Phoenix Investment Partners
April 30, 1999
Phoenix-Euclid
Market Neutral Fund
SEMIANNUAL REPORT
[LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
---------
CONTENTS
---------
1 Letter to Shareholders
4 Schedule of Investments
and Securities Sold Short
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Notes to Financial Statements
19 Financial Highlights
This report has been prepared for the information of shareholders of
Phoenix-Euclid Market Neutral Fund and is not authorized for use unless preceded
or accompanied by a current prospectus. The prospectus includes information
regarding the fund's sales charges, expenses, objectives, policies, management,
performance and other information. Please read it carefully before you invest or
send money. Call your financial advisor or Phoenix Equity Planning Corporation
at 1-800-272-2700 to obtain a copy of the prospectus.
The performance data quoted represent past performance, which is no guarantee of
future results. Investment return and principal value will fluctuate so that
your shares, when redeemed, may be worth more or less than their original cost.
The shorter the time period of your investment, the greater the possibility of
loss. Fund shares are not deposits or obligations of, or insured or guaranteed
by, the U.S. government, any financial institution, the Federal Deposit
Insurance Corporation, or any other agency, entity or person.
<PAGE>
[PHOTO OMITTED]
DAVID KATZEN
Portfolio Manager
DEAR FELLOW SHAREHOLDER,
It hasn't been an easy year for market neutral strategies, or for
valuation-based stock picking--both of which the Euclid Market Neutral Fund
employs. While we are disappointed with the fund's results, we urge you to keep
in mind the unusual character of the market over the past year.
During the six months ended April 30, 1999, the fund's Class A Shares lost 4.6%,
versus a gain of 2.1% for three-month Treasury bills. Class B and C Shares
(which have no initial sales charge, but bear higher annual expenses) lost 4.9%
and 5.0%, respectively. For the 12 months ended April 30, 1999, the fund's Class
A Shares declined 8.8%, compared to the 4.6% return of three-month Treasury
bills. Class B and C Shares declined 9.4% and 9.5%, respectively.
LARGE-CAP STOCKS DOMINATED THE FIELD
While over the long term, small- and mid-cap stocks have outpaced large-cap
stocks, each group has experienced periods of dominance. We've designed our
market neutral strategy to perform well independent of which group of stocks is
outperforming. As the chart below illustrates, however, the past 12 months saw
large-cap stocks trounce the rest of the market. The extent of the large-cap
outperformance--greater than we've seen in at least 25 years--overwhelmed our
strategy this year.
We examined the returns of the S&P Super Composite Index--made up of 500
large-cap stocks, 400 mid-cap stocks, and 600 small-cap stocks. We divided these
1500 stocks into quintiles, or five groups of 300 names, by market
capitalization. The first quintile--the largest 300 stocks--was the only group
to post positive returns over the past 12 months. Investors have been choosing
the largest stocks, ignoring the smaller, lesser-known names.
- --------------------------------------------------------------------------------
ONLY THE LARGEST STOCKS MADE MONEY
- --------------------------------------------------------------------------------
QUINTILE MARKET CAPITALIZATION 12-MONTH RETURN
- ---------------- --------------------------------------- ---------------------
1 $ 16.3 BILLION 16.6%
2 $ 3.5 BILLION -1.1%
3 $ 1.3 BILLION -10.4%
4 $ .6 BILLION -18.7%
5 $ .2 BILLION -32.0%
MEDIAN $ 1.3 BILLION -8.4%
OVERVALUED STOCKS OUTPACED THE MARKET
Historically, a valuation-based approach to picking stocks has paid off. That
is, buying stocks whose share price is a low multiple of their earnings has
usually resulted in good long-term returns. But look at the S&P Super Composite
divided into quintiles by price/earnings ratio. The first quintile represents
the stocks trading at the highest P/Es--the stocks we consider overvalued. This
quintile significantly outperformed the other four quintiles over the past year,
earning 16.2% versus a median return of negative 8.4% for all 1,500 stocks.
Investors have been buying the most expensive stocks and shunning more
reasonably priced names.
1
<PAGE>
- --------------------------------------------------------------------------------
THE MOST EXPENSIVE STOCKS EARNED THE STRONGEST RETURNS
- --------------------------------------------------------------------------------
QUINTILE P/E Ratio 12-month return
- ---------------- --------------------------------------- ---------------------
1 48.0x 16.2%
- --------------------------------------------------------------------------------
2 24.7x -6.2%
- --------------------------------------------------------------------------------
3 17.2x -7.2%
- --------------------------------------------------------------------------------
4 12.7x -18.4%
- --------------------------------------------------------------------------------
5 7.6x -31.5%
- --------------------------------------------------------------------------------
median 19.4x -8.4%
THE FASTEST-GROWING STOCKS AT THE HIGHEST PRICES PERFORMED THE BEST
Pursuing the highest growth at any cost has historically been a volatile and
risky investment strategy. During the last year, however, these stocks have been
the best performers. The chart below divides the S&P Super Composite into
quartiles, ranking them by earnings per share growth and by price/earnings
ratio. As you read the chart from left to right, stocks in the first quartile
have the highest earnings growth, while stocks in the fourth quartile have the
lowest earnings growth. Reading from top to bottom, the first quartile has the
highest P/E ratios, and the fourth quartile has the lowest P/E ratios.
- --------------------------------------------------------------------------------
GROWTH AT ANY COST DOMINATED DURING THE PAST YEAR
- --------------------------------------------------------------------------------
HIGHEST EPS GROWTH LOWEST
------------------ -------------------------- ---------------------
HIGHEST -3.7% -4.2% -1.3% -13.0%
----------------------------------------------------------------------
- --------- -14.3% 0.3% 1.5% -11.8%
P/E RATIO ----------------------------------------------------------------------
- --------- -9.5% -6.5% -12.6% -11.8%
----------------------------------------------------------------------
LOWEST -19.6% -13.3% -7.7% -12.1%
----------------------------------------------------------------------
Looking at the left-hand column, which shows the fastest-growing stocks ranked
from highest P/E to lowest P/E, you can see that, over the last 12 months,
growth has been worth whatever the market is charging for it. In other words,
the more you paid the more you made.
The bottom left-hand corner shows the median return of those stocks with the
fastest earnings growth and the lowest P/Es. These are stocks that our
quantitative approach finds attractive, because they represent a favorable
trade-off between growth and value. Their return for the past year, however, is
a dismal -19.6%. The upper right-hand corner shows the median return of the
stocks with the slowest earnings growth and the highest P/Es. These are stocks
that we find unattractive and would consider candidates for short positions,
because we believe they represent poor value. Their 12-month return is -13.0%,
still negative, but stronger than the stocks in our long portfolio.
2
<PAGE>
UNUSUAL MARKET CONDITIONS FOR AN UNPRECEDENTED LENGTH OF TIME
While trends like those illustrated in the charts have certainly occurred
before, they've never been so intense or so prolonged. We choose stocks that
demonstrate fundamental characteristics that historically have led to
outperformance, while shorting stocks that demonstrate fundamental
characteristics that have led to underperformance. During the past year, these
historically reliable factors have had little or no predictive value, and our
fund has suffered as a result.
We had managed market neutral accounts on a private basis for over eight years
prior to starting the fund. In that time, those accounts saw one other period as
difficult as the one we've just been through. Even counting that rough patch,
however, the private accounts managed to beat the return of three-month Treasury
bills by six to seven percentage points a year.*
The lesson in this is twofold: One year does not a track record make, and market
neutral is not a synonym for risk-free.
That said, I want to thank our shareholders for their patience and confidence in
our approach during the past year. We view the fund as a vehicle to offer
capital appreciation independent of the direction of the overall stock market
and the direction of interest rates. A market neutral strategy can offer
powerful diversification, as well as a low risk profile compared with most U.S.
stock funds, real estate, and precious metals.
We will continue to manage the fund in the manner that earned us strong
long-term returns in the private accounts in anticipation of a period in which
the market once again favors the types of stocks we believe offer a significant
opportunity for outperformance. We thank you for your continued support of our
efforts.
Sincerely,
/s/ David Katzen
DAVID KATZEN
Executive Vice President
May 20, 1999
* Past performance of the private accounts is no
guarantee of future results of the mutual fund.
3
<PAGE>
SCHEDULE OF INVESTMENTS AND SECURITIES SOLD SHORT
APRIL 30, 1999 (UNAUDITED)
Number Value
of Shares (Note 3)
================================================================================
INVESTMENTS
COMMON STOCKS: 89.56%
Aerospace and Defense: 2.12%
B.F. Goodrich & Co. 28,400 $ 1,128,900
Boeing Co. 17,900 727,187
Cordant Technologies, Inc. 8,000 369,000
Northrop Grumman Corp. 7,900 505,106
-----------------
2,730,193
-----------------
Agricultural Products: 0.10%
Corn Products International, Inc. 3,600 103,950
Universal Corp. 800 20,350
-----------------
124,300
-----------------
Airlines: 1.50%
* Alaska Air Group, Inc. 13,200 581,625
* America West Holding Corp.,
Class B 55,900 1,166,913
Delta Air Lines, Inc. 2,800 177,625
-----------------
1,926,163
-----------------
Automotive Parts and
Equipment: 1.15%
Arvin Industries, Inc. 13,413 491,251
Borg-Warner Automotive, Inc. 2,500 141,875
ITT Industries, Inc. 8,700 313,200
Magna International, Inc.,
Class A 400 23,900
Mark IV Industries, Inc. 28,400 507,650
-----------------
1,477,876
-----------------
Automobiles: 1.20%
General Motors Corp. 17,300 1,538,619
-----------------
Banks-Money Center: 1.21%
J.P. Morgan & Co., Inc. 5,000 673,750
UnionBancal Corp. 25,700 877,012
-----------------
1,550,762
-----------------
Banks-Regional: 2.36%
BancWest Corp. 9,400 374,238
City National Corp. 9,200 355,350
First Source Corp. 9,200 271,400
Fleet Financial Group, Inc. 4,900 211,006
M & T Bank Corp. 600 335,400
Old Kent Financial Corp. 12,000 567,000
Pacific Century Financial Corp. 17,400 378,450
Provident Financial Group, Inc. 700 29,312
SouthTrust Corp. 12,800 510,000
-----------------
3,032,156
-----------------
Beverages: 0.52%
* Canandaigua Brands Co.,
Class A 13,100 674,650
-----------------
Biotechnology: 1.02%
Amgen, Inc. 8,200 503,788
* IDEC Pharmaceuticals Corp. 2,600 131,950
* Millennium Pharmaceuticals,
Inc. 18,100 673,094
-----------------
1,308,832
-----------------
Broadcasting: 0.67%
* Chris-Craft Industries, Inc. 18,387 864,189
-----------------
Building Materials: 0.25%
Owens-Corning Corp. 9,200 327,750
-----------------
Chemicals: 1.14%
* FMC Corp. 5,600 364,000
IMC Global, Inc. 44,200 1,105,000
-----------------
1,469,000
-----------------
Chemicals-Specialty: 1.37%
Albemarle Corp. 11,300 248,600
H.B. Fuller Co. 8,900 606,313
M.A. Hanna Co. 12,700 205,581
Nalco Chemical Co. 10,400 380,250
OM Group, Inc. 8,800 320,100
Sociedad Quimica Y Minera
S.A., ADR 200 7,375
-----------------
1,768,219
-----------------
Communication Equipment: 1.50%
* ADC Telecommunications, Inc. 11,500 549,844
* Brightpoint, Inc. 73,100 450,022
* Commscope, Inc. 9,400 229,125
* General Instrument Corp. 14,100 514,650
* Tellabs, Inc. 1,700 185,991
-----------------
1,929,632
-----------------
Computer Hardware: 0.48%
* Electronics For Imaging, Inc. 10,400 492,050
International Business
Machines Corp. 600 125,512
-----------------
617,562
-----------------
Computer Services: 1.96%
* BEA Systems, Inc. 24,300 367,538
* Concord EFS, Inc. 15,900 530,662
* IMRglobal Corp. 29,100 501,975
Paychex, Inc. 10,400 531,050
* Whittman Hart, Inc. 20,800 587,600
-----------------
2,518,825
-----------------
Computer Software: 1.30%
* Check Point Software
Technology Corp. 22,200 782,550
* LHS Group, Inc. 5,100 175,950
* Sterling Software, Inc. 1,800 37,238
* Symantec Corp. 33,800 671,775
-----------------
1,667,513
-----------------
Computers-Networking: 0.07%
* UNOVA, Inc. 6,600 89,513
-----------------
Construction-Cement and
Aggregates: 1.64%
Lafarge Corp. 15,100 510,569
Southdown, Inc. 24,900 1,595,156
-----------------
2,105,725
-----------------
Consumer-Jewelry, Novelty
and Gifts: 0.02%
* Fossil, Inc. 700 21,525
-----------------
Consumer Finance: 0.66%
Newcourt Credit Group, Inc. 15,100 426,575
PMI Group, Inc. 7,500 418,594
-----------------
845,169
-----------------
4
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Containers-Metal and Glass: 0.67%
Ball Corp. 9,500 $ 521,906
Crown Cork & Seal Co., Inc. 10,400 338,000
-----------------
859,906
-----------------
Distributors-Food and Health: 0.73%
Supervalu, Inc. 21,800 455,075
Sysco Corp. 16,200 480,937
-----------------
936,012
-----------------
Electric Utilities: 4.54%
Allegheny Energy, Inc. 9,600 327,000
Florida Progress Corp. 9,500 365,750
GPU, Inc. 13,100 499,437
Northern States Power Co. 12,800 308,800
PG&E Corp. 42,300 1,313,944
Public Service Co.
of New Mexico 4,600 82,225
Public Service Enterprise
Group, Inc. 23,700 948,000
Unicom Corp. 18,800 729,675
Utilicorp United, Inc. 51,650 1,262,197
-----------------
5,837,028
-----------------
Electrical Equipment: 0.57%
Rockwell International Corp. 14,100 727,913
-----------------
Electronics-Component
Distributor: 1.16%
Avnet, Inc. 3,300 140,044
* DSP Communications, Inc. 21,700 591,325
* Safeguard Scientifics, Inc. 9,300 753,300
-----------------
1,484,669
-----------------
Engineering and Construction: 0.45%
Foster Wheeler Corp. 21,900 295,650
McDermott International, Inc. 9,900 287,100
-----------------
582,750
-----------------
Entertainment: 0.20%
Cinar Corp., Class B 12,500 260,937
-----------------
Financial-Diversified: 6.39%
AMBAC Financial Group, Inc. 15,100 911,662
Apartment Investment &
Management Co., Class A 10,400 416,650
Arden Realty, Inc. 43,800 1,095,000
Avalon Bay Communities, Inc. 23,800 833,000
* Avis Rent A Car, Inc. 12,900 404,738
Brandywine Realty Trust 15,600 294,450
CarrAmerica Realty Corp. 20,700 512,325
Citigroup, Inc. 8,500 639,625
Duke Realty Investments, Inc. 13,000 305,500
Federal Home Loan
Mortgage Corp. 4,500 282,375
FelCor Lodging Trust, Inc. 17,800 426,088
IndyMac Mortgage Holdings, Inc. 500 8,250
Leucadia National Corp. 11,400 350,550
Prison Realty Corp. 16,400 319,800
Public Storage, Inc. 36,500 1,017,437
Reckson Associates Realty Corp. 17,800 400,500
-----------------
8,217,950
-----------------
Foods: 1.95%
Chiquita Brands International,
Inc. 83,800 838,000
IBP, Inc. 82,200 1,664,550
-----------------
2,502,550
-----------------
Gold and Precious Metal Mining: 0.13%
* Stillwater Mining Co. 6,000 169,875
-----------------
Health Care-Diversified: 1.03%
Mallinckrodt Group, Inc. 37,900 1,328,869
-----------------
Health Care-Medical Products
and Supplies: 0.33%
* ResMed, Inc. 8,500 224,719
* Serologicals Corp. 26,700 200,250
-----------------
424,969
-----------------
Health Care-Special Services: 0.25%
* HEALTHSOUTH
Rehabilitation Corp. 24,000 322,500
-----------------
Homebuilding: 1.02%
Centex Corp. 13,200 482,625
Clayton Homes, Inc. 9,500 105,687
D.R. Horton, Inc. 37,300 720,356
-----------------
1,308,668
-----------------
Hospitals and Managed Care: 1.29%
Aetna, Inc. 1,600 140,300
* Pacificare Health Systems, Inc.,
Class B 9,100 726,009
* Quorum Health Group, Inc. 63,600 787,050
-----------------
1,653,359
-----------------
Hotels and Gaming: 1.54%
Carnival Corp. 300 12,375
* Circus Circus Enterprise, Inc. 20,300 427,569
* Extended Stay America, Inc. 67,200 705,600
* GTECH Holdings Corp. 1,800 46,913
* Harrahs Entertainment, Inc. 28,300 622,600
Royal Caribbean Cruises Ltd. 4,400 162,525
-----------------
1,977,582
-----------------
Household Furnishings: 1.40%
* Mohawk Industries, Inc. 24,600 793,350
Sony Corp. 1,800 166,500
Springs Industries, Inc., Class A 4,400 164,450
Whirlpool Corp. 10,100 670,388
-----------------
1,794,688
-----------------
Housewares and Household
Products: 0.98%
Church & Dwight, Inc. 5,200 222,625
Fortune Brands, Inc. 16,400 647,800
Tupperware Corp. 16,200 383,737
-----------------
1,254,162
-----------------
Insurance-Life and Health: 0.76%
Conseco, Inc. 10,200 321,938
Lincoln National Corp. 6,100 585,981
Provident Companies, Inc. 1,700 66,938
-----------------
974,857
-----------------
5
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Insurance-Multi-Line: 0.20%
Nationwide Financial Services
Corp., Class A 5,500 $ 255,063
-----------------
Insurance-Property and
Casualty: 3.26%
American Financial Group, Inc. 7,900 286,869
* Amerin Corp. 22,400 525,000
Enhance Financial Services
Group, Inc. 15,800 326,862
Financial Security Assurance
Holding Ltd. 26,400 1,508,100
Horace Mann Educators Corp. 4,400 100,100
MGIC Investment Corp. 17,700 859,556
Old Republic International Corp. 29,700 581,006
-----------------
4,187,493
-----------------
Investment Banking and Brokerage: 1.73%
A.G. Edwards, Inc. 33,800 1,183,000
Donaldson, Lufkin & Jenrette
Securities Corp. 5,900 412,631
PaineWebber Group, Inc. 13,400 628,962
-----------------
2,224,593
-----------------
Iron and Steel: 0.67%
Worthington Industries, Inc. 62,400 861,900
-----------------
Leisure Time-Products: 0.82%
Brunswick Corp. 43,900 1,053,600
-----------------
Machinery: 1.51%
Manitowoc Co. 11,000 419,375
Milacron, Inc. 3,800 87,400
* MotivePower Industries, Inc. 18,850 321,628
* Mueller Industries, Inc. 9,400 296,100
NACCO Industries, Inc., Class A 1,200 96,975
Tecumseh Products Co., Class A 11,700 715,163
-----------------
1,936,641
-----------------
Manufacturing-Diversified: 4.37%
Carlisle Companies, Inc. 11,600 568,400
Corning, Inc. 18,700 1,070,575
Johnson Controls, Inc. 6,900 503,269
National Service Industries, Inc. 1,700 66,194
Pentair, Inc. 7,600 357,200
Premark International Inc. 19,209 707,131
Trinity Industries, Inc. 15,600 543,075
Tyco International Ltd. 12,652 1,027,975
U.S. Industries, Inc. 10,600 196,762
United Technologies Corp. 4,000 579,500
-----------------
5,620,081
-----------------
Manufacturing-Specialized: 2.32%
Briggs & Stratton Corp. 22,800 1,503,375
York International, Inc. 35,700 1,472,625
-----------------
2,976,000
-----------------
Natural Gas: 0.76%
Coastal Corp. 6,800 260,100
Kinder Morgan Energy
Partners Ltd. 19,100 711,475
-----------------
971,575
-----------------
Office Equipment and Supplies: 0.18%
Moore Corp., Ltd. 5,000 50,000
Wallace Computer Services, Inc. 7,800 179,888
-----------------
229,888
-----------------
Oil-Intergrated: 1.27%
Amerada Hess Corp. 10,900 621,300
Occidental Petroleum Corp. 28,600 577,362
YPF Sociedad Anonima
S.A., ADR 10,200 428,400
-----------------
1,627,062
-----------------
Oil and Gas-Refining and
Marketing: 0.14%
Repsol S.A., ADR 10,700 176,550
-----------------
Paper and Forest Products: 2.44%
Boise Cascade Corp. 17,300 696,325
Chesapeake Corp. 26,700 867,750
Georgia-Pacific Group 4,200 388,500
International Paper Co. 6,000 319,875
Louisiana-Pacific Corp. 41,300 859,556
-----------------
3,132,006
-----------------
Personal Care: 0.65%
Avon Products, Inc. 15,300 830,981
-----------------
Photography and Imaging: 0.33%
* Imation Corp. 24,000 424,500
-----------------
Publishing: 1.16%
Dow Jones & Co., Inc. 6,600 359,700
Knight-Ridder, Inc. 21,100 1,135,444
-----------------
1,495,144
-----------------
Railroads: 1.63%
Kansas City Southern
Industries, Inc. 9,200 547,975
Union Pacific Corp. 25,800 1,548,000
-----------------
2,095,975
-----------------
Restaurants: 1.86%
Bob Evans Farms, Inc. 69,500 1,272,719
* Brinker International, Inc. 40,500 1,118,812
-----------------
2,391,531
-----------------
Retail: 1.75%
* Dollar Tree Stores, Inc. 8,300 302,950
* Federated Department
Stores, Inc. 4,200 196,088
* K mart Corp. 40,400 600,950
Sears Roebuck & Co. 8,500 391,000
Wal-Mart Stores, Inc. 16,500 759,000
-----------------
2,249,988
-----------------
Retail-Apparel: 0.64%
* Mens Wearhouse, Inc. 16,200 443,475
Talbots, Inc. 12,000 378,000
-----------------
821,475
-----------------
Retail-Building Supplies: 0.45%
Fastenal Co. 12,200 582,550
-----------------
6
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Retail-Computers and
Electronics: 0.42%
* Hollywood Entertainment Corp. 2,500 $ 61,719
* Tech Data Corp. 20,500 479,188
-----------------
540,907
-----------------
Retail-Drug Stores: 0.01%
Longs Drug Stores, Inc. 400 13,750
-----------------
Retail-Food Chains: 0.62%
American Stores Co. 10,500 331,406
Great Atlantic & Pacific Tea
Company, Inc. 12,700 390,525
* Safeway, Inc. 1,300 70,119
-----------------
792,050
-----------------
Retail-Specialty: 2.32%
Tiffany & Co. 13,900 1,167,600
* Toys R Us, Inc. 29,000 630,750
* Zale Corp. 31,400 1,187,312
-----------------
2,985,662
-----------------
Savings and Loan Companies: 0.71%
Astoria Financial Corp. 10,000 501,250
Charter One Financial, Inc. 11,100 346,875
Greenpoint Financial Corp. 1,800 63,000
-----------------
911,125
-----------------
Semiconductor Equipment: 0.82%
* LSI Logic Corp. 31,100 1,057,400
-----------------
Service-Commercial and
Consumer: 0.48%
* Metamor Worldwide, Inc. 2,300 44,994
Ogden Corp. 2,700 69,694
* Sylvan Learning Systems, Inc. 20,200 507,525
-----------------
622,213
-----------------
Service-Employment: 0.78%
* Interim Services, Inc. 28,100 488,237
* Modis Professional Services, Inc. 40,400 467,125
Protection One, Inc. 9,200 43,700
-----------------
999,062
-----------------
Shipping: 0.09%
Alexander & Baldwin, Inc. 5,100 110,925
-----------------
Specialty Printing: 0.20%
Banta Corp. 12,100 257,881
-----------------
Telephone: 3.08%
British Telecommunications
Plc., ADR 700 117,425
Comp Anon Nac Telefono, ADR 34,500 948,750
P T Telekomunikasi
Industries, ADR 24,100 210,875
Tele Danmark, ADR 17,000 867,000
Telefonos de Mexico S.A., ADR 23,900 1,810,425
-----------------
3,954,475
-----------------
Textiles-Apparel and Specialty: 0.25%
Warnaco Group, Inc., Class A 12,200 325,587
-----------------
Number of
Shares or
Principal Value
Amount (Note 3)
================================================================================
Truckers: 2.08%
J.B. Hunt Transport Services, Inc. 26,900 559,856
USFreightways Corp. 37,300 1,398,750
Werner Enterprises, Inc. 37,000 712,250
-----------------
2,670,856
Trucks and Parts: 1.37%
Cummins Engine Company, Inc. 15,600 834,600
PACCAR, Inc. 16,600 929,600
-----------------
1,764,200
-----------------
Waste Management: 0.56%
* Safety-Kleen Corp. 45,100 715,962
-----------------
Total Common Stocks
(Cost $108,801,027) 115,074,068
-----------------
SHORT-TERM OBLIGATIONS: 0.38%
United States Treasury Bills: 0.38%
4.30%, 8/26/99 $500,000 492,957
-----------------
Total Short-Term Obligations
(Cost $493,013) 492,957
-----------------
REPURCHASE AGREEMENTS: 16.43%
With Morgan Stanley & Co., Inc.,
(dated 4/30/99), 4.91%, due 5/3/99
(Repurchase proceeds $12,109,953);
collateralized by: $20,872,000
Federal National Mortgage
Association Bonds, 5.915% - 6.00%,
8/1/2010 - 1/1/2034
(Market value $12,359,247) 12,105,000 12,105,000
-----------------
With Prudential Securities Inc.,
(dated 4/30/99), 4.88%, due 5/3/99
(Repurchase proceeds $9,003,660);
collateralized by: $9,282,000
United States Treasury Bills,
4.535%, due 7/29/99
(Market value $9,180,251) 9,000,000 9,000,000
-----------------
Total Repurchase Agreements
(Cost $21,105,000) 21,105,000
-----------------
Total Investments
(Cost $130,399,040) 106.37% 136,672,025
Other Assets 103.72 133,267,224
------------ -----------------
Total Assets 210.09 269,939,249
------------ -----------------
Securities Sold Short
(Proceeds $107,774,947) (89.21) (114,617,525)
Other Liabilities (20.88) (26,836,144)
------------ -----------------
Total Liabilities (110.09) (141,453,669)
------------ -----------------
Net Assets 100.00% $ 128,485,580
============ =================
* Non-income producing security.
For Federal income tax purposes, the tax basis of investments owned at April 30,
1999 was $130,902,923 and net unrealized appreciation on investments consisted
of:
Gross unrealized appreciation $ 7,881,099
Gross unrealized depreciation (2,111,997)
---------------
Net unrealized appreciation $ 5,769,102
===============
7
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
SECURITIES SOLD SHORT
COMMON STOCKS: 89.21%
Aerospace and Defense: 0.52%
Alliant Techsystems, Inc. 3,800 $ 311,125
Lockheed Martin Corp. 8,300 357,419
-----------------
668,544
-----------------
Agricultural Products: 0.04%
Archer-Daniels-Midland Co. 3,500 52,500
-----------------
Air Freight: 1.30%
Air Express International Corp. 60,800 1,330,000
C. H. Robinson Worldwide, Inc. 11,400 341,287
-----------------
1,671,287
-----------------
Airlines: 1.56%
AMR Corp 12,900 900,581
ASA Holdings, Inc. 1,800 60,975
US Airways Group, Inc. 19,200 1,045,200
-----------------
2,006,756
-----------------
Automotive Parts and
Equipment: 2.04%
Dana Corp. 11,900 560,787
Federal-Mogul Corp. 1,500 65,812
Goodyear Tire & Rubber Co. 14,000 800,625
Mascotech, Inc. 16,900 293,637
Snap-On, Inc. 300 9,769
TRW, Inc. 21,200 889,075
-----------------
2,619,705
-----------------
Banks-Money Center: 0.34%
First Union Corp. 7,800 431,925
-----------------
Banks-Regional: 3.66%
Banco Frances Del Rio, ADR 17,100 440,325
CCB Financial Corp. 200 11,550
Centura Banks, Inc. 5,900 351,419
Commerce Bancorp, Inc. 5,300 233,862
Keystone Financial, Inc. 19,700 632,863
Mercantile Bankshares Corp. 24,400 902,800
Republic New York Corp. 1,200 70,500
Synovus Financial Corp. 200 4,425
U.S. Bancorp 15,000 555,938
Union Planters Corp. 12,514 535,756
Wachovia Corp. 2,500 219,687
Wilmington Trust Corp. 4,300 264,181
Zions Bancorporation 7,200 480,150
-----------------
4,703,456
-----------------
Beverages: 1.11%
Brown-Forman, Inc., Class B 10,300 758,981
Coca-Cola Co. 100 6,800
Coca-Cola Femsa De C V, ADR 19,000 393,063
Pepsico, Inc. 7,228 266,984
-----------------
1,425,828
-----------------
Biotechnology: 0.24%
Chiron Corp. 15,100 303,888
-----------------
Broadcasting: 0.93%
News Corp Ltd., ADR 16,900 551,363
USA Networks, Inc. 17,300 646,588
-----------------
1,197,951
-----------------
Building Materials: 0.33%
Armstrong World Industries, Inc. 6,900 377,775
USG Corp. 800 46,700
-----------------
424,475
-----------------
Cellular and Wireless
Telecommunications: 0.07%
Millicom International Cellular S.A. 2,500 86,250
-----------------
Chemicals: 1.61%
Cabot Corp. 14,600 394,200
Eastman Chemical Co. 1,100 61,256
Imperial Chemical
Industries Plc., ADR 11,200 482,300
Lyondell Chemical Co. 48,800 951,600
PPG Industries, Inc. 2,500 162,344
Rohm & Haas Co. 500 22,406
-----------------
2,074,106
-----------------
Chemicals-Specialty: 3.29%
Agrium, Inc. 9,700 87,906
Ecolab, Inc. 9,900 415,181
Hercules, Inc. 24,614 930,717
International Flavors &
Fragrances Corp. 13,300 525,350
Millennium Chemicals, Inc. 21,500 580,500
Potash Corp., Saskatchewan 14,300 865,150
RPM, Inc. 28,900 406,406
W.R. Grace & Co. 26,100 415,969
-----------------
4,227,179
-----------------
Communication Equipment: 0.66%
Alcatel, ADR 400 9,725
Andrew Corp. 5,500 76,656
L.M. Ericsson Telephone Co.,
Class B, ADR 16,100 434,700
Tekelec 36,300 327,834
-----------------
848,915
-----------------
Computer Hardware: 1.33%
Creative Technology Ltd. 22,400 282,800
Dell Computer Corp. 12,400 510,725
Qlogic Corp. 7,500 524,531
Storage Technology Corp. 20,000 386,250
-----------------
1,704,306
-----------------
Computer Services: 0.59%
Cambridge Technology
Partners, Inc. 4,900 70,744
Comdisco, Inc. 2,200 57,888
Equifax, Inc. 3,300 118,594
Policy Management Systems Corp. 8,200 257,787
Wang Laboratories, Inc. 10,100 253,131
-----------------
758,144
-----------------
Computer Software: 1.19%
Macromedia, Inc. 12,700 526,256
PeopleSoft, Inc. 27,800 380,513
Structural Dynamics
Research, Inc. 300 5,831
Transaction Systems
Architects, Inc., Class A 17,400 564,413
Wind River Systems, Inc. 3,400 51,000
-----------------
1,528,013
-----------------
8
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Computers-Networking: 0.85%
Mindspring Enterprises, Inc. 5,700 $ 552,544
Newbridge Networks Corp. 14,600 543,850
-----------------
1,096,394
-----------------
Construction-Cement and Aggregates: 0.69%
Martin Marietta Materials, Inc. 5,500 339,969
Vulcan Materials Co. 11,500 549,125
-----------------
889,094
-----------------
Consumer-Jewelry, Novelty and Gifts: 1.26%
American Greetings Corp.,
Class A 31,500 824,906
Jostens, Inc. 6,100 130,769
Lancaster Colony Corp. 22,300 657,850
-----------------
1,613,525
-----------------
Consumer Finance: 0.82%
Americredit Corp. 20,400 337,875
Fund American Enterprises
Holdings, Inc. 1,700 244,800
Metris Companies, Inc. 7,700 470,663
-----------------
1,053,338
-----------------
Containers-Metal and Glass: 0.77%
Owens-Illinois, Inc. 34,000 986,000
-----------------
Containers and Packages-Paper: 0.86%
Bemis Co. 9,500 332,500
Sonoco Products Co. 30,100 776,956
-----------------
1,109,456
-----------------
Distributors-Food and
Health: 0.15%
McKesson HBOC, Inc. 5,600 196,000
-----------------
Drugs: 0.42%
Barr Laboratories, Inc. 5,100 153,319
ICN Pharmaceuticals, Inc. 8,900 294,256
Merck & Co. 1,300 91,325
-----------------
538,900
-----------------
Electric Utilities: 2.47%
BEC Energy Corp. 6,800 289,000
Consolidated Edison Co. of
New York, Inc. 300 13,631
Duke Energy Corp. 12,500 700,000
Illinova Corp. 13,300 349,125
Kansas City Power & Light Co. 13,600 363,800
Montana Power Co. 6,400 477,200
Northeast Utilities Corp. 5,900 94,400
PECO Energy Co. 7,200 341,550
TECO Energy, Inc. 14,400 306,900
Wisconsin Energy Corp. 8,731 234,646
-----------------
3,170,252
-----------------
Electrical Equipment: 1.98%
American Power Conversion Corp. 6,800 224,400
Emerson Electric Co. 5,400 348,300
Hubbell, Inc., Class B 28,100 1,343,531
Molex, Inc. 19,000 612,750
SLI, Inc. 400 10,975
-----------------
2,539,956
-----------------
Electronics-Component
Distributor: 0.69%
CHS Electronics, Inc. 60,000 303,750
Ingram Micro, Inc., Class A 17,700 451,350
Rambus, Inc. 2,200 132,275
-----------------
887,375
-----------------
Electronics - Defense: 1.30%
General Motors Corp., Class H 19,800 1,096,425
Litton Industries, Inc. 9,100 569,887
-----------------
1,666,312
-----------------
Engineering and Construction: 0.50%
Fluor Corp. 700 23,362
Granite Construction, Inc. 14,000 399,875
Mastec, Inc. 8,700 226,200
-----------------
649,437
-----------------
Entertainment: 0.55%
Imax Corp. 2,500 47,344
Premier Parks, Inc. 4,100 141,706
Seagram Co., Ltd. 9,100 522,112
-----------------
711,162
-----------------
Financial-Diversified: 4.00%
BRE Properties, Inc., Class A 12,900 320,887
Budget Group, Inc., Class A 47,200 587,050
Cousins Properties Inc. 7,200 250,200
Equitable Companies, Inc. 3,400 228,862
Host Marriott Corp. 100 1,331
Meditrust Companies, Inc. 40,900 508,694
Mutual Risk Management Ltd. 2,200 85,525
Rouse Co. 35,400 860,662
SLM Holding Corp. 25,200 1,075,725
Starwood Hotels & Resorts 24,200 887,837
U S Trust Corp. 3,700 338,087
-----------------
5,144,860
-----------------
Foods: 2.44%
Cadbury Schweppes Plc., ADR 1,000 54,000
Dean Foods Co. 32,800 1,170,550
Hershey Foods Corp. 5,600 294,700
Interstate Bakeries Corp. 14,700 327,075
Keebler Foods Co. 3,300 106,013
McCormick & Co. 11,100 336,469
Nabisco Holdings Corp., Class A 12,400 468,875
Quaker Oats Co. 5,900 380,919
-----------------
3,138,601
-----------------
Footwear: 0.09%
Nike, Inc., Class B 214 13,308
Wolverine World Wide, Inc. 8,100 97,200
-----------------
110,508
-----------------
Hardware and Tools: 0.01%
Stanley Works 300 9,131
-----------------
Health Care-Diversified: 0.36%
American Home Products Corp. 5,528 337,208
Medicis Pharmaceutical Corp.,
Class A 4,900 119,131
-----------------
456,339
-----------------
9
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Health Care-Medical Products and
Supplies: 1.04%
Beckman Coulter, Inc. 7,700 $ 371,044
C.R. Bard, Inc. 700 34,300
Haemonetics Corp. 4,400 69,025
Invacare Corp. 4,300 99,438
Medtronic, Inc. 7,700 553,919
Varian Medical Sytems, Inc. 12,000 206,250
-----------------
1,333,976
-----------------
Health Care-Special Services: 0.18%
ALZA Corp. 6,900 231,581
-----------------
Homebuilding: 0.41%
Toll Brothers, Inc. 24,400 521,550
-----------------
Hospitals and Managed Care: 1.10%
First Health Group Corp. 34,500 562,781
Integrated Health Services, Inc. 58,600 282,013
Sunrise Assisted Living, Inc. 13,800 552,000
Tenet Healthcare Corp. 500 11,812
-----------------
1,408,606
-----------------
Hotels and Gaming: 1.61%
Anchor Gaming 16,700 789,075
Hilton Hotels Corp. 30,300 473,438
International Game Technology 600 10,650
Mirage Resorts, Inc. 23,600 529,525
Sun International Hotels Ltd. 3,300 139,631
Vail Resorts, Inc. 6,800 131,750
-----------------
2,074,069
-----------------
Household Furnishings: 0.33%
Department 56, Inc., Class A 3,300 89,306
Ethan Allen Interiors, Inc. 6,500 329,469
-----------------
418,775
-----------------
Housewares and Household Products: 0.73%
Newell Rubbermaid, Inc. 16,831 798,421
Procter & Gamble Co. 1,500 140,719
-----------------
939,140
-----------------
Insurance-Life and Health: 0.30%
Presidential Life Corp. 2,800 50,225
Torchmark Corp. 9,700 331,619
-----------------
381,844
-----------------
Insurance-Multi-Line: 0.61%
CIGNA Corp. 9,000 784,687
-----------------
Insurance-Property and Casualty: 4.12%
Executive Risk, Inc. 4,800 344,400
Fremont General Corp. 7,600 152,000
HSB Group Inc. 13,700 518,888
IPC Holdings Ltd. 17,700 311,963
LandAmerica Financial Group 9,200 257,600
Markel Corp. 800 149,200
Mercury General Corp. 12,400 447,950
Ohio Casualty Corp. 18,500 687,391
Safeco Corp. 8,500 337,875
St. Paul Companies, Inc. 11,400 327,037
Twentieth Century Industries, Inc. 8,400 149,625
W.R. Berkley Corp. 25,100 690,250
Xl Capital Ltd. 15,100 916,381
-----------------
5,290,560
-----------------
Insurance Brokers: 0.39%
Arthur J. Gallagher & Co. 6,200 294,500
E. W. Blanch Holdings, Inc. 3,500 206,063
-----------------
500,563
-----------------
Investment Banking and
Brokerage: 0.41%
E Trade Group, Inc. 4,600 531,300
-----------------
Investment Companies: 0.32%
Allied Capital Corp. 22,600 406,800
-----------------
Investment Management: 0.81%
T. Rowe Price Associates, Inc. 9,000 339,188
United Asset Management Corp. 31,100 701,694
-----------------
1,040,882
-----------------
Iron and Steel: 1.53%
Allegheny Teledyne, Inc. 26,500 592,938
British Steel Plc., ADR 43,800 1,012,875
Carpenter Technology Corp. 500 15,656
Steel Dynamics, Inc. 20,700 349,312
-----------------
1,970,781
-----------------
Leisure Time-Products: 0.54%
Callaway Golf Co. 23,400 352,462
Polaris Industries, Inc. 9,000 339,187
-----------------
691,649
-----------------
Machinery: 3.65%
Applied Power Corp., Class A 16,900 533,406
Caterpillar, Inc. 600 38,625
Deere & Co. 24,300 1,044,900
Dover Corp. 35,100 1,296,506
Harnischfeger Industries, Inc. 41,500 404,625
IDEX Corp. 14,000 373,625
Kaydon Corp. 29,700 1,002,375
-----------------
4,694,062
-----------------
Manufacturing-Diversified: 0.58%
AMETEK, Inc. 17,500 399,219
Canadian Pacific Ltd. 500 11,313
Harsco Corp. 4,100 134,531
Hillenbrand Industries, Inc. 3,200 150,200
Minnesota Mining &
Manufacturing Co. 100 8,900
Parker Hannifin Corp. 600 28,162
Thermo Electron Corp. 500 8,031
-----------------
740,356
-----------------
Manufacturing-Specialized: 1.58%
Donaldson Co., Inc. 13,700 306,538
Federal Signal Corp. 7,600 188,100
Pall Corp. 53,100 979,031
Roper Industries, Inc. 19,700 561,450
-----------------
2,035,119
-----------------
Metals and Mining: 0.60%
De Beers Consolidated
Mines, ADR 12,800 313,600
Freeport-McMoran Copper &
Gold, Inc., Class B 400 6,125
Phelps Dodge Corp. 7,100 449,075
-----------------
768,800
-----------------
10
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Natural Gas: 2.44%
Consolidated Natural Gas Co. 1,600 $ 95,200
KN Energy, Inc. 700 14,438
National Fuel Gas Co. 9,200 402,500
NICOR, Inc. 8,600 312,825
ONEOK, Inc. 14,100 393,919
Peoples Energy Corp. 12,200 455,975
Washington Gas Light Co. 25,400 598,488
Williams Companies, Inc. 18,200 859,950
-----------------
3,133,295
-----------------
Office Equipment and Supplies: 0.55%
Herman Miller, Inc. 35,400 705,788
-----------------
Oil-Integrated: 1.27%
ENI Spa, ADR 7,900 516,463
PennzEnergy Co. 28,300 366,131
Phillips Petroleum Co. 14,800 749,250
-----------------
1,631,844
-----------------
Oil and Gas-Drilling and
Equipment: 0.38%
Cooper Cameron Corp. 1,500 57,938
Halliburton Co. 100 4,263
Helmerich & Payne, Inc. 300 7,725
Nabors Industries, Inc. 5,500 113,094
Seacor Smit, Inc. 5,200 275,275
Varco International Corp. 3,000 33,937
-----------------
492,232
-----------------
Oil and Gas-Exploration and
Production: 0.33%
Unocal Corp. 10,242 425,683
-----------------
Oil and Gas-Refining and
Marketing: 0.29%
Ultramar Diamond Shamrock
Corp. 15,700 362,081
Valero Energy Corp. 500 11,156
-----------------
373,237
-----------------
Paper and Forest Products: 1.45%
Abitibi Consolidated, Inc. 34,400 408,500
Bowater, Inc. 7,600 407,550
Caraustar Industries, Inc. 13,700 349,350
Georgia-Pacific Timber Co. 19,600 504,700
Rayonier, Inc. 500 22,813
Wausau-Mosinee Paper Corp. 5,000 82,500
Westvaco Corp. 3,100 92,612
-----------------
1,868,025
-----------------
Photography and Imaging: 0.47%
Polaroid Corp. 614 12,664
Xerox Corp. 10,000 587,500
-----------------
600,164
-----------------
Power Producers-Independent: 0.45%
AES Corp. 4,500 225,000
MidAmerican Energy
Holdings Corp. 10,800 347,625
-----------------
572,625
-----------------
Publishing: 2.22%
A. H. Belo Corp., Class A 27,300 590,363
E. W. Scripps Co., Class A 6,600 330,000
Houghton Mifflin Co. 6,400 285,600
Media General Corp., Class A 1,200 62,400
Readers Digest Association,
Inc., Class A 15,800 561,887
Scholastic Corp. 10,100 477,541
Times Mirror Co., Class A 5,500 321,750
Washington Post Co., Class B 400 229,600
-----------------
2,859,141
-----------------
Railroads: 2.12%
CSX Corp. 12,800 630,400
GATX Corp. 9,800 336,875
Norfolk Southern Corp. 23,000 751,812
Wisconsin Central
Transportation Corp. 54,400 1,004,700
-----------------
2,723,787
-----------------
Restaurants: 1.05%
McDonald's Corp. 10,100 427,988
Starbucks Corp. 16,100 594,694
Wendy's International, Inc. 12,000 324,750
-----------------
1,347,432
-----------------
Retail: 2.66%
Consolidated Stores Corp. 17,128 588,775
Family Dollar Stores, Inc. 2,400 57,900
J.C. Penney Company, Inc. 37,000 1,688,125
May Department Stores Co. 6,500 258,781
Nordstrom, Inc. 7,200 253,350
Saks, Inc. 20,300 574,744
-----------------
3,421,675
-----------------
Retail-Apparel: 0.52%
Burlington Coat Factory, Inc. 17,600 271,700
Intimate Brands, Inc., Class A 8,000 400,000
-----------------
671,700
-----------------
Retail-Computers and
Electronics: 0.06%
CompUSA, Inc. 10,500 73,500
-----------------
Retail-Drug Stores: 0.88%
Rite Aid Corp. 48,500 1,130,656
-----------------
Retail-Food Chains: 0.62%
Albertson's, Inc. 4,400 226,600
Hannaford Brothers Co. 1,800 78,525
Winn-Dixie Stores, Inc. 13,800 494,213
-----------------
799,338
-----------------
Retail-Specialty: 0.78%
Autonation, Inc. 300 4,294
Barnes & Noble, Inc. 11,600 403,100
Borders Group, Inc. 10,200 147,263
General Nutrition Companies,
Inc., Class A 4,800 79,500
Office Depot, Inc. 2,800 61,600
Williams-Sonoma, Inc. 10,800 313,200
-----------------
1,008,957
-----------------
Savings and Loan Companies: 0.38%
Golden State Bancorp, Inc. 6,100 149,831
Queens County Bancorp, Inc. 9,700 340,713
-----------------
490,544
-----------------
11
<PAGE>
Number Value
of Shares (Note 3)
================================================================================
Semiconductor Equipment: 0.35%
Burr-Brown Corp. 11,300 $ 299,450
Intel Corp. 2,500 152,969
-----------------
452,419
-----------------
Service-Advertising and
Marketing: 0.39%
Outdoor Systems, Inc. 19,800 498,713
-----------------
Service-Commercial and
Consumer: 2.67%
H & R Block, Inc. 6,700 322,438
Cendant Corp. 4,700 84,600
Cerner Corp. 15,200 258,400
Laidlaw, Inc. 76,800 484,800
Nielsen Media Research, Inc. 20,900 572,138
Pittston Brinks Group, Inc. 25,700 677,837
Sotheby's Holdings Corp.,
Class A 15,100 643,637
Stewart Enterprises, Inc.,
Class A 19,400 385,575
-----------------
3,429,425
-----------------
Service-Employment: 0.31%
Manpower, Inc. 17,914 405,304
-----------------
Specialty Printing: 0.28%
Deluxe Corp. 10,500 363,562
-----------------
Telephone: 2.94%
Cincinnati Bell, Inc. 13,900 314,487
Compania Telecom Chile, ADR 21,500 568,406
Deutsche Telekom AG, ADR 11,800 457,250
Hong Kong Telecom Ltd., ADR 13,100 350,425
Pacific Gateway Exchange Inc. 20,100 804,000
Telecom Argentina, Class B, ADR 13,500 465,750
Telecom Corp. New Zealand, ADR 6,700 275,956
Telefonica De Argentina, ADR 12,200 455,975
Teleglobe, Inc. 3,000 88,312
-----------------
3,780,561
-----------------
Textiles-Apparel and Specialty: 0.46%
Fruit of The Loom Ltd., Class A 300 3,206
Nautica Enterprises, Inc. 3,600 48,825
Polo Ralph Lauren Corp., Class A 22,100 491,725
Unifi, Inc. 3,200 44,800
-----------------
588,556
-----------------
Tobacco: 0.09%
UST, Inc. 3,900 108,713
-----------------
Truckers: 0.23%
Ryder System, Inc. 11,000 290,125
-----------------
Trucks and Parts: 0.24%
New Holland NV 21,100 305,950
-----------------
Waste Management: 0.47%
Allied Waste Industries, Inc. 33,900 599,606
-----------------
Total Securities Sold Short
(Proceeds $107,774,947) $ 114,617,525
=================
For Federal income tax purposes, the tax basis of proceeds for securities sold
short on April 30, 1999 was $107,561,519 and net unrealized depreciation on
securities sold short consisted of:
Gross unrealized appreciation $1,948,680
Gross unrealized depreciation (9,004,686)
-----------------
Net unrealized depreciation $ (7,056,006)
=================
See notes to financial statements.
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments, at value (identified cost $130,399,040) ....................................................... $ 136,672,025
Cash ....................................................................................................... 8,520
Deposits with broker for securities sold short ............................................................. 107,774,947
Receivables:
Investments sold ...................................................................................... 24,839,314
Capital shares sold ................................................................................... 140,657
Dividends and interest ................................................................................ 471,025
Prepaid expenses ........................................................................................... 32,761
-------------
Total Assets ..................................................................................... 269,939,249
-------------
LIABILITIES
Securities sold short, at value (proceeds $107,774,947) .................................................... 114,617,525
Payables:
Investments purchased ................................................................................. 25,131,537
Capital shares redeemed ............................................................................... 1,475,785
Advisory fee .......................................................................................... 10,676
Distribution fees ..................................................................................... 77,113
Dividends on short sales .............................................................................. 139,614
Accrued expenses and other payables ................................................................... 1,419
-------------
Total liabilities ................................................................................ 141,453,669
-------------
Net Assets ................................................................................................. $ 128,485,580
=============
Net assets consist of
Capital paid-in ............................................................................................ $ 146,143,388
Undistributed net investment income ........................................................................ 719,312
Accumulated net realized loss on investments and futures ................................................... (9,678,751)
Accumulated net realized loss on securities sold short ..................................................... (8,128,776)
Net unrealized appreciation on investments ................................................................. 6,272,985
Net unrealized depreciation on securities sold short ....................................................... (6,842,578)
-------------
Net Assets ................................................................................................. $ 128,485,580
=============
Class A Shares
Net asset value ("NAV") and redemption price per share ($29,071,393/2,845,430 shares) ...................... $ 10.22
=============
Maximum public offering price per share-NAV/(1-maximum sales charge) ($10.22/.945) ......................... $ 10.81
=============
Class B Shares
Net asset value and offering price per share ($40,162,930/3,937,713 shares) ................................ $ 10.20
=============
Redemption price per share ................................................................................. *
=============
Class C Shares
Net asset value and offering price per share ($41,160,342/4,045,125 shares) ................................ $ 10.18
=============
Redemption price per share ................................................................................. *
=============
Class I Shares
Net asset value, offering and redemption price per share ($18,090,915/1,782,409 shares) .................... $ 10.15
=============
</TABLE>
*Varies by length of time shares are held. (Note 4b)
See notes to financial statements.
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends* ............................................................................................ $ 965,057
Interest .............................................................................................. 3,265,137
------------
Total income ..................................................................................... 4,230,194
------------
Expenses (Note 3)
Advisory fees (Note 4) ................................................................................ 1,138,642
Distribution fees, Class A (Note 4) ................................................................... 54,197
Distribution fees, Class B (Note 4) ................................................................... 232,546
Distribution fees, Class C (Note 4) ................................................................... 256,068
Transfer agent fees ................................................................................... 67,746
Amortization of organization expenses (Note 3) ........................................................ 4,128
Custodian fees ........................................................................................ 108,850
Portfolio accounting fees ............................................................................. 57,358
Professional fees ..................................................................................... 23,459
Reports to shareholders ............................................................................... 17,625
Registration fees ..................................................................................... 58,540
Insurance ............................................................................................. 11,924
Trustees' fees ........................................................................................ 11,041
Miscellaneous ......................................................................................... 1,878
------------
Expenses before dividends on short sales ................................................................... 2,044,002
Dividends on short sales .............................................................................. 980,547
------------
Total expenses ............................................................................................. 3,024,549
------------
Net investment income ...................................................................................... 1,205,645
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on
Investments ........................................................................................... 11,640,941
Securities sold short ................................................................................. (18,265,496)
Futures ............................................................................................... 874,299
------------
Net realized loss .......................................................................................... (5,750,256)
------------
Increase (decrease) in unrealized appreciation on
Investments ........................................................................................... 2,503,819
Securities sold short ................................................................................. (5,126,926)
------------
Net unrealized depreciation ................................................................................ (2,623,107)
------------
Net realized and unrealized loss on investments, securities sold short and futures ......................... (8,373,363)
------------
Net decrease in net assets resulting from operations ....................................................... $ (7,167,718)
============
</TABLE>
* Net of taxes withheld on foreign dividends of $2,161.
See notes to financial statements.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 AND FOR THE PERIOD MAY 1, 1998
(COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income ............................................................. $ 1,205,645 $ 1,169,245
Net realized loss on investments, securities sold short and futures ............... (5,750,256) (12,057,271)
Net unrealized appreciation (depreciation) on investments
and securities sold short .................................................... (2,623,107) 2,053,514
------------- -------------
Net decrease in net assets resulting from operations ......................... (7,167,718) (8,834,512)
------------- -------------
Dividends to shareholders from net investment income
Class A ........................................................................... (493,482) --
Class B ........................................................................... (368,615) --
Class C ........................................................................... (464,213) --
Class I ........................................................................... (329,268) --
------------- -------------
Total dividends to shareholders ........................................................ (1,655,578) --
------------- -------------
Capital share transactions (Note 6)
Net proceeds from sale of shares
Class A ................................................................................ 11,456,134 49,826,479
Class B ................................................................................ 6,872,825 51,623,271
Class C ................................................................................ 4,618,627 64,615,080
Class I ................................................................................ 4,586,000 24,024,074
------------- -------------
27,533,586 190,088,904
------------- -------------
Net asset value of shares issued to shareholders in
reinvestment of dividends
Class A ................................................................................ 425,449 --
Class B ................................................................................ 255,754 --
Class C ................................................................................ 365,808 --
Class I ................................................................................ 326,358 --
------------- -------------
1,373,369 --
------------- -------------
Cost of shares redeemed
Class A ................................................................................ (20,089,168) (8,317,141)
Class B ................................................................................ (12,075,421) (1,267,242)
Class C ................................................................................ (17,772,993) (4,613,114)
Class I ................................................................................ (6,505,110) (2,212,282)
------------- -------------
(56,442,692) (16,409,779)
------------- -------------
Increase (decrease) in net assets derived from
capital share transactions .............................................. (27,535,737) 173,679,125
------------- -------------
Net increase (decrease) in net assets ........................................ (36,359,033) 164,844,613
NET ASSETS
Beginning of period ............................................................... 164,844,613 --
------------- -------------
End of period ..................................................................... $ 128,485,580 $ 164,844,613
============= =============
Undistributed net investment income ............................................... $ 719,312 $ 1,169,245
============= =============
</TABLE>
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (UNAUDITED)
NOTE 1--ACQUISITION
On March 1, 1999, Phoenix Investment Partners, Ltd. ("Phoenix") completed the
acquisition of Zweig/Glaser Advisers, parent of Euclid Advisors LLC, the Fund's
investment manager (the "Manager"), and of Zweig Securities Corp., the Fund's
distributor (the Distributor"). As a result, Euclid Mutual Funds changed its'
name to Phoenix-Euclid Funds and Euclid Market Neutral Fund changed its' name to
Phoenix-Euclid Market Neutral Fund. In addition, Zweig/Glaser Advisers LLC has
succeeded Zweig/Glaser Advisers as parent of the Manager and Phoenix Equity
Planning Corporation ("PEPCO") has succeeded Zweig Securities Corp. as the
Distributor.
NOTE 2--ORGANIZATION
Phoenix-Euclid Funds (the "Trust"), organized as a Delaware business trust on
February 3, 1998, is registered under the Investment Company Act of 1940 (the
"Act") as a diversified, open-end management investment company. The Trust
presently consists of one investment portfolio ("Series"): Phoenix-Euclid Market
Neutral Fund (the "Fund"), which offers Class A, Class B, Class C and Class I
Shares. On April 22, 1998, the Trust sold $100,000 of shares of beneficial
interest of the Fund to the Manager. The Fund commenced operations on May 1,
1998.
NOTE 3--SIGNIFICANT ACCOUNTING POLICIES
(a) General:Investment transactions and securities sold short are recorded on
trade date. Realized gains and losses on sales of investments and securities
sold short are determined on the identified cost basis for both financial
reporting and income tax purposes. Distributions to shareholders and dividend
income are recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. Direct expenses are charged to each class and general expenses
are allocated in proportion to net assets. Organization expenses are amortized
on a straight-line basis over the first 60 months of operations of the Fund. In
the event that any of the initial shares of the Fund are redeemed during this
period, the Fund will be reimbursed by the Manager for any unamortized
organization expenses in the same proportion as the number of shares redeemed
bears to the number of initial shares outstanding at the time of redemption. On
February 22, 1999, the Manager redeemed all of the initial shares in the Fund
and reimbursed the Fund $55,323 representing the balance of the unamortized
organization expenses. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
(b) Portfolio Valuation:Stocks and futures are valued at the closing prices
reported on recognized securities exchanges or if no sale was reported, and for
unlisted securities, at the mean between the last-reported bid and asked prices.
Securities for which market quotations are not readily available (of which there
were none at April 30, 1999) are valued at fair value as determined by the Board
of Trustees. Short-term obligations having a remaining maturity of 60 days or
less are valued at amortized cost (which approximates market value).
(c) Futures Contracts and Option Accounting Principles:Initial margin deposits
on futures contracts are recorded as assets. The value of such contracts are
"marked to market" daily and changes are recognized as unrealized gains or
losses. Variation margin payments are recognized as assets or liabilities,
depending upon whether unrealized gains or losses are incurred. When a futures
contract is closed, the Fund realizes a gain or loss equal to the difference
between the proceeds from (or cost of) the closing transaction and its basis in
the contract. When the Fund writes an option, an amount equal to the premium
received is recorded as an asset and a corresponding liability. The liability is
subsequently "marked to market" daily. When an option written is exercised, the
proceeds of sale of the underlying security are increased by the premium
originally received and the Fund realizes a gain or loss. When an option written
expires or the Fund enters into a closing purchase transaction, the liability is
extinguished and the Fund realizes a gain or loss.
(d) Short Sales:A short sale is a transaction in which the Fund sells a security
it does not own in anticipation of a decline in market price. To sell a security
short, the Fund must borrow the security. The Fund's obligation to replace the
security borrowed and sold short will be fully collateralized at all times by
the proceeds from the short sale retained by the broker and by cash and
securities deposited in a segregated account with the Fund's custodian. If the
price of the security sold short increases between the time of the short sale
and the time the Fund replaces the borrowed security, the Fund will realize a
loss, and if the price declines during the period, the Fund will realize a gain.
Any realized gain will be decreased, and any realized loss increased, by the
amount of transaction costs. Dividends paid by the Fund in connection with such
short sales are recorded as expenses. At April 30, 1999, the value of securities
sold short amounted to $114,617,525 against which collateral of $243,954,015 was
16
<PAGE>
held. The collateral includes the deposits with broker for securities sold
short, the repurchase agreements, and the common stocks held long, as shown in
the Schedule of Investments and Securities Sold Short.
(e) Off-Balance-Sheet Risk, Repurchase Agreements and Derivatives: With respect
to repurchase agreements, losses may arise if the counterparty does not perform
under the contract or agreement. The Fund's investment manager monitors the
requirement that the market value of the securities used to collateralize a
repurchase agreement exceed the dollar amount of the counterparty's obligation
to repurchase. The Fund's use of futures contracts and options involves, to
varying degrees, elements of market risk in excess of the amount recognized in
the investment portfolio. These derivative financial instruments ("derivatives")
are used to adjust the risk and return characteristics of the Fund's portfolio.
Derivatives are not used for the purpose of leverage. The objective in buying or
selling a derivative instrument is to increase or decrease the Fund's exposure
to changing security prices or interest rates. If the Manager misjudges market
conditions or employs a strategy that does not correlate well with the Fund's
other investments; use of these derivatives could result in a loss, regardless
of the Manager's original intent to reduce risk.
(f) Federal Income Taxes:It is the intention of the Fund to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net taxable income, including any net
realized gain on investments, to its shareholders; therefore, no provision for
federal income tax is required. At October 31, 1998 (the Fund's tax fiscal
year-end), the Fund had a capital loss carryforward of $9,391,613, expiring
October 31, 2006 which is available to offset any net capital gains subsequently
realized, subject to certain limitations.
(g) Dividends and Distributions to Shareholders:Dividends and distributions are
declared separately for each class of shares of the Fund. The character of
distributions made during the year from net investment income or net realized
gains might differ from their ultimate characterization for federal income tax
purposes due to differences in the recognition of income and expense items for
financial statement and federal income tax purposes.
NOTE 4--INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
(a) Investment Manager: The Fund's investments are managed by Euclid Advisors
LLC (the "Manager"), a wholly owned subsidiary of Zweig/Glaser Advisers LLC. The
Manager's investment advisory fee is based on the average daily net assets of
the Fund at the annual rate of 1.50%. The fees are accrued daily and paid
monthly. Investment advisory fees for the six months ended April 30, 1999
aggregated $1,138,642.
(b) Principal Distributor: PEPCO (the "Distributor") serves as principal
distributor of shares of the Fund. The Fund's Class A Shares are sold with an
initial sales charge, Class B Shares and Class C Shares are sold without an
initial sales charge, but bear higher expenses and are subject to a contingent
deferred sales charge, and Class I Shares are sold without a sales charge.
During the six months ended April 30, 1999, the Distributor's share of the
initial and contingent deferred sales charges was $4,758 and $546,383,
respectively.
Pursuant to a Rule 12b-1 plan of distribution, the Fund pays the Distributor a
combined service and distribution fee equal to an annual rate of 0.30% of
average daily net assets of Class A Shares, 1.00% for Class B Shares, and 1.00%
for Class C Shares. Class I Shares, which are available for purchase by
tax-exempt retirement plans of the Distributor and its affiliates and certain
institutional investors, do not have a Rule 12b-1 Plan.
During the six months ended April 30, 1999, the Fund paid Zweig Securities Corp.
brokerage commissions of $13,093 in connection with portfolio transactions
effected by it.
One of the Trustees and all of the officers of the Trust are also officers of
the Manager and/or the Distributor. .
NOTE 5--PURCHASES AND SALES OF INVESTMENTS
During the six months ended April 30, 1999, purchase and sale transactions,
excluding repurchase agreements, short-term obligations held to maturity and
futures contracts, were:
Purchases $302,718,516
Sales $329,009,870
Short sales $293,945,059
Purchases to cover short sales $331,654,412
17
<PAGE>
NOTE 6--CAPITAL SHARES
The Trust has unlimited authorized shares of beneficial interest, divided into
Series and issued in classes (see Note 2). Capital share transactions for the
six months ended April 30, 1999 and for the period May 1, 1998 (commencement of
operations) to October 31, 1998 are set forth below.
<TABLE>
<CAPTION>
Class A Class B Class C Class I
------------------------ ------------------------ ------------------------ ------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold ............... 1,061,428 4,380,167 643,662 4,536,939 430,672 5,680,328 433,238 2,125,730
Issued in
reinvestment
of dividends ..... 38,748 -- 23,293 -- 33,377 -- 29,941 --
Redeemed ........... (1,883,758) (751,155) (1,151,925) (114,256) (1,687,230) (412,022) (602,946) (203,554)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase
(decrease) ....... (783,582) 3,629,012 (484,970) 4,422,683 (1,223,181) 5,268,306 (139,767) 1,922,176
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
NOTE 7--BORROWINGS
The Trust is a participant in a Liquidity Line of Credit with The Bank of New
York for $100,000,000. The Trust has not had to use the Line of Credit since it
became a participant on December 16, 1998. If a Series uses the Line of Credit,
it will be collateralized by that Series' portfolio.
18
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout the six
months ended April 30, 1999 and the period May 1, 1998 (commencement of
operations) to October 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Class A Class B Class C Class I
-------------------- -------------------- -------------------- --------------------
1999 1998 1999 1998 1999 1998 1999 1998
------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................. $10.84 $11.34 $10.81 $11.34 $10.80 $11.34 $10.85 $11.34
------- ------ ------- ------- ------- ------- ------- -------
Net investment income ...... 0.10 0.09 0.06 0.06 0.06 0.06 0.12 0.14
Net realized and unrealized
gains (losses) ............ (0.59) (0.59) (0.59) (0.59) (0.59) (0.60) (0.59) (0.63)
------- ------ ------- ------- ------- ------- ------- -------
Total from investment
operations ................ (0.49) (0.50) (0.53) (0.53) (0.53) (0.54) (0.47) (0.49)
Dividends from net
investment income ......... (0.13) -- (0.08) -- (0.09) -- (0.23) --
------- ------ ------- ------- ------- ------- ------- -------
Decrease in net asset value (0.62) (0.50) (0.61) (0.53) (0.62) (0.54) (0.70) (0.49)
------- ------ ------- ------- ------- ------- ------- -------
Net asset value,
end of period ............. $10.22 $10.84 $10.20 $10.81 $10.18 $10.80 $10.15 $10.85
======= ====== ======= ======= ======= ======= ======= =======
Total return *** ........... (4.60)%** (4.41)%** (4.94)%** (4.67)%** (4.95)%** (4.76)%** (4.50)%** (4.32)%**
Ratios to average net assets
Expenses (excluding
dividends on short sales)
after expense
reimbursement ............. 2.28%* 2.30%* 2.98%* 3.00%* 2.98%* 3.00%* 1.98%* 2.00%*
Expenses (including
dividends on short sales)
after expense
reimbursement ............. 3.57%* 3.65%* 4.27%* 4.35%* 4.27%* 4.35%* 3.27%* 3.35%*
Expenses (including
dividends on short sales)
before expense
reimbursement ............. 3.57%* 3.69%* 4.27%* 4.39%* 4.27%* 4.39%* 3.27%* 3.39%*
Net investment income
before expense
reimbursement ............. 2.01%* 2.29%* 1.31%* 1.59%* 1.31%* 1.59%* 2.31%* 2.59%*
Net investment income
after expense
reimbursement ............. 2.01%* 2.33%* 1.31%* 1.63%* 1.31%* 1.63%* 2.31%* 2.63%*
Portfolio turnover rate .... 268%* 431%* 268%* 431%* 268%* 431%* 268%* 431%*
Net assets, end of period
(in thousands) ............ $29,072 39,331 $40,163 $47,794 $41,160 $56,874 $18,091 $20,846
</TABLE>
During 1998, the Manager voluntarily reimbursed each Class $.003 per share
(0.04% ratio of expenses to average net assets).
* Annualized
** Not annualized
*** Total return does not consider the effect of any initial or contingent
deferred sales charge.
19
<PAGE>
TRUSTEES
James Balog
Claire B. Benenson
S. Leland Dill
Eugene J. Glaser
Donald B. Romans
OFFICERS
Eugene J. Glaser
Chairman, President,
& Chief Executive Officer
Michael E. Haylon
Executive Vice President
David Katzen
Executive Vice President
John F. Sharry
Executive Vice President
Thomas N. Steenburg
Senior Vice President
Barry M. Mandinach
First Vice President
Alfred J. Ratcliffe
First Vice President & Treasurer
Charles I. Leone
First Vice President
& Assistant Secretary
Annemarie Gilly
First Vice President
Marc Baltuch
Secretary
Thomas Disbrow
Assistant Vice President
& Assistant Treasurer
Thomas Farrell
Assistant Vice President
& Assistant Treasurer
Beth Abraham
Assistant Vice President
Rhonda Lee Berzner
Assistant Vice President
INVESTMENT MANAGER
Euclid Advisors LLC
900 Third Avenue--31st Floor
New York, NY 10022
PRINCIPAL DISTRIBUTOR
Phoenix Equity Planning Corp.
PO Box 2200
Enfield, CT 06083-2200
CUSTODIAN
The Bank of New York
One Wall Street
New York, New York 10286
TRANSFER AGENT
State Street Bank & Trust Co.
225 Franklin Street
Boston, Massachusetts 02110
SERVICING AGENT
Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
20
<PAGE>
Phoenix Equity Planning Corporation
PO Box 2200
Enfield CT 06083-2200
[LOGO] PHOENIX
INVESTMENT PARTNERS
---------------------------------------------------------------------------
For more information, contact your financial advisor or call us at
1.800.272.2700.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Visit our websites at www.euclidfunds.com and www.phoenixinvestments.com.
---------------------------------------------------------------------------
Mutual funds distributed by Phoenix Equity Planning Corporation, Enfield, CT
06083
(C) 1999 Phoenix Investment Partners, Ltd. PXP 1211 (6/99)
