UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07705
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Phoenix-Kayne Funds
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(Exact name of registrant as specified in charter)
1800 Avenue of the Stars, 2nd Floor
Los Angeles, California 90067
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(Address of principal executive offices) (Zip code)
Kevin J. Carr, Esq.
Vice President, Chief Legal Officer, John H. Beers, Esq.
Counsel and Secretary for Registrant Vice President and Secretary
Phoenix Life Insurance Company Phoenix Life Insurance Company
One American Row One American Row
Hartford, CT 06103-2899 Hartford, CT 06103-2899
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(Name and address of agent for service)
Registrant's telephone number, including area code: (860)-403-5000
Date of fiscal year end: December 31
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Date of reporting period: December 31, 2005
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
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DECEMBER 31, 2005
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ANNUAL REPORT
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o PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
FORMERLY PHOENIX-KAYNE CALIFORNIA INTERMEDIATE TAX-FREE BOND FUND
o PHOENIX INTERMEDIATE BOND FUND
FORMERLY PHOENIX-KAYNE INTERMEDIATE TOTAL RETURN BOND FUND
o PHOENIX OVERSEAS FUND
FORMERLY PHOENIX-KAYNE INTERNATIONAL FUND
o PHOENIX RISING DIVIDENDS FUND
FORMERLY PHOENIX-KAYNE RISING DIVIDENDS FUND
o PHOENIX SMALL-MID CAP FUND
FORMERLY PHOENIX-KAYNE SMALL-MID CAP FUND
GET FUND DOCUMENTS
BY E-MAIL INSTEAD.
ELIGIBLE SHAREHOLDERS
MAY SIGN UP FOR E-DELIVERY
AT PHOENIXFUND.COM.
TRUST NAME: PHOENIX-KAYNE FUNDS
[LOGO] PHOENIXFUNDS(SM)
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Mutual funds are not insured by the FDIC; are not deposits or other obligations
of a bank and are not guaranteed by a bank; and are subject to investment risks,
including possible loss of the principal invested.
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This report is not authorized for distribution to prospective investors in the
Phoenix-Kayne Funds unless preceded or accompanied by an effective Prospectus
which includes information concerning the sales charge, each Fund`s record and
other pertinent information.
MESSAGE FROM THE CHAIRMAN
DEAR SHAREHOLDER:
[PHOTO]
I encourage you to review this annual report for the Phoenix CA
Intermediate Tax-Free Bond Fund, Phoenix Intermediate Bond Fund, Phoenix
Overseas Fund, Phoenix Rising Dividends Fund and Phoenix Small-Mid Cap Fund, for
the fiscal year ended December 31, 2005.
Looking back at 2005, the equity market posted modest returns for the
year, with most of the gains coming after Labor Day, driven by strong corporate
earnings. The economy posted a 3.5% growth rate in 2005, down from 4% in 2004,
as rising interest rates and energy prices continued to weigh on the consumer.
As we enter a new year, the pace of U.S. economic growth continues to moderate.
No matter what the market brings, short-term performance changes should
not distract you from your long-term financial plan. Now may be an opportune
time for you to review your portfolio with your financial advisor to make sure
that your asset allocation remains on target. Keep in mind that finding the best
balance of performance and protection requires discipline and
diversification.(1) Your Phoenix mutual fund allocation may help in this effort.
As an alternative to paper mail, if you would like to view your mutual
fund communications electronically, including account statements, prospectuses,
and annual and semiannual reports, sign up for our E-Delivery service. To
register, go online to PhoenixFunds.com, select the Individual Investors option,
and follow the E-Delivery instructions, or call Mutual Fund Services at
1-800-243-1574 and a customer service representative will be happy to assist
you.
Sincerely,
/s/ Philip R. McLoughlin
Philip R. McLoughlin
Chairman, Phoenix Funds
JANUARY 2006
(1) DIVERSIFICATION DOES NOT GUARANTEE AGAINST A LOSS, AND THERE IS NO GUARANTEE
THAT A DIVERSIFIED PORTFOLIO WILL OUTPERFORM A NON-DIVERSIFIED PORTFOLIO.
The preceding information is the opinion of the Chairman of the Phoenix Funds
Board of Trustees. There is no guarantee that market forecasts discussed will be
realized.
1
TABLE OF CONTENTS
Glossary ................................................................. 3
Phoenix CA Intermediate Tax-Free Bond Fund ............................... 6
Phoenix Intermediate Bond Fund ........................................... 16
Phoenix Overseas Fund .................................................... 24
Phoenix Rising Dividends Fund ............................................ 37
Phoenix Small-Mid Cap Fund ............................................... 48
Notes to Financial Statements ............................................ 60
Report of Independent Registered Public Accounting Firm .................. 65
Board of Trustees' Consideration of Investment Advisory and Subadvisory
Agreements ............................................................... 66
Results of Shareholder Meeting ........................................... 71
Fund Management Tables ................................................... 72
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PROXY VOTING PROCEDURES (FORM N-PX)
The Adviser votes proxies relating to portfolio securities in accordance with
procedures that have been approved by the Trust's Board of Trustees. You may
obtain a description of these procedures, along with information regarding how
the Funds voted proxies during the most recent 12-month period ended June 30,
2005, free of charge, by calling toll-free 1-800-243-1574. This information is
also available through the Securities and Exchange Commission's website at
http://www.sec.gov.
FORM N-Q INFORMATION
The Trust files a complete schedule of portfolio holdings with the Securities
and Exchange Commission (the "SEC") for the first and third quarters of each
fiscal year on Form N-Q. Form N-Q is available on the SEC's website at
http://www.sec.gov. Form N-Q may be reviewed and copied at the SEC's Public
Reference Room. Information on the operation of the SEC's Public Reference Room
can be obtained by calling toll-free 1-800-SEC-0330.
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2
GLOSSARY
ADR (AMERICAN DEPOSITARY RECEIPT)
Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges
that are held by a bank or a trust. Foreign companies use ADRs in order to make
it easier for Americans to buy their shares.
AMBAC (AMERICAN MUNICIPAL BOND ASSURANCE CORPORATION)
One of the largest insurers of new municipal bond offerings.
DURATION
A measure of volatility of a fixed income security, fixed income portfolio or
fixed income portion of a portfolio. It is the change in the value of the fixed
income security, fixed income portfolio or portion thereof that will result from
a 1% change in interest rates. Duration is stated in years. For example, a
5-year duration means the fixed income security, fixed income portfolio or
portion will decrease in value by 5% if interest rates rise 1%, and increase in
value by 5% if interest rates fall 1%.
FEDERAL FUNDS RATE
The interest rate charged on overnight loans of reserves by one financial
institution to another in the United States. The federal funds rate is the most
sensitive indicator of the direction of interest rates since it is set daily by
the market.
FEDERAL RESERVE (THE "FED")
The central bank of the United States, responsible for controlling the money
supply, interest rates and credit with the goal of keeping the U.S. economy and
currency stable. Governed by a seven-member board, the system includes 12
regional Federal Reserve Banks, 25 branches and all national and state banks
that are part of the system.
FGIC (FINANCIAL GUARANTY INSURANCE COMPANY)
A leading financial guaranty insurance company providing triple-A credit
enhancement on public finance, structured finance and asset-backed securities.
FNMA OR "FANNIE MAE" (FEDERAL NATIONAL MORTGAGE ASSOCIATION)
Congressionally chartered corporation which buys mortgages on the secondary
market, pools them and sells them as mortgage-backed securities to investors on
the open market. Monthly principal and interest payments are guaranteed by FNMA
but not the U.S. government.
FSA (FINANCIAL SECURITY ASSURANCE, INC.)
A leading provider of Aaa/AAA/AAA financial guaranty insurance for asset-backed
securities, municipal bonds and other structured obligations in the global
markets.
GNMA OR "GINNIE MAE" (GOVERNMENT NATIONAL MORTGAGE ASSOCIATION)
Wholly-owned U.S. government corporation within the Department of Housing and
Urban Development, which guarantees the timely payment of principal and interest
on securities that are issued by private institutions and are backed by pools of
federally-issued or guaranteed mortgage loans.
3
GLOSSARY (CONTINUED)
LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX
The Lehman Brothers 5-Year Municipal Bond Index is a market
capitalization-weighted index that measures the long-term tax-exempt bond
market, and consists of general obligation bonds, revenue bonds, insured bonds
and pre-refunded bonds, all in the maturity range of 4 to 6 years. The index is
calculated on a total return basis.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
The Lehman Brothers 7-Year Municipal Bond Index measures the performance of
investment grade bonds with maturities of seven to eight years.
LEHMAN BROTHERS AGGREGATE BOND INDEX
An index that measures the U.S. investment grade fixed rate bond market. The
index is calculated on a total return basis.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT BOND INDEX
Measures U.S. investment grade government and corporate debt securities with an
average maturity of 4 to 5 years. The index is calculated on a total return
basis.
LEHMAN BROTHERS MUNICIPAL LONG BOND INDEX
The Lehman Brothers Municipal Long Bond Index measures the performance of
long-term tax-exempt bonds.
MBIA (MUNICIPAL BOND INSURANCE ASSOCIATION)
One of the largest insurers of financial obligations for municipalities,
not-for-profit organizations, banks, insurance and finance companies, and other
private-sector entities in the primary and secondary markets. Provides
triple-A-rating guarantee as an unconditional and irrevocable guarantee of full
principal and interest payment.
MSCI EAFE(R) GROWTH INDEX
The MSCI EAFE Growth Index is an unmanaged index considered representative of
growth stocks of Europe, Australia, Asia and the Far East.
MSCI EAFE(R) INDEX (NET)
A free float-adjusted market capitalization index that measures developed
foreign market equity performance, excluding the U.S. and Canada. The index is
calculated on a total return basis with net dividends reinvested.
MSCI EAFE(R) VALUE INDEX
The MSCI EAFE Value Index is a market-weighted index of companies in developed
markets, excluding the U.S. and Canada, with lower price-to-book ratios.
MSCI EMERGING MARKETS INDEX
The MSCI Emerging Markets Index is a free float-adjusted market capitalization
index designed to measure equity market performance in the global emerging
markets. The index is calculated on a total return basis with gross dividends
reinvested.
4
GLOSSARY (CONTINUED)
MUNICIPAL MARKET ADVISORS (MMA)
An analytical firm specializing in the municipal bond market that provides
research to financial services clients used for formulating investment
strategies in the tax-exempt and broader interest rate markets.
RUSSELL 2000(R) INDEX
The Russell 2000(R) Index is a market capitalization-weighted index of the 2,000
smallest companies in the Russell Universe, which comprises the 3,000 largest
U.S. companies. The index is calculated on a total return basis with dividends
reinvested.
RUSSELL 2500(TM) INDEX
A market capitalization-weighted index of the 2,500 smallest companies in the
Russell Universe, which comprises the 3,000 largest U.S. companies. The index is
calculated on a total return basis with dividends reinvested.
S&P 500(R) INDEX
A free-float market capitalization-weighted index of 500 of the largest U.S.
companies. The index is calculated on a total return basis with dividends
reinvested.
S&P CALIFORNIA MUNICIPAL BOND INDEX
A market value-weighted index of California municipal bond issues held by
managed municipal bond fund customers of Standard & Poor's that are priced
daily. The index is calculated on a total return basis.
SPONSORED ADR
An ADR which is issued with the cooperation of the company whose stock will
underlie the ADR. These shares carry all the rights of the common share such as
voting rights. ADRs must be sponsored to be able to trade on the NYSE.
XLCA (XL CAPITAL ASSURANCE)
A monoline financial guarantee insurance company that provides triple-A rated
financial guaranty insurance for the asset-backed structured finance, structured
investment products, future flow, global infrastructure project finance, power &
utilities, public finance, and bank deposit insurance markets worldwide.
YIELD CURVE
A line chart that shows interest rates at a specific point in time for
securities of equivalent quality but with different maturities. A "normal or
positive" yield curve indicates that short-term securities have a lower interest
rate than long-term securities; an "inverted or negative" yield curve indicates
short-term rates are exceeding long-term rates; and a "flat yield curve" means
short- and long-term rates are about the same.
INDEXES ARE UNMANAGED AND NOT AVAILABLE FOR DIRECT INVESTMENT; THEREFORE, THEIR
PERFORMANCE DOES NOT REFLECT THE EXPENSES ASSOCIATED WITH THE ACTIVE MANAGEMENT
OF AN ACTUAL PORTFOLIO.
5
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, KIMBERLY C. FRIEDRICKS
Q: HOW DID THE PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND PERFORM FOR ITS FISCAL
YEAR ENDED DECEMBER 31, 2005?
A: For the fiscal year ended December 31, 2005, the Fund's Class X shares
returned 1.33%. For the same period, the Lehman Brothers Aggregate Bond Index, a
broad-based fixed income index, returned 2.43%, and the S&P California Municipal
Bond Index, the Fund's style-specific benchmark, returned 4.73%. All performance
figures assume reinvestment of distributions. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE
PERFORMANCE SHOWN ABOVE.
Q: HOW DID THE FIXED INCOME MARKETS PERFORM DURING THE FUND'S FISCAL YEAR?
A: The Federal Reserve raised the federal funds rate to 4.25% over the course of
2005, leading to a flattening of the U.S. Treasury yield curve. The municipal
bond yield curve, as measured by Municipal Market Advisors, also flattened,
although not to the same extent as the U.S. Treasury yield curve. For the full
year, 5-year municipal rates were up 0.64% and 30-year municipal rates were down
0.14%.
This flattening of the yield curve led to extreme performance differences
between long and shorter duration strategies. To illustrate, the Lehman 5-Year
Municipal Index, with a duration of 4.09 years, returned 0.95% in 2005; the
Lehman 7-Year Municipal Index, with a duration of 5.27 years, returned 1.72%;
while the Lehman Municipal Long Bond Index, with a duration of 6.78 years,
achieved a 7.06% return.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR?
A: The Fund underperformed the S&P California Municipal Bond Index for the year.
The lag in performance was due to the Fund's shorter duration strategy relative
to the index. With a duration of 5.35 years, the benchmark's duration was much
longer than the Fund's duration of 3.84 years.
Rising interest rates in the intermediate portion of the curve throughout
the year offered us the opportunity to increase the Fund's yield while
maintaining our intermediate duration and high quality standards. We believe
that once the Federal Reserve ends the tightening cycle, the intermediate
portion of the yield curve will offer a compelling risk-to-reward ratio.
JANUARY 2006
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
FOR DEFINITIONS OF INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS
REPORT, SEE THE GLOSSARY ON PAGE 3.
6
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
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TOTAL RETURNS(1) PERIODS ENDING 12/31/05
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INCEPTION INCEPTION
1 YEAR 5 YEAR TO 12/31/05 DATE
------- ------- ----------- ---------
Class X Shares 1.33% 3.88% 4.08% 10/28/96
Lehman Brothers Aggregate Bond Index 2.43 5.87 6.51 10/28/96
S&P California Municipal Bond Index 4.73 5.71 5.59 10/31/96
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT
A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES.
PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
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GROWTH OF $10,000 PERIODS ENDING 12/31
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This Growth of $10,000 chart assumes an initial investment of $10,000 made on
10/28/96 (inception of the Fund) in Class X shares. The total return for Class X
shares reflects no sales charge. Performance assumes dividends and capital gain
distributions are reinvested.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:
Phoenix
CA Intermediate
Tax-Free Bond Fund Lehman Brothers S&P California
Class X Aggregate Bond Index Municipal Bond Index
------------------ -------------------- --------------------
10/28/96 $10,000 $10,000 $10,000
12/31/96 10,002 10,162 10,111
12/31/97 10,428 11,143 10,756
12/31/98 10,883 12,111 11,384
12/31/99 10,833 12,011 11,049
12/29/00 11,936 13,408 12,476
12/31/01 12,445 14,540 13,062
12/31/02 13,266 16,032 14,170
12/31/03 13,830 16,690 14,897
12/31/04 14,250 17,414 15,728
12/31/05 14,439 17,837 16,471
For information regarding the indexes, see the glossary on page 3.
7
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
ABOUT YOUR FUND'S EXPENSES
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of
the CA Intermediate Tax-Free Bond Fund, you incur ongoing costs, including
investment advisory fees and other expenses. Class X shares are sold without a
sales charge and do not incur distribution and service fees. This example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds. This example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire six- month period.
ACTUAL EXPENSES
The first line of the accompanying table provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the accompanying table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying table is meant to
highlight your ongoing costs only and do not reflect any transactional costs.
Therefore, the second line of the accompanying table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. If you have incurred transactional costs, your costs
could have been higher. The calculations assume no shares were bought or sold
during the period. Your actual costs may have been higher or lower, depending on
the amount of your investment and the timing of any purchases or redemptions.
CA Intermediate Beginning Ending Expenses Paid
Tax-Free Bond Fund Account Value Account Value During
Class X June 30, 2005 December 31, 2005 Period*
- ------------------ ------------- ----------------- -------------
Actual $1,000.00 $1,001.50 $3.78
Hypothetical (5% return
before expenses) 1,000.00 1,021.38 3.83
* EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 0.75%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS X
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 1.33%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,013.30.
YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL
STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING
EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS.
8
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
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TEN LARGEST HOLDINGS AT DECEMBER 31, 2005 (AS A PERCENTAGE OF NET ASSETS)(e)
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1. California State Department of
Water Resources Series W 5.50%, 12/1/13 3.1%
2. East Bay Municipal Utility District
Water System Revenue 5.25%, 6/1/18 3.1%
3. South Coast Air Quality Management
District 6%, 8/1/11 3.1%
4. Desert Community College District
5%, 8/1/18 3.0%
5. San Jose Financing Authority Convention
Center Project Series F 5%, 9/1/15 3.0%
6. Redlands Financing Authority Series A
5%, 9/1/17 3.0%
7. Port of Oakland California Series I
5.60%, 11/1/19 2.9%
8. California State Department of Water
Resource Power Supply Series A 5.25%,
5/1/09 2.9%
9. Irvine Unified School District Community
Facilities District No. 86-1 5.50%, 11/1/13 2.9%
10. Northern California Power Agency Public
Power Revenue Hydroelectric Project
No. 1 Series A 5%, 7/1/15 2.9%
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SECTOR WEIGHTINGS 12/31/05
- --------------------------------------------------------------------------------
As a percentage of total investments
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Water & Sewer Revenue 21%
General Obligation 15
Pre-Refunded 12
General Revenue 10
Power Revenue 10
Municipal Utility
District Revenue 8
Transportation Revenue 7
Other 17
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
PAR
VALUE
(000) VALUE
--------- -----------
MUNICIPAL TAX-EXEMPT BONDS(d)--99.1%
DEVELOPMENT REVENUE--4.6%
Los Angeles County Public Works Financing
Authority Series A 5.50%, 10/1/18
(FSA Insured)...................................... $ 450 $ 495,103
Menlo Park Community Development Agency
Las Pulgas Community Development Project
5.375%, 6/1/16 (AMBAC Insured)..................... 250 257,075
PAR
VALUE
(000) VALUE
--------- -----------
DEVELOPMENT REVENUE--CONTINUED
Ontario Redevelopment Financing Authority
Project No. 1 6.90%,
8/1/10 (MBIA Insured).............................. $ 70 $ 80,037
Ontario Redevelopment Financing Authority
Project No. 1 Center City & Cimarron 5.25%,
8/1/13 (MBIA Insured).............................. 500 545,405
Riverside County Redevelopment Agency
Jurupa Valley Project Area 5.25%, 10/1/17
(AMBAC Insured).................................... 250 272,005
-----------
1,649,625
-----------
See Notes to Financial Statements 9
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
PAR
VALUE
(000) VALUE
--------- -----------
FACILITIES REVENUE--2.5%
California State Public Works Board
Series C 5.25%, 11/1/20............................ $ 500 $ 529,460
Los Angeles State Building Authority
Department of General Services Series A
5.375%, 5/1/06..................................... 200 201,076
Oakland State Building Authority Series A
5%, 4/1/17 (AMBAC Insured)......................... 150 156,383
-----------
886,919
-----------
GENERAL OBLIGATION--17.5%
Brea Olinda Unified School District
Series A 6%, 8/1/15 (FGIC Insured)................. 150 175,350
California State 6.25%, 4/1/08..................... 825 874,855
California State 5.50%, 4/1/10 (MBIA Insured)...... 200 217,014
California State 5.25%, 6/1/16..................... 80 81,406
California State Unrefunded Balance-2001
5.375%, 3/1/06..................................... 45 45,110
Desert Community College District 5%, 8/1/18
(MBIA Insured)..................................... 990 1,068,883
Grossmont Cuyamaca Community College
Series A 5%, 8/1/19 (MBIA Insured)................. 250 266,355
Long Beach Unified School District Series C
5.375%, 8/1/16 (MBIA Insured)...................... 300 320,853
Metropolitan Water District Southern California
Series A 5.25%, 3/1/11............................. 180 189,223
Oakland Unified School District Alameda County
School Improvements 5%, 8/1/16 (FSA Insured)....... 400 420,912
San Diego County Certificates of Participation
5.25%, 11/1/15 (AMBAC Insured)..................... 960 1,041,437
San Francisco City and County Educational
Facilities Unified School District Series B 5.50%,
6/15/12............................................ 500 525,940
Santa Ana Unified School District 5.70%, 8/1/22
(FGIC Insured)..................................... 400 439,216
Wiseburn School District Series A 5%, 8/1/17
(MBIA Insured)..................................... 580 628,615
-----------
6,295,169
-----------
GENERAL REVENUE--10.3%
California State Public Works Board 5%, 11/1/17
(XLCA Insured)..................................... 460 493,557
Puerto Rico Public Finance Corp. Series A 5.25%,
8/1/30 (AMBAC Insured)(c).......................... 500 541,225
PAR
VALUE
(000) VALUE
--------- -----------
GENERAL REVENUE--CONTINUED
San Jose Financing Authority Convention Center
Project Series F 5%, 9/1/15 (MBIA Insured)......... $ 1,000 $ 1,062,070
Santa Clara County Financing Authority Leasing
Revenue 7.75%, 11/15/11 (AMBAC Insured)............ 400 484,164
South Coast Air Quality Management District 6%,
8/1/11 (AMBAC Insured)............................. 1,000 1,113,760
-----------
3,694,776
-----------
HIGHER EDUCATION REVENUE--2.4%
California State Public Works Board Community
Colleges Series A 5.25%, 12/1/13................... 290 307,345
University of California Series A 5%, 5/15/10
(AMBAC Insured).................................... 500 533,615
-----------
840,960
-----------
MEDICAL REVENUE--1.0%
California Health Facilities Financing Authority
Series A 5%, 11/15/14.............................. 250 265,150
San Joaquin County General Hospital Project
Certificates of Participation 5.25%, 9/1/12
(MBIA Insured)..................................... 100 106,797
-----------
371,947
-----------
MUNICIPAL UTILITY DISTRICT REVENUE--7.9%
City of San Diego Public Facilities Financial
Authority Series A 5%, 5/15/13
(AMBAC Insured).................................... 300 300,375
Los Angeles Wastewater System Revenue 5%,
6/1/08 (FSA Insured)............................... 375 390,585
Sacramento Municipal Utility District Electricity
Revenue Series L 5.10%, 7/1/13
(AMBAC Insured).................................... 500 522,570
Sacramento Municipal Utility District Electricity
Revenue Series O 5.25%, 8/15/10
(MBIA Insured)..................................... 500 539,595
Sacramento Municipal Utility District Electricity
Revenue Series O 5.25%, 8/15/15
(MBIA Insured)..................................... 310 336,257
Sacramento Municipal Utility District Electricity
Revenue Series O 5.25%, 8/15/17
(MBIA Insured)..................................... 200 215,676
Sacramento Municipal Utility District Electricity
Revenue Series P 5.25%, 8/15/17 (FSA Insured)...... 500 537,875
-----------
2,842,933
-----------
10 See Notes to Financial Statements
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
PAR
VALUE
(000) VALUE
--------- -----------
POWER REVENUE--9.5%
California State Department of Water Resource
Power Supply Series A 5.25%, 5/1/09
(MBIA Insured)..................................... $ 1,000 $ 1,059,220
City of Pasadena 5%, 6/1/17 (MBIA Insured)......... 300 317,838
Los Angeles Department of Water & Power
Series A-A-3 5.25%, 7/1/18......................... 300 303,045
Northern California Power Agency Public Power
Revenue Hydroelectric Project No. 1 Series A 5%,
7/1/15 (MBIA Insured).............................. 1,000 1,050,250
Southern California Public Power Authority
Series B 5%, 7/1/12 (FSA Insured).................. 635 688,708
-----------
3,419,061
-----------
PRE-REFUNDED--10.1%
California Educational Facilities Authority
Chapman University 5.375%, 10/1/16................. 250 258,755
Contra Costa County Home Mortgage Revenue
7.50%, 5/1/14 (GNMA Collateralized)(b)............. 500 625,620
Cypress Residential Mortgage Revenue Series B
7.25%, 1/1/12(b)................................... 200 240,086
Duarte Redevelopment Agency Single Family
Mortgage Revenue Series A 6.875%, 11/1/11
(FNMA Collateralized)(b)........................... 300 352,896
Fremont Union High School District/Santa Clara
County Series B 5.25%, 9/1/15 Prerefunded
9/1/10 @ 100....................................... 200 216,514
Los Angeles County Public Works Financing
Authority Revenue Regional Park and Open Space
Series A 5%, 10/1/13 Prerefunded
10/1/07 @ 101...................................... 325 338,159
Modesto Wastewater Treatment Facilities Revenue
6%, 11/1/12 (MBIA Insured)(b)...................... 735 843,692
San Francisco Bay Area Rapid Transit District
Sales Tax Revenue 5.25%, 7/1/17 Prerefunded
7/1/08 @ 101....................................... 320 338,688
Stockton Housing Facilities Revenue O'Connor
Woods Project A 5.60%, 3/20/28 Prerefunded
9/20/17 @ 100 (GNMA Collateralized)................ 200 200,896
Truckee Public Financing Authority Leasing
Revenue Series A 5.875%, 11/1/20 Prerefunded
11/1/08 @ 102 (AMBAC Insured)...................... 200 217,974
-----------
3,633,280
-----------
PAR
VALUE
(000) VALUE
--------- -----------
SCHOOL DISTRICT REVENUE--2.9%
Irvine Unified School District Community
Facilities District No. 86-1 5.50%, 11/1/13
(AMBAC Insured).................................... $ 1,000 $ 1,056,660
TRANSPORTATION REVENUE--7.2%
Alameda Corridor Transportation Authority
Series A 5.125%, 10/1/16 (MBIA Insured)............ 150 160,929
Alameda Corridor Transportation Authority
Series A 5.125%, 10/1/17 (MBIA Insured)............ 125 133,880
Port of Oakland California Series I 5.60%, 11/1/19
(MBIA Insured)..................................... 1,000 1,059,330
San Francisco Bay Area Rapid Transit Financing
Authority 5.25%, 7/1/17............................ 180 189,803
San Francisco City & County Airports Commission
Second Series - Issue 10B 5.375%, 5/1/17
(MBIA Insured)..................................... 1,000 1,026,470
-----------
2,570,412
-----------
VETERAN REVENUE--2.6%
State of California Veterans Bonds Series 5.15%,
12/1/14............................................ 895 938,703
WATER & SEWER REVENUE--20.6%
California State Department of Water Resources
Series T 5.125%, 12/1/12........................... 250 264,738
California State Department of Water Resources
Series U 5.125%, 12/1/15........................... 90 95,408
California State Department of Water Resources
Series W 5.50%, 12/1/13 (FSA-CR Insured)........... 1,000 1,126,020
East Bay Municipal Utility District Water System
Revenue 5.25%, 6/1/18 (MBIA Insured)............... 1,035 1,115,533
El Dorado Irrigation District Certificates of
Participation Series A 5.25%, 3/1/16
(FGIC Insured)..................................... 365 395,536
Los Angeles Waste Water System Revenue
Series B 5%, 6/1/14 (FGIC Insured)................. 700 734,748
Metropolitan Water District of Southern California
Series B 5%, 7/1/13................................ 500 543,880
Modesto Waste Water Series A 5%, 11/1/19
(FSA Insured)...................................... 245 262,873
Mountain View Shoreline Regional Park
Community Series A 5.50%, 8/1/21
(MBIA Insured)..................................... 1,000 1,032,090
See Notes to Financial Statements 11
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
PAR
VALUE
(000) VALUE
--------- -----------
WATER & SEWER REVENUE--CONTINUED
Redlands Financing Authority Series A 5%, 9/1/17
(FSA Insured)...................................... $ 1,000 $ 1,061,870
Sweetwater California Authority Water Revenue
5.25%, 4/1/10 (AMBAC Insured)...................... 200 207,420
Westlands Water District Revenue Certificates of
Participation 5.25%, 9/1/14 (MBIA Insured)......... 500 548,005
-----------
7,388,121
-----------
- -----------------------------------------------------------------------------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(IDENTIFIED COST $35,249,354) 35,588,566
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--99.1%
(IDENTIFIED COST $35,249,354) 35,588,566(a)
Other assets and liabilities, net--0.9% 328,102
-----------
NET ASSETS--100.0% $35,916,668
===========
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $624,964 and gross
depreciation of $285,752 for federal income tax purposes. At December 31,
2005, the aggregate cost of securities for federal income tax purposes was
$35,249,354.
(b) Escrowed to maturity.
(c) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(d) At December 31, 2005, 81% of the securities in the portfolio are backed by
insurance of financial institutions and financial guaranty assurance
agencies. Insurers with a concentration greater than 10% of net assets are
as follows: MBIA 38%, AMBAC 19%, and FSA 14%.
(e) Table excludes short-term investments.
12 See Notes to Financial Statements
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investment securities at value
(Identified cost $35,249,354) $ 35,588,566
Receivables
Interest 476,670
Prepaid expenses 10,316
-------------
Total assets 36,075,552
-------------
LIABILITIES
Cash overdraft 30,588
Payables
Fund shares repurchased 194
Dividend distributions 65,447
Professional fee 23,560
Investment advisory fee 19,046
Financial agent fee 4,603
Transfer agent fee 2,937
Trustees' fee 1,785
Other accrued expenses 10,724
-------------
Total liabilities 158,884
-------------
NET ASSETS $ 35,916,668
=============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 35,546,012
Undistributed net investment income 6,221
Accumulated net realized gain 25,223
Net unrealized appreciation 339,212
-------------
NET ASSETS $ 35,916,668
=============
Shares of beneficial interest outstanding,
no par value, unlimited authorization
(Net Assets $35,916,668) 3,408,300
Net asset value and offering price per share $ 10.54
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME
Interest $ 1,568,570
-------------
Total investment income 1,568,570
-------------
EXPENSES
Investment advisory fee 190,463
Financial agent fee 54,477
Trustees 35,446
Professional 32,332
Transfer agent 16,192
Registration 15,579
Printing 8,113
Custodian 6,300
Miscellaneous 33,154
-------------
Total expenses 392,056
Less expenses reimbursed by investment adviser (105,772)
Custodian fees paid indirectly (591)
-------------
Net expenses 285,693
-------------
NET INVESTMENT INCOME (LOSS) 1,282,877
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 69,727
Net change in unrealized appreciation (depreciation) on
investments (865,137)
-------------
NET GAIN (LOSS) ON INVESTMENTS (795,410)
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 487,467
=============
See Notes to Financial Statements 13
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) $ 1,282,877 $ 1,276,147
Net realized gain (loss) 69,727 387,638
Net change in unrealized appreciation (depreciation) (865,137) (463,295)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 487,467 1,200,490
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (1,281,172) (1,276,807)
Net realized short-term gains (50) (31,815)
Net realized long-term gains (44,454) (482,971)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,325,676) (1,791,593)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (300,844 and 500,653 shares, respectively) 3,212,011 5,418,380
Net asset value of shares issued from reinvestment of distributions
(56,283 and 72,718 shares, respectively) 598,864 786,372
Cost of shares repurchased (502,660 and 612,472 shares, respectively) (5,341,011) (6,696,885)
-------------- --------------
Total (1,530,136) (492,133)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (1,530,136) (492,133)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS (2,368,345) (1,083,236)
NET ASSETS
Beginning of period 38,285,013 39,368,249
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $6,221
AND $4,516, RESPECTIVELY) $ 35,916,668 $ 38,285,013
============== ==============
14 See Notes to Financial Statements
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $ 10.77 $ 10.96 $ 10.93 $ 10.74 $ 10.83
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.36(1) 0.37 0.41 0.46 0.47
Net realized and unrealized gain (loss) (0.22) (0.04) 0.04 0.24 (0.02)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.14 0.33 0.45 0.70 0.45
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.36) (0.37) (0.41) (0.46) (0.47)
Distributions from net realized gains (0.01) (0.15) (0.01) (0.05) (0.07)
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.37) (0.52) (0.42) (0.51) (0.54)
---------- ---------- ---------- ---------- ----------
Change in net asset value (0.23) (0.19) 0.03 0.19 (0.09)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.54 $ 10.77 $ 10.96 $ 10.93 $ 10.74
========== ========== ========== ========== ==========
Total return 1.33% 3.04% 4.25% 6.60% 4.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 35,917 $ 38,285 $ 39,368 $ 33,307 $ 34,422
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Net operating expenses 0.75% 0.75% 0.75% 0.75% 0.75%
Gross operating expenses 1.03% 0.98% 1.03% 0.98% 0.85%
Net investment income (loss) 3.37% 3.39% 3.72% 4.18% 4.38%
Portfolio turnover 36% 62% 33% 21% 61%
(1) Computed using average shares outstanding.
See Notes to Financial Statements 15
PHOENIX INTERMEDIATE BOND FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, KIMBERLY C. FRIEDRICKS
Q: HOW DID THE PHOENIX INTERMEDIATE BOND FUND PERFORM FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 2005?
A: For the fiscal year ended December 31, 2005, the Fund's Class X shares
returned 0.73%. For the same period, the Lehman Brothers Aggregate Bond Index, a
broad-based fixed income index, returned 2.43%, and the Lehman Brothers
Intermediate Government/Credit Bond Index, the Fund's style-specific benchmark,
returned 1.58%. All performance figures assume reinvestment of distributions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY
BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE.
Q: HOW DID THE FIXED INCOME MARKETS PERFORM DURING THE FUND'S FISCAL YEAR?
A: The Federal Reserve implemented eight interest rate hikes during the year,
pushing the federal funds rate to 4.25%. Long-term rates, however, barely moved,
creating a flat yield curve. Longer duration portfolios benefited greatly from
the flattening of the yield curve, as intermediate bonds, as measured by the
Lehman Intermediate Government/Credit Bond Index, were up 1.58% and long-term
bonds, as measured by the Lehman Long Government/Credit Bond Index, rose 5.34%.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR?
A: The Fund underperformed the Lehman Intermediate Government/Credit Bond Index.
The Fund's overweight position in industrial bonds was the biggest detractor
from performance, as the sector underperformed the overall market.
The Fund experienced positive performance from its high quality bias and
strong sector allocation. Specifically, the Fund's overweight position in
fixed-rate mortgage-backed securities benefited from the rising interest rate
environment, and agencies benefited performance. The Fund's underweight exposure
to Treasuries relative to the benchmark had a neutral effect as Treasuries moved
in line with the overall market.
JANUARY 2006
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
FOR DEFINITIONS OF INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS
REPORT, SEE THE GLOSSARY ON PAGE 3.
16
PHOENIX INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
TOTAL RETURNS(1) PERIODS ENDING 12/31/05
- --------------------------------------------------------------------------------
INCEPTION INCEPTION
1 YEAR 5 YEAR TO 12/31/05 DATE
------ ------ ----------- ---------
Class X Shares 0.73% 4.55% 5.03% 10/28/96
Lehman Brothers Aggregate Bond Index 2.43 5.87 6.51 10/28/96
Lehman Brothers Intermediate Government/Credit Bond Index 1.58 5.49 6.29 10/28/96
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE SHOWN. THE
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT
A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES.
PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
- --------------------------------------------------------------------------------
GROWTH OF $10,000 PERIODS ENDING 12/31
- --------------------------------------------------------------------------------
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
10/28/96 (inception of the Fund) in Class X shares. The total return for Class X
shares reflects no sales charge. Performance assumes dividends and capital gain
distributions are reinvested.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:
Phoenix Lehman Brothers
Intermediate Intermediate
Bond Fund Lehman Brothers Government/Credit
Class X Aggregate Bond Index Bond Index
------------ -------------------- -----------------
10/28/96 $10,000 $10,000 $10,000
12/31/96 10,020 10,162 10,364
12/31/97 10,741 11,143 11,180
12/31/98 11,558 12,111 12,123
12/31/99 11,484 12,011 12,169
12/29/00 12,563 13,408 13,400
12/31/01 13,565 14,540 14,601
12/31/02 14,846 16,032 16,037
12/31/03 15,253 16,690 16,728
12/31/04 15,579 17,414 17,237
12/30/05 15,692 17,837 17,509
For information regarding the indexes, see the glossary on page 3.
17
PHOENIX INTERMEDIATE BOND FUND
ABOUT YOUR FUND'S EXPENSES
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of
the Intermediate Bond Fund, you incur ongoing costs, including investment
advisory fees and other expenses. Class X shares are sold without a sales charge
and do not incur distribution and service fees. This example is intended to help
you understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire six-month period.
ACTUAL EXPENSES
The first line of the accompanying table provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the accompanying table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying tables are meant
to highlight your ongoing costs only and do not reflect any transactional costs.
Therefore, the second line of the accompanying tables is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. If you have incurred transactional costs, your costs
could have been higher. The calculations assume no shares were bought or sold
during the period. Your actual costs may have been higher or lower, depending on
the amount of your investment and the timing of any purchases or redemptions.
Intermediate Beginning Ending Expenses Paid
Bond Fund Account Value Account Value During
Class X June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $1,000.00 $ 994.20 $4.47
Hypothetical (5% return
before expenses) 1,000.00 1,020.66 4.54
* EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 0.89%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS X
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 0.73%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,007.30.
YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL
STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING
EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS.
18
PHOENIX INTERMEDIATE BOND FUND
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS AT DECEMBER 31, 2005 (AS A PERCENTAGE OF NET ASSETS)(c)
- --------------------------------------------------------------------------------
1. U.S. Treasury Note 5.75%, 8/15/10 8.7%
2. U.S. Treasury Note 6.50%, 2/15/10 8.7%
3. U.S. Treasury Note 4.75%, 5/15/14 3.8%
4. National Rural Utilities Cooperative
Finance Corp. 7.25%, 3/1/12 3.0%
5. Wal-Mart Stores, Inc. 4.55%, 5/1/13 3.0%
6. FHLB 7.23%, 9/8/15 2.9%
7. MetLife, Inc. 6.125%, 12/1/11 2.8%
8. McDonald's Corp. 6%, 4/15/11 2.8%
9. FNMA 6.63%, 10/15/07 2.8%
10. Honeywell International, Inc.
7%, 3/15/07 2.7%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS 12/31/05
- --------------------------------------------------------------------------------
As a percentage of total investments
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Domestic Corporate Bonds 42%
Agency Non-Mortgage-
Backed Securities 28
U.S.Government Securities 24
Agency Mortgage-Backed
Securities 5
Other 1
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
PAR
VALUE
(000) VALUE
--------- -----------
U.S. GOVERNMENT SECURITIES--23.4%
U.S. TREASURY NOTES--23.4%
U.S. Treasury Note 6%, 8/15/09..................... $ 1,150 $ 1,212,352
U.S. Treasury Note 6.50%, 2/15/10.................. 4,500 4,855,608
U.S. Treasury Note 5.75%, 8/15/10.................. 4,600 4,867,917
U.S. Treasury Note 4.75%, 5/15/14.................. 2,100 2,151,763
- -----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $13,313,881) 13,087,640
- -----------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED SECURITIES--4.8%
FHLMC 7.50%, 4/1/14................................ 66 69,959
FHLMC 7%, 4/1/16................................... 62 65,448
FNMA 7.50%, 7/1/09................................. 27 27,779
FNMA 7%, 5/1/14.................................... 54 56,557
FNMA 8%, 1/1/15.................................... 12 13,057
FNMA 8.50%, 7/1/27................................. 336 365,077
GNMA 7%, 7/20/13................................... 63 65,614
GNMA 8%, '21-'27................................... 204 217,763
GNMA 8.50%, 12/15/22............................... 2 2,136
PAR
VALUE
(000) VALUE
--------- -----------
GNMA 8.50%, 8/15/24................................ $ 71 $ 77,648
GNMA 8.50%, 8/15/25................................ 12 13,578
GNMA 8.50%, 6/15/26................................ 2 2,313
GNMA 7%, 6/15/31................................... 605 635,609
GNMA 6%, 8/15/31................................... 361 370,005
GNMA 6.50%, 10/15/31............................... 662 691,962
- -----------------------------------------------------------------------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $2,639,906) 2,674,505
- -----------------------------------------------------------------------------
AGENCY NON-MORTGAGE-BACKED
SECURITIES--28.0%
FFCB 7.125%, 11/16/15.............................. 500 547,069
FHLB 5.925%, 4/9/08................................ 1,000 1,025,953
FHLB 5.80%, 9/2/08................................. 350 358,998
FHLB 5%, 9/8/08.................................... 1,500 1,500,300
FHLB 5.15%, 1/28/13................................ 345 340,890
FHLB 6.30%, 5/13/13................................ 220 226,035
FHLB 7.23%, 9/8/15................................. 1,500 1,643,811
FHLB 6%, 4/27/22................................... 1,020 1,006,854
FHLMC 6%, 11/20/15................................. 1,000 1,005,899
See Notes to Financial Statements 19
PHOENIX INTERMEDIATE BOND FUND
PAR
VALUE
(000) VALUE
--------- -----------
FHLMC 6.125%, 12/1/15 ............................. $ 1,500 $ 1,505,820
FHLMC 7.09%, 11/22/16 ............................. 850 864,757
FNMA 6.625%, 10/15/07 ............................. 1,500 1,548,099
FNMA 6.375%, 6/15/09 .............................. 1,000 1,051,391
FNMA 6.625%, 11/15/10 ............................. 1,000 1,081,786
FNMA 6%, 5/16/11 .................................. 875 878,910
FNMA 6.96%, 9/5/12 ................................ 1,063 1,098,069
- -----------------------------------------------------------------------------
TOTAL AGENCY NON-MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $15,826,638) 15,684,641
- -----------------------------------------------------------------------------
DOMESTIC CORPORATE BONDS--41.7%
AEROSPACE & DEFENSE--4.2%
Boeing Capital Corp. 5.75%, 2/15/07 ............... 815 822,689
Honeywell International, Inc. 7%, 3/15/07 ......... 1,500 1,534,645
-----------
2,357,334
-----------
CONSUMER FINANCE--7.1%
American General Finance Corp. 5.375%,
10/1/12 ........................................... 1,500 1,509,738
General Electric Capital Corp. Series A 4.625%,
9/15/09 ........................................... 800 792,650
National Rural Utilities Cooperative Finance Corp.
7.25%, 3/1/12 ..................................... 1,500 1,675,031
-----------
3,977,419
-----------
HOUSEHOLD PRODUCTS--3.9%
Colgate-Palmolive Co. 5.98%, 4/25/12 .............. 620 658,403
Kimberly-Clark Corp. 5%, 8/15/13 .................. 1,500 1,522,326
-----------
2,180,729
-----------
HYPERMARKETS & SUPER CENTERS--3.0%
Wal-Mart Stores, Inc. 4.55%, 5/1/13 ............... 1,700 1,659,724
INTEGRATED OIL & GAS--1.9%
Conoco Funding Co. 6.35%, 10/15/11 ................ 1,000 1,072,776
INTEGRATED TELECOMMUNICATION SERVICES--2.2%
AT&T, Inc. 5.875%, 2/1/12 ......................... 1,200 1,235,309
INVESTMENT BANKING & BROKERAGE--6.8%
Bear Stearns Co., Inc. 7.80%, 8/15/07 ............. 825 862,059
Goldman Sachs Group, Inc. (The) 5.25%, 4/1/13 ..... 1,425 1,429,147
Morgan Stanley 6.60%, 4/1/12 ...................... 1,400 1,506,746
-----------
3,797,952
-----------
PAR
VALUE
(000) VALUE
--------- -----------
LIFE & HEALTH INSURANCE--2.8%
MetLife, Inc. 6.125%, 12/1/11...................... $ 1,500 $ 1,591,456
OTHER DIVERSIFIED FINANCIAL SERVICES--1.9%
Heller Financial, Inc. 7.375%, 11/1/09 ............ 1,000 1,085,681
PHARMACEUTICALS--5.1%
Johnson & Johnson 6.625%, 9/1/09................... 1,300 1,388,239
Pfizer, Inc. 4.50%, 2/15/14........................ 1,500 1,470,483
-----------
2,858,722
-----------
RESTAURANTS--2.8%
McDonald's Corp. 6%, 4/15/11....................... 1,500 1,568,584
- -----------------------------------------------------------------------------
TOTAL DOMESTIC CORPORATE BONDS
(IDENTIFIED COST $23,502,637) 23,385,686
- -----------------------------------------------------------------------------
TOTAL LONG TERM INVESTMENTS--97.9%
(IDENTIFIED COST $55,283,062) 54,832,472
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.5%
COMMERCIAL PAPER(b)--0.5%
Allstate Corp. 4.05%, 1/3/06....................... 278 277,937
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $277,937) 277,937
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--98.4%
(IDENTIFIED COST $55,560,999) 55,110,409(a)
Other assets and liabilities, net--1.6% 900,951
-----------
NET ASSETS--100.0% $56,011,360
===========
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $246,195 and gross
depreciation of $701,718 for federal income tax purposes. At December 31,
2005, the aggregate cost of securities for federal income tax purposes was
$55,565,932.
(b) The rate shown is the discount rate.
(c) Table excludes short-term investments.
20 See Notes to Financial Statements
PHOENIX INTERMEDIATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investment securities at value
(Identified cost $55,560,999) $55,110,409
Cash 1,789
Receivables
Interest 822,948
Fund shares sold 136,184
Prepaid expenses 10,214
-----------
Total assets 56,081,544
-----------
LIABILITIES
Payables
Investment advisory fee 23,988
Professional fee 23,361
Financial agent fee 5,405
Transfer agent fee 3,093
Trustees' fee 1,785
Other accrued expenses 12,552
-----------
Total liabilities 70,184
-----------
NET ASSETS $56,011,360
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $56,841,336
Undistributed net investment income 22,654
Accumulated net realized loss (402,040)
Net unrealized depreciation (450,590)
-----------
NET ASSETS $56,011,360
===========
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $56,011,360) 5,321,581
Net asset value and offering price per share $ 10.53
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME
Interest $ 2,284,697
-----------
Total investment income 2,284,697
-----------
EXPENSES
Investment advisory fee 264,240
Financial agent fee 62,281
Trustees 35,446
Professional 31,517
Registration 18,143
Transfer agent 17,783
Custodian 10,725
Printing 8,876
Miscellaneous 32,929
-----------
Total expenses 481,940
Custodian fees paid indirectly (621)
-----------
Net expenses 481,319
-----------
NET INVESTMENT INCOME (LOSS) 1,803,378
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments (362,303)
Net change in unrealized appreciation (depreciation)
on investments (968,070)
-----------
NET GAIN (LOSS) ON INVESTMENTS (1,330,373)
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 473,005
===========
See Notes to Financial Statements 21
PHOENIX INTERMEDIATE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) $ 1,803,378 $ 1,862,328
Net realized gain (loss) (362,303) 372,116
Net change in unrealized appreciation (depreciation) (968,070) (1,179,904)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 473,005 1,054,540
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (1,780,724) (1,895,342)
Net realized long-term gains -- (495,005)
-------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,780,724) (2,390,347)
-------------- --------------
FROM SHARE TRANSACTIONS
Proceeds from sales of shares (1,465,766 and 1,399,246 shares, respectively) 15,551,373 15,381,326
Net asset value of shares issued from reinvestment of distributions
(125,578 and 159,446 shares, respectively) 1,335,897 1,741,504
Cost of shares repurchased (968,972 and 899,478 shares, respectively) (10,305,034) (9,847,416)
-------------- --------------
Total 6,582,236 7,275,414
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 6,582,236 7,275,414
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS 5,274,517 5,939,607
NET ASSETS
Beginning of period 50,736,843 44,797,236
-------------- --------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $22,654 AND $0, RESPECTIVELY) $ 56,011,360 $ 50,736,843
============== ==============
22 See Notes to Financial Statements
PHOENIX INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $ 10.80 $ 11.09 $ 11.31 $ 10.91 $ 10.82
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.36(1) 0.41 0.48 0.55 0.57
Net realized and unrealized gain (loss) (0.27) (0.17) (0.17) 0.45 0.28
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.09 0.24 0.31 1.00 0.85
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.36) (0.42) (0.48) (0.55) (0.57)
Distributions from net realized gains -- (0.11) (0.05) (0.05) (0.19)
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.36) (0.53) (0.53) (0.60) (0.76)
---------- ---------- ---------- ---------- ----------
Change in net asset value (0.27) (0.29) (0.22) 0.40 0.09
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.53 $ 10.80 $ 11.09 $ 11.31 $ 10.91
========== ========== ========== ========== ==========
Total return 0.73% 2.13% 2.74% 9.45% 7.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 56,011 $ 50,737 $ 44,797 $ 42,902 $ 40,375
RATIO OF EXPENSES TO AVERAGE NET ASSETS:
Operating expenses 0.91% 0.90% 0.94% 0.88% 0.96%
Net investment income 3.41% 3.71% 4.28% 4.96% 5.13%
Portfolio turnover 36% 54% 35% 27% 50%
(1) Computed using average shares outstanding.
See Notes to Financial Statements 23
PHOENIX OVERSEAS FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGER, JEAN-BAPTISTE NADAL, CFA
Q: HOW DID THE PHOENIX OVERSEAS FUND PERFORM FOR ITS FISCAL YEAR ENDED DECEMBER
31, 2005?
A: For the fiscal year ended December 31, 2005, the Fund's Class X shares
returned 10.53%, Class A shares returned 10.17%, Class B shares returned 9.37%,
and Class C shares returned 9.37%. For the same period, the S&P 500(R) Index, a
broad-based equity index, returned 4.93%, and the MSCI EAFE(R) Index (Net), the
Fund's style-specific benchmark, returned 13.54%. All performance figures assume
reinvestment of distributions and exclude the effect of sales charges. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE
HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE.
Q: HOW DID THE INTERNATIONAL EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL
YEAR?
A: The international equity markets outperformed the domestic equity markets in
2005, representing the fourth consecutive year of outperformance. For the year,
the MSCI EAFE Index (Net) returned 13.54% and the S&P 500(R) Index returned
4.93%. Throughout the year, the international markets continued to favor smaller
cap stocks over mega-cap stocks, lower quality names over higher quality names,
and emerging markets over developed markets. To illustrate, those companies in
the MSCI EAFE Index with a market capitalization of $5 to $10 billion advanced
17.77%, while companies with a market capitalization above $40 billion returned
9.33%. Below-investment-grade companies within the MSCI EAFE Index (Net) were
the best performing group, gaining 33.19%, while double-A and single-A rated
companies underperformed the overall index. Emerging markets, as measured by the
MSCI Emerging Markets Index, rose 34%, more than double the performance of
developed markets, as measured by the MSCI EAFE Index (Net). These trends
underscore the pervasive appetite for risk in the marketplace.
Nevertheless, the U.S. dollar and the growth investment style reached an
inflection point in 2005. Both made significant improvements in their relative
strength. The U.S. dollar appreciated over 12% from its 2004 levels, and growth
stocks, as measured by the MSCI EAFE Growth Index, only slightly underperformed
value stocks, as measured by the MSCI EAFE Value Index.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR?
A: The Fund produced healthy returns but underperformed the MSCI EAFE Index
(Net), a benchmark with a much larger scope than the Fund's international
universe of high quality, large-cap stocks. The combination of a negative market
cap effect, negative quality effect, and strong emerging markets detracted from
performance, as the Fund is overweight in mega-cap, high quality names based in
developed markets. On the other hand, the renewed strength in the U.S. dollar
and the waning dominance of the value investment style have been two important
factors underpinning our improved
24
PHOENIX OVERSEAS FUND (CONTINUED)
relative performance. The strengthening U.S. dollar benefited our investment
style as most of our companies generated a portion of their sales in U.S.-dollar
related countries. At the same time, the lack of style leadership proved benign
to our growth bias.
JANUARY 2006
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
FOR DEFINITIONS OF INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS
REPORT, SEE THE GLOSSARY ON PAGE 3.
25
PHOENIX OVERSEAS FUND
- --------------------------------------------------------------------------------
TOTAL RETURNS(1) PERIODS ENDING 12/31/05
- --------------------------------------------------------------------------------
INCEPTION INCEPTION
1 YEAR 5 YEAR TO 12/31/05 DATE
------ ------ ----------- ---------
Class X Shares at NAV(2) 10.53% (2.30)% 5.18% 10/18/96
Class A Shares at NAV(2) 10.17 -- 12.73 8/30/02
Class A Shares at POP(3) 3.83 -- 10.75 8/30/02
Class B Shares at NAV(2) 9.37 -- 11.98 8/30/02
Class B Shares with CDSC(4) 5.37 -- 11.51 8/30/02
Class C Shares at NAV(2) 9.37 -- 11.98 8/30/02
Class C Shares with CDSC(4) 9.37 -- 11.98 8/30/02
S&P 500(R) Index 4.93 0.55 Note 5 Note 5
MSCI EAFE(R) Index (Net) 13.54 4.55 Note 6 Note 6
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH, IS NO GUARANTEE OF FUTURE RESULTS.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN. THE
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT
A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES.
PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
(2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES
CHARGE.
(3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE
MAXIMUM FRONT-END 5.75% SALES CHARGE.
(4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN
CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF
PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR
PERIOD. CDSC CHARGES FOR C SHARES ARE 1% IN THE FIRST YEAR AND 0%
THEREAFTER.
(5) INDEX PERFORMANCE IS 8.02% FOR CLASS X (SINCE 10/18/96) AND 11.71% FOR CLASS
A, CLASS B, CLASS C (SINCE 8/30/02).
(6) INDEX PERFORMANCE IS 6.00% FOR CLASS X (SINCE 10/18/96) AND 19.22% FOR CLASS
A, CLASS B, CLASS C (SINCE 8/30/02).
- --------------------------------------------------------------------------------
GROWTH OF $10,000 PERIODS ENDING 12/31
- --------------------------------------------------------------------------------
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
10/18/96 (inception of the Fund) in Class X shares. The total return for Class X
shares reflects no sales charge. The performance of other share classes will be
greater or less than that shown based on differences in inception dates, fees
and sales charges. Performance assumes dividends and capital gain distributions
are reinvested.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:
Phoenix
Overseas Fund S&P 500(R) MSCI EAFE(R)
Class X Index Index (Net)
------------- ---------- ------------
10/18/96 $10,000 $10,000 $10,000
12/31/96 10,256 10,474 10,264
12/31/97 11,940 13,970 10,447
12/31/98 15,101 17,988 12,536
12/31/99 19,792 21,789 15,916
12/29/00 17,882 19,788 13,661
12/31/01 12,571 17,438 10,732
12/31/02 10,052 13,584 9,021
12/31/03 12,680 17,484 12,502
12/31/04 14,399 19,383 15,033
12/30/05 15,916 20,339 17,068
For information regarding the indexes, see the glossary on page 3.
26
PHOENIX OVERSEAS FUND
ABOUT YOUR FUND'S EXPENSES
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of
the Overseas Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchases of Class A shares and contingent deferred
sales charges on Class B and Class C shares; and (2) ongoing costs, including
investment advisory fees; distribution and service fees and other expenses.
Class X shares are sold without a sales charge and do not incur distribution and
service fees. These examples are intended to help you understand your ongoing
costs (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. These examples are based on an
investment of $1,000 invested at the beginning of the period and held for the
entire six-month period.
ACTUAL EXPENSES
The first line of the accompanying tables provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the accompanying tables provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying tables are meant
to highlight your ongoing costs only and do not reflect any transactional costs,
such as sales charges or contingent deferred sales charges. Therefore, the
second line of the accompanying tables is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs could have been higher. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower,
depending on the amount of your investment and the timing of any purchases or
redemptions.
Beginning Ending Expenses Paid
Overseas Fund Account Value Account Value During
Class X June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,140.10 $ 7.55
Hypothetical (5% return
before expenses) 1,000.00 1,018.06 7.14
* EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 1.40%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS X
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 10.53%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,105.30.
Beginning Ending Expenses Paid
Overseas Fund Account Value Account Value During
Class A June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,138.30 $ 8.89
Hypothetical (5% return
before expenses) 1,000.00 1,016.79 8.42
* EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.65%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS A
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 10.17%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,101.70.
Beginning Ending Expenses Paid
Overseas Fund Account Value Account Value During
Class B June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,134.20 $ 12.92
Hypothetical (5% return
before expenses) 1,000.00 1,012.95 12.26
* EXPENSES ARE EQUAL TO THE FUND'S CLASS B ANNUALIZED EXPENSE RATIO OF 2.40%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS B
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 9.37%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,093.70.
27
PHOENIX OVERSEAS FUND
Beginning Ending Expenses Paid
Overseas Fund Account Value Account Value During
Class C June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,134.20 $ 12.91
Hypothetical (5% return
before expenses) 1,000.00 1,012.95 $ 12.25
* EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.40%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS C
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 9.37%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,093.70.
YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL
STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING
EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS.
28
PHOENIX OVERSEAS FUND
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS AT DECEMBER 31, 2005 (AS A PERCENTAGE OF NET ASSETS)(f)
- --------------------------------------------------------------------------------
1. BP plc 3.3%
2. Total SA Sponsored ADR 3.2%
3. Mitsubishi UFJ Financial Group, Inc. 3.0%
4. Air Liquide SA 2.4%
5. Koninklijke Philips Electronics N.V. 2.4%
6. BNP Paribas SA 2.4%
7. Sanofi-aventis 2.3%
8. Statoil ASA 2.3%
9. Canon, Inc. 2.2%
10. GlaxoSmithKline plc 2.1%
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS 12/31/05
- --------------------------------------------------------------------------------
As a percentage of total investments
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Japan 21%
France 17
United Kingdom 17
Switzerland 8
Germany 5
Netherlands 4
Spain 3
Other 25
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
SHARES VALUE
----------- ------------
FOREIGN COMMON STOCKS(b)--99.5%
AUSTRALIA--3.1%
Rio Tinto Ltd. (Diversified Metals & Mining)(d) 23,000 $ 1,163,430
Westpac Banking Corp. (Diversified Banks) ...... 37,800 630,429
------------
1,793,859
------------
BELGIUM--0.6%
Fortis (Multi-Sector Holdings) ................. 11,400 363,728
FRANCE--20.0%
Air Liquide SA (Industrial Gases)(d) ........... 7,285 1,401,509
AXA Sponsored ADR (Multi-line Insurance) ....... 26,824 867,220
BNP Paribas SA (Diversified Banks) ............. 17,000 1,375,626
Carrefour SA (Food Retail) ..................... 10,800 506,072
Compagnie de Saint-Gobain (Building
Products)(d) ................................... 10,100 600,856
L'Oreal SA (Personal Products)(d) .............. 11,100 825,269
LVMH Moet Hennessy Louis Vuitton SA
(Apparel, Accessories & Luxury Goods)(d) ....... 8,200 728,580
PSA Peugeot Citroen SA (Automobile
Manufacturers)(d) .............................. 8,680 500,451
SHARES VALUE
----------- ------------
FRANCE--CONTINUED
Sanofi-aventis (Pharmaceuticals)(d) ............ 15,000 $ 1,314,123
Schneider Electric SA (Electrical Components &
Equipment)(d) .................................. 7,600 677,969
Societe Generale (Diversified Banks)(d) ........ 6,600 811,844
Total SA Sponsored ADR (Integrated Oil & Gas) .. 14,396 1,819,654
------------
11,429,173
------------
GERMANY--6.2%
BASF AG (Diversified Chemicals) ................ 10,800 827,386
Henkel KGaA (Personal Products) ................ 7,500 697,373
SAP AG (Application Software) .................. 5,340 968,277
Siemens AG (Industrial Conglomerates) .......... 12,000 1,028,567
------------
3,521,603
------------
IRELAND--2.0%
Allied Irish Banks plc (Diversified Banks) ..... 28,875 620,799
Bank of Ireland (Diversified Banks) ............ 33,400 526,305
------------
1,147,104
------------
See Notes to Financial Statements 29
PHOENIX OVERSEAS FUND
SHARES VALUE
----------- ------------
JAPAN--24.2%
Canon, Inc. (Electronic Equipment
Manufacturers)(d) .............................. 22,000 $ 1,287,150
Denso Corp. (Auto Parts & Equipment) ........... 22,600 779,938
Kao Corp. (Personal Products) .................. 38,000 1,018,188
Millea Holdings, Inc. (Property & Casualty
Insurance) ..................................... 64 1,101,624
Mitsubishi UFJ Financial Group, Inc.
(Diversified Banks) ............................ 125 1,695,849
Murata Manufacturing Co. Ltd. (Electronic
Equipment Manufacturers) ....................... 10,500 673,082
Nomura Holdings, Inc. (Investment Banking &
Brokerage) ..................................... 37,400 716,700
Secom Co. Ltd. (Specialized Consumer Services) . 15,000 784,754
Shimano, Inc. (Leisure Products)(d) ............ 23,600 620,342
Shin-Etsu Chemical Co. Ltd. (Diversified
Chemicals) ..................................... 22,700 1,206,843
SMC Corp. (Electrical Components &
Equipment) ..................................... 7,100 1,014,415
Sony Corp. (Household Appliances) .............. 17,300 707,050
Takeda Pharmaceutical Co. Ltd.
(Pharmaceuticals) .............................. 12,500 676,220
TDK Corp. (Electronic Equipment Manufacturers) . 7,800 537,703
Toyota Motor Corp. (Automobile Manufacturers) .. 20,100 1,043,049
------------
13,862,907
------------
NETHERLANDS--4.9%
ABN AMRO Holding N.V. (Diversified Banks) ...... 28,700 750,569
Koninklijke Philips Electronics N.V. (Industrial
Conglomerates) ................................. 44,500 1,382,937
Wolters Kluwer N.V. (Publishing & Printing) .... 33,000 667,290
------------
2,800,796
------------
NORWAY--2.3%
Statoil ASA (Integrated Oil & Gas) ............. 56,300 1,292,949
SINGAPORE--3.4%
DBS Group Holdings, Ltd. (Diversified Banks)(d) 120,000 1,190,870
Singapore Technologies Engineering Ltd.
(Aerospace & Defense) .......................... 444,000 763,745
------------
1,954,615
------------
SPAIN--4.0%
Banco Bilbao Vizcaya Argentaria SA (Diversified
Banks) ......................................... 39,110 698,236
SHARES VALUE
----------- ------------
SPAIN--CONTINUED
Banco Popular Espanol SA (Regional Banks)(d) ... 50,000 $ 609,705
Telefonica SA (Integrated Telecommunication
Services) ...................................... 64,532 971,032
------------
2,278,973
------------
SWITZERLAND--8.9%
Credit Suisse Group (Diversified Banks) ........ 11,900 606,750
Nestle S.A. Registered Shares (Packaged Foods &
Meats) ......................................... 2,800 837,411
Nestle S.A. Sponsored ADR (Packaged Foods &
Meats) ......................................... 1,948 145,219
Novartis AG ADR (Pharmaceuticals) .............. 22,976 1,205,780
Roche Holding AG (Pharmaceuticals) ............. 5,700 855,835
Swiss Reinsurance (Property & Casualty
Insurance) ..................................... 11,400 834,580
UBS AG Registered Shares (Diversified Capital
Markets) ....................................... 6,480 616,908
------------
5,102,483
------------
UNITED KINGDOM--19.9%
BP plc (Integrated Oil & Gas) .................. 174,750 1,861,058
BT Group plc (Integrated Telecommunication
Services) ...................................... 233,275 894,001
Diageo plc (Distillers & Vintners) ............. 46,800 678,372
GlaxoSmithKline plc (Pharmaceuticals) .......... 47,773 1,207,414
HBOS plc (Diversified Banks) ................... 43,000 734,632
Kingfisher plc (Home Improvement Retail) ....... 216,000 881,682
Lloyds TSB Group plc (Multi-Sector Holdings) ... 67,610 568,234
Pearson plc (Publishing & Printing) ............ 47,924 566,862
Prudential plc (Life & Health Insurance) ....... 68,500 648,194
Reed Elsevier plc (Publishing & Printing) ...... 99,100 930,933
Royal Bank of Scotland Group plc
(Diversified Banks) ............................ 28,000 845,448
Tesco plc (Food Retail) ........................ 98,700 562,928
Vodafone Group plc Sponsored ADR (Wireless
Telecommunication Services) .................... 46,980 1,008,662
------------
11,388,420
------------
- -----------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $42,640,304) 56,936,610
- -----------------------------------------------------------------------------
TOTAL LONG TERM INVESTMENTS--99.5%
(IDENTIFIED COST $42,640,304) 56,936,610
- -----------------------------------------------------------------------------
30 See Notes to Financial Statements
PHOENIX OVERSEAS FUND
SHARES VALUE
----------- ------------
SHORT-TERM INVESTMENTS--18.4%
MONEY MARKET MUTUAL FUNDS--18.0%
State Street Navigator Prime Plus (4.28%
seven day effective yield)(c) .................. 10,280,241 $ 10,280,241
PAR
VALUE
(000)
-----------
COMMERCIAL PAPER(e)--0.4%
UBS Finance Delaware LLC 3.75%, 1/3/06 ......... $ 254 253,947
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $10,534,188) 10,534,188
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--117.9%
(IDENTIFIED COST $53,174,492) 67,470,798(a)
Other assets and liabilities, net--(17.9)% (10,250,359)
------------
NET ASSETS--100.0% $ 57,220,439
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $14,044,337 and gross
depreciation of $303,717 for federal income tax purposes. At December 31,
2005, the aggregate cost of securities for federal income tax purposes was
$53,730,178.
(b) Foreign common stocks are determined based on the country in which the
security is issued. The country of risk is determined based on criteria
described in Note 2G "Foreign security country determination" in the Notes
to Financial Statements.
(c) Represents security purchased with cash collateral received for securities
on loan.
(d) All or a portion of security is on loan.
(e) The rate shown is the discount rate.
(f) Table excludes short-term investments.
See Notes to Financial Statements 31
PHOENIX OVERSEAS FUND
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF
TOTAL LONG-TERM INVESTMENTS
(UNAUDITED)
Aerospace & Defense ......................... 1.3%
Apparel, Accessories & Luxury Goods ......... 1.3
Application Software ........................ 1.7
Auto Parts & Equipment ...................... 1.4
Automobile Manufacturers .................... 2.7
Building Products ........................... 1.1
Distillers & Vintners ....................... 1.2
Diversified Banks ........................... 18.4
Diversified Capital Markets ................. 1.1
Diversified Chemicals ....................... 3.6
Diversified Metals & Mining ................. 2.0
Electrical Components & Equipment ........... 3.0
Electronic Equipment Manufacturers .......... 4.4
Food Retail ................................. 1.9
Home Improvement Retail ..................... 1.5
Household Appliances ........................ 1.2
Industrial Conglomerates .................... 4.2
Industrial Gases ............................ 2.5
Integrated Oil & Gas ........................ 8.7
Integrated Telecommunication Services ....... 3.3
Investment Banking & Brokerage .............. 1.3
Leisure Products ............................ 1.1
Life & Health Insurance ..................... 1.1
Multi-Sector Holdings ....................... 1.6
Multi-line Insurance ........................ 1.5
Packaged Foods & Meats ...................... 1.7
Personal Products ........................... 4.5
Pharmaceuticals ............................. 9.2
Property & Casualty Insurance ............... 3.4
Publishing & Printing ....................... 3.8
Regional Banks .............................. 1.1
Specialized Consumer Services ............... 1.4
Wireless Telecommunication Services ......... 1.8
-----
100.0%
=====
32 See Notes to Financial Statements
PHOENIX OVERSEAS FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investment securities at value including $9,789,021 of
securities on loan (Identified cost $53,174,492) $ 67,470,798
Cash 1,686
Receivables
Dividends 72,957
Tax reclaims 43,620
Fund shares sold 10,764
Prepaid expenses 22,688
-------------
Total assets 67,622,513
-------------
LIABILITIES
Payables
Fund shares repurchased 852
Upon return of securities loaned 10,280,241
Investment advisory fee 53,435
Professional fee 23,541
Transfer agent fee 12,156
Custodian fee 9,566
Financial agent fee 5,436
Distribution and service fees 3,914
Trustees' fee 1,785
Other accrued expenses 11,148
-------------
Total liabilities 10,402,074
-------------
NET ASSETS $ 57,220,439
=============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 63,566,439
Undistributed net investment income 1,871
Accumulated net realized loss (20,640,402)
Net unrealized appreciation 14,292,531
-------------
NET ASSETS $ 57,220,439
=============
CLASS X
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $43,916,150) 3,153,589
Net asset value and offering price per share $ 13.93
CLASS A
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $11,627,497) 838,837
Net asset value per share $ 13.86
Offering price per share $13.86/(1-5.75%) $ 14.71
CLASS B
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $479,873) 34,816
Net asset value and offering price per share $ 13.78
CLASS C
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $1,196,919) 86,849
Net asset value and offering price per share $ 13.78
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME
Dividends $ 1,577,443
Interest 7,847
Security lending 4,501
Foreign taxes withheld (158,653)
-------------
Total investment income 1,431,138
-------------
EXPENSES
Investment advisory fee 541,611
Service fees, Class A 28,557
Distribution and service fees, Class B 4,108
Distribution and service fees, Class C 11,293
Financial agent fee 64,991
Transfer agent 68,428
Custodian 55,234
Registration 39,049
Trustees 35,446
Professional 31,980
Printing 12,450
Miscellaneous 37,706
-------------
Total expenses 930,853
Less expenses reimbursed by investment adviser (88,689)
-------------
Net expenses 842,164
-------------
NET INVESTMENT INCOME (LOSS) 588,974
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 3,569,272
Net realized gain (loss) on foreign currency transactions (94,459)
Net change in unrealized appreciation (depreciation)
on investments 1,396,569
Net change in unrealized appreciation (depreciation)
on foreign currency translation (8,468)
-------------
NET GAIN (LOSS) ON INVESTMENTS 4,862,914
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,451,888
=============
See Notes to Financial Statements 33
PHOENIX OVERSEAS FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) $ 588,974 $ 562,786
Net realized gain (loss) 3,474,813 779,992
Net change in unrealized appreciation (depreciation) 1,388,101 5,802,995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,451,888 7,145,773
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (444,123) (408,160)
Net investment income, Class A (91,465) (69,738)
Net investment income, Class B -- (74)
Net investment income, Class C -- (209)
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (535,588) (478,181)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (425,496 and 838,947 shares, respectively) 5,479,441 9,607,428
Net asset value of shares issued from reinvestment of distributions
(18,804 and 20,594 shares, respectively) 260,105 247,250
Cost of shares repurchased (962,406 and 814,640 shares, respectively) (12,322,572) (9,405,866)
------------- -------------
Total (6,583,026) 448,812
------------- -------------
CLASS A
Proceeds from sales of shares (154,346 and 215,708 shares, respectively) 1,972,828 2,477,322
Net asset value of shares issued from reinvestment of distributions
(6,580 and 5,756 shares, respectively) 90,307 69,334
Cost of shares repurchased (219,550 and 174,457 shares, respectively) (2,843,061) (1,989,541)
------------- -------------
Total (779,926) 557,115
------------- -------------
CLASS B
Proceeds from sales of shares (10,332 and 20,499 shares, respectively) 132,392 234,135
Net asset value of shares issued from reinvestment of distributions
(0 and 7 shares, respectively) -- 74
Cost of shares repurchased (6,416 and 3,352 shares, respectively) (81,146) (37,604)
------------- -------------
Total 51,246 196,605
------------- -------------
CLASS C
Proceeds from sales of shares (17,419 and 47,786 shares, respectively) 221,749 549,915
Net asset value of shares issued from reinvestment of distributions
(0 and 17 shares, respectively) -- 198
Cost of shares repurchased (14,875 and 20,048 shares, respectively) (182,746) (226,867)
------------- -------------
Total 39,003 323,246
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (7,272,703) 1,525,778
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (2,356,403) 8,193,370
NET ASSETS
Beginning of period 59,576,842 51,383,472
------------- -------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME
OF $1,871 AND $42,944, RESPECTIVELY) $ 57,220,439 $ 59,576,842
============= =============
34 See Notes to Financial Statements
PHOENIX OVERSEAS FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $ 12.73 $ 11.31 $ 9.01 $ 11.32 $ 16.15
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.14(2) 0.13(2) 0.09(2) 0.03 0.04
Net realized and unrealized gain (loss) 1.20 1.40 2.26 (2.29) (4.83)
---------- ---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.34 1.53 2.35 (2.26) (4.79)
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.14) (0.11) (0.05) (0.03) (0.04)
Return of capital -- -- -- (0.02) --
---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.14) (0.11) (0.05) (0.05) (0.04)
---------- ---------- ---------- ---------- ----------
Change in net asset value 1.20 1.42 2.30 (2.31) (4.83)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 13.93 $ 12.73 $ 11.31 $ 9.01 $ 11.32
========== ========== ========== ========== ==========
Total return 10.53% 13.56% 26.15% (20.04)% (29.72)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 43,916 $ 46,748 $ 41,013 $ 50,656 $ 56,513
RATIO TO AVERAGE NET ASSETS OF:
Net operating expenses 1.40% 1.40% 1.40% 1.41% 1.38%
Gross operating expenses 1.56% 1.60% 1.77% 1.41% 1.38%
Net investment income (loss) 1.11% 1.08% 0.93% 0.49% 0.09%
Portfolio turnover 28% 33% 49% 65% 88%
CLASS A
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
------------------------------------------ AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 12.68 $ 11.27 $ 9.01 $ 9.45
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.11(2) 0.10(2) (0.03)(2) (0.03)
Net realized and unrealized gain (loss) 1.18 1.39 2.32 (0.41)
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.29 1.49 2.29 (0.44)
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.11) (0.08) (0.03) --
---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.11) (0.08) (0.03) --
---------- ---------- ---------- ----------
Change in net asset value 1.18 1.41 2.26 (0.44)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 13.86 $ 12.68 $ 11.27 $ 9.01
========== ========== ========== ==========
Total return(1) 10.17% 13.24% 25.56% (4.76)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 11,627 $ 11,377 $ 9,582 $ 153
RATIO TO AVERAGE NET ASSETS OF:
Net operating expenses 1.65% 1.65% 1.65% 1.66%(4)
Gross operating expenses 1.81% 1.85% 1.98% 1.66%(4)
Net investment income (loss) 0.87% 0.81% (0.31)% 0.24%(4)
Portfolio turnover 28% 33% 49% 65%(3)
(1) Sales charges are not reflected in the total return calculation.
(2) Computed using average shares outstanding.
(3) Not annualized.
(4) Annualized.
See Notes to Financial Statements 35
PHOENIX OVERSEAS FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B
----------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
------------------------------------------ AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 12.60 $ 11.21 $ 8.98 $ 9.45
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.02(4) --(4)(5) (0.03)(4) (0.06)
Net realized and unrealized gain (loss) 1.16 1.39 2.26 (0.41)
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.18 1.39 2.23 (0.47)
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income -- --(5) -- --
---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS -- --(5) -- --
---------- ---------- ---------- ----------
Change in net asset value 1.18 1.39 2.23 (0.47)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 13.78 $ 12.60 $ 11.21 $ 8.98
========== ========== ========== ==========
Total return(1) 9.37% 12.43% 24.83% (4.97)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 480 $ 389 $ 154 $ 98
RATIO TO AVERAGE NET ASSETS OF:
Net operating expenses 2.40% 2.40% 2.40% 2.41%(3)
Gross operating expenses 2.56% 2.60% 2.73% 2.41%(3)
Net investment income (loss) 0.12% (0.01)% (0.27)% (0.51)%(3)
Portfolio turnover 28% 33% 49% 65%(2)
CLASS C
----------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
------------------------------------------ AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 12.60 $ 11.21 $ 8.98 $ 9.45
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.02(4) --(4)(5) (0.06)(4) (0.06)
Net realized and unrealized gain (loss) 1.16 1.39 2.29 (0.41)
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.18 1.39 2.23 (0.47)
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income -- --(5) -- --
---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS -- --(5) -- --
---------- ---------- ---------- ----------
Change in net asset value 1.18 1.39 2.23 (0.47)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 13.78 $ 12.60 $ 11.21 $ 8.98
========== ========== ========== ==========
Total return(1) 9.37% 12.43% 24.83% (4.97)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 1,197 $ 1,062 $ 634 $ 99
RATIO TO AVERAGE NET ASSETS OF:
Net operating expenses 2.40% 2.40% 2.40% 2.41%(3)
Gross operating expenses 2.56% 2.60% 2.73% 2.41%(3)
Net investment income (loss) 0.17% 0.02% (0.70)% (0.51)%(3)
Portfolio turnover 28% 33% 49% 65%(2)
(1) Sales charges are not reflected in the total return calculation.
(2) Not annualized.
(3) Annualized.
(4) Computed using average shares outstanding.
(5) Amount is less than $0.01.
36 See Notes to Financial Statements
PHOENIX RISING DIVIDENDS FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, ALLAN M. RUDNICK AND PAUL
WAYNE, CFA
Q: HOW DID THE PHOENIX RISING DIVIDENDS FUND PERFORM FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 2005?
A: For the fiscal year ended December 21, 2005, the Fund's Class X shares
returned (1.19)%, Class A shares returned (1.43)%, Class B shares returned
(2.22)%, and Class C shares returned (2.22)%. For the same period, the S&P
500(R) Index, a broad-based equity index and the Fund's style-specific
benchmark, returned 4.93%. All performance figures assume reinvestment of
distributions and exclude the effect of sales charges. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN
THE PERFORMANCE SHOWN ABOVE.
Q: HOW DID THE EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL YEAR?
A: For the year 2005, two definite themes drove the performance of the markets.
First, stocks of smaller and lower quality companies outperformed stocks of
larger and higher quality companies. To illustrate, those companies in the S&P
500(R) Index with a market capitalization of $20 billion or greater returned
2.17% for the year, while companies with a market capitalization between $5 and
$10 billion advanced 13.75%. Companies in the S&P 500 Index with an S&P bond
credit rating of triple-A lost 3.97%, while those companies with debt rated
below investment grade produced positive returns.
The second key theme was the energy sector's strong outperformance
relative to the other sectors in the S&P 500 Index. The energy sector returned
31.41% while the overall S&P 500 Index returned only 4.93% for the year.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR?
A: The Fund underperformed the S&P 500 Index in 2005. To a substantial degree,
the Fund's underperformance reflected the strong returns of smaller, lower
quality companies. The Fund is focused exclusively on higher quality companies
and the companies tend to be larger in market capitalization than the S&P 500
Index. In addition, the Fund was negatively impacted by the underweighting of
the energy and utilities sectors, as fairly valued, high quality companies that
the Fund prefers are scarce in these sectors.
A portion of the Fund's underperformance was driven by negative stock
selection. The stocks that detracted the most from return included Gannett and
Pfizer. Gannett, along with the rest of the newspaper industry, suffered margin
pressure from online competition and tough comparisons relative to 2004, which
featured two big news events - the Olympics and national elections. Pfizer
struggled with continued uncertainty regarding the timing of management's
earnings guidance and the Lipitor Paragraph 4 patent challenge decision, which
was ultimately decided in Pfizer's favor in mid-December.
Stocks that contributed positively to the Fund's performance included
American International Group and Paychex. American International Group
37
PHOENIX RISING DIVIDENDS FUND (CONTINUED)
and Paychex. American International Group posted strong results throughout 2005
despite management turnover earlier in the year. Paychex has combined price
increases and new customer acquisition to generate strong growth.
JANUARY 2006
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
FOR DEFINITIONS OF INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS
REPORT, SEE THE GLOSSARY ON PAGE 3.
38
PHOENIX RISING DIVIDENDS FUND
- --------------------------------------------------------------------------------
TOTAL RETURNS(1) PERIODS ENDING 12/31/05
- --------------------------------------------------------------------------------
INCEPTION INCEPTION
1 YEAR 5 YEAR 10 YEAR TO 12/31/05 DATE
------ ------ ------- ----------- ---------
Class X Shares at NAV(2) (1.19)% (2.03)% 6.24% --% --
Class A Shares at NAV(2) (1.43) -- -- 4.86 8/30/02
Class A Shares at POP(3) (7.10) -- -- 3.01 8/30/02
Class B Shares at NAV(2) (2.22) -- -- 4.06 8/30/02
Class B Shares with CDSC(4) (6.12) -- -- 3.51 8/30/02
Class C Shares at NAV(2) (2.22) -- -- 4.06 8/30/02
Class C Shares with CDSC(4) (2.22) -- -- 4.06 8/30/02
S&P 500(R) Index 4.93 0.55 9.12 Note 5 Note 5
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH IS NO GUARANTEE OF FUTURE RESULTS.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN. THE
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT
A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES.
PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
(2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES
CHARGE.
(3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE
MAXIMUM FRONT-END 5.75% SALES CHARGE.
(4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN
CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF
PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR
PERIOD. CDSC CHARGES FOR C SHARES ARE 1% IN THE FIRST YEAR AND 0%
THEREAFTER.
(5) INDEX PERFORMANCE IS 11.71% FOR CLASS A, CLASS B AND CLASS C (SINCE
8/30/02).
- --------------------------------------------------------------------------------
GROWTH OF $10,000 PERIODS ENDING 12/31
- --------------------------------------------------------------------------------
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
12/31/95 in Class X shares. The total return for Class X shares reflects no
sales charge. The performance of the other share classes will be greater or less
than that shown based on differences in inception dates, fees and sales charges.
Performance assumes dividends and capital gain distributions are reinvested.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:
Phoenix
Rising Dividends
Fund S&P 500(R)
Class X Index
----------------- ----------
12/29/95 $10,000 $10,000
12/31/96 11,909 12,325
12/31/97 15,600 16,438
12/31/98 17,806 21,165
12/31/99 20,714 25,639
12/29/00 20,300 23,283
12/31/01 18,062 20,518
12/31/02 14,946 15,984
12/31/03 17,703 20,573
12/31/04 18,547 22,807
12/30/05 18,325 23,931
For information regarding the index, see the glossary on page 3.
39
PHOENIX RISING DIVIDENDS FUND
ABOUT YOUR FUND'S EXPENSES
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of
the Rising Dividends Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchases of Class A shares and contingent deferred
sales charges on Class B and Class C shares; and (2) ongoing costs, including
investment advisory fees; distribution and service fees; and other expenses.
Class X shares are sold without a sales charge and do not incur distribution and
service fees. These examples are intended to help you understand your ongoing
costs (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. These examples are based on an
investment of $1,000 invested at the beginning of the period and held for the
entire six-month period.
ACTUAL EXPENSES
The first line of the accompanying tables provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the accompanying tables provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying tables are meant
to highlight your ongoing costs only and do not reflect any transactional costs,
such as sales charges or contingent deferred sales charges. Therefore, the
second line of the accompanying tables is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs could have been higher. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower,
depending on the amount of your investment and the timing of any purchases or
redemptions.
Beginning Ending Expenses Paid
Rising Dividends Fund Account Value Account Value During
Class X June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,022.80 $ 5.36
Hypothetical (5% return
before expenses) 1,000.00 1,019.84 5.36
* EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 1.05%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS X
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS (1.19)%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $988.10.
Beginning Ending Expenses Paid
Rising Dividends Fund Account Value Account Value During
Class A June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,021.60 $ 6.55
Hypothetical (5% return
before expenses) 1,000.00 1,018.64 6.56
* EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.29%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS A
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS (1.43)%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $985.70.
Beginning Ending Expenses Paid
Rising Dividends Fund Account Value Account Value During
Class B June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,017.30 $ 10.45
Hypothetical (5% return
before expenses) 1,000.00 1,014.71 10.49
* EXPENSES ARE EQUAL TO THE FUND'S CLASS B ANNUALIZED EXPENSE RATIO OF 2.06%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS B
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS (2.22)%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $977.80.
40
PHOENIX RISING DIVIDENDS FUND
Beginning Ending Expenses Paid
Rising Dividends Fund Account Value Account Value During
Class C June 30, 2005 December 31, 2005 Period*
- ----------------------- ------------- ----------------- -------------
Actual $ 1,000.00 $ 1,017.30 $ 10.45
Hypothetical (5% return
before expenses) 1,000.00 1,014.71 10.49
* EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.05%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS C
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS (2.22)%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $977.80.
YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL
STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING
EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS.
41
PHOENIX RISING DIVIDENDS FUND
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS AT DECEMBER 31, 2005 (AS A PERCENTAGE OF NET ASSETS)(e)
- --------------------------------------------------------------------------------
1. General Electric Co. 4.4%
2. Johnson & Johnson 4.1%
3. Wells Fargo & Co. 4.1%
4. Exxon Mobil Corp. 3.9%
5. Citigroup, Inc. 3.7%
6. Pfizer, Inc. 3.7%
7. Intel Corp. 3.6%
8. Microsoft Corp. 3.6%
9. Procter & Gamble Co. (The) 3.2%
10. American International Group, Inc. 3.1%
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS 12/31/05
- --------------------------------------------------------------------------------
As a percentage of total investments
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Financials 21%
Information Technology 17
Consumer Staples 15
Industrials 13
Health Care 11
Consumer Discretionary 6
Energy 6
Other 11
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
SHARES VALUE
----------- ------------
DOMESTIC COMMON STOCKS--98.3%
AIR FREIGHT & LOGISTICS--1.7%
United Parcel Service, Inc. Class B ............ 24,000 $ 1,803,600
ASSET MANAGEMENT & CUSTODY BANKS--2.3%
State Street Corp. ............................. 42,300 2,345,112
BREWERS--1.3%
Anheuser-Busch Cos., Inc. ...................... 30,800 1,323,168
COMPUTER HARDWARE--4.4%
Diebold, Inc.(c) ............................... 44,900 1,706,200
International Business Machines Corp. .......... 34,210 2,812,062
------------
4,518,262
------------
DATA PROCESSING & OUTSOURCED SERVICES--3.9%
Automatic Data Processing, Inc. ................ 46,130 2,116,906
Paychex, Inc. .................................. 49,800 1,898,376
------------
4,015,282
------------
SHARES VALUE
----------- ------------
DIVERSIFIED BANKS--8.1%
Bank of America Corp. .......................... 56,100 $ 2,589,015
U.S. Bancorp ................................... 53,300 1,593,137
Wells Fargo & Co. .............................. 66,680 4,189,504
------------
8,371,656
------------
DIVERSIFIED CHEMICALS--2.4%
Du Pont (E.I.) de Nemours & Co. ................ 58,300 2,477,750
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES--2.0%
Cintas Corp. ................................... 49,100 2,021,938
ELECTRICAL COMPONENTS & EQUIPMENT--1.6%
Emerson Electric Co. ........................... 21,900 1,635,930
FOOD DISTRIBUTORS--1.3%
Sysco Corp.(c) ................................. 43,800 1,359,990
HEALTH CARE EQUIPMENT--3.9%
Biomet, Inc.(c) ................................ 44,200 1,616,394
Medtronic, Inc. ................................ 41,500 2,389,155
------------
4,005,549
------------
42 See Notes to Financial Statements
PHOENIX RISING DIVIDENDS FUND
SHARES VALUE
----------- ------------
HOME FURNISHING RETAIL--1.8%
Leggett & Platt, Inc.(c) ....................... 80,600 $ 1,850,576
HOME IMPROVEMENT RETAIL--2.6%
Home Depot, Inc. (The) ......................... 65,550 2,653,464
HOUSEHOLD PRODUCTS--3.2%
Procter & Gamble Co. (The) ..................... 57,200 3,310,736
HYPERMARKETS & SUPER CENTERS--5.2%
Costco Wholesale Corp. ......................... 45,900 2,270,673
Wal-Mart Stores, Inc. .......................... 65,300 3,056,040
------------
5,326,713
------------
INDUSTRIAL CONGLOMERATES--6.4%
3M Co.(c) ...................................... 27,600 2,139,000
General Electric Co. ........................... 128,560 4,506,028
------------
6,645,028
------------
INDUSTRIAL MACHINERY--1.5%
Illinois Tool Works, Inc. ...................... 17,320 1,523,987
INTEGRATED OIL & GAS--5.9%
ConocoPhillips ................................. 36,500 2,123,570
Exxon Mobil Corp. .............................. 71,240 4,001,551
------------
6,125,121
------------
INTEGRATED TELECOMMUNICATION SERVICES--2.7%
AT&T, Inc. ..................................... 112,100 2,745,329
INVESTMENT BANKING & BROKERAGE--1.5%
Morgan Stanley ................................. 27,100 1,537,654
LIFE & HEALTH INSURANCE--1.8%
AFLAC, Inc. .................................... 40,700 1,889,294
MULTI-LINE INSURANCE--3.1%
American International Group, Inc. ............. 46,800 3,193,164
OTHER DIVERSIFIED FINANCIAL SERVICES--3.7%
Citigroup, Inc. ................................ 77,800 3,775,634
PHARMACEUTICALS--7.7%
Johnson & Johnson .............................. 70,370 4,229,237
Pfizer, Inc. ................................... 161,500 3,766,180
------------
7,995,417
------------
SHARES VALUE
----------- ------------
PUBLISHING & PRINTING--2.0%
Gannett Co., Inc. .............................. 34,600 $ 2,095,722
REGIONAL BANKS--1.5%
Synovus Financial Corp. ........................ 56,000 1,512,560
SEMICONDUCTORS--6.2%
Intel Corp. .................................... 150,600 3,758,976
Linear Technology Corp. ........................ 73,500 2,651,145
------------
6,410,121
------------
SOFT DRINKS--5.0%
Coca-Cola Co. (The)............................. 75,660 3,049,854
PepsiCo, Inc. .................................. 36,500 2,156,420
------------
5,206,274
------------
SYSTEMS SOFTWARE--3.6%
Microsoft Corp. ................................ 141,380 3,697,087
- -----------------------------------------------------------------------------
TOTAL DOMESTIC COMMON STOCKS
(IDENTIFIED COST $95,033,126) 101,372,118
- -----------------------------------------------------------------------------
TOTAL LONG TERM INVESTMENTS--98.3%
(IDENTIFIED COST $95,033,126) 101,372,118
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--6.7%
MONEY MARKET MUTUAL FUNDS--5.2%
State Street Navigator Prime Plus (4.28% seven
day effective yield)(b)......................... 5,323,305 5,323,305
PAR
VALUE
(000)
-----------
COMMERCIAL PAPER(d)--1.5%
Lehman Brothers Holdings, Inc. 4.10%,
1/3/06.......................................... $ 1,580 1,579,640
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $6,902,945) 6,902,945
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--105.0%
(IDENTIFIED COST $101,936,071) 108,275,063(a)
Other assets and liabilities, net--(5.0)% (5,157,368)
------------
NET ASSETS--100.0% $103,117,695
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $8,654,775 and gross
depreciation of $3,277,593 for federal income tax purposes. At December 31,
2005, the aggregate cost of securities for federal income tax purposes was
$102,897,881.
(b) Represents security purchased with cash collateral received for securities
on loan.
(c) All or a portion of security is on loan.
(d) The rate shown is the discount rate.
(e) Table excludes short-term investments.
See Notes to Financial Statements 43
PHOENIX RISING DIVIDENDS FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investment securities at value
including $5,202,449 of securities on loan
(Identified cost $101,936,071) $ 108,275,063
Cash 1,847
Receivables
Fund shares sold 161,519
Dividends 133,559
Prepaid expenses 28,639
-------------
Total assets 108,600,627
-------------
LIABILITIES
Payables
Fund shares repurchased 17,430
Upon return of securities loaned 5,323,305
Investment advisory fee 67,613
Professional fee 22,420
Transfer agent fee 22,338
Financial agent fee 7,765
Distribution and service fees 7,273
Trustees' fee 1,785
Other accrued expenses 13,003
-------------
Total liabilities 5,482,932
-------------
NET ASSETS $ 103,117,695
=============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 109,568,656
Undistributed net investment income 78,481
Accumulated net realized loss (12,868,434)
Net unrealized appreciation 6,338,992
-------------
NET ASSETS $ 103,117,695
=============
CLASS X
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $85,075,326) 5,479,062
Net asset value and offering price per share $ 15.53
CLASS A
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $12,893,728) 832,359
Net asset value per share $ 15.49
Offering price per share $15.49/(1-5.75%) $ 16.44
CLASS B
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $2,753,770) 179,249
Net asset value and offering price per share $ 15.36
CLASS C
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $2,394,871) 155,799
Net asset value and offering price per share $ 15.37
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME
Dividends $ 2,768,749
Interest 54,330
Security lending 112
-------------
Total investment income 2,823,191
-------------
EXPENSES
Investment advisory fee 1,019,981
Service fees, Class A 95,312
Distribution and service fees, Class B 28,633
Distribution and service fees, Class C 28,232
Financial agent fee 108,595
Transfer agent 104,100
Registration 45,840
Trustees 41,145
Professional 27,846
Printing 23,129
Custodian 14,357
Miscellaneous 35,451
-------------
Total expenses 1,572,621
Custodian fees paid indirectly (6)
-------------
Net expenses 1,572,615
-------------
NET INVESTMENT INCOME (LOSS) 1,250,576
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 5,582,035
Net change in unrealized appreciation (depreciation)
on investments (8,998,282)
-------------
NET GAIN (LOSS) ON INVESTMENTS (3,416,247)
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (2,165,671)
=============
44 See Notes to Financial Statements
PHOENIX RISING DIVIDENDS FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) $ 1,250,576 $ 1,662,336
Net realized gain (loss) 5,582,035 404,869
Net change in unrealized appreciation (depreciation) (8,998,282) 4,306,551
------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,165,671) 6,373,756
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (1,324,154) (1,111,168)
Net investment income, Class A (424,144) (419,864)
Net investment income, Class B (9,192) (3,205)
Net investment income, Class C (8,278) (2,729)
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,765,768) (1,536,966)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (436,950 and 1,380,241 shares, respectively) 6,804,544 21,627,667
Net asset value of shares issued from reinvestment of distributions
(48,431 and 39,607 shares, respectively) 759,875 631,250
Cost of shares repurchased (1,059,956 and 716,034 shares, respectively) (16,369,469) (11,235,744)
------------- -------------
Total (8,805,050) 11,023,173
------------- -------------
CLASS A
Proceeds from sales of shares (552,328 and 1,681,448 shares, respectively) 8,601,133 26,244,605
Net asset value of shares issued from reinvestment of distributions
(26,708 and 26,018 shares, respectively) 416,489 413,479
Cost of shares repurchased (3,101,744 and 241,473 shares, respectively) (48,397,862) (3,777,804)
------------- -------------
Total (39,380,240) 22,880,280
------------- -------------
CLASS B
Proceeds from sales of shares (22,646 and 110,300 shares, respectively) 349,846 1,713,590
Net asset value of shares issued from reinvestment of distributions
(382 and 126 shares, respectively) 5,949 1,990
Cost of shares repurchased (33,260 and 33,910 shares, respectively) (513,247) (522,985)
------------- -------------
Total (157,452) 1,192,595
------------- -------------
CLASS C
Proceeds from sales of shares (30,780 and 95,231 shares, respectively) 475,661 1,478,747
Net asset value of shares issued from reinvestment of distributions
(473 and 142 shares, respectively) 7,366 2,234
Cost of shares repurchased (74,357 and 24,835 shares, respectively) (1,141,833) (380,847)
------------- -------------
Total (658,806) 1,100,134
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (49,001,548) 36,196,182
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (52,932,987) 41,032,972
NET ASSETS
Beginning of period 156,050,682 115,017,710
------------- -------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$78,481 AND $593,673, RESPECTIVELY) $ 103,117,695 $ 156,050,682
============= =============
See Notes to Financial Statements 45
PHOENIX RISING DIVIDENDS FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
-------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $ 15.95 $ 15.40 $ 13.03 $ 15.81 $ 17.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.16(2) 0.20(2) 0.07(2) 0.06 0.05
Net realized and unrealized gain (loss) (0.35) 0.53 2.33 (2.78) (2.03)
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS (0.19) 0.73 2.40 (2.72) (1.98)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.23) (0.18) (0.03) (0.06) (0.05)
Distributions from net realized gain -- -- -- -- (0.13)
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.23) (0.18) (0.03) (0.06) (0.18)
----------- ----------- ----------- ----------- -----------
Change in net asset value (0.42) 0.55 2.37 (2.78) (2.16)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 15.53 $ 15.95 $ 15.40 $ 13.03 $ 15.81
=========== =========== =========== =========== ===========
Total return (1.19)% 4.76% 18.45% (17.25)% (11.03)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 85,075 $ 96,558 $ 82,361 $ 77,263 $ 104,770
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.04% 1.04% 1.19% 1.04% 0.95%
Net investment income (loss) 1.04% 1.25% 0.53% 0.42% 0.30%
Portfolio turnover 33% 22% 26% 26% 32%
CLASS A
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
--------------------------------------------- AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 15.91 $ 15.35 $ 13.02 $ 13.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.12(2) 0.17(2) 0.05(2) --(5)
Net realized and unrealized gain (loss) (0.35) 0.53 2.31 (0.51)
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS (0.23) 0.70 2.36 (0.51)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.19) (0.14) (0.03) --
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.19) (0.14) (0.03) --
----------- ----------- ----------- -----------
Change in net asset value (0.42) 0.56 2.33 (0.51)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 15.49 $ 15.91 $ 15.35 $ 13.02
=========== =========== =========== ===========
Total return(1) (1.43)% 4.61% 18.06% (3.77)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 12,894 $ 53,369 $ 28,988 $ 4,012
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.29% 1.28% 1.44% 1.29%(4)
Net investment income (loss) 0.76% 1.09% 0.36% 0.17%(4)
Portfolio turnover 33% 22% 26% 26%(3)
(1) Sales charges are not reflected in the total return calculation.
(2) Computed using average shares outstanding.
(3) Not annualized.
(4) Annualized.
(5) Amount is less than $0.01.
46 See Notes to Financial Statements
PHOENIX RISING DIVIDENDS FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
--------------------------------------------- AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 15.76 $ 15.20 $ 12.98 $ 13.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.01(4) 0.06(4) (0.06)(4) (0.01)
Net realized and unrealized gain (0.36) 0.52 2.30 (0.54)
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS (0.35) 0.58 2.24 (0.55)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.02) (0.02) --
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.05) (0.02) (0.02) --
----------- ----------- ----------- -----------
Change in net asset value (0.40) 0.56 2.22 (0.55)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 15.36 $ 15.76 $ 15.20 $ 12.98
=========== =========== =========== ===========
Total return(1) (2.22)% 3.80% 17.29% (4.07)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 2,754 $ 2,987 $ 1,717 $ 336
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.05% 2.04% 2.19% 2.04%(3)
Net investment income (loss) 0.05% 0.36% (0.47)% (0.58)%(3)
Portfolio turnover 33% 22% 26% 26%(2)
CLASS C
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
--------------------------------------------- AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 15.77 $ 15.20 $ 12.98 $ 13.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.01(4) 0.05(4) (0.06)(4) (0.01)
Net realized and unrealized gain (0.36) 0.54 2.30 (0.54)
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS (0.35) 0.59 2.24 (0.55)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.02) (0.02) --
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS (0.05) (0.02) (0.02) --
----------- ----------- ----------- -----------
Change in net asset value (0.40) 0.57 2.22 (0.55)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 15.37 $ 15.77 $ 15.20 $ 12.98
=========== =========== =========== ===========
Total return(1) (2.22)% 3.85% 17.24% (4.07)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 2,395 $ 3,137 $ 1,952 $ 575
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.05% 2.04% 2.19% 2.04%(3)
Net investment income (loss) 0.05% 0.32% (0.47)% (0.58)%(3)
Portfolio turnover 33% 22% 26% 26%(2)
(1) Sales charges are not reflected in the total return calculation.
(2) Not annualized.
(3) Annualized.
(4) Computed using average shares outstanding.
See Notes to Financial Statements 47
PHOENIX SMALL-MID CAP FUND
A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGERS, ROBERT A. SCHWARZKOPF, CFA AND
SANDRA L. GLEASON, CFA
Q: HOW DID THE PHOENIX SMALL-MID CAP FUND PERFORM FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 2005?
For the fiscal year ended December 31, 2005, the Fund's Class X shares returned
2.95%, Class A shares returned 2.72%, Class B shares returned 1.97%, and Class C
shares returned 1.92%. For the same period, the S&P 500(R) Index, a broad-based
equity index, returned 4.93% and the Russell 2500(TM) Index, the Fund's
style-specific benchmark, returned 8.11%. All performance figures assume
reinvestment of distributions and exclude the effect of sales charges. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE
HIGHER OR LOWER THAN THE PERFORMANCE SHOWN ABOVE.
Q: HOW DID THE EQUITY MARKETS PERFORM DURING THE FUND'S FISCAL YEAR?
A: In 2005, large-cap stocks outperformed small-cap stocks, while mid caps
surpassed them both. This is the first time in six years that the Russell 2000
Index has underperformed the S&P 500 Index for the year.
Energy prices dominated stock market returns for the year. Despite small
weightings in the indexes, energy's strong performance created disproportionate
returns. Energy and utilities were the best performing sectors, as energy prices
rose from strong demand. Transportation and consumer discretionary were two of
the worst performing sectors for the year.
To preempt inflation from rising energy prices, the Federal Reserve
implemented eight interest-rate hikes during the year, including two during the
fourth quarter, pushing the federal funds rate to 4.25% by year end. Long-term
rates, however, barely moved during the year, indicating investors' diminishing
concerns over inflation. This trend continued to benefit the most highly
indebted companies, as corporate cost of capital is based upon long-term
interest rates.
Q: WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR?
A: Higher quality stocks in the portfolio, with S&P rankings of A- and above,
outperformed stocks similarly ranked in the Russell 2500 Index. However, the
Fund underperformed its benchmark, as low quality companies, those ranked B to
D, pushed the market higher.
Stocks that detracted the most from performance included 99 Cents Only
Stores and Rent-A-Center. 99 Cents Only Stores is a deep-discount retailer of
consumable general merchandise priced at ninety-nine cents. Shares have
disappointed due to ongoing infrastructure issues as the company invests for
future growth and its core customer struggles with higher year-over-year energy
costs. We believe the company is addressing its operational issues and they are
not related to the general health of the business. With only 227 stores and
leading store-level economics, we believe the company can resume its historical
growth once infrastructure issues are resolved. Rent-A-Center is the leading
"rent-to-own" retailer in the U.S. with a highly fragmented market. The
company's main customer base, with low discretionary income levels, has been
disproportionately hurt by rising energy costs. In addition, cannibalization
caused by recent store
48
PHOENIX SMALL-MID CAP FUND (continued)
openings in existing markets and aggressive expansion by its chief competitor
have temporarily affected sales growth. However, with its solid free-cash-flow
characteristics, a strong stock buyback program, a compelling valuation, and new
initiatives underway to improve store performance, we continue to hold the
shares.
Stocks that contributed positively to the Fund's performance included
Brown & Brown and C.H. Robinson Worldwide. Brown & Brown is the nation's leader
in the "second tier" of property & casualty (P&C) insurance brokerage firms,
which serves small and mid-size businesses. The stock rose sharply after
reporting consistent double-digit earnings growth despite general softening of
the P&C insurance market. Along with other P&C insurance brokers, the company
also benefited from expectations of market hardening following the recent heavy
hurricane season. C.H. Robinson Worldwide, one of North America's largest
third-party logistics companies (freight forwarder) providing truck, rail,
ocean, and air transportation services, benefited from increased usage of
third-party logistics services while the transportation industry struggled with
tight capacity. The company was able to overcome truck capacity shortages using
its large network of independently owned motor carriers while generating strong
double-digit earnings and free cash-flow growth. Logistic dependence on C.H.
Robinson Worldwide from its customers appears to be a long-term trend.
JANUARY 2006
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE THAT
MARKET FORECASTS DISCUSSED WILL BE REALIZED.
FOR DEFINITIONS OF INDEXES CITED AND CERTAIN INVESTMENT TERMS USED IN THIS
REPORT, SEE THE GLOSSARY ON PAGE 3.
49
PHOENIX SMALL-MID CAP FUND
- -----------------------------------------------------------------------------------------
TOTAL RETURNS(1) PERIODS ENDING 12/31/05
- -----------------------------------------------------------------------------------------
INCEPTION INCEPTION
1 YEAR 5 YEAR TO 12/31/05 DATE
------ ------ ----------- ---------
Class X Shares at NAV(2) 2.95% 5.08% 9.93% 10/18/96
Class A Shares at NAV(2) 2.72 -- 10.21 8/30/02
Class A Shares at POP(3) (3.19) -- 8.27 8/30/02
Class B Shares at NAV(2) 1.97 -- 9.46 8/30/02
Class B Shares with CDSC(4) (2.03) -- 8.97 8/30/02
Class C Shares at NAV(2) 1.92 -- 9.49 8/30/02
Class C Shares with CDSC(4) 1.92 -- 9.49 8/30/02
S&P 500(R) Index 4.93 0.55 Note 5 Note 5
Russell 2500(TM) Index 8.11 9.14 Note 6 Note 6
ALL RETURNS REPRESENT PAST PERFORMANCE WHICH, IS NO GUARANTEE OF FUTURE RESULTS.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN PERFORMANCE SHOWN. THE
INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. THE ABOVE TABLE AND GRAPH BELOW DO NOT REFLECT THE DEDUCTION OF TAXES THAT
A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF SHARES.
PLEASE VISIT PHOENIXFUNDS.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
(2) "NAV" (NET ASSET VALUE) TOTAL RETURNS DO NOT INCLUDE THE EFFECT OF ANY SALES
CHARGE.
(3) "POP" (PUBLIC OFFERING PRICE) TOTAL RETURNS INCLUDE THE EFFECT OF THE
MAXIMUM FRONT-END 5.75% SALES CHARGE.
(4) CDSC (CONTINGENT DEFERRED SALES CHARGE) IS APPLIED TO REDEMPTIONS OF CERTAIN
CLASSES OF SHARES THAT DO NOT HAVE A SALES CHARGE APPLIED AT THE TIME OF
PURCHASE. CDSC CHARGES FOR B SHARES DECLINE FROM 5% TO 0% OVER A FIVE YEAR
PERIOD. CDSC CHARGES FOR C SHARES ARE 1% IN THE FIRST YEAR AND 0%
THEREAFTER.
(5) INDEX PERFORMANCE IS 8.02% FOR CLASS X (SINCE 10/18/96) AND 11.71% FOR CLASS
A, CLASS B, CLASS C (SINCE 8/30/02).
(6) INDEX PERFORMANCE IS 11.23% FOR CLASS X (SINCE 10/18/96) AND 19.80% FOR
CLASS A, CLASS B, CLASS C (SINCE 8/30/02).
- --------------------------------------------------------------------------------
GROWTH OF $10,000 PERIODS ENDING 12/31
- --------------------------------------------------------------------------------
This Growth of $10,000 chart assumes an initial investment of $10,000 made on
10/18/96 (inception of the Fund) in Class X shares. The total return for Class X
shares reflects no sales charge. The performance of other share classes will be
greater or less than that shown based on differences in inception dates, fees
and sales charges. Performance assumes dividends and capital gain distributions
are reinvested.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:
Phoenix
Small-Mid Cap
Fund S&P 500(R) Russell 2500(TM)
Class X Index Index
------------- ---------- ----------------
10/18/96 $10,000 $10,000 $10,000
12/31/96 10,400 10,474 10,642
12/31/97 12,424 13,970 13,234
12/31/98 14,433 17,988 13,285
12/31/99 14,958 21,789 16,493
12/29/00 18,663 19,788 17,197
12/31/01 19,857 17,438 17,407
12/31/02 16,087 13,584 14,309
12/31/03 20,384 17,484 20,821
12/31/04 23,222 19,383 24,630
12/30/05 23,907 20,338 26,627
For information regarding the indexes, see the glossary on page 3.
50
PHOENIX SMALL-MID CAP FUND
ABOUT YOUR FUND'S EXPENSES
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of
the Small-Mid Cap Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchases of Class A shares and contingent deferred
sales charges on Class B and Class C shares; and (2) ongoing costs, including
investment advisory fees; distribution and service fees; and other expenses.
Class X shares are sold without a sales charge and do not incur distribution and
service fees. These examples are intended to help you understand your ongoing
costs (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. These examples are based on an
investment of $1,000 invested at the beginning of the period and held for the
entire six-month period.
ACTUAL EXPENSES
The first line of the accompanying tables provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the accompanying tables provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not your Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in your Fund and other funds. To do so, compare these
5% hypothetical examples with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the accompanying tables are meant
to highlight your ongoing costs only and do not reflect any transactional costs,
such as sales charges or contingent deferred sales charges. Therefore, the
second line of the accompanying tables is useful in comparing ongoing costs
only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs could have been higher. The calculations assume no shares were bought or
sold during the period. Your actual costs may have been higher or lower,
depending on the amount of your investment and the timing of any purchases or
redemptions.
Beginning Ending Expenses Paid
Small Mid-Cap Fund Account Value Account Value During
Class X June 30, 2005 December 31, 2005 Period*
- ------------------------ ------------- ----------------- -------------
Actual $1,000.00 $1,077.40 $6.18
Hypothetical (5% return
before expenses) 1,000.00 1,019.18 6.03
* EXPENSES ARE EQUAL TO THE FUND'S CLASS X ANNUALIZED EXPENSE RATIO OF 1.18%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS X
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 2.95%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,029.50.
Beginning Ending Expenses Paid
Small Mid-Cap Fund Account Value Account Value During
Class A June 30, 2005 December 31, 2005 Period*
- ------------------------ ------------- ----------------- -------------
Actual $1,000.00 $1,076.30 $7.44
Hypothetical (5% return
before expenses) 1,000.00 1,017.95 7.26
* EXPENSES ARE EQUAL TO THE FUND'S CLASS A ANNUALIZED EXPENSE RATIO OF 1.42%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS A
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 2.72%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,027.20.
Beginning Ending Expenses Paid
Small Mid-Cap Fund Account Value Account Value During
Class B June 30, 2005 December 31, 2005 Period*
- ------------------------ ------------- ----------------- -------------
Actual $1,000.00 $1,073.20 $11.46
Hypothetical (5% return
before expenses) 1,000.00 1,014.01 11.20
* EXPENSES ARE EQUAL TO THE FUND'S CLASS B ANNUALIZED EXPENSE RATIO OF 2.19%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS B
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 1.97%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,019.70.
51
PHOENIX SMALL-MID CAP FUND
Beginning Ending Expenses Paid
Small Mid-Cap Fund Account Value Account Value During
Class C June 30, 2005 December 31, 2005 Period*
- ------------------------ ------------- ----------------- -------------
Actual $1,000.00 $1,072.60 $11.45
Hypothetical (5% return
before expenses) 1,000.00 1,014.02 11.19
* EXPENSES ARE EQUAL TO THE FUND'S CLASS C ANNUALIZED EXPENSE RATIO OF 2.19%,
WHICH INCLUDES WAIVED FEES AND REIMBURSED EXPENSES, IF APPLICABLE, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY THE NUMBER OF DAYS
IN THE MOST RECENT FISCAL HALF-YEAR, THEN DIVIDED BY 365 TO REFLECT THE
ONE-HALF YEAR PERIOD.
ACTUAL RETURN AS CALCULATED IN THE ABOVE TABLE IS BASED ON THE FUND'S CLASS C
RETURN FOR THE PAST SIX MONTHS. WHILE REQUIRED TO BE PRESENTED IN THIS FORMAT,
IT IS NOT THE CLASS' ACTUAL RETURN FOR THE YEAR ENDED DECEMBER 31, 2005. THE
CLASS' ACTUAL RETURN AT NAV FOR THE FISCAL YEAR WAS 1.92%. UTILIZING THIS 12
MONTH RETURN YIELDS AN ACCOUNT VALUE AT DECEMBER 31, 2005 OF $1,019.20.
YOU CAN FIND MORE INFORMATION ABOUT THE FUND'S EXPENSES IN THE FINANCIAL
STATEMENTS SECTION THAT FOLLOWS. FOR ADDITIONAL INFORMATION ON OPERATING
EXPENSES AND OTHER SHAREHOLDER COSTS REFER TO THE PROSPECTUS.
52
PHOENIX SMALL-MID CAP FUND
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS AT DECEMBER 31, 2005 (AS A PERCENTAGE OF NET ASSETS)(c)
- --------------------------------------------------------------------------------
1. Eaton Vance Corp. 4.6%
2. Diagnostic Products Corp. 4.5%
3. Universal Compression Holdings, Inc. 4.5%
4. Regis Corp. 4.2%
5. Microchip Technology, Inc. 4.0%
6. Fair Isaac Corp. 3.8%
7. Jack Henry & Associates, Inc. 3.8%
8. Reinsurance Group of America, Inc. 3.5%
9. Bemis Co., Inc. 3.4%
10. StanCorp Financial Group, Inc. 3.3%
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS 12/31/05
- --------------------------------------------------------------------------------
As a percentage of total investments
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Information Technology 20%
Financials 18
Industrials 16
Consumer Discretionary 13
Health Care 6
Energy 5
Materials 4
Other 18
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
SHARES VALUE
----------- ------------
DOMESTIC COMMON STOCKS--99.4%
ADVERTISING--2.8%
Catalina Marketing Corp.(e)..................... 146,010 $ 3,701,354
AEROSPACE & DEFENSE--1.1%
HEICO Corp. Class A(e).......................... 71,564 1,468,493
AIR FREIGHT & LOGISTICS--1.8%
Robinson (C.H.) Worldwide, Inc.(e).............. 66,600 2,466,198
APPLICATION SOFTWARE--10.3%
FactSet Research Systems, Inc.(e)............... 88,075 3,625,167
Fair Isaac Corp.(e)............................. 116,585 5,149,560
Jack Henry & Associates, Inc.(e)................ 265,815 5,071,750
------------
13,846,477
------------
ASSET MANAGEMENT & CUSTODY BANKS--4.7%
Eaton Vance Corp.(e)............................ 228,508 6,251,979
SHARES VALUE
----------- ------------
CONSUMER FINANCE--2.8%
World Acceptance Corp.(b)(e).................... 132,800 $ 3,784,800
DATA PROCESSING & OUTSOURCED SERVICES--2.5%
Certegy, Inc.(e)................................ 82,867 3,361,086
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES--6.6%
Cintas Corp.(e)................................. 53,565 2,205,807
Copart, Inc.(b)................................. 176,500 4,070,090
Equifax, Inc.(e)................................ 67,885 2,580,987
------------
8,856,884
------------
ELECTRONIC EQUIPMENT MANUFACTURERS--3.1%
Mettler-Toledo International, Inc.(b)........... 75,000 4,140,000
ENVIRONMENTAL & FACILITIES SERVICES--3.5%
ABM Industries, Inc. ........................... 112,530 2,199,961
Stericycle, Inc.(b)(e).......................... 43,400 2,555,392
------------
4,755,353
------------
See Notes to Financial Statements 53
PHOENIX SMALL-MID CAP FUND
SHARES VALUE
----------- ------------
GENERAL MERCHANDISE STORES--2.0%
99 Cents Only Stores(b)(e) ..................... 260,000 $ 2,719,600
HEALTH CARE EQUIPMENT--4.5%
Diagnostic Products Corp.(e) ................... 125,700 6,102,735
HEALTH CARE SERVICES--1.0%
IMS Health, Inc. ............................... 55,000 1,370,600
HOME FURNISHING RETAIL--3.1%
Rent-A-Center, Inc.(b) ......................... 221,250 4,172,775
INDUSTRIAL CONGLOMERATES--2.4%
Teleflex, Inc.(e) .............................. 50,610 3,288,638
INDUSTRIAL MACHINERY--4.3%
Donaldson Co., Inc.(e) ......................... 110,200 3,504,360
Lincoln Electric Holdings, Inc.(e) ............. 55,700 2,209,062
------------
5,713,422
------------
INSURANCE BROKERS--2.2%
Brown & Brown, Inc.(e) ......................... 95,600 2,919,624
LEISURE PRODUCTS--1.8%
Polaris Industries, Inc.(e) .................... 47,000 2,359,400
LIFE & HEALTH INSURANCE--3.3%
StanCorp Financial Group, Inc. ................. 89,000 4,445,550
OFFICE ELECTRONICS--2.5%
Zebra Technologies Corp. Class A(b)(e) ......... 79,300 3,398,005
OIL & GAS EQUIPMENT & SERVICES--4.5%
Universal Compression Holdings, Inc.(b)(e) ..... 146,000 6,003,520
OIL & GAS REFINING, MARKETING & TRANSPORTATION--1.1%
World Fuel Services Corp.(e) ................... 45,200 1,524,144
SHARES VALUE
----------- ------------
PACKAGED FOODS & MEATS--0.9%
Tootsie Roll Industries, Inc.(e) ............... 43,000 $ 1,243,990
PAPER PACKAGING--3.4%
Bemis Co., Inc.(e) ............................. 162,944 4,541,249
PHARMACEUTICALS--1.5%
Axcan Pharma, Inc.(b)(e) ....................... 137,000 2,074,180
PROPERTY & CASUALTY INSURANCE--2.8%
Cincinnati Financial Corp.(e) .................. 85,674 3,827,914
REGIONAL BANKS--2.4%
UCBH Holdings, Inc.(e) ......................... 180,000 3,218,400
REINSURANCE--3.5%
Reinsurance Group of America, Inc.(e) .......... 98,600 4,709,136
SEMICONDUCTOR EQUIPMENT--1.5%
Cabot Microelectronics Corp.(b)(e) ............. 69,650 2,042,835
SEMICONDUCTORS--4.0%
Microchip Technology, Inc. ..................... 168,000 5,401,200
SPECIALIZED CONSUMER SERVICES--4.2%
Regis Corp.(e) ................................. 147,000 5,669,790
SPECIALTY CHEMICALS--2.0%
Valspar Corp. (The)(e) ......................... 109,040 2,690,017
SPECIALTY STORES--1.3%
Tiffany & Co.(e) ............................... 43,900 1,680,931
- -----------------------------------------------------------------------------
TOTAL DOMESTIC COMMON STOCKS
(IDENTIFIED COST $99,306,385) 133,750,279
- -----------------------------------------------------------------------------
TOTAL LONG TERM INVESTMENTS--99.4%
(IDENTIFIED COST $99,306,385) 133,750,279
- -----------------------------------------------------------------------------
54 See Notes to Financial Statements
PHOENIX SMALL-MID CAP FUND
SHARES VALUE
----------- ------------
SHORT-TERM INVESTMENTS--20.3%
MONEY MARKET MUTUAL FUNDS--19.6%
State Street Navigator Prime Plus (4.28%
seven day effective yield)(d)................... 26,413,165 $ 26,413,165
PAR
VALUE
(000)
-----------
COMMERCIAL PAPER(f)--0.7%
Lehman Brothers Holdings, Inc. 4.10%,
1/3/06.......................................... $ 890 889,797
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $27,302,962) 27,302,962
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS--119.7%
(IDENTIFIED COST $126,609,347) 161,053,241(a)
Other assets and liabilities, net--(19.7)% (26,531,856)
------------
NET ASSETS--100.0% $134,521,385
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $36,193,341 and gross
depreciation of $1,749,447 for federal income tax purposes. At December 31,
2005, the aggregate cost of securities for federal income tax purposes was
$126,609,347.
(b) Non-income producing.
(c) Table excludes short-term investments.
(d) Represents security purchased with cash collateral received for securities
on loan.
(e) All or a portion of security is on loan.
(f) The rate shown is the discount rate.
See Notes to Financial Statements 55
PHOENIX SMALL-MID CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investment securities at value
including $25,825,161 of securities on loan
(Identified cost $126,609,347) $ 161,053,241
Cash 3,681
Receivables
Fund shares sold 146,154
Dividends 74,656
Prepaid expenses 30,149
-------------
Total assets 161,307,881
-------------
LIABILITIES
Payables
Fund shares repurchased 164,406
Upon return of securities loaned 26,413,165
Investment advisory fee 98,717
Transfer agent fee 32,277
Distribution and service fees 24,013
Professional fee 22,420
Financial agent fee 9,013
Trustees' fee 1,785
Other accrued expenses 20,700
-------------
Total liabilities 26,786,496
-------------
NET ASSETS $ 134,521,385
=============
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 97,283,350
Accumulated net realized gain 2,794,141
Net unrealized appreciation 34,443,894
-------------
NET ASSETS $ 134,521,385
=============
CLASS X
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $78,290,019) 3,673,899
Net asset value and offering price per share $ 21.31
CLASS A
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $38,169,547) 1,805,074
Net asset value per share $ 21.15
Offering price per share $21.15/(1-5.75%) $ 22.44
CLASS B
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $3,960,060) 191,582
Net asset value and offering price per share $ 20.67
CLASS C
Shares of beneficial interest outstanding, no par value,
unlimited authorization (Net Assets $14,101,759) 681,499
Net asset value and offering price per share $ 20.69
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME
Dividends $ 1,550,581
Interest 28,947
Security lending 6,503
-------------
Total investment income 1,586,031
-------------
EXPENSES
Investment advisory fee 1,374,646
Service fees, Class A 149,812
Distribution and service fees, Class B 40,221
Distribution and service fees, Class C 154,596
Financial agent fee 122,897
Transfer agent 179,726
Printing 50,238
Registration 45,842
Trustees 41,145
Professional 27,944
Custodian 15,655
Miscellaneous 36,997
-------------
Total expenses 2,239,719
-------------
NET INVESTMENT INCOME (LOSS) (653,688)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments 18,147,704
Net change in unrealized appreciation (depreciation)
on investments (15,195,581)
-------------
NET GAIN (LOSS) ON INVESTMENTS 2,952,123
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,298,435
=============
56 See Notes to Financial Statements
PHOENIX SMALL-MID CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 2005 December 31, 2004
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) $ (653,688) $ (847,956)
Net realized gain (loss) 18,147,704 (2,427,226)
Net change in unrealized appreciation (depreciation) (15,195,581) 26,148,760
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,298,435 22,873,578
----------------- -----------------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (477,066 and 674,594 shares, respectively) 9,519,100 12,509,815
Cost of shares repurchased (1,287,633 and 1,872,057 shares, respectively) (25,745,311) (34,757,079)
----------------- -----------------
Total (16,226,211) (22,247,264)
----------------- -----------------
CLASS A
Proceeds from sales of shares (847,062 and 1,898,490 shares, respectively) 16,653,578 34,894,504
Cost of shares repurchased (2,626,953 and 502,551 shares, respectively) (52,735,024) (9,306,773)
----------------- -----------------
Total (36,081,446) 25,587,731
----------------- -----------------
CLASS B
Proceeds from sales of shares (70,155 and 96,144 shares, respectively) 1,363,205 1,759,784
Cost of shares repurchased (95,771 and 29,932 shares, respectively) (1,863,646) (536,789)
----------------- -----------------
Total (500,441) 1,222,995
----------------- -----------------
CLASS C
Proceeds from sales of shares (128,207 and 382,735 shares, respectively) 2,482,794 6,972,739
Cost of shares repurchased (325,669 and 203,578 shares, respectively) (6,363,844) (3,696,766)
----------------- -----------------
Total (3,881,050) 3,275,973
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (56,689,148) 7,839,435
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS (54,390,713) 30,713,013
NET ASSETS
Beginning of period 188,912,098 158,199,085
----------------- -----------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0 AND
$0, RESPECTIVELY) $ 134,521,385 $ 188,912,098
================= =================
See Notes to Financial Statements 57
PHOENIX SMALL-MID CAP FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $ 20.70 $ 18.17 $ 14.34 $ 17.70 $ 17.19
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.04)(4) (0.06)(4) (0.05)(4) (0.06) (0.01)
Net realized and unrealized gain (loss) 0.65 2.59 3.88 (3.30) 1.15
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.61 2.53 3.83 (3.36) 1.14
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- -- (0.01)
Distributions from net realized gain -- -- -- -- (0.62)
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS -- -- -- -- (0.63)
----------- ----------- ----------- ----------- -----------
Change in net asset value 0.61 2.53 3.83 (3.36) 0.51
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 21.31 $ 20.70 $ 18.17 $ 14.34 $ 17.70
=========== =========== =========== =========== ===========
Total return 2.95% 13.92% 26.71% (18.98)% 6.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 78,290 $ 92,838 $ 103,269 $ 98,112 $ 95,138
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.17% 1.15% 1.26% 1.22% 1.17%
Net investment income (loss) (0.18)% (0.32)% (0.35)% (0.38)% (0.14)%
Portfolio turnover 22% 16% 17% 16% 17%
CLASS A
------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
------------------------------------------- AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 20.59 $ 18.12 $ 14.34 $ 15.29
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.09)(4) (0.10)(4) (0.09)(4) (0.02)
Net realized and unrealized gain (loss) 0.65 2.57 3.87 (0.93)
----------- ----------- ----------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.56 2.47 3.78 (0.95)
----------- ----------- ----------- --------
Change in net asset value 0.56 2.47 3.78 (0.95)
----------- ----------- ----------- --------
NET ASSET VALUE, END OF PERIOD $ 21.15 $ 20.59 $ 18.12 $ 14.34
=========== =========== =========== ========
Total return(1) 2.72% 13.63% 26.36% (6.21)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 38,170 $ 73,825 $ 39,656 $ 2,086
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.42% 1.41% 1.51% 1.47%(3)
Net investment income (loss) (0.45)% (0.55)% (0.60)% 0.62%(3)
Portfolio turnover 22% 16% 17% 16%(2)
(1) Sales charges are not reflected in the total return calculation.
(2) Not annualized.
(3) Annualized.
(4) Computed using average shares outstanding.
58 See Notes to Financial Statements
PHOENIX SMALL-MID CAP FUND
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B
------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
------------------------------------------- AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 20.27 $ 17.94 $ 14.30 $ 15.29
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.23)(4) (0.24)(4) (0.20)(4) (0.02)
Net realized and unrealized gain (loss) 0.63 2.57 3.84 (0.97)
----------- ----------- ----------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.40 2.33 3.64 (0.99)
----------- ----------- ----------- --------
Change in net asset value 0.40 2.33 3.64 (0.99)
----------- ----------- ----------- --------
NET ASSET VALUE, END OF PERIOD $ 20.67 $ 20.27 $ 17.94 $ 14.30
=========== =========== =========== ========
Total return(1) 1.97% 12.99% 25.45% (6.47)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 3,960 $ 4,404 $ 2,709 $ 626
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.19% 2.16% 2.26% 2.22%(3)
Net investment income (loss) (1.19)% (1.31)% (1.35)% (1.37)%(3)
Portfolio turnover 22% 16% 17% 16%(2)
CLASS C
------------------------------------------------------------------
YEAR ENDED DECEMBER 31, FROM INCEPTION
------------------------------------------- AUGUST 30, 2002 TO
2005 2004 2003 DECEMBER 31, 2002
Net asset value, beginning of period $ 20.30 $ 17.96 $ 14.31 $ 15.29
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.23)(4) (0.24)(4) (0.20)(4) (0.03)
Net realized and unrealized gain (loss) 0.62 2.58 3.85 (0.95)
----------- ----------- ----------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.39 2.34 3.65 (0.98)
----------- ----------- ----------- --------
Change in net asset value 0.39 2.34 3.65 (0.98)
----------- ----------- ----------- --------
NET ASSET VALUE, END OF PERIOD $ 20.69 $ 20.30 $ 17.96 $ 14.31
=========== =========== =========== ========
Total return(1) 1.92% 13.03% 25.59% (6.47)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 14,102 $ 17,845 $ 12,565 $ 572
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.19% 2.16% 2.26% 2.22%(3)
Net investment income (loss) (1.19)% (1.31)% (1.35)% (1.37)%(3)
Portfolio turnover 22% 16% 17% 16%(2)
(1) Sales charges are not reflected in the total return calculation.
(2) Not annualized.
(3) Annualized.
(4) Computed using average shares outstanding.
See Notes to Financial Statements 59
PHOENIX-KAYNE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
1. ORGANIZATION
Phoenix-Kayne Funds (the "Trust") is organized as a Delaware statutory
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
Currently five Funds are offered for sale (each a "Fund"). The Phoenix CA
Intermediate Tax-Free Bond Fund ("CA Intermediate Tax-Free Bond Fund") is a
non-diversified fund and seeks current income exempt from Federal and California
state personal income taxes. The Phoenix Intermediate Bond Fund ("Intermediate
Bond Fund") is a diversified fund and seeks to maximize total return, mainly
through current income, with capital appreciation as a secondary factor. The
Phoenix Overseas Fund ("Overseas Fund") is a diversified fund and seeks
long-term capital appreciation, with dividend income as a secondary
consideration. The Phoenix Rising Dividends Fund ("Rising Dividends Fund") is a
diversified fund and seeks long-term capital appreciation, with dividend income
as a secondary consideration. The Phoenix Small-Mid Cap Fund ("Small-Mid Cap
Fund") is a diversified fund and seeks long-term capital appreciation, with
dividend income as a secondary consideration.
The funds offer the following classes of shares for sale:
Class X Class A Class B Class C
------- ------- ------- -------
CA Intermediate
Tax-Free Bond Fund ......... X -- -- --
Intermediate Bond Fund ........ X -- -- --
Overseas Fund ................. X X X X
Rising Dividends Fund ......... X X X X
Small-Mid Cap Fund............. X X X X
Class X shares are sold without a sales charge. Class A shares are sold
with a front-end sales charge of up to 5.75%. Generally, Class A shares are not
subject to any charges by the Funds when redeemed; however, effective January
11, 2006, a 1% contingent deferred sales charge may be imposed on certain
redemptions within one year on purchases on which a finder's fee has been paid.
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.
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 and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of increases and decreases in
net assets from operations during the reporting period. 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 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.
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Trustees.
Certain foreign common stocks may be fair valued in cases where closing
prices are not readily available or are deemed not reflective of readily
available market prices. For example, significant events (such as movement in
the U.S. securities market, or other regional and local developments) may occur
between the time that foreign markets close (where the security is principally
traded) and the time that the Fund calculates its net asset value (generally,
the close of the NYSE) that may impact the value of securities traded in these
foreign markets. In these cases, information from an external vendor may be
utilized to adjust closing market prices of certain foreign common stocks to
reflect their fair value. Because the frequency of significant events is not
predictable, fair valuation of certain foreign common stocks may occur on a
frequent basis.
Short-term investments having a remaining maturity of 60 days or less are
valued at amortized cost, which approximates market.
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. Each Fund 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 in the Trust to comply with the requirements of the Internal Revenue
Code and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes or excise taxes
has been made.
60
PHOENIX-KAYNE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 (CONTINUED)
The Trust may be subject to foreign taxes on income, gains on investments
or currency repatriation, a portion of which may be recoverable. Each Fund will
accrue such taxes and recoveries as applicable based upon current
interpretations of the tax rules and regulations that exist in the markets in
which they invest.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Fund on the ex-dividend date. For the
CA Intermediate Tax-Free Bond Fund, income distributions are recorded daily.
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 capital paid in on shares of
beneficial interest.
E. 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
appropriately made.
F. 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. The
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 date 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 isolate that
portion of the results of operations arising from either changes in exchange
rates or in the market prices of securities.
G. FOREIGN SECURITY COUNTRY DETERMINATION:
A combination of the following criteria is used to assign the countries of
risk listed in the schedules of investments: country of incorporation, actual
building address, primary exchange on which the security is traded and country
in which the greatest percentage of company revenue is generated.
H. SECURITIES LENDING:
Certain Funds loan securities to qualified brokers through an agreement
with State Street Bank and Trust (the "Custodian"). Under the terms of the
agreement, the Funds receive collateral with a market value not less than 100%
of the market value of loaned securities. Collateral is adjusted daily in
connection with changes in the market value of securities on loan. Collateral
consists of cash, securities issued or guaranteed by the U.S. Government or its
agencies and the sovereign debt of foreign countries. Cash collateral has been
invested in short-term money market funds. Dividends earned on the collateral
and premiums paid by the borrower are recorded as income by the Fund net of fees
charged by the Custodian for its services in connection with this securities
lending program. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities or in the foreclosure on collateral.
3. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
The Adviser, Kayne Anderson Rudnick Investment Management, LLC provides
each Fund with investment management services under an Investment Advisory
Agreement (the "Agreement"). Kayne Anderson Rudnick Investment Management, LLC
is wholly-owned by Phoenix Investment Partners, Ltd. ("PXP"). PXP is the
wholly-owned investment management subsidiary of The Phoenix Companies, Inc.
("PNX"). As compensation for its services, the Adviser is entitled to a fee
based upon the following annual rates as a percentage of the average daily net
assets of each Fund:
CA Intermediate Tax-Free Bond Fund ................ 0.50%
Intermediate Bond Fund ............................ 0.50%
Overseas Fund ..................................... 0.95%
Rising Dividends Fund ............................. 0.75%
Small-Mid Cap Fund ................................ 0.85%
The Adviser has voluntarily agreed to reimburse each Fund's total annual
operating expenses (excluding interest, taxes, and extraordinary expenses)
through April 30, 2006, to the extent that such expenses exceed the following
percentages of average annual net assets:
Class X Class A Class B Class C
------- ------- ------- -------
CA Intermediate
Tax-Free Bond Fund .......... 0.75% -- -- --
Intermediate Bond Fund ......... 0.95% -- -- --
Overseas Fund .................. 1.40% 1.65% 2.40% 2.40%
Rising Dividends Fund .......... 1.20% 1.45% 2.20% 2.20%
Small-Mid Cap Fund ............. 1.30% 1.55% 2.30% 2.30%
61
PHOENIX-KAYNE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 (CONTINUED)
Any fee reimbursed and/or any Fund expense absorbed by the Adviser
pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the
Adviser, if so requested by the Adviser, provided the aggregate amount of the
Fund's current operating expense for such fiscal year does not exceed the
applicable limitation on Fund expenses.
For the fiscal year (the "period") ended December 31, 2005, the Adviser
reimbursed fees and paid expenses of $105,772 and $88,689 for the CA
Intermediate Tax-Free Bond Fund and Overseas Fund, respectively. The Management
Agreement permits the Adviser to seek reimbursement of any reductions made to
its management fee within the three-year period following such reduction,
subject to a Fund's ability to effect such reimbursement and remain in
compliance with applicable expense limitations.
At December 31, 2005, the amounts available for reimbursement recapture
that has been paid and/or waived by the Adviser on behalf of each of the Funds
listed below. The Adviser may recapture all or a portion of the amounts no later
than the each of the dates shown:
2006 2007 2008 Total
-------- -------- -------- --------
CA Intermediate
Tax-Free Bond Fund ..... $100,802 $ 87,348 $105,772 $293,922
Overseas Fund ............. 162,514 108,890 88,689 360,093
For the period ended December 31, 2005, the adviser recouped $0 and $0
from CA Intermediate Tax-Free Bond Fund and Overseas Fund respectively. Each
Fund must pay its current ordinary operating expenses before the Adviser is
entitled to any reimbursement. Any such reimbursement is also contingent upon
the Board of Trustees review and approval prior to the time the reimbursement is
initiated.
As a distributor of each Fund's shares, Phoenix Equity Planning
Corporation ("PEPCO") an indirect wholly-owned subsidiary of PNX, has advised
the Funds that it retained net selling commissions and deferred sales charges
for the period ended December 31, 2005, as follows:
Class A Class B Class C
Net Selling Deferred Deferred
Commisions Sales Charges Sales Charges
----------- ------------- -------------
Overseas Fund ................ $ -- $ 673 $ 36
Rising Dividends Fund ........ 2,615 5,369 757
Small-Mid Cap Fund ........... 4,603 51,643 2,494
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.
Under certain circumstances, shares of certain Phoenix Funds may be
exchanged for shares of the same class of certain other Phoenix Funds on the
basis of the relative net asset values per share at the time of the exchange. On
exchanges with share classes that carry a contingent deferred sales charge, the
CDSC schedule of the original shares purchased continues to apply.
As financial agent of the Trust, PEPCO receives a financial agent fee
equal to the sum of (1) the documented cost to PEPCO to provide oversight of the
performance of PFPC Inc. (subagent to PEPCO), plus (2) the documented cost of
fund accounting, tax services and related services provided by PFPC Inc. For the
period ended December 31, 2005, the Trust incurred financial agent fees totaling
$413,241.
PEPCO serves as the Trust's transfer agent with State Street Bank and
Trust Company serving as sub-transfer agent. For the period ended December 31,
2005, transfer agent fees were $386,229 as reported in the Statement of
Operations, of which PEPCO retained the following:
Transfer Agent
Fee Retained
--------------
Small-Mid Cap Fund .................................... $23,987
At December 31, 2005, PNX and its affiliates, the retirement plans of PNX
and its affiliates, and Phoenix affiliated Funds held shares which aggregated
the following:
Aggregate
Net Asset
Shares Value
------------- -------------
Overseas Fund
- --Class B ................................. 10,585 $145,861
- --Class C ................................. 10,585 145,861
Rising Dividends Fund
- --Class B ................................. 7,435 114,202
- --Class C ................................. 7,431 114,214
Small-Mid Cap Fund
- --Class B ................................. 6,540 135,182
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding U.S. Government securities
and agency securities and short-term securities) for the period ended December
31, 2005, were as follows:
Purchases Sales
----------- -----------
CA Intermediate Tax-Free Bond Fund ....... $13,627,437 $14,741,575
Intermediate Bond Fund ................... 13,404,085 8,969,824
Overseas Fund ............................ 15,940,444 23,385,783
Rising Dividends Fund .................... 43,771,269 90,860,318
Small-Mid Cap Fund ....................... 36,194,293 92,650,433
62
PHOENIX-KAYNE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 (CONTINUED)
Purchases and sales of long-term U.S. Government and agency securities for
the period ended December 31, 2005, were as follows:
Purchases Sales
------------ ------------
Intermediate Bond Fund ................... $ 15,738,310 $ 9,499,426
5. CREDIT RISK AND ASSET CONCENTRATION
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 may 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 on a
Fund, positive or negative, than if a Fund did not concentrate its investments
in such sectors.
The CA Intermediate Tax-Free Bond Fund invests primarily in California
municipal securities and is more susceptible to economic, political and other
developments that may adversely affect issuers of such securities, than a more
geographically diversified fund. Such developments could result in certain
adverse consequences including impairing the market value and marketability of
the securities, as well as impairing the ability of certain issuers of
California municipal securities to pay principal and interest on their
obligations.
At December 31, 2005, the CA Intermediate Tax-Free Bond Fund was 98%
invested in California municipal securities.
At December 31, 2005, the Intermediate Bond Fund held $31,446,786 in
investments issued by the U.S. Government, comprising 56% of the total net
assets of the Fund.
6. 10% SHAREHOLDERS
As of December 31, 2005, the Trust had single shareholders and omnibus
shareholder accounts (which are comprised of several individual shareholders),
which individually amounted to more than 10% of the total shares outstanding as
detailed below:
% Shares
Outstanding
-----------
CA Intermediate Tax-Free Bond Fund ........ 50%
Intermediate Bond Fund .................... 36
Overseas Fund ............................. 36
Rising Dividends Fund ..................... 10
7. INDEMNIFICATIONS
Under the Funds' organizational documents, its trustees and officers are
indemnified against certain liabilities arising out of the performance of their
duties to the Funds. In addition, the Funds enter into contracts that contain a
variety of indemnifications. The Funds' maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these contracts and expect the risk of loss to be remote.
8. REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries
and conduct examinations regarding compliance by The Phoenix Companies, Inc. and
its subsidiaries (collectively "the Company") with securities and other laws and
regulations affecting their registered products. During 2004 and 2005, the
Boston District Office of the Securities and Exchange Commission ("SEC")
conducted an examination of the Company's investment company and investment
adviser affiliates. Following the examination, the staff of the SEC Boston
District Office issued a deficiency letter primarily focused on perceived
weaknesses in procedures for monitoring trading to prevent market timing
activity prior to 2004. The staff requested the Company to conduct an analysis
as to whether shareholders, policyholders and contract holders who invested in
the funds that may have been affected by undetected market timing activity had
suffered harm and to advise the staff whether the Company believes reimbursement
is necessary or appropriate under the circumstances. Market timing is an
investment technique involving frequent short-term trading of mutual fund shares
that is designed to exploit market movements or inefficiencies in the way mutual
fund companies price their shares. A third party was retained to assist the
Company in preparing the analysis. In 2005, based on the third party analysis
the Company notified the staff at the SEC Boston District Office that
reimbursements were not appropriate under the circumstances. The Company does
not believe that the outcome of this matter will be material to these financial
statements.
9. FEDERAL INCOME TAX INFORMATION
The Funds have capital loss carryovers which may be used to offset future
capital gains, as follows:
Expiration Date
---------------------------------------------------------------
2006 2010 2011 2013 Total
-------- ----------- ----------- --------- ------------
Intermediate
Bond Fund ...... $ -- $ -- $ -- $ 273,543 $ 273,543
Overseas Fund ..... -- 12,916,895 7,167,821 -- 20,084,716
Rising Dividends
Fund ........... -- 6,937,638 4,873,757 -- 11,811,395
Small-Mid Cap
Fund ........... 838,736 -- -- -- 838,736
The Trust may not realize the benefit of these losses to the extent each
Fund does not realize gains on investments prior to the expiration of the
capital loss carryovers.
63
PHOENIX-KAYNE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 (CONTINUED)
For the period ended December 31, 2005, the Funds utilized losses deferred
in prior years against current year capital gains as follows:
Overseas Fund ................... $ 3,501,958
Rising Dividends Fund ........... 6,133,990
Small-Mid Cap Fund .............. 13,413,785
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 year ended December 31, 2005 the Funds deferred
and recognized post-October losses as follows:
Capital Capital Currency
Deferred Recognized Deferred
----------- ----------- ---------
Intermediate Bond Fund .... $ 123,564 $ 34,804 $ --
Overseas Fund ............. -- -- 6,050
Rising Dividends Fund ..... 95,229 -- --
Small-Mid Cap Fund ........ -- 1,101,042 --
The components of distributable earnings on a tax basis (excluding
unrealized appreciation (depreciation), which are disclosed in the Schedules of
Investments) consist of undistributed ordinary income and undistributed
long-term capital gains as follows:
Undistributed Undistributed Undistributed
Ordinary Long-Term Tax-Exempt
Income Capital Gains Income
------------- ------------- -------------
CA Intermediate
Tax-Free Bond Fund ..... $ -- $ 25,223 $ 6,221
Intermediate Bond Fund .... 22,654 -- --
Overseas Fund ............. 7,921 -- --
Rising Dividends Fund ..... 78,481 -- --
Small-Mid Cap Fund ........ -- 3,632,877 --
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
Statements of Changes in Net Assets, if any, are reported as ordinary income for
federal tax purposes.
10. 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 value of the
Funds. For the year ended December 31, 2005, the following Funds recorded
reclassifications to increase (decrease) the accounts as listed below:
Capital Paid
in on
Shares of Accumulated Undistributed
Beneficial Net Realized Net Investment
Interest Gain (Loss) Income (Loss)
------------- ------------- --------------
Overseas Fund .......... $ -- $ 94,459 $ (94,459)
Small-Mid Cap Fund ..... (653,688) -- 653,688
- --------------------------------------------------------------------------------
TAX NOTICE (UNAUDITED)
For federal income tax purposes, 99.8% of the income dividends paid by the
CA Intermediate Tax-Free Bond Fund qualify as exempt-interest dividends.
For the fiscal year ended December 31, 2005, for federal income tax
purposes, 100% of the ordinary income dividends earned by the Rising Dividends
Fund qualify for the dividends received deduction for corporate shareholders.
For the fiscal year ended December 31, 2005, the Rising Dividends Fund and
Overseas Fund hereby designate 100%, or the maximum amount allowable, of its
ordinary income dividends to qualify for the lower tax rates applicable to
individual shareholders. The actual percentage for the calendar year will be
designated in the year-end tax statements.
For the year ended December 31, 2005, the following funds designated
long-term capital gains dividends:
CA Intermediate Tax-Free Bond Fund .......... $ 69,677
Small-Mid Cap Fund .......................... 3,632,877
- --------------------------------------------------------------------------------
64
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS [LOGO]
To the Board of Trustees of
Phoenix-Kayne Funds and Shareholders of
Phoenix CA Intermediate Tax-Free Bond Fund
Phoenix Intermediate Bond Fund
Phoenix Overseas Fund
Phoenix Rising Dividends Fund
Phoenix Small-Mid Cap Fund
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 CA Intermediate Tax-Free
Bond Fund (formerly Phoenix-Kayne California Intermediate Tax-Free Bond Fund),
Phoenix Intermediate Bond Fund (formerly Phoenix-Kayne Intermediate Total Return
Bond Fund), Phoenix Overseas Fund (formerly Phoenix-Kayne International Fund),
Phoenix Rising Dividends Fund (formerly Phoenix-Kayne Rising Dividends Fund) and
Phoenix Small-Mid Cap Fund (formerly Phoenix-Kayne Small-Mid Cap Fund)
(constituting Phoenix-Kayne Funds hereafter referred to as the "Trust") at
December 31, 2005 and the results of each of their operations, the changes in
each of their net assets and their 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
Trust'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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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
December 31, 2005 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
/s/ Pricewaterhousecoopers LLP
Boston, Massachusetts
February 17, 2006
65
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT FOR
PHOENIX CA INTERMEDIATE TAX-FREE BOND FUND (THE "FUND")
DECEMBER 31, 2005 (UNAUDITED)
The Board of Trustees is responsible for determining whether to approve
the Fund's investment advisory agreement. At a meeting held on November 4, 2005,
the Board, including a majority of the independent Trustees, approved the
investment advisory agreement (the "Advisory Agreement") between Kayne Anderson
Rudnick Investment Management, LLC ("Kayne") and the Fund. Pursuant to the
Advisory Agreement between Kayne and the Fund, Kayne provides advisory services
to the Fund.
During the review process, the Board received assistance and advice from,
and met separately with, independent legal counsel. In approving the Advisory
Agreement, the Board, including a majority of the independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
the Advisory Agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services provided by Kayne and its
affiliates to the Fund and its shareholders was reasonable. The Board's
conclusion was based, in part, upon services provided to the Fund such as
quarterly reports provided by Kayne comparing the performance of the Fund with a
peer group and benchmark, reports provided by Kayne showing that the investment
policies and restrictions for the Fund were followed and reports provided by
Kayne covering matters such as the compliance of investment personnel and other
access persons with Kayne's and the Fund's code of ethics, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board also considered the experience of Kayne having
acted as an investment adviser to mutual funds for over 20 years. The Board also
noted the extent of benefits that are provided Fund shareholders from being part
of the Phoenix family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. The Board also considered the transfer agent
and shareholder services that are provided to Fund shareholders by an affiliate
of Kayne, noting continuing improvements by management in the scope and quality
of services and favorable reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Fund in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Fund prepared by Lipper Inc. ("Lipper") furnished
for the contract renewal process. The Lipper report showed the investment
performance of the Fund's Class X shares for the 1, 3 and 5 year and
year-to-date periods ended September 30, 2005. The Board reviewed the investment
performance of the Fund, along with comparative performance information of a
peer group of funds and a relevant market index. The Board noted that the Fund
had underperformed its benchmark for the 1 and 3 year and year-to-date periods
but had outperformed the benchmark for the 5 year period. The Board noted
Management's conclusion that the Fund had underperformed due to the Fund's
emphasis on holding investment grade debt securities in an economy where low
grade debt securities are outperforming. The Board concluded that it was
satisfied with the performance of the Fund given management's comment regarding
the Fund's investment philosophy.
PROFITABILITY. The Board also considered the level of profits realized by
Kayne and its affiliates in connection with the operation of the Fund. In this
regard, the Board reviewed the Fund profitability analysis that addressed the
overall profitability of Kayne for its management of the Phoenix retail fund
family, as well as its profits and that of its affiliates, for managing the
Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this regard, the Board noted
that the allocation appeared reasonable. The Board also noted the voluntary
waiver provided to the Fund. The Board concluded that the profitability to Kayne
was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed significant
emphasis on the review of expenses of the Fund. Consideration was given to a
comparative analysis of the management fee and total expense ratio of the Fund
compared with those of a group of other funds selected by Lipper as its
appropriate Lipper expense group in the Lipper report. The Board noted that
although the total expenses of the Fund were higher than the average total
expenses for comparable funds, the contractual management fee was slightly lower
than the median for the peer group. Management noted that because of the Trust's
small size this Fund and the other Funds in the Trust, had to bear a
disproportionate amount of fixed costs. Management indicated to the Board that
it was considering whether to recommend that the Fund merge with a similar fund.
The Board was satisfied with the management fee and with management's response
regarding expenses and concluded that the Fund's management fee and expenses
were reasonable, particularly given the plan to possibly merge the Fund with
another similar fund.
ECONOMIES OF SCALE. The Board noted that it was likely that Kayne and the
Fund would achieve certain economies of scale as the assets grew covering
certain fixed costs. The Board concluded that shareholders would have an
opportunity to benefit from these economies of scale.
66
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT FOR
PHOENIX INTERMEDIATE BOND FUND (THE "FUND")
DECEMBER 31, 2005 (UNAUDITED)
The Board of Trustees is responsible for determining whether to approve
the Fund's investment advisory agreement. At a meeting held on November 4, 2005,
the Board, including a majority of the independent Trustees, approved the
investment advisory agreement (the "Advisory Agreement") between Kayne Anderson
Rudnick Investment Management, LLC ("Kayne") and the Fund. Pursuant to the
Advisory Agreement between Kayne and the Fund, Kayne provides advisory services
to the Fund.
During the review process, the Board received assistance and advice from,
and met separately with, independent legal counsel. In approving the Advisory
Agreement, the Board, including a majority of the independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
the Advisory Agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services provided by Kayne and its
affiliates to the Fund and its shareholders was reasonable. The Board's
conclusion was based, in part, upon services provided to the Fund such as
quarterly reports provided by Kayne comparing the performance of the Fund with a
peer group and benchmark, reports provided by Kayne showing that the investment
policies and restrictions for the Fund were followed and reports provided by
Kayne covering matters such as the compliance of investment personnel and other
access persons with Kayne's and the Fund's code of ethics, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board also considered the experience of Kayne having
acted as an investment adviser to mutual funds for over 20 years. The Board also
noted the extent of benefits that are provided Fund shareholders from being part
of the Phoenix family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. The Board also considered the transfer agent
and shareholder services that are provided to Fund shareholders by an affiliate
of Kayne, noting continuing improvements by management in the scope and quality
of services and favorable reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Fund in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Fund prepared by Lipper Inc. ("Lipper") furnished
for the contract renewal process. The Lipper report showed the investment
performance of the Fund's Class X shares for the 1, 3 and 5 year and
year-to-date periods ended September 30, 2005. The Board reviewed the investment
performance of the Fund, along with comparative performance information of a
peer group of funds and a relevant market index. The Board noted that the Fund
had underperformed its benchmark for the 1, 3 and 5 year and year-to-date
periods. Management indicated to the Board that it was considering whether to
recommend that the Fund merge with a similar fund. The Board concluded that it
was satisfied with the performance of the Fund given Management's plan to
possibly merge the Fund into a similar Fund.
PROFITABILITY. The Board also considered the level of profits realized by
Kayne and its affiliates in connection with the operation of the Fund. In this
regard, the Board reviewed the Fund profitability analysis that addressed the
overall profitability of Kayne for its management of the Phoenix retail fund
family, as well as its profits and that of its affiliates, for managing the
Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this regard, the Board noted
that the allocation appeared reasonable. The Board concluded that the
profitability to Kayne was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed significant
emphasis on the review of expenses of the Fund. Consideration was given to a
comparative analysis of the management fee and total expense ratio of the Fund
compared with those of a group of other funds selected by Lipper as its
appropriate Lipper expense group in the Lipper report. The Board noted that
although the total expenses of the Fund were higher than the average total
expenses for comparable funds, the contractual management fee was in line with
the median for the peer group. The Board was satisfied with the management fee
and with management's response regarding expenses and concluded that the Fund's
management fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that it was likely that Kayne and the
Fund would achieve certain economies of scale as the assets grew covering
certain fixed costs. The Board concluded that shareholders would have an
opportunity to benefit from these economies of scale.
67
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT FOR
PHOENIX OVERSEAS FUND (THE "FUND")
DECEMBER 31, 2005 (UNAUDITED)
The Board of Trustees is responsible for determining whether to approve
the Fund's investment advisory agreement. At a meeting held on November 4, 2005,
the Board, including a majority of the independent Trustees, approved the
investment advisory agreement (the "Advisory Agreement") between Kayne Anderson
Rudnick Investment Management, LLC ("Kayne") and the Fund. Pursuant to the
Advisory Agreement between Kayne and the Fund, Kayne provides advisory services
to the Fund.
During the review process, the Board received assistance and advice from,
and met separately with, independent legal counsel. In approving the Advisory
Agreement, the Board, including a majority of the independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
the Advisory Agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services provided by Kayne and its
affiliates to the Fund and its shareholders was reasonable. The Board's
conclusion was based, in part, upon services provided to the Fund such as
quarterly reports provided by Kayne comparing the performance of the Fund with a
peer group and benchmark, reports provided by Kayne showing that the investment
policies and restrictions for the Fund were followed and reports provided by
Kayne covering matters such as the compliance of investment personnel and other
access persons with Kayne's and the Fund's code of ethics, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board also considered the experience of Kayne having
acted as an investment adviser to mutual funds for over 20 years. The Board also
noted the extent of benefits that are provided Fund shareholders from being part
of the Phoenix family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. The Board also considered the transfer agent
and shareholder services that are provided to Fund shareholders by an affiliate
of Kayne, noting continuing improvements by management in the scope and quality
of services and favorable reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Fund in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Fund prepared by Lipper Inc. ("Lipper") furnished
for the contract renewal process. The Lipper report showed the investment
performance of the Fund's Class X shares for the 1, 3 and 5 year and
year-to-date periods ended September 30, 2005. The Board reviewed the investment
performance of the Fund, along with comparative performance information of a
peer group of funds and a relevant market index. The Board noted that the Fund
had underperformed its benchmark for the 1, 3 and 5 year periods and slightly
underperformed its benchmark for the year-to-date period. Management indicated
to the Board that it was considering whether to recommend that the Fund merge
with a similar fund. The Board concluded that it was satisfied with the
performance of the Fund given Management's plan to possibly merge the Fund into
a similar Fund.
PROFITABILITY. The Board also considered the level of profits realized by
Kayne and its affiliates in connection with the operation of the Fund. In this
regard, the Board reviewed the Fund profitability analysis that addressed the
overall profitability of Kayne for its management of the Phoenix retail fund
family, as well as its profits and that of its affiliates, for managing the
Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this regard, the Board noted
that the allocation appeared reasonable. The Board concluded that the
profitability to Kayne was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed significant
emphasis on the review of expenses of the Fund. Consideration was given to a
comparative analysis of the management fee and total expense ratio of the Fund
compared with those of a group of other funds selected by Lipper as its
appropriate Lipper expense group in the Lipper report. The Board noted that the
total expenses of the Fund were slightly higher than the average total expenses
for comparable funds and the contractual management fee was also slightly higher
than the average for the peer group. Management noted that the Fund's total
expenses and contractual management fee were within 10 and 1 basis points,
respectively, of the peer group average. The Board was satisfied with the
management fee and concluded that the Fund's management fee and expenses were
reasonable.
ECONOMIES OF SCALE. The Board noted that it was likely that Kayne and the
Fund would achieve certain economies of scale as the assets grew covering
certain fixed costs. The Board concluded that shareholders would have an
opportunity to benefit from these economies of scale.
68
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT FOR
PHOENIX RISING DIVIDENDS FUND (THE "FUND")
DECEMBER 31, 2005 (UNAUDITED)
The Board of Trustees is responsible for determining whether to approve
the Fund's investment advisory agreement. At a meeting held on November 4, 2005,
the Board, including a majority of the independent Trustees, approved the
investment advisory agreement (the "Advisory Agreement") between Kayne Anderson
Rudnick Investment Management, LLC ("Kayne") and the Fund. Pursuant to the
Advisory Agreement between Kayne and the Fund, Kayne provides advisory services
to the Fund.
During the review process, the Board received assistance and advice from,
and met separately with, independent legal counsel. In approving the Advisory
Agreement, the Board, including a majority of the independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
the Advisory Agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services provided by Kayne and its
affiliates to the Fund and its shareholders was reasonable. The Board's
conclusion was based, in part, upon services provided to the Fund such as
quarterly reports provided by Kayne comparing the performance of the Fund with a
peer group and benchmark, reports provided by Kayne showing that the investment
policies and restrictions for the Fund were followed and reports provided by
Kayne covering matters such as the compliance of investment personnel and other
access persons with Kayne's and the Fund's code of ethics, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board also considered the experience of Kayne having
acted as an investment adviser to mutual funds for over 20 years. The Board also
noted the extent of benefits that are provided Fund shareholders from being part
of the Phoenix family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. The Board also considered the transfer agent
and shareholder services that are provided to Fund shareholders by an affiliate
of Kayne, noting continuing improvements by management in the scope and quality
of services and favorable reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Fund in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Fund prepared by Lipper Inc. ("Lipper") furnished
for the contract renewal process. The Lipper report showed the investment
performance of the Fund's Class X shares for the 1, 3, 5 and 10 year and
year-to-date periods ended September 30, 2005. The Board reviewed the investment
performance of the Fund, along with comparative performance information of a
peer group of funds and a relevant market index. The Board noted that the Fund
had underperformed its benchmark for the 1, 3 and year-to-date periods and
slightly underperformed the benchmark for the 5 and 10 year periods. Management
noted that the Fund had adhered to its investment style in managing the Fund.
The Board noted that Management had previously informed the Board that Kayne was
making adjustments to the Fund's investment strategy in an attempt to improve
the Fund's performance relative to its peer group. The Board concluded that it
was satisfied with the performance of the Fund given Management's earlier
comment and the Fund's investment style.
PROFITABILITY. The Board also considered the level of profits realized by
Kayne and its affiliates in connection with the operation of the Fund. In this
regard, the Board reviewed the Fund profitability analysis that addressed the
overall profitability of Kayne for its management of the Phoenix retail fund
family, as well as its profits and that of its affiliates, for managing the
Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this regard, the Board noted
that the allocation appeared reasonable. The Board concluded that the
profitability to Kayne was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed significant
emphasis on the review of expenses of the Fund. Consideration was given to a
comparative analysis of the management fee and total expense ratio of the Fund
compared with those of a group of other funds selected by Lipper as its
appropriate Lipper expense group in the Lipper report. The Board noted that the
total expenses of the Fund were slightly higher than the average total expenses
for comparable funds and the contractual management fee was lower than the
median for the peer group. Management noted that the Fund's assets were
declining which causes an increase in expenses. The Board was satisfied with the
management fee and with management's response regarding expenses and concluded
that the Fund's management fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that it was likely that Kayne and the
Fund would achieve certain economies of scale as the assets grew covering
certain fixed costs. The Board concluded that shareholders would have an
opportunity to benefit from these economies of scale.
69
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT FOR
PHOENIX SMALL-MID CAP FUND (THE "FUND")
DECEMBER 31, 2005 (UNAUDITED)
The Board of Trustees is responsible for determining whether to approve
the Fund's investment advisory agreement. At a meeting held on November 4, 2005,
the Board, including a majority of the independent Trustees, approved the
investment advisory agreement (the "Advisory Agreement") between Kayne Anderson
Rudnick Investment Management, LLC ("Kayne") and the Fund. Pursuant to the
Advisory Agreement between Kayne and the Fund, Kayne provides advisory services
to the Fund.
During the review process, the Board received assistance and advice from,
and met separately with, independent legal counsel. In approving the Advisory
Agreement, the Board, including a majority of the independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
the Advisory Agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services provided by Kayne and its
affiliates to the Fund and its shareholders was reasonable. The Board's
conclusion was based, in part, upon services provided to the Fund such as
quarterly reports provided by Kayne comparing the performance of the Fund with a
peer group and benchmark, reports provided by Kayne showing that the investment
policies and restrictions for the Fund were followed and reports provided by
Kayne covering matters such as the compliance of investment personnel and other
access persons with Kayne's and the Fund's code of ethics, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board also considered the experience of Kayne having
acted as an investment adviser to mutual funds for over 20 years. The Board also
noted the extent of benefits that are provided Fund shareholders from being part
of the Phoenix family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. The Board also considered the transfer agent
and shareholder services that are provided to Fund shareholders by an affiliate
of Kayne, noting continuing improvements by management in the scope and quality
of services and favorable reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Fund in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Fund prepared by Lipper Inc. ("Lipper") furnished
for the contract renewal process. The Lipper report showed the investment
performance of the Fund's Class X shares for the 1, 3, and 5 year and
year-to-date periods ended September 30, 2005. The Board reviewed the investment
performance of the Fund, along with comparative performance information of a
peer group of funds and a relevant market index. The Board noted that the Fund
had lagged its benchmark for the 1, 3, 5 and year-to-date periods. Management
noted that the Fund had adhered to its focus on high quality securities in
managing the Fund and was in the top 3% of the Lipper universe for the month of
October 2005. The Board concluded that it was satisfied with the performance of
the Fund.
PROFITABILITY. The Board also considered the level of profits realized by
Kayne and its affiliates in connection with the operation of the Fund. In this
regard, the Board reviewed the Fund profitability analysis that addressed the
overall profitability of Kayne for its management of the Phoenix retail fund
family, as well as its profits and that of its affiliates, for managing the
Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this regard, the Board noted
that the allocation appeared reasonable. The Board concluded that the
profitability to Kayne was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed significant
emphasis on the review of expenses of the Fund. Consideration was given to a
comparative analysis of the management fee and total expense ratio of the Fund
compared with those of a group of other funds selected by Lipper as its
appropriate Lipper expense group in the Lipper report. The Board noted that the
total expenses of the Fund were slightly higher than the average total expenses
for comparable funds and the contractual management fee was slightly lower than
the median for the peer group. Management noted that once the Fund achieved
economies of scale, its total expense ratio would decrease. The Board was
satisfied with the management fee and with management's response regarding
expenses and concluded that the Fund's management fee and expenses were
reasonable.
ECONOMIES OF SCALE. The Board noted that it was likely that Kayne and the
Fund would achieve certain economies of scale as the assets grew covering
certain fixed costs. The Board concluded that shareholders would have an
opportunity to benefit from these economies of scale.
70
RESULTS OF SHAREHOLDER MEETING
FEBRUARY 15, 2005
(UNAUDITED)
A Special Meeting of Shareholders of The Phoenix-Kayne Funds was held on
February 15, 2005, to approve the following matters:
1. Reconstitute the Board of Trustees and to elect fourteen Trustees to
such Board.
2. Ratify selection of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm, as auditors for the fiscal year ending December
31, 2005.
NUMBER OF ELIGIBLE UNITS VOTED:
1. Election of Trustees
For Withheld
----------- ----------
E. Virgil Conway 385,430,412 52,921,000
Harry Dalzell-Payne 385,430,412 52,921,000
S. Leland Dill 385,430,412 52,921,000
Francis E. Jeffries 385,456,548 52,894,865
Leroy Keith, Jr. 385,430,412 52,921,000
Marilyn E. LaMarche 385,456,548 52,894,865
Philip R. McLoughlin 385,430,412 52,921,000
Geraldine M. McNamara 385,469,906 52,881,506
Everett L. Morris 385,469,906 52,881,506
James M. Oates 385,430,412 52,921,000
Donald B. Romans 385,456,548 52,894,865
Richard E. Segerson 385,456,548 52,894,865
Ferdinand L. J. Verdonck 385,430,412 52,921,000
Lowell P. Weicker, Jr 384,840,119 53,511,294
2. PricewaterhouseCoopers LLP
For Against Abstain
----------- ---------- ----------
385,404,031 10,352,298 42,595,083
71
FUND MANAGEMENT TABLES (UNAUDITED)
Information pertaining to the Trustees and officers of the Trust as of December
31, 2005 is set forth below. The statement of additional information (SAI)
includes additional information about the Trustees and is available without
charge, upon request, by calling (800) 243-4361.
The address of each individual, unless otherwise noted, is 56 Prospect
Street, Hartford, CT 06115-0480. There is no stated term of office for Trustees
of the Trust except for Messrs Dill and Romans who are serving a two year term
expiring April 29, 2006.
INDEPENDENT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, ADDRESS AND LENGTH OF OVERSEEN BY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND
DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
E. Virgil Conway Served since 53 Chairman, Rittenhouse Advisors, LLC (consulting firm)
Rittenhouse Advisors, LLC November (2001-present). Trustee/Director, Phoenix Funds Complex
101 Park Avenue 2002. (1983-present). Trustee/Director, Realty Foundation of New York
New York, NY 10178 (1972-present), Josiah Macy, Jr. Foundation (Honorary)
DOB: 8/2/29 (2004-present), Pace University (Director/Trustee Emeritus)
(2003-present), Greater New York Councils, Boy Scouts of America
(1985-present), The Academy of Political Science (Vice Chairman)
(1985-present), Urstadt Biddle Property Corp. (1989-present),
Colgate University (Trustee Emeritus) (2004-present).
Director/Trustee, The Harlem Youth Development Foundation,
(Chairman) (1998-2002), Metropolitan Transportation Authority
(Chairman) (1992-2001), Trism, Inc. (1994-2001), 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), Pace University (1978-2003), New York
Housing Partnership Development Corp. (Chairman) (1981-2003),
Josiah Macy, Jr. Foundation (1975-2004).
- -----------------------------------------------------------------------------------------------------------------------------------
Harry Dalzell-Payne Served since 53 Retired. Trustee/Director, Phoenix Funds Complex (1983-present).
The Flat, Elmore Court November
Elmore, GL05, GL2 3NT 2002.
U.K.
DOB: 9/8/29
- ----------------------------------------------------------------------------------------------------------------------------------
S. Leland Dill Served since 51 Retired. Trustee, Phoenix Funds Family (1989-present). Trustee,
7721 Blue Heron Way 2005 Scudder Investments (55 portfolios) (1986-present). Director,
West Palm Beach, FL 33412 Coutts & Co. Trust Holdings Limited (1991-2000), Coutts & Co.
DOB: 3/28/30 Group (1991-2000) and Coutts & Co. International (USA) (private
banking) (1991-2000).
- ----------------------------------------------------------------------------------------------------------------------------------
Francis E. Jeffries Served since 53 Director, The Empire District Electric Company (1984-2004).
8477 Bay Colony Dr. #902 2005 Trustee/Director, Phoenix Funds Complex (1987-present).
Naples, FL 34108
DOB: 9/23/30
- -----------------------------------------------------------------------------------------------------------------------------------
Leroy Keith, Jr. Served since 51 Partner, Stonington Partners, Inc. (private equity fund)
Stonington Partners, Inc. 2005 (2001-present). Director/Trustee, Evergreen Funds (six
736 Market Street, Ste. 1430 portfolios). Trustee, Phoenix Funds Family (1980-present).
Chattanooga, TN 37402 Director, Diversapak (2002-present). Obaji Medical Products
DOB: 2/14/39 Company (2002-present). Director, Lincoln Educational Services
(2002-2004). Chairman, Carson Products Company (cosmetics) (1998
to 2000).
- -----------------------------------------------------------------------------------------------------------------------------------
72
FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
INDEPENDENT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, ADDRESS AND LENGTH OF OVERSEEN BY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND
DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
Geraldine M. McNamara Served since 53 Managing Director, U.S. Trust Company of New York (private bank)
U.S. Trust Company of November (1982-present). Trustee/Director, Phoenix Funds Complex
New York 2002. (2001-present).
11 West 54th Street
New York, NY 10019
DOB: 4/17/51
- -----------------------------------------------------------------------------------------------------------------------------------
Everett L. Morris(1) Served since 53 Retired. Trustee/Director, Phoenix Funds Complex (1991-present).
164 Laird Road 1995. Director, W.H. Reaves Utility Income Fund (2004-present). Vice
Colts Neck, NJ 07722 President, W.H. Reaves and Company (investment management)
DOB: 5/26/28 (1993-2003).
- -----------------------------------------------------------------------------------------------------------------------------------
James M. Oates(2) Served since 51 Chairman, Hudson Castle Group, Inc. (Formerly IBEX Capital
c/o Northeast Partners 2005 Markets, Inc.) (financial services) (1997-present). Trustee/
150 Federal Street, Director Phoenix Funds Family (1987-present). Managing Director,
Suite 1000 Wydown Group (consulting firm) (1994-present). Director,
Boston, MA 02110 Investors Financial Service Corporation (1995-present), Investors
DOB: 5/31/46 Bank & Trust Corporation (1995-present), Stifel Financial
(1996-present), Connecticut River Bancorp (1998-present),
Connecticut River Bank (1999-present), Trust Company of New
Hampshire (2002-present). Chairman, Emerson Investment Management,
Inc. (2000-present). Independent Chairman, John Hancock Trust
(since 2005), Trustee, John Hancock Funds II and John Hancock
Funds III (since 2005). Trustee, John Hancock Trust (2004-2005).
Director/Trustee, AIB Govett Funds (six portfolios) (1991-2000),
and Command Systems, Inc. (1998-2000), Phoenix Investment
Partners, Ltd. (1995-2001), 1Mind, Inc. (formerly 1Mind.com),
(2000-2002), Plymouth Rubber Co. (1995-2003). Director and
Treasurer, Endowment for Health, Inc. (2000-2004).
- -----------------------------------------------------------------------------------------------------------------------------------
Donald B. Romans Served since 51 Retired. President, Romans & Company (private investors and
39 S. Sheridan Road 2005 financial consultants) (1987-2003). Trustee/Director, Phoenix
Lake Forest, IL 60045 Funds Family (1985-present). Trustee, Burnham Investors Trust (5
DOB: 4/22/31 portfolios) (1967-2003).
- -----------------------------------------------------------------------------------------------------------------------------------
Richard E. Segerson Served since 51 Managing Director, Northway Management Company (1998-present).
Northway Management 2005 Trustee/Director, Phoenix Funds Family (1983-present).
Company
164 Mason Street
Greenwich, CT 06830
DOB: 2/16/46
- -----------------------------------------------------------------------------------------------------------------------------------
Ferdinand L. J. Verdonck Served since 51 Director, Banco Urquijo (Chairman)(1998-present). Trustee, Phoenix
Nederpolder, 7 2005 Funds Family (2002-present). Director EASDAQ (Chairman)
B-9000 Gent, Belgium (2001-present), The JP Morgan Fleming Continental European
DOB: 7/30/42 Investment Trust (1998-present), Groupe SNEF (1998-present),
Degussa Antwerpen N.V.(1998-present), Santens N.V. (1999-present).
Managing Director, Almanij N.V. (1992-2003). Director, KBC Bank and
Insurance Holding Company (Euronext) (1992-2003), KBC Bank
(1992-2003), KBC Insurance (1992-2003), Kredietbank, S.A.
Luxembourgeoise (1992-2003), Investco N.V. (1992-2003), Gevaert
N.V. (1992-2003), Fidea N.V. (1992-2003), Almafin N.V. (1992-2003),
Centea N.V. (1992-2003), Dutch Chamber of Commerce for Belgium and
Luxemburg (1995-2001), Phoenix Investment Partners, Ltd.
(1995-2001).
- -----------------------------------------------------------------------------------------------------------------------------------
73
FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
INDEPENDENT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, ADDRESS AND LENGTH OF OVERSEEN BY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND
DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
Lowell P. Weicker, Jr.(1) Served since 51 Director, Medallion Financial New York (2003-present), Compuware
7 Little Point Street 1995. (1996-present), WWE, Inc. (2000-present). President, The Trust
Essex, CT 06426 for America's Health (non-profit) (2001-present).
DOB: 5/16/31 Trustee/Director, Phoenix Funds Family (1995-present). Director,
UST, Inc. (1995-2004), HPSC Inc. (1995-2004).
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Pursuant to the Trust's retirement policy, Mr. Weicker will retire from the
Board of Trustees effective January 1, 2006.Pursuant to the Trust's
retirement policy Mr. Morris will retire from the Board immediately
following its May 2006 meeting.
(2) Mr. Oates is a Director and Chairman of the Board and a shareholder of
Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) ("Hudson"),
a privately owned financial services firm. Phoenix Investment Partners,
Ltd., an affiliate of the adviser, owns approximately 1% of the common stock
of Hudson and Phoenix Life Insurance Company also an affiliate, owns
approximately 8% of Hudson's common stock.
74
FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
INTERESTED TRUSTEES
Each of the individuals listed below is an "interested person" of the
Fund, 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 AND LENGTH OF OVERSEEN BY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND
DATE OF BIRTH TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
Daniel T. Geraci(3) Director 51 Executive Vice President, Asset Management, The Phoenix Companies,
DOB: 6/12/57 since 2005 Inc. (since 2003). President and Chief Executive Officer, Phoenix
and Investment Partners, Ltd. (since 2003). President, certain funds
President within the Phoenix Fund Complex (2004-present). President and
since 2004. Chief Executive Officer of North American investment operations,
Pioneer Investment Management USA, Inc. (2001-2003). President of
Private Wealth Management Group (2000-2001), and Executive Vice
President of Distribution and Marketing for U.S. institutional
services business (1998-2000) Fidelity Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
Marilyn E. LaMarche(4) Served since 51 Limited Managing Director, Lazard Freres & Co. LLC (1997-present).
Lazard Freres & Co. LLC 2002. Trustee/Director, Phoenix Funds Family (2002-present). Director,
30 Rockefeller Plaza, The Phoenix Companies, Inc. (2001-2005) and Phoenix Life Insurance
59th Floor Company (1989-2005).
New York, NY 10020
DOB: 5/11/34
- -----------------------------------------------------------------------------------------------------------------------------------
Philip R. McLoughlin(5) Served since 75 Director, PXRE Corporation (Reinsurance) (1985-present), World
200 Bridge Street 1989. Trust Fund (1991-present). Director/Trustee, Phoenix Funds Complex
Chatham, MA 02633 (1989-present). Management Consultant (2002-2004), Chairman
DOB: 10/23/46 Chairman (1997-2002), Chief Executive Officer (1995-2002), Director
(1995-2002), Phoenix Investment Partners, Ltd., Director and
Executive Vice President, The Phoenix Companies, Inc. (2000-
2002). Director (1994-2002) and Executive Vice President,
Investments (1987-2002), Phoenix Life Insurance Company. Director
(1983-2002) and Chairman (1995-2002), Phoenix Investment Counsel,
Inc. Director (1982-2002), Chairman (2000-2002) and President
(1990-2000), Phoenix Equity Planning Corporation. Chairman and
President, Phoenix/Zweig Advisers LLC (2001-2002). Director
(2001-2002) and President (April 2002-September 2002), Phoenix
Investment Management Company. Director and Executive Vice
President, Phoenix Life and Annuity Company (1996-2002). Director
(1995-2000) and Executive Vice President (1994-2002) and Chief
Investment Counsel (1994-2002), PHL Variable Insurance Company.
Director, Phoenix National Trust Holding Company (2001-2002).
Director (1985-2002) and Vice President (1986-2002) and Executive
Vice President (April 2002-September 2002), PM Holdings, Inc.
Director, WS Griffith Associates, Inc. (1995-2002). Director, WS
Griffith Securities, Inc. (1992-2002).
- -----------------------------------------------------------------------------------------------------------------------------------
(3) Mr. Geraci is an "interested person" as defined in the Investment Company
Act of 1940, by reason of his position as Executive Vice President, Asset
Management, The Phoenix Companies Inc. and his position as President and
Chief Executive Officer, Phoenix Investment Partners, Ltd.
(4) Ms. LaMarche is an "interested person," as defined in the Investment Company
Act of 1940, by reason of her former position as Director of The Phoenix
Companies, Inc. and Phoenix Life Insurance Company.
(5) Mr. McLoughlin is an "interested person," as defined in the Investment
Company Act of 1940, by reason of his former relationship with Phoenix
Investment Partners, Ltd. and its affiliates.
75
FUND MANAGEMENT TABLES (UNAUDITED) (CONTINUED)
OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
POSITION(S) HELD WITH
NAME, ADDRESS AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH TIME SERVED DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
George R. Aylward Executive Vice President Senior Vice President and Chief Operating Officer, Asset
DOB: 8/17/64 since 2004. Management, The Phoenix Companies, Inc. (2004-present). Executive
Vice President and Chief Operating Officer, Phoenix Investment
Partners, Ltd. (2004-present). Vice President, Phoenix Life
Insurance Company (2002-2004). Vice President, The Phoenix
Companies, Inc. (2001-2004). Vice President, Finance, Phoenix
Investment Partners, Ltd. (2001-2002). Assistant Controller,
Phoenix Investment Partners, Ltd. (1996-2001). Executive Vice
President, certain funds within the Phoenix Funds Family
(2004-present).
- -----------------------------------------------------------------------------------------------------------------------------------
Francis G. Waltman Senior Vice President Senior Vice President, Product Development and Management, Phoenix
DOB: 7/27/62 since 2004. Investment Partners, Ltd. (2005-present), Senior Vice President
and Chief Administrative Officer, Phoenix Investment Partners,
Ltd., (2003-2004). Senior Vice President and Chief Administrative
Officer, Phoenix Equity Planning Corporation (1999-2003), Senior
Vice President, certain funds within the Phoenix Fund Family
(2004-present).
- -----------------------------------------------------------------------------------------------------------------------------------
Marc Baltuch Vice President and Chief Compliance Officer, Zweig-DiMenna Associates LLC
900 Third Avenue Chief Compliance Officer (1989-present); Vice President and Chief Compliance Officer,
New York, NY 10022 since 2004. certain Funds within the Phoenix Fund Complex (2004-present); Vice
DOB: 9/23/45 President, The Zweig Total Return Fund, Inc. (2004-present); Vice
President, The Zweig Fund, Inc. (2004-present); President and
Director of Watermark Securities, Inc. (1991-present); Assistant
Secretary of Gotham Advisors Inc. (1990-present); Secretary,
Phoenix-Zweig Trust (1989-2003); Secretary, Phoenix-Euclid Market
Neutral Fund (1999-2002).
- -----------------------------------------------------------------------------------------------------------------------------------
W. Patrick Bradley Chief Financial Officer and Second Vice President, Fund Control and Tax, Phoenix Equity
DOB: 3/2/72 Treasurer since 2005. Planning Corporation (2004-present). Chief Financial Officer and
Treasurer (2005-present) or Assistant Treasurer (2004-present) of
certain funds within the Phoenix Fund Family. Senior Manager
(2002-2004), Manager (2000-2002), Audit, Deloitte & Touche, LLP.
- -----------------------------------------------------------------------------------------------------------------------------------
Kevin J. Carr Vice President, Counsel, Vice President and Counsel, Phoenix Life Insurance Company (May
One American Row Secretary and 2005-present). Vice President, Counsel, Chief Legal Officer and
Hartford, CT 06102 Chief Legal Officer Secretary of certain funds within the Phoenix Fund Complex (May
DOB: 8/3/54 since 2005. 2005-present). Compliance Officer of Investments and Counsel,
Travelers Life & Annuity Company (January 2005-May 2005).
Assistant General Counsel, The Hartford Financial Services Group
(1999-2005).
- -----------------------------------------------------------------------------------------------------------------------------------
76
PHOENIX-KAYNE FUNDS INVESTMENT ADVISER
1800 Avenue of the Stars, 2nd Floor Kayne Anderson Rudnick Investment
Los Angeles, CA 90067 Management, LLC
1800 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067
TRUSTEES
PRINCIPAL UNDERWRITER
E. Virgil Conway
Harry Dalzell-Payne Phoenix Equity Planning Corporation
S. Leland Dill One American Row
Daniel T. Geraci Hartford, CT 06102
Francis E. Jeffries
Leroy Keith, Jr. TRANSFER AGENT
Marilyn E. LaMarche
Philip R. McLoughlin, Chairman Phoenix Equity Planning Corporation
Geraldine M. McNamara One American Row
Everett L. Morris Hartford, CT 06102
James M. Oates
Donald B. Romans CUSTODIAN
Richard E. Segerson
Ferdinand L. J. Verdonck State Street Bank and Trust Company
Lowell P. Weicker, Jr. P.O. Box 5501
Boston, MA 02206-5501
OFFICERS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Daniel T. Geraci, President PricewaterhouseCoopers LLP
George R. Aylward, Executive Vice President 125 High Street
Francis G. Waltman, Senior Vice President Boston, MA 02110
Marc Baltuch, Vice President and Chief
Compliance Officer HOW TO CONTACT US
W. Patrick Bradley, Chief Financial Officer
and Treasurer Mutual Fund Services 1-800-243-1574
Kevin J. Carr, Vice President, Counsel, Secretary and Advisor Consulting Group 1-800-243-4361
Chief Legal Officer Telephone Orders 1-800-367-5877
Text Telephone 1-800-243-1926
Web site PHOENIXFUNDS.COM
- --------------------------------------------------------------------------------
IMPORTANT NOTICE TO SHAREHOLDERS
The Securities and Exchange Commission has modified mailing regulations for
semiannual and annual shareholder fund reports to allow mutual fund companies to
send a single copy of these reports to shareholders who share the same mailing
address. If you would like additional copies, please call Mutual Fund Services
at 1-800-243-1574.
- --------------------------------------------------------------------------------
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---------------
PRESORTED
STANDARD
U.S. POSTAGE
PAID
Louisville, KY
[LOGO] PHOENIXFUNDS(SM) Permit No. 1051
---------------
PHOENIX EQUITY PLANNING CORPORATION
P.O. Box 150480
Hartford, CT 06115-0480
For more information about Phoenix mutual funds, please call your financial
representative, contact us at 1-800-243-1574 or visit PHOENIXFUNDS.COM.
NOT INSURED BY FDIC/NCUSIF OR ANY FEDERAL GOVERNMENT AGENCY.
NO BANK GUARANTEE. NOT A DEPOSIT. MAY LOSE VALUE.
PXP1813 2-06
BPD19589
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics described in Item 2(b) of the instructions for
completion of Form N-CSR.
(d) The registrant has not granted any waivers, during the period covered
by this report, including an implicit waiver, from a provision of the
code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third
party, that relates to one or more of the items set forth in paragraph
(b) of the instructions for completion of this Item.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant's Board of Trustees has determined that the Registrant
has two "audit committee financial experts" serving on its Audit
Committee.
(a)(2) E. Virgil Conway and Everett L. Morris have been determined by the
Registrant to possess the technical attributes identified in
Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit
committee financial expert." Mr. Conway and Mr. Morris are
"independent" trustees pursuant to paragraph (a)(2) of Item 3 to Form
N-CSR.
(a)(3) Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
- ----------
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services
that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years
are $95,000 for 2005 and $98,000 for 2004.
Audit-Related Fees
- ------------------
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $5,000 for 2005 and $5,000 for 2004. This represents the
review of the semi-annual financial statements.
Tax Fees
- --------
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $20,000 for 2005 and
$20,000 for 2004.
"Tax Fees" are those primarily associated with review of the Trust's
tax provision and qualification as a regulated investment company (RIC)
in connection with audits of the Trust's financial statement, review of
year-end distributions by the Fund to avoid excise tax for the Trust,
periodic discussion with management on tax issues affecting the Trust,
and reviewing and signing the Fund's federal income and excise tax
returns.
All Other Fees
- --------------
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2005 and $0 for 2004.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Phoenix-Kayne Funds (the "Fund") Board has adopted policies and
procedures with regard to the pre-approval of services provided by PwC.
Audit, audit-related and tax compliance services provided to the Fund
on an annual basis require specific pre-approval by the Board. As noted
above, the Board must also approve other non-audit services provided to
the Fund and those non-audit services provided to the Fund's Affiliated
Service Providers that relate directly to the operations and financial
reporting of the Fund. Certain of these non-audit services that the
Board believes are a) consistent with the SEC's auditor independence
rules and b) routine and recurring services that will not impair the
independence of the independent auditors may be approved by the Board
without consideration on a specific case-by-case basis ("general
pre-approval").
The Audit Committee has determined that Mr. E. Virgil Conway, Chair of
the Audit Committee, may provide pre-approval for such services that
meet the above requirements in the event such approval is sought
between regularly scheduled meetings. In the event that Mr. Conway
determines that the full board should review the request, he has the
opportunity to convene a meeting of the Fund's Board. In any event, the
Board is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 100% for 2005; not applicable for 2004
(c) 100% for 2005; 100% for 2004
(d) Not applicable for 2005; not applicable for 2004
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $892,561 for 2005 and $1,876,791 for 2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Phoenix-Kayne Funds
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By (Signature and Title)* /s/ George R. Aylward
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George R. Aylward, Executive Vice President
(principal executive officer)
Date March 9, 2006
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ George R. Aylward
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George R. Aylward, Executive Vice President
(principal executive officer)
Date March 9, 2006
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By (Signature and Title)* /s/ W. Patrick Bradley
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W. Patrick Bradley, Chief Financial Officer
and Treasurer
(principal financial officer)
Date March 9, 2006
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* Print the name and title of each signing officer under his or her signature.