 2003, the Trustees deliberated the equities of depriving such parties of fees that such entities would otherwise have been entitled to receive had these shares been sold to individual investors. The Trustees considered the merits of extending the definition of parties qualified to receive Rule 12b-1 Fees hereunder and now desire to amend the Plan to provide that such fees shall also be payable to the Distributor (and sub-distributors) as compensation for the sale of class A shares to the Fund of Funds and providing personal service to shareholders of the Fund of Funds, including assistance in connection with inquiries relating to shareholder accounts, and maintaining shareholder accounts. It is the intent of the Trustees that these amendments shall not increase the amount of Rule 12b-1 Fees beyond that amount otherwise payable in connection with the direct sale of class A shares to individual investors.
NOW, THEREFORE, in consideration of the foregoing, the Plan is hereby amended so as to provide that notwithstanding anything to the contrary, Rule 12b-1 Fees shall also be payable to the Distributor (and sub-distributors) as compensation for the sale of class A shares to the Fund of Funds and providing personal service to shareholders of the Fund of Funds, including assistance in connection with inquiries relating to shareholder accounts, and maintaining shareholder accounts.
EXHIBIT o.2
18f3 - 4th AMENDMENT & RESTATEMENT 0503
(Effective October 1, 2002)
PHOENIX FUNDS
and
PHOENIX-SENECA FUNDS
(the "Funds")
FOURTH AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended ("1940 Act"), this Plan describes the multi-class system for the Funds, including the separate classes of shares' arrangements for distribution, the method for allocating expenses to those classes and any related conversion or exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Funds shall offer multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this Plan.
The portfolios of the Funds listed on Schedule A hereto shall offer up to five classes of shares as indicated on Schedule A: Class A, Class B, Class C, Class X and Class T. Shares of the Multi-Class Portfolios shall represent an equal pro rata interest in the respective Multi-Class Portfolio and, generally, shall have identical voting, dividend, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications and terms and conditions, except that: (a) each class shall have a different designation; (b) each class shall bear any Class Expenses, as defined by Section 2(b), below; (c) each class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its distribution arrangement; and (d) each class shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. In addition, Class A, Class B, Class C and Class T shares shall have the features described in Sections a, b, c and d, below.
The Funds have adopted Distribution Plans pursuant to Rule 12b-1 with respect to Class A, Class B, Class C and Class T for each Multi-Class Portfolio, containing substantially the following terms:
i. Class A shares of each Multi-Class Portfolio shall pay Phoenix Equity Planning Corporation (the "Distributor") an amount on an annual basis equal to 0.25% of the average daily net assets of a Multi-Class Portfolio's Class A shares as compensation for providing personal service to shareholders (including shareholders of affiliated fund of funds investing in such Multi-Class Portfolio), including assistance in connection with inquiries relating to shareholder accounts, and for maintaining shareholder accounts as provided in the Class A Distribution Plan and any supplements thereto.
ii. Class B shares of each Multi-Class Portfolio shall pay the Distributor a fee consisting of a distribution fee at the rate of 0.75% per annum of the average daily net asset value of a Multi-Class Portfolio's Class B shares and a service fee of 0.25% per annum of the average daily net asset value of a Multi-Class Portfolio's Class B shares for services and expenses incurred in connection with distribution and marketing of shares thereof, as provided in the Class B Distribution Plan and any supplements thereto.
iii. Class C shares of each Multi-Class Portfolio other than the Phoenix-Goodwin Multi-Sector Short Term Bond Fund shall pay the Distributor a fee consisting of a distribution fee at the rate of 0.75% per annum of the average daily net asset value of a Multi-Class Portfolio's Class C shares and a service fee of 0.25% per annum of the average daily net asset value of a Multi-Class Portfolio's Class C shares for services and expenses incurred in connection with distribution and marketing of shares thereof, as provided in the Class C Distribution Plan and any supplements thereto.
iv. Class T shares of the Phoenix-Goodwin Multi-Sector Short Term Bond Fund shall pay the Distributor a fee consisting of a distribution fee at the rate of 0.75% per annum of the average daily net asset value of such Fund's Class C shares and a service fee of 0.25% per annum of the average daily net asset value of such Fund's Class C shares for services and expenses incurred in connection with distribution and marketing of shares thereof, as provided in the Class T Distribution Plan and any supplements thereto.
The gross income, realized and unrealized capital gains and losses and expenses (other than Class Expenses, as defined below) of each Multi-Class Portfolio shall be allocated to each class on the basis of its net asset value relative to the net asset value of the Multi-Class Portfolio. Expenses to be so allocated include expenses of the Funds that are not attributable to a particular Multi-Class Portfolio or class of a Multi-Class Portfolio but are allocated to a Multi-Class Portfolio ("Fund Expenses") and expenses of a particular Multi-Class Portfolio that are not attributable to a particular class of that Multi-Class Portfolio ("Portfolio Expenses"). Fund Expenses include, but are not limited to, trustees' fees, insurance costs and certain legal fees. Portfolio Expenses include, but are not limited to, certain state registration fees, custodial fees, advisory fees and other expenses relating to the management of the Multi-Class Portfolio's assets.
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (1) transfer agency fees; (2) stationery, printing,
postage, and delivery expenses relating to preparing and distributing
shareholder reports, prospectuses, and proxy statements; (3) state Blue Sky
registration fees; (4) SEC registration fees; (5) expenses of administrative
personnel and services to the extent related to another category of
class-specific expenses; (6) trustees' fees and expenses; (7) accounting
expenses, auditors' fees, litigation expenses, and legal fees and expenses; and
(8) expenses incurred in connection with shareholder meetings. Expenses
described in subsection (a) (i) through (iv) must be allocated to the class for
which they are incurred. All other expenses described in this paragraph will be
allocated as Class
Expenses, if a Fund's President and Treasurer have determined, subject to Board approval or ratification, which of such categories of expenses will be treated as Class Expenses, consistent with applicable legal principles under the 1940 Act and the Internal Revenue Code of 1986, as amended ("Code"). The difference between the Class Expenses allocated to each share of a class during a year and the Class Expenses allocated to each share of any other class during such year shall at all times be less than .50% of the average daily net asset value of the class of shares with the smallest average net asset value. The aforedescribed description of Class Expenses and any amendment thereto shall be subject to the continuing availability of an opinion of counsel or a ruling from the Internal Revenue Service to the effect that any such allocation of expenses or the assessment of higher distribution fees and transfer agency costs on any class of shares does not result in any dividends or distributions constituting "preferential dividends" under the Code.
In the event that a particular expense is no longer reasonably allocable by class or to a particular class, it shall be treated as a Fund Expense or Portfolio Expense as applicable, and in the event a Fund Expense or Portfolio Expense becomes allocable as a Class Expense, it shall be so allocated, subject to compliance with Rule 18f-3 and Board approval or ratification.
The initial determination of expenses that will be allocated as Class Expenses and any subsequent changes thereto as set forth in this Plan shall be reviewed by the Board of Trustees and approved by such Board and by a majority of the Trustees who are not "interested persons" of the Fund, as defined in the 1940 Act ("Independent Trustees").
Investment Advisor may waive or reimburse its management fee in whole or in part provided that the fee is waived or reimbursed to all shares of the Fund in proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a Class Expense may waive or reimburse that fee in whole or in part only if the revised fee more accurately reflects the relative cost of providing to each Multi-Class Portfolio the service for which the Class Expense is charged.
Distributor may waive or reimburse a Rule 12b- 1 Plan fee payment in whole or in part.
Shareholders of a Multi-Class Portfolio may exchange shares of a particular class for shares of the same class in any other Phoenix, Phoenix-Engemann, Phoenix-Seneca, Phoenix-Zweig or Phoenix-Euclid Funds for which exchange privileges are available, at the relative net asset values of the respective shares to be exchanged and with no sales charge, provided the shares to be acquired in the exchange are, as may be necessary, qualified for sale in the shareholder's state of residence and subject to the applicable requirements, if any, as to minimum amount. Shareholders of Class T of the Phoenix-Goodwin Multi-Sector Short Term Bond Fund may exchange shares of such class for class C shares in any other Phoenix, Phoenix-Engemann, Phoenix-Seneca, Phoenix-Zweig or Phoenix-Euclid Funds for which exchange privileges are available, at the relative net asset values of the respective shares to be exchanged and with no sales charge, provided the shares to be acquired in the exchange are, as may be necessary, qualified for sale in the shareholder's state of residence and subject to the applicable requirements, if any, as to
minimum amount. Each Multi-Class Portfolio reserves the right to temporarily or permanently terminate exchange privileges, impose conditions upon the exercising of exchange privileges, or reject any specific order from any dealer, shareholder or person whose transactions seem to follow a timing pattern, including those who request more than one exchange out of a Multi-Class Portfolio within any thirty (30) day period. Each Multi-Class Portfolio reserves the right to terminate or modify these exchange privileges at any time upon giving prominent notice to shareholders at least 60 days in advance.
Class B Shares of a Multi-Class Portfolio will automatically convert to Class A Shares of that portfolio, without sales charge, at the relative net asset values of each such classes, not later than eight years from the acquisition of the Class B Shares. The conversion of Class B Shares to Class A Shares is subject to the continuing availability of an opinion of counsel or a ruling from the Internal Revenue Service to the effect that the conversion of shares does not constitute a taxable event under federal income tax law.
The Board of Trustees, including a majority of the Independent Trustees, at a meeting held on May 21, 2003, approved the Fourth Amended and Restated Plan based on a determination that the Plan, including the expense allocation, is in the best interests of each class and Multi-Class Portfolio individually and of the Funds. Their determination was based on their review of information furnished to them that they deemed reasonably necessary and sufficient to evaluate the Plan.
The Plan may not be amended materially unless the Board of Trustees, including a majority of the Independent Trustees, have found that the proposed amendment, including any proposed related expense allocation, is in the best interests of each class and Multi-Class Portfolio individually and of the Funds. Such funding shall be based on information required by the Board and furnished to them that the Board deems reasonably necessary to evaluate the proposed amendment.
The Board shall review reports of expense allocations and such other information as they request at such times, or pursuant to such schedule, as they may determine consistent with applicable legal requirements.
Any agreement related to the Multi-Class System shall require the parties thereto to furnish to the Board of Trustees, upon their request, such information as is reasonably necessary to permit the Trustees to evaluate the Plan or any proposed amendment.
The Fourth Amended and Restated Plan, having been reviewed and approved by the Board of Trustees and the Independent Trustees, shall take effect as of the first day of each Fund's current fiscal year.
The Plan may not be amended to modify materially its terms unless such amendment has been approved in the manner specified in Section 3(b) of this Plan.
SCHEDULE A
(as of October 1, 2002)
Class A Class B Class Class T Class X
------- ------- ------ ------- -------
PHOENIX-ABERDEEN WORLDWIDE OPPORTUNITIES FUND X X X
PHOENIX EQUITY SERIES FUND:
PHOENIX-DUFF & PHELPS CORE EQUITY FUND X X X
PHOENIX-OAKHURST GROWTH & INCOME FUND X X X
PHOENIX-GOODWIN CALIFORNIA TAX-EXEMPT BOND FUND X X
PHOENIX INVESTMENT TRUST 97:
PHOENIX-HOLLISTER SMALL CAP VALUE FUND X X X
PHOENIX-HOLLISTER VALUE EQUITY FUND X X X
PHOENIX MULTI-PORTFOLIO FUND:
PHOENIX-GOODWIN EMERGING MARKETS BOND FUND X X X
PHOENIX-ABERDEEN INTERNATIONAL FUND X X X
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES FUND X X X
PHOENIX-GOODWIN TAX-EXEMPT BOND FUND X X
PHOENIX-SENECA TAX SENSITIVE GROWTH FUND X X X X
PHOENIX MULTI-SERIES TRUST
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME FUND X X X
PHOENIX GOODWIN MULTI-SECTOR SHORT
TERM BOND FUND X X X X
PHOENIX-OAKHURST INCOME & GROWTH FUND X X X
PHOENIX-OAKHURST STRATEGIC ALLOCATION FUND X X
PHOENIX PARTNER SELECT FUND
(f/k/a PHOENIX-ABERDEEN SERIES FUND)
WEALTH BUILDER FUND X X
GROWTH & DIVIDEND FUND X X
PHOENIX SENECA FUNDS
PHOENIX-SENECA BOND FUND X X X X
PHOENIX-SENECA GROWTH FUND X X X X
PHOENIX-SENECA REAL ESTATE SECURITIES FUND X X X X
PHOENIX SERIES FUND:
PHOENIX-ENGEMANN AGGRESSIVE GROWTH FUND X X X
PHOENIX-OAKHURST BALANCED FUND X X
PHOENIX-ENGEMANN CAPITAL GROWTH FUND X X
PHOENIX-GOODWIN HIGH YIELD FUND X X X
PHOENIX-GOODWIN MONEY MARKET FUND X X X
PHOENIX-DUFF & PHELPS CORE BOND FUND X X X
PHOENIX STRATEGIC EQUITY SERIES FUND:
PHOENIX-SENECA GROWTH FUND X X X X
PHOENIX-SENECA STRATEGIC THEME FUND X X X
|
EXHIBIT p
CODE OF ETHICS
(Effective 01/01/04)
AMENDED AND RESTATED
CODE OF ETHICS
PHOENIX FUNDS
PHOENIX-DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
PHOENIX-ABERDEEN SERIES FUND
PHOENIX-ENGEMANN FUNDS
PHOENIX-ZWEIG FUNDS
These principles apply to all Access Persons of each Phoenix advisory and broker-dealer subsidiary in their management and administration of the Phoenix Family of Funds (Phoenix Funds). Phoenix Investment Counsel, Inc., Duff & Phelps Investment Management Co, Phoenix-Aberdeen International Advisors, LLC, Roger Engemann & Associates, Inc., Seneca Capital Management LLC, Phoenix/Zweig Advisers LLC, Phoenix Equity Planning Corporation, and PXP Securities Corporation are related subsidiaries, which currently provide services to the Phoenix Funds and certain subaccounts of the Phoenix Edge Series Fund. To the extent necessary, each subsidiary may impose further limitations on personal trading subject to notifying Counsel and the Compliance Officer of the Phoenix Funds.
When Fund Access Persons covered by the terms of this Code of Ethics engage in personal securities transactions, they must adhere to the following general principles as well as to the Code's specific provisions:
A. At all times, the interests of Fund shareholders must be paramount;
B. Personal transactions must be conducted consistent with this Code of Ethics in a manner that avoids any actual or potential conflict of interest; and
C. No inappropriate advantage should be taken of any position of trust and responsibility.
A. "Fund" means each and every investment company, or series thereof, or other institutional account managed by the Adviser, individually and collectively.
B. "Access Person" means any Trustee, officer, general partner, or Advisory Person of the Fund or its adviser. Disinterested Trustees are considered to be Non-Access Persons and are not subject to the personal securities trading and reporting requirements set forth under the code. The Compliance Department shall maintain a list of the Fund's Access Persons.
C. "Advisory Person" means (i) any employee of the Fund or of any company in a control relationship to the Fund, who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of securities by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (ii) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to
the Fund with regard to the purchase of sale of securities by the Fund. This grouping customarily includes the Portfolio Manager and other investment personnel comprising an investment team, such as an analyst or trader, who provide information and advice that enter into the investment decision to buy or sell a security on behalf of the Fund.
D. A security is "being considered for purchase or sale" when a recommendation to purchase or sell a security has been made and communicated and, with respect to the Advisory Person making the recommendation, when such person seriously considers making such a recommendation.
E. "Beneficial ownership" shall be interpreted in the same
manner as it would be under Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934 in determining whether a
person is the beneficial owner of a security for purposes of
Section 16 of the Securities Exchange Act of 1934 and the
rules and regulations thereunder.
F. "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the Investment Company Act, as amended.
G. "Disinterested Trustee" means a Trustee of a Fund who is
not an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the Investment Company Act, as amended.
H. "Initial Public Offering" means a public sale of an issue not previously offered to the public.
I. "Managed Fund" shall mean those Funds, individually and collectively, for which the Portfolio Manager makes buy and sell decisions.
J. "Portfolio Manager" means the person (or one of the persons) entrusted with the day-to-day management of the Fund's portfolio.
K. "Private Placement" shall have the same meaning as that set forth in Section 4(2) of the Securities Exchange Act.
L. "Purchase or sale of a security" includes inter alia, the writing of an option or the purchase or sale of a security that is exchangeable for or convertible into, a security that is held or to be acquired by a Fund.
M. "Security" shall have the meaning set forth in Section 2(a)(36) of the Investment Company Act, as amended, except that it shall not include securities issued by the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies.
The prohibitions of Section 4 of this Code shall not apply to:
A. Purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control in the reasonable estimation of the Compliance Officer.
B. Purchases or sales of securities (1) not eligible for purchase or sale by the Fund; or (2) specified from time to time by the Trustees, subject to such rules, if any, as the Trustees shall specify.
C. Purchases or sales which are non-volitional on the part of either the Access Person or the Fund.
D. Purchases of shares necessary to establish an automatic dividend reinvestment plan or pursuant to an automatic dividend reinvestment plan, and subsequent sales of such securities.
E. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.
F. Purchase or sale of securities issued under an employee stock purchase or incentive program unless otherwise restricted.
A. IPO Rule: No Access Person may purchase securities in an Initial Public Offering, except with the prior approval of the Compliance Department. This rule also applies to IPO's offered through the Internet.
B. Private Placement Rule: No Access Person may purchase securities in a Private Placement unless the Compliance Department has approved such purchase. Any such approved purchase should be disclosed to the Fund if that issuer's securities are being considered for purchase or sale by the Fund.
C. Preclearance Rule: No Access Person may purchase or sell a security unless the Compliance Department has precleared such purchase or sale. Preclearance is required prior to executing a trade through a personal Internet brokerage account. Preclearance is required for ALL transactions in options, puts, calls and well-known stock indices (e.g. the S&P 500). Preclearance is valid through the business day next following the day preclearance is given.
Exceptions: The following securities transactions do not require preclearance. These exceptions do not apply to transactions in options:
1. Purchases or sales of up to 500 shares of securities of issuers ranked in the Standard & Poor's 500 Composite Stock Index (S&P 500) at the time of purchase or sale. The Compliance Department maintains this list on the Intranet web site and updates it after the end of each quarter.
2. Purchase orders sent directly to the issuer via mail (other than in connection with a Private Placement) or sales of such securities which are redeemed directly by the issuer via mail.
NOTE: THE COMPLIANCE DEPARTMENT MAY DENY APPROVAL OF ANY TRANSACTION REQUIRING PRECLEARANCE UNDER THIS PRECLEARANCE RULE, EVEN IF NOMINALLY PERMITTED UNDER THIS CODE OF ETHICS, IF IT IS BELIEVED THAT DENYING PRECLEARANCE IS NECESSARY FOR
THE PROTECTION OF A FUND. ANY SUCH DENIAL MAY BE APPEALED TO
THE FUND'S COUNSEL. THE DECISION OF COUNSEL SHALL BE FINAL.
D. Open Order Rule: No Access Person may purchase or sell, directly or indirectly, any security in which he has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, when a Fund has a pending "buy" or "sell" order for that security of the same type (i.e. buy or sell) as the proposed personal trade, until the Fund's order is executed or withdrawn.
Exceptions: The following securities transactions are exempt from the Open Order Rule:
1. Purchases or sales of up to 500 shares of securities of issuers in the S&P 500 at the time of the transaction.
2. Purchases or sales approved by the Compliance Department in his/her discretion.
ANY PROFITS REALIZED ON A PERSONAL TRADE IN VIOLATION OF THIS
SECTION 4D MUST BE DISGORGED.
E. Blackout Rule: If a Portfolio Manager's Managed Fund holds a security that is the subject of a proposed personal trade by that Portfolio Manager, the Portfolio Manager is prohibited from buying or selling such security within 7 calendar days before and after the Managed Fund trades in such security.
Exceptions: The following securities transactions are exempt from the Blackout Rule:
1. Purchases or sales of up to 500 shares of securities of issuers in the S&P 500 at the time of the transaction.
2. Purchases or sales approved by the Compliance Department in his/her discretion.
ANY PROFITS REALIZED BY A PORTFOLIO MANAGER ON A PERSONAL
TRADE IN VIOLATION OF THIS SECTION 4E MUST BE DISGORGED.
F. Holding Period Rule: Access Persons must hold each Security, for a period of not less than sixty (60) days, whether or not the purchase of such Security was an exempt transaction under any other provision of Section 4.
ANY PROFITS REALIZED ON TRADING IN CONTRAVENTION OF THIS
POLICY MUST BE DISGORGED.
G. No Access Person shall annually accept any gift or other item of more than $100 in value from any person or entity that does business with or on behalf of the Fund.
H. No Advisory Person shall serve on the board of directors of a publicly traded company without prior authorization from Counsel or the Compliance Officer of the Fund. If board service is authorized, such Advisory Person shall have no role in making investment decisions with respect to the publicly traded company.
I. NO PORTFOLIO MANAGER SHALL ENGAGE IN EXCESSIVE TRADING OR MARKET TIMING ACTIVITIES WITH RESPECT TO ANY MUTUAL FUND WHETHER OR NOT SUCH MUTUAL FUND IS MANAGED BY SUCH ADVISER/SUBADVISOR OR ANY AFFILIATED ADVISER/SUBADVISOR. FOR THE PURPOSES OF THE FOREGOING, "MARKET TIMING" SHALL BE DEFINED AS A PURCHASE AND REDEMPTION, REGARDLESS OF SIZE, IN AND OUT OF THE SAME MUTUAL FUND WITHIN ANY SIXTY (60) DAY PERIOD. THE FOREGOING RESTRICTIONS SHALL NOT APPLY TO PORTFOLIO MANAGERS INVESTING IN MONEY MARKET FUNDS OR CERTAIN OTHER FUNDS DESIGNED TO PERMIT SHORT TERM INVESTMENT, NOR SHALL THE RESTRICTIONS APPLY TO PORTFOLIO MANAGERS INVESTING IN MUTUAL FUNDS THROUGH ASSET ALLOCATION PROGRAMS, AUTOMATIC REINVESTMENT PROGRAMS, 401(K) AND SIMILAR RETIREMENT ACCOUNTS AND ANY OTHER NON-VOLITIONAL INVESTMENT VEHICLES. PORTFOLIO MANAGERS SHALL PROVIDE QUARTERLY CERTIFICATIONS AS TO THEIR COMPLIANCE WITH THIS RESTRICTION.
J. NO ADVISORY PERSON SHALL DIVULGE OR ACT UPON ANY MATERIAL, NON-PUBLIC INFORMATION, AS SUCH TERM IS DEFINED UNDER RELEVANT SECURITIES LAWS.
A. All Access Persons shall direct their brokers to supply, at the same time that they are sent to the Access Person, a copy of the confirmation for each personal securities trade and a copy of each periodic account statement to the Compliance Department.
B. Every Access Person shall report to the Fund the information described in Section 5D of this Code with respect to transactions in any security in which such Access Person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the security; provided, however, that an Access Person shall not be required to make a report with respect to transactions effected for any account over which such person does not have any direct or indirect influence.
C. A Disinterested Trustee of the Fund need only report a transaction in a security if such Trustee, at the time of that transaction knew or, in the ordinary course of fulfilling his official duties as a Trustee of the Fund, should have known that, (1) during the 15-day period immediately preceding or after the date of the transaction by the Trustee, such security was purchased or sold by the Fund or (2) such security was being considered for purchase or sale by the Fund.
D. Every report required pursuant to Section 5B above shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the transaction was effected; and
(v) The date of approval of the transaction and the person who approved it as required by Section 4B or C above.
E. Each Access Person shall submit a report listing all personal securities holdings to the Compliance Department upon the commencement of service and annually thereafter. The annual report shall be as of December 31 and include a certification by the Access Person that he or she has read and understood the Code of Ethics and has complied with the Code's requirements. The annual report and certification will be submitted to the Compliance Department by January 30. This requirement does not apply to a Disinterested Trustee.
F. Any report made under this Section 5 may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates.
G. The Compliance Officer shall submit an annual report to the Fund's Board of Trustees that summarizes the current Code of Ethics procedures, identifies any violations requiring significant remedial action, and recommends appropriate changes to the Code, if any.
H. Any Access Person shall immediately report any potential violation of this Code of which he or she becomes aware to the Compliance Department .
Upon discovering a violation of this Code, the Board of Trustees of the Fund, in addition to any remedial action already taken by the respective adviser or related entity, may impose such sanctions as it deems appropriate, including inter alia, a letter of censure or suspension or termination of employment, or suspension of personal trading privileges for such period as it may deem appropriate.