<PAGE>
AUGUST 31, 1998
P H O E N I X
F U N D S
A N N U A L R E P O R T
-->PHOENIX VALUE EQUITY
FUND
-->PHOENIX SMALL CAP
VALUE FUND
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
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.
<PAGE>
PRESIDENT'S MESSAGE
- ------------------------------------------------------
Dear Shareholder:
At Phoenix Investment Partners, formerly Phoenix Duff & Phelps, we are
creating a new kind of investment company, one that preserves the independent,
distinct investment processes of each of our partners. Experience has shown that
investment professionals perform best when they remain focused, disciplined, and
distanced from activities that distract them from managing your investments. At
Phoenix Investment Partners, we have enabled our money managers to do just
that--solely manage your money.
Over the past year, we have added some of the industry's most experienced and
talented money management teams to provide you with a wider array of quality
investment products. You now have access to seven distinct investment styles
from money managers across the U.S. and around the world:
<TABLE>
<CAPTION>
OUR PARTNERS THEIR DISTINCTIVE STYLES THEIR LOCATIONS
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Aberdeen Fund Managers, Inc. International and global Scotland,
equity and global fixed Singapore,
income London, and
Ft. Lauderdale, FL
Duff & Phelps Investment Management Core equity and core fixed Chicago, IL and
Co. income Cleveland, OH
Phoenix Investment Counsel, Inc. Classic value equity, Sarasota, FL,
systematic value equity, Scotts Valley, CA
growth equity, and multi- and Hartford, CT
sector fixed income
Seneca Capital Management LLC Growth with controlled risk San Francisco, CA
equity and value-driven
fixed
income
Roger Engemann & Associates, Inc. Classic growth equity Pasadena, CA
</TABLE>
In this report, Fund manager Chris Bertelsen discusses how the Value Equity
Fund and Small Cap Value Fund have performed over the last fiscal year and gives
his near-term outlook. We hope you will find his comments informative.
To learn more about our other partners and their distinctive investment
styles, please contact your financial advisor or call Phoenix Investment
Partners National Sales Desk at 1-800-243-4361 to obtain a prospectus that
includes additional information, including charges and expenses. Please read the
prospectus carefully before you invest or send money.
Sincerely,
[LOGO]
Philip R. McLoughlin
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Phoenix Value Equity Fund........................ 1
Phoenix Small Cap Value Fund..................... 8
Notes to Financial Statements.................... 15
</TABLE>
<PAGE>
PHOENIX VALUE EQUITY FUND
- ------------------------------------------------------
INVESTOR PROFILE
Phoenix Value Equity Fund is appropriate for long-term investors seeking
capital appreciation by investing in a diversified portfolio of common stocks.
INVESTMENT ADVISER'S REPORT
Since the Fund's inception on November 5, 1997 through the end of the fiscal
reporting period, August 31, 1998, Class A shares returned -10.28%, Class B
shares returned -10.92%, and Class C shares returned -10.86% compared with a
return of 3.10% for the S&P 500 Index(1) and -1.69% for the Russell 1000 Value
Index.(2) All performance figures assume reinvestment of dividends and exclude
the effect of sales charges.
Every bull market eventually gets sideswiped by an unexpected event. It just
so happens in 1998 that what that event was is not so clear-cut. We could select
Japan and its continued unwillingness to correct the banking system, which
eventually sandbagged the rest of Asia. Russia could also be a finalist, but as
we all know, the economic backlash to the U.S. was minimal. Is Latin America
finally going to go bust and take the world's sixth largest economy, Brazil,
with it? Lastly, but certainly not least, the former question does not have to
be raised to the managers at Long-Term Capital now.
The Fund's performance over the last year has been impacted greatly by the
above events. The health-care, consumer cyclical, and capital goods sectors have
held their ground during this time of volatility, while the financial,
technology, and transportation sectors remain under pressure due to the global
environment.
The Fund continues to be overweighted versus the S&P 500 in financials going
into 1999. Although our exposure to this group has hindered performance to date,
we believe this beat-up sector will seem a major bargain when we look back at
this point come mid-1999. As ugly as the financial scene has been, we see the
Fed gaining control over the crisis. We believe there is a growing probability
that any future Fed rate cuts would prove near-term catalysts to reverse
direction and sentiment for financial stocks and the markets.
OUTLOOK
As contrarians, we continue to buy heavily discounted, low-expectation stocks
that reflect our strong value bias. Valuations, in many instances, have come to
levels not seen for many years. In the near term, we are concerned with the
seasonally bad month of October and tax-loss selling but remain sanguine about
the longer-term prospects.
(1) The S&P 500 Index is an unmanaged, commonly used measure of stock market
total return performance. The Index is not available for direct investment.
(2) The Russell 1000 Value Index is an unmanaged, commonly used measure of total
return performance of large- capitalization value-oriented stocks. The Index
is not available for direct investment.
1
<PAGE>
PHOENIX VALUE EQUITY FUND
- ------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX VALUE PHOENIX VALUE PHOENIX VALUE S 500
<S> <C> <C> <C> <C>
Equity Fund-- Equity Fund-- Equity Fund--
Class A Class B Class C Index*
11/5/97 $9,524 $10,000 $10,000 $10,000
8/31/98 $8,544 $8,463 $8,825 $10,310
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIOD ENDING 8/31/98
<S> <C>
FROM INCEPTION
11/5/97 TO
8/31/98
- --------------------------------------------------------
Class A with 4.75% sales charge (14.56)%
- --------------------------------------------------------
Class A at net asset value (10.28)%
- --------------------------------------------------------
Class B with CDSC (15.37)%
- --------------------------------------------------------
Class B at net asset value (10.92)%
- --------------------------------------------------------
Class C with CDSC (11.75)%
- --------------------------------------------------------
Class C at net asset value (10.86)%
- --------------------------------------------------------
Class M with 3.50% sales charge (13.58)%
- --------------------------------------------------------
Class M at net asset value (10.47)%
- --------------------------------------------------------
S&P 500 Index* 3.10%
- --------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 11/5/97
(inception of the Fund) for Class A, B and C shares. Class M shares are closed
to investors. The total return for Class A shares reflects the maximum sales
charge of 4.75% on the initial investment and assumes reinvestment of dividends
and capital gains. Class B shares performance will be greater or less than that
shown based on differences in fees and sales charges. The total return for Class
B shares reflects the 5% contingent deferred sales charge (CDSC), which is
applicable on all shares redeemed during the 1st year after purchase and 4% for
all shares redeemed during the 2nd year after purchase (scaled down to 3%--3rd
year; 2%--4th and 5th year and 0% thereafter). The total return for Class C
shares reflects the 1% contingent deferred sales charge (CDSC) which is
applicable on all shares redeemed within one year of purchase. Returns indicate
past performance, which is not predictive of future performance. Investment
return and net asset value will fluctuate, so that your shares, when redeemed
may be worth more or less than the original cost.
* The S&P 500 Index is an unmanaged, commonly used measure of stock market total
return performance. The S&P 500's performance does not reflect sales charges.
2
<PAGE>
PHOENIX VALUE EQUITY FUND
- ------------------------------------------------------
INVESTMENTS AT AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C> <C>
COMMON STOCKS -- 87.4%
AEROSPACE/DEFENSE -- 3.7%
Boeing Co. ...................... 22,000 $ 680,625
Sundstrand Corp. ................ 7,000 318,937
------------
999,562
------------
AIR FREIGHT -- 0.6%
FDX Corp. (b).................... 3,000 150,187
------------
AUTOMOBILES -- 0.4%
Chrysler Corp. .................. 2,500 111,562
------------
BANKS (MAJOR REGIONAL) -- 3.2%
Fleet Financial Group, Inc. ..... 5,400 354,037
PNC Bank Corp. .................. 4,600 197,800
Wells Fargo & Co. ............... 1,150 324,156
------------
875,993
------------
BANKS (MONEY CENTER) -- 9.0%
BankAmerica Corp. ............... 6,500 416,406
Bankers Trust Corp. ............. 5,000 371,562
Chase Manhattan Corp. ........... 11,500 609,500
Citicorp......................... 5,000 540,625
Morgan (J.P.) & Co., Inc. ....... 2,300 213,900
NationsBank Corp. ............... 5,000 285,000
------------
2,436,993
------------
BEVERAGES (ALCOHOLIC) -- 1.5%
Anheuser-Busch Companies,
Inc. .......................... 9,000 415,125
------------
CHEMICALS -- 0.4%
Praxair, Inc. ................... 3,000 107,625
------------
COMMUNICATIONS EQUIPMENT -- 1.6%
Motorola, Inc. .................. 10,000 430,625
------------
COMPUTERS (HARDWARE) -- 1.2%
Sun Microsystems, Inc. (b)....... 8,000 317,000
------------
ELECTRICAL EQUIPMENT -- 2.8%
Honeywell, Inc. ................. 12,000 750,000
------------
ELECTRONICS (DEFENSE) -- 1.4%
Raytheon Co. Class B............. 8,400 383,250
------------
FINANCIAL (DIVERSIFIED) -- 10.8%
American Express Co. ............ 7,000 546,000
Fannie Mae....................... 15,000 852,187
Freddie Mac...................... 19,000 750,500
SLM Holding Corp. ............... 22,000 789,250
------------
2,937,937
------------
FOOTWEAR -- 0.8%
Nike, Inc. Class B............... 6,000 208,125
------------
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES -- 0.4%
Mirage Resorts, Inc. (b)......... 7,000 $ 104,125
------------
HEALTH CARE (DIVERSIFIED) -- 1.6%
Johnson & Johnson................ 6,300 434,700
------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) -- 3.5%
Lilly (Eli) & Co. ............... 5,500 360,250
Pfizer, Inc. .................... 3,000 279,000
Pharmacia & Upjohn, Inc. ........ 7,500 311,719
------------
950,969
------------
HEALTH CARE (MANAGED CARE) -- 2.0%
Foundation Health Systems, Inc.
(b)............................ 20,000 223,750
Humana, Inc. (b)................. 25,000 325,000
------------
548,750
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) -- 0.9%
Baxter International, Inc. ...... 4,500 239,625
------------
HEALTH CARE (SPECIALIZED SERVICES) -- 0.9%
ALZA Corp. (b)................... 7,000 252,000
------------
HOUSEHOLD PRODUCTS (NON-DURABLES) -- 1.2%
Procter & Gamble Co. ............ 4,100 313,650
------------
HOUSEWARES -- 0.5%
Fortune Brands, Inc. ............ 5,000 137,813
------------
INSURANCE (MULTI-LINE) -- 6.2%
American International Group,
Inc. .......................... 10,500 811,781
CIGNA Corp. ..................... 9,000 523,688
Travelers Group, Inc. ........... 8,000 355,000
------------
1,690,469
------------
INSURANCE (PROPERTY-CASUALTY) -- 6.0%
Ace Ltd. ........................ 1,000 29,000
Allstate Corp. .................. 4,000 150,000
Chicago Title Corp. ............. 16,000 563,000
General Re Corp. ................ 3,200 664,000
Travelers Property Casualty Corp.
Class A........................ 7,000 230,563
------------
1,636,563
------------
INVESTMENT BANKING/BROKERAGE -- 1.9%
Bear Stearns Companies, Inc.
(The).......................... 4,000 147,750
Merrill Lynch & Co., Inc. ....... 5,600 369,600
------------
517,350
------------
MACHINERY (DIVERSIFIED) -- 0.8%
Caterpillar, Inc. ............... 5,100 215,156
------------
MANUFACTURING (DIVERSIFIED) -- 2.7%
AlliedSignal, Inc. .............. 11,100 380,869
Illinois Tool Works, Inc. ....... 5,000 242,188
</TABLE>
See Notes to Financial Statements 3
<PAGE>
PHOENIX VALUE EQUITY FUND
- ------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C> <C>
MANUFACTURING (DIVERSIFIED)--CONTINUED
United Technologies Corp. ....... 1,500 $ 108,844
------------
731,901
------------
MANUFACTURING (SPECIALIZED) -- 1.6%
Diebold, Inc. ................... 20,000 437,500
------------
OFFICE EQUIPMENT & SUPPLIES -- 1.8%
Pitney Bowes, Inc. .............. 10,000 496,250
------------
PHOTOGRAPHY/IMAGING -- 1.5%
Eastman Kodak Co. ............... 2,000 156,250
Xerox Corp. ..................... 3,000 263,438
------------
419,688
------------
RAILROADS -- 0.9%
GATX Corp. ...................... 3,200 105,600
Union Pacific Corp. ............. 3,500 139,344
------------
244,944
------------
RESTAURANTS -- 3.3%
McDonald's Corp. ................ 16,000 897,000
------------
RETAIL (DEPARTMENT STORES) -- 0.3%
May Department Stores Co. ....... 1,500 84,375
------------
RETAIL (FOOD CHAINS) -- 1.2%
Albertson's, Inc. ............... 6,500 328,656
------------
RETAIL (GENERAL MERCHANDISE) -- 2.3%
Dayton Hudson Corp. ............. 17,200 619,200
------------
SERVICES (DATA PROCESSING) -- 1.2%
First Data Corp. ................ 16,000 331,000
------------
TELECOMMUNICATIONS (LONG DISTANCE) -- 0.5%
WorldCom, Inc. (b)............... 3,000 122,813
------------
TELEPHONE -- 4.3%
BellSouth Corp. ................. 5,200 356,525
GTE Corp. ....................... 10,000 500,000
SBC Communications, Inc. ........ 8,500 323,000
------------
1,179,525
------------
TOBACCO -- 2.5%
Philip Morris Companies, Inc. ... 16,000 665,000
------------
TOTAL COMMON STOCKS
(Identified cost $28,071,899).................................................... 23,723,006
------------
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C> <C>
FOREIGN COMMON STOCKS -- 7.5%
CHEMICALS (DIVERSIFIED) -- 1.0%
Hoechst AG Sponsored ADR
(Germany)...................... 7,000 $ 276,938
------------
FOODS -- 4.7%
Nestle SA Sponsored ADR
(Switzerland).................. 5,500 509,941
Unilever NV NY Registered Shares
(Netherlands).................. 12,000 760,500
------------
1,270,441
------------
HOUSEHOLD FURN. & APPLIANCES -- 0.7%
Royal Philips Electronics NV NY
Registered Shares
(Netherlands).................. 3,000 179,813
------------
MANUFACTURING (DIVERSIFIED) -- 0.6%
Siemens AG Sponsored ADR
(Germany)...................... 2,500 162,318
------------
TELEPHONE -- 0.5%
Telecomunicacoes Brasileiras SA
Sponsored ADR (Brazil)......... 2,000 143,625
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $2,336,327)..................................................... 2,033,135
------------
UNIT INVESTMENT TRUSTS -- 4.2%
S&P 500 Depository Receipts...... 12,000 1,148,250
------------
TOTAL UNIT INVESTMENT TRUSTS
(Identified cost $1,342,142)..................................................... 1,148,250
------------
TOTAL LONG-TERM INVESTMENTS -- 99.1%
(Identified cost $31,750,368).................................................... 26,904,391
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(UNAUDITED) (000)
------------ --------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS -- 0.4%
COMMERCIAL PAPER -- 0.4%
Goldman Sachs
5.83%, 9/1/98.............................................................. A-1+ $110 110,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $110,000)........................................................................... 110,000
---------------
TOTAL INVESTMENTS -- 99.5%
(Identified cost $31,860,368)........................................................................ 27,014,391(a)
Cash and receivables, less liabilities -- 0.5%....................................................... 136,913
---------------
NET ASSETS--100.0%..................................................................................... $ 27,151,304
---------------
---------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $471,375 and gross
depreciation of $5,334,625 for federal income tax purposes. At August 31,
1998, the aggregate cost of securities for federal income tax purposes was
$31,877,641.
(b) Non-income producing.
4 See Notes to Financial Statements
<PAGE>
Phoenix Value Equity Fund
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $31,860,368) $ 27,014,391
Cash 4,476
Receivables
Investment securities sold 230,894
Dividends and interest 38,863
Fund shares sold 25,725
Prepaid expenses 13,715
-------------
Total assets 27,328,064
-------------
LIABILITIES
Payables
Fund shares repurchased 50,595
Distribution fee 11,853
Trustees' fee 9,888
Transfer agent fee 6,200
Financial agent fee 5,843
Investment advisory fee 5,407
Accrued expenses 86,974
-------------
Total liabilities 176,760
-------------
NET ASSETS $ 27,151,304
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 32,507,139
Undistributed net investment income 69,817
Accumulated net realized loss (579,675)
Net unrealized depreciation (4,845,977)
-------------
NET ASSETS $ 27,151,304
-------------
-------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $19,765,877) 2,210,098
Net asset value per share $8.94
Offering price per share $8.94/(1-4.75%) $9.39
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $5,291,195) 595,100
Net asset value and offering price per share $8.89
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,004,713) 225,379
Net asset value and offering price per share $8.89
CLASS M
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $89,519) 10,024
Net asset value per share $8.93
Offering price per share $8.93/(1-3.50%) $9.25
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION NOVEMBER 5, 1997
TO AUGUST 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 242,395
Interest 18,496
Foreign taxes withheld (2,634)
------------
Total investment income 258,257
------------
EXPENSES
Investment advisory fee 124,124
Distribution fee--Class A 29,194
Distribution fee--Class B 34,420
Distribution fee--Class C 13,320
Distribution fee--Class M 491
Financial agent fee 61,919
Registration 103,373
Transfer agent 63,114
Custodian 19,068
Printing 18,828
Professional 18,603
Trustees 17,645
Miscellaneous 21,039
------------
Total expenses 525,138
Less expenses borne by investment adviser (282,208)
------------
Net expenses 242,930
------------
NET INVESTMENT INCOME 15,327
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (579,675)
Net change in unrealized appreciation (depreciation) on
investments (4,845,977)
------------
NET LOSS ON INVESTMENTS (5,425,652)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (5,410,325)
------------
------------
</TABLE>
See Notes to Financial Statements 5
<PAGE>
PHOENIX VALUE EQUITY FUND
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
NOVEMBER 5, 1997 TO
AUGUST 31, 1998
--------------------
<S> <C>
FROM OPERATIONS
Net investment income $ 15,327
Net realized loss (579,675)
Net change in unrealized appreciation (depreciation) (4,845,977)
--------------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (5,410,325)
--------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (11,186)
Net investment income--Class B (2,802)
Net investment income--Class C (1,239)
Net investment income--Class M (100)
In excess of net investment income--Class A (6,975)
In excess of net investment income--Class B (1,747)
In excess of net investment income--Class C (773)
In excess of net investment income--Class M (61)
--------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (24,883)
--------------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (2,356,722 shares) 25,504,049
Net asset value of shares issued from reinvestment of distributions (1,823 shares) 18,045
Cost of shares repurchased (148,447 shares) (1,615,279)
--------------------
Total 23,906,815
--------------------
CLASS B
Proceeds from sales of shares (621,551 shares) 6,514,113
Net asset value of shares issued from reinvestment of distributions (370 shares) 3,662
Cost of shares repurchased (26,821 shares) (296,436)
--------------------
Total 6,221,339
--------------------
CLASS C
Proceeds from sales of shares (260,718 shares) 2,734,842
Net asset value of shares issued from reinvestment of distributions (108 shares) 1,073
Cost of shares repurchased (35,447 shares) (375,236)
--------------------
Total 2,360,679
--------------------
CLASS M
Proceeds from sales of shares (12,175 shares) 122,245
Net asset value of shares issued from reinvestment of distributions (16 shares) 161
Cost of shares repurchased (2,167 shares) (24,727)
--------------------
Total 97,679
--------------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 32,586,512
--------------------
NET INCREASE IN NET ASSETS 27,151,304
NET ASSETS
Beginning of period 0
--------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $69,817) $ 27,151,304
--------------------
--------------------
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix Value Equity Fund
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS M
-------------- -------------- -------------- --------------
FROM INCEPTION FROM INCEPTION FROM INCEPTION FROM INCEPTION
11/5/97 TO 11/5/97 TO 11/5/97 TO 11/5/97 TO
8/31/98 8/31/98 8/31/98 8/31/98
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.03(4)(5) (0.04)(4)(5) (0.04)(4)(5) 0.01(4)(5)
Net realized and unrealized gain
(loss) (1.07) (1.05) (1.05) (1.07)
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (1.04) (1.09) (1.09) (1.06)
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.01) (0.01) (0.01) (0.01)
In excess of net investment income (0.01) (0.01) (0.01) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.02) (0.02) (0.02) (0.01)
------ ------ ------ ------
Change in net asset value (1.06) (1.11) (1.11) (1.07)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 8.94 $ 8.89 $ 8.89 $ 8.93
------ ------ ------ ------
------ ------ ------ ------
Total return(1) (10.28)%(3) (10.92)%(3) (10.86)%(3) (10.47)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $19,766 $5,291 $2,005 $90
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.25%(2) 2.00%(2) 2.00%(2) 1.50%(2)
Net investment income (loss) 0.31%(2) (0.45)%(2) (0.45)%(2) 0.15%(2)
Portfolio turnover 59%(3) 59%(3) 59%(3) 59%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.15,
$0.15, $0.15 and $0.15, respectively.
See Notes to Financial Statements 7
<PAGE>
PHOENIX SMALL CAP VALUE FUND
- ------------------------------------------------------
INVESTOR PROFILE
Phoenix Small Cap Value Fund is appropriate for long-term investors seeking
capital appreciation by investing in a diversified portfolio of common stocks of
small companies with capitalizations of $100 million to $1 billion. Investors
should note that small company investing involves added risks, including greater
price volatility, less liquidity, and increased competitive threat.
INVESTMENT ADVISER'S REPORT
Since the Fund's inception on November 5, 1997 through the end of the fiscal
reporting period, August 31, 1998, Class A shares returned -18.64%, Class B
shares returned -19.07%, and Class C shares returned -19.09% compared with a
return of -16.30% for the Russell 2000 Value Index.(1) All performance figures
assume reinvestment of dividends and exclude the effect of sales charges.
Every bull market eventually gets sideswiped by an unexpected event. It just
so happens in 1998 that what that event was is not so clear-cut. We could select
Japan and its continued unwillingness to correct the banking system, which
eventually sandbagged the rest of Asia. Russia could also be a finalist, but as
we all know, the economic backlash to the U.S. was minimal. Is Latin America
finally going to go bust and take the world's sixth largest economy, Brazil,
with it? Lastly, but certainly not least, the former question does not have to
be raised to the managers at Long-Term Capital now.
The Fund's performance over the last year has been impacted greatly by the
above events. The health-care, consumer cyclical, and capital goods sectors have
held their ground during this time of volatility, while the financial,
technology, and transportation sectors remain under pressure due to the global
environment.
The Fund continues to be overweighted versus the S&P 500 in financials going
into 1999. Although our exposure to this group has hindered performance to date,
we believe this beat-up sector will seem a major bargain when we look back at
this point come mid-1999. As ugly as the financial scene has been, we see the
Fed gaining control over the crisis. We believe there is a growing probability
that any future Fed rate cuts would prove near-term catalysts to reverse
direction and sentiment for financial stocks and the markets.
OUTLOOK
As contrarians, we continue to buy heavily discounted, low-expectation stocks
that reflect our strong value bias. Valuations, in many instances, have come to
levels not seen for many years. In the near term, we are concerned with the
seasonally bad month of October and tax-loss selling but remain sanguine about
the longer-term prospects.
(1) The Russell 2000 Value Index is an unmanaged, commonly used measure of total
return performance of small- capitalization value-oriented stocks. The Index
is not available for direct investment.
8
<PAGE>
Phoenix Small Cap Value Fund
- ------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX SMALL CAP VALUE FUND-- PHOENIX SMALL CAP VALUE FUND-- PHOENIX SMALL CAP VALUE FUND-- RUSSELL 2000
<S> <C> <C> <C> <C>
Class A Class B Class C Value Index*
11/20/97 $9,524 $10,000 $10,000 $10,000
8/31/98 $7,749 $7,690 $8,010 $8,370
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURNS FOR PERIOD ENDING 8/31/98
<S> <C>
FROM INCEPTION
11/20/97 TO
8/31/98
- --------------------------------------------------------
Class A with 4.75% sales charge (22.51)%
- --------------------------------------------------------
Class A at net asset value (18.64)%
- --------------------------------------------------------
Class B with CDSC (23.10)%
- --------------------------------------------------------
Class B at net asset value (19.07)%
- --------------------------------------------------------
Class C with CDSC (19.90)%
- --------------------------------------------------------
Class C at net asset value (19.09)%
- --------------------------------------------------------
Class M with 3.50% sales charge (21.62)%
- --------------------------------------------------------
Class M at net asset value (18.80)%
- --------------------------------------------------------
Russell 2000 Value Index* (16.30)%
- --------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 11/20/97
(inception of the Fund) for Class A, B and C shares. Class M shares are closed
to investors. The total return for Class A shares reflects the maximum sales
charge of 4.75% on the initial investment and assumes reinvestment of dividends
and capital gains. Class B share performance will be greater or less than that
shown based on differences in fees and sales charges. The total return for Class
B shares reflects the 5% contingent deferred sales charge (CDSC), which is
applicable on all shares redeemed during the 1st year after purchase and 4% for
all shares redeemed during the 2nd year after purchase (scaled down to 3%--3rd
year; 2%--4th and 5th year and 0% thereafter). The total return for Class C
shares reflects the 1% contingent deferred sales charge (CDSC) which is
applicable on all shares redeemed within one year of purchase. Returns indicate
past performance, which is not predictive of future performance. Investment
return and net asset value will fluctuate, so that your shares, when redeemed
may be worth more or less than the original cost.
* The Russell 2000 Value Index is an unmanaged, commonly used measure of total
return performance of small-capitalization value-oriented stocks. The index
does not reflect sales charges.
9
<PAGE>
Phoenix Small Cap Value Fund
- ------------------------------------------------------
INVESTMENTS AT AUGUST 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
COMMON STOCKS -- 95.0%
AEROSPACE/DEFENSE -- 0.3%
Gulfstream Aerospace Corp. (b)... 2,000 $ 70,250
------------
AIRLINES -- 0.8%
America West Holdings Corp.
(b)............................ 10,000 194,375
------------
BANKS (MAJOR REGIONAL) -- 5.6%
Bank Plus Corp. ................. 27,000 205,875
Charter One Financial, Inc. ..... 20,000 460,000
FirstMerit Corp. ................ 4,400 97,350
St. Paul Bancorp., Inc. ......... 9,000 155,250
Washington Federal, Inc. ........ 17,000 384,625
------------
1,303,100
------------
BIOTECHNOLOGY -- 1.0%
ICOS Corp. (b)................... 15,000 223,125
------------
BROADCASTING (TELEVISION, RADIO & CABLE) -- 3.0%
Jones Intercable, Inc. (b)....... 15,000 345,000
Westwood One, Inc. (b)........... 18,000 347,625
------------
692,625
------------
BUILDING MATERIALS -- 6.8%
Lennar Corp. .................... 29,100 527,437
Toll Brothers, Inc. (b).......... 25,500 651,844
Webb (Del E.) Corp. ............. 20,000 393,750
------------
1,573,031
------------
CHEMICALS (SPECIALTY) -- 1.8%
Fuller (H.B.) Co. ............... 9,000 427,500
------------
COMPUTERS (PERIPHERALS) -- 0.4%
At Home Corp. (b)................ 3,300 94,050
------------
COMPUTERS (SOFTWARE & SERVICES) -- 7.0%
Black Box Corp. (b).............. 5,600 128,100
Concurrent Computer Corp. (b).... 78,000 156,000
Fremont General Corp. ........... 19,000 812,250
PeopleSoft, Inc. (b)............. 12,300 345,937
Walker Interactive Systems (b)... 30,000 180,000
------------
1,622,287
------------
CONSUMER FINANCE -- 1.8%
New Century Financial Corp.
(b)............................ 46,000 425,500
------------
CONTAINERS & PACKAGING (PAPER) -- 0.4%
Shorewood Packaging Corp. (b).... 7,500 97,500
------------
ELECTRONICS (COMPONENT DISTRIBUTORS) -- 2.5%
AFC Cable Systems, Inc. (b)...... 7,000 162,094
CHS Electronics, Inc. (b)........ 34,000 429,250
------------
591,344
------------
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
ELECTRONICS (INSTRUMENTATION) -- 1.8%
Dallas Semiconductor Corp. ...... 15,000 $ 405,937
------------
ENTERTAINMENT -- 0.8%
AMC Entertainment Inc. (b)....... 14,500 184,875
------------
EQUIPMENT (SEMICONDUCTORS) -- 1.1%
Broadcom Corp. (b)............... 5,000 256,250
------------
FINANCIAL (DIVERSIFIED) -- 1.4%
Finet Holdings Corp. (b)......... 12,000 11,250
Jefferies Group, Inc. ........... 5,000 142,812
Southern Pacific Funding Corp.
(b)............................ 22,000 178,750
------------
332,812
------------
HEALTH CARE (LONG TERM CARE) -- 0.5%
Sun Healthcare Group, Inc. (b)... 12,000 105,000
------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) -- 2.2%
Alaris Medical, Inc. (b)......... 95,000 326,562
Cell Genesys, Inc. (b)........... 46,000 192,625
------------
519,187
------------
HOMEBUILDING -- 1.9%
D. R. Horton, Inc. .............. 9,000 144,000
NVR, Inc. ....................... 9,000 293,062
------------
437,062
------------
HOUSEHOLD FURN. & APPLIANCES -- 0.4%
Furniture Brands International,
Inc. (b)....................... 4,500 100,687
------------
INSURANCE (MULTI-LINE) -- 6.3%
Ambac Financial Group, Inc. ..... 10,000 471,875
Everest Reinsurance Holdings,
Inc. .......................... 1,000 35,000
Horace Mann Educators Corp. ..... 28,000 780,500
NAC Re Corp. .................... 1,000 47,188
RenaissanceRe Holdings Ltd. ..... 3,000 125,625
------------
1,460,188
------------
INSURANCE (PROPERTY-CASUALTY) -- 8.8%
Chartwell Re Corp. .............. 13,200 347,325
Commerce Group, Inc. ............ 22,000 577,500
Executive Risk, Inc. ............ 2,000 72,000
LandAmerica Financial Group,
Inc. .......................... 16,000 795,000
Selective Insurance Group, Inc
(b)............................ 15,000 266,719
------------
2,058,544
------------
IRON & STEEL -- 1.4%
Quanex Corp. .................... 15,000 326,250
------------
</TABLE>
10 See Notes to Financial Statements
<PAGE>
PHOENIX SMALL CAP VALUE FUND
- ------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
MACHINERY (DIVERSIFIED) -- 2.8%
Blount International, Inc. Class
A.............................. 20,500 $ 486,875
Stewart & Stevenson Services,
Inc. .......................... 13,000 169,813
------------
656,688
------------
MANUFACTURING (DIVERSIFIED) -- 2.8%
Furon Co. ....................... 32,500 534,219
Trinity Industries, Inc. ........ 4,000 121,000
------------
655,219
------------
MANUFACTURING (SPECIALIZED) -- 1.0%
Fleetwood Enterprises, Inc. ..... 7,000 234,063
------------
METALS MINING -- 1.5%
AK Steel Holding Corp. .......... 9,000 124,875
Titanium Metals Corp. (b)........ 20,000 230,000
------------
354,875
------------
RAILROADS -- 2.2%
Railtex, Inc. (b)................ 36,900 516,600
------------
REITS -- 0.7%
Hospitality Properties Trust..... 6,000 165,000
------------
RETAIL (BUILDING SUPPLIES) -- 4.1%
Homebase, Inc. (b)............... 46,000 281,750
Sherwin-Williams Co. ............ 28,000 668,500
------------
950,250
------------
RETAIL (GENERAL MERCHANDISE) -- 1.0%
Heilig-Meyers Co. ............... 21,000 238,875
------------
RETAIL (SPECIALTY) -- 4.6%
Claire's Stores, Inc. ........... 46,000 690,000
Talbots, Inc. (The) (b).......... 18,000 379,125
------------
1,069,125
------------
SAVINGS & LOAN COMPANIES -- 0.9%
Bank United Corp. ............... 6,000 199,500
------------
SERVICES (ADVERTISING/MARKETING) -- 0.8%
Catalina Marketing Corp. (b)..... 4,000 168,250
Purchase Point Media Corp. (b)... 5,000 20,000
------------
188,250
------------
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C> <C>
SERVICES (COMMERCIAL/CONSUMER) -- 1.4%
Wackenhut Corp. Class A.......... 17,500 $ 332,500
------------
SPECIALTY PRINTING -- 4.3%
Valassis Communications, Inc.
(b)............................ 20,000 596,250
World Color Press, Inc. (b)...... 14,500 407,813
------------
1,004,063
------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) -- 6.1%
Applied Cellular Technology, Inc.
(b)............................ 28,500 51,656
Crown Castle International
Corp. ......................... 10,000 81,250
Iridium World Communications Ltd.
(b)............................ 8,000 264,000
L-3 Communications Holdings, Inc.
(b)............................ 15,500 513,438
Scientific Atlanta, Inc. ........ 29,100 514,706
------------
1,425,050
------------
TEXTILES (APPAREL) -- 2.8%
Supreme International Corp.
(b)............................ 33,000 387,750
Tandy Brand Accessories, Inc.
(b)............................ 19,700 262,872
------------
650,622
------------
TOTAL COMMON STOCKS
(Identified cost $28,591,278).................................................... 22,142,159
------------
FOREIGN COMMON STOCKS -- 1.0%
FINANCIAL (DIVERSIFIED) -- 1.0%
London Pacific Group Ltd.
Sponsored ADR.................. 20,000 227,500
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $298,610)....................................................... 227,500
------------
UNIT INVESTMENT TRUSTS -- 4.1%
S&P 500 Depositary Receipts...... 10,000 956,875
------------
TOTAL UNIT INVESTMENT TRUSTS
(Identified cost $1,177,334)..................................................... 956,875
------------
TOTAL INVESTMENTS --100.1%
(Identified cost $30,067,222).................................................... 23,326,534(a)
Cash and receivables, less liabilities--(0.1%)................................... (28,775)
------------
NET ASSETS--100.0%................................................................. $ 23,297,759
------------
------------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $453,284 and gross
depreciation of $7,252,120 for federal income tax purposes. At August 31,
1998, the aggregate cost of securities for federal income tax purposes was
$30,125,370.
(b) Non-income producing.
See Notes to Financial Statements 11
<PAGE>
Phoenix Small Cap Value Fund
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $30,067,222) $ 23,326,534
Cash 290,607
Receivables
Fund shares sold 69,304
Receivable from adviser 6,748
Dividends and interest 18,353
Prepaid expenses 17,365
-------------
Total assets 23,728,911
-------------
LIABILITIES
Payables
Investment securities purchased 149,475
Fund shares repurchased 157,954
Distribution fee 12,491
Transfer agent fee 6,044
Financial agent fee 5,075
Trustees' fee 4,500
Accrued expenses 95,613
-------------
Total liabilities 431,152
-------------
NET ASSETS $ 23,297,759
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 30,051,480
Accumulated net realized loss (13,033)
Net unrealized depreciation (6,740,688)
-------------
NET ASSETS $ 23,297,759
-------------
-------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $14,518,616) 1,790,631
Net asset value per share $8.11
Offering price per share $8.11/(1-4.75%) $8.51
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $5,921,541) 733,996
Net asset value and offering price per share $8.07
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,769,772) 343,328
Net asset value and offering price per share $8.07
CLASS M
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $87,830) 10,849
Net asset value per share $8.10
Offering price per share $8.10/(1-3.50%) $8.39
</TABLE>
STATEMENT OF OPERATIONS
FROM INCEPTION NOVEMBER 20, 1997
TO AUGUST 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 164,726
Interest 33,948
------------
Total investment income 198,674
------------
EXPENSES
Investment advisory fee 145,860
Distribution fee--Class A 27,599
Distribution fee--Class B 34,110
Distribution fee--Class C 16,544
Distribution fee--Class M 513
Financial agent fee 57,509
Registration 98,739
Transfer agent 64,660
Custodian 19,266
Printing 17,794
Professional 17,581
Trustees 15,963
Miscellaneous 28,473
------------
Total expenses 544,611
Less expenses borne by investment adviser (279,449)
------------
Net expenses 265,162
------------
NET INVESTMENT LOSS (66,488)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 12,932
Net change in unrealized appreciation (depreciation) on
investments (6,740,688)
------------
NET LOSS ON INVESTMENTS (6,727,756)
------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ (6,794,244)
------------
------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
PHOENIX SMALL CAP VALUE FUND
- ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM INCEPTION
NOVEMBER 20, 1997 TO
AUGUST 31, 1998
---------------------
<S> <C>
FROM OPERATIONS
Net investment loss $ (66,488)
Net realized gain 12,932
Net change in unrealized appreciation (depreciation) (6,740,688)
---------------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (6,794,244)
---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
In excess of net investment income--Class A (27,475)
In excess of net investment income--Class B (2,932)
In excess of net investment income--Class C (1,800)
In excess of net investment income--Class M (251)
---------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (32,458)
---------------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (2,003,648 shares) 20,830,478
Net asset value of shares issued from reinvestment of distributions (2,693 shares) 26,901
Cost of shares repurchased (215,710 shares) (2,249,618)
---------------------
Total 18,607,761
---------------------
CLASS B
Proceeds from sales of shares (779,154 shares) 8,252,028
Net asset value of shares issued from reinvestment of distributions (224 shares) 2,235
Cost of shares repurchased (45,382 shares) (463,815)
---------------------
Total 7,790,448
---------------------
CLASS C
Proceeds from sales of shares (381,563 shares) 4,020,977
Net asset value of shares issued from reinvestment of distributions (102 shares) 1,015
Cost of shares repurchased (38,337 shares) (402,328)
---------------------
Total 3,619,664
---------------------
CLASS M
Proceeds from sales of shares (14,556 shares) 146,910
Net asset value of shares issued from reinvestment of distributions (25 shares) 250
Cost of shares repurchased (3,732 shares) (40,572)
---------------------
Total 106,588
---------------------
INCREASE IN NET ASSETS FROM SHARE TRANSACTIONS 30,124,461
---------------------
NET INCREASE IN NET ASSETS 23,297,759
NET ASSETS
Beginning of period 0
---------------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $0) $ 23,297,759
---------------------
---------------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Phoenix Small Cap Value Fund
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS M
-------------- -------------- -------------- --------------
FROM INCEPTION FROM INCEPTION FROM INCEPTION FROM INCEPTION
11/20/97 TO 11/20/97 TO 11/20/97 TO 11/20/97 TO
8/31/98 8/31/98 8/31/98 8/31/98
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.01)(4)(5) (0.08)(4)(5) (0.08)(4)(5) (0.03)(4)(5)
Net realized and unrealized gain
(loss) (1.85) (1.82) (1.82) (1.84)
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (1.86) (1.90) (1.90) (1.87)
------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income -- -- -- --
In excess of net investment income (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.03) (0.03) (0.03) (0.03)
------ ------ ------ ------
Change in net asset value (1.89) (1.93) (1.93) (1.90)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 8.11 $ 8.07 $ 8.07 $ 8.10
------ ------ ------ ------
------ ------ ------ ------
Total return(1) (18.64)%(3) (19.07)%(3) (19.09)%(3) (18.80)%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $14,519 $5,922 $2,770 $88
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.40%(2) 2.15%(2) 2.15%(2) 1.65%(2)
Net investment income (loss) (0.14)%(2) (1.01)%(2) (0.98)%(2) (0.30)%(2)
Portfolio turnover 105%(3) 105%(3) 105%(3) 105%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by invetsment adviser of $0.14,
$0.14, $0.14 and $0.14, respectively.
14 See Notes to Financial Statements
<PAGE>
PHOENIX INVESTMENT TRUST 97
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix Investment Trust 97 (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company whose shares
are offered in two separate Series, each a "Fund". Each Fund has distinct
investment objectives.
Phoenix Value Equity Fund's primary investment objective is to seek long-term
capital appreciation and its secondary objective is to seek current income by
investing in a diversified portfolio of common stocks.
Phoenix Small Cap Value Fund seeks long-term capital appreciation.
Each Fund offers Class A, Class B and Class C shares. Class M shares have been
closed to new investors. Class A shares are sold with the front-end sales charge
of up to 4.75%. 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. Class M shares are sold with a front-end
sales charge of up to 3.50%. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. Income and expenses of each Fund
are borne pro rata by the holders of all classes of shares, except that each
class bears distribution expenses unique to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported 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 last bid price. Short-term investments having a remaining
maturity of 60 days or less are valued at amortized cost which approximates
market. All other securities and assets are valued at fair value as determined
in good faith by or under the direction of the Trustees.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date or, in the case of certain foreign securities, as soon as the Fund is
notified. Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
Fund in the Trust to comply with the requirements of the Internal Revenue Code
(the "Code"), applicable to regulated investment companies, and to distribute
all of its taxable and tax-exempt 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 non-taxable dividends, 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. 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 offset with the same counterparty,
15
<PAGE>
PHOENIX INVESTMENT TRUST 97
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998 (CONTINUED)
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.
G. EXPENSES:
Expenses incurred by the Trust with respect to more than one Fund are
allocated in proportion to the net assets of each Fund, except where allocation
of direct expense to each Fund or an alternative allocation method can be more
fairly made.
H. REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction where a Fund acquires a security for
cash and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date. Each Fund, through its custodian,
takes possession of securities collateralizing the repurchase agreement. The
collateral is marked-to-market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund in the event of default
by the seller. If the seller defaults and the value of the collateral declines,
or, if the seller enters insolvency proceedings, realization of collateral may
be delayed or limited.
2. INVESTMENT ADVISORY FEE AND
RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Adviser, Phoenix Investment
Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home Life Mutual
Insurance Company ("PHL"), is entitled to a fee based upon the following annual
rates as a percentage of the average daily net assets of each separate Fund:
<TABLE>
<CAPTION>
1ST $1 $1-2 $2+
FUND BILLION BILLION BILLION
- ---------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Value Equity Fund................. 0.75% 0.70% 0.65%
Small Cap Value Fund.............. 0.90% 0.85% 0.80%
</TABLE>
The Adviser has voluntarily agreed to assume total operating expenses of each
Fund excluding interest, taxes, brokerage fees, commissions and extraordinary
expenses, until August 31, 1998, to the extent that such expenses exceed the
following percentages of the average annual net asset values for each Fund:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS M
SHARES SHARES SHARES SHARES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Value Equity Fund..... 1.25% 2.00% 2.00% 1.50%
Small Cap Value
Fund................ 1.40% 2.15% 2.15% 1.65%
</TABLE>
As Distributor of the Trust's shares, Phoenix Equity Planning Corp. ("PEPCO"),
an indirect majority-owned subsidiary of PHL, has advised the Trust that it
retained net selling commissions of $29,279 for Class A shares and $354 for
Class M shares, and deferred sales charges of $5,771 for Class B shares and
$3,876 for Class C shares for the period ended August 31, 1998. In addition,
each Fund pays PEPCO a distribution fee at an annual rate of 0.25% for Class A
shares, 1.00% for Class B shares, 1.00% for Class C shares and 0.50% for Class M
shares applied to the average daily net assets of the Fund. The Distributor has
advised the Trust that of the total amount expensed for the period ended August
31, 1998, $100,907 was earned by the Distributor, $50,717 was paid to
unaffiliated participants, and $4,567 was paid to W.S. Griffith, an indirect
subsidiary of PHL.
As Financial Agent of each Fund, PEPCO received a fee for bookkeeping,
administration and pricing services through May 31, 1998, at an annual rate of
0.005% of average daily net assets up to $100 million, 0.04% of average daily
net assets of $100 million to $300 million, 0.03% of average daily net assets of
$300 million through $500 million, and 0.015% of average daily net assets
greater than $500 million; a minimum fee applied. Effective June 1, 1998, PEPCO
receives a financial agent fee equal to the sum of (1) the documented cost of
fund accounting and related services provided by PFPC Inc. (subagent to PEPCO),
plus (2) the documented cost to PEPCO to provide financial reporting, tax
services and oversight of subagent's performance. The current fee schedule of
PFPC Inc. ranges from 0.085% to 0.0125% of the average daily net asset values of
each Fund. Certain minimum fees and fee waivers may apply.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the period ended August 31, 1998, transfer
agent fees were $127,774 of which PEPCO retained $141 which is net of the fees
paid to State Street.
At August 31, 1998, PHL and its affiliates held shares of the Trust which
aggregated the following:
<TABLE>
<CAPTION>
AGGREGATE
NET ASSET
SHARES VALUE
------------ ------------
<S> <C> <C>
Value Equity Fund-Class A........... 1,313,245 $ 11,740,410
Value Equity Fund-Class B........... 10,020 89,078
Value Equity Fund-Class C........... 10,016 89,042
Value Equity Fund-Class M........... 10,014 89,425
Small Cap Value Fund-Class A........ 471,506 3,823,914
Small Cap Value Fund-Class B........ 10,029 80,934
Small Cap Value Fund-Class C........ 10,026 80,910
Small Cap Value Fund-Class M........ 10,025 81,203
</TABLE>
16
<PAGE>
PHOENIX INVESTMENT TRUST 97
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998 (CONTINUED)
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the period ended August 31, 1998
(excluding U.S. Government and agency securities, and short-term securities)
aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Value Equity Fund.................... $ 44,430,205 $ 12,102,273
Small Cap Value Fund................. 51,096,620 21,042,107
</TABLE>
There were no purchases or sales of long-term U.S. Government and agency
securities during the period ended August 31, 1998.
4. MARKET RISK
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.
5. CAPITAL LOSS CARRYOVERS
Under current tax law, capital losses realized after October 31, 1997 may be
deferred and treated as occuring on the first day of the following fiscal year.
For the year ended August 31, 1998, the Value Equity Fund deferred capital
losses of $562,402.
6. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Funds have recorded
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of each of the Funds and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of August 31, 1998, the
Funds recorded the following reclassifications to increase (decrease) the
accounts listed beow:
<TABLE>
<CAPTION>
UNDISTRIBUTED CAPITAL PAID
NET ACCUMULATED IN ON SHARES
INVESTMENT NET REALIZED OF BENEFICIAL
INCOME GAIN (LOSS) INTEREST
------------- ------------ -------------
<S> <C> <C> <C>
Value Equity
Fund........... 79,373 -- (79,373)
Small Cap Value
Fund........... 98,946 (25,965) (72,981)
</TABLE>
This report is not authorized for distribution to prospective investors in the
Phoenix Investment Trust 97 unless preceded or accompanied by an effective
Prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------
[LOGO]
To the Trustees and Shareholders of
Phoenix Investment Trust 97
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Phoenix Value Equity Fund and Phoenix Small Cap Value Fund (constituting The
Phoenix Investment Trust 97, hereinafter referred to as the "Trust") at August
31, 1998, the results of each of their operations, the changes in each of their
net assets and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 14, 1998
18
<PAGE>
PHOENIX INVESTMENT TRUST 97
101 Munson Street
Greenfield, Massachusetts 01301
TRUSTEES
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
OFFICERS
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
John F. Sharry, Executive Vice President
Christian C. Bertelsen, Vice President
William E. Keen, III, Vice President
William R. Moyer, Vice President
Leonard J. Saltiel, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Clerk and Secretary
INVESTMENT ADVISER
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
PRINCIPAL UNDERWRITER
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
TRANSFER AGENT
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
HOW TO CONTACT US
Toll-Free Numbers
The Fund Connection 1-800-243-1574
Customer Service 1-800-243-1574 (option 0)
Investment Strategy Hotline 1-800-243-4361 (option 2)
Marketing Department 1-800-243-4361 (option 3)
Text Telephone 1-800-243-1926
Internet access:
www.phoenixinvestments.com
<PAGE>
PHOENIX FUNDS
PO Box 2200
Enfield CT 06083-2200 BULK RATE MAIL
U.S. POSTAGE
PAID
SPRINGFIELD, MA
PERMIT NO. 444
[LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 215 (10/98)
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