N-30D 1 g02-0924.txt PHOENIX-SENECA AR ANNUAL REPORT September 30, 2002 [GRAPHIC OMITTED] o SENECA o PHOENIX-SENECA BOND FUND PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND PHOENIX-SENECA REAL ESTATE SECURITIES FUND [GRAPHIC OMITTED] PHOENIX INVESTMENT PARTNERS, LTD. A MEMBER OF THE PHOENIX COMPANIES, INC. MESSAGE FROM THE PRESIDENT DEAR SHAREHOLDER: [PHOTO OMITTED] As a firm, Phoenix Investment Partners has always encouraged investors to use a variety of styles and strategies to mitigate the pain associated with the type of volatile market that we have experienced over the last 12 months and more. A diversified portfolio can help to offer protection by spreading investment risk across a broad spectrum of investment styles and asset classes. Less overlap or redundancy in a portfolio should translate into lower volatility and greater opportunity to participate in whatever style or asset class is currently in favor. Of course, diversification itself does not guarantee against a loss, and there can be no guarantee that a diversified portfolio will outperform a non-diversified portfolio. We recognize that it is important for investors to succeed in reaching their personal financial goals within the context of their risk tolerance and investment horizon. Your financial advisor can show you the benefits of asset allocation to help you shape an investment plan to meet your needs. Investors' biggest challenge is adopting an investing discipline and committing to it. As always, your financial advisor can provide the insight and wisdom to help keep you on track to meet your financial goals. To learn more about the markets and investing, ask your financial advisor to share Phoenix's exclusive "Investing Perspectives" presentation. If you have any questions about your account, please contact your financial advisor or a Phoenix Mutual Fund Services representative at 1-800-243-1574, option 4. To obtain current mutual fund prices and performance information, go to PhoenixInvestments.com and select INDIVIDUAL INVESTORS to enter the "Investor Center." And, while you're there, take advantage of our new Investor Resources, including educational, tax and retirement topics. Sincerely, /S/ PHILIP R. MCLOUGHLIN Philip R. McLoughlin President, Phoenix Funds SEPTEMBER 30, 2002 -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- 1 TABLE OF CONTENTS Phoenix-Seneca Bond Fund ........................................... 3 Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund ............................. 15 Phoenix-Seneca Real Estate Securities Fund ......................... 24 Notes to Financial Statements ...................................... 33 2 PHOENIX-SENECA BOND FUND A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM LEADER, GAIL SENECA, PH.D. Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE? A: The fund seeks high total return from both current income and capital appreciation. Q: HOW DID THE FUND PERFORM FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002? A: For the 12 months ended September 30, 2002, Class X shares rose 5.94%, Class A shares gained 5.50%, and Class B and Class C shares were up 4.83%. The Lehman Aggregate Bond Index returned 8.60% for the same period.(1) All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is no guarantee of future results. Our bond portfolios continue to produce above-market current income, due to our strategic preference for non-Treasury debt. In the past, this approach has produced strong relative returns. However, given investor uncertainty following the accounting scandals, continuing economic weakness and numerous pre-announcements by major firms of disappointing earnings, the flight to the perceived safety of Treasury securities undermined our near-term results. All "spread" sectors, from investment-grade corporates to government-backed mortgage securities, suffered in the rush to the ultimate safety of Treasuries. Q: HOW WOULD YOU CHARACTERIZE THE FIXED-INCOME MARKET ENVIRONMENT? A: The Fed continued to cut rates in the fourth quarter of 2001--the beginning of our fiscal year--and set the target rate at 1.75%, the lowest level in 40 years. The spectacular demise of Enron, which as recently as April 2001 was ranked the seventh largest company in the U.S., certainly spooked bondholders. At the time, we thought the corporate credit cycle could only improve. In fact, "spread" sectors (non-Treasury issues) led the bond market in the first quarter of 2002 as investors became more confident that the economy was strengthening. Then in a complete reversal, spread sectors underperformed, as a seemingly endless stream of accounting restatements caused investors to seek safety in Treasuries. In fact, June 2002 was the toughest month in 19 years for high yield securities. The final three months of our fiscal year were marked by even more investor pessimism as the pace of economic recovery slowed. Anxiety was further exacerbated by the ever-growing threat of war with Iraq and continued angst over corporate fraud. Investors continued to flee to the safety of Treasuries, driving yields on the 10-year Treasury down to 3.5% from 4.8% just three months earlier. In September, 10-year Treasuries had their best month in 22 years. Q: WHAT FACTORS AFFECTED PERFORMANCE? A: Our bond strategy struggled in the final months of 2001 as the credit cycle deteriorated. We have historically produced above-market returns through an emphasis on the higher yields available in the non-Treasury sectors of the market. All spread sectors from investment-grade corporate bonds to government-backed mortgage securities suffered in the rush to the safety of U.S. Treasuries. With the New Year, the economic picture brightened. Spread sectors 1 THE LEHMAN AGGREGATE BOND INDEX MEASURES BROAD BOND MARKET TOTAL-RETURN PERFORMANCE. THE INDEX IS UNMANAGED, DOES NOT REFLECT MANAGEMENT FEES AND IS NOT AVAILABLE FOR DIRECT INVESTMENT. 3 PHOENIX-SENECA BOND FUND (CONTINUED) returned to favor, and our overweights in commercial mortgage-backed securities and asset-backed issues added to performance. This stance turned on us over the next few months, however, as the "flight to quality" was renewed. Our overweighting in spread products and underweighting in Treasuries and agencies weighed negatively on performance. The fund benefited from an increased allocation to commercial mortgage-backed securities and a decreased allocation to residential mortgage-backed securities. In the corporate sector, exposure to investment-grade securities helped performance. We continue to position the high-grade portion of the portfolio to weather a modestly weak environment with commensurate spread volatility. Q: WHAT IS YOUR CURRENT OUTLOOK? A: Although the recent Treasury rally seems to indicate a complete lack of investor confidence in an economic recovery, we believe that the economy will continue to improve, even if at a slower pace than was originally anticipated. Consumer spending has been robust on houses and autos, capital spending has come off the bottom and even after recent revised guidance numbers, earnings are still significantly higher than they were a year ago. Still, the threat of a double-dip looms, given the high level of uncertainty, especially in the Middle East. In corporate America, default rates remain relatively high and the "fallen angel" phenomenon persists. Our investment strategy remains to seek out opportunities in "spread" sectors, but with a relatively conservative bias. We anticipate that even when the market does experience a recovery, it will not be a consistent linear upward move in prices as credit fundamentals vary dramatically across the market. In this volatile environment, we continue to be vigilant in our selection of credits across all asset classes. SEPTEMBER 30, 2002 4 PHOENIX-SENECA BOND FUND ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/02
INCEPTION INCEPTION 1 YEAR 5 YEARS TO 9/30/02 DATE ------ ------- ---------- ---------- Class X Shares at NAV(2) 5.94% 6.95% 7.63% 3/7/96 Class A Shares at NAV(2) 5.50 -- 5.58 7/1/98 Class A Shares at POP(3) 0.48 -- 4.38 7/1/98 Class B Shares at NAV(2) 4.83 -- 4.79 7/1/98 Class B Shares with CDSC(4) 0.88 -- 4.41 7/1/98 Class C Shares at NAV(2) 4.83 -- 4.80 7/1/98 Class C Shares with CDSC(4) 4.83 -- 4.80 7/1/98 Lehman Aggregate Bond Index(7) 8.60 7.83 Note 5 Note 5 1 Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains 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 4.75% 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 7.65% for Class X (since 3/7/96) and 7.53% for Class A, Class B and Class C (since 7/1/98). 6 This chart illustrates NAV returns on Class X shares. Returns on Class A, Class B and Class C shares will vary due to differing sales charges. 7 The Lehman Aggregate Bond Index is an unmanaged, commonly used measure of bond market total return performance. The index's performance does not reflect management fees and sales charges. All returns represent past performance which may not be indicative of future performance. 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.
GROWTH OF $10,000 PERIODS ENDING 9/30 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Phoenix-Seneca Bond Fund Lehman Aggregate Class X at NAV(6) Bond Index(7) 3/7/96 $10,000.00 $10,000.00 9/30/96 10,413.21 10,146.20 9/30/97 11,585.77 11,131.54 9/30/98 12,679.15 12,412.72 9/30/99 13,123.98 12,367.32 9/29/00 13,934.21 13,231.56 9/28/01 15,304.83 14,945.50 9/30/02 16,214.47 16,230.25 This Growth of $10,000 chart assumes an initial investment of $10,000 made on 3/7/96 (inception of the Fund) in Class X shares and reflects no sales charge. Performance assumes dividends and capital gains are reinvested. The performance of other share classes will be greater or less than that shown based on differences in inception dates, fees and sales charges. SECTOR WEIGHTINGS 9/30/02 As a percentage of bond holdings [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Corporate 30% U.S. Government 23 Agency Mortgage-Backed 16 Non-Agency Mortgage-Backed 14 Agency Non Mortgage-Backed 11 Foreign Government 2 Foreign Corporate 2 Convertible 2 5 PHOENIX-SENECA BOND FUND TEN LARGEST HOLDINGS AT SEPTEMBER 30, 2002 (AS A PERCENTAGE OF TOTAL NET ASSETS) 1. Freddie Mac 5.25%, 1/15/06 9.6% AGENCY NON MORTGAGE-BACKED SECURITY 2. U.S. Treasury Notes 3.25%, 8/15/07 8.5% U.S. GOVERNMENT SECURITY 3. U.S. Treasury Notes 4.375%, 8/15/12 6.8% U.S. GOVERNMENT SECURITY 4. U.S. Treasury Notes 2.875%, 6/30/04 3.1% U.S. GOVERNMENT SECURITY 5. U.S. Treasury Bonds 5.375%, 2/15/31 2.6% U.S. GOVERNMENT SECURITY 6. United Mexican States Global Bond 8.375%, 1/14/11 2.1% FOREIGN GOVERNMENT SECURITY 7. Sovereign Real Estate Investment Trust Series A 144A 1.9% CORPORATE BOND 8. Fannie Mae 2.273%, 4/15/27 1.8% AGENCY MORTGAGE-BACKED SECURITY 9. Fannie Mae 2.223%, 4/15/29 1.6% AGENCY MORTGAGE-BACKED SECURITY 10. Freddie Mac 2.373%, 3/15/32 1.6% AGENCY MORTGAGE-BACKED SECURITY INVESTMENTS AT SEPTEMBER 30, 2002 MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- U.S. GOVERNMENT SECURITIES--21.4% U.S. TREASURY BONDS--2.6% U.S. Treasury Bonds 5.375%, 2/15/31 ........ Aaa $ 1,953 $ 2,170,271 U.S. TREASURY NOTES--18.8% U.S. Treasury Notes 2.875%, 6/30/04 ........ Aaa 2,606 2,660,460 U.S. Treasury Notes 6.50%, 8/15/05 ......... Aaa 300 337,676 U.S. Treasury Notes 3.25%, 8/15/07(e) ...... Aaa 7,040 7,256,149 U.S. Treasury Notes 4.375%, 8/15/12 ........ Aaa 5,404 5,745,971 ----------- 16,000,256 ----------- --------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT SECURITIES (IDENTIFIED COST $17,479,994) 18,170,527 --------------------------------------------------------------------------- AGENCY MORTGAGE-BACKED SECURITIES--14.7% Fannie Mae 6%, 10/25/20 .................... Aaa 34 35,598 Fannie Mae 2.273%, 4/15/27(c) .............. Aaa 1,539 1,540,568 Fannie Mae 2.223%, 4/15/29(c) .............. Aaa 1,359 1,359,262 Fannie Mae 6.50%, 7/1/29 ................... Aaa 329 341,745 Fannie Mae 2.264%, 12/25/29(c) ............. Aaa 424 425,690 Fannie Mae 2.37%, 3/18/32(c) ............... Aaa 1,175 1,179,627 Freddie Mac 5.50%, '16-'17 ................. Aaa 2,960 3,069,678 Freddie Mac 6%, 11/15/17 ................... Aaa 253 264,412 Freddie Mac 6%, 2/15/30 .................... Aaa 44 45,696 Freddie Mac 2.273%, 12/15/31(c) ............ Aaa 496 497,659 MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- Freddie Mac 2.273%, 12/15/31(c) ............ Aaa $ 557 $ 557,709 Freddie Mac 2.323%, 3/15/32(c) ............. Aaa 733 734,618 Freddie Mac 2.373%, 3/15/32(c) ............. Aaa 620 621,911 Freddie Mac 2.373%, 3/15/32(c) ............. Aaa 1,330 1,328,967 GNMA 2.22%, 2/20/29(c) ..................... Aaa 518 519,943 --------------------------------------------------------------------------- TOTAL AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $12,406,586) 12,523,083 --------------------------------------------------------------------------- AGENCY NON MORTGAGE-BACKED SECURITIES--9.6% Freddie Mac 5.25%, 1/15/06 ................. Aaa 7,500 8,116,568 --------------------------------------------------------------------------- TOTAL AGENCY NON MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $8,054,555) 8,116,568 --------------------------------------------------------------------------- NON-AGENCY MORTGAGE-BACKED SECURITIES--12.8% Bank of America Commercial Mortgage, Inc. 02-2, A3 5.118%, 5/11/12 ................... AAA(d) 404 419,192 Bear Stearns Commercial Mortgage Security 99-WF2 A2 7.08%, 6/15/09 ................... Aaa 608 705,058 CDC Commercial Mortgage Trust 02-FX1, A1 5.252%, 5/15/19 ......................... Aaa 301 317,772 Chase Manhattan Bank-First Union National Bank 7.439%, 7/15/09 ....................... AAA(d) 547 641,349 See Notes to Financial Statements 6 PHOENIX-SENECA BOND FUND MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- DLJ Commercial Mortgage Corp. 7.30%, 6/10/09 .................................... Aaa $ 471 $ 550,364 DLJ Commercial Mortgage Corp. 7.18%, 8/10/10 .................................... Aaa 580 677,413 First Union National Bank Commercial Mortgage 7.841%, 3/15/10 ................... AAA(d) 684 821,395 First Union National Bank Commercial Mortgage 01-C3, A3 6.423%, 6/15/11 ......... AAA(d) 525 591,026 First Union-Chase Commercial Mortgage 99-C2, A2 6.645%, 4/15/09 .................. Aaa 574 649,555 First Union-Lehman Brothers-Bank of America 98-C2, A1 6.28%, 11/18/08 .......... Aaa 1,201 1,292,189 GE Capital Commercial Mortgage Corp. 01-2, A3 6.03%, 10/11/10 ................... Aaa 310 342,267 GE Capital Commercial Mortgage Corp., 00-1, A2 6.496%, 12/15/10 .................. Aaa 460 519,281 GMAC Commerical Mortgage Securities, Inc. 99-C1, A2 6.175%, 5/15/33 .................. AAA(d) 550 611,750 J.P. Morgan Chase Commercial Mortgage Securities Corp. 01-CIB3, A2 6.044%, 12/15/10 ................................... AAA(d) 542 597,514 LB-UBS Commercial Mortgage Trust 01-C3, A2 6.365%, 6/15/11 ......................... AAA(d) 471 527,567 Prudential Mortgage Capital Funding, LLC 01-Rock, A2 6.605%, 5/10/09 ........... Aaa 460 523,333 Residential Accredit Loans, Inc. 2.414%, 7/25/32(c) ................................. Aaa 544 546,217 Salomon Brothers Mortgage Securities VII 00-C3, A2 6.592%, 11/18/10 ................. Aaa 460 521,997 --------------------------------------------------------------------------- TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $10,552,009) 10,855,239 --------------------------------------------------------------------------- CORPORATE BONDS--27.4% AEROSPACE & DEFENSE--0.1% L-3 Communications Corp. 8.50%, 5/15/08 .................................... Ba 75 78,000 AUTOMOBILE MANUFACTURERS--0.9% Ford Motor Credit Co. 7.375%, 10/28/09 ..... A 832 791,085 BANKS--4.2% Bank of America Corp. 4.875%, 9/15/12 ...... Aa 106 107,132 Colonial Bank 9.375%, 6/1/11 ............... Ba 600 674,607 MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- First Republic Bank 7.75%, 9/15/12 ......... BB+(d) $ 177 $ 182,214 Golden West Financial Corp. 4.75%, 10/1/12 .................................... A 738 742,030 Riggs Capital Trust II Series C 8.875%, 3/15/27 .................................... Ba 141 122,296 Sovereign Bancorp 8%, 3/15/03 .............. BB(d) 60 60,786 Sovereign Bancorp 144A 10.20%, 6/30/05(b) ................................. Baa 1,069 1,183,301 Wells Fargo & Co. 5.125%, 9/1/12 ........... Aa 480 495,765 ----------- 3,568,131 ----------- BROADCASTING & CABLE TV--2.9% AMFM 8%, 11/1/08 ........................... Ba 200 209,000 Chancellor Corp. Series B 8.75%, 6/15/07 ... Ba 50 52,000 Clear Channel Communications, Inc. 7.875%, 6/15/05 ............................ Baa 601 625,938 Comcast Corp. 7.625%, 4/15/08 .............. Baa 85 79,475 Continental Cablevision, Inc. 8.875%, 9/15/05 .................................... Baa 40 39,000 Cox Communications, Inc. 7.75%, 8/15/06 .................................... Baa 367 379,082 Cox Communications, Inc. 7.125%, 10/1/12 .................................... Baa 165 164,579 Echostar DBS Corp. 9.375%, 2/1/09 .......... B 80 77,200 Echostar DBS Corp. 144A 9.125%, 1/15/09(b) ................................. B 140 132,300 Time Warner, Inc. 9.125%, 1/15/13 .......... Baa 535 527,403 Turner Broadcasting System, Inc. 8.40%, 2/1/24 .............................. Baa 206 178,046 ----------- 2,464,023 ----------- BUILDING PRODUCTS--0.1% American Standard, Inc. 7.625%, 2/15/10 .... Ba 105 109,200 CASINOS & GAMING--0.9% Circus & Eldorado Joint Venture/Silver Legacy Capital Corp. 144A 10.125%, 3/1/12(b) .................................. B 183 182,543 Herbst Gaming, Inc. Series B 10.75%, 9/1/08 ..................................... B 76 79,040 Mandalay Resort Group 9.50%, 8/1/08 ........ Ba 46 50,140 Mandalay Resort Group 9.375%, 2/15/10 ...... Ba 117 123,435 MGM Mirage, Inc. 6.875%, 2/6/08 ............ Ba 253 252,400 See Notes to Financial Statements 7 PHOENIX-SENECA BOND FUND MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- Mohegan Tribal Gaming 8%, 4/1/12 ........... Ba $ 81 $ 83,430 ----------- 770,988 ----------- CONSUMER FINANCE--3.9% Avis Group Holdings, Inc. 11%, 5/1/09 ...... Baa 167 180,569 CIT Group, Inc. 7.625%, 8/16/05 ............ A 455 484,293 CIT Group, Inc. 6.50%, 2/7/06 .............. A 135 142,016 General Electric Capital Corp. Series A 4.625%, 9/15/09 ............................ Aaa 1,267 1,275,989 General Motors Acceptance Corp. 6.125%, 8/28/07 ............................ A 610 614,232 General Motors Acceptance Corp. 6.875%, 9/15/11 ............................ A 610 594,624 ----------- 3,291,723 ----------- DIVERSIFIED FINANCIAL SERVICES--1.8% Boeing Capital Corp 5.75%, 2/15/07 ......... A 341 359,950 Boeing Capital Corp. 5.80%, 1/15/13 ........ A 103 105,080 CIT Group, Inc. 5.75%, 9/25/07 ............. A 245 247,095 Citigroup, Inc. 7.25%, 10/1/10 ............. Aa 305 349,550 Golman Sachs Group, Inc. 6.60%, 1/15/12 .... Aa 376 412,750 Morgan Stanley 6.75%, 4/15/11 .............. Aa 14 15,305 ----------- 1,489,730 ----------- ELECTRIC UTILITIES--0.3% El Paso Energy Partners 8.50%, 6/1/11 ...... B 233 222,515 ENVIRONMENTAL SERVICES--0.4% Allied Waste North America Series B 7.875%, 1/1/09 .................... Ba 91 85,085 Allied Waste North America Series B 10%, 8/1/09 ....................... B 48 44,400 Waste Management, Inc. 7%, 10/1/04 ......... Ba 165 170,129 ----------- 299,614 ----------- FOOD RETAIL--0.6% Kroger Co. 7.45%, 3/1/08 ................... Baa 220 252,930 Stater Brothers Holdings, Inc. 10.75%, 8/15/06 ............................ B 243 244,215 ----------- 497,145 ----------- GAS UTILITIES--1.2% Kinder Morgan Energy Partners LP 6.75%, 3/15/11 ............................. Baa 500 540,017 Nisource Finance Corp. 7.625%, 11/15/05 .... Baa 336 343,228 MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- Nisource Finance Corp. 7.875%, 11/15/10 .... Baa $ 91 $ 93,556 ----------- 976,801 ----------- HEALTH CARE DISTRIBUTORS & SERVICES--0.2% US Oncology, Inc. 9.625%, 2/1/12 ........... B 142 141,290 HEALTH CARE FACILITIES--0.1% HCA, Inc. 7%, 7/1/07 ....................... Ba 95 100,849 HOMEBUILDING--0.0% Tech Olympic USA, Inc. 144A 9%, 7/1/10(b) .. Ba 44 40,480 HOTELS, RESORTS & CRUISE LINES--0.4% Hammons (John Q.) Hotels, Inc. 8.875%, 5/15/12 ............................ B 95 91,912 La Quinta Inns Corp. 7.40%, 9/15/05 ........ Ba 108 106,245 Royal Caribbean Cruises Ltd. 7.25%, 8/15/06 ............................. Ba 5 4,329 Royal Caribbean Cruises Ltd. 8.75%, 2/2/11 .............................. Ba 130 111,336 Royal Caribbean Cruises Ltd. 7.25%, 3/15/18 ............................. Ba 21 14,524 ----------- 328,346 ----------- HOUSEHOLD APPLIANCES--0.1% Applica, Inc. 10%, 7/31/08 ................. B 115 113,562 HOUSEHOLD PRODUCTS--0.4% Pennzoil-Quaker State Co. 6.75%, 4/1/09 .... Aa 319 360,047 HOUSEWARES & SPECIALTIES--0.2% American Greetings 6.10%, 8/1/28 ........... Ba 222 202,020 INTEGRATED OIL & GAS--0.9% ChevronTexaco 3.50%, 9/17/07 ............... Aa 780 791,767 INTEGRATED TELECOMMUNICATION SERVICES--1.8% Citizens Communications 8.50%, 5/15/06 ..... Baa 60 57,600 Citizens Communications 7.625%, 8/15/08 .... Baa 135 126,900 Verizon Global Funding Corp. 7.375%, 9/1/12 ............................. A 300 315,867 Verizon Global Funding Corp. 7.75%, 12/1/30 ............................. A 1,041 1,039,174 ----------- 1,539,541 ----------- MANAGED HEALTH CARE--1.2% Coventry Health Care, Inc. 8.125%, 2/15/12 ............................ Ba 51 52,785 UnitedHealth Group, Inc. 6.60%, 12/1/03 .... A 932 975,678 ----------- 1,028,463 ----------- See Notes to Financial Statements 8 PHOENIX-SENECA BOND FUND MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- MEAT, POULTRY & FISH--0.2% Dean Foods Co. 8.15%, 8/1/07 ............... B $ 185 $ 189,387 METAL & GLASS CONTAINERS--0.3% Owens-Brockway Glass Container, Inc. 8.875%, 2/15/09 ............................ B 285 287,850 MOVIES & ENTERTAINMENT--1.2% ABC Family Worldwide, Inc. 10.25%, 11/1/07(c) ......................... Baa 171 180,213 AOL Time Warner, Inc. 7.625%, 4/15/31 ...... Baa 160 133,400 United Artists Theatre Circuit, Inc. 9.30%, 7/1/15 .............................. NR 139 122,975 Viacom, Inc. 6.40%, 1/30/06 ................ A 503 544,060 ----------- 980,648 ----------- OIL & GAS EXPLORATION & PRODUCTION--0.1% Encore Acquisition Co. 144A 8.375%, 6/15/12(b) ......................... B 90 91,350 Westport Resources Corp. 8.25%, 11/1/11 .... Ba 23 23,805 ----------- 115,155 ----------- REITS--2.5% Archstone-Smith Trust 6.875%, 2/15/08 ...... Baa 4 4,095 Archstone-Smith Trust 7.90%, 2/15/16 ....... Baa 250 294,207 Evans Withycombe Residential, Inc. 7.50%, 4/15/04 ............................. Baa 100 106,433 Sovereign Real Estate Investment Trust Series A 144A 12%, 8/29/49(b) .............. Ba 1,500 1,623,750 Washington Real Estate Investment Trust 7.125%, 8/13/03 ............................ Baa 110 114,093 ----------- 2,142,578 ----------- RESTAURANTS--0.2% Jack in the Box, Inc. Series B 9.75%, 11/1/03 ............................. BB+(d) 67 67,586 Yum! Brands, Inc. 7.70%, 7/1/12 ............ Ba 95 98,800 ----------- 166,386 ----------- STEEL--0.1% AK Steel Corp. 144A 7.75%, 6/15/12(b) ...... B 50 49,750 TOBACCO--0.2% Dimon, Inc. Series B 9.625%, 10/15/11 ...... Ba 130 136,662 --------------------------------------------------------------------------- TOTAL CORPORATE BONDS (IDENTIFIED COST $23,046,512) 23,273,736 --------------------------------------------------------------------------- MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- FOREIGN GOVERNMENT SECURITIES--2.2% MEXICO--2.2% United Mexican States Global Bond 8.375%, 1/14/11 ............................ Baa $ 1,731 $ 1,821,877 United Mexican States Global Bond 8%, 9/24/22 ................................ Baa 26 24,869 --------------------------------------------------------------------------- TOTAL FOREIGN GOVERNMENT SECURITIES (IDENTIFIED COST $1,827,340) ............... 1,846,746 --------------------------------------------------------------------------- FOREIGN CORPORATE BONDS--1.5% CANADA--1.5% Abitibi-Consolidated, Inc. 8.55%, 8/1/10 ... Baa 400 422,428 Canadian National Railways Co. 6.375%, 10/15/11 ........................... Baa 500 562,744 Canadian Natural Resources 5.45%, 10/1/12 ............................. Baa 165 171,614 Corus Entertainment, Inc. 8.75%, 3/1/12 .... B 80 81,800 Rogers Communications, Inc. 8.875%, 7/15/07 ............................ Ba 60 48,900 --------------------------------------------------------------------------- TOTAL FOREIGN CORPORATE BONDS (IDENTIFIED COST $1,221,677) 1,287,486 --------------------------------------------------------------------------- CONVERTIBLE BONDS--0.1% COMPUTER STORAGE & PERIPHERALS--0.0% Quantum Corp. Cv. 7%, 8/1/04 ............... B 80 62,000 ELECTRONIC EQUIPMENT & INSTRUMENTS--0.1% Solectron Corp. Cv. 0%, 11/20/20 ........... Ba 170 68,212 --------------------------------------------------------------------------- TOTAL CONVERTIBLE BONDS (IDENTIFIED COST $156,310) 130,212 --------------------------------------------------------------------------- SHARES ------- PREFERRED STOCKS--0.4% BANKS--0.4% First Republic Bank Series A Pfd. 144A 10.50%(b) ............................. 3,000 303,750 --------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (IDENTIFIED COST $300,000) 303,750 --------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--90.1% (IDENTIFIED COST $75,044,983) 76,507,347 --------------------------------------------------------------------------- See Notes to Financial Statements 9 PHOENIX-SENECA BOND FUND MOODY'S PAR RATING VALUE (Unaudited) (000) VALUE ----------- ------- ----------- SHORT-TERM OBLIGATIONS--9.3% FEDERAL AGENCY SECURITIES--9.3% FHLB Discount Note 1.55%, 10/1/02 .......... AAA $ 7,900 $ 7,900,000 --------------------------------------------------------------------------- TOTAL SHORT-TERM OBLIGATIONS (IDENTIFIED COST $7,900,000) 7,900,000 --------------------------------------------------------------------------- TOTAL INVESTMENTS--99.4% (Identified Cost $82,944,983) 84,407,347(a) Other assets and liabilities, net--0.6% 470,609 ----------- NET ASSETS--100.0% $84,877,956 =========== (a) Federal Income Tax Information: Net unrealized appreciation of investment securities is comprised of gross appreciation of $1,929,453 and gross depreciation of $467,089 for federal income tax purposes. At September 30, 2002, the aggregate cost of securities for federal income tax purposes was $82,944,983. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2002, these securities amounted to a value of $3,607,224 or 4.2% of net assets. (c) Variable or step coupon security; interest rate shown reflects the rate currently in effect. (d) As rated by Standard & Poors or Fitch. (e) All or a portion segregated as collateral for delayed delivery contracts. See Notes to Financial Statements 10 PHOENIX-SENECA BOND FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002 ASSETS Investment securities at value (Identified cost $82,944,983) $84,407,347 Cash 29,617 Receivables Interest 721,578 Investment securities sold 234,498 Fund shares sold 174,766 ----------- Total assets 85,567,806 ----------- LIABILITIES Payables Investment securities purchased 365,166 Fund shares repurchased 175,805 Distribution fee 48,668 Investment advisory fee 24,403 Transfer agent fee 15,750 Financial agent fee 8,648 Trustees' fee 6,325 Payable to adviser 85 Accrued expenses 45,000 ----------- Total liabilities 689,850 ----------- NET ASSETS $84,877,956 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest$ $85,256,217 Undistributed net investment income 454,609 Accumulated net realized loss (2,295,234) Net unrealized appreciation 1,462,364 ----------- NET ASSETS $84,877,956 =========== CLASS X Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $48,606,180) 4,679,717 Net asset value and offering price per share $10.39 CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $21,126,643) 2,052,219 Net asset value per share $10.29 Offering price per share $10.29/(1-4.75%) $10.80 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $10,092,704) 996,188 Net asset value and offering price per share $10.13 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $5,052,429) 497,872 Net asset value and offering price per share $10.15 STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2002 INVESTMENT INCOME Interest $4,300,441 Dividends 64,506 ---------- Total investment income 4,364,947 ---------- EXPENSES Investment advisory fee 392,847 Distribution fee, Class A 44,784 Distribution fee, Class B 86,322 Distribution fee, Class C 43,445 Financial agent fee 104,011 Transfer agent 93,187 Registration 44,175 Professional 27,334 Custodian 21,916 Trustees 17,137 Printing 16,658 Miscellaneous 16,812 ---------- Total expenses 908,628 Less expenses borne by investment adviser (60,097) Custodian fees paid indirectly (2,980) ---------- Net expenses 845,551 ---------- NET INVESTMENT INCOME 3,519,396 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on securities (781,445) Net change in unrealized appreciation (depreciation) on investments 1,729,657 ---------- NET GAIN ON INVESTMENTS 948,212 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,467,608 ========== See Notes to Financial Statements 11 PHOENIX-SENECA BOND FUND STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended 9/30/02 9/30/01 ----------- ----------- FROM OPERATIONS Net investment income (loss) $ 3,519,396 $ 4,111,529 Net realized gain (loss) (781,445) (87,628) Net change in unrealized appreciation (depreciation) 1,729,657 1,424,868 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,467,608 5,448,769 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class X (2,299,950) (2,769,948) Net investment income, Class A (840,732) (767,943) Net investment income, Class B (374,903) (311,389) Net investment income, Class C (186,987) (176,262) Net realized short-term gains, Class X (726,361) -- Net realized short-term gains, Class A (276,722) -- Net realized short-term gains, Class B (134,769) -- Net realized short-term gains, Class C (67,218) -- ----------- ----------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (4,907,642) (4,025,542) ----------- ----------- FROM SHARE TRANSACTIONS CLASS X Proceeds from sales of shares (875,484 and 1,276,355 shares, respectively) 8,953,585 13,270,239 Net asset value of shares issued from reinvestment of distributions (286,441 and 260,508 shares, respectively) 2,919,131 2,689,580 Cost of shares repurchased (1,123,032 and 832,955 shares, respectively) (11,438,951) (8,569,115) ----------- ----------- Total 433,765 7,390,704 ----------- ----------- CLASS A Proceeds from sales of shares (1,068,591 and 1,514,368 shares, respectively) 10,885,294 15,630,418 Net asset value of shares issued from reinvestment of distributions (67,268 and 41,119 shares, respectively) 680,360 422,342 Cost of shares repurchased (566,845 and 798,016 shares, respectively) (5,743,494) (8,256,255) ----------- ----------- Total 5,822,160 7,796,505 ----------- ----------- CLASS B Proceeds from sales of shares (385,681 and 527,114 shares, respectively) 3,867,119 5,400,940 Net asset value of shares issued from reinvestment of distributions (34,119 and 15,818 shares, respectively) 340,424 165,547 Cost of shares repurchased (176,399 and 97,526 shares, respectively) (1,759,987) (999,262) ----------- ----------- Total 2,447,556 4,567,225 ----------- ----------- CLASS C Proceeds from sales of shares (246,752 and 231,605 shares, respectively) 2,471,471 2,366,320 Net asset value of shares issued from reinvestment of distributions (20,043 and 12,773 shares, respectively) 200,275 135,519 Cost of shares repurchased (143,299 and 64,594 shares, respectively) (1,436,614) (659,233) ----------- ----------- Total 1,235,132 1,842,606 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 9,938,613 21,597,040 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS 9,498,579 23,020,267 NET ASSETS Beginning of period 75,379,377 52,359,110 ----------- ----------- END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $454,609 AND ($634,441), RESPECTIVELY] $84,877,956 $75,379,377 =========== ===========
See Notes to Financial Statements 12 PHOENIX-SENECA BOND FUND FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X ---------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ---------------------------------------------------------------- 2002(10) 2001 2000 1999 1998 Net asset value, beginning of period $10.44 $10.16(1) $10.35 $10.68 $10.47 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.48(1) 0.70(1) 0.77(1) 0.69(1) 0.56 Net realized and unrealized gain (loss) 0.12 0.26 (0.18) (0.31) 0.40 ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.60 0.96 0.59 0.38 0.96 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.49) (0.68) (0.71) (0.62) (0.57) Dividends from net realized gains (0.16) -- (0.07) (0.09) (0.18) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.65) (0.68) (0.78) (0.71) (0.75) ------ ------ ------ ------ ------ Change in net asset value (0.05) 0.28 (0.19) (0.33) 0.21 ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $10.39 $10.44 $10.16 $10.35 $10.68 ====== ====== ====== ====== ====== Total return 5.94% 9.84% 6.17% 3.51% 9.44% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $48,606 $48,448 $39,981 $34,853 $26,455 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 0.82%(8) 0.84%(8) 0.90%(5)(8) 1.06%(5)(7) 1.66% Net investment income 4.75% 6.79% 7.67% 6.60% 5.92% Portfolio turnover 410% 170% 74% 95% 112%
CLASS A --------------------------------------------------------- FROM YEAR ENDED SEPTEMBER 30, INCEPTION --------------------------------------------- 7/1/98 TO 2002(10) 2001 2000 1999 9/30/98 Net asset value, beginning of period $10.37 $10.11 $10.29 $10.68 $10.79 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) 0.44 0.67 0.75 0.59 0.13 Net realized and unrealized gain (loss) 0.11 0.26 (0.18) (0.33) (0.07) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.55 0.93 0.57 0.26 0.06 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.47) (0.67) (0.68) (0.56) (0.17) Dividends from net realized gains (0.16) -- (0.07) (0.09) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.63) (0.67) (0.75) (0.65) (0.17) ------ ------ ------ ------ ------ Change in net asset value (0.08) 0.26 (0.18) (0.39) (0.11) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $10.29 $10.37 $10.11 $10.29 $10.68 ====== ====== ====== ====== ====== Total return(2) 5.50% 9.54% 5.84% 2.46% 0.53%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $21,127 $15,376 $7,335 $2,732 $348 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(6) 1.15%(7) 1.15%(9) 1.15%(9) 1.88%(7) 2.45%(3) Net investment income (loss) 4.38% 6.42% 7.60% 5.80% 5.17%(3) Portfolio turnover 410% 170% 74% 95% 112%(4) (1) Computed using average shares outstanding. (2) Maximum sales charge is not reflected in the total return calculation. (3) Annualized. (4) Not annualized. (5) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 1.13% and 3.41% for the periods ended September 30, 2000 and 1999, respectively. (6) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 1.22%, 1.27%, 1.81%, 4.08% and 8.99% for the periods ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively. (7) The ratio of operating expenses to average net assets excludes the effect of expense offsets for custodian fees; if expense offsets were included, the ratio would not significantly differ. (8) For the periods ended September 30, 2002, 2001 and 2000, the ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would have been 0.83%, 0.85% and 0.91%, respectively. (9) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would have been 1.16%. (10) As required, effective October 1, 2001, the Fund has adopted the provisions of AICPA Audit and Accounting Guide for Investment Companies and began including paydown gains and losses in interest income. The effect of this change for the year ended September 30, 2002, was to decrease the ratio of net investment income to average net assets from 4.80% to 4.75% and from 4.44% to 4.38% for Class X and Class A, respectively; to decrease net investment income (loss) per share from 0.49 to 0.48 per share and from 0.45 to 0.44 per share for Class X and Class A, respectively; and, to increase net realized and unrealized gain (loss) from 0.11 to 0.12 per share and from 0.10 to 0.11 per share for Class X and Class A, respectively. Per share ratios and supplemental data for prior periods have not been restated to reflect this change.
See Notes to Financial Statements 13 PHOENIX-SENECA BOND FUND FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B ---------------------------------------------------------- FROM YEAR ENDED SEPTEMBER 30, INCEPTION --------------------------------------------- 7/1/98 TO 2002(9) 2001 2000 1999 9/30/98 Net asset value, beginning of period $10.25 $10.04 $10.27 $10.67 $10.79 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) 0.36 0.57 0.68 0.52 0.11 Net realized and unrealized gain (loss) 0.11 0.28 (0.20) (0.33) (0.08) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.47 0.85 0.48 0.19 0.03 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.43) (0.64) (0.64) (0.50) (0.15) Dividends from net realized gains (0.16) -- (0.07) (0.09) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.59) (0.64) (0.71) (0.59) (0.15) ------ ------ ------ ------ ------ Change in net asset value (0.12) 0.21 (0.23) (0.40) (0.12) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $10.13 $10.25 $10.04 $10.27 $10.67 ====== ====== ====== ====== ====== Total return(2) 4.83% 8.67% 5.06% 1.67% 0.28%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $10,093 $7,713 $3,086 $1,593 $234 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(5) 1.90%(7) 1.90%(8) 1.90%(8) 2.62%(7) 3.20%(3) Net investment income (loss) 3.63% 5.64% 6.83% 5.09% 4.42%(3) Portfolio turnover 410% 170% 74% 95% 112%(4)
CLASS C ------------------------------------------------------------ FROM YEAR ENDED SEPTEMBER 30, INCEPTION ---------------------------------------------- 7/1/98 TO 2002(9) 2001 2000 1999 9/30/98 Net asset value, beginning of period $10.26 $10.06 $10.27 $10.67 $10.79 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) 0.36 0.58 0.69 0.49 0.10 Net realized and unrealized gain (loss) 0.12 0.26 (0.20) (0.30) (0.07) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS 0.48 0.84 0.49 0.19 0.03 ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.43) (0.64) (0.63) (0.50) (0.15) Dividends from net realized gains (0.16) -- (0.07) (0.09) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.59) (0.64) (0.70) (0.59) (0.15) ------ ------ ------ ------ ------ Change in net asset value (0.11) 0.20 (0.21) (0.40) (0.12) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $10.15 $10.26 $10.06 $10.27 $10.67 ====== ====== ====== ====== ====== Total return(2) 4.83% 8.65% 5.12% 1.66% 0.28%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $5,052 $3,842 $1,957 $444 $439 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(6) 1.90%(7) 1.90%(8) 1.90%(8) 2.91%(7) 3.20%(3) Net investment income (loss) 3.63% 5.69% 6.88% 4.71% 4.27%(3) Portfolio turnover 410% 170% 74% 95% 112%(4) (1) Computed using average shares outstanding. (2) Maximum sales charge is not reflected in the total return calculation. (3) Annualized. (4) Not annualized. (5) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 2.16%, 2.35%, 3.08%, 5.67% and 15.79% for the periods ended September 30, 2002, 2001, 2000, 1999, and 1998, respectively. (6) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 2.50%, 2.78%, 4.08%, 9.50% and 11.22% for the periods ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively. (7) The ratio of operating expenses to average net assets excludes the effect of expense offsets for custodian fees; if expense offsets were included, the ratio would not significantly differ. (8) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would have been 1.91%. (9) As required, effective October 1, 2001, the Fund has adopted the provisions of AICPA Audit and Accounting Guide for Investment Companies and began including paydown gains and losses in interest income. The effect of this change for the year ended September 30, 2002, was to decrease the ratio of net investment income to average net assets from 3.69% to 3.63% for Class B and Class C; to decrease net investment income (loss) per share from 0.37 to 0.36 per share for Class B and Class C; and, to increase net realized and unrealized gain (loss) from 0.10 to 0.11 per share and from 0.11 to 0.12 per share for Class B and Class C, respectively. Per share ratios and supplemental data for prior periods have not been restated to reflect this change.
See Notes to Financial Statements 14 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM, GAIL SENECA, PH.D., RICK LITTLE, CFA AND RON JACKS, CFA Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE? A: The fund seeks long-term capital appreciation. Q: HOW DID THE FUND PERFORM OVER THE LAST 12 MONTHS? A: For the fiscal year ended September 30, 2002, Class A shares declined 20.51%, Class B and C shares were down 21.10%, and Class X shares fell 20.32%. The Russell Midcap Growth Index lost 15.50% for the same period.(1) All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is not a guarantee of future results. Q: WHAT FACTORS AFFECTED PERFORMANCE LAST YEAR? A: The fund's fiscal year began almost immediately after the tragic events of September 11th. Remarkably, stocks staged a strong rally in the fourth quarter of 2001 and recovered all the losses they suffered after September 11. But, even with the rebound, the market posted a decline for the second consecutive year. In hindsight, the reasons for the sharp sell-offs of 2000 and 2001 are clear: the bursting of the tech bubble and the dramatic economic slowdown from the heady pace of the late 1990s. Easy money, overinvestment, overleverage and overcapacity in the "new economy" led to a sharp downturn in the entire economy. Stock prices reflected that downturn. All investors looked forward to the New Year, and the markets attempted to cooperate. The markets struggled to hold onto the gains they had made in the fourth quarter and despite huge volatility, the major indexes did manage to end the first quarter roughly flat. Much stronger-than-expected economic news, a nascent recovery in corporate earnings, and a surprise fiscal stimulus package bolstered returns and gave hope for a better 2002. All of this optimism quickly evaporated in the second quarter, which experienced one of the steepest drops in any quarterly period in market history. Investors were treated almost daily to bizarre tales of corporate and personal malfeasance. As the stories continued to unfold, stock prices swooned. The crisis of confidence completely eclipsed market and economic fundamentals. Psychology alone drove market prices. This emotional frenzy continued into the third quarter, the end of our fiscal year. Through the first half of the year, a few market sectors and styles, such as "value" investing, provided a bit of shelter. But in the third quarter, the end of the fund's fiscal year, nothing was spared. Stocks collapsed in the most thorough rout since the 1930s, ending the fund's fiscal year in horrific style with the worst quarter-end results since 1987. The decline in stocks was so extreme that it became self-reinforcing. As stocks fell, so did investor and business confidence, which are precious fuel for the economy. The economic recovery appeared to stall, which was then immediately reflected in further stock price declines. Q: WHAT SECTORS OR STOCKS HELPED OR DETRACTED FROM PERFORMANCE? A: In the fourth quarter of last year--the beginning of the fund's fiscal year--the greatest contributor to performance was good stock selection in the capital 1 THE RUSSELL MIDCAP GROWTH INDEX MEASURES MID-CAPITALIZATION, GROWTH-ORIENTED STOCK TOTAL-RETURN PERFORMANCE. THE INDEX IS UNMANAGED, DOES NOT REFLECT MANAGEMENT FEES AND IS NOT AVAILABLE FOR DIRECT INVESTMENT. 15 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND (CONTINUED) goods sector, with SPX Corporation providing an impressive return. We were also aided by the fact that the fund had virtually no exposure to basic materials, transportation and utilities, which performed poorly. An underweighted position in technology detracted from performance, as did our lack of exposure to biotechnology as these high-beta stocks rallied significantly during the quarter. During the first three months of 2002, our health-care stocks hurt performance, as pharmaceutical companies were some of the worst performers. Another drag on performance was our lack of exposure to energy stocks as OPEC quota reductions drove up prices. Stock selection in technology was the greatest contributor to performance. Although the environment generally was not favorable for technology, the fund's semiconductor holdings performed well. Also on the positive side was our underweighting in telecommunications services and overweight in the consumer discretionary sector, especially specialty retailers. By the midway mark of the fiscal year, investor confidence was thoroughly vanquished. Investors sold indiscriminately as anxiety heightened over the war on terrorism, corporate scandals, and a weaker dollar. Our performance during the period March through June benefited from an underweight in the health care sector and good stock selection. Exposure to consumer discretionary stocks and good stock selection also had a positive impact. An overweight in the weak-performing technology sector was the greatest detractor from performance as investors expressed doubts over a recovery in chip demand. The fund's industrial stocks also hurt performance due to investor concerns over accounting issues. During the final three months of the reporting period, the market was driven even lower by investor unease over mixed economic data and the increased threat of war with Iraq. The market was especially cruel to stocks in the consumer discretionary and technology sectors, selling indiscriminately on rumors that the consumer was capitulating. Our exposure to retail stocks (consumer discretionary sector) had a negative impact on performance as did our weighting in semiconductor stocks (technology sector). An overweight in the materials sector and good stock selection contributed positively to performance. The fund was also helped by an underweight in the industrial sector. Q: WHAT WOULD YOU ADVISE INVESTORS TODAY? A: There are no easy choices in today's markets. The risks are serious and well understood. Confidence is in short supply. Many individual investors, particularly those new to stocks, have thrown in the towel. Institutional investors with fiduciary responsibilities and long-term time horizons have not. They know that it is foolhardy to manage a portfolio by looking in the rearview mirror. Recent returns do not predict short- or long-term trends. Instead, the market moves in volatile fashion, with poor return periods often followed by strong periods. Investing for the long term requires patience and tolerance for even the worst of times. Despite the near-term challenges, we believe the long-term outlook for high quality American companies is fundamentally sound. We also believe those with the wherewithal and courage to invest through these challenging times will be rewarded, as investors in U.S. markets have been throughout history. OCTOBER 4, 2002 16 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/02
INCEPTION INCEPTION 1 YEAR 5 YEARS TO 9/30/02 DATE -------- ------- ---------- --------- Class X Shares at NAV(2) (20.32)% 1.66% 9.46% 3/8/96 Class A Shares at NAV(2) (20.51) 1.27 9.07 3/8/96 Class A Shares at POP(3) (25.08) 0.07 8.09 3/8/96 Class B Shares at NAV(2) (21.10) -- (3.34) 7/1/98 Class B Shares with CDSC(4) (24.25) -- (3.71) 7/1/98 Class C Shares at NAV(2) (21.10) -- (3.34) 7/1/98 Class C Shares with CDSC(4) (21.10) -- (3.34) 7/1/98 S&P 500 Index(8) (20.48) (1.61) Note 5 Note 5 Russell Midcap Growth Index(9) (15.50) (4.06) Note 6 Note 6 1 Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains 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 5.55% for Class X and Class A (since 3/8/96) and (6.49)% for Class B and Class C (since 7/1/98). 6 Index performance is 2.29% for Class X and Class A (since 3/8/96) and (6.79)% for Class B and Class C (since 7/1/98). 7 This chart illustrates NAV returns on Class X shares and POP returns on Class A shares. Returns on Class B and Class C shares will vary due to differing sales charges. 8 The S&P 500 Index is a measure of stock market total return performance. The index has replaced the S&P 400 MidCap Index to provide a broader measure of equity market performance. The index's performance does not reflect management fees and sales charges. 9 The Russell Midcap Growth Index is an unmanaged, commonly used measure of total return performance of mid-capitalization growth-oriented stocks. The index's performance does not reflect management fees and sales charges. All returns represent past performance which may not be indicative of future performance. 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.
GROWTH OF $10,000 PERIODS ENDING 9/30 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Phoenix-Seneca Phoenix-Seneca Russell Mid Cap "EDGE"(SM) Fund Mid Cap "EDGE"(SM) Fund Midcap Growth Class X at NAV(7) Class A at POP(7) S&P 500 Index(8) Index(9) 3/8/96 $10,000.00 $9,425.00 $10,000.00 $10,000.00 9/30/96 14,970.00 14,071.53 10,991.59 11,010.38 9/30/97 16,675.62 15,653.94 15,461.54 14,274.04 9/30/98 15,972.25 14,911.85 16,876.33 12,936.58 9/30/99 21,245.94 19,724.19 21,556.16 17,747.91 9/30/00 40,751.35 37,732.57 24,437.54 28,462.78 9/30/01 22,720.38 20,970.17 17,928.61 13,728.30 9/30/02 18,103.95 16,699.99 14,256.72 11,600.50
This Growth of $10,000 chart assumes an initial investment of $10,000 made on 3/8/96 (inception of the Fund) in Class X and A shares. The total return for Class X shares reflects no sales charge. The total return for Class A shares reflects the maximum sales charge of 5.75% on the initial investment. Performance assumes dividends and capital gains are reinvested. The performance of other share classes will be greater or less than that shown based on differences in inception dates, fees and sales charges. SECTOR WEIGHTINGS 9/30/02 As a percentage of equity holdings [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Consumer Disretionary 32% Health Care 23 Information Technology 16 Materials 12 Industrials 10 Financials 4 Consumer Staples 3 17 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND TEN LARGEST HOLDINGS AT SEPTEMBER 30, 2002 (AS A PERCENTAGE OF TOTAL NET ASSETS) 1. AutoZone, Inc. 4.6% RETAIL AUTO PARTS STORE 2. Allergan, Inc. 3.9% PRODUCES OPHTHALMIC AND DERMATOLOGIC PRODUCTS 3. SPX Corp. 3.6% MANUFACTURER OF ENGINE PARTS 4. Danaher Corp. 3.5% MANUFACTURER OF HAND TOOLS 5. Electronic Arts, Inc. 3.5% DEVELOPS AND MARKETS ENTERTAINMENT SOFTWARE 6. Air Products and Chemicals, Inc. 3.5% PRODUCER OF INDUSTRIAL GASES AND CHEMICALS 7. St. Jude Medical, Inc. 3.4% A LEADER IN ARTIFICIAL HEART VALVES, TISSUE VALVES AND OTHER PRODUCTS FOR HEART VALVE DISEASE 8. Charter One Financial, Inc. 3.4% OHIO-BASED SAVINGS BANK 9. Circuit City Stores--Circuit City Group 3.3% RETAIL VIDEO AND APPLIANCE STORE 10. AmerisourceBergen Corp. 3.2% WHOLESALE DRUG DISTRIBUTOR INVESTMENTS AT SEPTEMBER 30, 2002 SHARES VALUE ------- ------------ COMMON STOCKS--90.9% ADVERTISING--3.1% Lamar Advertising Co.(b) ......................... 133,690 $ 4,057,491 APPAREL RETAIL--2.8% Talbots, Inc. (The) .............................. 132,760 3,717,280 APPAREL, ACCESSORIES & LUXURY GOODS--2.1% Polo Ralph Lauren Corp.(b) ....................... 134,120 2,787,014 APPLICATION SOFTWARE--5.0% Electronic Arts, Inc.(b) ......................... 70,070 4,621,817 Intuit, Inc.(b) .................................. 42,590 1,939,123 ------------ 6,560,940 ------------ BANKS--3.4% Charter One Financial, Inc. ...................... 148,594 4,416,211 BIOTECHNOLOGY--3.0% Gilead Sciences, Inc.(b) ......................... 118,570 3,975,652 BROADCASTING & CABLE TV--3.2% Univision Communications, Inc. Class A(b) ........ 181,930 4,148,004 COMPUTER & ELECTRONICS RETAIL--3.3% Circuit City Stores-Circuit City Group ........... 285,890 4,331,233 ELECTRICAL COMPONENTS & EQUIPMENT--1.9% Molex, Inc. ...................................... 103,860 2,442,787 ELECTRONIC EQUIPMENT & INSTRUMENTS--2.9% Jabil Circuit, Inc.(b) ........................... 257,590 3,807,180 SHARES VALUE ------- ------------ HEALTH CARE DISTRIBUTORS & SERVICES--3.2% AmerisourceBergen Corp. .......................... 59,900 $ 4,278,058 HEALTH CARE EQUIPMENT--3.4% St. Jude Medical, Inc.(b) ........................ 124,260 4,436,082 HOUSEHOLD APPLIANCES--2.5% Black & Decker Corp. (The) ....................... 78,850 3,306,181 HOUSEHOLD PRODUCTS--3.0% Clorox Co. (The) ................................. 97,970 3,936,435 HOUSEWARES & SPECIALTIES--3.0% Newell Rubbermaid, Inc. .......................... 129,670 4,002,913 INDUSTRIAL GASES--3.5% Air Products and Chemicals, Inc. ................. 108,330 4,550,943 INDUSTRIAL MACHINERY--7.1% Danaher Corp. .................................... 81,780 4,649,193 SPX Corp.(b) ..................................... 46,960 4,738,264 ------------ 9,387,457 ------------ IT CONSULTING & SERVICES--2.9% Affiliated Computer Services, Inc. Class A(b) .................................. 89,530 3,809,502 MANAGED HEALTH CARE--5.5% Aetna, Inc. ...................................... 107,770 3,859,244 WellPoint Health Networks, Inc.(b) ............... 46,860 3,434,838 ------------ 7,294,082 ------------ METAL & GLASS CONTAINERS--5.2% Ball Corp. ....................................... 63,990 3,224,456 Pactiv Corp.(b) .................................. 216,900 3,568,005 ------------ 6,792,461 ------------ See Notes to Financial Statements 18 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND SHARES VALUE ------- ------------ PHARMACEUTICALS--3.9% Allergan, Inc. ................................... 93,870 $ 5,106,528 SEMICONDUCTORS--4.8% Altera Corp.(b) .................................. 342,060 2,965,660 LSI Logic Corp.(b) ............................... 445,880 2,831,338 QLogic Corp.(b) .................................. 21,580 561,943 ------------ 6,358,941 ------------ SPECIALTY CHEMICALS--2.3% Ecolab,Inc ....................................... 73,130 3,051,715 SPECIALTY STORES--9.9% AutoZone, Inc.(b) ................................ 76,680 6,046,985 Bed Bath & Beyond, Inc.(b) ....................... 111,120 3,619,178 Michaels Stores, Inc.(b) ......................... 72,220 3,300,454 ------------ 12,966,617 ------------ ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $145,038,916) 119,521,707 ----------------------------------------------------------------------------- FOREIGN COMMON STOCKS--3.1% PHARMACEUTICALS--3.1% Biovail Corp. (Canada)(b) ........................ 164,710 4,066,690 ----------------------------------------------------------------------------- TOTAL FOREIGN COMMON STOCKS (IDENTIFIED COST $7,076,251) 4,066,690 ----------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--94.0% (IDENTIFIED COST $152,115,167) 123,588,397 ----------------------------------------------------------------------------- PAR VALUE (000) VALUE ------- ------------ SHORT-TERM OBLIGATIONS--6.3% REPURCHASE AGREEMENTS--6.3% State Street Bank & Trust Co. repurchase agreement, 0.65% dated 9/30/02 due 10/1/02, repurchase price $8,242,149, collateralized by U.S. Treasury Bond 8.75%, 5/15/17, market value $8,413,481 ................................. $ 8,242 $ 8,242,000 ----------------------------------------------------------------------------- TOTAL SHORT-TERM OBLIGATIONS (IDENTIFIED COST $8,242,000) 8,242,000 ----------------------------------------------------------------------------- TOTAL INVESTMENTS--100.3% (IDENTIFIED COST $160,357,167) 131,830,397(a) Other assets and liabilities, net--(0.3)% (334,110) ------------ NET ASSETS--100.0% $131,496,287 ============ (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $3,308,378 and gross depreciation of $31,944,707 for federal income tax purposes. At September 30, 2002, the aggregate cost of securities for federal income tax purposes was $160,466,726. (b) Non-income producing. See Notes to Financial Statements 19 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002 ASSETS Investment securities at value (Identified cost $160,357,167) $131,830,397 Cash 415 Receivables Investment securities sold 2,549,863 Fund shares sold 286,254 Dividends and interest 37,411 Receivable from adviser 106 ------------ Total assets 134,704,446 ------------ LIABILITIES Payables Investment securities purchased 2,492,886 Fund shares repurchased 329,787 Distribution fee 194,080 Transfer agent fee 65,004 Investment advisory fee 46,319 Financial agent fee 13,078 Trustees' fee 6,325 Accrued expenses 60,680 ------------ Total liabilities 3,208,159 ------------ NET ASSETS $131,496,287 ============ NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $233,495,299 Accumulated net realized loss (73,472,242) Net unrealized depreciation (28,526,770) ------------ NET ASSETS $131,496,287 ============ CLASS X Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $11,218,769) 896,953 Net asset value and offering price per share $12.51 CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $66,383,700) 5,418,299 Net asset value per share $12.25 Offering price per share $12.25/(1-5.75%) $13.00 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $22,576,598) 1,916,424 Net asset value and offering price per share $11.78 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $31,317,220) 2,658,925 Net asset value and offering price per share $11.78 STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 2002 INVESTMENT INCOME Dividends $ 586,646 Interest 96,949 ------------ Total investment income 683,595 ------------ EXPENSES Investment advisory fee 1,348,427 Distribution fee, Class A 211,497 Distribution fee, Class B 288,138 Distribution fee, Class C 390,129 Financial agent fee 176,638 Transfer agent 365,039 Printing 69,700 Registration 58,656 Professional 29,776 Custodian 20,011 Trustees 17,134 Miscellaneous 21,338 ------------ Total expenses 2,996,483 Less expenses borne by investment adviser (168,354) ------------ Net expenses 2,828,129 ------------ NET INVESTMENT LOSS (2,144,534) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss on securities (41,965,558) Net change in unrealized appreciation (depreciation) on investments 3,627,837 ------------ NET LOSS ON INVESTMENTS (38,337,721) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(40,482,255) ============ See Notes to Financial Statements 20 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended 9/30/02 9/30/01 ------------ ------------ FROM OPERATIONS Net investment income (loss) $ (2,144,534) $ (1,518,265) Net realized gain (loss) (41,965,558) (31,412,506) Net change in unrealized appreciation (depreciation) 3,627,837 (48,619,393) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (40,482,255) (81,550,164) ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS Net realized short-term gains, Class X -- (1,280,655) Net realized short-term gains, Class A -- (3,636,707) Net realized short-term gains, Class B -- (1,295,626) Net realized short-term gains, Class C -- (1,543,099) Net realized long-term gains, Class X -- (498,795) Net realized long-term gains, Class A -- (1,416,473) Net realized long-term gains, Class B -- (504,626) Net realized long-term gains, Class C -- (601,570) ------------ ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS -- (10,777,551) ------------ ------------ FROM SHARE TRANSACTIONS CLASS X Proceeds from sales of shares (245,953 and 211,221 shares, respectively) 4,301,629 4,937,511 Net asset value of shares issued from reinvestment of distributions (0 and 74,271 shares, respectively) -- 1,683,726 Cost of shares repurchased (253,619 and 119,042 shares, respectively) (4,129,658) (2,742,193) ------------ ------------ Total 171,971 3,879,044 ------------ ------------ CLASS A Proceeds from sales of shares (3,287,089 and 3,487,025 shares, respectively) 55,903,216 76,920,845 Net asset value of shares issued from reinvestment of distributions (0 and 206,250 shares, respectively) -- 4,601,463 Cost of shares repurchased (2,177,539 and 1,015,689 shares, respectively) (35,463,581) (21,198,122) ------------ ------------ Total 20,439,635 60,324,186 ------------ ------------ CLASS B Proceeds from sales of shares (720,227 and 1,129,519 shares, respectively) 11,693,404 24,755,985 Net asset value of shares issued from reinvestment of distributions (0 and 106,167 shares, respectively) -- 2,308,063 Cost of shares repurchased (378,710 and 188,526 shares, respectively) (5,666,375) (3,675,032) ------------ ------------ Total 6,027,029 23,389,016 ------------ ------------ CLASS C Proceeds from sales of shares (1,318,694 and 1,526,427 shares, respectively) 21,920,511 33,718,734 Net asset value of shares issued from reinvestment of distributions (0 and 141,991 shares, respectively) -- 3,085,415 Cost of shares repurchased (728,101 and 205,773 shares, respectively) (11,582,879) (4,329,817) ------------ ------------ Total 10,337,632 32,474,332 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 36,976,267 120,066,578 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS (3,505,988) 27,738,863 NET ASSETS Beginning of period 135,002,275 107,263,412 ------------ ------------ END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $0 AND $0, RESPECTIVELY] $131,496,287 $135,002,275 ============ ============
See Notes to Financial Statements 21 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X ---------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ---------------------------------------------------------- 2002 2001 2000 1999 1998 Net asset value, beginning of period $15.70 $31.18 $17.78 $13.81 $16.47 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) (0.13) (0.14) (0.19) (0.21) (0.23) Net realized and unrealized gain (loss) (3.06) (12.91) 15.65 4.72 (0.58) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (3.19) (13.05) 15.46 4.51 (0.81) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- Dividends from net realized gains -- (2.43) (2.06) (0.54) (1.85) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS -- (2.43) (2.06) (0.54) (1.85) ------ ------ ------ ------ ------ Change in net asset value (3.19) (15.48) 13.40 3.97 (2.66) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $12.51 $15.70 $31.18 $17.78 $13.81 ====== ====== ====== ====== ====== Total return (20.32)% (44.25)% 91.81 % 33.02 % (4.22)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $11,219 $14,198 $23,016 $10,640 $8,940 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.15 %(3) 1.15 %(3)(5) 1.27 %(3) 1.96 % 2.10 %(3) Net investment income (loss) (0.75)% (0.61)% (0.72)% (1.27)% (1.49)% Portfolio turnover 135 % 96 % 124 % 192 % 206 %
CLASS A ---------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ---------------------------------------------------------- 2002 2001 2000 1999 1998 Net asset value, beginning of period $15.41 $30.75 $17.60 $13.75 $16.49 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) (0.16) (0.19) (0.24) (0.31) (0.30) Net realized and unrealized gain (loss) (3.00) (12.72) 15.45 4.70 (0.59) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (3.16) (12.91) 15.21 4.39 (0.89) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- Dividends from net realized gains -- (2.43) (2.06) (0.54) (1.85) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS -- (2.43) (2.06) (0.54) (1.85) ------ ------ ------ ------ ------ Change in net asset value (3.16) (15.34) 13.15 3.85 (2.74) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $12.25 $15.41 $30.75 $17.60 $13.75 ====== ====== ====== ====== ====== Total return(2) (20.51)% (44.42)% 91.30 % 32.27 % (4.74)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $66,384 $66,411 $50,150 $6,457 $3,666 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.40 %(4) 1.40 %(4)(5) 1.47 %(4) 2.51 % 2.70 %(4) Net investment income (loss) (0.99)% (0.86)% (0.91)% (1.81)% (1.95)% Portfolio turnover 135 % 96 % 124 % 192 % 206 % (1) Computed using average shares outstanding. (2) Maximum sales charge is not reflected in the total return calculation. (3) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 1.24%, 1.22%, 1.43% and 2.38% for the periods ended September 30, 2002, 2001, 2000 and 1998, respectively. (4) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 1.46%, 1.40%, 1.59% and 2.74% for the periods ended September 30, 2002, 2001, 2000 and 1998, respectively. (5) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would not significantly differ.
See Notes to Financial Statements 22 PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B --------------------------------------------------------------- FROM YEAR ENDED SEPTEMBER 30, INCEPTION ------------------------------------------------- 7/1/98 TO 2002 2001 2000 1999 9/30/98 Net asset value, beginning of period $14.93 $30.09 $17.41 $13.73 $17.15 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.28)(1) (0.34) (0.45) (0.47) (0.09) Net realized and unrealized gain (loss) (2.87) (12.39) 15.19 4.69 (3.33) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (3.15) (12.73) 14.74 4.22 (3.42) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- Dividends from net realized gains -- (2.43) (2.06) (0.54) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS -- (2.43) (2.06) (0.54) -- ------ ------ ------ ------ ------ Change in net asset value (3.15) (15.16) 12.68 3.68 (3.42) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.78 $14.93 $30.09 $17.41 $13.73 ====== ====== ====== ====== ====== Total return(2) (21.10)% (44.83)% 89.49 % 31.05 % (19.94)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $22,577 $23,519 $15,879 $1,676 $145 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(5) 2.15 % 2.15 %(7) 2.29 % 3.45 % 3.45 %(3) Net investment income (loss) (1.74)% (1.61)% (1.73)% (2.78)% (2.45)%(3) Portfolio turnover 135 % 96 % 124 % 192 % 206 %(4)
CLASS C --------------------------------------------------------------- FROM YEAR ENDED SEPTEMBER 30, INCEPTION ------------------------------------------------- 7/1/98 TO 2002 2001 2000 1999 9/30/98 Net asset value, beginning of period $14.93 $30.08 $17.40 $13.72 $17.15 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.28)(1) (0.34) (0.45) (0.47) (0.09) Net realized and unrealized gain (loss) (2.87) (12.38) 15.19 4.69 (3.34) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (3.15) (12.72) 14.74 4.22 (3.43) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- Dividends from net realized gains -- (2.43) (2.06) (0.54) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS -- (2.43) (2.06) (0.54) -- ------ ------ ------ ------ ------ Change in net asset value (3.15) (15.15) 12.68 3.68 (3.43) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.78 $14.93 $30.08 $17.40 $13.72 ====== ====== ====== ====== ====== Total return(2) (21.10)% (44.81)% 89.54 % 31.07 % (20.00)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $31,317 $30,874 $18,218 $975 $103 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(6) 2.15 % 2.15 %(7) 2.25 % 3.45 % 3.45 %(3) Net investment income (loss) (1.74)% (1.61)% (1.68)% (2.78)% (2.44)%(3) Portfolio turnover 135 % 96 % 124 % 192 % 206 %(4) (1) Computed using average shares outstanding. (2) Maximum sales charge is not reflected in the total return calculation. (3) Annualized. (4) Not annualized. (5) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 2.43%, 2.34%, 2.70%, 6.33% and 20.80% for the periods ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively. (6) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 2.21%, 2.20%, 2.65%, 9.03% and 21.14% for the periods ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively. (7) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would not significantly differ.
See Notes to Financial Statements 23 PHOENIX-SENECA REAL ESTATE SECURITIES FUND A DISCUSSION WITH THE FUND'S PORTFOLIO MANAGEMENT TEAM LEADER, DAVID SHAPIRO Q: WHAT IS THE FUND'S INVESTMENT OBJECTIVE? A: The fund seeks high total return from both current income and capital appreciation. Q: HOW DID THE FUND PERFORM OVER THE LAST 12 MONTHS? A: For the 12 months ended September 30, 2002, Class X shares returned -0.42%, Class A shares -1.73%, Class B shares -2.63%, and Class C shares -2.47%. The S&P 500 Index was down -20.48% for the same period, while the Wilshire Real Estate Securities Index returned 6.76% for the fiscal year.(1) All performance figures assume reinvestment of distributions and exclude the effect of sales charges. Past performance is not a guarantee of future results. Q: WHAT IS YOUR STRATEGY IN SELECTING INVESTMENTS? A: Our strategy continues to be to own the preeminent companies in the real estate and finance sectors. Good management teams and strong balance sheets are the characteristics we emphasize when selecting companies for the portfolio. Additionally, we look for reasonable valuations elative to the long-term growth rates of the companies in the portfolio. Q: WHAT FACTORS LED TO THE FUND'S UNDERPERFORMANCE RELATIVE TO ITS BENCHMARKS? A: The fund was overweight in the apartment sector and the finance sector, which hurt performance relative to the benchmark for the fiscal year. Low mortgage interest rates have allowed more people to buy homes, and apartment occupancies and cash flows have declined as a result. The apartment sector is directly and immediately affected by changes in the economy, and the delayed recovery of the economy has held this sector back. The stock market also continued its decline through September, and our real estate finance-related equity holdings, such as Fannie Mae, were brought down with it. The fund was underweighted in the properties sector relative to the benchmark, which held back results as it was a good performing sector. Our focus on valuation did not allow us to pay up for some of these names that are trading with big premiums to their net asset value. We also had zero exposure to the hotel sector, which was one of the top performing sectors in the first half of 2002. Q: HOW IS THE PORTFOLIO POSITIONED TO BENEFIT FROM THE CURRENT MARKET ENVIRONMENT? A: The fund is staying with an overweight position in apartments and finance. Apartments are traditionally the first to benefit in a recovering economy, and we will keep our holdings in the finance and banking sectors as the lower short-term interest rates begin to restart the economy. These companies should also benefit from a recovery in the stock market. The fund is still light in the properties sector because of valuations and underweight in the office sector because it is much more of a lagging indicator. Q: WHAT IS YOUR OUTLOOK? A: We continue to focus our attention on companies with low multiples and reasonable growth rates. Year-over-year growth in real estate companies is getting harder to find, so we are positioning the portfolio to own the areas expected to benefit first 1 THE S&P 500 INDEX MEASURES BROAD STOCK MARKET TOTAL-RETURN PERFORMANCE, WHILE THE WILSHIRE REAL ESTATE SECURITIES INDEX MEASURES REAL ESTATE EQUITY MARKET TOTAL-RETURN PERFORMANCE. THE INDEXES ARE UNMANAGED, DO NOT REFLECT MANAGEMENT FEES AND ARE NOT AVAILABLE FOR DIRECT INVESTMENT. 24 PHOENIX-SENECA REAL ESTATE SECURITIES FUND (CONTINUED) in a recovery, such as banks, mortgage lenders and apartments. There are two aspects to these investments -- income and growth -- so with the growth prospects tempered, we are looking for outsized dividends. The risks at this time have less to do with fundamentals than the flow of funds. Any time there is a large flow of assets out of these securities into the equity market, it can affect the entire asset class. Because of this risk, we are staying with more liquid investments. The dividend yield is extremely attractive right now compared to bank rates and Treasuries, and we continue to believe that real estate securities are a good way to diversify an asset allocation plan. OCTOBER 22, 2002 25 PHOENIX-SENECA REAL ESTATE SECURITIES FUND ANNUAL TOTAL RETURNS(1) PERIOD ENDING 9/30/02
INCEPTION INCEPTION 1 YEAR 5 YEARS TO 9/30/02 DATE ------ ------- ---------- --------- Class X Shares at NAV(2) (0.42)% 1.41% 7.79% 3/12/96 Class A Shares at NAV(2) (1.73) 0.02 6.47 3/12/96 Class A Shares at POP(3) (7.38) (1.16) 5.52 3/12/96 Class B Shares at NAV(2) (2.63) -- 1.41 7/1/98 Class B Shares with CDSC(4) (6.45) -- 0.99 7/1/98 Class C Shares at NAV(2) (2.47) -- 1.43 7/1/98 Class C Shares with CDSC(4) (2.47) -- 1.43 7/1/98 Wilshire Real Estate Securities Index(8) 6.76 3.13 Note 5 Note 5 S&P 500 Index(9) (20.48) (1.61) Note 6 Note 6 1 Total returns are historical and include changes in share price and the reinvestment of both dividends and capital gains 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 9.81% for Class X and Class A (since 3/29/96) and 5.07% for Class B and Class C (since 6/30/98). 6 Index performance is 5.47% for Class X and Class A (since 3/12/96) and (6.49)% for Class B and Class C (since 7/1/98). 7 This chart illustrates NAV returns on Class X shares and POP returns on Class A shares. Returns on Class B and Class C shares will vary due to differing sales charges. 8 The Wilshire Real Estate Securities Index is an unmanaged, commonly used measure of real estate equity market total return performance. The index's performance does not reflect management fees and sales charges. 9 The S&P 500 Index is a measure of stock market total return performance. The index's performance does not reflect management fees and sales charges. All returns represent past performance which may not be indicative of future performance. 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.
GROWTH OF $10,000 PERIODS ENDING 9/30 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Phoenix-Seneca Phoenix-Seneca Real Estate Securities Real Estate Wilshire Fund Class X Securities Fund Real Estate S&P 500 at NAV(7) Class A at POP(7) Index(8) Index(9) 3/12/96 $10,000.00 $9,425.00 $10,000.00 $10,000.00 9/30/96 11,261.04 10,556.51 11,096.79 10,929.05 9/30/97 15,252.30 14,202.62 15,761.22 15,373.57 9/30/98 12,456.10 11,430.18 13,120.57 16,780.32 9/30/99 11,626.45 10,519.46 12,552.42 21,433.52 9/30/00 14,998.16 13,401.66 15,723.53 24,298.51 9/30/01 16,426.24 14,468.99 17,225.08 17,826.61 9/30/02 16,356.78 14,218.65 18,389.22 14,175.61
This Growth of $10,000 chart assumes an initial investment of $10,000 made on 3/12/96 (inception of the Fund) in Class X and A shares. The total return for Class X shares reflects no sales charge. The total return for Class A shares reflects the maximum sales charge of 5.75% on the initial investment. Performance assumes dividends and capital gains are reinvested. The performance of other share classes will be greater or less than that shown based on differences in inception dates, fees and sales charges. SECTOR WEIGHTINGS 9/30/02 As a percentage of real estate holdings [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Apartments 24% Office 22 Mortgage 15 Manufactured Homes 13 Regional Malls 9 Diversified 8 Other 9 26 PHOENIX-SENECA REAL ESTATE SECURITIES FUND TEN LARGEST HOLDINGS AT SEPTEMBER 30, 2002 (AS A PERCENTAGE OF TOTAL NET ASSETS) 1. Simon Property Group, Inc. 5.5% REGIONAL MALLS REIT 2. Redwood Trust, Inc. 5.2% MORTGAGE REIT 3. Glenborough Realty Trust, Inc. Series A Cv. Pfd. 7.75% 5.1% OFFICE REIT 4. iStar Financial, Inc. 4.9% DIVERSIFIED REIT 5. Wells Fargo & Co. 4.6% MAJOR REGIONAL BANK 6. Reckson Associates Realty Corp. Series A Cv. Pfd. 7.625% 4.2% MIXED REIT 7. Chateau Communities, Inc. 4.1% MANUFACTURED HOMES REIT 8. Manufactured Home Communities, Inc. 4.0% MANUFACTURED HOMES REIT 9. Post Properties, Inc. 3.8% APARTMENT REIT 10. Freddie Mac 3.8% FEDERAL MORTGAGE AGENCY INVESTMENTS AT SEPTEMBER 30, 2002 SHARES VALUE ------ ----------- COMMON STOCKS--87.5% REAL ESTATE INVESTMENT TRUSTS--54.6% DIVERSIFIED--4.9% iStar Financial, Inc. ............................ 39,450 $ 1,101,444 INDUSTRIAL/OFFICE--11.1% MIXED--1.8% Reckson Associates Realty Corp. .................. 18,050 410,999 OFFICE--9.3% Arden Realty, Inc. ............................... 17,000 402,050 Equity Office Properties Trust ................... 29,445 760,270 Mack-Cali Realty Corp. ........................... 13,150 422,509 Trizec Properties, Inc. .......................... 42,500 482,375 ----------- 2,067,204 ----------- ----------------------------------------------------------------------------- TOTAL INDUSTRIAL/OFFICE 2,478,203 ----------------------------------------------------------------------------- MORTGAGE--9.5% COMMERCIAL FINANCING--5.2% Redwood Trust, Inc. .............................. 42,500 1,161,525 HOME FINANCING--4.3% Apex Mortgage Capital, Inc. ...................... 25,900 289,821 Impac Mortgage Holdings, Inc. .................... 60,250 671,788 ----------- 961,609 ----------- ----------------------------------------------------------------------------- TOTAL MORTGAGE 2,123,134 ----------------------------------------------------------------------------- RESIDENTIAL--23.6% APARTMENTS--15.5% Archstone Smith Trust ............................ 27,546 657,798 Avalonbay Communities, Inc. ...................... 9,850 411,730 BRE Properties, Inc. Class A ..................... 11,800 362,850 SHARES VALUE ------ ----------- Equity Residential ............................... 27,400 $ 655,956 Essex Property Trust, Inc. ....................... 10,250 506,760 Post Properties, Inc. ............................ 32,700 849,546 ----------- 3,444,640 MANUFACTURED HOMES--8.1% Chateau Communities, Inc. ........................ 34,100 900,581 Manufactured Home Communities, Inc. .............. 28,200 899,016 ----------- 1,799,597 ----------- ----------------------------------------------------------------------------- TOTAL RESIDENTIAL 5,244,237 ----------------------------------------------------------------------------- RETAIL--5.5% REGIONAL MALLS--5.5% Simon Property Group, Inc. ....................... 34,115 1,218,929 ----------------------------------------------------------------------------- TOTAL REAL ESTATE INVESTMENT TRUSTS (IDENTIFIED COST $11,622,592) 12,165,947 ----------------------------------------------------------------------------- REAL ESTATE OPERATING COMPANIES--2.2% DIVERSIFIED--2.2% Northstar Capital Investment Corp. 144A(b)(c)(d) . 35,000 490,000 ----------------------------------------------------------------------------- TOTAL REAL ESTATE OPERATING COMPANIES (IDENTIFIED COST $720,625) 490,000 ----------------------------------------------------------------------------- BANKS--7.4% Bay View Capital Corp.(b) ........................ 108,404 614,651 Wells Fargo & Co. ................................ 21,300 1,025,808 ----------- (Identified cost $1,495,429) 1,640,459 ----------- BUILDING PRODUCTS--2.4% Masco Corp. ...................................... 27,000 527,850 (Identified cost $725,150) See Notes to Financial Statements 27 PHOENIX-SENECA REAL ESTATE SECURITIES FUND SHARES VALUE ------ ----------- CONSUMER FINANCE--3.7% Allied Capital Corp. ............................. 37,500 $ 820,875 (Identified cost $865,744) DIVERSIFIED COMMERCIAL SERVICES--2.6% Cendant Corp.(b) ................................. 53,000 570,280 (Identified cost $890,130) DIVERSIFIED FINANCIAL SERVICES--9.0% Freddie Mac ...................................... 15,000 838,500 Fannie Mae ....................................... 10,000 595,400 J.P. Morgan Chase & Co. .......................... 29,500 560,205 ----------- (Identified cost $2,819,735) 1,994,105 ----------- HOTELS, RESORTS & CRUISE LINES--2.0% Starwood Hotels & Resorts Worldwide, Inc. ........ 20,500 457,150 (Identified cost $555,875) PROPERTY & CASUALTY INSURANCE--3.6% Fidelity National Financial, Inc. ................ 27,900 801,846 (Identified cost $829,296) ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (IDENTIFIED COST $20,524,576) 19,468,512 ----------------------------------------------------------------------------- CONVERTIBLE PREFERRED STOCKS--9.2% REAL ESTATE INVESTMENT TRUSTS--9.2% INDUSTRIAL/OFFICE--9.2% MIXED--4.1% Reckson Associates Realty Corp. .................. Series A Cv. Pfd. 7.625% ......................... 39,000 924,300 OFFICE--5.1% Glenborough Realty Trust, Inc. ................... Series A Cv. Pfd. 7.75% .......................... 50,950 1,125,995 ----------------------------------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $1,864,227) 2,050,295 ----------------------------------------------------------------------------- TOTAL LONG TERM INVESTMENTS--96.7% (IDENTIFIED COST $22,388,803) 21,518,807 ----------------------------------------------------------------------------- PAR VALUE (000) VALUE ------- ----------- SHORT-TERM OBLIGATIONS--2.0% REPURCHASE AGREEMENTS--2.0% State Street Bank & Trust Co. repurchase agreement, 0.65%, dated 9/30/02, due 10/1/02, repurchase price $447,008, collateralized by U.S. Treasury Bond 8.75%, 5/15/17, market value $458,644 ................................... $447 $ 447,000 ----------------------------------------------------------------------------- TOTAL SHORT-TERM OBLIGATIONS (IDENTIFIED COST $447,000) 447,000 ----------------------------------------------------------------------------- TOTAL INVESTMENTS--98.7% (IDENTIFIED COST $22,835,803) 21,965,807(a) Other assets and liabilities, net--1.3% 295,417 ----------- NET ASSETS--100.0% $22,261,224 =========== (a) Federal Income Tax Information: Net unrealized depreciation of investment securities is comprised of gross appreciation of $1,713,420 and gross depreciation of $2,669,531 for federal income tax purposes. At September 30, 2002, the aggregate cost of securities for federal income tax purposes was $22,921,918. (b) Non income producing. (c) Private placement. Security valued at fair value as determined in good faith by or under the direction of the Trustees. (d) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2002, these securities amounted to a value of $490,000 or 2.2% of net assets. See Notes to Financial Statements 28 PHOENIX-SENECA REAL ESTATE SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2002 ASSETS Investment securities at value, (Identified cost $22,835,803) $21,965,807 Cash 150 Receivables Investment securities sold 224,017 Dividends and interest 204,438 Fund shares sold 1,757 ----------- Total assets 22,396,169 ----------- LIABILITIES Payables Fund shares repurchased 55,342 Transfer agent fee 13,683 Investment advisory fee 11,287 Distribution fee 7,132 Trustees' fee 6,325 Financial agent fee 4,692 Accrued expenses 36,484 ----------- Total liabilities 134,945 ----------- NET ASSETS $22,261,224 =========== NET ASSETS CONSIST OF: Capital paid in on shares of beneficial interest $23,944,714 Accumulated net realized loss (813,494) Net unrealized depreciation (869,996) ----------- NET ASSETS $22,261,224 =========== CLASS X Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $17,584,095) 1,456,916 Net asset value and offering price per share $12.07 CLASS A Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $2,514,583) 213,398 Net asset value per share $11.78 Offering price per share $11.78/(1-5.75%) $12.50 CLASS B Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $987,423) 84,086 Net asset value and offering price per share $11.74 CLASS C Shares of beneficial interest outstanding, $1 par value, unlimited authorization (Net Assets $1,175,123) 100,000 Net asset value and offering price per share $11.75 STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER, 2002 INVESTMENT INCOME Dividends $ 1,238,077 Interest 10,340 ----------- Total investment income 1,248,417 ----------- EXPENSES Investment advisory fee 200,545 Distribution fee, Class A 6,674 Distribution fee, Class B 8,150 Distribution fee, Class C 8,276 Financial agent fee 59,363 Transfer agent 81,285 Registration 42,077 Professional 23,184 Trustees 17,134 Printing 10,861 Custodian 8,814 Miscellaneous 8,523 ----------- Total expenses 474,886 Less expenses borne by investment adviser (38,353) Custodian fees paid indirectly (290) ----------- Net expenses 436,243 ----------- NET INVESTMENT INCOME 812,174 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on securities 1,241,305 Net realized gain on written options 34,949 Net change in unrealized appreciation (depreciation) on investments (2,150,646) ----------- NET LOSS ON INVESTMENTS (874,392) ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (62,218) =========== See Notes to Financial Statements 29 PHOENIX-SENECA REAL ESTATE SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended 9/30/02 9/30/01 ----------- ----------- FROM OPERATIONS Net investment income (loss) $ 812,174 $ 636,484 Net realized gain (loss) 1,276,254 367,999 Net change in unrealized appreciation (depreciation) (2,150,646) 745,168 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (62,218) 1,749,651 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS Net investment income, Class X (799,965) (527,989) Net investment income, Class A (72,548) (43,015) Net investment income, Class B (16,495) (7,350) Net investment income, Class C (16,756) (7,319) ----------- ----------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (905,764) (585,673) ----------- ----------- FROM SHARE TRANSACTIONS CLASS X Proceeds from sales of shares (410,208 and 131,659 shares, respectively) 5,303,637 1,571,755 Net asset value of shares issued from reinvestment of distributions (58,066 and 42,197 shares, respectively) 760,765 507,375 Cost of shares repurchased (386,311 and 204,805 shares, respectively) (5,169,932) (2,466,963) ----------- ----------- Total 894,470 (387,833) ----------- ----------- CLASS A Proceeds from sales of shares (177,962 and 128,148 shares, respectively) 2,296,733 1,521,782 Net asset value of shares issued from reinvestment of distributions (4,974 and 3,036 shares, respectively) 63,526 35,849 Cost of shares repurchased (165,182 and 58,698 shares, respectively) (2,124,815) (679,131) ----------- ----------- Total 235,444 878,500 ----------- ----------- CLASS B Proceeds from sales of shares (51,904 and 24,883 shares, respectively) 674,381 297,497 Net asset value of shares issued from reinvestment of distributions (1,246 and 624 shares, respectively) 15,827 7,349 Cost of shares repurchased (14,145 and 5,035 shares, respectively) (178,481) (60,239) ----------- ----------- Total 511,727 244,607 ----------- ----------- CLASS C Proceeds from sales of shares (75,376 and 21,102 shares, respectively) 978,001 249,493 Net asset value of shares issued from reinvestment of distributions (1,049 and 519 shares, respectively) 13,281 6,124 Cost of shares repurchased (19,160 and 7,148 shares, respectively) (241,271) (84,079) ----------- ----------- Total 750,011 171,538 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 2,391,652 906,812 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS 1,423,670 2,070,790 NET ASSETS Beginning of period 20,837,554 18,766,764 ----------- ----------- END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $0 AND $48,998 RESPECTIVELY] $22,261,224 $20,837,554 =========== ===========
See Notes to Financial Statements 30 PHOENIX-SENECA REAL ESTATE SECURITIES FUND FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS X -------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, -------------------------------------------------------------- 2002 2001 2000 1999 1998 Net asset value, beginning of period $12.62 $11.89 $ 9.69 $11.11 $14.71 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.49(1) 0.42(1) 0.34(1) 0.47(1) 0.54 Net realized and unrealized gain (loss) (0.51) 0.69 2.35 (1.20) (3.10) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (0.02) 1.11 2.69 (0.73) (2.56) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.53) (0.38) (0.49) (0.44) (0.46) Dividends from net realized gains -- -- -- (0.25) (0.58) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.53) (0.38) (0.49) (0.69) (1.04) ------ ------ ------ ------ ------ Change in net asset value (0.55) 0.73 2.20 (1.42) (3.60) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $12.07 $12.62 $11.89 $ 9.69 $11.11 ====== ====== ====== ====== ====== Total return (0.42)% 9.52% 29.00% (6.66)% (18.33)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $17,584 $17,349 $16,713 $17,346 $21,794 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 1.55 %(5) 1.59%(4) 1.79% 1.66 % 1.47 % Net investment income (loss) 3.73 % 3.49% 3.35% 4.50 % 4.14 % Portfolio turnover 111 % 40% 65% 5 % 53 %
CLASS A ------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, ------------------------------------------------------------- 2002 2001 2000 1999 1998 Net asset value, beginning of period $12.32 $11.67 $ 9.54 $11.00 $14.68 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.32(1) 0.25(1) 0.21(1) 0.32(1) 0.35 Net realized and unrealized gain (loss) (0.51) 0.67 2.30 (1.19) (3.08) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (0.19) 0.92 2.51 (0.87) (2.73) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.35) (0.27) (0.38) (0.34) (0.37) Dividends from net realized gains -- -- -- (0.25) (0.58) ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.35) (0.27) (0.38) (0.59) (0.95) ------ ------ ------ ------ ------ Change in net asset value (0.54) 0.65 2.13 (1.46) (3.68) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.78 $12.32 $11.67 $ 9.54 $11.00 ====== ====== ====== ====== ====== Total return(2) (1.73)% 7.96% 27.40% (7.97)% (19.52)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $2,515 $2,410 $1,437 $919 $1,357 RATIO TO AVERAGE NET ASSETS OF: Operating expenses 2.83 %(5) 3.05%(3)(4) 3.05%(3) 3.05 %(3) 2.76 % Net investment income (loss) 2.50 % 2.11% 2.11% 3.13 % 2.45 % Portfolio turnover 111 % 40% 65% 5 % 53 % (1) Computed using average shares outstanding. (2) Maximum sales charge is not reflected in the total return calculation. (3) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 3.18%, 4.28% and 4.27% for the periods ended September 30, 2001, 2000 and 1999, respectively. (4) For the year ended September 30, 2001, the ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would have been 1.60% for Class X and the ratio would not significantly differ for Class A. (5) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratios would not significantly differ.
See Notes to Financial Statements 31 PHOENIX-SENECA REAL ESTATE SECURITIES FUND FINANCIAL HIGHLIGHTS (SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
CLASS B ------------------------------------------------------------ FROM YEAR ENDED SEPTEMBER 30, INCEPTION ---------------------------------------------- 7/1/98 TO 2002 2001 2000 1999 9/30/98 Net asset value, beginning of period $12.28 $11.66 $ 9.55 $11.01 $12.58 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.20(1) 0.17(1) 0.12(1) 0.29(1) 0.07 Net realized and unrealized gain (loss) (0.50) 0.65 2.31 (1.22) (1.58) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (0.30) 0.82 2.43 (0.93) (1.51) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.24) (0.20) (0.32) (0.28) (0.06) Dividends from net realized gains -- -- -- (0.25) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.24) (0.20) (0.32) (0.53) (0.06) ------ ------ ------ ------ ------ Change in net asset value (0.54) 0.62 2.11 (1.46) (1.57) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.74 $12.28 $11.66 $ 9.55 $11.01 ====== ====== ====== ====== ====== Total return(2) (2.63)% 7.21% 26.37% (8.59)% (11.97)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $987 $554 $287 $197 $91 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(5) 3.80 %(8) 3.80%(7) 3.80% 3.80 % 3.80 %(3) Net investment income (loss) 1.59 % 1.43% 1.19% 2.79 % 2.50 %(3) Portfolio turnover 111 % 40% 65% 5 % 53 %(4)
CLASS C ------------------------------------------------------------ FROM YEAR ENDED SEPTEMBER 30, INCEPTION ---------------------------------------------- 7/1/98 TO 2002 2001 2000 1999 9/30/98 Net asset value, beginning of period $12.28 $11.66 $ 9.55 $11.01 $12.58 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) 0.21(1) 0.16(1) 0.14(1) 0.29(1) 0.07 Net realized and unrealized gain (loss) (0.50) 0.66 2.29 (1.22) (1.58) ------ ------ ------ ------ ------ TOTAL FROM INVESTMENT OPERATIONS (0.29) 0.82 2.43 (0.93) (1.51) ------ ------ ------ ------ ------ LESS DISTRIBUTIONS: Dividends from net investment income (0.24) (0.20) (0.32) (0.28) (0.06) Dividends from net realized gains -- -- -- (0.25) -- ------ ------ ------ ------ ------ TOTAL DISTRIBUTIONS (0.24) (0.20) (0.32) (0.53) (0.06) ------ ------ ------ ------ ------ Change in net asset value (0.53) 0.62 2.11 (1.46) (1.57) ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.75 $12.28 $11.66 $ 9.55 $11.01 ====== ====== ====== ====== ====== Total return(2) (2.47)% 7.12% 26.37% (8.58)% (11.97)%(4) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $1,175 $525 $329 $200 $88 RATIO TO AVERAGE NET ASSETS OF: Operating expenses(6) 3.80 %(8) 3.80%(7) 3.80% 3.80 % 3.80 %(3) Net investment income (loss) 1.63 % 1.38% 1.36% 2.80 % 2.44 %(3) Portfolio turnover 111 % 40% 65% 5 % 53 %(4) (1) Computed using average shares outstanding. (2) Maximum sales charge is not reflected in the total return calculation. (3) Annualized. (4) Not annualized. (5) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 6.17%, 9.33%, 15.48%, 18.50% and 22.08% for the periods ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively. (6) If the investment adviser had not waived fees and reimbursed expenses, the ratio of operating expenses to average net assets would have been 6.10%, 9.18%, 13.58%, 19.95% and 22.93% for the periods ended September 30, 2002, 2001, 2000, 1999 and 1998, respectively. (7) For the year ended September 30, 2001, the ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratio would have been 3.81%. (8) The ratio of operating expenses to average net assets includes the effect of expense offsets for custodian fees; if expense offsets were excluded, the ratios would not significantly differ.
See Notes to Financial Statements 32 PHOENIX-SENECA FUNDS NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 1. SIGNIFICANT ACCOUNTING POLICIES Phoenix-Seneca Funds (the "Trust") is organized as a Delaware business trust and is registered under the Investment Company Act of 1940, as amended, as an open end management investment company. Shares of the Trust are divided into three series, each a "Fund" and collectively the "Funds" as follows: Phoenix-Seneca Bond Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities Fund. Each Fund has distinct investment objectives. Bond Fund is a diversified Fund and seeks to generate a high level of current income and capital appreciation. Mid-Cap "EDGE"(SM) Fund is a diversified Fund and seeks to achieve long-term capital appreciation. Real Estate Securities Fund is a non-diversified Fund and seeks to emphasize capital appreciation and income equally. Each Fund offers Class X, Class A, Class B and Class C shares. Class X shares are sold without a sales charge. Class A shares of Bond Fund are sold with a front-end sales charge of up to 4.75%. Class A shares of Mid-Cap "EDGE"(SM) Fund and Real Estate Securities Fund are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge which declines from 5% to zero depending on the period of time the shares are held. Class C shares are sold with a 1% contingent deferred sales charge if redeemed within one year of purchase. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class A, Class B and Class C shares bear distribution expenses and have exclusive voting rights with respect to their distribution plans. Investment income and realized and unrealized gains/losses are allocated among the classes on the basis of net assets of each class. The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. A. SECURITY VALUATION: Equity securities are valued at the last sale price, or if there had been no sale that day, at the mean between the most recent high bid and the most recent low asked quotations. Debt securities are valued on the basis of broker quotations or valuations provided by a pricing service which utilizes information with respect to recent sales, market transactions in comparable securities, quotations from dealers and various relationships between securities in determining value. Short-term investments having a remaining maturity of 60 days or less are valued at amortized cost which approximates market. All other securities and assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. B. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date or, in the case of certain foreign securities, as soon as the Fund is notified. Interest income is recorded on the accrual basis. The Trust amortizes premiums and accretes discounts using the effective interest method. Realized gains and losses are determined on the identified cost basis. Effective October 1, 2001, the Fund has adopted the revised AICPA Audit and Accounting Guide, Audits of Investment Companies, and began to classify gains and losses on mortgage and asset-backed securities previously included in realized gains and losses, as a component of interest income. The cumulative effect of the accounting changes had no impact on total net assets of the Fund or the Fund's net asset value. The effect of the accounting changes for the year ended September 30, 2002, was to increase realized gains and losses by $43,662 and to decrease net investment income by $43,662. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change. C. INCOME TAXES: Each Fund is treated as a separate taxable entity. It is the policy of each Fund to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. In addition, each Fund intends to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision for federal income taxes or excise taxes has been made. D. DISTRIBUTIONS TO SHAREHOLDERS: Distributions are recorded by each Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include the treatment of nontaxable dividends, market discount, organization costs, expiring capital loss carryforwards, foreign currency gain/loss, partnerships, operating losses and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. E. FOREIGN CURRENCY TRANSLATION: Foreign securities and other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement dates of a portfolio transaction is treated as a gain or loss on foreign currency. 33 PHOENIX-SENECA FUNDS NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) Likewise, the gain or loss resulting from a change in currency exchange rates between the date income is accrued and paid is treated as a gain or loss on foreign currency. The Trust does not separate that portion of the results of operations arising from changes in exchange rates and that portion arising from changes in the market prices of securities. F. FORWARD CURRENCY CONTRACTS: Each Fund may enter into forward currency contracts in conjunction with the planned purchase or sale of foreign denominated securities in order to hedge the U.S. dollar cost or proceeds. Forward currency contracts involve, to varying degrees, elements of market risk in excess of the amount recognized in the statement of assets and liabilities. Risks arise from the possible movements in foreign exchange rates or if the counterparty does not perform under the contract. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded directly between currency traders and their customers. The contract is marked-to-market daily and the change in market value is recorded by each Fund as an unrealized gain (or loss). When the contract is closed or there is right of offset with the same counterparty, the Fund records a realized gain (or loss) equal to the change in the value of the contract when it was opened and the value at the time it was closed or offset. At September 30, 2002, the Trust had no forward currency contracts. G. OPTIONS: Each Fund may write covered options or purchase options contracts for the purpose of hedging against changes in the market value of the underlying securities or foreign currencies. Each Fund will realize a gain or loss upon the expiration or closing of the option transaction. Gains and losses on written options are reported separately in the Statement of Operations. When a written option is exercised, the proceeds on sales or amounts paid are adjusted by the amount of premium received. Options written are reported as a liability in the Statement of Assets and Liabilities and subsequently marked-to-market to reflect the current value of the option. The risk associated with written options is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, or if a liquid secondary market does not exist for the contracts. Each Fund may purchase options which are included in the Funds' Schedule of Investments and subsequently marked-to-market to reflect the current value of the option. When a purchased option is exercised, the cost of the security is adjusted by the amount of premium paid. The risk associated with purchased options is limited to the premium paid. At September 30, 2002, the Trust had no options. H. EXPENSES: Trust expenses not directly attributable to a specific Fund are allocated evenly among all funds. Fund expenses that are not related to the distribution of shares of a particular class or to services provided specifically to a particular class are allocated among the classes on the basis of relative average daily net assets of each class. Expenses that relate to the distribution of shares or services provided to a particular class are allocated to that class. I. REPURCHASE AGREEMENTS: A repurchase agreement is a transaction where a Fund acquires a security for cash and obtains a simultaneous commitment from the seller to repurchase the security at an agreed upon price and date. Each Fund, through its custodian, takes possession of securities collateralizing the repurchase agreement. The collateral is marked-to-market daily to ensure that the market value of the underlying assets remains sufficient to protect the Fund in the event of default by the seller. If the seller defaults and the value of the collateral declines, or if the seller enters insolvency proceedings, realization of collateral may be delayed or limited. J. WHEN-ISSUED AND DELAYED TRANSACTIONS: Each Fund may engage in when-issued or delayed delivery transactions. Each Fund records when-issued securities on the trade date and maintains collateral for the securities purchased. Securities purchased on when-issued or delayed delivery basis begin earning interest on the settlement date. 2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS Phoenix Investment Counsel, Inc, ("PIC" or the "Adviser") serves as investment adviser to the Phoenix-Seneca Funds and Seneca Capital Management LLC ("Seneca" or the "Subadviser") serves as investment subadviser. All of the outstanding stock of PIC and a majority of the equity interests of Seneca are owned by Phoenix Investment Partners, Ltd. ("PXP"), a wholly-owned subsidiary of The Phoenix Companies, Inc. ("PNX"). As compensation for services to the Trust, the Adviser receives a fee based upon the following annual rates as a percentage of the average daily net assets of each Fund: Adviser Fee -------- Bond Fund ......................................... 0.50% Mid-Cap "EDGE"(SM) Fund ........................... 0.80% Real Estate Securities Fund ....................... 0.85% The Adviser pays the Subadviser a fee equal to one half of the Adviser fee. 34 PHOENIX-SENECA FUNDS NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) Phoenix Equity Planning Corporation ("PEPCO"), a direct subsidiary of PXP, serves as Financial Agent of the Trust. PEPCO receives a financial agent fee equal to the sum of (1) the documented cost of fund accounting and related services provided by PFPC Inc. (subagent to PEPCO), plus (2) the documented cost to PEPCO to provide financial reporting, tax services and oversight of the subagent's performance. For the year ended September 30, 2002, financial agent fees were $340,012 of which PEPCO received $117,442 The current fee schedule of PFPC Inc. ranges from 0.085% to 0.0125% of the average daily net asset values of the Trust. Certain minimum fees and fee waivers may apply. The Adviser has agreed to waive or reimburse each Fund's operating expenses until January 31, 2003, to the extent that such expenses exceed the following percentages of average annual net assets: Class X Class A Class B Class C ------- ------- ------- ------- Bond Fund .................... 0.90% 1.15% 1.90% 1.90% Mid-Cap "EDGE"(SM) Fund ...... 1.15% 1.40% 2.15% 2.15% Real Estate Securities Fund .. 2.35% 3.05% 3.80% 3.80% PEPCO serves as the national distributor of the Trust's shares and has advised the Trust that it retained net selling commissions of $31,438 for Class A shares for the year ended September 30, 2002. Deferred sales charges retained by PEPCO for the year ended September 30, 2002 were $139,555 for Class B shares and $19,528 for Class C shares. In addition, each Fund pays PEPCO a distribution fee at an annual rate of 0.25% for Class A shares and 1.00% for Class B and C shares applied to the average daily net assets of each Fund. The distributor has advised the Trust that of the total amount expensed for the year ended September 30, 2002, $660,275 was retained by the Distributor, $417,206 was paid out to unaffiliated participants and $9,934 was paid to W.S. Griffith Securities, Inc., an indirect subsidiary of PNX. PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust Company as sub-transfer agent. For the year ended September 30, 2002, transfer agent fees were $539,511 of which PEPCO retained $62,724. For the year ended September 30, 2002, the Trust paid PXP Securities Corp., an indirect subsidiary of PNX, brokerage commissions of $6,965 in connection with portfolio transactions effected by it. At September 30, 2002, PNX and affiliates held Phoenix-Seneca Funds shares which aggregated the following: Aggregate Net Asset Shares Value ------ --------- Bond Fund, Class A ..................... 12,255 $126,104 Bond Fund, Class B ..................... 12,057 122,137 Bond Fund, Class C ..................... 12,038 122,186 Mid-Cap "EDGE"(SM) Fund, Class B ....... 7,389 87,042 Mid-Cap "EDGE"(SM) Fund, Class C ....... 7,389 87,042 Real Estate Securities Fund, Class B ... 8,999 105,648 Real Estate Securities Fund, Class C ... 8,999 105,738 3. PURCHASE AND SALE OF SECURITIES Purchases and sales of securities during the year ended September 30, 2002 (excluding U.S. Government and agency securities and short-term securities) aggregated the following: Purchases Sales ------------ ------------ Bond Fund ....................... $ 65,685,806 $ 68,061,962 Mid-Cap "EDGE"(SM) Fund ......... 243,871,019 206,314,223 Real Estate Securities Fund ..... 19,433,900 18,210,459 Purchases and sales of long-term U.S. Government and agency securities during the year ended September 30, 2002, aggregated the following: Purchases Sales ------------ ------------ Bond Fund ...................... $235,903,462 $237,770,456 Real Estate Securities Fund .... 7,822,694 6,339,791 Written call option activity for the year ended September 30, 2002 aggregated the following: Real Estate Securities Fund --------------------------- Number of Amount of Options Premiums --------- --------- Options outstanding at September 30, 2001 -- $ -- Options written ......................... 360 59,999 Options closed .......................... (210) (48,074) Options exercised ....................... (150) (11,925) ----- -------- Options outstanding at September 30, 2002 -- -- ===== ======== 4. CREDIT RISK AND ASSET CONCENTRATIONS In countries with limited or developing markets, investments may present greater risks than in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of these investments and the income they generate, as well as a fund's ability to repatriate such amounts. Certain funds invest a high percentage of their assets in specific sectors of the market in their pursuit of a greater investment return. Fluctuations in these sectors of concentration may have a greater impact to the fund, positive or negative, than if the fund did not concentrate its investments in such sectors. 35 PHOENIX-SENECA FUNDS NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2002 (CONTINUED) 5. OTHER As of September 30, 2002, the funds had omnibus shareholder accounts, comprised of several individual shareholders, which individually amounted to more than 10% of the total shares outstanding. None of the accounts are affiliated with PNX. Number of % of Shares Accounts Outstanding ------------------ ----------- Mid-Cap "EDGE"(SM) Fund ........ 2 Omnibus Accounts 28% Real Estate Securities Fund .... 1 Omnibus Account 49% 6. FEDERAL INCOME TAX INFORMATION The following funds have capital loss carryovers which may be used to offset future capital gains. 2009 2010 -------- ----------- Bond Fund ..................... -- $ 1,767,986 Mid-Cap EDGE(SM) Fund ......... $709,370 42,302,857 Real Estate Securities Fund ... 727,379 -- For the year ended September 30, 2002, the Real Estate Securities Fund utilized losses deferred in the prior year against current year capital gains in the amount of $1,224,955. Under current tax law, 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 September 30, 2002, the Bond Fund and the Mid-Cap "EDGE"(SM) Fund deferred capital losses of $527,248 and $30,350,458, respectively. For the year ended September 30, 200 2, the Bond Fund and the Mid-Cap EDGE(SM) Fund utilized prior year capital losses deferred of $1,502,796 and $30,661,639, respectively. As of September 30, 2002, the components of distributable earnings on a tax basis (excluding unrealized appreciation/(depreciation) which is disclosed in the respective schedule of investments) were as follows: Undistributable Undistributable Ordinary Long-Term Income Capital Gains --------------- --------------- Bond Fund ....................... $454,609 $ -- Mid-Cap "EDGE"(SM) Fund ......... -- -- Real Estate Securities Fund ..... -- -- The differences between the book basis and tax basis components of distributable earnings related principally to the timing of recognition of income and gains for federal income tax purposes. Short-term gain distributions reported in the statement of changes in net assets are reported as ordinary income for federal tax purposes. 7. RECLASSIFICATION OF CAPITAL ACCOUNTS For financial reporting purposes, book basis capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the year ended September 30, 2002, the funds recorded the following permanent reclassifications which arose primarily from nondeductible current net operating losses, premium amortization and non-taxable dividends. The reclassifications have no impact on the net assets or net asset value of the funds. The following funds recorded reclassifications to increase (decrease) the accounts listed below:
Undistributed Accumulated Capital paid in net investment net realized on shares income (loss) gain (loss) beneficial interest ----------------- ------------ ------------------- Bond Fund ........................ $ 3,344 $(10,991) $ 7,647 Mid-Cap "EDGE"(SM) Fund .......... 2,144,534 -- (2,144,534) Real Estate Securities Fund ...... 44,592 -- (44,592)
This report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective Prospectus which includes information concerning the sales charge, the Trust's record and other pertinent information. 36 REPORT OF INDEPENDENT ACCOUNTANTS [GRAPIC OMITTED] PRICEWATERHOUSECOOPERS To the Board of Trustees and Shareholders of Phoenix-Seneca Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Phoenix-Seneca Bond Fund, Phoenix-Seneca Mid Cap "EDGE" Fund, and Phoenix-Seneca Real Estate Securities Fund (constituting the Phoenix-Seneca Funds, hereafter referred to as the "Fund") at September 30, 2002, the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /S/ PRICEWATERHOUSECOOPERS LLP Boston, Massachusetts November 13, 2002 37 FUND MANAGEMENT Information pertaining to the Trustees and officers of the Trust 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. INDEPENDENT TRUSTEES
NUMBER OF PORTFOLIOS IN FUND COMPLEX PRINCIPAL OCCUPATION(S) NAME, (AGE), AND LENGTH OF OVERSEEN BY DURING PAST 5 YEARS AND ADDRESS TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------ Robert Chesek (68) Served since 31 Currently retired. 2000. ------------------------------------------------------------------------------------------------------------------------ E. Virgil Conway (73) Served since 33 Chairman, Rittenhouse Advisors, LLC (consulting firm) since Rittenhouse Advisors, LLC 2000. 2001. Trustee/Director, Realty Foundation of New York 101 Park Avenue (1972-present), Pace University (1978-present), New York New York, NY 10178 Housing Partnership Development Corp. (Chairman) (1981-present), Greater New York Councils, Boy Scouts of America (1985-present), Academy of Political Science (Vice Chairman) (1985-present), Urstadt Biddle Property Corp. (1989-present), The Harlem Youth Development Foundation (1998-present). Chairman, Metropolitan Transportation Authority (1992-2001). Director, Trism, Inc. (1994-2001), Consolidated Edison Company of New York, Inc. (1970-2002), Atlantic Mutual Insurance Company (1974-2002), Centennial Insurance Company (1974-2002), Josiah Macy, Jr., Foundation (1975-2002), Union Pacific Corp. (1978-2002), BlackRock Freddie Mac Mortgage Securities Fund (Advisory Director) (1990-2002), Accuhealth (1994-2002). ------------------------------------------------------------------------------------------------------------------------ William Crawford (74) Served since 7 Currently retired. 3003 Gulf Shore Blvd., #401 2000. Naples, FL 34103 ------------------------------------------------------------------------------------------------------------------------ Harry Dalzell-Payne (73) Served since 33 Currently retired. The Flat, Elmore Court 1999. Elmore, GL05, GL2 3NT U.K. ------------------------------------------------------------------------------------------------------------------------ William N. Georgeson (75) Served since 7 Currently retired. Director, Concordia University 575 Glenwood Road 2000. Foundation (charity) (1994-present). Lake Forest, IL 60045 ------------------------------------------------------------------------------------------------------------------------ Francis E. Jeffries (72) Served since 34 Director, The Empire District Electric Company 8477 Bay Colony Dr. #902 2000. (1984-present). Director (1989-1997), Chairman of the Board Naples, FL 34108 (1993-1997), Phoenix Investment Partners, Ltd. ------------------------------------------------------------------------------------------------------------------------ Leroy Keith, Jr. (63) Served since 31 Partner, Stonington Partners, Inc. (private equity fund) Stonington Partners, Inc. 2000. since 2001. Chairman (1995 to 2000) and Chief Executive 736 Market Street, Ste. 1430 Officer (1995-1998), Carson Products Company (cosmetics). Chattanooga, TN 37402 Director/Trustee, Evergreen Funds (6 portfolios). ------------------------------------------------------------------------------------------------------------------------ 38 FUND MANAGEMENT (CONTINUED) INDEPENDENT TRUSTEES NUMBER OF PORTFOLIOS IN FUND COMPLEX PRINCIPAL OCCUPATION(S) NAME, (AGE), AND LENGTH OF OVERSEEN BY DURING PAST 5 YEARS AND ADDRESS TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------ Geraldine M. McNamara (51) Served since 31 Managing Director, U.S. Trust Company of New York United States Trust 2001. (private bank) (1982-present). Company of NY 114 West 47th Street New York, NY 10036 ------------------------------------------------------------------------------------------------------------------------ Eileen A. Moran (47) Served since 7 President and Chief Executive Officer, PSEG Resources Inc. PSEG Resources, Inc. 2000. (investment company) (1990-present). 80 Park Plaza, T-22 Newark, NJ 07102 ------------------------------------------------------------------------------------------------------------------------ Everett L. Morris (74) Served since 33 Vice President, W.H. Reaves and Company (investment W.H. Reaves and Company 2000. management) (1993-present). 10 Exchange Place Jersey City, NJ 07302 ------------------------------------------------------------------------------------------------------------------------ Richard A. Pavia (72) Served since 7 Currently retired. Vice Chairman, Forest Preserve District, 7145 North Ionia 2000. Cook County President Advisory Council (1997-present). Chicago, IL 60646 Special Consultant, K&D Facilities Resource Corp. (1995-present). ------------------------------------------------------------------------------------------------------------------------ Herbert Roth, Jr. (74) Served since 31 Currently retired. Member, Directors Advisory Council, 134 Lake Street 2000. Phoenix Life Insurance Company (1998-present). Director, Sherbom, MA 01770 Boston Edison Company (1978-present), Landauer, Inc. (medical services) (1970-present), Tech Ops./Sevcon, Inc. (electronic controllers) (1987-present), and Mark IV Industries (diversified manufacturer) (1985-present). Director, Phoenix Home Life Mutual Insurance Company (1972-1998). ------------------------------------------------------------------------------------------------------------------------ Richard E. Segerson (56) Served since 31 Managing Director, Northway Management Company Northway Management Company 2000. (1998-present). Managing Director, Mullin Associates 164 Mason Street (1993-1998). Greenwich, CT 06830 ------------------------------------------------------------------------------------------------------------------------ Lowell P. Weicker, Jr. (71) Served since 31 Director, UST Inc. (1995-present), HPSC Inc. (1995-present), 200 Duke Street 2000. Compuware (1996-present) and WWF, Inc. (2000-present). Alexandria, VA 22314 President, The Trust for America's Health (non-profit) (2001-present). Director, Duty Free International, Inc. (1997-1998). ------------------------------------------------------------------------------------------------------------------------
39 FUND MANAGEMENT (CONTINUED) INTERESTED TRUSTEES Each of the individuals listed below is an "interested person" of the Trust, as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
INDEPENDENT TRUSTEES NUMBER OF PORTFOLIOS IN FUND COMPLEX PRINCIPAL OCCUPATION(S) NAME, (AGE), AND LENGTH OF OVERSEEN BY DURING PAST 5 YEARS AND ADDRESS TIME SERVED TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE ------------------------------------------------------------------------------------------------------------------------ *Philip R. McLoughlin (55) Served since 44 Director, PXRE Corporation (Delaware) (1985-present), World 1999. Trust Fund (1991-present). Chairman (1997-2002), Director Chairman (1995-2002), Vice Chairman (1995-1997) and Chief Executive Officer (1995-2002), Phoenix Investment Partners, Ltd. Director, Executive Vice President and Chief Investment Officer, The Phoenix Companies, Inc. (2001-2002). Director (1994-2002) and Executive Vice President, Investments (1988-2002), Phoenix Life Insurance Company. Director (1983-2002) and Chairman (1995-2002), Phoenix Investment Counsel, Inc. Director (1984-2002) and President (1990-2000), Phoenix Equity Planning Corporation. Chairman and Chief Executive Officer, Phoenix/Zweig Advisers LLC (1999-2002). Director and President, Phoenix Investment Management Company (2001-2002). Director and Executive Vice President, Phoenix Life and Annuity Company (1996-2002). Director and Executive Vice President, PHL Variable Insurance Company (1995-2002). Director, Phoenix National Trust Company (1996-2002). Director and Vice President, PM Holdings, Inc. (1985-2002). Director, PHL Associates, Inc. (1995-2002). Director (1992-2002) and President (1992-1994), WS Griffith Securities, Inc. ------------------------------------------------------------------------------------------------------------------------ **James M. Oates (56) Served since 31 Chairman, IBEX Capital Markets Inc. (financial services) IBEX Capital Markets, Inc. 2000. (1997-present). Managing Director, Wydown Group (consulting 60 State Street, Ste. 950 firm) (1994-present). Director, Investors Financial Service Boston, MA 02109 Corporation (1995-present), Investors Bank & Trust Corporation (1995-present), Plymouth Rubber Co. (1995-present), Stifel Financial (1996-present), Connecticut River Bancorp (1998-present), Connecticut River Bank (1998-present, 1Mind, Inc. (1999-present) and 1Mind.com (2000-present). Director and Treasurer, Endowment for Health, Inc. (2000-present). Chairman, Emerson Investment Management, Inc. (2000-present). Member, Chief Executives Organization (1996-present). Vice Chairman, Massachusetts Housing Partnership (1998-1999). Director, Blue Cross and Blue Shield of New Hampshire (1994-1999), AIB Govett Funds (1991-2000) and Command Systems, Inc. (1998-2000). Director, Phoenix Investment Partners, Ltd. (1995-2001). ------------------------------------------------------------------------------------------------------------------------ * Mr. McLoughlin is an "interested person," as defined in the Investment Company Act of 1940, by reason of his position with Phoenix Investment Partners, Ltd., and its affiliates. ** Mr. Oates is being treated as an Interested Trustee due to certain relationships existing among Mr. Oates, IBEX Capital Markets, Inc. and Phoenix and certain of its affiliates.
40 FUND MANAGEMENT (CONTINUED) OFFICERS OF THE TRUST WHO ARE NOT TRUSTEES
POSITION(S) HELD WITH NAME, (AGE), AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) ADDRESS TIME SERVED DURING PAST 5 YEARS --------------------------------------------------------------------------------------------------------------------------- Gail P. Seneca (49) President since 1996. President and Chief Executive and Investment Officer, Seneca 909 Montgomery Street Capital Management LLC (1996-present). Managing Director, San Francisco, CA 94133 Equities, Phoenix Investment Counsel, Inc. (1998-present). Managing General Partner and Chief Executive and Investment Officer, GMG/Seneca Capital Management LP (1989-present). President, GenCap, Inc. (1994-present). Trustee, Phoenix-Seneca Funds (1996-2000). --------------------------------------------------------------------------------------------------------------------------- William R. Moyer (58) Executive Vice President Executive Vice President and Chief Financial Officer since 2000. (1999-present), Senior Vice President and Chief Financial Officer (1995-1999), Phoenix Investment Partners, Ltd. Director (1998-present), Senior Vice President, Finance (1990-present), Chief Financial Officer (1996-present), and Treasurer (1998-present), Phoenix Equity Planning Corporation. Director (1998-present), Senior Vice President (1990-present), Chief Financial Officer (1996-present) and Treasurer (1994-present), Phoenix Investment Counsel, Inc. Senior Vice President and Chief Financial Officer, Duff & Phelps Investment Management Co. (1996-present). Vice President, Phoenix Fund Complex (1990-present). --------------------------------------------------------------------------------------------------------------------------- John F. Sharry (50) Executive Vice President President, Private Client Group (1999-present), Executive since 2000. Vice President, Retail Division (1997-1999), Phoenix Investment Partners, Ltd. President, Private Client Group, Phoenix Equity Planning Corporation (2000-present). Executive Vice President, Phoenix Fund Complex (1998-present). --------------------------------------------------------------------------------------------------------------------------- Robert S. Driessen (54) Vice President since 1999. Vice President and Compliance Officer, Phoenix Investment Partners, Ltd. (1999-present) and Phoenix Investment Counsel, Inc. (1999-present). Vice President, Phoenix Fund Complex (1999-present). Compliance Officer (2000-present) and Associate Compliance Officer (1999), PXP Securities Corp. Vice President, Risk Management Liaison, Bank of America (1996-1999). Vice President, Securities Compliance, The Prudential Insurance Company of America (1993-1996). Branch Chief/Financial Analyst, Securities and Exchange Commission, Division of Investment Management (1972-1993). --------------------------------------------------------------------------------------------------------------------------- Nancy G. Curtiss (49) Treasurer since 2000. Vice President, Fund Accounting (1994-present) and Treasurer (1996-present), Phoenix Equity Planning Corporation. Treasurer, Phoenix Fund Complex (1994-present). --------------------------------------------------------------------------------------------------------------------------- Richard J. Wirth (43) Secretary since 2002. Vice President and Insurance and Investment Products Counsel One American Row (2002-present), Counsel (1993-2002), Phoenix Life Insurance Hartford, CT 06102 Company. ---------------------------------------------------------------------------------------------------------------------------
41 PHOENIX-SENECA FUNDS 909 Montgomery Street San Francisco, California 94133 TRUSTEES Robert Chesek E. Virgil Conway William W. Crawford Harry Dalzell-Payne William N. Georgeson Francis E. Jeffries Leroy Keith, Jr. Philip R. McLoughlin Geraldine M. McNamara Eileen A. Moran Everett L. Morris James M. Oates Richard A. Pavia Herbert Roth, Jr. Richard E. Segerson Lowell P. Weicker, Jr. OFFICERS Gail P. Seneca, President William R. Moyer, Executive Vice President John F. Sharry, Executive Vice President Robert S. Driessen, Vice President Richard J. Wirth, Secretary Nancy G. Curtiss, Treasurer -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- INVESTMENT ADVISER Phoenix Investment Counsel, Inc. 56 Prospect Street Hartford, Connecticut 06115-0480 SUBADVISER Seneca Capital Management LLC 909 Montgomery Street San Francisco, California 94133 PRINCIPAL UNDERWRITER Phoenix Equity Planning Corporation 56 Prospect Street Hartford, Connecticut 06115-0480 CUSTODIAN State Street Bank and Trust Company P.O. Box 351 Boston, Massachusetts 02101 TRANSFER AGENT Phoenix Equity Planning Corporation 56 Prospect Street Hartford, Connecticut 06115-0480 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP 160 Federal Street Boston, Massachusetts 02110 HOW TO CONTACT US Mutual Fund Services 1-800-243-1574 Advisor Consulting Group 1-800-243-4361 Text Telephone 1-800-243-1926 Web site PHOENIXINVESTMENTS.COM (This page has been left blank intentionally.) (This page has been left blank intentionally.) PRESORTED STANDARD U.S. POSTAGE PAID Louisville, KY Permit No. 1051 PHOENIX EQUITY PLANNING CORPORATION P.O. Box 150480 Hartford, CT 06115-0480 [GRAPHIC OMITTED] PHOENIX INVESTMENT PARTNERS, LTD. For more information about Phoenix mutual funds, please call your financial representative or contact us at 1-800-243-4361 or PHOENIXINVESTMENTS.COM. E-DELIVERY OF YOUR FUND COMMUNICATIONS NOW AVAILABLE! To sign up, go to the Individual Investors area at Phoenixinvestments.com and log in. Select an account, then click the "E-Delivery" button. PXP 1140 (11/02)