[FRONT COVER]
December 31, 1996
PHOENIX FUNDS
ANNUAL REPORT
Phoenix Strategic
Allocation Fund
[LOGOTYPE] PHOENIX
DUFF & PHELPS
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PHOENIX STRATEGIC ALLOCATION FUND, INC.
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Investment Environment
Despite increasing interest rates and waning corporate earnings momentum,
U.S. stock prices forged higher over this reporting period, fueled by
unprecedented cash inflows into equity mutual funds and continued corporate
share buybacks. Although this remarkable rally dates back to December 1994,
the past year has been one of tremendous rotation among various sectors of
the stock market--a manifestation of increasing investor uncertainty over the
direction of interest rates and the economy. As measured by the Standard &
Poor's 500 Stock Index, the U.S. equity market returned an impressive 23.25%
during 1996.
While it may have been another record year for U.S. equities, the overall
bond market produced less than stellar results. For the twelve months ended
December 31, 1996, the Lehman Brothers Aggregate Bond Index, an unmanaged
gauge of bond market performance, returned a mere 3.63%. Shifting market
opinion over the direction of the U.S. economy contributed to much of the
volatility in interest rates during this reporting period. As measured by the
30-year Treasury bond, interest rates started the year at 5.95%, climbed as
high as 7.19% in July, and finished 1996 yielding 6.64%. Generally speaking,
investors were well rewarded for moving down the credit-risk spectrum last
year, as lower-quality bonds generally outperformed higher-quality issues.
Portfolio Review
For the twelve months ended December 31, 1996, the Fund's class A shares
returned a respectable 8.78% and class B shares earned 7.95%. Over the same
period, its peer group average--the 185 retail flexible funds tracked by
Lipper Analytical Services--earned 13.59%. As with the broad market returns
noted above, all of these figures assume reinvestment of any distributions,
but exclude the effect of sales charges.
During this latest reporting period, Fund performance was held back
primarily because of weakness in some of our consumer cyclical, technology
and health care stocks. Positive contributors to equity performance included
our strong stock selection in the energy, finance and capital goods sectors.
The fixed-income segment of the Fund also boosted results as it continued to
significantly outperform its benchmark, the Lehman Brothers Aggregate Bond
Index. Our decision to emphasize such non-traditional sectors of the bond
market such as taxable municipals, commercial and non-agency residential
mortgage-backed securities and emerging market debt, paid off handsomely
during the year.
Outlook
After two back-to-back years of powerful performance, the equity risk level
is clearly rising. In a stock market caught between long-term concerns and
intermediate opportunities, we are focusing our equity exposure on growth
companies that have some sensitivity to the domestic economy and/or foreign
sales growth. The Fund is currently emphasizing such timely investment themes
as Capital Goods--The Long Wave (capital goods), Software Solutions
(technology) and Energy Technology (energy). Looking ahead, we believe that
the key to outperformance lies in taking advantage of market inefficiencies
within a volatile trading range combined with individual stock selection.
With a few minor adjustments, we believe that the fixed-income investment
strategy we successfully implemented last year can also perform well in 1997.
In the mortgage-backed arena, we are of the opinion that commercial and
non-agency residential securities continue to offer better relative value
than their agency counterparts. We also like the underfollowed taxable
municipal sector which currently provides a significant yield advantage over
comparably rated corporate bonds. Lastly, despite its extended rally, we
remain bullish on emerging markets debt. While last year's gains were
exceptionally strong relative to other fixed-income groups, returns of this
nature are not unprecedented for this sector.
Overall, we believe the Fund is well positioned for the new year. As of
December 31, 1996, the Fund's asset allocation mix was 75% equities, 17%
fixed income and 8% cash equivalents. As always, we remain committed to the
Fund's primary goal of generating a high level of capital appreciation, but
with less risk than a typical equity fund.
1
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Phoenix Strategic Allocation Fund, Inc.
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[STRATEGIC ALLOCATION FUND LINE CHART]
Phoenix Lipper
Strategic Analytical
Allocation S&P 500 Services
Fund-Class A Stock Index* Flexible Fund**
------------ ------------ ---------------
Dec 31, 86 9525 10000 10000
Dec 31, 87 10572.7 10571 10620
Dec 31, 88 10926.6 12253 11547
Dec 31, 89 12928.7 16104 13546
Dec 31, 90 13512 15590 13446
Dec 31, 91 17382.6 20352 16866
Dec 31, 92 19176.2 21917 18251
Dec 31, 93 21188.5 24109 20275
Dec 31, 94 20170.5 24427 19823
Dec 31, 95 24487 33590 24759
Dec 31, 96 26638 41398 28128
[/LINE CHART]
Average Annual Total Returns for Periods Ending 12/31/96
<TABLE>
<CAPTION>
From Inception
10/24/94 to
1 Year 5 Years 10 Years 12/31/96
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Class A with 4.75% sales charge 3.60% 7.86% 10.29% --
- -----------------------------------------------------------------------------------------
Class A at net asset value 8.78% 8.91% 10.83% --
- -----------------------------------------------------------------------------------------
Class B with CDSC 3.10% -- -- 10.11%
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Class B at net asset value 7.95% -- -- 11.35%
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Lipper Analytical Services
Flexible Fund** 13.59% 10.75% 10.89% 26.45%
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S&P 500 Stock Index* 23.25% 15.26% 15.27% 27.39%
- -----------------------------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/86
for Class A shares. 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 inception date, 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). 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 Stock Index is an unmanaged but commonly used measure of common
stock total return performance. The S&P 500's performance does not reflect
sales charges.
**The Lipper Analytical Services Flexible Fund category is an average
composed of 185 funds; the 5 and 10 year returns are derived from compounding
the yearly returns. Performance is based on the reinvestment of all
distributions and does not reflect the effects of sales charges.
2
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Phoenix Strategic Allocation Fund, Inc.
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INVESTMENTS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- -------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--2.9%
U.S. Treasury Bonds--0.3%
U.S. Treasury Bonds 6%, '26 AAA $1,060 $ 964,268
--------------
U.S. Treasury Notes--2.6%
U.S. Treasury Notes 5.75%, '98 AAA 7,200 7,181,208
U.S. Treasury Notes 6.50%, '06 AAA 1,000 1,005,625
--------------
8,186,833
--------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $9,103,318) 9,151,101
--------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------
<S> <C> <C>
COMMON STOCKS--72.9%
Advertising--0.7%
Omnicom Group, Inc. 50,000 2,287,500
--------------
Aerospace & Defense--2.1%
Boeing Co. 62,300 6,627,162
--------------
Banks--4.1%
Ahmanson (H.F.) & Co. 80,700 2,622,750
Golden West Financial Corp. 44,000 2,777,500
Great Western Financial Corp. 141,100 4,091,900
Wells Fargo & Co. 13,300 3,587,675
--------------
13,079,825
--------------
Beverages--1.0%
Seagram Ltd. 83,100 3,220,125
--------------
Chemical--2.4%
Du Pont (E.I.) de Nemours & Co. 41,100 3,878,812
Monsanto Co. 95,900 3,728,113
--------------
7,606,925
--------------
Computer Software & Services--8.5%
Computer Associates International, Inc. 82,800 4,119,300
Fiserv, Inc. (b) 106,700 3,921,225
HBO & Co. 24,700 1,466,562
Microsoft Corp. (b) 76,200 6,296,025
Oracle Corp. (b) 87,100 3,636,425
Parametric Technology Corp. (b) 85,900 4,413,113
Sungard Data Systems, Inc. (b) 83,000 3,278,500
--------------
27,131,150
--------------
Conglomerates--2.3%
AlliedSignal, Inc. 71,700 4,803,900
Tyco International Ltd. 48,500 2,564,438
--------------
7,368,338
--------------
Containers--1.1%
Crown Cork & Seal, Inc. 66,900 3,637,688
--------------
Cosmetics & Soaps--2.2%
Colgate Palmolive Co. 44,600 4,114,350
Procter & Gamble Co. 25,300 2,719,750
--------------
6,834,100
--------------
Diversified Financial Services--1.1%
Federal National Mortgage Assoc. 92,100 3,430,725
--------------
Diversified Miscellaneous--1.0%
CUC International, Inc. (b) 134,700 3,199,125
--------------
Electrical Equipment--2.0%
General Electric Co. 26,700 2,639,963
Honeywell, Inc. 58,000 3,813,500
--------------
6,453,463
--------------
Electronics--1.3%
Intel Corp. 31,000 4,059,063
--------------
Healthcare--Diversified--3.1%
American Home Products Corp. 107,100 6,278,737
Warner-Lambert Co. 47,200 3,540,000
--------------
9,818,737
--------------
Healthcare--Drugs--3.4%
Biochem Pharmaceutical, Inc. (b) 67,700 3,401,925
Lilly (Eli) & Co. 43,300 3,160,900
Pfizer, Inc. 53,100 4,400,663
--------------
10,963,488
--------------
Lodging & Restaurants--1.7%
Marriott International, Inc. 96,000 5,304,000
--------------
Machinery--1.7%
Caterpillar, Inc. 32,500 2,445,625
Deere & Co. 76,300 3,099,688
--------------
5,545,313
--------------
Medical Products & Supplies--3.3%
Boston Scientific Corp. (b) 89,600 5,376,000
Medtronic, Inc. 76,400 5,195,200
--------------
10,571,200
--------------
Metal & Mining--1.1%
Aluminum Company of America 56,600 3,608,250
--------------
Natural Gas--6.3%
Anadarko Petroleum Corp. 49,800 3,224,550
Apache Corp. 100,000 3,537,500
Coastal Corp. 16,600 811,325
Columbia Gas System, Inc. 11,800 750,775
KN Energy, Inc. 20,000 785,000
PanEnergy Corp. 47,700 2,146,500
Questar Corp. 20,000 735,000
Sonat, Inc. 74,000 3,811,000
Tejas Gas Corp. (b) 19,000 904,875
Williams Companies, Inc. 94,200 3,532,500
--------------
20,239,025
--------------
Office & Business Equipment--1.2%
Hewlett Packard Co. 76,000 3,819,000
--------------
Oil--0.5%
Triton Energy Ltd. (b) 34,400 1,668,400
--------------
See Notes to Financial Statements
</TABLE>
3
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Phoenix Strategic Allocation Fund, Inc.
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<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Oil Service & Equipment--7.0%
BJ Services Co. (b) 80,400 $ 4,100,400
Baker Hughes, Inc. 132,100 4,557,450
Halliburton Co. 86,900 5,235,725
Noble Drilling Corp. (b) 216,600 4,304,925
Varco International, Inc. (b) 110,000 2,543,750
Weatherford Enterra, Inc. (b) 53,100 1,593,000
-------------
22,335,250
-------------
Retail--3.8%
Home Depot, Inc. 95,000 4,761,875
Tiffany & Co. 96,000 3,516,000
TJX Companies, Inc. 78,900 3,737,887
-------------
12,015,762
-------------
Telecommunications Equipment--6.6%
Andrew Corp. (b) 26,800 1,422,075
Ascend Communications, Inc. (b) 48,400 3,006,850
Cisco Systems, Inc. (b) 157,600 10,027,300
Lucent Technologies, Inc. 98,800 4,569,500
Tellabs, Inc. (b) 58,500 2,201,062
-------------
21,226,787
-------------
Textile & Apparel--3.4%
Liz Claiborne, Inc. 75,300 2,908,462
Nautica Enterprises, Inc. (b) 60,300 1,522,575
Nike, Inc. Class B 61,600 3,680,600
Tommy Hilfiger Corp. (b) 55,300 2,654,400
-------------
10,766,037
-------------
TOTAL COMMON STOCKS
(Identified cost $218,089,223) 232,816,438
-------------
FOREIGN COMMON STOCKS--2.1%
Chemical--1.2%
Potash Corp. of Saskatchewan, Inc. (Canada) 44,200 3,757,000
-------------
Textile & Apparel--0.9%
Gucci Group NV-NY (Italy) 45,800 2,925,475
-------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $6,674,591) 6,682,475
-------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- -------- --------------
<S> <C> <C> <C>
MUNICIPAL BONDS--3.3%
California--1.7%
Kern County Pension Obligation
Taxable 7.26%, '14 AAA $1,700 1,675,622
Long Beach Pension Obligation
Taxable 6.87%, '06 AAA 950 952,156
San Bernardino County Obligation
Revenue Taxable 6.87%, '08 AAA 455 451,679
San Bernardino County Obligation
Revenue Taxable 6.94%, '09 AAA 1,240 1,235,772
Ventura County Pension Taxable
6.54%, '05 AAA 1,100 1,083,379
--------------
5,398,608
--------------
Florida--1.6%
Dade County Ed. Facs. Authority
5.75%, '20 AAA 300 303,684
Miami Beach Special Obligation
Taxable 8.60%, '21 AAA 3,600 3,940,092
University Miami Exchange Revenue A
Taxable 7.65%, '20 AAA 1,065 1,074,936
--------------
5,318,712
--------------
TOTAL MUNICIPAL BONDS
(Identified cost $10,770,310) 10,717,320
--------------
NON-CONVERTIBLE BONDS--6.6%
Asset-Backed Securities--0.9%
Airplanes Pass Through Trust 1D
10.875%, '19 BB 560 617,719
Fleetwood Credit Corp. 96-B, A
6.90%, '12 AAA 948 957,182
Green Tree Financial Corp. 96-2, M1
7.60%, '27 AA- 1,150 1,154,672
--------------
2,729,573
--------------
Non-Agency Mortgage-Backed Securities--5.6%
CS First Boston Mortgage 95-AE1, B
7.182%, '27 AA- 1,775 1,767,512
GE Capital Mortgage Service
96-8, M 7.25%, '26 AA 249 242,177
Lehman Commercial Conduit
95-C2, B 7.184%, '05 AA 1,850 1,858,672
Merrill Lynch Mortgage, Inc. 95-C2,
B 7.61%, '21 Aa(c) 893 904,589
Merrill Lynch Mortgage, Inc. 96-C1,
B 7.42%, '28 AA 420 424,528
Nationslink Funding Corp. 96-1, B
7.69%, '05 AA 325 337,187
Residential Asset Securitization
Trust 96-A8, A1 8%, '26 AAA 979 993,565
Residential Funding Mortgage 96-S1,
A11 7.10%, '26 AAA 1,500 1,459,453
Residential Funding Mortgage 96-S4,
M1 7.25%, '26 AA 496 482,202
Resolution Trust Corp. 93-C1, B
8.75%, '24 Aa(c) 1,750 1,789,922
See Notes to Financial Statements
4
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Phoenix Strategic Allocation Fund, Inc.
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STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- -------- --------------
Non-Agency Mortgage-Backed Securities--continued
Resolution Trust Corp. 95-C2, B
6.80%, '27 Aa(c) $ 993 $ 981,670
Resolution Trust Corp. 95-C1, B
6.90%, '27 Aa(c) 2,125 2,105,742
Resolution Trust Corp. 95-2, M1
7.15%, '29 Aa(c) 1,538 1,540,998
Structured Asset Securities
Corp. 95-C1, C 7.375%, '24 A 755 754,882
Structured Asset Securities Corp.
95-C4, B 7%, '26 AA 1,850 1,824,562
Structured Asset Securities
Corp. 96-CFL, C 6.525%, '28 A 405 395,888
--------------
17,863,549
--------------
Paper & Forest Products--0.1%
Buckeye Cellulose Corp. 9.25%, '08 BB- 350 364,875
--------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $20,917,493) 20,957,997
--------------
FOREIGN GOVERNMENT SECURITIES--2.8%
Argentina--0.4%
Republic of Argentina Discount L-GL
Euro 6.375%, '23 (e) BB- 1,800 1,389,375
--------------
Brazil--0.3%
Republic of Brazil Discount ZL Euro
6.50%, '24 (e) B+ 500 385,938
Republic of Brazil Par Z-L Euro
4.25%, '24 (e) B (c) 1,000 630,000
--------------
1,015,938
--------------
Colombia--1.2%
Republic of Colombia Yankee 7.25%,
'04 BBB- 3,900 3,802,500
--------------
Mexico--0.5%
United Mexican States 144A 7.563%,
'01 (d) (e) Baa(c) 375 375,881
United Mexican States Euro D 6.352%,
'19 (e) (f) BB 1,250 1,078,125
--------------
1,454,006
--------------
Panama--0.4%
Panama IRB 144A 3.50%, '14 (d) (e) NR 700 486,937
Panama PDI 144A, PIK interest
capitalization, 6.75%, '16 (d) (e) NR 925 733,046
--------------
1,219,983
--------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $7,911,854) 8,881,802
--------------
FOREIGN NON-CONVERTIBLE BONDS--1.3%
Chile--0.1%
Petropower Funding 144A 7.36%, '14
(d) BBB 500 477,150
--------------
Colombia--1.2%
Financiera Energ. Nacional EMTN Euro
9%, '99 BBB- 3,600 3,775,500
--------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $4,186,400) 4,252,650
--------------
TOTAL LONG-TERM INVESTMENTS--91.9%
(Identified cost $277,653,189) 293,459,783
--------------
SHORT-TERM OBLIGATIONS--8.2%
Commercial Paper--5.6%
Abbott Laboratories 5.42%, 1-7-97 A-1+ 4,390 4,386,034
Abbott Laboratories 5.26%, 1-14-97 A-1+ 1,495 1,491,908
Bellsouth Capital Funding Corp.
5.40%, 1-14-97 A-1+ 1,705 1,701,675
Kellog Co. 5.35%, 2-5-97 A-1+ 2,180 2,168,661
General Re Corp. 5.30%, 2-14-97 A-1+ 2,500 2,482,479
First Deposit Funding Trust 5.33%,
3-14-97 A-1 3,617 3,575,406
Receivables Capital Corp. 5.39%,
5-1-97 A-1+ 2,000 1,963,560
--------------
17,769,723
--------------
Federal Agency Securities--2.6%
Federal National Mortgage
Assoc. 5.24%, 2-27-97 5,000 4,955,787
Federal Farm Credit Bank
5.24%, 3-14-97 3,480 3,442,451
--------------
8,398,238
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $26,176,892) 26,167,961
--------------
TOTAL INVESTMENTS--100.1%
(Identified cost $303,830,081) 319,627,744(a)
Cash and receivables, less liabilities--(0.1%) (355,981)
--------------
NET ASSETS--100.0% $319,271,763
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $21,816,083 and gross
depreciation of $6,018,420 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$303,830,081.
(b) Non-income producing.
(c) As rated by Moody's, Fitch, or Duff & Phelps.
(d) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1996, these securities amounted to a value of $2,073,014 or 0.65% of net
assets.
(e) Variable or step coupon bond; interest rate shown reflects the rate
currently in effect.
(f) Rights incorporated as a unit.
See Notes to Financial Statements
5
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Phoenix Strategic Allocation Fund, Inc.
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STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $303,830,081) $319,627,744
Short-term investments held as collateral for loaned
securities 1,042,575
Receivables
Investment securities sold 558
Fund shares sold 104,166
Dividends and interest 752,622
--------------
Total assets 321,527,665
--------------
Liabilities
Payables
Custodian 28,753
Collateral on securities loaned 1,042,575
Fund shares repurchased 712,076
Investment advisory fee 178,649
Transfer agent fee 82,423
Distribution fee 74,849
Financial agent fee 8,245
Directors' fee 7,985
Accrued expenses 120,347
--------------
Total liabilities 2,255,902
--------------
Net Assets $319,271,763
==============
Net Assets Consist of:
Capital paid in on shares of common stock $299,123,712
Undistributed net investment income 448,303
Accumulated net realized gain 3,902,085
Net unrealized appreciation 15,797,663
--------------
Net Assets $319,271,763
==============
Class A
Shares of common stock, $1 par value,
50,000,000 shares authorized
(Net Assets $309,677,605) 19,953,080
Net asset value per share $15.52
Offering price per share
$15.52/(1-4.75%) $16.29
Class B
Shares of common stock, $1 par value,
50,000,000 shares authorized
(Net Assets $9,594,158) 621,695
Net asset value and offering price per share $15.43
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
Investment Income
Dividends $ 2,681,346
Interest 7,565,350
Security lending 47,825
------------
Total investment income 10,294,521
------------
Expenses
Investment advisory fee 2,241,038
Distribution fee--Class A 839,140
Distribution fee--Class B 91,191
Financial agent fee 103,432
Transfer agent 642,283
Printing 108,837
Custodian 57,088
Registration 53,279
Professional 45,578
Directors 18,795
Miscellaneous 23,962
------------
Total expenses 4,224,623
------------
Net investment income 6,069,898
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 32,230,748
Net realized loss on foreign currency transactions (5,744)
Net change in unrealized appreciation (depreciation) on
investments (9,313,255)
------------
Net gain on investments 22,911,749
------------
Net increase in net assets resulting from operations $28,981,647
============
See Notes to Financial Statements
6
<PAGE>
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Phoenix Strategic Allocation Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
From Operations
Net investment income $ 6,069,898 $ 9,711,631
Net realized gain 32,225,004 30,657,387
Net change in unrealized appreciation (depreciation) (9,313,255) 20,305,509
--------------- ----------------
Increase in net assets resulting from operations 28,981,647 60,674,527
--------------- ----------------
From Distributions to Shareholders
Net investment income--Class A (5,622,283) (11,137,166)
Net investment income--Class B (90,090) (157,249)
Net realized gains--Class A (29,211,894) (21,046,512)
Net realized gains--Class B (899,061) (460,526)
--------------- ----------------
Decrease in net assets from distributions to shareholders (35,823,328) (32,801,453)
--------------- ----------------
From Share Transactions
Class A
Proceeds from sales of shares (918,493 and 2,327,216 shares,
respectively) 14,942,495 36,428,108
Net asset value of shares issued from reinvestment of
distributions (1,918,313 and 1,767,069 shares, respectively) 30,240,866 27,891,041
Cost of shares repurchased (5,512,257 and 4,076,035 shares,
respectively) (90,484,207) (65,751,129)
--------------- ----------------
Total (45,300,846) (1,431,980)
--------------- ----------------
Class B
Proceeds from sales of shares (168,248 and 418,716 shares,
respectively) 2,738,747 6,684,860
Net asset value of shares issued from reinvestment of
distributions (55,850 and 34,447 shares, respectively) 875,001 539,518
Cost of shares repurchased (108,645 and 36,705 shares,
respectively) (1,770,975) (599,012)
--------------- ----------------
Total 1,842,773 6,625,366
--------------- ----------------
Increase (decrease) in net assets from share transactions (43,458,073) 5,193,386
--------------- ----------------
Net increase (decrease) in net assets (50,299,754) 33,066,460
Net Assets
Beginning of period 369,571,517 336,505,057
--------------- ----------------
End of period (including undistributed net investment income
of $448,303 and $0, respectively) $319,271,763 $369,571,517
=============== ================
</TABLE>
See Notes to Financial Statements
7
<PAGE>
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Phoenix Strategic Allocation Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------------------------------
From
Year Ended Inception
Year Ended December 31, December 31, 10/24/94
to
1996 1995 1994 1993 1992 1996 1995 12/31/94
--------- -------- -------- ------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $15.98 $14.82 $15.48 $14.89 $15.22 $15.89 $14.79 $14.98
Income from investment operations
Net investment income 0.31 0.45 0.34 0.06(2) 0.24 0.19 0.30(2) 0.07
Net realized and unrealized
gain (loss) 1.10 2.22 (0.69) 1.49 1.32 1.09 2.22 (0.09)
------- ------- ------- ------- ------ ------ ------ -------
Total from investment
operations 1.41 2.67 (0.35) 1.55 1.56 1.28 2.52 (0.02)
------- ------- ------- ------- ------ ------ ------ -------
Less distributions
Dividends from net investment
income (0.29) (0.52) (0.31) (0.11) (0.25) (0.16) (0.43) (0.17)
Dividends from net realized
gains (1.58) (0.99) (0.001) (0.85) (1.64) (1.58) (0.99) --
------- ------- ------- ------- ------ ------ ------- -------
Total distributions (1.87) (1.51) (0.311) (0.96) (1.89) (1.74) (1.42) (0.17)
------- ------- ------- ------- ------ ------ ------- -------
Change in net asset value (0.46) 1.16 (0.66) 0.59 (0.33) (0.46) 1.10 (0.19)
------- ------- ------- ------- ------ ------ ------- -------
Net asset value, end of period $15.52 $15.98 $14.82 $15.48 $14.89 $15.43 $15.89 $14.79
======= ======= ======= ======= ====== ======= ======= =======
Total return(1) 8.78% 18.23% -2.26% 10.49% 10.32% 7.95% 17.31% -0.12%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $309,678 $361,526 $335,177 $370,440 $58,006 $9,594 $8,046 $1,328
Ratio to average net assets of:
Operating expenses 1.21% 1.21% 1.24% 1.29% 1.36% 1.96% 1.97% 2.26%(3)
Net investment income 1.78% 2.67% 2.18% 1.26% 2.06% 1.01% 1.88% 1.74%(3)
Portfolio turnover 275% 184% 225% 246% 322% 275% 184% 225%
Average commission rate paid(5) $0.0529 N/A N/A N/A N/A $0.0529 N/A N/A
</TABLE>
(1) Maximum sales load is not reflected in total return calculation.
(2) Computed using average shares outstanding.
(3) Annualized
(4) Not annualized
(5) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
8
<PAGE>
PHOENIX STRATEGIC ALLOCATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Strategic Allocation Fund, Inc., formerly Phoenix Total Return Fund,
Inc., ("the Fund") is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
investment objective is to achieve the highest total return consistent with
reasonable risk by investing in stocks, bonds and money market instruments.
The Fund offers both Class A and Class B shares. Class A shares are sold with
a 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. Both 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 the Fund are borne pro rata by the holders of both 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 Fund 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. Debt securities are valued on the basis
of broker quotations or valuations provided by a pricing service which
utilizes information with respect to recent sales, market transactions in
comparable securities, quotations from dealers, and various relationships
between securities in determining value. Short-term investments having a
remaining maturity of 60 days or less are valued at amortized cost which
approximates market. All other securities and assets are valued at fair value
as determined in good faith by or under the direction of the Directors.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign
securities, as soon as the Fund is notified. Interest income is recorded on
the accrual basis. The Fund does not amortize premiums but does amortize
discounts using the effective interest method. Realized gains or losses are
determined on the identified cost basis.
C. Income taxes:
It is the policy of the Fund to comply with the requirements of the Internal
Revenue Code (the Code), applicable to regulated investment companies, and to
distribute substantially all of its taxable income to its shareholders. In
addition, the Fund intends to distribute an amount sufficient to avoid the
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 to shareholders are recorded 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, expiring
capital loss carryforwards, foreign currency gain/loss, partnerships, 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 Fund
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.
9
<PAGE>
PHOENIX STRATEGIC ALLOCATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 (Continued)
F. Security lending:
The Fund loans securities to qualified brokers through an agreement with
State Street Bank and Trust Company (State Street). Under the terms of the
agreement, the Fund receives collateral with a market value not less than
100% of the market value of loaned securities. Collateral consists of cash,
securities issued or guaranteed by the U.S. Government or its agencies and
the sovereign debt of foreign countries. Interest earned on the collateral
and premiums paid by the borrower are recorded as income by the Fund net of
fees charged by State Street for its services in connection with this
securities lending program. Lending portfolio securities involves a risk of
delay in the recovery of the loaned securities or in the foreclosure on
collateral. At December 31, 1996, the Fund had loaned securities with a
market value of $1,019,538 and received collateral of $1,042,575.
NOTE 2. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Investment Adviser,
Phoenix Investment Counsel, Inc., an indirect majority-owned subsidiary of
Phoenix Home Life Mutual Insurance Company ("PHL"), is entitled to a fee at
an annual rate of 0.65% of the average daily net assets of the Fund for the
first $1 billion.
As Distributor of the Fund's shares, Phoenix Equity Planning Corp.
("PEPCO"), an indirect majority-owned subsidiary of PHL, has advised the Fund
that it retained net selling commissions of $29,291 for Class A shares and
deferred sales charges of $21,076 for Class B shares for the year ended
December 31, 1996. In addition, the Fund pays PEPCO a distribution fee at an
annual rate of 0.25% for Class A shares and 1.00% for Class B shares of the
average daily net assets of the Fund. The Distributor has advised the Fund
that of the total amount expensed for the year ended December 31, 1996,
$206,149 was retained by the Distributor and $724,182 was paid to
unaffiliated participants.
As Financial Agent of the Fund, PEPCO receives a fee at an annual rate of
0.03% of the average daily net assets of the Fund for bookkeeping,
administration and pricing services. PEPCO serves as the Fund's Transfer
Agent with State Street as sub-transfer agent. For the year ended December
31, 1996, transfer agent fees were $642,283 of which PEPCO retained $226,746
which is net of the fees paid to State Street.
At December 31, 1996, PHL and affiliates held 49 Class A shares and 8,276
Class B shares of the Fund with a combined value of $128,460.
NOTE 3. PURCHASES AND SALES OF SECURITIES
During the year ended December 31, 1996, purchases and sales of investments,
excluding short-term securities and U.S. Government and agency securities,
amounted to $693,453,897 and $685,401,380, respectively. Purchases and sales
of long-term U.S. Government and agency securities amounted to $127,409,131
and $162,628,551, respectively.
NOTE 4. RECLASSIFICATION OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Fund has recorded several
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of the Fund 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. During the year ended
December 31, 1996, the Fund increased undistributed net investment income by
$90,778 and decreased accumulated net realized gains by $90,778.
TAX INFORMATION NOTICE (Unaudited)
For the fiscal year ended December 31, 1996, the Fund distributed
$14,378,203 of long-term capital gain dividends.
For federal income tax purposes, 7.31% of the ordinary income dividends paid
by the Fund qualify for the dividends received deduction for corporate
shareholders.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGOTYPE] Price Waterhouse LLP [LOGO]
To the Board of Directors and Shareholders of
Phoenix Strategic Allocation Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule 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 Strategic Allocation Fund, Inc. (formerly Phoenix Total
Return Fund, Inc.) (the "Fund") at December 31, 1996, and the results of its
operations, the changes in its 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 Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with 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 December 31, 1996 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/Price Waterhouse LLP
Boston, Massachusetts
February 7, 1997
11
<PAGE>
RESULTS OF SHAREHOLDER MEETING (Unaudited)
A special meeting in lieu of the Annual Meeting of shareholders of the
Phoenix Strategic Allocation Fund, Inc. was held on November 8, 1996 to
approve the following matters:
1. Fix the number of directors at fourteen and elect such number as
detailed below.
2. Ratify selection of Price Waterhouse LLP, independent accountants, as
auditors for the fiscal year ending December 31, 1996.
3. Approve amending the Fund's Restated Articles of Organization to change
the name of the Fund from Phoenix Total Return Fund, Inc. to Phoenix
Strategic Allocation Fund, Inc.
On the record date for this meeting, there were 20,088,259 shares outstanding
and 60.177% of the shares outstanding and entitled to vote were present by
proxy.
Number of votes:
1. Election of Directors For Withheld
---------- --------
C. Duane Blinn 11,656,327 432,266
Robert Chesek 11,669,951 418,639
E. Virgil Conway 11,651,391 437,202
Harry Dalzell-Payne 11,659,135 429,458
Francis E. Jeffries 11,669,168 419,425
Leroy Keith, Jr. 11,668,501 420,092
Philip R. McLoughlin 11,674,430 414,163
Everett L. Morris 11,656,260 432,333
James M. Oates 11,669,438 419,154
Calvin J. Pedersen 11,674,932 413,661
Philip R. Reynolds 11,651,461 437,132
Herbert Roth, Jr. 11,653,915 434,678
Richard E. Segerson 11,673,864 414,729
Lowell P. Weicker, Jr. 11,631,056 457,537
For Against Abstain
---------- ------- -------
2. Price Waterhouse LLP 11,466,657 131,399 490,537
3. Change name of Fund 10,464,424 750,603 873,566
12
<PAGE>
PHOENIX STRATEGIC ALLOCATION FUND, INC.
101 Munson Street
Greenfield, Massachusetts 01301
Directors
C. Duane Blinn
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
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
David R. Pepin, Executive Vice President
William J. Newman, Senior Vice President
Mary E. Canning, 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, Secretary and Clerk
Investment Adviser
Phoenix Investment Counsel, Inc.
56 Prospect St.
Hartford, CT 06115-0480
Principal Underwriter
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
This report is not authorized for distribution to prospective investors in
the Phoenix Strategic Allocation Fund, Inc. unless preceded or accompanied by
an effective prospectus which includes information concerning the sales
charge, the Fund's record and other pertinent information.
<PAGE>
Phoenix Strategic Allocation Fund, Inc. | BULK RATE MAIL |
P.O. Box 2200 | U.S. POSTAGE |
Enfield, CT 06083-2200 | PAID |
| SPRINGFIELD, MA |
| PERMIT NO. 444 |
[LOGOTYPE] PHOENIX
DUFF & PHELPS
PDP 454 (2/97)
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