[FRONT COVER]
ANNUAL REPORT
P H O E N I X
THE PHOENIX EDGE SERIES FUND
December 31, 1997
[LOGOTYPE]PHOENIX
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THIS PAGE LEFT INTENTIONALLY BLANK.
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Table of Contents
Page
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Phoenix Money Market Series ....................... 2
Phoenix Growth Series ............................. 7
Phoenix Multi-Sector Fixed Income Series .......... 12
Phoenix Strategic Allocation Series ............... 18
Phoenix International Series ...................... 25
Phoenix Balanced Series ........................... 32
Phoenix Real Estate Securities Series ............. 39
Phoenix Strategic Theme Series .................... 43
Phoenix Aberdeen New Asia Series .................. 48
Phoenix Research Enhanced Index Series ............ 53
Notes to Financial Statements ..................... 61
- --------------------------------------------------------------------------------
Not FDIC Insured No Bank Guarantee May Lose Value
- --------------------------------------------------------------------------------
<PAGE>
MONEY MARKET SERIES
INVESTOR PROFILE
Phoenix Money Market Series is designed for conservative investors who want
competitive money market yields with minimal risk to principal.
INVESTMENT REVIEW
Phoenix Money Market Series continued to perform well during this 12-month
reporting period. As of December 31, 1997, the seven-day current yield was 5.14%
compared with the 5.05% IBC Money Fund Average as reported in IBC's Money Fund
Report. Current yield is a seven-day annualized yield computed by dividing the
average net income earned per share during the seven days preceding the date of
calculation by the average daily net asset value per share for the same period
multiplied by 365.
Money markets were quite volatile over the last year. Fourth-quarter GDP
rose 4.3%, showing strength in the employment and wages components. Continued
strength into the first quarter of 1997 and growing concerns over inflation
prompted the Federal Reserve to preemptively raise rates from 5.25% to 5.50%.
In the months that followed the tightening, economic data continued to show
pockets of strength. Concerns over the strength of the economy and fears of
rekindled inflation increased cash flows in the short end of the market.
However, moderate growth with well-behaved inflation kept the Federal Reserve on
hold indefinitely.
The summer months were marked by continued mixed economic data. Warnings
from the Federal Reserve referencing an over enthusiastic stock market and signs
of rising inflation rumbled through the markets. Short-term interest rates were
very volatile at this time, and by early fall there was a definitive feeling in
the markets of another rate increase. Subsequently, unexpected turmoil in the
Asian markets caused unstable markets globally, most likely keeping the Fed on
hold indefinitely.
Uncertainty as to how the Asian turmoil would impact the domestic markets
prevailed through year-end. Normal year-end pressures offered attractive buying
opportunities to extend the Fund's average maturity to 52 days.
Throughout most of the year, average maturity was held relatively neutral.
Our strategy has been to manage the Fund's average maturity as opposed to
predicting rates. The volatility in the world markets has proven this strategy
to be effective. We continued to emphasize high-quality commercial paper and
variable-rate securities to enhance yield. The Fund's average credit quality
remains A1/P1.
OUTLOOK
For the near future, we anticipate slower U.S. economic growth due to the
recent shakeup in the world markets. Growth is expected to decelerate with
inflation remaining subdued. However, if inflation fears are rekindled, the Fed
is likely to be diligent in reacting by raising rates.
We will continue to emphasize credit quality, focusing on higher yielding
issues, such as commercial paper and variable-rate securities. Given the
uncertainty in the market, we will be monitoring any movement in interest rates
or shifts in yield spreads to identify attractive trading opportunities.
MONTHLY YIELD COMPARISON
[TABULAR REPRESENTATION OF LINE CHART]
IBC Money Fund Report* Money Market Series
1/31/97 4.77% 4.96%
2/28/97 4.75% 4.89%
3/31/97 4.75% 4.93%
4/30/97 4.85% 4.91%
5/31/97 4.91% 5.26%
6/30/97 4.95% 5.13%
7/31/97 4.94% 5.13%
8/31/97 4.94% 4.82%
9/30/97 4.93% 5.12%
10/31/97 4.92% 5.04%
11/30/97 4.97% 5.10%
12/31/97 5.05% 5.18%
The above graph covers the period from January 1, 1997 to December 31, 1997.
The results are not indicative of the rate of return which may be realized from
an investment made in the Money Market Series today. The Money Market Series is
neither insured nor guaranteed by the U.S. Government, and there can be no
assurance the Series will be able to maintain a stable net asset value at
$10.00 per share.
*Average monthly yield of First Tier Money Market Funds as reported by IBC's
Money Fund Report.
2
<PAGE>
MONEY MARKET SERIES
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
FACE
VALUE INTEREST MATURITY
(000) DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------- ---------- --------- -------------
FEDERAL AGENCY SECURITIES--9.2%
<S> <C> <C> <C> <C>
$ 2,000 FHLB ........................ 5.79% 1/21/98 $ 2,000,000
3,000 FHLB ........................ 5.78 1/28/98 3,000,000
2,000 FHLB ........................ 5.95 2/12/98 2,000,000
173 FNMA ........................ 5.75 2/20/98 171,618
2,000 FHLB ........................ 6.00 3/30/98 2,000,000
2,500 SLMA ........................ 6.00 6/30/98 2,500,000
-----------
TOTAL FEDERAL AGENCY SECURITIES ..................................... 11,671,618
-----------
RESET
DATE
-------
FEDERAL AGENCY SECURITIES--VARIABLE (b)--15.2%
3,500 FFCB (final maturity 4/1/99) 5.53 1/1/98 3,500,000
521 SBA (final maturity 1/25/21) 6.00 1/1/98 520,095
519 SBA (final maturity 5/25/21) 6.00 1/1/98 518,760
2,000 SBA (final maturity 10/25/22) 6.00 1/1/98 1,997,517
2,000 FNMA (final maturity 11/9/98) 5.93 1/6/98 1,999,504
1,500 SLMA (final maturity 11/10/98) 5.62 1/6/98 1,499,322
1,000 SLMA (final maturity 2/22/99) 5.63 1/6/98 1,000,000
2,000 FHLMC (final maturity 6/22/98) 5.75 1/20/98 1,999,535
4,500 FFCB (final maturity 7/24/00) 5.79 1/26/98 4,501,299
1,650 FNMA (final maturity 12/14/98) 5.51 3/14/98 1,649,141
-----------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE ........................... 19,185,173
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S
RATING MATURITY
DESCRIPTION (Unaudited) DATE
---------------------------------------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--67.7%
2,880 Koch Industries, Inc. ........................ A-1+ 6.70 1/2/98 2,879,464
2,000 AlliedSignal, Inc. ........................... A-1 6.00 1/5/98 1,998,667
1,500 Donnelley (R.R.) & Sons Co. .................. A-1 6.45 1/5/98 1,498,925
1,500 CXC, Inc. .................................... A-1+ 5.97 1/9/98 1,498,010
2,630 Potomac Electric Power Co. ................... A-1 6.10 1/9/98 2,626,435
440 Receivables Capital Corp. .................... A-1+ 5.90 1/9/98 439,423
890 Receivables Capital Corp. .................... A-1+ 6.01 1/9/98 888,811
256 Enterprise Funding Corp. ..................... A-1+ 5.70 1/12/98 255,554
2,500 Greenwich Funding Corp. ...................... A-1+ 5.75 1/13/98 2,495,208
500 Preferred Receivables Funding Corp. .......... A-1 5.65 1/13/98 499,058
630 Preferred Receivables Funding Corp. .......... A-1 5.97 1/14/98 628,642
2,200 Deutsche Bank Financial, Inc. ................ A-1+ 5.64 1/15/98 2,200,000
545 Koch Industries, Inc. ........................ A-1+ 5.90 1/15/98 543,750
1,290 Receivables Capital Corp. .................... A-1+ 5.90 1/16/98 1,286,829
710 International Lease Finance Corp. ............ A-1 5.55 1/20/98 707,920
550 Corporate Asset Funding Co., Inc ............. A-1+ 6.00 1/21/98 548,167
2,300 Enterprise Funding Corp. ..................... A-1+ 5.73 1/23/98 2,291,946
1,100 Pitney Bowes Credit Corp. .................... A-1+ 5.53 1/23/98 1,096,283
2,000 CXC, Inc. .................................... A-1+ 5.70 1/26/98 1,992,083
2,085 Receivables Capital Corp. .................... A-1+ 5.83 1/26/98 2,076,559
2,400 CXC, Inc. .................................... A-1+ 5.57 1/27/98 2,390,345
2,500 Goldman Sachs & Co. .......................... A-1+ 5.85 1/30/98 2,488,219
1,500 Merrill Lynch & Co., Inc. .................... A-1+ 5.58 1/30/98 1,493,258
1,410 Donnelley (R.R.) & Sons Co. .................. A-1 5.70 2/3/98 1,402,633
1,655 Corporate Asset Funding Co., Inc. ............ A-1+ 5.90 2/4/98 1,645,778
2,500 Corporate Asset Funding Co., Inc. ............ A-1+ 5.61 2/5/98 2,486,365
2,000 Private Export Funding Corp. ................. A-1+ 5.73 2/6/98 1,988,540
1,195 Greenwich Funding Corp. ...................... A-1+ 5.82 2/12/98 1,186,886
2,000 Preferred Receivables Funding Corp. .......... A-1 5.70 2/12/98 1,986,700
1,000 Preferred Receivables Funding Corp. .......... A-1 5.83 2/12/98 993,198
2,000 Corporate Receivables Corp. .................. A-1 5.70 2/13/98 1,986,383
2,500 Corporate Receivables Corp. .................. A-1 5.55 2/18/98 2,481,500
2,500 General Re Corp. ............................. A-1+ 5.77 2/20/98 2,479,965
1,426 Receivables Capital Corp. .................... A-1+ 5.80 2/20/98 1,414,513
2,000 Preferred Receivables Funding Corp. .......... A-1 5.56 2/23/98 1,983,629
2,265 Greenwich Funding Corp. ...................... A-1+ 5.72 2/25/98 2,245,206
2,000 Enterprise Funding Corp. ..................... A-1+ 5.69 2/27/98 1,981,982
400 AT&T Corp. ................................... A-1+ 5.73 3/4/98 396,053
850 Du Pont (E.I.) de Nemours & Co. .............. A-1+ 5.57 3/6/98 841,583
1,600 Corporate Receivables Corp. .................. A-1 5.75 3/10/98 1,582,622
</TABLE>
See Notes to Financial Statements
3
<PAGE>
MONEY MARKET SERIES
<TABLE>
<CAPTION>
STANDARD
FACE & POOR'S
VALUE RATING INTEREST MATURITY
(000) DESCRIPTION (Unaudited) RATE DATE VALUE
- ---------- -------------------------------------------------- ------------- ---------- --------- --------------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--continued
$ 1,700 Beta Finance, Inc. ............................... A-1+ 5.58% 3/12/98 $ 1,681,555
1,335 General Re Corp. ................................. A-1+ 5.73 3/13/98 1,319,913
1,050 Merrill Lynch & Co., Inc. ........................ A-1+ 5.73 3/13/98 1,038,134
2,250 Asset Securitization Cooperative Corp. ........... A-1+ 5.75 3/16/98 2,223,406
1,380 Asset Securitization Cooperative Corp. ........... A-1+ 5.75 3/17/98 1,363,469
2,500 General Re Corp. ................................. A-1+ 5.75 3/20/98 2,468,854
2,500 Merrill Lynch & Co., Inc. ........................ A-1+ 5.57 3/25/98 2,467,895
2,500 General Electric Capital Corp. ................... A-1+ 5.54 3/30/98 2,466,145
1,750 Enterprise Funding Corp. ......................... A-1+ 5.75 3/31/98 1,725,123
2,390 General Electric Capital Corp. ................... A-1+ 5.65 4/23/98 2,347,989
2,765 Beta Finance, Inc. ............................... A-1+ 5.60 4/29/98 2,714,247
--------------
TOTAL COMMERCIAL PAPER .................................................................................. 85,723,822
--------------
MEDIUM-TERM NOTES--4.7%
1,500 Associates Corporation of North America .......... AA- 5.51 7/20/98 1,497,105
1,500 Associates Corporation of North America .......... AA- 6.38 8/15/98 1,504,039
2,000 Associates Corporation of North America .......... AA- 6.50 9/9/98 2,008,400
1,000 Pitney Bowes Credit Corp. ........................ AA 6.31 9/23/98 1,003,614
--------------
TOTAL MEDIUM-TERM NOTES ................................................................................. 6,013,158
--------------
TOTAL INVESTMENTS--96.8%
(Identified cost $122,593,771) ......................................................................... 122,593,771(a)
Cash and receivables, less liabilities--3.2% ........................................................... 4,012,923
--------------
NET ASSETS--100.0% ...................................................................................... $ 126,606,694
==============
</TABLE>
(a) Federal Income Tax Information: At December 31, 1997, the aggregate cost of
securities was the same for book and tax purposes.
(b) Variable rate demand notes. The interest rates shown reflect the rates
currently in effect.
See Notes to Financial Statements
4
<PAGE>
MONEY MARKET SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $122,593,771) ........................ $ 122,593,771
Cash ................................................................................. 61,267
Receivables
Fund shares sold .................................................................... 3,444,264
Interest ............................................................................ 601,187
-------------
Total assets ....................................................................... 126,700,489
-------------
Liabilities
Payables
Investment advisory fee ............................................................. 42,079
Financial agent fee ................................................................. 6,312
Trustees' fee ....................................................................... 4,656
Accrued expenses .................................................................... 40,748
-------------
Total liabilities .................................................................. 93,795
-------------
Net Assets ........................................................................... $ 126,606,694
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest .................................... $ 126,606,691
Undistributed net investment income ................................................. 3
-------------
Net Assets ........................................................................... $ 126,606,694
=============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization ..... 12,660,669
=============
Net asset value and offering price per share ......................................... $ 10.00
=============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
Investment Income
Interest ................................................... $6,936,028
----------
Total investment income .................................... 6,936,028
----------
Expenses
Investment advisory fee ..................................... 494,051
Financial agent fee ......................................... 74,108
Printing .................................................... 29,280
Custodian ................................................... 26,300
Professional ................................................ 23,353
Trustees .................................................... 20,780
Miscellaneous ............................................... 6,627
----------
Total expenses ............................................. 674,499
----------
Net investment income ........................................ 6,261,529
----------
Net increase in net assets resulting from operations ......... $6,261,529
==========
See Notes to Financial Statements
5
<PAGE>
MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income .............................................................. $ 6,261,529 $ 5,274,565
-------------- --------------
Net increase in net assets resulting from operations ............................... 6,261,529 5,274,565
-------------- --------------
From Distributions to Shareholders
Net investment income .............................................................. (6,261,529) (5,303,654)
-------------- --------------
Decrease in net assets from distributions to shareholders .......................... (6,261,529) (5,303,654)
-------------- --------------
From Share Transactions
Proceeds from sales of shares (35,987,251 and 31,500,976 shares, respectively) ..... 359,872,496 315,009,761
Net asset value of shares issued from reinvestment of distributions
(626,153 and 530,365 shares, respectively) ........................................ 6,261,528 5,303,654
Cost of shares repurchased (37,088,873 and 29,186,637 shares, respectively) ........ (370,888,736) (291,866,357)
-------------- --------------
Increase (decrease) in net assets from share transactions .......................... (4,754,712) 28,447,058
-------------- --------------
Net increase (decrease) in net assets .............................................. (4,754,712) 28,417,969
Net Assets
Beginning of period ................................................................ 131,361,406 102,943,437
-------------- --------------
End of period (including undistributed net investment income of $3 and
$3, respectively) ................................................................. $ 126,606,694 $ 131,361,406
============== ==============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995 1994 1993
------------ ------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment income ......................... 0.50 0.50 0.56 0.38(1) 0.28(1)
------- ------- -------- ----------- -----------
Total from investment operations ............. 0.50 0.50 0.56 0.38 0.28
------- ------- -------- ----------- -----------
Less distributions
Dividends from net investment income ......... (0.50) (0.50) (0.56) (0.38) (0.28)
-------- -------- -------- ----------- -----------
Total distributions ......................... (0.50) (0.50) (0.56) (0.38) (0.28)
-------- -------- -------- ----------- -----------
Net asset value, end of period ................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== =========== ===========
Total return ................................... 4.99% 4.98% 5.55% 3.77% 2.80%
Ratios/supplemental data:
Net assets, end of period (thousands) .......... $126,607 $131,361 $102,943 $ 94,586 $ 72,946
Ratio to average net assets of:
Operating expenses ............................ 0.55% 0.55% 0.53%(2) 0.55% 0.55%
Net investment income ......................... 5.07% 4.89% 5.57% 3.85% 2.84%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 and $0.01 per share, respectively.
(2) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
See Notes to Financial Statements
6
<PAGE>
GROWTH SERIES
INVESTOR PROFILE
Phoenix Growth Series is designed for investors seeking long-term capital
appreciation.
INVESTMENT REVIEW
For the 12-month period ended December 31, 1997, Phoenix Growth Series
earned 21.07% compared with 33.38% for the S&P 500 Index. All performance
figures assume reinvestment of dividends and exclude the effect of sales
charges.
Despite increased volatility in the fourth quarter, 1997 was another good
year for U.S. investors. In fact, the Dow Jones Industrial Average ended the
year at more than 10 times its 1982 low. Overseas, however, the picture was not
as bright: high jobless rates continued in Europe, turmoil continues in the
Middle East and Latin America is recovering slowly. The surprise was the
collapse of many markets in the Asia-Pacific region. While it will be some time
before we see the real impact of the Asian problems on the earnings of domestic
and global companies, the U.S. market reacted to the uncertainty with a violent
rotation to defensive issues. The strongest sectors in the fourth quarter were
communication services, utilities and consumer staples--slow but steady growers.
During this latest reporting cycle, the Fund benefited from an overweighted
position in the health-care sector and strong stock selection in the basic
materials group. Negative contributors to performance included the relative
underperformance of some of our consumer cyclical and technology holdings as
well as our limited exposure to the communication services area.
OUTLOOK
While our long-term outlook remains constructive, there are more reasons
than ever to maintain a cautious investment posture. On the positive side, the
economy continues to grow at a healthy, sustainable pace; inflation remains
benign; and the overall outlook for corporate earnings is still upbeat. On the
other hand, analysts' estimates for 1998 earnings are probably too high, and we
believe that the frequency of earnings disappointments will increase.
Our stock selection continues to focus on firms that possess above-average
earnings growth potential, superior management and global opportunities outside
Asia. We expect interest rates to continue to trend down and would not be
surprised if the Fed actually cut rates during the year, which would partially
offset the negative impact of slightly slower earnings growth on equity prices.
While the Asian "meltdown" introduces a new element of uncertainty in the
outlook for the financial markets, we do not believe the real impact will be
great. Health-care, financial services and technology continue to be the sectors
in which we have the greatest confidence for exceptional long-term growth.
[TABULAR REPRESENTATION OF LINE CHART]
S&P 500 Stock Index* Growth Series
12/31/87 $10,000 $10,000
12/31/88 11,650 10,384
12/31/89 15,312 14,128
12/31/90 14,823 14,705
12/31/91 19,351 21,133
12/31/92 20,839 23,308
12/31/93 22,923 27,898
12/31/94 23,266 28,310
12/31/95 31,937 37,043
12/31/96 39,362 41,703
12/31/97 52,500 50,491
Average Annual Total Returns for Periods Ending 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Series 21.07% 16.72% 17.57%
- -------------------------------------------------------------------------------
S&P 500 Stock Index* 33.38% 20.30% 18.04%
- -------------------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/87.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. 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. Foreign investing involves special
risks such as currency fluctuation and less public disclosure, as well as
economic and political risks.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance.
7
<PAGE>
GROWTH SERIES
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ----------------
<S> <C> <C>
COMMON STOCKS--90.3%
Banks (Major Regional)--6.6%
AmSouth Bancorporation ........................ 134,200 $ 7,288,737
Banc One Corp. ................................ 430,100 23,359,806
BankBoston Corp. .............................. 259,700 24,395,569
Compass Bankshares, Inc. ...................... 103,900 4,545,625
Mellon Bank Corp. ............................. 258,200 15,653,375
NationsBank Corp. ............................. 246,300 14,978,119
Southtrust Corp. .............................. 132,400 8,399,125
-------------
98,620,356
-------------
Banks (Money Center)--2.8%
BankAmerica Corp. ............................. 386,900 28,243,700
Citicorp ...................................... 113,100 14,300,081
-------------
42,543,781
-------------
Biotechnology--0.6%
Centocor, Inc. (b) ............................ 255,700 8,502,025
-------------
Broadcasting (Television, Radio, & Cable)--0.7%
Chancellor Media Corp. (b) .................... 141,200 10,537,050
-------------
Chemicals (Specialty)--0.7%
Solutia, Inc. (b) ............................. 377,740 10,080,936
-------------
Communications Equipment--2.7%
Ciena Corp. (b) ............................... 386,600 23,630,925
Lucent Technologies, Inc. ..................... 215,300 17,197,088
-------------
40,828,013
-------------
Computers (Hardware)--5.0%
International Business Machines Corp. ......... 724,500 75,755,531
-------------
Computers (Networking)--0.7%
Cisco Systems, Inc. (b) ....................... 195,750 10,913,062
-------------
Computers (Peripherals)--0.5%
EMC Corp. (b) ................................. 280,100 7,685,244
-------------
Computers (Software & Services)--6.1%
Adaptec, Inc. (b) ............................. 622,300 23,102,888
BMC Software, Inc. (b) ........................ 514,200 33,744,375
Compuware Corp. (b) ........................... 744,900 23,836,800
Edwards (J.D.) & Co. (b) ...................... 268,400 7,917,800
Sterling Commerce, Inc. (b) ................... 1 38
Yahoo!, Inc. (b) .............................. 56,500 3,912,625
-------------
92,514,526
-------------
Distributors (Food & Health)--1.5%
Cardinal Health, Inc. ......................... 301,500 22,650,187
-------------
Electrical Equipment--2.1%
General Electric Co. .......................... 434,500 31,881,437
-------------
Electronics (Instrumentation)--0.4%
Linear Technology Corp. ....................... 111,500 6,425,188
-------------
Electronics (Semiconductors)--2.4%
National Semiconductor Corp. (b) .............. 845,900 21,940,531
Texas Instruments, Inc. ....................... 304,800 13,716,000
-------------
35,656,531
-------------
Entertainment--1.6%
Tele-Comm Liberty Media Group (b) ............. 662,000 23,997,500
-------------
Financial (Diversified)--1.0%
American Express Co. .......................... 166,300 14,842,275
-------------
Health Care (Diversified)--3.3%
Bristol-Myers Squibb Co. ...................... 249,100 23,571,088
Warner-Lambert Co. ............................ 216,500 26,846,000
-------------
50,417,088
-------------
Health Care (Drugs-Major Pharmaceuticals)--5.3%
Lilly (Eli) & Co. ............................. 174,700 12,163,488
Pfizer, Inc. .................................. 719,700 53,662,631
Watson Pharmaceuticals, Inc. (b) .............. 449,600 14,583,900
-------------
80,410,019
-------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ----------------
<S> <C> <C>
Health Care (Hospital Management)--1.6%
HBO & Co. ..................................... 509,100 $ 24,436,800
-------------
Health Care (Long Term Care)--1.0%
HEALTHSOUTH Corp. (b) ......................... 568,300 15,770,325
-------------
Health Care (Medical Products & Supplies)--2.7%
Guidant Corp. ................................. 382,100 23,785,725
Medtronic, Inc. ............................... 335,200 17,535,150
-------------
41,320,875
-------------
Household Furn. & Appliances--1.0%
Sunbeam Corp., Inc. ........................... 371,200 15,636,800
-------------
Household Products (Non-Durables)--1.1%
Colgate-Palmolive Co. ......................... 230,800 16,963,800
-------------
Insurance (Life/Health)--0.6%
UNUM Corp. .................................... 153,800 8,362,875
-------------
Insurance (Multi-Line)--2.0%
Reliastar Financial Corp. ..................... 49,100 2,022,306
Travelers Group, Inc. ......................... 514,800 27,734,850
-------------
29,757,156
-------------
Insurance (Property-Casualty)--1.5%
Allstate Corp. ................................ 245,300 22,291,637
-------------
Investment Banking/Brokerage--0.5%
Merrill Lynch & Co., Inc. ..................... 101,900 7,432,331
-------------
Machinery (Diversified)--1.1%
Deere & Co. ................................... 278,700 16,251,694
-------------
Manufacturing (Diversified)--2.8%
Tyco International Ltd. ....................... 932,400 42,016,275
-------------
Oil (Domestic Integrated)--1.8%
Tosco Corp. ................................... 711,600 26,907,375
-------------
Oil & Gas (Drilling & Equipment)--8.0%
BJ Services Co. (b) ........................... 205,700 14,797,544
Cooper Cameron Corp. (b) ...................... 97,400 5,941,400
Diamond Offshore Drilling, Inc. ............... 298,800 14,379,750
Halliburton Co. ............................... 502,000 26,072,625
Nabors Industries, Inc. (b) ................... 86,400 2,716,200
Noble Drilling Corp. (b) ...................... 207,700 6,360,812
Rowan Companies, Inc. (b) ..................... 187,400 5,715,700
Schlumberger Ltd. ............................. 367,200 29,559,600
Transocean Offshore, Inc. ..................... 315,200 15,188,700
-------------
120,732,331
-------------
Oil & Gas (Refining & Marketing)--0.6%
Santa Fe International Corp. .................. 203,800 8,292,113
-------------
Personal Care--2.2%
Gillette Co. .................................. 329,700 33,114,244
-------------
Retail (Building Supplies)--1.7%
Home Depot, Inc. .............................. 434,350 25,572,356
-------------
Retail (Drug Stores)--3.5%
CVS Corp. ..................................... 404,200 25,894,063
Rite Aid Corp. ................................ 458,400 26,902,350
-------------
52,796,413
-------------
Retail (Food Chains)--2.2%
Safeway, Inc. (b) ............................. 512,400 32,409,300
-------------
Retail (General Merchandise)--1.8%
Borders Group, Inc. (b) ....................... 341,900 10,705,744
Staples, Inc. (b) ............................. 566,300 15,714,825
-------------
26,420,569
-------------
Telecommunications (Cellular/Wireless)--2.6%
AirTouch Communications, Inc. (b) ............. 947,300 39,372,156
-------------
Telecommunications (Long Distance)--3.3%
AT&T Corp. .................................... 799,200 48,951,000
-------------
Tobacco--2.7%
Philip Morris Companies, Inc. ................. 898,300 40,704,219
-------------
TOTAL COMMON STOCKS
(Identified cost $1,236,119,905) .................................. 1,359,773,393
-------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
GROWTH SERIES
SHARES VALUE
---------- ----------------
FOREIGN COMMON STOCKS--6.2%
Computers (Software & Services)--0.2%
Baan Company NV (Netherlands) (b) .......... 103,000 $ 3,399,000
--------------
Health Care (Drugs-Major Pharmaceuticals)--1.5%
SmithKline Beecham PLC Sponsored ADR
(United Kingdom) ......................... 447,300 23,007,994
--------------
Health Care (Medical Products & Supplies)--0.5%
Elan PLC Sponsored ADR (Ireland) (b) ....... 151,400 7,749,787
--------------
Household Furn. & Appliances--2.6%
Philips Electronics NV ADR NY Registered
Shares (Netherlands) ..................... 638,600 38,635,300
--------------
Oil (International Integrated)--1.4%
Elf Aquitane SA Sponsored ADR (France) ..... 358,300 21,005,338
--------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $92,672,524)......................... 93,797,419
--------------
TOTAL LONG-TERM INVESTMENTS--96.5%
(Identified cost $1,328,792,429)...................... 1,453,570,812
--------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
SHORT-TERM OBLIGATIONS--3.0%
Commercial Paper--2.7%
Sara Lee Corp. 6.05%, 1/7/98 ........... A-1+ $3,275 3,271,698
Greenwich Funding Corp. 5.91%,
1/9/98 ............................... A-1+ 315 314,586
Kimberly-Clark Corp. 6.15%, 1/9/98 ..... A-1+ 5,000 4,993,167
Exxon Imperial U.S., Inc. 5.82%,
1/13/98 .............................. A-1+ 2,530 2,525,092
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -----------------
<S> <C> <C> <C>
Commercial Paper--continued
General Electric Capital Corp. 5.82%,
1/14/98 ........................... A-1+ $1,500 $ 1,496,847
Receivables Capital Corp. 5.90%,
1/16/98 ........................... A-1+ 2,935 2,927,785
Coca-Cola Co. 5.75%, 1/21/98 ........ A-1+ 935 932,013
Corporate Asset Funding Co., Inc. 6%,
1/21/98 ........................... A-1+ 3,160 3,149,467
CXC, Inc. 5.77%, 1/26/98 ............ A-1+ 3,000 2,987,979
Receivables Capital Corp. 5.83%,
1/26/98 ........................... A-1+ 2,415 2,405,223
CXC, Inc. 5.57%, 1/27/98 ............ A-1+ 1,190 1,185,006
Corporate Asset Funding Co., Inc.
5.61%, 2/5/98 ..................... A-1+ 3,000 2,983,375
Private Export Funding Corp. 5.65%,
2/6/98 ............................ A-1+ 3,000 2,983,050
Corporate Receivables Corp. 5.73%,
3/10/98 ........................... A-1 3,000 2,967,720
Beta Finance, Inc. 5.60%, 4/29/98 ... A-1+ 5,835 5,727,869
----------------
40,850,877
----------------
Federal Agency Securities--0.3%
FHLB 5.75%, 1/2/98 .................. 4,275 4,274,318
----------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $45,125,500) .............................. 45,125,195
----------------
TOTAL INVESTMENTS--99.5%
(Identified cost $1,373,917,929) ........................... 1,498,696,007(a)
Cash and receivables, less liabilities--0.5% ............... 6,871,846
----------------
NET ASSETS--100.0% .......................................... $ 1,505,567,853
================
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $172,636,916 and gross
depreciation of $48,406,472 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$1,374,465,563.
(b) Non-income producing.
See Notes to Financial Statements
9
<PAGE>
GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
Assets
<S> <C>
Investment securities at value (Identified cost $1,373,917,929) ..................... $1,498,696,007
Cash ................................................................................ 89,997
Receivables
Investment securities sold ......................................................... 12,501,983
Dividends and interest ............................................................. 1,683,668
-------------
Total assets ...................................................................... 1,512,971,655
-------------
Liabilities
Payables
Investment securities purchased .................................................... 5,593,650
Fund shares repurchased ............................................................ 532,726
Investment advisory fee ............................................................ 781,841
Financial agent fee ................................................................ 74,999
Trustees' fee ...................................................................... 3,397
Accrued expenses ................................................................... 417,189
-------------
Total liabilities ................................................................. 7,403,802
-------------
Net Assets .......................................................................... $1,505,567,853
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest ................................... $1,330,807,064
Undistributed net investment income ................................................ 875,361
Accumulated net realized gain ...................................................... 49,107,350
Net unrealized appreciation ........................................................ 124,778,078
--------------
Net Assets .......................................................................... $1,505,567,853
==============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization .... 78,569,011
==============
Net asset value and offering price per share ........................................ $ 19.16
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Investment Income
<S> <C>
Dividends .......................................................... $ 13,104,144
Interest ........................................................... 5,907,309
------------
Total investment income ........................................... 19,011,453
------------
Expenses
Investment advisory fee ............................................ 8,659,012
Financial agent fee ................................................ 828,401
Custodian .......................................................... 280,398
Printing ........................................................... 264,371
Professional ....................................................... 62,614
Trustees ........................................................... 20,578
Miscellaneous ...................................................... 74,969
------------
Total expenses .................................................... 10,190,343
------------
Net investment income ............................................... 8,821,110
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities .................................... 208,524,851
Net realized loss on foreign currency transactions ................. (19,655)
Net change in unrealized appreciation (depreciation) on investments 44,027,962
------------
Net gain on investments ............................................. 252,533,158
------------
Net increase in net assets resulting from operations ................ $261,354,268
============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
From Operations
<S> <C> <C>
Net investment income .............................................................. $ 8,821,110 $ 11,543,617
Net realized gain .................................................................. 208,505,196 151,631,180
Net change in unrealized appreciation (depreciation) ............................... 44,027,962 (28,811,458)
-------------- --------------
Net increase in net assets resulting from operations ............................... 261,354,268 134,363,339
-------------- --------------
From Distributions to Shareholders
Net investment income .............................................................. (8,665,448) (10,973,300)
Net realized gains ................................................................. (236,146,906) (82,322,855)
-------------- --------------
Decrease in net assets from distributions to shareholders .......................... (244,812,354) (93,296,155)
-------------- --------------
From Share Transactions
Proceeds from sales of shares (12,502,677 and 16,369,935 shares, respectively) ..... 253,355,592 309,035,692
Net asset value of shares issued from reinvestment of distributions
(12,750,840 and 4,853,881 shares, respectively) ................................... 244,812,354 93,296,155
Cost of shares repurchased (12,075,426 and 10,173,971 shares, respectively) ........ (244,536,540) (193,393,445)
-------------- --------------
Increase in net assets from share transactions ..................................... 253,631,406 208,938,402
-------------- --------------
Net increase in net assets ......................................................... 270,173,320 250,005,586
Net Assets
Beginning of period ................................................................ 1,235,394,533 985,388,947
-------------- --------------
End of period (including undistributed net investment income of $875,361 and
$739,354, respectively) ........................................................... $1,505,567,853 $1,235,394,533
============== ==============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Year Ended December 31,
1997 1996
-------------- --------------
Net asset value, beginning of period .......... $ 18.89 $ 18.13
Income from investment operations
Net investment income ........................ 0.13 0.19
Net realized and unrealized gain ............. 3.70 2.10
------- --------
Total from investment operations ............ 3.83 2.29
------- ---------
Less distributions
Dividends from net investment income ......... (0.13) (0.18)
Dividends from net realized gains ............ (3.43) (1.35)
-------- --------
Total distributions ......................... (3.56) (1.53)
-------- --------
Change in net asset value ..................... 0.27 0.76
-------- --------
Net asset value, end of period ................ $ 19.16 $ 18.89
======== ========
Total return .................................. 21.07% 12.58%
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $1,505,568 $1,235,395
Ratio to average net assets of:
Operating expenses ........................... 0.74% 0.72%
Net investment income ........................ 0.64% 1.03%
Portfolio turnover rate ....................... 284% 167%
Average commission rate paid(4) ............... $ 0.0496 $ 0.0455
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---------------- ---------------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period .......... $ 15.69 $ 16.59 $ 15.01
Income from investment operations
Net investment income ........................ 0.20 0.23(1)(3) 0.16(3)
Net realized and unrealized gain ............. 4.60 0.02 2.77
------- -------- --------
Total from investment operations ............ 4.80 0.25 2.93
------- -------- --------
Less distributions
Dividends from net investment income ......... (0.17) (0.23) (0.15)
Dividends from net realized gains ............ (2.19) (0.92) (1.20)
-------- --------- ---------
Total distributions ......................... (2.36) (1.15) (1.35)
-------- -------- --------
Change in net asset value ..................... 2.44 (0.90) 1.58
------- -------- --------
Net asset value, end of period ............... $ 18.13 $ 15.69 $ 16.59
======== ========= =========
Total return .................................. 30.85% 1.48% 19.69%
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $985,389 $616,221 $446,368
Ratio to average net assets of:
Operating expenses ........................... 0.75%(2) 0.80% 0.79%
Net investment income ........................ 1.12% 1.38% 0.97%
Portfolio turnover rate ....................... 173% 185% 185%
Average commission rate paid(4) ............... N/A N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 per share.
(2) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
(3) Computed using average shares outstanding.
(4) 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
11
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
INVESTOR PROFILE
Phoenix Multi-Sector Fixed Income Series is designed for moderate risk
investors seeking a broadly diversified bond fund.
INVESTMENT REVIEW
Phoenix Multi-Sector Fixed Income Series continued to provide investors
with above-average returns. For the 12 months ended December 31, 1997, the Fund
earned 10.93% compared with a return of 9.65% for the Lehman Brothers Aggregate
Bond Index. All performance figures assume reinvestment of dividends and exclude
the effect of sales charges.
The Fund's overweighting in non-traditional sectors, such as non-Agency
mortgage-backed securities and taxable municipals, contributed positively to
performance as did our very small exposure to Asia and Latin America. Earlier in
the year, we had reduced our holdings in traditional emerging markets, shifting
our emphasis to global high-yield issuers domiciled in Europe.
OUTLOOK
Given our outlook for moderate growth and benign inflation in the U.S., our
emphasis will be on higher-rated credits within the non-traditional sectors,
such as non-Agency mortgage-backed securities and taxable municipal issues. We
will also continue to take advantage of undervalued global high-yield credits,
focusing on issuers domiciled in Europe as their economy continues to
strengthen.
We will maintain a duration that is neutral to our benchmark. As of
December 31, the Portfolio's duration was 5.8 years.
[TABULAR REPRESENTATION OF LINE CHART]
Lehman Brothers Multi-Sector Fixed
Aggregate Bond Index* Income Series
12/31/87 $10,000 $10,000
12/31/88 10,789 11,042
12/31/89 12,357 11,944
12/31/90 13,464 12,571
12/31/91 15,619 15,012
12/31/92 16,774 16,517
12/31/93 18,410 19,143
12/31/94 17,873 18,096
12/31/95 21,176 22,355
12/31/96 21,945 25,131
12/31/97 24,063 27,878
<TABLE>
<CAPTION>
Average Annual Total Returns for Periods Ending 12/31/97
1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Multi-Sector Fixed Income Series 10.93% 11.04% 10.80%
- -------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index* 9.65% 7.48% 9.18%
- -------------------------------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/87.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. 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. High yield fixed income securities
generally are subject to greater market fluctuations and risk of loss of income
and principal than are investments in lower-yielding fixed income securities.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
*The Lehman Brothers Aggregate Bond Index is an unmanaged but commonly used
measure of bond performance. It is a combination of several Lehman Brothers
Fixed Income Indexes.
12
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- ---------------
U.S. GOVERNMENT AND AGENCY SECURITIES--11.9%
<S> <C> <C> <C>
U.S. Treasury Bonds--3.8%
U.S. Treasury Strip P.O., 0%, 2/15/19 ..... Aaa $ 5,000 $ 1,408,400
U.S. Treasury Strip P.O., (TIGER) 0%,
5/15/25 ................................. Aaa 24,000 5,906,640
------------
7,315,040
------------
U.S. Treasury Notes--5.4%
U.S. Treasury Notes 6.125%, 8/15/07 ....... Aaa 10,000 10,278,120
------------
Agency Mortgage-Backed Securities--0.9%
GNMA 8%, '06 .............................. Aaa 172 180,105
GNMA 6.50%, '23-26 ........................ Aaa 1,482 1,470,737
------------
1,650,842
------------
Agency Non-Mortgage-Backed Securities--1.8%
Overseas Private Investment Corp.
6.58%, 12/15/01 ......................... NR 3,500 3,560,200
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $21,567,025) ........................................ 22,804,202
------------
MUNICIPAL BONDS--9.3%
California--2.4%
California State Department Water
System Series S 5%, 12/1/29 ............. Aa 1,850 1,798,700
Orange County Pension A Taxable
7.67%, 9/1/09 ........................... Aaa 2,500 2,762,275
------------
4,560,975
------------
Colorado--1.1%
Denver City and County School District
Taxable 6.76%, 12/15/07 ................. Aaa 2,000 2,063,580
------------
Florida--1.1%
Palm Beach Waste Revenue Project B
Taxable 10.50%, 1/1/11 (e) .............. NR 1,500 840,000
University of Miami Exchangeable
Revenue Series A Taxable 7.65%,
4/1/20 .................................. Aaa 1,290 1,361,608
------------
2,201,608
------------
Illinois--1.6%
Illinois Educational Facilities Authority
Revenue--Loyola University Series A
Taxable 7.84%, 7/1/24 ................... Aaa 2,800 3,038,168
------------
Massachusetts--1.1%
Massachusetts Turnpike Authority
Metropolitan Highway System
Revenue 5%, 1/1/27 ...................... Aaa 2,125 2,065,245
------------
New Hampshire--0.8%
New Hampshire Higher Educational &
Health Facilities Authority Revenue
5.125%, 6/1/28 .......................... Aaa 1,650 1,619,145
------------
Virginia--0.4%
Newport News Taxable Series B 7.05%,
1/15/25 ................................. Aa 750 756,682
------------
Washington--0.8%
Washington State Series E Taxable 5%,
7/1/22 .................................. Aa 1,545 1,519,461
------------
TOTAL MUNICIPAL BONDS
(Identified cost $17,581,981) ........................................ 17,824,864
------------
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- ---------------
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS--52.1%
Asset-Backed Securities--6.1%
BankAmerica Manufacturing Housing
Contract 97-1, B1 6.94%, 6/10/21 ........ Baa $ 1,500 $ 1,493,437
Continental Airlines 97-2D 7.522%,
6/30/01 ................................. Ba 2,600 2,618,434
Green Tree Financial Corp. 94-1, B2
7.85%, 4/15/19 .......................... Baa 3,000 3,082,969
Green Tree Financial Corp. 97-4, M1
7.22%, 2/15/29 .......................... Aa 2,500 2,546,875
Team Fleet Financing Corp. 96-1, B
144A 7.10%, 12/15/02 (b) ................ BBB(c) 1,975 1,987,344
------------
11,729,059
------------
Automobiles--1.3%
Titan Tire Loan Participation Private
Placement 7%, 2/11/00 ................... NR 2,500 2,437,500
------------
Banks--1.3%
BNP U.S. Funding LLC 7.738%, 144A
12/5/07 (b)(d) .......................... A 2,500 2,524,250
------------
Broadcasting (Television, Radio,& Cable)--3.2%
Cablevision Systems Corp. 7.875%,
12/15/07 ................................ Ba 975 997,903
Fox Kids Worldwide 144A 0%, 11/1/07
(b)(d) .................................. B 5,000 2,975,000
Poland Communications, Inc. Series B
9.875%, 11/1/03 ......................... B 2,200 2,213,750
------------
6,186,653
------------
Computers (Software & Services)--1.3%
Verio, Inc. Unit 144A 13.50%,
6/15/04 (b) ............................. NR 2,000 2,400,000
------------
Engineering & Construction--0.5%
Neenah Corp. Series B 11.125%, 5/1/07 ..... B 800 880,000
------------
Entertainment, Leisure & Gaming--1.7%
Boyd Gaming Corp. 9.50%,7/15/07 ........... BB-(c) 1,000 1,052,500
Station Casinos, Inc. 10.125%, 3/15/06 B 2,000 2,110,000
------------
3,162,500
------------
Gaming, Lottery, & Parimutuel Cos.--0.6%
Mashantucket Pequot 144A 6.91%,
9/1/12 (b) .............................. Aaa 1,100 1,154,241
------------
Health Care (Drugs--Major Pharmaceuticals)--1.5%
Schein Pharmaceutical, Inc. 144A
8.938%, 12/15/04 (b)(d) ................. B 3,000 2,932,500
------------
Non-Agency Mortgage-Backed Securities--21.0%
BTC Mortgage Investors Trust 97-S1, D
144A 6.95%, 12/31/09 (b) ................ BBB(c) 1,750 1,747,266
CS First Boston Mortgage Securities
Corp. 97-1R, 1M4 144A 7.364%,
2/28/22 (b) ............................. Baa 2,798 2,772,292
CS First Boston Mortgage Securities
Corp. 97-SPCE, D 144A 7.33%,
4/20/08 (b) ............................. BBB(c) 1,800 1,802,250
DLJ Mortgage Acceptance Corp. 97-
CF2, B2 144A 7.14%, 11/15/08 (b) ........ Baa 2,200 2,194,500
FDIC REMIC Trust 96-C1, 1D 7.25%,
5/25/26 ................................. Baa 1,500 1,508,437
First Chicago/Lennar Trust 97-CHL1, D
144A 8.10%, 5/29/08 (b) ................. BB(c) 2,000 2,000,000
</TABLE>
See Notes to Financial Statements
13
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- ---------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
General Electric Mortgage Services, Inc.
96-8, 2A5 7.50%, 5/25/26 ............... AAA(c) $ 986 $ 1,012,486
General Growth Properties Series 1, D2
144A 6.992%, 11/15/07 (b) .............. Baa 2,000 2,010,625
Prudential Home Mortgage Securities
96-A, B1 144A 7.958%, 5/28/26 (b) ...... NR 2,000 1,885,937
Residential Asset Securitization Trust
96-A4, A13 7.50%, 9/25/26 .............. AAA(c) 1,000 1,037,031
Residential Asset Securitization Trust
96-A8, A1 8%, 12/25/26 ................. AAA(c) 1,321 1,339,117
Resolution Trust Corp. 92-C8, D
8.835%, 12/25/23 ....................... Baa 1,818 1,841,737
Resolution Trust Corp. 95-1, M2 7.50%,
10/25/28 ............................... Aa 1,642 1,666,581
Resolution Trust Corp. 95-2, C1 7.45%,
5/25/29 ................................ Baa 1,360 1,383,910
Resolution Trust Corp. 95-2, M1 7.15%,
5/25/29 ................................ Aa 1,417 1,440,732
Resolution Trust Corp. 95-C2, C 7%,
5/25/27 ................................ A 1,777 1,784,399
Ryland Mortgage Securities Corp. III
92-A, 1A 8.27%, 3/29/30 ................ A-(c) 839 852,083
Securitized Asset Sales, Inc. 95-6, B3
144A 7%, 12/25/10 (b) .................. NR 1,337 1,263,933
Securitized Asset Sales, Inc. 95-A, M
7.53%, 3/25/24 ......................... Aa 1,795 1,843,718
Structured Asset Securities Corp.
93-C1, B 6.60%, 10/25/24 ............... A+(c) 2,250 2,205,000
Structured Asset Securities Corp.
95-C1, D 7.375%, 9/25/24 ............... BBB(c) 2,000 2,007,812
Structured Asset Securities Corp.
95-C4, D 7%, 6/25/26 ................... BBB(c) 1,900 1,880,406
Structured Asset Securities Corp.
96-C3, C 144A 7.375%, 6/25/30 (b) ...... BBB(c) 1,150 1,161,141
Wilshire Funding Corp. 97-WFC1, M3
7.25%, 8/25/27 ......................... Baa 1,588 1,547,044
------------
40,188,437
------------
Oil & Gas (Exploration & Production)--7.4%
Benton Oil & Gas Co. 11.625%,
5/1/03 ................................. B 1,000 1,107,500
Benton Oil & Gas Co. 144A 9.375%,
11/1/07 (b) ............................ B 1,500 1,541,250
Forcenergy, Inc. 8.50%, 2/15/07 .......... B 4,500 4,556,250
Lomak Petroleum, Inc. 8.75%, 1/15/07 ..... B 1,750 1,785,000
Ocean Energy, Inc. 8.875%, 7/15/07 ....... B 3,000 3,210,000
Snyder Oil Corp. 8.75%, 6/15/07 .......... B 2,000 2,030,000
------------
14,230,000
------------
Publishing--0.9%
Hollinger International Publishing, Inc.
9.25%, 3/15/07 ......................... B 650 685,750
ITT Publimedia 144A 9.375%,
9/15/07 (b) ............................ B 1,000 1,055,000
------------
1,740,750
------------
Services (Commercial & Consumer)--0.0%
ARA Services, Inc. 10.625%, 8/1/00 ....... Baa 54 58,455
------------
Telecommunications (Cellular/Wireless)--1.3%
Orion Network Systems 0%,
1/15/07 (d) ............................ B 1,000 730,000
Sprint Spectrum L.P. 0%, 8/15/06 (d) ..... B 2,325 1,819,312
------------
2,549,312
------------
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- ---------------
<S> <C> <C> <C>
Telephone--1.8%
Call-Net Enterprises 0%, 12/1/04 (d) ..... B $2,000 $ 1,830,000
Teleport Communications 0%, 7/1/07 (d) B 2,000 1,640,000
------------
3,470,000
------------
Textiles (Apparel)--2.2%
Westpoint Stevens, Inc. 9.375%,
12/15/05 ............................... B 4,000 4,200,000
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $97,761,653) ....................................... 99,843,657
------------
FOREIGN GOVERNMENT SECURITIES--3.4%
Croatia--0.9%
Croatia Series A 6.625%, 7/31/10 (d) ..... Baa 1,000 880,000
Croatia Series B 6.625%, 7/31/06 (d) ..... Baa 944 862,687
------------
1,742,687
------------
Dominican Republic--0.2%
Dominican Republic PDI Bearer
6.688%, 8/30/09 (d) .................... B+(c) 495 416,420
------------
Poland--1.8%
Poland PDI Bearer 4%, 10/27/14 (d) ....... Baa 4,000 3,465,000
------------
Russia--0.4%
Russia Principal Loan 6.719%,
12/15/20 (d) ........................... NR 1,300 807,625
------------
Slovenia--0.1%
Republic of Slovenia Series 1, 6.813%,
12/27/06 (d) ........................... A(c) 125 125,618
Republic of Slovenia Series 2, 6.375%,
12/27/06 (d) ........................... A(c) 27 26,084
------------
151,702
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $6,515,891)......................................... 6,583,434
------------
FOREIGN NON-CONVERTIBLE BONDS--15.4%
Argentina--0.9%
Bridas Corp. Yankee Sr. Notes 12.50%,
11/15/99 ............................... Ba 1,600 1,712,000
------------
Bahamas--0.6%
Sun International Hotels 9%, 3/15/07 ..... Ba 1,000 1,035,000
------------
Bermuda--1.2%
AES China Generating Co. Yankee
10.125%, 12/15/06 ...................... Ba 2,336 2,277,600
------------
Brazil--3.2%
Copel Series RegS 9.75%, 5/2/05 .......... NR 3,000 2,891,250
RBS Participacoes SA 144A 11%,
4/1/07 (b) ............................. BB-(c) 2,500 2,331,250
Tevecap SA 12.625%, 11/26/04 ............. NR 1,000 940,000
------------
6,162,500
------------
Chile--1.0%
Compania Sud Americana de Vapores
SA 7.375%, 12/8/03 ..................... BBB(c) 2,000 1,987,500
------------
Germany--0.8%
Kablemedia Holding 0%, 8/1/06 (d) ........ B 2,000 1,467,500
------------
Greece--1.0%
Fage Dairy Industries SA 9%, 2/1/07 ...... B 2,000 1,947,500
------------
Mexico--2.8%
Coca-Cola Femsa 8.95%, 11/1/06 ........... Ba 2,000 2,090,000
Copamex Industries SA Series B
11.375%, 4/30/04 ....................... NR 3,000 3,315,000
------------
5,405,000
------------
</TABLE>
See Notes to Financial Statements
14
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- ------------------
<S> <C> <C> <C>
Netherlands--2.2%
PTC International Finance BV 144A 0%,
7/1/07 (b)(d) ......................... B+(c) $6,500 $ 4,257,500
------------
United Kingdom--1.1%
Diamond Cable Co. 0%, 2/15/07 (d) ....... B 3,000 2,055,000
------------
Venezuela--0.6%
CanTV Finance Ltd. VNT 9.25%, 2/1/04..... Ba 1,200 1,209,000
------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $29,218,116) .................................. 29,516,100
------------
CONVERTIBLE BONDS--1.9%
Leisure Time (Products)--0.7%
Comcast Corp. Cv. 1.125%, 4/15/07 ....... Ba 2,000 1,322,500
------------
Oil & Gas (Drilling & Equipment)--1.2%
Loews Corp. Cv. 3.125%, 9/15/07 ......... A+(c) 2,400 2,400,000
------------
TOTAL CONVERTIBLE BONDS
(Identified cost $3,570,522) ................................... 3,722,500
------------
FOREIGN CONVERTIBLE BONDS--3.3%
Canada--0.7%
Petersburg Long Cv. 144A 9%,
6/1/06 (b) ............................ NR 1,266 1,310,310(f)
------------
Russia--2.6%
Lukinter Finance BV Cv. Series RegS
3.50%, 5/6/02 ......................... Ba 3,450 4,916,250
------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $5,997,225) ................................... 6,226,560
------------
</TABLE>
SHARES VALUE
-------- --------------
PREFERRED STOCKS--0.6%
Paper & Forest Products--0.6%
SD Warren Co. Series B Pfd. PIK 14% ... 30,000 $ 1,086,699
-----------
TOTAL PREFERRED STOCKS
(Identified cost $607,500) ...................... 1,086,699
-----------
WARRANTS--0.0%
Orion Network Systems, Inc. Warrants (e) 1,000 17,500
-----------
TOTAL WARRANTS
(Identified cost $0) ............................ 17,500
-----------
TOTAL LONG-TERM INVESTMENTS--97.9%
(Identified cost $182,819,913)................... 187,625,516
-----------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--0.6%
Commercial Paper--0.6%
Koch Industries, Inc. 6.70%, 1/2/98 ......... A-1+ $1,190 1,189,779
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,189,779) ...................................... 1,189,779
--------------
TOTAL INVESTMENTS--98.5%
(Identified cost $184,009,692) .................................... 188,815,295(a)
Cash and receivables, less liabilities--1.5% ...................... 2,811,289
--------------
NET ASSETS--100.0% .................................................. $ 191,626,584
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $7,014,714 and gross
depreciation of $2,213,334 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$184,013,915.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers. At December 31,
1997, these securities amounted to a value of $41,574,032 or 21.7% of net
assets.
(c) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(d) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(e) Non-income producing.
(f) Security valued at fair value as determined in good faith by or under the
direction of the Trustees.
See Notes to Financial Statements
15
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $184,009,692) ........................ $ 188,815,295
Cash ................................................................................. 54,548
Receivables
Investment securities sold .......................................................... 210,814
Fund shares sold .................................................................... 109,422
Interest and dividends .............................................................. 2,939,659
-------------
Total assets ....................................................................... 192,129,738
-------------
Liabilities
Payables
Investment securities purchased ..................................................... 329,585
Investment advisory fee ............................................................. 74,771
Financial agent fee ................................................................. 9,509
Trustees' fee ....................................................................... 4,039
Accrued expenses .................................................................... 85,250
-------------
Total liabilities .................................................................. 503,154
-------------
Net Assets ........................................................................... $ 191,626,584
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest .................................... $ 185,251,314
Undistributed net investment income ................................................. 336,142
Accumulated net realized gain ....................................................... 1,233,525
Net unrealized appreciation ......................................................... 4,805,603
-------------
Net Assets ........................................................................... $ 191,626,584
=============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization ..... 18,455,613
=============
Net asset value and offering price per share ......................................... $ 10.38
=============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest ................................................................ $12,558,252
Dividends ............................................................... 155,626
-----------
Total investment income ................................................ 12,713,878
-----------
Expenses
Investment advisory fee ................................................. 804,838
Financial agent fee ..................................................... 96,581
Printing ................................................................ 62,515
Custodian ............................................................... 44,188
Professional ............................................................ 25,583
Trustees ................................................................ 20,833
Miscellaneous ........................................................... 5,016
-----------
Total expenses ......................................................... 1,059,554
Less expenses borne by investment adviser .............................. (13,265)
-----------
Net expenses ........................................................... 1,046,289
-----------
Net investment income .................................................... 11,667,589
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ......................................... 4,679,819
Net realized gain on foreign currency transactions ...................... 15,586
Net change in unrealized appreciation (depreciation) on investments ..... 390,571
-----------
Net gain on investments .................................................. 5,085,976
-----------
Net increase in net assets resulting from operations ..................... $16,753,565
===========
</TABLE>
See Notes to Financial Statements
16
<PAGE>
MULTI-SECT0R FIXED INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income ....................................................... $ 11,667,589 $ 9,460,659
Net realized gain ........................................................... 4,695,405 7,367,063
Net change in unrealized appreciation (depreciation) ........................ 390,571 (2,309,914)
------------- -------------
Net increase in net assets resulting from operations ........................ 16,753,565 14,517,808
------------- -------------
From Distributions to Shareholders
Net investment income ....................................................... (11,945,923) (9,238,947)
Net realized gains .......................................................... (4,694,394) (4,270,844)
------------- -------------
Decrease in net assets from distributions to shareholders ................... (16,640,317) (13,509,791)
------------- -------------
From Share Transactions
Proceeds from sales of shares (8,085,010 and 6,711,402 shares, respectively) 84,607,552 69,891,527
Net asset value of shares issued from reinvestment of distributions
(1,609,511 and 1,316,308 shares, respectively) ............................. 16,640,317 13,509,791
Cost of shares repurchased (5,265,201 and 4,670,077 shares, respectively) ... (54,778,943) (48,410,465)
------------- -------------
Increase in net assets from share transactions .............................. 46,468,926 34,990,853
------------- -------------
Net increase in net assets .................................................. 46,582,174 35,998,870
Net Assets
Beginning of period ......................................................... 145,044,410 109,045,540
------------- -------------
End of period (including undistributed net investment income of $336,142 and
$426,754, respectively) .................................................... $ 191,626,584 $ 145,044,410
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period ............. $10.34 $10.22
Income from investment operations
Net investment income ........................... 0.75(1) 0.79(1)
Net realized and unrealized gain (loss) ......... 0.34 0.43
---------- ----------
Total from investment operations ............... 1.09 1.22
---------- ----------
Less distributions
Dividends from net investment income ............ (0.77) (0.78)
Dividends from net realized gains ............... (0.28) (0.32)
---------- ----------
Total distributions ............................ (1.05) (1.10)
---------- ----------
Change in net asset value ........................ 0.04 0.12
---------- ----------
Net asset value, end of period ................... $10.38 $10.34
========== ==========
Total return ..................................... 10.93% 12.42%
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $191,627 $145,044
Ratio to average net assets of:
Operating expenses .............................. 0.65% 0.65%
Net investment income ........................... 7.25% 7.80%
Portfolio turnover rate .......................... 151% 191%
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............. $8.98 $10.27 $9.58
Income from investment operations
Net investment income ........................... 0.83(1)(2) 0.72(1)(2) 0.66(1)(2)
Net realized and unrealized gain (loss) ......... 1.22 (1.28) 0.84
----------- --------- --------
Total from investment operations ............... 2.05 (0.56) 1.50
----------- --------- --------
Less distributions
Dividends from net investment income ............ (0.81) (0.73) (0.66)
Dividends from net realized gains ............... -- -- (0.15)
----------- --------- --------
Total distributions ............................ (0.81) (0.73) (0.81)
----------- --------- --------
Change in net asset value ........................ 1.24 (1.29) 0.69
----------- --------- --------
Net asset value, end of period ................... $10.22 $8.98 $10.27
=========== ========= ========
Total return ..................................... 23.54% (5.47)% 15.90%
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $109,046 $74,686 $79,393
Ratio to average net assets of:
Operating expenses .............................. 0.65%(3) 0.66% 0.65%
Net investment income ........................... 8.55% 7.62% 6.71%
Portfolio turnover rate .......................... 147% 181% 169%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001, $0.002, $0.007, $0.006 and $0.005 per share, respectively.
(2) Computed using average shares outstanding.
(3) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
See Notes to Financial Statements
17
<PAGE>
STRATEGIC ALLOCATION SERIES
INVESTOR PROFILE
Phoenix Strategic Allocation Series is designed for investors seeking
capital appreciation with less volatility than an all-equity fund.
INVESTMENT REVIEW
Phoenix Strategic Allocation Series posted a strong gain of 20.73% for the
12 months ended December 31, 1997. Over the same period, the average return of a
peer group of 529 variable annuity funds was 18.42% according to Lipper
Analytical Services, Inc. All performance figures assume reinvestment of
dividends and exclude the effect of sales charges.
Despite increased volatility in the fourth quarter, 1997 was another good
year for U.S. investors. In fact, the Dow Jones Industrial Average ended the
year at more than 10 times its 1982 low. Overseas, however, the picture was not
as bright: high jobless rates continued in Europe, turmoil continues in the
Middle East and Latin America is recovering slowly. The surprise was the
collapse of many markets in the Asia-Pacific region. While it will be some time
before we see the real impact of the Asian problems on the earnings of domestic
and global companies, the U.S. market reacted to the uncertainty with a violent
rotation to defensive issues. The strongest sectors in the fourth quarter were
communication services, utilities and consumer staples--slow but steady growers.
During this latest reporting period, the Fund benefited from an
overweighted position in the health-care sector, strong stock selection in the
financial services group and excellent relative performance from the
fixed-income segment of the portfolio. Negative contributors to performance
included the relative underperformance of some of our consumer staples and
technology holdings as well as our underweighted position in the communication
services area.
OUTLOOK
While our long-term outlook remains constructive, there are more reasons
than ever to maintain a cautious investment posture. On the positive side, the
economy continues to grow at a healthy, sustainable pace; inflation remains
benign; and the overall outlook for corporate earnings is still upbeat. On the
other hand, analysts' estimates for 1998 earnings are probably too high, and we
believe that the frequency of earnings disappointments will increase.
Our stock selection continues to focus on firms that possess above-average
earnings growth potential, superior management and global opportunities outside
Asia. We expect interest rates to continue to trend down and would not be
surprised if the Fed actually cut rates during the year, which would partially
offset the negative impact of slightly slower earnings growth on equity prices.
While the Asian "meltdown" introduces a new element of uncertainty in the
outlook for the financial markets, we do not believe at this time the real
impact will be great. Health-care, financial services and technology continue to
be the sectors in which we have the greatest confidence for exceptional
long-term growth.
18
<PAGE>
STRATEGIC ALLOCATION SERIES
[TABULAR REPRESENTATION OF LINE CHART]
Strategic S&P 500 Lipper Analytical Services
Allocation Series Stock Index* Flexible Portfolio Index**
12/31/87 $10,000 $10,000 $10,000
12/31/88 10,233 11,650 10,869
12/31/89 12,257 15,312 12,744
12/31/90 12,962 14,823 12,863
12/31/91 16,751 19,351 16,334
12/31/92 18,539 20,839 17,260
12/31/93 20,583 22,923 19,460
12/31/94 20,285 23,226 18,941
12/31/95 23,981 31,937 23,409
12/31/96 26,151 39,362 26,698
12/31/97 31,571 52,500 31,713
<TABLE>
<CAPTION>
Average Annual Total Returns for Periods Ending 12/31/97
1 Year 5 Years 10 Years
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Strategic Allocation Series 20.73% 11.24% 12.18%
-------------------------------------------------------------------------------------------------
Lipper Analytical Services Flexible Portfolio Index** 18.77% 12.93% 12.22%
-------------------------------------------------------------------------------------------------
Lipper Analytical Services Variable Annuities Flexible
Portfolio Fund*** 18.42% 11.96% 12.34%
------------------------------------------------------------------------------------------------
S&P 500 Stock Index* 33.38% 20.30% 18.04%
------------------------------------------------------------------------------------------------
</TABLE>
This chart assumes an initial gross investment of $10,000 made on 12/31/87.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. 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. High yield fixed income securities
generally are subject to greater market fluctuations and risk of loss of income
and principal than are investments in lower-yielding fixed income securities.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance.
**The Lipper Analytical Services Flexible Portfolio Index is an average of the
largest mutual funds within the flexible portfolio category.
***The Lipper Analytical Services Variable Annuities Flexible Portfolio Fund
Category is an average composed of 529 funds; the 5 and 10 year returns are
decided from compounding the yearly returns. Performance is based on the
reinvestment of all distributions and does not reflect the effects of sales
charges.
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--6.7%
U.S. Treasury Notes--6.3%
U.S. Treasury Notes 5.625%, 10/31/99 .... AAA $ 2,100 $ 2,097,375
U.S. Treasury Notes 5.75%, 11/15/00 ..... AAA 4,950 4,959,281
U.S. Treasury Notes 5.75%, 11/30/02 ..... AAA 3,180 3,182,980
U.S. Treasury Notes 6.625%, 5/15/07 ..... AAA 16,000 16,940,000
------------
27,179,636
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- ---------------
<S> <C> <C> <C>
Agency Mortgage-Backed Securities--0.4%
FNMA 6.85%, 5/17/20 ..................... AAA $1,500 $ 1,538,906
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $27,606,721)........................................... 28,718,542
------------
MUNICIPAL BONDS--2.9%
California--1.4%
California State Department Water
System Series S 5%, 12/1/29 ........... AA 415 403,492
</TABLE>
See Notes to Financial Statements
19
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- --------------
<S> <C> <C> <C>
California--continued
Kern County Pension Obligation Taxable
7.26%, 8/15/14 ............................. AAA $ 1,500 $ 1,593,510
Long Beach Pension Obligation Taxable
6.87%, 9/1/06 .............................. AAA 840 873,911
Los Angeles County Public Works
5.125%, 12/1/29 ............................ AAA 630 618,962
San Bernardino County Pension
Obligation Revenue Taxable 6.87%,
8/1/08 ..................................... AAA 410 426,142
San Bernardino County Pension
Obligation Revenue Taxable 6.94%,
8/1/09 ..................................... AAA 1,110 1,161,171
Ventura County Pension Obligation
Taxable 6.54%, 11/1/05 ..................... AAA 975 993,954
-----------
6,071,142
-----------
Florida--1.1%
Florida State Department of
Transportation Series A 5%, 7/1/27 ......... AA+ 500 486,575
Miami Beach Special Obligation Taxable
8.60%, 9/1/21 .............................. AAA 3,210 3,625,599
University of Miami Exchangeable
Revenue Series A Taxable 7.65%,
4/1/20 ..................................... AAA 540 569,975
-----------
4,682,149
-----------
Massachusetts--0.1%
Massachusetts State Water Authority
5%, 8/1/24 ................................. AAA 500 485,740
-----------
Texas--0.1%
Houston Water & Sewer Refunding, Jr.
Lien, Series D 5%, 12/1/25 ................. AAA 630 616,184
-----------
Washington--0.2%
Washington State Series E Taxable 5%,
7/1/22 ..................................... AA+ 630 619,586
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $12,080,691)............................................ 12,474,801
-----------
NON-CONVERTIBLE BONDS--4.5%
Asset-Backed Securities--1.5%
AESOP Funding II LLC 97-1, A2 144A
6.40%, 10/20/03 (d) ........................ AAA 2,000 2,016,250
Capita Equipment Receivables Trust
97-1, B 6.45%, 8/15/02 ..................... A+ 720 721,125
Chase Credit Card Master Trust 97-2, A
6.30%, 4/15/03 ............................. AAA 2,000 2,014,766
Fleetwood Credit Corp. 96-B, A 6.90%,
3/15/12 .................................... AAA 728 734,143
Green Tree Financial Corp. 96-2, M1
7.60%, 4/15/27 ............................. AA- 1,075 1,121,359
-----------
6,607,643
-----------
Non-Agency Mortgage-Backed Securities--2.9%
CS First Boston Mortgage Securities Corp.
95-AE, B 7.182%, 11/25/27 .................. AA- 1,350 1,359,281
First Union Lehman Bros. 97-C1, B
7.43%, 4/18/29 ............................. Aa(c) 850 890,109
G.E. Capital Mortgage Services, Inc.
96-8, M 7.25%, 5/25/26 ..................... AA 246 248,333
Lehman Large Loan 97-LL1, B 6.95%,
3/12/07 .................................... AA 645 660,621
Nationslink Funding Corp. 96-1, B
7.69%, 12/20/05 ............................ AA 450 478,547
Residential Asset Securitization Trust
96-A8, A1 8%, 12/25/26 ..................... AAA 660 669,558
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ----------- --------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
Residential Funding Mortgage Securities
I 96-S1, A11 7.10%, 1/25/26 ................ AAA $ 1,500 $ 1,518,281
Residential Funding Mortgage Securities
I 96-S4, M1 7.25%, 2/25/26 ................. AA 981 993,277
Resolution Trust Corp. 93-C1, B 8.75%,
5/25/24 .................................... Aa(c) 736 735,985
Resolution Trust Corp. 95-2, M1 7.15%,
5/25/29 .................................... Aa(c) 1,204 1,224,622
Securitized Asset Sales, Inc. 93-J, 2B
6.807%, 11/28/23 ........................... A(c) 973 956,467
Structured Asset Securities Corp.
93-C1, B 6.60%, 10/25/24 ................... A+ 1,150 1,127,093
Structured Asset Securities Corp.
95-C4, B 7%, 6/25/26 ....................... AA 1,650 1,664,953
-----------
12,527,127
-----------
Paper & Forest Products--0.1%
Buckeye Cellulose Corp. 9.25%, 9/15/08 ....... BB- 350 370,125
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $19,188,398)............................................. 19,504,895
-----------
FOREIGN GOVERNMENT SECURITIES--3.0%
Argentina--0.2%
Republic of Argentina Bearer FRB
6.688%, 3/31/05 (e) ........................ BB 1,046 935,220
-----------
Brazil--0.3%
Republic of Brazil NMB-L 6.75%,
4/15/09 (e) ................................ BB- 1,235 998,034
-----------
Bulgaria--0.1%
Republic of Bulgaria FLIRB Series A
Bearer Euro 2.25%, 7/28/12 (e) ............. B(c) 810 493,088
-----------
Colombia--0.2%
Republic of Colombia Yankee 7.25%,
2/23/04 .................................... BBB- 1,000 943,750
-----------
Croatia--0.1%
Croatia Series A 6.625%, 7/31/10 (e) ......... BBB- 550 484,000
-----------
Ecuador--0.2%
Ecuador Bearer PDI Euro, PIK interest
capitalization 6.688%, 2/27/15 (e) ......... B(c) 1,329 881,783
-----------
Mexico--0.4%
United Mexican States Global Bond
11.50%, 5/15/26 ............................ BB 1,395 1,650,634
-----------
Panama--0.2%
Republic of Panama 8.875%, 9/30/27 ........... BB+ 1,050 988,050
-----------
Peru--0.2%
Peru PDI 4%, 3/7/17 (e) ...................... BB 1,320 867,900
-----------
Poland--0.3%
Poland PDI Bearer 4%, 10/27/14 (e) ........... BBB- 1,475 1,277,719
-----------
Russia--0.5%
Russia Interest Notes Series US 144A
6.719%, 12/15/15 (d) (e) ................... NR 3,015 2,140,650
-----------
Venezuela--0.3%
Republic of Venezuela 9.25%, 9/15/27 ......... B+ 1,110 992,756
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $12,132,368)............................................. 12,653,584
-----------
FOREIGN NON-CONVERTIBLE BONDS--0.2%
Chile--0.2%
Compania Sud Americana de Vapores
SA 7.375%, 12/8/03 ......................... BBB 140 139,125
Petropower I Funding Trust 144A
7.36%, 2/15/14 (d) ......................... BBB 500 506,420
</TABLE>
See Notes to Financial Statements
20
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
VALUE
--------------
<S> <C> <C>
TOTAL FOREIGN CONVERTIBLE BONDS $ 645,545
(Identified cost $637,268) --------------
SHARES
---------
COMMON STOCKS--68.0%
Banks (Major Regional)--5.9%
AmSouth Bancorporation ........................ 44,000 2,389,750
Banc One Corp. ................................ 81,300 4,415,606
BankBoston Corp. .............................. 54,400 5,110,200
Compass Bankshares, Inc. ...................... 33,500 1,465,625
Mellon Bank Corp. ............................. 54,900 3,328,312
NationsBank Corp. ............................. 48,300 2,937,244
Southtrust Corp. .............................. 30,000 1,903,125
Washington Mutual, Inc. ....................... 61,100 3,898,944
---------
25,448,806
----------
Banks (Money Center)--1.6%
BankAmerica Corp. ............................. 79,000 5,767,000
Citicorp ...................................... 9,800 1,239,087
----------
7,006,087
----------
Biotechnology--0.2%
Centocor, Inc. (b) ............................ 23,900 794,675
----------
Broadcasting (Television, Radio, & Cable)--0.7%
Chancellor Media Corp. (b) .................... 40,800 3,044,700
----------
Chemicals (Specialty)--0.4%
Solutia, Inc. (b) ............................. 56,900 1,518,519
----------
Communications Equipment--2.7%
Ciena Corp. (b) ............................... 101,100 6,179,737
Lucent Technologies, Inc. ..................... 66,500 5,311,688
-----------
11,491,425
-----------
Computers (Hardware)--4.1%
International Business Machines Corp. ......... 167,200 17,482,850
-----------
Computers (Networking)--0.9%
Cisco Systems, Inc. (b) ....................... 66,750 3,721,313
-----------
Computers (Peripherals)--0.4%
EMC Corp. (b) ................................. 60,900 1,670,944
-----------
Computers (Software & Services)--4.6%
Adaptec, Inc. (b) ............................. 107,900 4,005,788
BMC Software, Inc. (b) ........................ 110,300 7,238,437
Compuware Corp. (b) ........................... 170,500 5,456,000
Edwards (J.D.) & Co. (b) ...................... 76,800 2,265,600
Yahoo!, Inc. (b) .............................. 9,300 644,025
-----------
19,609,850
-----------
Distributors (Food & Health)--0.8%
Cardinal Health, Inc. ......................... 45,000 3,380,625
-----------
Electrical Equipment--2.0%
General Electric Co. .......................... 116,700 8,562,862
-----------
Electronics (Instrumentation)--0.3%
Linear Technology Corp. ....................... 26,000 1,498,250
-----------
Electronics (Semiconductors)--1.6%
National Semiconductor Corp. (b) .............. 143,600 3,724,625
Texas Instruments, Inc. ....................... 68,600 3,087,000
-----------
6,811,625
-----------
Entertainment--1.1%
Tele-Comm Liberty Media Group (b) ............. 127,000 4,603,750
-----------
Financial (Diversified)--0.9%
American Express Co. .......................... 42,600 3,802,050
-----------
SHARES VALUE
---------- --------------
Health Care (Diversified)--2.3%
Bristol-Myers Squibb Co. ................. 42,400 $ 4,012,100
Warner-Lambert Co. ....................... 46,400 5,753,600
-----------
9,765,700
-----------
Health Care (Drugs-Major Pharmaceuticals)--3.3%
Lilly (Eli) & Co. ........................ 39,600 2,757,150
Pfizer, Inc. ............................. 135,100 10,073,394
Watson Pharmaceuticals, Inc. (b) ......... 43,600 1,414,275
-----------
14,244,819
-----------
Health Care (Hospital Management)--1.2%
HBO & Co. ................................ 111,600 5,356,800
-----------
Health Care (Long Term Care)--0.6%
HEALTHSOUTH Corp. (b) .................... 93,600 2,597,400
-----------
Health Care (Medical Products & Supplies)--2.4%
Guidant Corp. ............................ 86,200 5,365,950
Medtronic, Inc. .......................... 91,000 4,760,437
-----------
10,126,387
-----------
Household Furn. & Appliances--0.8%
Sunbeam Corp., Inc. ...................... 84,300 3,551,138
-----------
Household Products (Non-Durables)--0.8%
Colgate-Palmolive Co. .................... 46,300 3,403,050
-----------
Insurance (Life/Health)--0.6%
UNUM Corp. ............................... 49,800 2,707,875
-----------
Insurance (Multi-Line)--1.4%
Reliastar Financial Corp. ................ 10,700 440,706
Travelers Group, Inc. .................... 101,500 5,468,312
-----------
5,909,018
-----------
Insurance (Property-Casualty)--1.0%
Allstate Corp. ........................... 45,200 4,107,550
-----------
Investment Banking/Brokerage--0.5%
Merrill Lynch & Co., Inc. ................ 30,700 2,239,181
-----------
Machinery (Diversified)--0.6%
Deere & Co. .............................. 47,800 2,787,338
-----------
Manufacturing (Diversified)--2.1%
Tyco International Ltd. .................. 201,100 9,062,069
-----------
Oil (Domestic Integrated)--1.3%
Tosco Corp. .............................. 147,600 5,581,125
-----------
Oil & Gas (Drilling & Equipment)--6.1%
BJ Services Co. (b) ...................... 43,800 3,150,862
Cooper Cameron Corp. (b) ................. 22,300 1,360,300
Diamond Offshore Drilling, Inc. .......... 63,600 3,060,750
Halliburton Co. .......................... 110,700 5,749,481
Nabors Industries, Inc. (b) .............. 21,000 660,188
Noble Drilling Corp. (b) ................. 50,000 1,531,250
Rowan Companies, Inc. (b) ................ 42,500 1,296,250
Schlumberger Ltd. ........................ 78,100 6,287,050
Transocean Offshore, Inc. ................ 67,000 3,228,562
-----------
26,324,693
-----------
Oil & Gas (Refining & Marketing)--0.4%
Santa Fe International Corp. ............. 41,200 1,676,325
-----------
Personal Care--1.6%
Gillette Co. ............................. 68,600 6,890,013
-----------
Retail (Building Supplies)--1.2%
Home Depot, Inc. ......................... 90,800 5,345,850
-----------
Retail (Drug Stores)--2.8%
CVS Corp. ................................ 92,200 5,906,563
Rite Aid Corp. ........................... 101,000 5,927,437
-----------
11,834,000
-----------
</TABLE>
See Notes to Financial Statements
21
<PAGE>
STRATEGIC ALLOCATION SERIES
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<S> <C> <C>
Retail (Food Chains)--1.6%
Safeway, Inc. (b) ................................. 106,400 $ 6,729,800
------------
Retail (General Merchandise)--1.2%
Borders Group, Inc. (b) ........................... 98,300 3,078,019
Staples, Inc. (b) ................................. 74,800 2,075,700
------------
5,153,719
------------
Telecommunications (Cellular/Wireless)--2.0%
AirTouch Communications, Inc. (b) ................. 208,100 8,649,156
------------
Telecommunications (Long Distance)--1.6%
AT&T Corp. ........................................ 108,600 6,651,750
------------
Tobacco--2.4%
Philip Morris Companies, Inc. ..................... 230,400 10,440,000
------------
TOTAL COMMON STOCKS
(Identified cost $270,878,402) .............................. 291,583,087
------------
FOREIGN COMMON STOCKS--4.2%
Computers (Software & Services)--0.2%
Baan Company NV (Netherlands) (b) ................. 23,500 775,500
------------
Health Care (Drugs--Major Pharmaceuticals)--1.3%
SmithKline Beecham PLC Sponsored ADR (United
Kingdom) ........................................ 107,200 5,514,100
------------
Health Care (Medical Products & Supplies)--0.4%
Elan PLC Sponsored ADR (Ireland) (b) .............. 33,300 1,704,544
------------
Household Furn. & Appliances--1.3%
Philips Electronics NV ADR NY Registered Shares
(Netherlands) ................................... 96,500 5,838,250
------------
Oil (International Integrated)--1.0%
Elf Aquitane SA Sponsored ADR (France) ............ 74,300 4,355,838
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $20,374,337) ............................... 18,188,232
------------
TOTAL LONG-TERM INVESTMENTS--89.5%
(Identified cost $362,898,185) .............................. 383,768,686
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- ---------- ------------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--9.0%
Commercial Paper--8.3%
Kimberly-Clark Corp. 5.95%, 1/6/98 ........... A-1+ $ 2,500 $ 2,497,934
Exxon Imperial U.S., Inc. 6%, 1/7/98 ......... A-1+ 3,575 3,571,425
Greenwich Funding Corp. 5.91%,
1/9/98 ..................................... A-1+ 2,040 2,037,321
BellSouth Telecommunications, Inc.
5.95%, 1/12/98 ............................. A-1+ 3,100 3,094,364
Exxon Imperial U.S., Inc. 5.82%,
1/13/98 .................................... A-1+ 3,125 3,118,938
Receivables Capital Corp. 6.10%,
1/16/98 .................................... A-1+ 2,625 2,618,328
Coca-Cola Co. 5.75%, 1/21/98 ................. A-1+ 700 697,764
Receivables Capital Corp. 6.15%,
1/23/98 .................................... A-1+ 3,655 3,641,263
Greenwich Funding Corp. 5.65%,
1/26/98 .................................... A-1+ 3,165 3,152,414
Goldman Sachs & Co. 5.85%, 1/30/98 ........... A-1+ 1,715 1,706,918
Corporate Asset Funding Co. 5.61%,
2/5/98 ..................................... A-1+ 1,500 1,491,687
Procter & Gamble Co. 5.63%, 2/11/98 .......... A-1+ 3,000 2,980,764
Preferred Receivables Funding Corp.
5.53%, 2/23/98 ............................. A-1 110 109,073
General Re Corp. 5.75%, 3/20/98 .............. A-1+ 3,000 2,962,939
CXC, Inc. 5.75%, 3/23/98 ..................... A-1+ 2,000 1,974,580
--------------
35,655,712
--------------
Federal Agency Securities--0.7%
FHLMC 5.63%, 2/18/98 ..................................... 3,068 3,044,970
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $38,700,243)......................................... 38,700,682
--------------
TOTAL INVESTMENTS--98.5%
(Identified cost $401,598,428)........................................ 422,469,368(a)
Cash and receivables, less liabilities--1.5% ........................ 6,532,748
--------------
NET ASSETS--100.0% .................................................... $ 429,002,116
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $32,052,551 and gross
depreciation of $11,596,384 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$402,013,201.
(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,
1997, these securities amounted to a value of $4,663,320 or 1.1% of net
assets.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
22
<PAGE>
STRATEGIC ALLOCATION SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $401,598,428) ........................ $422,469,368
Cash ................................................................................. 2,671,147
Receivables
Investment securities sold .......................................................... 8,005,713
Interest and dividends .............................................................. 1,211,407
Fund shares sold .................................................................... 66,797
-------------
Total assets ....................................................................... 434,424,432
-------------
Liabilities
Payables
Investment securities purchased ..................................................... 5,036,512
Investment advisory fee ............................................................. 207,000
Financial agent fee ................................................................. 21,424
Trustees' fee ....................................................................... 4,203
Accrued expenses .................................................................... 153,177
-------------
Total liabilities .................................................................. 5,422,316
-------------
Net Assets ........................................................................... $429,002,116
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest .................................... $392,783,577
Undistributed net investment income ................................................. 32,496
Accumulated net realized gain ....................................................... 15,315,103
Net unrealized appreciation ......................................................... 20,870,940
-------------
Net Assets ........................................................................... $429,002,116
=============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization ..... 30,382,459
=============
Net asset value and offering price per share ......................................... $14.12
=============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest ................................................................ $ 8,529,705
Dividends ............................................................... 2,774,712
-----------
Total investment income ................................................ 11,304,417
-----------
Expenses
Investment advisory fee ................................................. 2,344,369
Financial agent fee ..................................................... 242,113
Printing ................................................................ 106,007
Custodian ............................................................... 91,588
Professional ............................................................ 27,532
Trustees ................................................................ 20,780
Miscellaneous ........................................................... 29,418
-----------
Total expenses ......................................................... 2,861,807
-----------
Net investment income .................................................... 8,442,610
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ......................................... 63,866,811
Net realized loss on written options .................................... (233,706)
Net realized gain on foreign currency transactions ...................... 5,916
Net change in unrealized appreciation (depreciation) on investments ..... 3,449,569
-----------
Net gain on investments .................................................. 67,088,590
-----------
Net increase in net assets resulting from operations ..................... $75,531,200
===========
</TABLE>
See Notes to Financial Statements
23
<PAGE>
STRATEGIC ALLOCATION SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income ............................................................ $ 8,442,610 $ 8,315,276
Net realized gain ................................................................ 63,639,021 25,851,907
Net change in unrealized appreciation (depreciation) ............................. 3,449,569 (2,475,007)
------------- -------------
Net increase in net assets resulting from operations ............................. 75,531,200 31,692,176
------------- -------------
From Distributions to Shareholders
Net investment income ............................................................ (8,832,503) (7,996,685)
Net realized gains ............................................................... (52,948,379) (23,234,158)
------------- -------------
Decrease in net assets from distributions to shareholders ........................ (61,780,882) (31,230,843)
------------- -------------
From Share Transactions
Proceeds from sales of shares (3,408,140 and 4,387,120 shares, respectively) ..... 50,911,029 61,269,234
Net asset value of shares issued from reinvestment of distributions
(4,363,884 and 2,254,196 shares, respectively) .................................. 61,780,882 31,230,843
Cost of shares repurchased (4,807,163 and 5,175,253 shares, respectively) ........ (71,683,788) (72,555,884)
------------- -------------
Increase in net assets from share transactions ................................... 41,008,123 19,944,193
------------- -------------
Net increase in net assets ....................................................... 54,758,441 20,405,526
Net Assets
Beginning of period .............................................................. 374,243,675 353,838,149
------------- -------------
End of period (including undistributed net investment income of $32,496
and $414,865, respectively) ..................................................... $429,002,116 $374,243,675
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Year Ended December 31,
1997 1996
------------ ------------
Net asset value, beginning of period ............. $13.65 $13.63
Income from investment operations
Net investment income ........................... 0.32 0.32
Net realized and unrealized gain (loss) ......... 2.46 0.91
-------- --------
Total from investment operations ............... 2.78 1.23
-------- --------
Less distributions
Dividends from net investment income ............ (0.33) (0.31)
Dividends from net realized gains ............... (1.98) (0.90)
--------- ---------
Total distributions ............................ (2.31) (1.21)
--------- ---------
Change in net asset value ........................ 0.47 0.02
--------- ---------
Net asset value, end of period ................... $14.12 $13.65
========= =========
Total return ..................................... 20.73% 9.05%
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $429,002 $ 374,244
Ratio to average net assets of:
Operating expenses .............................. 0.71% 0.70%
Net investment income ........................... 2.09% 2.26%
Portfolio turnover rate .......................... 368% 287%
Average commission rate paid(4) .................. $0.0547 $ 0.0530
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---------------- ---------------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............. $12.68 $13.71 $12.86
Income from investment operations
Net investment income ........................... 0.45 0.36(1)(3) 0.23(3)
Net realized and unrealized gain (loss) ......... 1.84 (0.56) 1.17
--------- -------------- ------------
Total from investment operations ............... 2.29 (0.20) 1.40
--------- -------------- ------------
Less distributions
Dividends from net investment income ............ (0.45) (0.37) (0.23)
Dividends from net realized gains ............... (0.89) (0.46) (0.32)
--------- -------------- ------------
Total distributions ............................ (1.34) (0.83) (0.55)
--------- -------------- ------------
Change in net asset value ........................ 0.95 (1.03) 0.85
--------- -------------- ------------
Net asset value, end of period ................... $13.63 $12.68 $13.71
========= ============== ============
Total return ..................................... 18.22% (1.45)% 11.02%
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $353,838 $289,083 $256,011
Ratio to average net assets of:
Operating expenses .............................. 0.67%(2) 0.74% 0.74%
Net investment income ........................... 3.28% 2.71% 1.82%
Portfolio turnover rate .......................... 170% 220% 269%
Average commission rate paid(4) .................. N/A N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001 per share.
(2) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
(3) Computed using average shares outstanding.
(4) 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
24
<PAGE>
INTERNATIONAL SERIES
INVESTOR PROFILE
Phoenix International Series is designed for long-term investors seeking
potentially higher returns and greater diversification. Investors should note
that foreign investments pose added risks, such as currency fluctuation, less
public information and political and economic uncertainty.
INVESTMENT REVIEW
The Fund returned 12.04% for the year ended December 31, 1997 compared with
1.78% for the MSCI EAFE Index and 5.44% for the Lipper International average for
421 funds. The Fund ranked in the 17th percentile of its mutual fund peer group
for the year according to Lipper Analytics, Inc. and in the variable annuity
peer group category, the Fund ranked in the 12th, 19th, and 11th percentiles for
the one-, three- and five-year periods, respectively. All performance figures
are stated in U.S. dollars, assume reinvestment of dividends and exclude the
effect of sales charges. The MSCI total return figures are net of foreign
withholding taxes.
The Fund benefited from its overweighted positions in Europe and Latin
America as well as currency hedges in the first part of the year. Performance
was also helped by our small exposure to Japan and almost none to the rest of
Asia.
Within the EAFE Index, there was great divergence in returns among regions.
Europe produced the best regional performance, gaining 23.80% when measured in
U.S. dollars and 37.97% in local currency. Within Europe, Denmark, Germany,
Italy, the Netherlands, Spain and Switzerland all gained more than 40%, with
Portugal (which recently joined the core MSCI Europe Index) up an impressive
74.72% in local terms. France was up 30.08%, and the UK rose 27.54% in local
currencies.
Dragging down the EAFE index this year was the Far East region. Japan
declined 23.67%; Hong Kong fell 23.29%; Malaysia dropped 68.26%. The entire
region will continue to suffer from a lack of confidence until the extent of the
bad debt problem is realized, and policies to reform the structural imbalances
of the banking systems are put into place.
Latin America, as well as some of the emerging markets of Europe and the
Middle East, were the success stories of the past 12 months. The Fund's
above-average exposure to Latin America has been additive to performance with
the exception of November when turmoil in Asia spilled over into South America.
OUTLOOK
We expect continued economic recovery in Europe, coupled with relatively
low interest rates, to be helpful to stock markets in the months ahead. The
longer-term trends of growth in the service sector, the application of
technology and growth in financial services will continue to be well represented
in the Fund.
In Latin America, privatization and structural reform will help the
telecommunications and electric utilities industries to become more efficient,
and to meet future competition. We remain optimistic as to the long-term
prospects for the region, particularly Brazil.
In Japan, there are hopes for further fiscal stimulus later in the year,
but major tax reform does not seem imminent. We expect to maintain minimal
exposure until we see signs of change. In Asia, we need to see governments
enacting changes in the law to make a cleaner, clearer financial system in order
to have confidence that the existing problems are being resolved. When clear
action starts to be taken, the markets will have a basis upon which to rebuild
confidence in the region.
25
<PAGE>
INTERNATIONAL SERIES
[TABULAR REPRESENTATION OF LINE CHART]
MSCI EAFE
International Series MSCI EAFE Index* excluding Japan
5/1/90 $10,000 $10,000 $10,000
12/31/90 9,190 9,618 10,014
12/31/91 10,997 10,785 11,608
12/31/92 9,589 9,472 11,270
12/31/93 13,274 12,556 15,498
12/31/94 13,278 13,533 15,379
12/31/95 14,552 15,049 18,541
12/31/96 17,265 15,960 22,514
12/31/97 19,344 16,243 25,891
Average Annual Total Returns for Periods Ending 12/31/97
From
Inception
5/1/90 to
1 Year 5 Years 12/31/97
----------------------------------------------------------------------------
International Series 12.04% 15.07% 8.98%
----------------------------------------------------------------------------
MSCI EAFE Index* 1.78% 11.39% 6.53%
----------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 5/1/90
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. 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.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
*The Morgan Stanley Capital International EAFE Index is an unmanaged but
commonly used measure of foreign stock fund performance which includes net
dividends reinvested. Total return figures are net of foreign withholding
taxes. The EAFE index is an aggregate of 19 individual country indexes in
Europe, Australia, New Zealand and the Far East.
SCHEDULE OF INVESTMENTS
December 31, 1997
SHARES VALUE
------- -----
FOREIGN COMMON STOCKS--95.8%
Argentina--1.9%
Banco de Galicia y Buenos Aires SA de C.V.
Sponsored ADR (Banks) ........................ 69,000 $1,776,750
Telefonica de Argentina SA Sponsored ADR
(Utility--Telephone) ......................... 52,650 1,961,213
----------
3,737,963
----------
Australia--0.6%
Westpac Banking Corporation Ltd. (Banks) ....... 176,000 1,125,703
----------
Brazil--1.1%
Telebras Sponsored ADR (Utility--Telephone)..... 17,900 2,084,231
----------
Canada--3.5%
Bank of Montreal (Banks) ....................... 49,200 2,178,071
Northern Telecom Ltd. (Communications
Equipment) ................................... 52,400 4,655,947
----------
6,834,018
----------
Finland--1.2%
Raision Tehtaat Oy (Foods) ..................... 19,700 2,340,673
----------
France--9.9%
Alcatel Alsthom (Communications
Equipment) ................................... 26,100 3,319,010
Axa-UAP (Insurance (Multi-Line)) ............... 33,369 2,583,188
SHARES VALUE
------ --------
France--continued
Banque Nationale de Paris (Banks) .............. 44,000 $2,339,772
Coflexip SA (Oil & Gas (Drilling &
Equipment)) .................................. 13,800 1,525,483
GrandVision (Retail) ........................... 23,200 954,872
Rhone-Poulenc (Healthcare (Diversified)) ....... 43,800 1,962,911
Societe Generale (Banks) ....................... 14,200 1,935,570
Total SA (Oil (Integrated)) .................... 42,500 4,627,398
----------
19,248,204
----------
Germany--4.2%
Adidas AG (Textiles (Apparel)) ................. 20,350 2,677,870
Deutsche Lufthansa AG Registered Shares
(Airlines) ................................... 152,150 2,919,452
Muenchener Rueckversicherungs-Gesellschaft
AG (Insurance (Reinsurance)) ................. 6,600 2,488,765
----------
8,086,087
----------
Hong Kong--0.0%
Henderson China Holding Ltd. (Real Estate) ..... 828 663
----------
Hungary--0.7%
Matav Rt. Sponsored ADR (Utility--
Telephone) (b) ............................... 50,200 1,305,200
----------
Ireland--0.5%
Elan Corp. PLC Sponsored ADR (Health Care
(Diversified)) (b) ........................... 19,315 988,687
----------
See Notes to Financial Statements
26
<PAGE>
INTERNATIONAL SERIES
SHARES VALUE
------- ---------
Italy--7.2%
Banca Fideuram SPA (Financial (Diversified))....... 249,900 $ 1,094,728
Ericsson SPA (Communications Equipment) ........... 42,000 1,833,941
Istituto Mobiliare Italiano SPA (Banks) ........... 179,100 2,127,323
La Fondiaria Assicurazioni (Insurance
(Multi-Line)) (b) ............................... 221,700 1,191,264
Mediolanum SPA (Financial (Diversified)) .......... 84,000 1,582,130
Telecom Italia Mobile RNC
(Telecommunications (Cellular/
Wireless))(b) ................................... 406,000 1,155,082
Telecom Italia Mobile SPA
(Telecommunications (Cellular/Wireless)) ........ 600,000 2,770,933
Telecom Italia SPA (Utility--Telephone) ........... 356,000 2,275,344
-----------
14,030,745
-----------
Japan--1.0%
Credit Saison Co. Ltd. (Consumer Credit) .......... 22,700 562,171
Nintendo Co. Ltd. (Leisure Time (Products)) ....... 9,000 886,011
Sankyo Co. Ltd. (Health Care (Drugs--Major
Pharmaceuticals)) ............................... 18,000 408,395
-----------
1,856,577
-----------
Mexico--5.3%
Cemex SA de C.V. (Building Materials) (b) ......... 185,000 982,163
Coca-Cola Femsa SA Sponsored ADR
(Beverages (Non-Alcoholic)) (c) ................. 36,600 2,122,800
Grupo Financiero Bancomer SA de C.V.
(Banks) (b) ..................................... 1,560,000 1,013,967
Grupo Televisa SA Sponsored GDR
(Publishing, Broadcasting & Printing) (b) ....... 76,100 2,944,118
Telefonos de Mexico SA Sponsored ADR
(Utility--Telephone) ............................ 56,700 3,178,744
-----------
10,241,792
-----------
Netherlands--9.3%
Benckiser NV Class B (Cosmetics &
Soaps) (b) ...................................... 28,000 1,158,840
Getronics NV (Computers (Software &
Services)) ...................................... 85,500 2,724,596
IHC Caland NV (Oil & Gas (Drilling &
Equipment)) ..................................... 37,700 1,956,413
ING Groep NV (Financial (Diversified)) ............ 68,000 2,864,641
Oce NV (Office Equipment & Supplies) .............. 15,300 1,667,966
VNU-Verenigde Bezit (Publishing) .................. 131,800 3,718,903
Vendex International NV (Retail (General
Merchandise)) ................................... 72,800 4,018,508
-----------
18,109,867
-----------
Norway--0.6%
Smedvig ASA A Shares (Oil Service) ................ 56,200 1,189,241
-----------
Poland--0.5%
Amica Wronki SA (Manufacturing (Consumer
Durables)) (b) .................................. 58,700 999,177
----------
Portugal--3.0%
Brisa-Auto Estradas de Portugal SA (Utility--
Toll Road) (b) .................................. 4,400 157,792
Portugal Telecom SA (Utility--Telephone) .......... 58,400 2,712,816
Telecel-Comunicacoes Pessoais SA
(Telecommunications(Cellular/Wireless)) (b) ..... 26,700 2,847,990
-----------
5,718,598
-----------
Spain--4.7%
Banco Santander SA (Banks) ........................ 73,600 2,457,914
Dragados & Construcciones SA
(Construction) .................................. 47,500 1,011,299
SHARES VALUE
-------- ----------
Tabacalera SA (Tobacco) ........................... 33,000 $ 2,673,942
Telefonica de Espana (Utility--Telephone) ......... 107,300 3,062,387
-----------
9,205,542
-----------
Sweden--0.5%
Biora AB (Health Care (Medical Products &
Supplies)) (b) .................................. 50,000 516,744
Biora AB Sponsored ADR (Health Care
(Medical Products & Supplies)) (b) .............. 19,000 394,250
-----------
910,994
-----------
Switzerland--13.4%
Ares-Serono Group Bearer Shares (Health
Care (Diversified)) ............................. 1,890 3,123,003
Ciba Specialty Chemicals AG Registered
Shares (Chemicals (Specialty)) (b) .............. 20,500 2,445,663
Credit Suisse Group Registered Shares
(Financial (Diversified)) ....................... 21,400 3,316,010
Novartis AG Registered Shares (Health Care
(Drugs--Major Pharmaceuticals)) ................. 4,010 6,516,078
Roche Holding AG (Health Care (Diversified))....... 210 2,088,481
Schweizerische Lebensversicherungs
(Insurance (Life/Health)) ....................... 4,550 3,578,231
Zurich Versicherungs-Gesellschaft Registered
Shares (Financial (Diversified)) ................ 10,510 5,015,399
-----------
26,082,865
-----------
United Kingdom--26.7%
British Aerospace PLC (Aerospace/Defense) ......... 155,500 4,454,920
British Petroleum Co. PLC (Oil (Integrated)) ...... 245,500 3,233,878
British Petroleum Co. PLC Sponsored ADR
(Oil (Integrated)) .............................. 9,000 717,188
Compass Group PLC (Services (Catering)) ........... 194,000 2,375,119
GKN PLC (Engineering) ............................. 117,000 2,400,839
Glaxo Wellcome PLC (Health Care) (Drugs--
Major Pharmaceuticals)) ......................... 90,580 2,143,394
Granada Group PLC (Leisure Time
(Products)) ..................................... 80,000 1,233,503
Kingfisher PLC (Retail (General
Merchandise)) ................................... 66,800 932,144
Legal & General Group PLC (Insurance (Life)) 370,000 3,196,478
Lloyds TSB Group PLC (Financial
(Diversified)) .................................. 471,600 6,099,681
Misys PLC (Computers (Software &
Services)) ...................................... 54,200 1,632,154
Next PLC (Retail (General Merchandise)) ........... 337,000 3,837,486
Norwich Union PLC (Insurance
(Life/Health)) (b) .............................. 190,000 1,167,764
Rentokil Initial PLC (Business Services) .......... 544,000 2,408,030
Shell Transport & Trading Co. PLC (Oil
(Integrated)) ................................... 459,000 3,334,680
Siebe PLC (Electrical Equipment) .................. 120,000 2,251,111
SmithKline Beecham PLC (Health Care
(Drugs--Major Pharmaceuticals)) ................. 201,220 2,071,139
Stagecoach Holdings PLC (Transportation) .......... 142,700 1,970,138
Vodafone Group PLC (Telecommunications
(Cellular/Wireless)) ............................ 368,200 2,687,127
WPP Group PLC (Services (Advertising/
Marketing)) ..................................... 421,500 1,869,249
Williams PLC (Manufacturing (Fire Safety/
Security Products)) ............................. 324,100 1,791,963
-----------
51,807,985
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $156,761,584) ................................ 185,904,812
-----------
See Notes to Financial Statements
27
<PAGE>
INTERNATIONAL SERIES
SHARES VALUE
-------- --------------
PREFERRED STOCKS--2.8%
Germany
SAP AG-Vorzug Pfd. (Computers (Software &
Services)) ............................. 16,800 $ 5,498,776
------------
TOTAL PREFERRED STOCKS
(Identified cost $4,087,384) ...................... 5,498,776
------------
WARRANTS--0.2%
France
Rhone-Poulenc Warrant (Health Care
(Diversified)) (b) ..................... 90,300 310,717
------------
TOTAL WARRANTS
(Identified cost $296,963) ........................ 310,717
------------
TOTAL LONG-TERM INVESTMENTS--98.8%
(Identified cost $161,145,931)..................... 191,714,305
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- --------------
SHORT-TERM OBLIGATIONS--1.0%
Commercial Paper--0.5%
Enterprise Funding Corp.
5.73%, 2/25/98 ................. A-1+ $1,000 $ 991,326
------------
Federal Agency Securities--0.5%
Federal Home Loan Banks 5.80%,
1/2/98 ......................... 1,065 1,064,828
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,056,074)............................ 2,056,154
------------
TOTAL INVESTMENTS--99.8%
(Identified cost $163,202,005) ......................... 193,770,459(a)
Cash and receivables, less liabilities--0.2% ........... 338,016
------------
NET ASSETS--100.0% ....................................... $194,108,475
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $32,223,415 and gross
depreciation of $3,242,545 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$164,789,589.
(b) Non-income producing.
(c) All or a portion segregated as collateral.
See Notes to Financial Statements
28
<PAGE>
INTERNATIONAL SERIES
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of
Total Long-Term Investments
(Unaudited)
Aerospace/Defense ..................................... 2.3%
Airlines .............................................. 1.5
Banks ................................................. 7.8
Beverages (Non-Alcoholic) ............................. 1.1
Building Materials .................................... 0.5
Business Services ..................................... 1.3
Chemicals (Specialty) ................................. 1.3
Communications Equipment .............................. 5.1
Computers (Software & Services) ....................... 5.1
Construction .......................................... 0.5
Consumer Credit ....................................... 0.3
Cosmetics & Soaps ..................................... 0.6
Electrical Equipment .................................. 1.2
Engineering ........................................... 1.3
Financial (Diversified) ............................... 10.4
Foods ................................................. 1.2
Health Care (Diversified) ............................. 4.4
Health Care (Drugs--Major Pharmaceuticals) ............ 5.8
Health Care (Medical Products & Supplies) ............. 0.5
Insurance (Life) ...................................... 1.7
Insurance (Life/Health) ............................... 2.5
Insurance (Multi-Line) ................................ 2.0
Insurance (Reinsurance) ............................... 1.3
Leisure Time (Products) ............................... 1.1
Manufacturing (Consumer Durables) ..................... 0.5
Manufacturing (Fire Safety/Security Products) ......... 0.9
Office Equipment & Supplies ........................... 0.9
Oil (Integrated) ...................................... 6.2
Oil Service ........................................... 0.6
Oil & Gas (Drilling & Equipment) ...................... 1.8
Publishing ............................................ 2.0
Publishing, Broadcasting & Printing ................... 1.5
Real Estate............................................ 0.0
Retail ................................................ 0.5
Retail (General Merchandise) .......................... 4.6
Services (Catering) ................................... 1.2
Services (Advertising/Marketing) ...................... 1.0
Telecommunications(Cellular/Wireless) ................. 4.9
Textiles (Apparel) .................................... 1.4
Tobacco ............................................... 1.4
Transportation ........................................ 1.0
Utility--Telephone .................................... 8.7
Utility--Toll Road .................................... 0.1
-----
100.0%
=====
See Notes to Financial Statements
29
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $163,202,005) ..................... $193,770,459
Foreign currency at value (Identified cost $2,639) ................................ 7,130
Cash .............................................................................. 3,017
Receivables
Dividends and interest ........................................................... 103,367
Investment securities sold ....................................................... 234,223
Tax reclaim ...................................................................... 69,611
Net unrealized appreciation on forward currency contracts ........................ 398,807
------------
Total assets .................................................................... 194,586,614
------------
Liabilities
Payables
Investment securities purchased .................................................. 5,981
Fund shares repurchased .......................................................... 126,217
Custodian fee .................................................................... 128,949
Investment advisory fee .......................................................... 121,142
Financial agent fee .............................................................. 9,241
Trustees' fee .................................................................... 2,158
Accrued expenses ................................................................. 84,451
------------
Total liabilities ............................................................... 478,139
------------
Net Assets ........................................................................ $194,108,475
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest ................................. $163,223,980
Accumulated net investment loss .................................................. (1,443,875)
Accumulated net realized gain .................................................... 1,363,801
Net unrealized appreciation ...................................................... 30,964,569
------------
Net Assets ........................................................................ $194,108,475
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization .. 13,356,879
============
Net asset value and offering price per share ...................................... $14.53
============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Dividends .............................................................................. $ 2,488,729
Interest ............................................................................... 1,051,955
Foreign taxes withheld ................................................................. (233,017)
------------
Total investment income ............................................................... 3,307,667
------------
Expenses
Investment advisory fee ................................................................ 1,434,773
Financial agent fee .................................................................... 114,782
Custodian .............................................................................. 239,772
Printing ............................................................................... 65,961
Professional ........................................................................... 30,539
Trustees ............................................................................... 20,478
Miscellaneous .......................................................................... 28,902
------------
Total expenses ........................................................................ 1,935,207
------------
Net investment income ................................................................... 1,372,460
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ........................................................ 16,403,468
Net realized loss on foreign currency transactions ..................................... (2,521,930)
Net change in unrealized appreciation (depreciation) on investments .................... 6,575,085
Net change in unrealized appreciation (depreciation) on foreign currency and
foreign currency transactions ------------
(676,642)
Net gain on investments ................................................................. 19,779,981
------------
Net increase in net assets resulting from operations .................................... $ 21,152,441
============
</TABLE>
See Notes to Financial Statements
30
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income ................................................................ $ 1,372,460 $ 1,238,905
Net realized gain .................................................................... 13,881,538 12,048,984
Net change in unrealized appreciation (depreciation) ................................. 5,898,443 13,071,593
------------- -------------
Net increase in net assets resulting from operations ................................. 21,152,441 26,359,482
------------- -------------
From Distributions to Shareholders
Net investment income ................................................................ (2,638,818) (2,156,537)
Net realized gains ................................................................... (18,496,435) (3,811,548)
In excess of net investment income ................................................... -- (272,380)
In excess of accumulated net realized gains .......................................... (204,295) --
------------- -------------
Decrease in net assets from distributions to shareholders ............................ (21,339,548) (6,240,465)
------------- -------------
From Share Transactions
Proceeds from sales of shares (3,308,827 and 3,516,722 shares, respectively) ......... 50,646,953 48,544,295
Net asset value of shares issued from reinvestment of distributions (1,433,541 and 435,075
shares, respectively) ............................................................... 21,339,548 6,240,465
Cost of shares repurchased (3,280,469 and 2,645,302 shares, respectively) ............ (50,358,574) (36,690,696)
------------- -------------
Increase in net assets from share transactions ....................................... 21,627,927 18,094,064
------------- -------------
Net increase in net assets ........................................................... 21,440,820 38,213,081
Net Assets
Beginning of period .................................................................. 172,667,655 134,454,574
------------- -------------
End of period (including accumulated net investment loss and undistributed net
investment income of ($1,443,875) and $1,390,579, respectively) ...................... $ 194,108,475 $ 172,667,655
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding through the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
---------------- ------------
<S> <C> <C>
Net asset value, beginning of period ............. $14.52 $12.70
Income from investment operations
Net investment income ........................... 0.12(3) 0.11(3)
Net realized and unrealized gain (loss) ......... 1.61 2.25
-------- ---------
Total from investment operations ............... 1.73 2.36
-------- ---------
Less distributions
Dividends from net investment income ............ (0.22) (0.19)
Dividends from net realized gains ............... (1.50) (0.33)
In excess of net investment income .............. -- (0.02)
-------- ---------
Total distributions ............................ (1.72) (0.54)
-------- ---------
Change in net asset value ........................ 0.01 1.82
-------- ---------
Net asset value, end of period ................... $14.53 $14.52
========= ==========
Total return ..................................... 12.04% 18.65%
Ratio/supplemental data:
Net assets, end of period (thousands) ............ $194,108 $172,668
Ratio to average of net assets of:
Operating expenses .............................. 1.01% 1.04%
Net investment income ........................... 0.72% 0.80%
Portfolio turnover rate .......................... 184% 142%
Average commission rate paid(2) .................. $0.0181 $0.0213
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
---------------- ---------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period ............. $11.85 $12.21 $8.82
Income from investment operations
Net investment income ........................... 0.12(3) 0.08(3) 0.07(1)(3)
Net realized and unrealized gain (loss) ......... 1.02 (0.07) 3.32
---------- ---------- --------
Total from investment operations ............... 1.14 0.01 3.39
---------- ---------- --------
Less distributions
Dividends from net investment income ............ (0.04) (0.03) --
Dividends from net realized gains ............... (0.25) (0.34) --
In excess of net investment income .............. -- -- --
---------- ------------ --------
Total distributions ............................ (0.29) (0.37) --
---------- ------------ --------
Change in net asset value ........................ 0.85 (0.36) 3.39
---------- ---------- --------
Net asset value, end of period ................... $12.70 $11.85 $12.21
========== ========== ========
Total return ..................................... 9.59% 0.03% 38.44%
Ratio/supplemental data:
Net assets, end of period (thousands) ............ $134,455 $134,627 $61,242
Ratio to average of net assets of:
Operating expenses .............................. 1.07% 1.10% 1.15%
Net investment income ........................... 0.95% 0.64% 0.49%
Portfolio turnover rate .......................... 249% 172% 193%
Average commission rate paid(2) .................. N/A N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.05.
(2) 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.
(3) Computed using average shares outstanding.
See Notes to Financial Statements
31
<PAGE>
BALANCED SERIES
INVESTOR PROFILE
Phoenix Balanced Series is designed for investors seeking long-term capital
and current income from a balanced investment in stocks, bonds and cash.
INVESTMENT REVIEW
For the 12 months ended December 31, 1997, the Fund and its benchmark
returned 17.93% and 21.95%, respectively. All performance figures assume
reinvestment of dividends and exclude the effect of sales charges.
Despite increased volatility in the fourth quarter, 1997 was another good
year for U.S. investors. In fact, the Dow Jones Industrial Average ended the
year at more than 10 times its 1982 low. Overseas, however, the picture was not
as bright: high jobless rates continued in Europe, turmoil continues in the
Middle East and Latin America is recovering slowly. The surprise was the
collapse of many markets in the Asia-Pacific region. While it will be some time
before we see the real impact of the Asian problems on the earnings of domestic
and global companies, the U.S. market reacted to the uncertainty with a violent
rotation to defensive issues. The strongest sectors in the fourth quarter were
communication services, utilities and consumer staples--slow but steady growers.
Positive contributors to overall results during 1997 included strong stock
selection in the consumer staples, energy and capital goods sectors, in addition
to our modest overweighting in the strongly performing financial services
sector. With interest rates trending downward since mid-April, our decision to
raise the average duration of the portfolio's bond holdings also boosted
returns. Areas which held back performance during this period included the
relative underperformance of some of our technology and health-care holdings as
well as an underweighted position in communication services.
OUTLOOK
While our long-term outlook remains constructive, there are more reasons
than ever to maintain a cautious investment posture. On the positive side, the
economy continues to grow at a healthy, sustainable pace; inflation remains
benign; and the overall outlook for corporate earnings is still upbeat. On the
other hand, analysts' estimates for 1998 earnings are probably too high, and we
believe that the frequency of earnings disappointments will increase.
Our stock selection continues to focus on firms that possess above-average
earnings growth potential, superior management and global opportunities outside
Asia. We expect interest rates to continue to trend down and would not be
surprised if the Fed actually cut rates during the year, which would partially
offset the negative impact of slightly slower earnings growth on equity prices.
While the Asian "meltdown" introduces a new element of uncertainty in the
outlook for the financial markets, we do not believe the real impact will be
great. Health-care, financial services and technology continue to be the sectors
in which we have the greatest confidence for exceptional long-term growth.
32
<PAGE>
BALANCED SERIES
[TABULAR REPRESENTATION OF LINE CHART]
Balanced Benchmark* Balanced Series
5/1/92 $10,000 $10,000
12/31/92 10,712 10,972
12/31/93 11,702 11,912
12/31/94 11,725 11,579
12/31/95 14,917 14,274
12/31/96 17,056 15,782
12/31/97 20,800 18,612
Average Annual Total Returns for Periods Ending 12/31/97
From
Inception
5/1/92 to
1 Year 5 Years 12/31/97
---------------------------------------------------------------------------
Balanced Series 17.93% 11.15% 11.58%
---------------------------------------------------------------------------
Balanced Benchmark* 21.95% 14.19% 13.79%
---------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 5/1/92
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. 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.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
*The Balanced Benchmark is calculated based upon the performance of the
following indices: 55% S&P 500/35% Lehman Brothers Aggregate Bond Index/10%
90-day Treasury Bills and is produced by Frank Russell Company.
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- -------------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--12.6%
U.S. Treasury Notes--9.7%
U.S. Treasury Notes 6.375%,
5/15/99 ................................. AAA $3,775 $3,809,209
U.S. Treasury Notes 6.875%,
3/31/00 ................................. AAA 3,100 3,176,074
U.S. Treasury Notes 6%, 8/15/00 ........... AAA 1,700 1,712,218
U.S. Treasury Notes 6.625%,
6/30/01 ................................. AAA 2,280 2,344,125
U.S. Treasury Notes 6.50%,
8/15/05 ................................. AAA 1,550 1,616,883
U.S. Treasury Notes 6.50%,
10/15/06 ................................ AAA 9,235 9,668,306
----------
22,326,815
----------
Agency Mortgage-Backed Securities--2.9%
FNMA 6.85%, 5/17/20 ....................... AAA 1,700 1,744,094
GNMA 6.50%, '23-'24 ....................... AAA 5,020 5,004,931
----------
6,749,025
----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $28,536,332)............................................... 29,075,840
----------
MUNICIPAL BONDS--3.4%
California--1.4%
California State Department Water
System Series S 5%, 12/1/29 ............. AA 450 437,521
Kern County Pension Obligation
Taxable 7.26%, 8/15/14 .................. AAA 420 446,183
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- -------------- ---------------
<S> <C> <C> <C>
California--continued
L.A. County Public Works
Financing Authority Series A
5.125%, 12/1/29 ......................... AAA $ 685 $ 672,999
Long Beach Pension Obligation
Taxable 6.87%, 9/1/06 ................... AAA 230 239,285
Orange County Pension Series A
Taxable 7.62%, 9/1/08 ................... AAA 650 714,142
San Bernardino County Pension
Obligation Revenue Taxable
6.94%, 8/1/09 ........................... AAA 300 313,830
San Bernardino County Pension
Obligation Revenue Taxable
6.87%, 8/1/08 ........................... AAA 110 114,331
Ventura County Pension Obligation
Taxable 6.54%, 11/1/05 .................. AAA 260 265,054
----------
3,203,345
----------
Florida--0.8%
Florida State Department of
Transportation Series A 5%,
7/1/27 .................................. AA+ 545 530,367
Miami Beach Special Obligation
Taxable 8.60%, 9/1/21 ................... AAA 875 988,286
University of Miami Exchangeable
Revenue Series A Taxable
7.65%, 4/1/20 ........................... AAA 270 284,988
----------
1,803,641
----------
</TABLE>
See Notes to Financial Statements
33
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- -------------- ---------------
<S> <C> <C> <C>
Massachusetts--0.2%
Massachusetts State Water
Authority Series D 5%, 8/1/24 ......... AAA $ 545 $ 529,457
----------
Texas--0.3%
Houston Water & Sewer
Refunding, Jr. Lien, Series D
5%, 12/1/25 ........................... AAA 685 669,978
----------
Virginia--0.4%
Newport News Series B Taxable
7.05%, 1/15/25 ........................ AA- 1,000 1,008,910
----------
Washington--0.3%
Washington State Series E Taxable
5%, 7/1/22 ............................ AA+ 685 673,677
----------
TOTAL MUNICIPAL BONDS
(Identified cost $7,652,600).............................................. 7,889,008
----------
NON-CONVERTIBLE BONDS--7.2%
Asset-Backed Securities--1.7%
AESOP Funding II LLC 144A 97-1,
A2 6.40%, 10/20/03 (c) ................ AAA 1,200 1,209,750
Capita Equipment Receivables Trust
97-1, B 6.45%, 8/15/02 ................ A+ 770 771,203
Chase Credit Card Master Trust
97-2, A 6.30%, 4/15/03 ................ AAA 350 352,584
Fleetwood Credit Corp. 96-B, A
6.90%, 3/15/12 ........................ AAA 582 587,315
Green Tree Financial Corp. 96-2,
M1 7.60%, 4/15/27 ..................... AA- 675 704,109
Newcourt Receivables Asset Trust
97-1, A3 6.11%, 5/21/01 ............... AAA 190 190,030
----------
3,814,991
----------
Non-Agency Mortgage-Backed Securities--5.1%
CS First Boston Mortgage
Securities Corp. 95-AE, B
7.182%, 11/25/27 ...................... AA- 425 427,922
CS First Boston Mortgage
Securities Corp. 97-C2, B
6.72%, 1/17/35 ........................ Aa(d) 2,000 2,012,500
DLJ Mortgage Acceptance Corp.
96-CF1, A1B 144A 7.58%,
3/13/28 (c) ........................... AAA 400 423,625
First Union Lehman Bros. 97-C1, B
7.43%, 4/18/29 ........................ Aa(d) 930 973,884
G.E. Capital Mortgage Services,
Inc. 96-8, M 7.25%, 5/25/26 ........... AA 246 248,333
Lehman Large Loan 97-LL1, B
6.95%, 3/12/07 ........................ AA 825 844,980
Nationslink Funding Corp. 96-1, B
7.69%, 12/20/05 ....................... AA 450 478,547
Norwest Asset Securities Corp.
96-9, A15 7.75%, 1/25/27 .............. Aaa(d) 2,000 2,079,375
Residential Asset Securitization
Trust 96-A8, A1 8%, 12/25/26 .......... AAA 462 468,691
Residential Funding Mortgage
Securities I 96-S1, A11 7.10%,
1/25/26 ............................... AAA 1,000 1,012,188
Residential Funding Mortgage
Securities I 96-S4, M1 7.25%,
2/25/26 ............................... AA 982 993,577
Residential Funding Mortgage
Securities I 96-S8, A4 6.75%,
3/25/11 ............................... AAA 651 655,476
Resolution Trust Corp. 93-C1, B
8.75%, 5/25/24 ........................ Aa(d) 195 195,496
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- -------------- ---------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
Resolution Trust Corp. 95-2, M1
7.15%, 5/25/29 ........................ Aa(d) $ 531 $ 540,275
Structured Asset Securities Corp.
93-C1, B 6.60%, 10/25/24 .............. A+ 525 514,542
----------
11,869,411
----------
Paper & Forest Products--0.3%
Buckeye Cellulose Corp. 8.50%,
12/15/05 .............................. BB- 700 721,000
----------
Truckers--0.1%
Teekay Shipping Corp. 8.32%, 2/1/08 BB 230 234,600
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $16,414,402)............................................. 16,640,002
----------
FOREIGN GOVERNMENT SECURITIES--8.0%
Argentina--0.6%
Republic of Argentina Bearer FRB
6.688%, 3/31/05 (e) ................... BB 1,507 1,347,060
----------
Brazil--0.8%
Republic of Brazil C Bond, PIK
interest capitalization, 8%,
4/15/14 (e) ........................... BB- 91 72,333
Republic of Brazil DCB-L Bearer
Euro 6.75%, 4/15/12 (e) ............... BB- 425 323,531
Republic of Brazil NMB-L Bearer
6.75%, 4/15/09 ........................ BB- 1,780 1,438,463
----------
1,834,327
----------
Bulgaria--0.3%
Bulgaria FLIRB Series A Bearer
Euro 2.25%, 7/28/12 (e) ............... B(d) 1,165 709,194
----------
Colombia--0.6%
Republic of Colombia 7.25%,
2/15/03 ............................... BBB- 610 591,700
Republic of Colombia Yankee
7.25%, 2/23/04 ........................ BBB- 825 778,594
----------
1,370,294
----------
Croatia--0.3%
Croatia Series A 6.625%, 7/31/10 (e) BBB- 775 682,000
----------
Ecuador--0.6%
Ecuador Bearer PDI Euro, PIK
interest capitalization, 6.688%,
2/27/15 (e) ........................... B(d) 1,914 1,270,058
----------
Mexico--1.0%
United Mexican States Global Bond
11.50%, 5/15/26 ....................... BB 2,005 2,372,416
----------
Panama--0.6%
Panama 8.875%, 9/30/27 .................. BB+ 1,510 1,420,910
----------
Peru--0.5%
Peru PDI 4%, 3/7/17 (e) ................. BB 1,900 1,249,250
----------
Poland--0.8%
Poland Bearer PDI 4%, 10/27/14 (e) BBB- 1,450 1,256,062
Poland Discount Euro 6.688%,
10/27/24 (e) .......................... BBB- 600 584,625
----------
1,840,687
----------
Russia--1.3%
Russia Interest Notes Series US
144A 6.719%, 12/15/15 (c)(e) .......... NR 4,335 3,077,850
----------
Venezuela--0.6%
Republic of Venezuela 9.25%,
9/15/27 ............................... B+ 1,595 1,426,528
----------
</TABLE>
See Notes to Financial Statements
34
<PAGE>
BALANCED SERIES
VALUE
----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $17,837,553).............................. $18,600,574
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- -------
FOREIGN NON-CONVERTIBLE BONDS--0.2%
Chile--0.2%
Compania Sud Americana de
Vapores SA 7.375%, 12/8/03 ......... BBB $120 119,250
Petropower I Funding Trust 144A
7.36%, 2/15/14 (c) ................. BBB 350 354,494
-------
473,744
-------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $467,658).................................. 473,744
-------
SHARES
---------
COMMON STOCKS--53.2%
Banks (Major Regional)--4.3%
AmSouth Bancorporation ........................ 8,300 450,794
Banc One Corp. ................................ 39,100 2,123,619
BankBoston Corp. .............................. 23,800 2,235,712
Compass Bankshares, Inc. ...................... 6,400 280,000
Mellon Bank Corp. ............................. 23,500 1,424,688
NationsBank Corp. ............................. 22,400 1,362,200
Southtrust Corp. .............................. 12,000 761,250
Washington Mutual, Inc. ....................... 20,500 1,308,156
---------
9,946,419
---------
Banks (Money Center)--1.2%
BankAmerica Corp. ............................. 23,500 1,715,500
Citicorp ...................................... 8,700 1,100,006
---------
2,815,506
---------
Biotechnology--0.3%
Centocor, Inc. (b) ............................ 23,100 768,075
---------
Broadcasting (Television, Radio, & Cable)--0.3%
Chancellor Media Corp. (b) .................... 8,800 656,700
---------
Chemicals (Specialty)--0.3%
Solutia, Inc. (b) ............................. 29,900 797,956
---------
Communications Equipment--1.6%
Ciena Corp. (b) ............................... 35,600 2,176,050
Lucent Technologies, Inc. ..................... 19,400 1,549,575
---------
3,725,625
---------
Computers (Hardware)--3.0%
International Business Machines Corp. ......... 66,700 6,974,319
---------
Computers (Networking)--0.4%
Cisco Systems, Inc. (b) ....................... 17,850 995,138
---------
Computers (Peripherals)--0.3%
EMC Corp. (b) ................................. 25,900 710,631
---------
Computers (Software & Services)--3.7%
Adaptec, Inc. (b) ............................. 57,600 2,138,400
BMC Software, Inc. (b) ........................ 47,600 3,123,750
Compuware Corp. (b) ........................... 69,000 2,208,000
Edwards (J.D.) & Co. (b) ...................... 24,900 734,550
Yahoo!, Inc. (b) .............................. 5,200 360,100
---------
8,564,800
---------
Distributors (Food & Health)--0.9%
Cardinal Health, Inc. ......................... 27,100 2,035,887
---------
Electrical Equipment--1.2%
General Electric Co. .......................... 38,400 2,817,600
---------
SHARES VALUE
-------- -------------
Electronics (Instrumentation)--0.3%
Linear Technology Corp. ...................... 10,000 $ 576,250
----------
Electronics (Semiconductors)--1.4%
National Semiconductor Corp. (b) ............. 76,500 1,984,219
Texas Instruments, Inc. ...................... 27,400 1,233,000
----------
3,217,219
----------
Entertainment--0.9%
Tele-Comm Liberty Media Group (b) ............ 59,600 2,160,500
----------
Financial (Diversified)--0.6%
American Express Co. ......................... 15,400 1,374,450
----------
Health Care (Diversified)--2.0%
Bristol-Myers Squibb Co. ..................... 22,400 2,119,600
Warner-Lambert Co. ........................... 19,500 2,418,000
----------
4,537,600
----------
Health Care (Drugs--Major Pharmaceuticals)--3.1%
Lilly (Eli) & Co. ............................ 15,900 1,107,037
Pfizer, Inc. ................................. 64,800 4,831,650
Watson Pharmaceuticals, Inc. (b) ............. 40,500 1,313,719
----------
7,252,406
----------
Health Care (Hospital Management)--1.0%
HBO & Co. .................................... 45,800 2,198,400
----------
Health Care (Long Term Care)--0.6%
HEALTHSOUTH Corp. (b) ........................ 51,200 1,420,800
----------
Health Care (Medical Products & Supplies)--1.6%
Guidant Corp. ................................ 34,400 2,141,400
Medtronic, Inc. .............................. 30,200 1,579,837
----------
3,721,237
----------
Household Furn. & Appliances--0.6%
Sunbeam Corp., Inc. .......................... 33,800 1,423,825
----------
Household Products (Non-Durables)--0.7%
Colgate-Palmolive Co. ........................ 20,800 1,528,800
----------
Insurance (Life/Health)--0.3%
UNUM Corp. ................................... 14,000 761,250
----------
Insurance (Multi-Line)--1.3%
Reliastar Financial Corp. .................... 4,600 189,463
Travelers Group, Inc. ........................ 52,800 2,844,600
----------
3,034,063
----------
Insurance (Property-Casualty)--0.9%
Allstate Corp. ............................... 22,700 2,062,862
----------
Investment Banking/Brokerage--0.3%
Merrill Lynch & Co., Inc. .................... 9,300 678,319
----------
Machinery (Diversified)--0.6%
Deere & Co. .................................. 25,100 1,463,644
----------
Manufacturing (Diversified)--1.7%
Tyco International Ltd. ...................... 84,900 3,825,806
----------
Oil (Domestic Integrated)--1.1%
Tosco Corp. .................................. 64,100 2,423,781
----------
Oil & Gas (Drilling & Equipment)--4.8%
BJ Services Co. (b) .......................... 18,700 1,345,231
Cooper Cameron Corp. (b) ..................... 8,800 536,800
Diamond Offshore Drilling, Inc. .............. 27,200 1,309,000
Halliburton Co. .............................. 45,700 2,373,544
Nabors Industries, Inc. (b) .................. 7,800 245,213
Noble Drilling Corp. (b) ..................... 18,700 572,687
Rowan Companies, Inc. (b) .................... 16,900 515,450
Schlumberger Ltd. ............................ 33,400 2,688,700
Transocean Offshore, Inc. .................... 28,700 1,382,981
----------
10,969,606
----------
See Notes to Financial Statements
35
<PAGE>
BALANCED SERIES
SHARES VALUE
-------- --------------
Oil & Gas (Refining & Marketing)--0.3%
Santa Fe International Corp. .................... 18,300 $ 744,581
------------
Personal Care--1.3%
Gillette Co. .................................... 29,700 2,982,994
------------
Retail (Building Supplies)--0.9%
Home Depot, Inc. ................................ 35,550 2,093,006
------------
Retail (Drug Stores)--2.1%
CVS Corp. ....................................... 36,400 2,331,875
Rite Aid Corp. .................................. 41,600 2,441,400
------------
4,773,275
------------
Retail (Food Chains)--1.3%
Safeway, Inc. (b) ............................... 46,100 2,915,825
------------
Retail (General Merchandise)--1.0%
Borders Group, Inc. (b) ......................... 30,700 961,294
Staples, Inc. (b) ............................... 50,900 1,412,475
------------
2,373,769
------------
Telecommunications (Cellular/Wireless)--1.5%
AirTouch Communications, Inc. (b) ............... 85,300 3,545,281
------------
Telecommunications (Long Distance)--1.9%
AT&T Corp. ...................................... 73,000 4,471,250
------------
Tobacco--1.6%
Philip Morris Companies, Inc. ................... 80,800 3,661,250
------------
TOTAL COMMON STOCKS
(Identified cost $112,342,089).......................... 123,000,705
------------
FOREIGN COMMON STOCKS--3.7%
Computers (Software & Services)--0.2%
Baan Company NV (Netherlands) (b) ............... 9,500 313,500
------------
Health Care (Drugs--Major Pharmaceuticals)--0.9%
SmithKline Beecham PLC Sponsored ADR
(United Kingdom) .............................. 40,700 2,093,506
------------
Health Care (Medical Products & Supplies)--0.3%
Elan PLC Sponsored ADR (Ireland) (b) 13,600 696,150
------------
Household Furn. & Appliances--1.5%
Philips Electronics NV ADR NY Registered
(Netherlands) ................................. 57,600 3,484,800
------------
Oil (International Integrated)--0.8%
Elf Aquitane Sponsored ADR (France) ............. 32,300 1,893,588
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $9,129,222)............................ 8,481,544
------------
TOTAL LONG-TERM INVESTMENTS--88.3%
(Identified cost $192,379,856).......................... 204,161,417
------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- -------- --------------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--11.3%
Commercial Paper--8.3%
General Electric Capital Corp.
6.25%, 1/5/98 ....................... A-1+ $ 825 $ 824,427
Greenwich Funding Corp. 5.91%,
1/9/98 .............................. A-1+ 2,300 2,296,979
Receivables Capital Corp. 5.90%,
1/9/98 .............................. A-1+ 92 91,879
Exxon Imperial U.S., Inc. 5.82%,
1/13/98 ............................. A-1+ 3,000 2,994,180
AlliedSignal, Inc. 5.87%, 1/15/98 ..... A-1 2,405 2,399,510
Receivables Capital Corp. 6.15%,
1/23/98 ............................. A-1+ 2,500 2,490,604
Receivables Capital Corp. 5.70%,
1/26/98 ............................. A-1+ 1,035 1,030,903
Corporate Receivables Corp.
5.55%, 1/28/98 ...................... A-1 1,410 1,404,059
Proctor & Gamble Co. 5.63%,
2/11/98 ............................. A-1+ 3,650 3,626,596
CXC, Inc. 5.75%, 3/23/98 .............. A-1+ 2,000 1,974,125
--------------
19,133,262
--------------
Federal Agency Securities--3.0%
FHLB 5.75%, 1/2/98 .................... 4,880 4,879,221
FHLMC 5.63%, 2/18/98 .................. 2,000 1,984,987
--------------
6,864,208
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $25,997,542) ................................ 25,997,470
--------------
TOTAL INVESTMENTS--99.6%
(Identified cost $218,377,398)................................ 230,158,887(a)
Cash and receivables, less liabilities--0.4% ................. 1,020,932
--------------
NET ASSETS--100.0% ............................................. $ 231,179,819
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $16,642,077 and gross
depreciation of $4,860,606 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$218,377,416.
(b) Non-income producing.
(c) 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,
1997, these securities amounted to a value of $5,065,719 or 2.2% of net
assets.
(d) As rated by Moody's, Fitch or Duff & Phelps.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
36
<PAGE>
BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $218,377,398) ........................ $ 230,158,887
Cash ................................................................................. 2,920,756
Receivables
Investment securities sold .......................................................... 2,492,794
Interest and dividends .............................................................. 1,130,031
-------------
Total assets ....................................................................... 236,702,468
-------------
Liabilities
Payables
Investment securities purchased ..................................................... 5,248,936
Fund shares repurchased ............................................................. 28,797
Investment advisory fee ............................................................. 105,898
Financial agent fee ................................................................. 11,553
Trustees' fee ....................................................................... 912
Accrued expenses .................................................................... 126,553
-------------
Total liabilities .................................................................. 5,522,649
-------------
Net Assets ........................................................................... $ 231,179,819
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest .................................... $ 210,297,393
Undistributed net investment income ................................................. 52,552
Accumulated net realized gain ....................................................... 9,048,385
Net unrealized appreciation ......................................................... 11,781,489
-------------
Net Assets ........................................................................... $ 231,179,819
=============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization ..... 18,861,194
=============
Net asset value and offering price per share ......................................... $ 12.26
=============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest .................................................................... $ 6,556,658
Dividends ................................................................... 1,284,526
-----------
Total investment income .................................................... 7,841,184
-----------
Expenses
Investment advisory fee ..................................................... 1,194,141
Financial agent fee ......................................................... 130,270
Printing .................................................................... 84,167
Custodian ................................................................... 52,810
Professional ................................................................ 30,300
Trustees .................................................................... 21,014
Miscellaneous ............................................................... 15,345
-----------
Total expenses ............................................................. 1,528,047
-----------
Net investment income ........................................................ 6,313,137
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ............................................. 28,914,720
Net realized gain on written options ........................................ 7,293
Net realized gain on foreign currency and foreign currency transactions ..... 6,764
Net change in unrealized appreciation (depreciation) on investments ......... 398,108
-----------
Net gain on investments ...................................................... 29,326,885
-----------
Net increase in net assets resulting from operations ......................... $35,640,022
===========
</TABLE>
See Notes to Financial Statements
37
<PAGE>
BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income ............................................................ $ 6,313,137 $ 5,806,775
Net realized gain ................................................................ 28,928,777 16,867,817
Net change in unrealized appreciation (depreciation) ............................. 398,108 (2,671,304)
------------- -------------
Net increase in net assets resulting from operations ............................. 35,640,022 20,003,288
------------- -------------
From Distributions to Shareholders
Net investment income ............................................................ (6,626,999) (5,536,811)
Net realized gains ............................................................... (25,653,795) (18,064,626)
------------- -------------
Decrease in net assets from distributions to shareholders ........................ (32,280,794) (23,601,437)
------------- -------------
From Share Transactions
Proceeds from sales of shares (2,522,290 and 2,805,856 shares, respectively) ..... 32,463,957 34,642,833
Net asset value of shares issued from reinvestment of distributions
(2,611,513 and 1,949,091 shares, respectively) .................................. 32,280,794 23,601,437
Cost of shares repurchased (3,214,459 and 3,529,372 shares, respectively) ........ (41,209,392) (43,662,808)
------------- -------------
Increase in net assets from share transactions ................................... 23,535,359 14,581,462
------------- -------------
Net increase in net assets ....................................................... 26,894,587 10,983,313
Net Assets
Beginning of period .............................................................. 204,285,232 193,301,919
------------- -------------
End of period (including undistributed net investment income of $52,552
and $351,214, respectively) ..................................................... $ 231,179,819 $ 204,285,232
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............. $ 12.06 $12.30 $ 10.53
Income from investment operations
Net investment income ........................... 0.38 0.36 0.40(2)
Net realized and unrealized gain (loss) ......... 1.73 0.89 2.02
------- ------ --------
Total from investment operations ............... 2.11 1.25 2.42
------- ------ --------
Less distributions
Dividends from net investment income ............ (0.40) (0.35) (0.40)
Dividends from net realized gains ............... (1.51) (1.14) (0.25)
-------- ------- ---------
Total distributions ............................ (1.91) (1.49) (0.65)
-------- ------- ---------
Change in net asset value ........................ 0.20 (0.24) 1.77
-------- ------- ---------
Net asset value, end of period ................... $ 12.26 $12.06 $ 12.30
======== ======= =========
Total return ..................................... 17.93% 10.56% 23.28%
Ratios/supplemental data:
Net assets, end of period (thousands) ............$ 231,180 $204,285 $ 193,302
Ratio to average net assets of:
Operating expenses .............................. 0.71% 0.68% 0.65%(3)
Net investment income ........................... 2.92% 2.93% 3.44%
Portfolio turnover rate .......................... 181% 229% 223%
Average commission rate paid(4) .................. $0.0525 $0.0641 N/A
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
---------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period ............. $11.31 $10.77
Income from investment operations
Net investment income ........................... 0.38(1)(2) 0.32(1)(2)
Net realized and unrealized gain (loss) ......... (0.70) 0.60
--------- --------
Total from investment operations ............... (0.32) 0.92
--------- --------
Less distributions
Dividends from net investment income ............ (0.36) (0.32)
Dividends from net realized gains ............... (0.10) (0.06)
--------- --------
Total distributions ............................ (0.46) (0.38)
--------- --------
Change in net asset value ........................ (0.78) 0.54
--------- --------
Net asset value, end of period ................... $10.53 $11.31
========= ========
Total return ..................................... (2.80)% 8.57%
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $161,105 $158,144
Ratio to average net assets of:
Operating expenses .............................. 0.69% 0.70%
Net investment income ........................... 3.44% 3.16%
Portfolio turnover rate .......................... 171% 161%
Average commission rate paid(4) .................. N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001 and $0.001 per share, respectively.
(2) Computed using average shares outstanding.
(3) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included, the
ratio would not significantly differ.
(4) 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
38
<PAGE>
REAL ESTATE SERIES
INVESTOR PROFILE
Phoenix Real Estate Series Fund is designed for investors seeking
investment in a diversified portfolio of real estate investment trusts ("REITs")
and real estate operating companies ("REOCs"). The Portfolio's objective is to
emphasize appreciation and current yield equally.
INVESTMENT REVIEW
For the period ended December 31, 1997, the Phoenix Real Estate Series Fund
provided a total net return of 22.05%, outperforming the NAREIT Equity Total
Return Index gross return for the same period of 20.29%. The S&P 500 Index total
return for 1997 was 33.38%.
Growth in FFO (the REIT substitute for earnings) was very strong and
exceeded analysts' expectations with average REIT FFO growth of 13%. Throughout
the year, REITs experienced less volatility during market swings than the S&P
500 even though $23 billion in REIT equity offerings were brought to market,
more than 1996 and 1995 combined. Nevertheless, REITs have outperformed the S&P
500 Index, on a total return basis, in 5 out of the last 7 years.
Our investment strategy begins with identifying preferred property types
and markets, based on fundamental analysis of the economic, demographic, and
real estate market trends, which are then used to form a portfolio framework. We
then identify companies with significant exposure to those preferred markets and
which are trading at attractive levels. Our 1997 returns were enhanced from
overweightings in the hotel and office sectors, the top performing sectors for
two years. The results from luxury, full-service, urban hotels indicated
increased demand, relatively little new supply, increasing occupancy, and rising
room rates. Office REITs had similar positive results with a record volume of
acquisitions, increasing occupancy, and rising rental rates. The Fund benefited
from an underweighting in the apartment and retail sectors. Concerns about
potential overbuilding in apartments and weak sales growth and a generally
over-stored condition substantiated our views.
OUTLOOK
Our outlook for REITs remains very positive, for several reasons. First,
real estate and REITs continue to exhibit strong fundamentals. Demand and supply
are in equilibrium in most markets and the pace of new development is modest.
REITs have access to competitively cheap cost of capital, and leverage remains
modest with a group average of approximately 35%. In a number of markets
occupancy continues to rise and rents are escalating.
Second, it appears as if the growth for REITs in 1998 will keep pace with
the broader market. REIT analysts are predicting REIT growth of 10 to 12% in
1998 which when combined with yields of 5 to 6%, equate to total return
projections of 15 to 18%. REITs began 1997 trading at a multiple of 11.5 times
current FFO and ended the year at approximately the same multiple. The S&P 500
ended 1997 at 20 times current earnings, or 1.7 times the REIT FFO multiple of
11.5 times versus a historical average of less than 1.5 times the REIT FFO
multiple, implying the S&P 500 is relatively expensive.
Third, REITs are beginning to substantiate the view that they are defensive
investments due to their high current yields and the relative high certainty of
revenues derived from contractual rents on portfolios of property within the
U.S. The broader market continues to address the impact of economic and currency
weakness in Southeast Asia, Korea, and Japan. Investors should continue to view
REITs as an attractive "safe harbor" option.
Finally, we believe there are themes that we can continue to exploit in
1998. We anticipate a great deal of merger activity and expect REITs will
continue to look outside the industry to rationalize the ownership of real
estate in a tax efficient structure with modest leverage.
39
<PAGE>
REAL ESTATE SERIES
[TABULAR REPRESENTATION OF LINE CHART]
NAREIT* Real Estate Series
5/1/95 $10,000 $10,000
12/31/95 11,779 11,548
12/31/96 15,677 15,618
12/31/97 19,134 18,787
Average Annual Total Returns for Periods Ending 12/31/97
From
Inception
5/1/95 to
1 Year 12/31/97
---------------------------------------------------------------------------
Real Estate Series 22.05% 27.50%
---------------------------------------------------------------------------
NAREIT Equity Index* 20.29% 26.63%
---------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 5/1/95
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. 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 National Association of Real Estate Investment Trusts (NAREIT) Equity
Index is a commonly used, unmanaged indicator of REIT performance.
SCHEDULE OF INVESTMENTS
December 31, 1997
SHARES VALUE
----------- ----------
COMMON STOCKS--92.5%
REAL ESTATE INVESTMENT TRUSTS--91.7%
COMMERCIAL--30.3%
Office/Industrial--28.4%
Boston Properties, Inc. ........................ 55,500 $ 1,834,969
CarrAmerica Realty Corp. ....................... 1,000 31,688
Duke Realty Investments, Inc. .................. 76,600 1,857,550
Equity Office Properties Trust ................. 34,173 1,078,588
First Industrial Realty Trust, Inc. ............ 52,600 1,900,175
Highwoods Properties, Inc. ..................... 59,900 2,227,531
Mack-Cali Realty Corp. ......................... 47,200 1,935,200
Reckson Associates Realty Corp. ................ 57,200 1,451,450
Spieker Properties, Inc. ....................... 51,700 2,216,637
Weeks Corp. .................................... 30,500 976,000
-----------
15,509,788
-----------
Storage--1.9%
Storage USA, Inc. .............................. 25,900 1,034,381
-----------
TOTAL COMMERCIAL ............................................. 16,544,169
-----------
DIVERSIFIED--12.7%
Colonial Properties Trust ...................... 35,000 1,054,375
Crescent Real Estate Equities Co. .............. 74,900 2,949,187
Vornado Realty Trust ........................... 62,200 2,919,513
-----------
6,923,075
-----------
HEALTH CARE--3.6%
Health Care Property Investors, Inc. ........... 5,650 213,641
Nationwide Health Properties, Inc. ............. 47,900 1,221,450
OMEGA Healthcare Investors, Inc. ............... 14,000 540,750
-----------
1,975,841
-----------
HOTELS--17.8%
FelCor Suite Hotels, Inc. ...................... 39,500 1,402,250
Patriot American Hospitality, Inc. ............. 91,800 2,644,988
Starwood Lodging Trust combined certificate .... 64,900 3,756,087
Sunstone Hotel Investors, Inc. ................. 111,500 1,923,375
-----------
9,726,700
-----------
NET LEASE--2.0%
TriNet Corporate Realty Trust, Inc. ............ 28,000 1,083,250
-----------
RESIDENTIAL--17.6%
Apartments--14.5%
Bay Apartment Communities, Inc. ................ 63,900 2,492,100
Camden Property Trust .......................... 26,100 809,100
Equity Residential Properties Trust ............ 49,600 2,507,900
Essex Property Trust, Inc. ..................... 30,700 1,074,500
Irvine Apartment Communities, Inc. ............. 33,500 1,065,719
-----------
7,949,319
-----------
SHARES VALUE
----------- -----------
Manufactured Homes--3.1%
Manufactured Home Communities, Inc. ............ 33,800 $ 912,600
Sun Communities, Inc. .......................... 21,300 765,469
-----------
1,678,069
-----------
TOTAL RESIDENTIAL ............................................ 9,627,388
-----------
RETAIL--7.7%
Community/Neighborhood--2.1%
Developers Diversified Realty Corp. ............ 20,000 765,000
Regency Realty Corp. ........................... 15,000 415,312
-----------
1,180,312
-----------
Factory Outlet--1.6%
Chelsea GCA Realty, Inc. ....................... 22,600 863,038
-----------
Regional Malls--4.0%
Macerich Company (The) ......................... 30,300 863,550
Simon DeBartolo Group, Inc. .................... 17,796 581,707
Urban Shopping Centers, Inc. ................... 21,700 756,787
-----------
2,202,044
-----------
TOTAL RETAIL .................................................... 4,245,394
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified cost $40,757,618) ................................. 50,125,817
-----------
REAL ESTATE OPERATING COMPANIES--0.8%
Regional Malls--0.8%
Rouse Co. ...................................... 12,500 409,375
-----------
TOTAL REAL ESTATE OPERATING COMPANIES
(Identified cost $320,613) .................................... 409,375
-----------
TOTAL COMMON STOCKS
(Identified cost $41,078,231) ................................. 50,535,192
-----------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--7.8%
Commercial Paper--7.8%
Goldman, Sachs & Co. 6.75%, 1/2/98 ..... A-1+ $1,000 999,813
BellSouth Telecommunications, Inc.
6%, 1/5/98 ........................... A-1+ 1,790 1,788,807
Marsh & McLennan Cos. 6.20%,
1/5/98 ............................... A-1+ 995 994,314
Potomac Electric Power Co. 6.20%,
1/7/98 ............................... A-1 500 499,483
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $4,282,417)..................................... 4,282,417
-----------
TOTAL INVESTMENTS--100.3%
(Identified cost $45,360,648) ................................... 54,817,609(a)
Cash and receivables, less liabilities--(0.3%) .................. (158,600)
-----------
NET ASSETS--100.0% ................................................ $54,659,009
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $9,498,575 and gross
depreciation of $41,614 for income tax purposes. At December 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$45,360,648.
See Notes to Financial Statements
40
<PAGE>
REAL ESTATE SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $45,360,648) ..................... $54,817,609
Cash ............................................................................. 3,278
Receivables
Dividends and interest .......................................................... 227,663
-----------
Total assets ................................................................... 55,048,550
-----------
Liabilities
Payables
Fund shares repurchased ......................................................... 314,362
Investment advisory fee ......................................................... 14,763
Trustees' fee ................................................................... 3,874
Financial agent fee ............................................................. 2,670
Accrued expenses ................................................................ 53,872
-----------
Total liabilities .............................................................. 389,541
-----------
Net Assets ....................................................................... $54,659,009
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest ................................ $45,076,319
Undistributed net investment income ............................................. 80,383
Accumulated net realized gain ................................................... 45,346
Net unrealized appreciation ..................................................... 9,456,961
-----------
Net Assets ....................................................................... $54,659,009
===========
Shares of beneficial interest outstanding, $1 par value, unlimited authorization . 3,336,491
===========
Net asset value and offering price per share ..................................... $16.38
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Dividends ............................................................... $1,685,789
Interest ................................................................ 106,768
----------
Total investment income ................................................ 1,792,557
----------
Expenses
Investment advisory fee ................................................. 292,874
Financial agent fee ..................................................... 23,430
Printing ................................................................ 29,311
Professional ............................................................ 27,900
Trustees ................................................................ 20,365
Custodian ............................................................... 18,058
Miscellaneous ........................................................... 4,913
----------
Total expenses ......................................................... 416,851
Less expenses borne by investment adviser .............................. (26,352)
----------
Net expenses ........................................................... 390,499
----------
Net investment income .................................................... 1,402,058
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ......................................... 1,766,075
Net change in unrealized appreciation (depreciation) on investments ..... 5,041,754
----------
Net gain on investments .................................................. 6,807,829
----------
Net increase in net assets resulting from operations ..................... $8,209,887
==========
</TABLE>
See Notes to Financial Statements
41
<PAGE>
REAL ESTATE SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income ................................................................. $ 1,402,058 $ 538,337
Net realized gain ..................................................................... 1,766,075 357,371
Net change in unrealized appreciation (depreciation) .................................. 5,041,754 3,569,257
------------- ------------
Net increase in net assets resulting from operations .................................. 8,209,887 4,464,965
------------- ------------
From Distributions to Shareholders
Net investment income ................................................................. (1,330,417) (529,595)
Net realized gains .................................................................... (1,843,915) (234,185)
------------- ------------
Decrease in net assets from distributions to shareholders ............................. (3,174,332) (763,780)
------------- ------------
From Share Transactions
Proceeds from sales of shares (2,796,827 and 1,121,196 shares, respectively) .......... 42,663,506 14,117,141
Net asset value of shares issued from reinvestment of distributions
(196,112 and 59,531 shares, respectively) ............................................ 3,174,332 763,780
Cost of shares repurchased (1,242,092 and 342,758 shares, respectively) ............... (18,924,144) (4,344,888)
------------- ------------
Increase in net assets from share transactions ........................................ 26,913,694 10,536,033
------------- ------------
Net increase in net assets ............................................................ 31,949,249 14,237,218
Net Assets
Beginning of period ................................................................... 22,709,760 8,472,542
------------- ------------
End of period (including undistributed net investment income of $80,383 and $8,742,
respectively) ......................................................................... $ 54,659,009 $ 22,709,760
============= ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
Year Ended December 31, 5/1/95 to
1997 1996 12/31/95
---------------- ---------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of period .......... $ 14.32 $11.33 $10.00
Income from investment operations
Net investment income ........................ 0.50(3) 0.50(3) 0.33(3)
Net realized and unrealized gain ............. 2.62 3.14 1.42
--------- ------- --------
Total from investment operations ............ 3.12 3.64 1.75
--------- ------- --------
Less distributions
Dividends from net investment income ......... (0.48) (0.50) (0.33)
Dividends from net realized gains ............ (0.58) (0.15) (0.06)
Tax return of capital ........................ -- -- (0.03)
--------- ------- --------
Total distributions ......................... (1.06) (0.65) (0.42)
--------- ------- --------
Change in net asset value ..................... 2.06 2.99 1.33
--------- ------- --------
Net asset value, end of period ................ $ 16.38 $14.32 $11.33
========= ======= ========
Total return .................................. 22.05% 33.09% 17.79%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $ 54,659 $22,710 $8,473
Ratio to average net assets of:
Operating expenses ........................... 1.00% 1.00% 1.00%(1)
Net investment income ........................ 3.59% 4.36% 4.80%(1)
Portfolio turnover rate ....................... 41% 21% 10%(2)
Average commission rate paid(4) ............... $ 0.0490 $0.0468 N/A
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment adviser of
$0.01, $0.05 and $0.07 per share, respectively.
(4) 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
42
<PAGE>
STRATEGIC THEME SERIES
INVESTOR PROFILE
Strategic Theme Series is designed for long-term investors seeking capital
appreciation while accepting the higher risk associated with investing in the
stock market.
INVESTMENT REVIEW
For the 12 months ended December 31, 1997, Phoenix Strategic Theme Series
returned 17.16%. By comparison the S&P 500 Index was up 33.38% and the S&P
Midcap 400 Index was up 32.27%. Although the Fund underperformed last year,
since inception it has exceeded 58% of a peer universe of 159 funds with an
annualized total return of 19.47%, according to Lipper Analytical Services, Inc.
All performance figures assume reinvestment of dividends and exclude the effect
of sales charges.
Large-cap stocks dominated in 1997. In fact, the largest 50 companies in
the S&P 500 Index accounted for a disproportionate amount of the Index's return.
We do not believe this trend is sustainable. Over the past 12 months the Fund
has focused on the small- and mid-cap arenas, which we believe offer more
opportunities for thematic investing, higher earnings growth rates and more
attractive valuations compared to large-cap stocks.
The Fund's performance was generated by both new and existing themes.
Internet Commerce Ignition, a new theme, represents companies benefiting from
the explosive growth of the number of people and businesses utilizing the
Internet for retailing, advertising and business-to-business commerce. Our
emphasis on the theme Deregulating Financial Services continued to serve us
well. Convergence among banks, insurance companies and brokerages will drive
above-average earnings growth and industry consolidation. 21st Century Medicine
continues to be an attractive theme due to remarkable advances in gene-mapping,
biotechnology and non-invasive surgical techniques that are changing the way
medicine is practiced and enhancing the quality of life.
Hindering the Fund's performance was an overweighting in energy service
stocks and select technology stocks.
OUTLOOK
We believe our key investment themes focusing on domestic companies with
strong revenue and earnings growth will serve us well in an environment
characterized by worries of the Asian contagion. Driving investment themes
coupled with our defensive use of cash should help in what we believe to be a
trading environment in 1998. As of December 31, the Fund's asset allocation mix
was 87.2% equities and 12.8% cash equivalents.
[TABULAR REPRESENTATION OF PIE CHART]
Internet Commerce Ignition 7.5%
Software Solutions 8.0%
Next Destination Data 8.3%
Special Situations 0.4%
Move to Outsourcing 2.5%
Retail Revival 2.9%
Next Generation Semiconductors 3.0%
Genomic Revolution 3.2%
Logic of Logistics 3.7%
Power Plays 4.1%
Short-Terms & Equivalents 12.8%
Blue Skies 10.2%
Deregulating Financial Services 13.8%
21st Century Medicine 13.9%
Energy Technology 5.7%
43
<PAGE>
STRATEGIC THEME SERIES
[TABULAR REPRESENTATION OF LINE CHART]
S&P 500 Stock Strategic Theme S&P MidCap 400
Index** Series Index*
1/29/96 $10,000 $10,000 $10,000
12/31/96 12,198 11,033 10,011
12/31/97 16,197 12,927 15,818
Average Annual Total Returns for Period Ending 12/31/97
From
Inception
1/29/96 to
1 Year 12/31/97
---------------------------------------------------------------------------
Strategic Theme Series 17.16% 14.28%
---------------------------------------------------------------------------
S&P MidCap 400 Index* 32.27% 26.93%
---------------------------------------------------------------------------
S&P 500 Stock Index** 33.38% 28.50%
---------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 1/29/96
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. 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.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
* The S&P MidCap 400 is an unmanaged index composed of companies with market
capitalizations between $300 million and $5 billion.
** The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance.
SCHEDULE OF INVESTMENTS
December 31, 1997
SHARES VALUE
--------- -------
COMMON STOCKS--86.0%
Banks--Midwest--2.5%
U.S. Bancorp .............................. 10,500 $1,175,344
----------
Banks--Southeast--1.1%
Union Planters Corp. ...................... 8,000 543,500
----------
Banks--Super Regional--0.9%
Wachovia Corp. ............................ 5,500 446,188
----------
Commercial--Leasing Companies--2.1%
Avis Rent A Car, Inc. (b) ................. 25,000 798,437
Budget Group, Inc. (b) .................... 5,800 200,463
----------
998,900
----------
Computer--Services--7.8%
America Online, Inc. (b) .................. 10,500 936,469
Ciber, Inc. (b) ........................... 12,500 725,000
Excite, Inc. (b) .......................... 30,500 915,000
Shared Medical Systems Corp. .............. 7,000 462,000
Yahoo!, Inc. (b) .......................... 10,000 692,500
----------
3,730,969
----------
Computer--Software--10.2%
Citrix Systems, Inc. (b) .................. 7,000 532,000
Compuware Corp. (b) ....................... 23,000 736,000
Intuit, Inc. (b) .......................... 25,000 1,031,250
Keane, Inc. (b) ........................... 12,000 487,500
PeopleSoft, Inc. (b) ...................... 33,500 1,306,500
Platinum Technology, Inc. (b) ............. 27,000 762,750
----------
4,856,000
----------
Electric--Semiconductor Equipment--0.9%
Novellus Systems, Inc. (b) ................ 14,000 452,375
----------
Electric--Semiconductor Manufacturing--1.0%
Micron Technology, Inc. (b) ............... 18,000 468,000
----------
SHARES VALUE
----------------- ------------
Finance--Mortgage and Related Services--1.0%
FNMA ...................................... 8,500 $ 485,031
----------
Finance--Savings & Loan--2.0%
Ahmanson (H.F.) & Co. ..................... 7,500 502,031
Ocwen Financial Corp. (b) ................. 17,000 432,437
----------
934,468
----------
Insurance--Diversified--1.9%
Transamerica Corp. ........................ 4,000 426,000
Travelers Group, Inc. ..................... 8,500 457,937
----------
883,937
----------
Insurance--Life--1.5%
Lincoln National Corp. .................... 6,300 492,187
Protective Life Corp. ..................... 4,000 239,000
----------
731,187
----------
Insurance--Property/Casualty/Title--2.9%
Allstate Corp. ............................ 8,200 745,175
General Re Corp. .......................... 3,000 636,000
----------
1,381,175
----------
Medical--Biomed/Genetics--3.2%
Biogen, Inc. (b) .......................... 13,000 472,875
Incyte Pharmaceuticals, Inc. (b) .......... 14,000 630,000
Transkaryotis Therapies, Inc. (b) ......... 11,600 407,450
----------
1,510,325
----------
Medical--Ethical Drugs--4.2%
Lilly (Eli) & Co. ......................... 15,000 1,044,375
Pfizer, Inc. .............................. 13,000 969,312
----------
2,013,687
----------
Medical--Instruments--3.3%
Medtronic, Inc. ........................... 18,000 941,625
Sofamor Danek Group, Inc. (b) ............. 10,000 650,625
----------
1,592,250
----------
Medical--Products--4.0%
Guidant Corp. ............................. 16,000 996,000
Sepracor, Inc. (b) ........................ 23,000 921,437
----------
1,917,437
----------
See Notes to Financial Statements
44
<PAGE>
STRATEGIC THEME SERIES
SHARES VALUE
----------- -------------
Medical/Dental--Supplies--2.3%
Safeskin Corp. (b) .......................... 19,500 $ 1,106,625
-----------
Oil & Gas--Drilling--1.8%
Diamond Offshore Drilling, Inc. ............. 10,000 481,250
Noble Drilling Corp. (b) .................... 12,000 367,500
-----------
848,750
-----------
Oil & Gas--Field Services--2.8%
Halliburton Co. ............................. 9,000 467,437
Schlumberger Ltd. ........................... 10,500 845,250
-----------
1,312,687
-----------
Oil & Gas--U.S. Exploration & Production--1.0%
Cross Timbers Oil Co. ....................... 6,100 152,119
Houston Exploration Co. (The) (b) ........... 17,000 312,375
-----------
464,494
-----------
Real Estate Operations--0.4%
Tower Realty Trust, Inc. .................... 7,700 189,613
-----------
Retail--Discount & Variety--0.5%
Consolidated Stores Corp. (b) ............... 5,000 219,688
-----------
Retail--Home Furnishings--1.0%
Ethan Allen Interiors, Inc. ................. 12,000 462,750
-----------
Retail--Major Discount Chains--0.5%
Costco Companies, Inc. (b) .................. 5,500 245,438
-----------
Retail/Wholesale--Building Products--1.0%
Home Depot, Inc. ............................ 8,000 471,000
-----------
Telecommunications--Equipment--1.5%
Ciena Corp. (b) ............................. 11,500 702,938
-----------
Telecommunications--Services--5.9%
AT&T Corp. .................................. 28,000 1,715,000
ITC DeltaCom, Inc. (b) ...................... 6,000 99,000
Teleport Communications Group, Inc.
Class A (b) ............................... 18,000 987,750
-----------
2,801,750
-----------
Transportation--Airline--10.3%
AMR Corp. (b) ............................... 8,000 1,028,000
Alaska Air Group, Inc. (b) .................. 12,500 484,375
Comair Holdings, Inc. ....................... 18,000 434,250
Delta Air Lines, Inc. ....................... 8,000 952,000
Southwest Airlines Co. ...................... 28,500 701,812
U.S. Airways Group, Inc. (b) ................ 20,500 1,281,250
-----------
4,881,687
-----------
Transportation--Services--1.5%
C.H. Robinson Worldwide, Inc. ............... 33,000 738,375
-----------
Utility--Electric Power--4.1%
Boston Edison Co. ........................... 6,000 227,250
Consolidated Edison Company of New York,
Inc. ...................................... 12,000 492,000
IPALCO Enterprises, Inc. .................... 6,000 251,625
Minnesota Power & Light Co. ................. 5,500 239,594
New York State Electric & Gas Corp. ......... 14,000 497,000
PG&E Corp. .................................. 8,000 243,500
-----------
1,950,969
-----------
SHARES VALUE
----------- -------------
Utility--Telephone--0.9%
Ameritech Corp. ............................. 5,500 $ 442,750
-----------
TOTAL COMMON STOCKS
(Identified cost $38,081,291) ............................... 40,960,287
-----------
FOREIGN COMMON STOCKS--1.2%
Electric--Semiconductor Equipment--1.0%
ASM Lithography Holding NV
(Netherlands) (b) ......................... 7,500 506,250
-----------
Oil & Gas--Drilling--0.2%
Precision Drilling Corp. (Canada) (b) ....... 3,500 85,313
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $575,255) .............................. 591,563
-----------
TOTAL LONG-TERM INVESTMENTS--87.2%
(Identified cost $38,656,546) ............................... 41,551,850
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- ---------
SHORT-TERM OBLIGATIONS--22.8%
Commercial Paper--20.5%
Koch Industries, Inc. 6.70%,
1/2/98 ........................... A-1+ $1,295 1,294,759
Sara Lee Corp. 6.05%, 1/7/98 ....... A-1+ 1,000 998,992
Greenwich Funding Corp.
5.91%, 1/9/98 .................... A-1+ 345 344,547
Receivables Capital Corp.
5.90%, 1/9/98 .................... A-1+ 835 833,905
Exxon Imperial U.S., Inc. 5.82%,
1/13/98 .......................... A-1+ 1,015 1,013,031
Corporate Receivables Corp.
6.08%, 1/14/98 ................... A-1 360 359,210
Receivables Capital Corp.
6.25%, 1/16/98 ................... A-1+ 1,000 997,396
Coca-Cola Co. 5.75%, 1/21/98 ....... A-1+ 1,110 1,106,454
Corporate Asset Funding Co.,
Inc. 6%, 1/21/98 ................. A-1+ 1,290 1,285,700
CXC, Inc. 6.03%, 1/27/98 ........... A-1+ 1,540 1,533,293
---------
9,767,287
---------
Federal Agency Securities--2.3%
FHLMC 5.75%, 1/22/98 ............... 84 83,718
FHLMC 5.63%, 2/18/98 ............... 1,000 992,493
---------
1,076,211
---------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $10,843,498) ............................. 10,843,498
----------
TOTAL INVESTMENTS--110.0%
(Identified cost $49,500,044) ............................. 52,395,348(a)
Cash and receivables, less liabilities--(10.0%) ........... (4,775,837)
----------
NET ASSETS--100.0% .......................................... $47,619,511
===========
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $3,236,891 and gross
depreciation of $665,645 for income tax purposes. At December 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$49,824,102.
(b) Non-income producing.
See Notes to Financial Statements
45
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $49,500,044) ..................... $ 52,395,348
Cash ............................................................................. 696
Receivables
Interest and dividends .......................................................... 21,865
Fund shares sold ................................................................ 4,640
------------
Total assets ................................................................... 52,422,549
------------
Liabilities
Payables
Investment securities purchased ................................................. 4,722,034
Investment advisory fee ......................................................... 3,340
Trustees' fee ................................................................... 3,086
Financial agent fee ............................................................. 2,343
Accrued expenses ................................................................ 72,235
------------
Total liabilities .............................................................. 4,803,038
------------
Net Assets ....................................................................... $ 47,619,511
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest ................................ $ 46,329,596
Accumulated net realized loss ................................................... (1,605,389)
Net unrealized appreciation ..................................................... 2,895,304
------------
Net Assets ....................................................................... $ 47,619,511
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization . 4,208,172
============
Net asset value and offering price per share ..................................... $ 11.32
============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest ................................................................ $ 372,110
Dividends ............................................................... 174,274
----------
Total investment income ................................................ 546,384
----------
Expenses
Investment advisory fee ................................................. 289,018
Financial agent fee ..................................................... 23,121
Printing ................................................................ 49,183
Custodian ............................................................... 25,202
Professional ............................................................ 25,070
Trustees ................................................................ 20,039
Miscellaneous ........................................................... 7,287
----------
Total expenses ......................................................... 438,920
Less expense borne by investment adviser ............................... (53,563)
----------
Net expenses ........................................................... 385,357
----------
Net investment income .................................................... 161,027
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ......................................... 4,405,157
Net realized loss on written options .................................... (111,241)
Net change in unrealized appreciation (depreciation) on investments ..... 1,374,168
----------
Net gain on investments .................................................. 5,668,084
----------
Net increase in net assets resulting from operations ..................... $5,829,111
==========
</TABLE>
See Notes to Financial Statements
46
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended January 29, 1996
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income .......................................................... $ 161,027 $ 94,091
Net realized gain (loss) ....................................................... 4,293,916 (438,134)
Net change in unrealized appreciation (depreciation) ........................... 1,374,168 1,521,136
------------- -------------
Net increase in net assets resulting from operations ........................... 5,829,111 1,177,093
------------- -------------
From Distributions to Shareholders
Net investment income .......................................................... (161,027) (94,091)
Net realized gains ............................................................. (4,293,916) --
In excess of net realized gains ................................................ (1,167,255) --
Tax return of capital .......................................................... (23,025) (21,960)
------------- -------------
Decrease in net assets from distributions to shareholders ...................... (5,645,223) (116,051)
------------- -------------
From Share Transactions
Proceeds from sales of shares (2,325,529 and 3,425,481 shares, respectively) ... 27,902,960 36,431,726
Net asset value of shares issued from reinvestment of distributions (504,343 and
10,456 shares, respectively) .................................................. 5,645,223 116,051
Cost of shares repurchased (987,193 and 1,070,444 shares, respectively) ........ (12,084,569) (11,636,810)
------------- -------------
Increase in net assets from share transactions ................................. 21,463,614 24,910,967
------------- -------------
Net increase in net assets ..................................................... 21,647,502 25,972,009
Net Assets
Beginning of period ............................................................ 25,972,009 0
------------- -------------
End of period (including undistributed net investment income of $0 and $0,
respectively) ................................................................. $ 47,619,511 $ 25,972,009
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year From Inception
Ended 1/29/96 to
12/31/97 12/31/96
---------------- ---------------
<S> <C> <C>
Net asset value, beginning of period .......... $10.98 $10.00
Income from investment operations
Net investment income ........................ 0.05(2) 0.04(2)
Net realized and unrealized gain ............. 1.82 0.99
------- -------
Total from investment operations ............ 1.87 1.03
------- -------
Less distributions
Dividends from net investment income ......... (0.05) (0.04)
Dividends from net realized gains ............ (1.16) --
In excess of net realized gains .............. (0.31) --
Tax return of capital ........................ (0.01) (0.01)
------- -------
Total distributions ......................... (1.53) (0.05)
------- -------
Change in net asset value ..................... 0.34 0.98
------- -------
Net asset value, end of period ................ $11.32 $10.98
======= =======
Total return .................................. 17.16% 10.33%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $47,620 $25,972
Ratio to average net assets of:
Operating expenses ........................... 1.00% 1.00%(1)
Net investment income ........................ 0.42% 0.64%(1)
Portfolio turnover rate ....................... 642% 391%(3)
Average commission rate paid(4) ............... $0.0579 $0.0587
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.02
and $0.02 per share, respectively.
(3) Not annualized.
(4) 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
47
<PAGE>
ABERDEEN NEW ASIA SERIES
INVESTOR PROFILE
Aberdeen New Asia Series is designed for aggressive, long-term investors
who seek maximum growth potential and greater diversification. Investors should
note that foreign investments pose added risks, such as currency fluctuation,
less public information and political and economic uncertainty. There are also
additional risks inherent in investing in a single sector.
INVESTMENT REVIEW
For the 12 months ended December 31, 1997, Phoenix New Asia Series was down
32.39%, while the MSCI AC Asia Pacific ex Japan Index declined 32.64%. All
performance figures assume reinvestment of dividends and exclude the effect of
sales charges.
The Fund suffered from recent events in Southeast Asia as signs of cracks
in the Asian economic miracle began to emerge in late October. Thailand's
problems have been part political and part economic. Poor lending practices have
continued unchecked with funds channeled into non-productive assets, such as
property. As the economy has slowed, the corporate sector has been left with a
large debt, and many of the finance houses are technically bankrupt. Although
the economy will slow dramatically and corporate earnings will plummet, as
investors our emphasis must be on the quality of business, management and
financials.
Thailand's crisis has had a ripple effect throughout Southeast Asia,
causing a fallout in stock markets and currencies in Indonesia, Korea, Malaysia
and the Philippines. The question now is whether "Asia's financial crisis" is
deeper than first believed. Our view is that it remains country specific. The
currency shocks throughout Southeast Asia have shown governments that access to
international capital markets cannot be on their own terms. We have also been
wary of the region's obsession with mega projects and the belief that property
values can only rise in value.
There are signs of a slowing Chinese economy, and inflation has turned to
disinflation in recent months, pointing to problematic domestic demand. Hong
Kong has not escaped the decelerating forces in the other regional economies.
Although the government has successfully managed to maintain the Hong Kong
dollar peg, we expect it to disappear some time soon as the economic cost is too
great. It has already caused a 20% correction in property prices and held back
corporate earnings.
The economies of Australia and New Zealand boast a generally strong
corporate and public sector. Our investments in these areas have performed well
during this reporting period. Our holdings are concentrated in the industrial,
commercial and financial sectors, not the resources sector.
OUTLOOK
We believe that the turnaround in stock markets and in economies can be
rapid simply because the affected countries do not have the strength to resist.
Southeast Asia's economy may begin to improve in 18 months or more, but sooner
in terms of the stock markets. Asia will stop short of a market meltdown. Once
currencies find a level, prices settle and interest rates fall, liquidity will
improve. With currencies nearer their true value, the "tigers" have an
opportunity to compete once again.
Looking forward, the key is to be selective and identify those companies
that are well-managed, have good products and manage their finances sensibly. As
the cycle turns in Asia's favor, these companies will emerge even stronger.
[TABULAR REPRESENTATION OF LINE CHART]
MSCI AC Asia Pacific Aberdeen New Asia
Ex Japan Index* Series
9/17/96 $10,000 $10,000
12/31/96 10,385 10,016
12/31/97 6,995 6,772
Average Annual Total Returns for Periods Ending 12/31/97
From
Inception
9/17/96 to
1 Year 12/31/97
---------------------------------------------------------------------------
Aberdeen New Asia Series -32.39% -26.12%
---------------------------------------------------------------------------
MSCI AC Asia Pacific Ex Japan Index* -32.64% -24.24%
---------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 9/17/96
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the stated
period. 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.
*Morgan Stanley Capital International All Country Asia Pacific (excluding
Japan) Index is a market-value weighted average of the performance of
securities listed on the stock exchanges of 14 countries in Asia and the
Pacific Basin. Performance is calculated on a total return basis, as reported
by Frank Russell Company.
48
<PAGE>
ABERDEEN NEW ASIA SERIES
SCHEDULE OF INVESTMENTS
December 31, 1997
SHARES VALUE
----------- -------------
COMMON STOCKS--87.0%
Australia--18.2%
Australian Gas Light Co. Ltd. (Utility-Gas) ........ 50,000 $ 348,602
BRL Hardy Ltd. (Beverages) ......................... 157,500 484,702
Commonwealth Bank of Australia (Banks) ............. 25,000 286,701
Pacifica Group Ltd. (Miscellaneous) ................ 60,000 198,840
QBE Insurance Group Ltd. (Insurance) ............... 112,500 506,312
-----------
1,825,157
-----------
Hong Kong--20.6%
CDL Hotels International Ltd. (Hotels) ............. 700,000 212,307
Giordano International Ltd. (Retail) ............... 400,000 138,097
Hongkong Electric Holdings Ltd.
(Utility-Electric) ............................... 110,000 418,097
Manhattan Card Co. Ltd. (Consumer Finance) 700,000 246,186
National Mutual Asia Ltd. (Insurance) .............. 450,000 447,201
Smartone Telecommunications (Utility-
Telephone) ....................................... 100,000 192,948
Swire Pacific Ltd. Class B (Miscellaneous) ......... 400,000 405,255
-----------
2,060,091
-----------
India--8.3%
Grasim Industries Ltd. Sponsored GDR 144A
(Basic Materials) (c) ............................ 22,600 246,340
Industrial Credit & Investment Corporation of
India Ltd Sponsored GDR (Diversified
Financial Services) .............................. 45,000 585,000
-----------
831,340
-----------
Indonesia--3.9%
PT Bank Bali (Banks) ............................... 370,000 45,452
PT Duta Anggada Realty TBK (Property) .............. 200,000 7,279
PT Indosat TBK (Utility-Telephone) ................. 180,000 334,132
-----------
386,863
-----------
Malaysia--4.0%
AMMB Holdings Berhad (Diversified Financial
Services) ........................................ 50,000 32,757
Malaysian Oxygen Berhad (Chemical) ................. 80,000 178,815
Muhibbah Engineering (M) Berhad (Engineering
& Construction) .................................. 85,000 54,595
Rashid Hussain Berhad (Diversified Financial
Services) ........................................ 50,000 38,794
Sime UEP Properties Berhad (Property) .............. 180,000 96,190
-----------
401,151
-----------
New Zealand--2.4%
Telecom Corporation of New Zealand Ltd.
(Utility-Telephone) .............................. 50,000 242,437
-----------
Philippines--7.7%
Ayala Land, Inc. Class B (Engineering &
Construction) .................................... 575,000 230,583
Bank of the Philippine Islands (Banks) ............. 20,000 44,613
La Tondena Distillers, Inc. (Beverages) ............ 175,000 81,143
Manila Electric Co. (Electric Companies) ........... 9,000 30,226
Philippine Long Distance Telephone Co.
Sponsored ADR (Utility-Telephone) ................ 17,000 382,500
-----------
769,065
-----------
Singapore--9.0%
Clipsal Industries Ltd. (Electrical Equipment) ..... 100,000 128,000
Robinson & Co. Ltd. (Retail) ....................... 108,000 384,593
Rothmans Industries Ltd. (Tobacco) ................. 75,000 391,715
-----------
904,308
-----------
SHARES VALUE
----------- -------------
South Korea--0.9%
Samsung Electronics Sponsored GDR 144A
Non-Voting Shares (Electronics) (c) .............. 15,000 $ 93,750
-----------
Sri Lanka--1.4%
National Development Bank Ltd. (Banks) (b) ......... 36,500 135,808
-----------
Taiwan--4.0%
Standard Foods Taiwan Ltd. GDR Reg S
(Retail-Food) (b) ................................ 35,000 402,500
-----------
Thailand--3.5%
Bangkok Bank Public Co. Ltd. (Banks) ............... 40,000 99,692
Ruam Pattana Fund II (Closed End Mutual Fund)....... 1,250,000 127,211
Siam Commercial Bank Public Co. Ltd. (Banks) ....... 106,666 121,844
-----------
348,747
-----------
United Kingdom--3.1%
HSBC Holdings PLC (Banks) .......................... 12,000 310,219
-----------
TOTAL COMMON STOCKS
(Identified cost $13,074,969) ................................ 8,711,436.
-----------
WARRANTS--0.0%
Malaysia--0.0%
AMMB Holdings Berhad Warrants (Diversified
Financial Services) (b) .......................... 6,000 462
-----------
Thailand--0.0%
Siam Commercial Bank Public Co. Ltd.
Warrants (Banks) ................................. 26,666 0
-----------
TOTAL WARRANTS
(Identified cost $0)........................................... 462
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- -----------
CONVERTIBLE BONDS--0.0%
Malaysia--0.0%
AMMB Holdings Berhad (ICULS)
Cv. 7.50%, 5/8/02 (Diversified
Financial Services) ........................ NR 60(d) 4,008
-----
TOTAL CONVERTIBLE BONDS
(Identified cost $24,024).................................. 4,008
-----
NON-CONVERTIBLE BONDS--0.1%
Malaysia--0.1%
AMMB Holdings Berhad 5%, 5/13/02
(Diversified Financial Services) ........... NR 60(d) 7,091
-----
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $24,024).................................. 7,091
-----
TOTAL LONG-TERM INVESTMENTS--87.1%
(Identified cost $13,123,017).............................. 8,722,997
---------
SHORT-TERM OBLIGATIONS--10.0%
Aubrey G. Lanston & Co., Inc. repurchase
agreement, 5.75%, dated 12/31/97 due
1/2/98, repurchase price $1,000,319,
collateralized by U.S. Treasury Note
6.25%, 6/30/98, market value $1,021,132 $1,000 1,000,000
---------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,000,000)............................... 1,000,000
---------
TOTAL INVESTMENTS--97.1%
(Identified cost $14,123,017).............................. 9,722,997(a)
Cash and receivables, less liabilities--2.9% .............. 293,705
-----------
NET ASSETS--100.0% .......................................... $10,016,702
===========
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $398,772 and gross
depreciation of $4,949,287 for income tax purposes. At December 31, 1997
the aggregate cost of securities for federal income tax purposes was
$14,273,512.
(b) Non-income producing.
(c) 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,
1997, these securities amounted to a value of $340,090 or 3.4% of net
assets.
(d) Par value represents Malaysian Ringgits.
See Notes to Financial Statements
49
<PAGE>
ABERDEEN NEW ASIA SERIES
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Total Long-Term Investments
(Unaudited)
Banks .................................. 12.0%
Basic Materials ........................ 2.8
Beverages .............................. 6.5
Chemical ............................... 2.0
Closed End Mutual Fund ................. 1.5
Consumer Finance ....................... 2.8
Diversified Financial Services ......... 7.7
Electric Companies ..................... 0.3
Electrical Equipment ................... 1.5
Electronics ............................ 1.1
Engineering & Construction ............. 3.3
Hotels ................................. 2.4
Insurance .............................. 10.9
Miscellaneous .......................... 6.9
Property ............................... 1.2
Retail ................................. 6.0
Retail-Food ............................ 4.6
Tobacco ................................ 4.5
Utility-Electric ....................... 4.8
Utility-Gas ............................ 4.0
Utility-Telephone ...................... 13.2
-----
100.0%
=====
See Notes to Financial Statements
50
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $14,123,017) ..................... $ 9,722,997
Foreign currency at value (Identified cost $7,445)................................ 7,445
Cash ............................................................................. 57,058
Receivables
Investment securities sold ...................................................... 278,311
Dividends and interest .......................................................... 17,972
Fund shares sold ................................................................ 425
Tax reclaim ..................................................................... 150
-----------
Total assets ................................................................... 10,084,358
-----------
Liabilities
Payables
Investment advisory fee ......................................................... 4,914
Trustees' fee ................................................................... 4,365
Financial agent fee ............................................................. 1,633
Accrued expenses ................................................................ 56,744
-----------
Total liabilities .............................................................. 67,656
-----------
Net Assets ....................................................................... $10,016,702
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest ................................ $15,094,871
Distributions in excess of net investment income ................................ (159,799)
Accumulated net realized loss ................................................... (513,917)
Net unrealized depreciation ..................................................... (4,404,453)
-----------
Net Assets ....................................................................... $10,016,702
===========
Shares of beneficial interest outstanding, $1 par value, unlimited authorization . 1,555,458
===========
Net asset value and offering price per share ..................................... $6.44
===========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
Investment Income
Dividends .............................................................................. $ 351,842
Interest ............................................................................... 55,368
Foreign taxes withheld ................................................................. (33,831)
-----------
Total investment income ............................................................... 373,379
-----------
Expenses
Investment advisory fee ................................................................ 129,766
Financial agent fee .................................................................... 7,786
Custodian .............................................................................. 59,952
Trustees ............................................................................... 20,505
Professional ........................................................................... 20,486
Printing ............................................................................... 17,972
Miscellaneous .......................................................................... 3,338
-----------
Total expenses ........................................................................ 259,805
Less expenses borne by investment adviser ............................................. (97,597)
-----------
Net expenses .......................................................................... 162,208
-----------
Net investment income ................................................................... 211,171
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities ........................................................ (513,917)
Net realized loss on foreign currency transactions ..................................... (12,179)
Net change in unrealized appreciation (depreciation) on investments .................... (4,377,468)
Net change in unrealized appreciation (depreciation) on foreign currency and foreign
currency transactions ------------
(4,383)
Net loss on investments ................................................................. (4,907,947)
-----------
Net decrease in net assets resulting from operations .................................... ($ 4,696,776)
===========
</TABLE>
See Notes to Financial Statements
51
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-------------------
<S> <C>
From Operations
Net investment income ................................................................... $ 211,171
Net realized gain (loss) ................................................................ (526,096)
Net change in unrealized appreciation (depreciation) .................................... (4,381,851)
------------
Net increase (decrease) in net assets resulting from operations ......................... (4,696,776)
------------
From Distributions to Shareholders
Net investment income ................................................................... (211,171)
Net realized gains ...................................................................... (6,760)
In excess of net investment income ...................................................... (143,676)
Tax return of capital ................................................................... (76,927)
------------
Decrease in net assets from distributions to shareholders ............................... (438,534)
------------
From Share Transactions
Proceeds from sales of shares (1,188,914 and 1,343,657 shares, respectively) ............ 10,623,009
Net asset value of shares issued from reinvestment of distributions (66,703 and 5,928
shares, respectively) .................................................................. 438,534
Cost of shares repurchased (862,809 and 186,935 shares, respectively) ................... (7,494,737)
------------
Increase in net assets from share transactions .......................................... 3,566,806
------------
Net increase (decrease) in net assets ................................................... (1,568,504)
Net Assets
Beginning of period ..................................................................... 11,585,206
------------
End of period (including distributions in excess of net investment income of
($159,799) and ($3,944), respectively) ................................................. $ 10,016,702
============
</TABLE>
<TABLE>
<CAPTION>
From Inception
September 17, 1996 to
December 31, 1996
----------------------
<S> <C>
From Operations
Net investment income ................................................................... $ 58,378
Net realized gain (loss) ................................................................ 3,328
Net change in unrealized appreciation (depreciation) .................................... (22,602)
------------
Net increase (decrease) in net assets resulting from operations ......................... 39,104
------------
From Distributions to Shareholders
Net investment income ................................................................... (58,378)
Net realized gains ...................................................................... --
In excess of net investment income ...................................................... (512)
Tax return of capital ................................................................... --
------------
Decrease in net assets from distributions to shareholders ............................... (58,890)
------------
From Share Transactions
Proceeds from sales of shares (1,188,914 and 1,343,657 shares, respectively) ............ 13,400,256
Net asset value of shares issued from reinvestment of distributions (66,703 and 5,928
shares, respectively) .................................................................. 58,890
Cost of shares repurchased (862,809 and 186,935 shares, respectively) ................... (1,854,154)
------------
Increase in net assets from share transactions .......................................... 11,604,992
------------
Net increase (decrease) in net assets ................................................... 11,585,206
Net Assets
Beginning of period ..................................................................... 0
------------
End of period (including distributions in excess of net investment income of
($159,799) and ($3,944), respectively) ................................................. $ 11,585,206
============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
Year Ended 9/17/96 to
12/31/97 12/31/96
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period .......... $9.96 $10.00
Income from investment operations
Net investment income ........................ 0.15(1) 0.05(1)
Net realized and unrealized gain (loss) ...... (3.36) (0.04)
------- --------
Total from investment operations ............ (3.21) 0.01
------- --------
Less distributions
Dividends from net investment income ......... (0.15) (0.05)
Dividends from net realized gains ............ (0.01) --
In excess of net investment income ........... (0.10) --
Tax return of capital ........................ (0.05) --
------- --------
Total distributions ......................... (0.31) (0.05)
------- --------
Change in net asset value ..................... (3.52) (0.04)
------- --------
Net asset value, end of period ................ $6.44 $9.96
======= ========
Total return .................................. (32.39)% 0.16%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $10,017 $11,585
Ratio to average net assets of:
Operating expenses ........................... 1.25% 1.25%(2)
Net investment income ........................ 1.63% 2.40%(2)
Portfolio turnover rate ....................... 27% 2%(3)
Average commission rate paid(4) ............... $0.0109 $0.0109
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.07
and $0.03 per share, respectively.
(2) Annualized.
(3) Not annualized.
(4) 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
52
<PAGE>
ENHANCED INDEX SERIES
INVESTMENT REVIEW
Since its inception in July 1997, the Fund has returned 5.83% compared with
5.67% for the S&P 500 Index. All performance figures assume reinvestment of
dividends and are net of fees.
The Fund underperformed its benchmark in the fourth quarter, 2.61% versus
2.84% as the market returned to the large-cap domination. Because of the Fund's
sector and style neutral construction, the weakness can be attributed entirely
to stock selection, particularly in the telephone and retail sectors. While our
strategy constrains each stock's relative weight in the portfolio, limiting the
impact of each purchase decision, a few holdings were worth noting.
In the telephone sector, an overweighted position in Worldcom and
underweighted position in AT&T held back performance. Worldcom shares suffered
from the second round of bidding for MCI, although strategically this company is
the best-positioned and has the best managerial track record for achieving
merger synergies. We believe they will be the best performing telephone stock in
1998 as they capture proportionately more revenue in Internet, local and long
distance. AT&T, a laggard in the first half of 1997, has rallied on the
cost-cutting reputation of its new CEO, Michael Armstrong, and the prospects of
a merger as industry consolidation continues.
In the retail sector, overweighted positions in Sears and Toys "R" Us
contributed to the performance shortfall. Sears fell sharply in October when the
company warned that fourth-quarter results might be disappointing as more
customers fell behind in credit card payments. Weakness in Toys "R" Us stemmed
from overblown rumors over a poor Christmas shopping season. However, strong
sales in the final week of the year helped the company meet earnings
expectations.
Good stock selection in the drug sector was a positive contributor to
results. The single most successful decision was to underweight Merck & Co. That
allowed us to overweight Schering-Plough and Warner-Lambert, which both had
excellent results. Schering-Plough had been a neglected stock with solid
management and an enormously successful allergy drug, Claritin. Warner-Lambert
had two of the most successful drug launches ever this year, with Lipitor (a
cholesterol drug) and Rezulin (a diabetes drug), far exceeding analysts' sales
estimates. The stock gave back some of its gains in December but remains
attractive. Stock selection in the financial services and consumer staple
sectors also contributed positively to the portfolio, in particular holdings in
Green Tree Acceptance and Archer-Daniels-Midland.
OUTLOOK
We expect moderately lower growth and higher inflation next year. Gross
domestic product should grow at a more trend-like rate of 2.7% in 1998, down
from approximately 3.7% in 1997. We believe inflation will tick up to 2.25% from
1.8% last year as wage pressures begin to be felt during this latter stage of
prolonged economic expansion. Accordingly, we expect after-tax corporate
operating profit growth to fall from 12% this year to 7% next year.
Going forward, we will continue to invest in attractively valued stocks
where we have a high degree of confidence in our forecasts, where we can
identify events that can cause value to be realized and where a compelling
risk/reward tradeoff can be offered.
Total Returns for Period Ending 12/31/97
From
Inception
7/15/97 to
12/31/97
--------------------------------------------------
Enhanced Index Series 5.83%
--------------------------------------------------
S&P 500 Stock Index* 5.67%
--------------------------------------------------
* The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance.
53
<PAGE>
ENHANCED INDEX SERIES
SCHEDULE OF INVESTMENTS
December 31, 1997
SHARES VALUE
---------- -------
COMMON STOCKS--92.4%
Aerospace/Defense--1.2%
Boeing Co. ............................. 6,600 $ 322,987
General Motors Corp. Class H ........... 1,300 48,019
Sundstrand Corp. ....................... 100 5,037
----------
376,043
----------
Airlines--0.2%
AMR Corp. (b) .......................... 400 51,400
Southwest Airlines Co. ................. 900 22,162
----------
73,562
----------
Aluminum--0.4%
Aluminum Company of America ............ 1,100 77,412
Reynolds Metals Co. .................... 500 30,000
----------
107,412
----------
Auto Parts & Equipment--0.8%
Cooper Tire & Rubber Co. ............... 700 17,063
Dana Corp. ............................. 300 14,250
Echlin, Inc. ........................... 600 21,713
Genuine Parts Co. ...................... 1,600 54,300
Goodyear Tire & Rubber Co. ............. 1,500 95,437
ITT Industries, Inc. ................... 1,100 34,512
Lear Corp. (b) ......................... 400 19,000
----------
256,275
----------
Automobiles--1.2%
Chrysler Corp. ......................... 5,800 204,088
Ford Motor Co. ......................... 2,600 126,587
General Motors Corp. ................... 500 30,312
----------
360,987
----------
Banks (Major Regional)--5.0%
Associated Banc-Corp ................... 200 11,025
Banc One Corp. ......................... 2,200 119,488
BankBoston Corp. ....................... 600 56,363
Barnett Banks, Inc. .................... 1,100 79,063
Charter One Financial, Inc. ............ 300 18,938
City National Corp. .................... 200 7,387
Colonial BancGroup, Inc. ............... 200 6,887
Comerica, Inc. ......................... 300 27,075
Compass Bankshares, Inc. ............... 300 13,125
Crestar Financial Corp. ................ 500 28,500
Deposit Guaranty Corp. ................. 200 11,375
Dime Bancorp, Inc. ..................... 500 15,125
First American Corp. ................... 100 4,975
First Commerce Corp. ................... 500 33,625
First of America Bank Corp. ............ 1,100 84,837
First Union Corp. ...................... 4,100 210,125
Firstar Corp. .......................... 500 21,219
Fleet Financial Group, Inc. ............ 1,200 89,925
Hibernia Corp. Class A ................. 600 11,287
KeyCorp ................................ 800 56,650
Mercantile Bancorporation, Inc. ........ 600 36,900
NationsBank Corp. ...................... 2,800 170,275
Northern Trust Corp. ................... 100 6,975
Provident Financial Group, Inc. ........ 200 9,700
Republic New York Corp. ................ 200 22,837
Southtrust Corp. ....................... 400 25,375
Sovereign Bancorp, Inc. ................ 400 8,300
Star Banc Corp. ........................ 400 22,950
SunTrust Banks, Inc. ................... 100 7,137
U.S. Bancorp ........................... 700 78,356
Union Planters Corp. ................... 200 13,587
SHARES VALUE
--------- ---------
Banks (Major Regional)--continued
Valley National Bancorp ........................... 200 $ 7,863
Washington Federal, Inc. .......................... 200 6,288
Washington Mutual, Inc. ........................... 1,100 70,194
Wells Fargo & Co. ................................. 400 135,775
Westamerica Bancorporation ........................ 100 10,225
----------
1,539,731
----------
Banks (Money Center)--2.7%
BankAmerica Corp. ................................. 3,000 219,000
Bankers Trust New York Corp. ...................... 400 44,975
Chase Manhattan Corp. ............................. 1,800 197,100
Citicorp .......................................... 2,000 252,875
First Chicago NBD Corp. ........................... 1,300 108,550
----------
822,500
----------
Beverages (Alcoholic)--0.4%
Anheuser-Busch Companies, Inc. .................... 2,500 110,000
----------
Beverages (Non-Alcoholic)--2.7%
Coca-Cola Co. ..................................... 8,500 566,313
PepsiCo, Inc. ..................................... 7,100 258,706
----------
825,019
----------
Broadcasting (Television, Radio, & Cable)--0.8%
Comcast Corp. Special Class A ..................... 1,400 44,187
Tele-Communications TCI Group A (b) ............... 3,300 92,194
U.S. West Media Group (b) ......................... 4,300 124,163
----------
260,544
----------
Building Materials--0.1%
Owens Corning ..................................... 500 17,062
----------
Chemicals--2.2%
Air Products & Chemicals, Inc. .................... 500 41,125
Dow Chemical Co. .................................. 1,100 111,650
Du Pont (E.I.) de Nemours & Co. ................... 5,300 318,331
Lyondell Petrochemical Co. ........................ 400 10,600
Monsanto Co. ...................................... 2,800 117,600
Praxair, Inc. ..................................... 700 31,500
Rohm & Haas Co. ................................... 300 28,725
Union Carbide Corp. ............................... 600 25,763
----------
685,294
----------
Chemicals (Diversified)--0.1%
PPG Industries, Inc. .............................. 700 39,987
----------
Chemicals (Specialty)--0.2%
Albemarle Corp. ................................... 200 4,775
Crompton & Knowles Corp. .......................... 300 7,950
Cytec Industries, Inc. (b) ........................ 200 9,388
International Flavors & Fragrances, Inc. .......... 500 25,750
Solutia, Inc. (b) ................................. 700 18,681
----------
66,544
----------
Commercial Finance--0.1%
Fremont General Corp. ............................. 200 10,950
National Commerce Bancorporation .................. 200 7,050
North Fork Bancorporation, Inc. ................... 300 10,069
Pacific Century Financial Corp. ................... 400 9,900
Wilmington Trust Corp. ............................ 100 6,237
----------
44,206
----------
Communications Equipment--1.5%
360 Communications Co. (b) ........................ 600 12,113
Harris Corp. ...................................... 700 32,113
Lucent Technologies, Inc. ......................... 3,100 247,612
Motorola, Inc. .................................... 3,200 182,600
----------
474,438
----------
See Notes to Financial Statements
54
<PAGE>
ENHANCED INDEX SERIES
SHARES VALUE
------------ -------------
Computers (Hardware)--3.5%
Compaq Computer Corp. (b) ..................... 4,000 $ 225,750
Dell Computer Corp. (b) ....................... 1,700 142,800
Hewlett Packard Co. ........................... 1,500 93,750
International Business Machines Corp. (c) ..... 5,100 533,268
Quantum Corp. (b) ............................. 700 14,044
Sun Microsystems, Inc. (b) .................... 2,000 79,750
----------
1,089,362
----------
Computers (Networking)--1.1%
Bay Networks, Inc. (b) ........................ 1,100 28,119
Cabletron Systems, Inc. (b) ................... 800 12,000
Cisco Systems, Inc. (b) ....................... 5,500 306,625
----------
346,744
----------
Computers (Peripherals)--0.2%
EMC Corp. (b) ................................. 2,700 74,081
----------
Computers (Software & Services)--2.5%
Computer Associates International, Inc. ....... 2,500 132,187
Electronic Data Systems Corp. ................. 1,800 79,088
Microsoft Corp. (b) (c) ....................... 3,400 439,450
Oracle Corp. (b) .............................. 5,300 118,256
Sybase, Inc. (b) .............................. 300 3,994
----------
772,975
----------
Consumer Finance--0.4%
Beneficial Corp. .............................. 200 16,625
Green Tree Financial Corp. .................... 600 15,713
Household International, Inc. ................. 500 63,781
Providian Financial Corp. ..................... 400 18,075
----------
114,194
----------
Containers & Packaging (Paper)--0.1%
Stone Container Corp. ......................... 600 6,262
Temple-Inland, Inc. ........................... 400 20,925
Union Camp Corp. .............................. 200 10,738
----------
37,925
----------
Diversified Financial Services--0.5%
American General Corp. ........................ 1,300 70,281
Capital One Financial Corp. ................... 300 16,256
MBNA Corp. .................................... 2,200 60,088
----------
146,625
----------
Electric Companies--2.6%
Baltimore Gas & Electric Co. .................. 800 27,250
CMS Energy Corp. .............................. 500 22,031
Central & Southwest Corp. ..................... 1,100 29,769
Cinergy Corp. ................................. 800 30,650
DTE Energy Co. ................................ 700 24,281
Dominion Resources, Inc. ...................... 1,000 42,562
Duke Energy Corp. ............................. 1,900 105,212
Edison International .......................... 1,900 51,656
Entergy Corp. ................................. 1,300 38,919
GPU, Inc. ..................................... 600 25,275
Houston Industries, Inc. ...................... 1,500 40,031
Illinova Corp. ................................ 400 10,775
New England Electric System ................... 300 12,825
Nipsco Industries, Inc. ....................... 100 4,944
Northern States Power Co. ..................... 400 23,300
PECO Energy Co. ............................... 1,200 29,100
PP&L Resources, Inc. .......................... 900 21,544
Potomac Electric Power Co. .................... 600 15,488
Public Service Enterprise Group, Inc. ......... 700 22,181
Southern Co. .................................. 3,600 93,150
Teco Energy, Inc. ............................. 700 19,688
Texas Utilities Co. ........................... 1,200 49,875
SHARES VALUE
------------ ----------
Electric Companies--continued
Unicom Corp. .................................. 1,100 $ 33,825
Union Electric Co. ............................ 500 21,625
Wisconsin Energy Corp. ........................ 600 17,250
----------
813,206
----------
Electrical Equipment--3.6%
Coltec Industries, Inc. (b) ................... 400 9,275
Emerson Electric Co. .......................... 2,600 146,738
General Electric Co. .......................... 10,500 770,437
General Signal Corp. .......................... 300 12,656
Honeywell, Inc. ............................... 1,200 82,200
Rockwell International Corp. .................. 1,800 94,050
----------
1,115,356
----------
Electronics (Component Distributors)--0.1%
Grainger (W.W.), Inc. ......................... 300 29,156
----------
Electronics (Defense)--0.5%
Raytheon Co. Class A (b) ...................... 1,501 74,040
Raytheon Co. Class B .......................... 1,800 90,900
----------
164,940
----------
Electronics (Instrumentation)--0.2%
Perkin Elmer Corp. ............................ 500 35,531
Xilinx, Inc. (b) .............................. 400 14,025
----------
49,556
----------
Electronics (Semiconductors)--2.3%
Intel Corp. (c) ............................... 8,300 583,075
National Semiconductor Corp. (b) .............. 900 23,344
Texas Instruments, Inc. ....................... 2,100 94,500
----------
700,919
----------
Engineering & Construction--0.1%
Fluor Corp. ................................... 500 18,687
Foster Wheeler Corp. .......................... 200 5,413
----------
24,100
----------
Entertainment--2.1%
Time Warner, Inc. ............................. 3,700 229,400
Viacom, Inc. Class B (b) ...................... 2,500 103,594
Walt Disney Co. ............................... 3,200 317,000
----------
649,994
----------
Entertainment, Leisure & Gaming--0.1%
International Game Technology ................. 800 20,200
----------
Equipment (Semiconductor)--0.2%
Applied Materials, Inc. (b) ................... 1,900 57,237
----------
Financial (Diversified)--2.8%
American Express Co. .......................... 2,000 178,500
Associates First Capital Corp. Class A ........ 300 21,337
Bear Stearns Companies, Inc. .................. 500 23,750
ContiFinancial Corp. (b) ...................... 200 5,037
FHLMA ......................................... 3,000 125,813
FNMA (c) ...................................... 4,600 262,487
Finova Group, Inc. ............................ 200 9,938
Greenpoint Financial Corp. .................... 200 14,513
Lehman Brothers Holdings, Inc. ................ 500 25,500
MBIA, Inc. .................................... 500 33,406
Money Store, Inc. (The) ....................... 200 4,200
Morgan Stanley, Dean Witter, Discover and Co. 2,600 153,725
TCF Financial Corp. ........................... 400 13,575
----------
871,781
----------
Foods--1.5%
CPC International, Inc. ....................... 400 43,100
General Mills, Inc. ........................... 500 35,813
Heinz (H.J.) Co. .............................. 1,500 76,219
Hershey Foods Corp. ........................... 400 24,775
Kellogg Co. ................................... 2,100 104,212
See Notes to Financial Statements
55
<PAGE>
ENHANCED INDEX SERIES
SHARES VALUE
---------- ----------
Foods--continued
Nabisco Holdings Corp. Class A ................ 200 $ 9,687
Ralston-Ralston Purina Group .................. 600 55,763
Sara Lee Corp. ................................ 2,100 118,256
---------
467,825
---------
Footwear--0.2%
Nike, Inc. Class B ............................ 1,500 58,875
Reebok International Ltd. (b) ................. 500 14,406
---------
73,281
---------
Gaming, Lottery, & Parimutuel Cos.--0.0%
Harrah's Entertainment, Inc. (b) .............. 600 11,325
---------
Hardware & Tools--0.1%
Black & Decker Corp. .......................... 900 35,156
---------
Health Care (Diversified)--4.2%
Abbott Laboratories ........................... 700 45,894
American Home Products Corp. .................. 3,400 260,100
Bristol-Myers Squibb Co. ...................... 5,400 510,975
Johnson & Johnson ............................. 3,700 243,737
Warner-Lambert Co. ............................ 1,800 223,200
---------
1,283,906
---------
Health Care (Drugs-Major Pharmaceuticals)--4.1%
Agouron Pharmaceuticals, Inc. (b) ............. 100 2,938
Chiron Corp. (b) .............................. 1,000 17,000
Forest Laboratories, Inc. (b) ................. 300 14,794
Lilly (Eli) & Co. ............................. 2,000 139,250
Merck & Co., Inc. ............................. 5,800 616,250
Pfizer, Inc. .................................. 4,200 313,162
Schering-Plough Corp. ......................... 2,500 155,312
Watson Pharmaceuticals, Inc. (b) .............. 600 19,463
---------
1,278,169
---------
Health Care (Hospital Management)--0.9%
Columbia/HCA Healthcare Corp. (c) ............. 5,400 159,975
Health Care and Retirement Corp. (b) .......... 400 16,100
Health Management Association, Inc. Class A (b) 700 17,675
Tenet Healthcare Corp. (b) .................... 2,800 92,750
---------
286,500
---------
Health Care (Managed Care)--0.4%
Humana, Inc. (b) .............................. 1,600 33,200
United Healthcare Corp. ....................... 1,700 84,469
---------
117,669
---------
Health Care (Medical Products & Supplies)--0.5%
Bard (C.R.), Inc. ............................. 500 15,656
Bausch & Lomb, Inc. ........................... 600 23,775
Baxter International, Inc. .................... 900 45,394
Boston Scientific Corp. (b) ................... 1,800 82,575
---------
167,400
---------
Health Care (Specialized Services)--0.0%
Alza Corp. (b) ................................ 300 9,544
---------
Household Furn. & Appliances--0.2%
Leggett & Platt, Inc. ......................... 900 37,687
Whirlpool Corp. ............................... 700 38,500
---------
76,187
---------
Household Products (Non-Durables)--2.3%
Kimberly Clark Corp. .......................... 2,800 138,075
Procter & Gamble Co. .......................... 7,000 558,687
---------
696,762
---------
Housewares--0.1%
Rubbermaid, Inc. .............................. 1,400 35,000
---------
SHARES VALUE
------- ----------
Insurance (Life/Health)--0.5%
Aetna, Inc. ................................. 1,300 $ 91,731
Transamerica Corp. .......................... 300 31,950
UNUM Corp. .................................. 800 43,500
---------
167,181
---------
Insurance (Multi-Line)--3.1%
Ambac Financial Group, Inc. ................. 400 18,400
American International Group, Inc. .......... 4,000 435,000
Cigna Corp. ................................. 500 86,531
Financial Security Assurance Holdings Ltd. .. 200 9,650
Hartford Financial Services Group, Inc. ..... 700 65,494
Lincoln National Corp. ...................... 400 31,250
PMI Group, Inc. (The) ....................... 200 14,462
SAFECO Corp. ................................ 800 39,000
Travelers Group, Inc. ....................... 5,000 269,375
---------
969,162
---------
Insurance (Property-Casualty)--0.7%
Allstate Corp. .............................. 500 45,438
General Re Corp. ............................ 400 84,800
Mercury General Corp. ....................... 200 11,050
Ohio Casualty Corp. ......................... 200 8,925
St. Paul Companies, Inc. .................... 500 41,031
Travelers Property Casualty Corp. Class A ... 400 17,600
---------
208,844
---------
Insurance Brokers--0.3%
Marsh & McLennan Companies, Inc. ............ 1,000 74,563
---------
Investment Banking/Brokerage--0.1%
Edwards (A.G.), Inc. ........................ 400 15,900
---------
Iron & Steel--0.1%
Allegheny Teledyne, Inc. .................... 1,000 25,875
Nucor Corp. ................................. 200 9,663
---------
35,538
---------
Leisure Time (Products)--0.6%
Circus Circus Enterprises, Inc. (b) ......... 700 14,350
Hasbro, Inc. ................................ 1,300 40,950
MGM Grand, Inc. (b) ......................... 400 14,425
Mattel, Inc. ................................ 2,400 89,400
Mirage Resorts, Inc. (b) .................... 1,200 27,300
---------
186,425
---------
Lodging-Hotels--0.4%
Extended Stay America, Inc. (b) ............. 500 6,219
Hilton Hotels Corp. ......................... 1,700 50,575
ITT Corp. (b) ............................... 800 66,300
---------
123,094
---------
Machinery (Diversified)--0.5%
Caterpillar, Inc. ........................... 2,200 106,837
Cooper Industries, Inc. ..................... 700 34,300
Harnischfeger Industries, Inc. .............. 300 10,594
Ingersoll-Rand Co. .......................... 300 12,150
---------
163,881
---------
Manufacturing (Diversified)--2.1%
Aeroquip-Vickers, Inc. ...................... 200 9,813
AlliedSignal, Inc. .......................... 5,200 202,475
Eaton Corp. ................................. 400 35,700
Illinois Tool Works, Inc. ................... 800 48,100
Johnson Controls, Inc. ...................... 800 38,200
Tenneco, Inc. ............................... 1,800 71,100
Tyco International Ltd. ..................... 5,200 234,325
---------
639,713
---------
See Notes to Financial Statements
56
<PAGE>
ENHANCED INDEX SERIES
SHARES VALUE
------ --------
Metals Mining--0.2%
Freeport-McMoran Copper & Gold, Inc.
Class A ...................................... 1,200 $ 18,375
Oregon Metallurgical Corp. (b) ................. 300 10,013
Phelps Dodge Corp. ............................. 400 24,900
---------
53,288
---------
Natural Gas--0.4%
Consolidated Natural Gas Co. ................... 500 30,250
Enron Corp. .................................... 1,600 66,500
Western Resources, Inc. ........................ 300 12,900
---------
109,650
---------
Office Equipment & Supplies--0.0%
Symbol Technologies, Inc. ...................... 400 15,100
---------
Oil (Domestic Integrated)--0.9%
Atlantic Richfield Co. ......................... 1,700 136,212
Occidental Petroleum Corp. ..................... 1,200 35,175
Phillips Petroleum Co. ......................... 800 38,900
Pogo Producing Co. ............................. 100 2,950
Tosco Corp. .................................... 800 30,250
Unocal Corp. ................................... 600 23,288
---------
266,775
---------
Oil (International Integrated)--4.6%
Amoco Corp. .................................... 1,400 119,175
Chevron Corp. .................................. 2,800 215,600
Exxon Corp. .................................... 11,000 673,062
Mobil Corp. .................................... 3,800 274,313
Texaco, Inc. ................................... 2,600 141,375
---------
1,423,525
---------
Oil & Gas (Drilling & Equipment)--1.1%
Baker Hughes, Inc. ............................. 900 39,263
Cooper Cameron Corp. (b) ....................... 300 18,300
Diamond Offshore Drilling, Inc. ................ 400 19,250
ENSCO International, Inc. ...................... 300 10,050
Falcon Drilling Company, Inc. (b) .............. 400 14,025
Halliburton Co. ................................ 200 10,387
Input/Output, Inc. (b) ......................... 200 5,937
Noble Drilling Corp. (b) ....................... 700 21,438
Schlumberger Ltd. .............................. 2,400 193,200
Smith International, Inc. (b) .................. 200 12,275
---------
344,125
---------
Oil & Gas (Exploration & Production)--0.1%
Anadarko Petroleum Corp. ....................... 200 12,138
Union Pacific Resources Group, Inc. ............ 700 16,975
Valero Energy Corp. ............................ 300 9,431
---------
38,544
---------
Oil & Gas (Refining & Marketing)--0.1%
Ashland, Inc. .................................. 400 21,475
El Paso Natural Gas Co. ........................ 300 19,950
---------
41,425
---------
Paper & Forest Products--0.7%
Boise Cascade Corp. ............................ 400 12,100
Bowater, Inc. .................................. 300 13,331
Champion International Corp. ................... 700 31,719
Georgia-Pacific Corp. .......................... 600 36,450
Georgia-Pacific Corp. (Timber Group) (b) ....... 500 11,344
International Paper Co. ........................ 200 8,625
Louisiana-Pacific Corp. ........................ 700 13,300
Mead Corp. ..................................... 700 19,600
Weyerhaeuser Co. ............................... 1,200 58,875
---------
205,344
---------
SHARES VALUE
-------- -------
Personal Care--1.1%
Avon Products, Inc. ........................... 600 $ 36,825
Gillette Co. .................................. 2,900 291,269
---------
328,094
---------
Photography/Imaging--1.3%
Eastman Kodak Co. ............................. 2,700 164,194
Xerox Corp. ................................... 3,000 221,437
---------
385,631
---------
Publishing--0.1%
Tele-Communications TCI Ventures
Group A (b) ................................. 1,200 33,975
---------
Railroads--0.9%
Burlington Northern, Inc. ..................... 800 74,350
CSX Corp. ..................................... 1,100 59,400
Illinois Central Corp. ........................ 300 10,219
Norfolk Southern Corp. ........................ 1,900 58,544
Union Pacific Corp. ........................... 1,300 81,168
Wisconsin Central Transportation Corp. (b) .... 200 4,675
---------
288,356
---------
Restaurants--0.8%
McDonald's Corp. .............................. 4,900 233,975
---------
Retail (Building Supplies)--0.7%
Home Depot, Inc. .............................. 2,700 158,962
Lowe's Companies, Inc. ........................ 500 23,844
Sherwin-Williams Co. .......................... 600 16,650
---------
199,456
---------
Retail (Computers & Electronics)--0.1%
Circuit City Stores, Inc. ..................... 600 21,338
---------
Retail (Department Stores)--0.7%
Dillard's, Inc. Class A ....................... 700 24,675
Federated Department Stores, Inc. (b) ......... 1,400 60,287
J.C. Penney, Inc. ............................. 1,100 66,344
May Department Stores Co. ..................... 1,300 68,494
---------
219,800
---------
Retail (Drug Stores)--0.1%
General Nutrition Co., Inc. (b) ............... 500 17,000
---------
Retail (Food Chains)--0.6%
Albertson's, Inc. ............................. 100 4,738
American Stores Co. ........................... 1,600 32,900
Kroger Co. (b) ................................ 1,600 59,100
Safeway, Inc. (b) ............................. 1,500 94,875
---------
191,613
---------
Retail (General Merchandise)--2.2%
Best Buy Co., Inc. (b) ........................ 300 11,063
Corporate Express, Inc. (b) ................... 800 10,300
Dayton Hudson Corp. ........................... 1,400 94,500
Kmart Corp. (b) ............................... 2,700 31,219
Sears Roebuck & Co. ........................... 2,500 113,125
Wal-Mart Stores, Inc. ......................... 10,200 402,262
---------
662,469
---------
Retail (Specialty)--0.3%
AutoZone, Inc. (b) ............................ 1,000 29,000
Toys "R" Us, Inc. (b) ......................... 1,800 56,588
---------
85,588
---------
Retail (Specialty-Apparel)--0.1%
TJX Co., Inc. ................................. 900 30,938
---------
See Notes to Financial Statements
57
<PAGE>
ENHANCED INDEX SERIES
SHARES VALUE
----------- -------------
Savings & Loan Companies--0.2%
Ahmanson (H.F.) & Co. ....................... 400 $ 26,775
Golden West Financial Corp. ................. 200 19,563
Ocwen Financial Corp. (b) ................... 300 7,631
-----------
53,969
-----------
Services (Commercial & Consumer)--0.2%
Service Corporation International ........... 1,800 66,487
-----------
Services (Data Processing)--0.3%
Equifax, Inc. ............................... 1,100 38,981
First Data Corp. ............................ 2,200 64,350
-----------
103,331
-----------
Specialty Printing--0.1%
Donnelley (R.R.) & Sons Co. ................. 1,000 37,250
-----------
Telecommunications (Cellular/Wireless)--0.4%
AirTouch Communications, Inc. (b) ........... 2,800 116,375
-----------
Telecommunications (Long Distance)--2.5%
AT&T Corp. .................................. 5,200 318,500
MCI Communications Corp. .................... 4,300 184,094
Sprint Corp. ................................ 2,400 140,700
WorldCom, Inc. (b) .......................... 4,300 130,075
-----------
773,369
-----------
Telephone--3.7%
Ameritech Corp. ............................. 300 24,150
Bell Atlantic Corp. ......................... 2,700 245,700
BellSouth Corp. ............................. 4,200 236,513
GTE Corp. ................................... 5,200 271,700
SBC Communications, Inc. (c) ................ 5,000 366,250
-----------
1,144,313
-----------
Textiles (Apparel)--0.1%
Fruit of the Loom, Inc. Class A (b) ......... 600 15,375
Nine West Group, Inc. (b) ................... 100 2,594
-----------
17,969
-----------
Tobacco--1.9%
Philip Morris Companies, Inc. (c) ........... 12,600 570,938
-----------
Truckers--0.1%
CNF Transportation, Inc. .................... 200 7,675
Ryder System, Inc. .......................... 400 13,100
-----------
20,775
-----------
Trucks & Parts--0.0%
Cummins Engine Co., Inc. .................... 200 11,813
-----------
Utility--Electric--0.0%
Northeast Utilities ......................... 700 8,269
-----------
SHARES VALUE
----------- -------------
Utility--Water--0.0%
American Water Works, Inc. .................. 400 $ 10,925
-----------
Waste Management--0.4%
Waste Management, Inc. ...................... 4,200 115,500
Wheelabrator Technologies, Inc. ............. 500 8,031
-----------
123,531
-----------
TOTAL COMMON STOCKS
(Identified cost $27,667,300) .............................. 28,516,303
-----------
FOREIGN COMMON STOCKS--2.6%
Aluminum--0.1%
Alcan Aluminum Ltd. (Canada) ................ 1,500 41,438
-----------
Beverages (Alcoholic)--0.2%
Seagram Ltd. (Canada) ....................... 2,000 64,625
-----------
Communications Equipment--0.2%
Northern Telecom Ltd. (Canada) .............. 600 53,400
-----------
Foods--0.7%
Unilever NV (Netherlands) ................... 3,300 206,044
-----------
Metals Mining--0.1%
Inco Ltd. (Canada) .......................... 1,100 18,700
-----------
Oil (International Integrated)--1.3%
Royal Dutch Petroleum Co. ADR NY
Registered (Netherlands) .................. 7,500 406,405
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $807,870).................................. 790,612
-----------
TOTAL LONG-TERM INVESTMENTS--95.0%
(Identified cost $28,475,170)............................... 29,306,915
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- -------
SHORT-TERM OBLIGATIONS--5.7%
Commercial Paper--5.5%
Goldman Sachs 6.75%, 1/2/98 A-1+ $600 599,888
Marsh & McLennan Cos., Inc.
6.20%, 1/5/98 ................. A-1+ 695 694,521
Preferred Receivables Funding
6.60%, 1/6/98 ................. A-1 400 399,633
-----------
1,694,042
-----------
Federal Agency Securities--0.2%
U.S. Treasury Bills 5.06%, 1/29/98 (c) ...... 50 49,800
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,743,842).......................... 1,743,842
-----------
TOTAL INVESTMENTS--100.7%
(Identified cost $30,219,012)......................... 31,050,757(a)
Cash and receivables, less liabilities--(0.7%) ....... (199,385)
-----------
NET ASSETS--100.0% ..................................... $30,851,372
===========
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,066,104 and gross
depreciation of $1,239,877 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$30,224,530.
(b) Non-income producing.
(c) All or a portion segregated as collateral.
See Notes to Financial Statements
58
<PAGE>
ENHANCED INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $30,219,012) ..................... $ 31,050,757
Receivables
Fund shares sold ................................................................ 113,662
Dividends and interest .......................................................... 41,902
Investment securities sold ...................................................... 23,871
------------
Total assets ................................................................... 31,230,192
------------
Liabilities
Payables
Custodian ....................................................................... 1,251
Investment securities purchased ................................................. 346,143
Variation margin for futures contracts .......................................... 307
Investment advisory fee ......................................................... 3,151
Trustees' fee ................................................................... 2,880
Financial agent fee ............................................................. 1,480
Accrued expenses ................................................................ 23,608
------------
Total liabilities .............................................................. 378,820
------------
Net Assets ....................................................................... $ 30,851,372
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest ................................ $ 29,852,034
Undistributed net investment income ............................................. 9,237
Accumulated net realized gain ................................................... 158,289
Net unrealized appreciation ..................................................... 831,812
------------
Net Assets ....................................................................... $ 30,851,372
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization . 2,942,318
============
Net asset value and offering price per share ..................................... $ 10.49
============
</TABLE>
STATEMENT OF OPERATIONS
From inception July 15, 1997 to December 31, 1997
<TABLE>
<S> <C>
Investment Income
Dividends ............................................................... $ 174,936
Interest ................................................................ 39,297
----------
Total investment income ................................................ 214,233
----------
Expenses
Investment advisory fee ................................................. 47,974
Financial agent fee ..................................................... 6,397
Custodian ............................................................... 29,248
Professional ............................................................ 9,998
Trustees ................................................................ 9,338
Printing ................................................................ 8,186
Miscellaneous ........................................................... 725
----------
Total expenses ......................................................... 111,866
Less expenses borne by investment adviser .............................. (53,231)
----------
Net expenses ........................................................... 58,635
----------
Net investment income .................................................... 155,598
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities ......................................... 248,183
Net realized gain on futures contracts .................................. 47,858
Net change in unrealized appreciation (depreciation) on investments ..... 831,812
----------
Net gain on investments .................................................. 1,127,853
----------
Net increase in net assets resulting from operations ..................... $1,283,451
==========
</TABLE>
See Notes to Financial Statements
59
<PAGE>
ENHANCED INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
July 15, 1997 to
December 31, 1997
------------------
<S> <C>
From Operations
Net investment income ................................................................... $ 155,598
Net realized gain ....................................................................... 296,041
Net change in unrealized appreciation (depreciation) .................................... 831,812
------------
Net increase in net assets resulting from operations .................................... 1,283,451
------------
From Distributions to Shareholders
Net investment income ................................................................... (146,361)
Net realized gains ...................................................................... (137,752)
------------
Decrease in net assets from distributions to shareholders ............................... (284,113)
------------
From Share Transactions
Proceeds from sales of shares (3,153,122 shares) ........................................ 31,994,673
Net asset value of shares issued from reinvestment of distributions (27,107 shares) ..... 284,113
Cost of shares repurchased (237,911 shares) ............................................. (2,426,752)
------------
Increase in net assets from share transactions .......................................... 29,852,034
------------
Net increase in net assets .............................................................. 30,851,372
Net Assets
Beginning of period ..................................................................... 0
------------
End of period (including undistributed net investment income of $9,237) ................. $ 30,851,372
============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
7/15/97 to
12/31/97
---------------
<S> <C>
Net asset value, beginning of period .......... $ 10.00
Income from investment operations
Net investment income ........................ 0.05(2)
Net realized and unrealized gain ............. 0.54
--------
Total from investment operations ............ 0.59
--------
Less distributions
Dividends from net investment income ......... (0.05)
Dividends from net realized gains ............ (0.05)
--------
Total distributions ......................... (0.10)
--------
Change in net asset value ..................... 0.49
--------
Net asset value, end of period ................ $ 10.49
========
Total return .................................. 5.83%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $30,851
Ratio to average net assets of:
Operating expenses ........................... 0.55%(1)
Net investment income ........................ 1.46%(1)
Portfolio turnover rate ....................... 9%(3)
Average commission rate paid(4) ............... $0.0293
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.02
per share.
(3) Not annualized.
(4) 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
60
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
Note 1--Organization
The Phoenix Edge Series Fund (the "Fund") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940,
as amended, as an open-end management investment company. The Fund is
comprised of the Money Market, Growth, Multi-Sector Fixed Income, Strategic
Allocation, International, Balanced, Real Estate Securities ("Real Estate"),
Strategic Theme, Aberdeen New Asia, and Research Enhanced Index ("Enhanced
Index") Series. The Fund was established as part of the December 8, 1986
reorganization of the Phoenix Home Life Variable Accumulation Account (the
Account) from a management investment company to a unit investment trust
under the Investment Company Act of 1940. The Fund is organized with Series
which are available only to the sub-accounts of the Phoenix Home Life
Variable Accumulation Account, the Phoenix Home Life Variable Universal Life
Account, the PHL Variable Accumulation Account, the Phoenix Life and Annuity
Variable Universal Life Account, and the Phoenix Home Life Separate Accounts
B, C, and D.
Each Series has distinct investment objectives. The Money Market Series
seeks to provide maximum current income consistent with capital preservation
and liquidity. The Growth Series seeks to achieve intermediate and long-term
growth of capital, with income as a secondary consideration. The
Multi-Sector Fixed Income Series seeks to provide long-term total return by
investing in a diversified portfolio of high yield and high quality fixed
income securities. The Strategic Allocation Series seeks to realize as high
a level of total rate of return over an extended period of time as is
considered consistent with prudent investment risk by investing in three
market segments; stocks, bonds and money market instruments. The
International Series seeks as its investment objective a high total return
consistent with reasonable risk by investing primarily in an internationally
diversified portfolio of equity securities. The Balanced Series seeks to
provide reasonable income, long-term growth and conservation of capital. The
Real Estate Series seeks to achieve capital appreciation and income with
approximately equal emphasis through investments in real estate investment
trusts and companies that operate, manage, develop or invest in real estate.
The Strategic Theme Series seeks long-term appreciation of capital by
investing in securities that the adviser believes are well positioned to
benefit from cultural, demographic, regulatory, social or technological
changes worldwide. The Aberdeen New Asia Series seeks to provide long-term
capital appreciation by investing primarily in diversified equity securities
of issuers organized and principally operating in Asia, excluding Japan. The
Enhanced Index Series seeks high total return by investing in a broadly
diversified portfolio of equity securities of large and medium
capitalization companies within market sectors reflected in the Standard &
Poor's 500 Composite Stock Price Index.
Note 2--Significant Accounting Policies
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 their
fair value as determined in good faith by or under the direction of the
Trustees.
The Money Market Series uses the amortized cost method of security valuation
which, in the opinion of the Trustees, represents the fair value of the
particular security. The Trustees monitor the deviations between the Series'
net asset value per share as determined by using available market quotations
and its amortized cost per share. If the deviation exceeds 1/2 of 1%, the
Board of Trustees will consider what action, if any, should be initiated to
provide fair valuation. The Series attempts to maintain a constant net asset
value of $10 per share.
B. Security Transactions and Related Income
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date, or in the case of certain foreign securities, as soon as
the Fund is notified. The Fund does not amortize premiums except for the
Money Market Series, but does amortize discounts using the effective
interest method. Realized gains and losses are determined on the identified
cost basis.
C. Income Taxes
Each of the Series is treated as a separate taxable entity. It is the policy
of each Series to comply with the requirements of the Internal Revenue Code,
applicable to regulated investment companies, and to distribute all of its
taxable income to its shareholders. In addition, each Series intends to
distribute an amount sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision for federal income taxes
or excise taxes has been made.
D. Distributions to Shareholders
Distributions are recorded by each Series on the ex-dividend date and all
distributions are reinvested into the Fund. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted
61
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
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.
F. Forward Currency Contracts
Each Series may enter into forward currency contracts in conjunction with
the planned purchase or sale of foreign denominated securities in order to
hedge the U.S. dollar cost or proceeds. Forward currency contracts involve,
to varying degrees, elements of market risk in excess of the amount
recognized in the statement of assets and liabilities. Risks arise from the
possible movements in foreign exchange rates or if the counterparty does not
perform under the contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency
traders and their customers. The contract is marked-to-market daily and the
change in market value is recorded by the Series as an unrealized gain (or
loss). When the contract is closed or offset with the same counterparty, the
Series records a realized gain (or loss) equal to the change in the value of
the contract when it was opened and the value at the time it was closed or
offset.
G. Futures Contracts
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. A Series may enter into financial
futures contracts as a hedge against anticipated changes in the market value
of their portfolio securities. Upon entering into a futures contract, the
Series is required to pledge to the broker an amount of cash and/or
securities equal to the "initial margin" requirements of the futures
exchange on which the contract is traded. Pursuant to the contract, the
Series agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in the value of the contract. Such receipts or
payments are known as variation margins and are recorded by the Series as
unrealized gains or losses. When the contract is closed, the Series records
a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The potential risk to the Series is that the change in value of the futures
contract may not correspond to the change in value of the hedged
instruments.
H. Options
Each Series may write covered options or purchase options contracts for the
purpose of hedging against changes in the market value of the underlying
securities or foreign currencies.
Each Series will realize a gain or loss upon the expiration or closing of
the option transaction. Gains and losses on written options are reported
separately in the Statement of Operations. When a written option is
exercised, the proceeds on sales or amounts paid are adjusted by the amount
of premium received. Options written are reported as a liability in the
Statement of Assets and Liabilities and subsequently marked-to-market to
reflect the current value of the option. The risk associated with written
options is that the change in value of options contracts may not correspond
to the change in value of the hedged instruments. In addition, losses may
arise from changes in the value of the underlying instruments, or if a
liquid secondary market does not exist for the contracts.
Each Series may purchase options which are included in the Series' Schedule
of Investments and subsequently marked-to-market to reflect the current
value of the option. When a purchased option is exercised, the cost of the
security is adjusted by the amount of premium paid. The risk associated with
purchased options is limited to the premium paid.
I. Expenses
Expenses incurred by the Fund with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation
method can be more fairly made.
J. When-Issued and Delayed Delivery Transactions
Each Series may engage in when-issued or delayed delivery transactions. The
Series record when-issued securities on the trade date and maintain
collateral for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis begin earning interest on the
settlement date.
K. Repurchase Agreements
A repurchase agreement is a transaction where a Series acquires a security
for cash and obtains a simultaneous commitment from the seller to repurchase
the security at an agreed upon price and date. The Series, through its
custodian, takes possession of
62
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
securities collateralizing the repurchase agreement. The collateral is
marked to market daily to ensure that the market value of the underlying
assets remains sufficient to protect the Series in the event of default by
the seller. If the seller defaults and the value of the collateral declines
or, if the seller enters insolvency proceedings, realization of collateral
may be delayed or limited.
Note 3--Investment Advisory Fees and Related Party Transactions
As compensation for its advisory services to the Fund, Phoenix Investment
Counsel, Inc. ("PIC"), an indirect majority-owned subsidiary of Phoenix Home
Life Mutual Insurance Company ("PHL") is entitled to a fee, based upon the
following annual rates as a percentage of the average daily net assets of
each separate Series listed below:
<TABLE>
<CAPTION>
Rate for first Rate for next Rate for excess
Series $250 million $250 million over $500 million
- ------------------------------------- ---------------- --------------- ------------------
<S> <C> <C> <C>
Money Market ...................... 0.40% 0.35% 0.30%
Multi-Sector Fixed Income ......... 0.50 0.45 0.40
Balanced .......................... 0.55 0.50 0.45
Strategic Allocation .............. 0.60 0.55 0.50
Growth ............................ 0.70 0.65 0.60
International ..................... 0.75 0.70 0.65
Strategic Theme ................... 0.75 0.70 0.65
Enhanced Index .................... 0.45 0.45 0.45
</TABLE>
Pursuant to a subadvisory agreement with the Fund, PIC delegates certain
investment decisions and research functions with respect to the Enhanced
Index Series to J.P. Morgan Investment Management, Inc. ("J.P. Morgan" or
"subadvisor") for which it is paid a fee by PIC. In accordance with the
subadvisory agreement between the Fund and J.P. Morgan, J.P. Morgan is paid
a monthly fee at the annual rate of 0.25% of the average aggregate daily net
asset values of the Enhanced Index Series up to $100 million; and 0.20% of
such value in excess of $100 million.
The investment adviser for the Real Estate Series through December 31, 1997,
is Phoenix Realty Securities, Inc. ("PRS"). PRS is an indirect, wholly-owned
subsidiary of PHL. For its services, PRS is entitled to a fee at an annual
rate of 0.75% of the average daily net assets for the first $1 billion.
Pursuant to a Sub-Advisory Agreement with the Series, PRS delegates certain
investment decisions and research functions to Duff & Phelps Investment
Management Co. ("DPIM"), a subsidiary of Phoenix Duff & Phelps, ("PD&P").
PD&P is a majority owned subsidiary of PHL. For its services, DPIM is paid a
fee by PRS equal to 0.45% of the average daily net assets of the Real Estate
Series for the first $1 billion. Formerly, ABKB/LaSalle Securities Limited
Partnership ("ABKB") served as sub-adviser for the Real Estate Series.
Effective January 1, 1998, DPIM will serve as the investment adviser for the
Real Estate Series.
Phoenix-Aberdeen International Advisors, LLC ("PAIA") serves as the
investment adviser to the Aberdeen New Asia Series. PAIA is a joint venture
between PM Holdings, Inc., a direct subsidiary of PHL, and Aberdeen Fund
Managers, Inc. ("Aberdeen"), a wholly-owned subsidiary of Aberdeen Trust
PLC. PAIA is entitled to a fee, at an annual rate of 1.00% of the average
daily net assets of the Aberdeen New Asia Series. Pursuant to Sub-advisory
agreements, PAIA delegates certain investment decisions and functions to
other entities. PIC receives a fee of 0.30% of the average daily net assets
of the Aberdeen New Asia Series from PAIA for providing research and other
domestic advisory services, as needed. In addition, PAIA also pays a
sub-advisory fee to Aberdeen of 0.40% of the average daily net assets of the
Aberdeen New Asia Series for implementing certain portfolio transactions and
providing research and other services.
Each Series (except the International, Real Estate, Strategic Theme,
Aberdeen New Asia and Enhanced Index Series) pays a portion or all of its
other operating expenses (not including management fee, interest, taxes,
brokerage fees and commissions), up to 0.15% of its average net assets. The
International, Real Estate, Strategic Theme, Aberdeen New Asia and Enhanced
Index Series pay other operating expenses up to 0.40%, 0.25%, 0.25%, 0.25%
and 0.10%, respectively, of its average net assets. Expenses above these
limits are paid by the Advisers, PIC, PRS, PAIA and/or PHL and/or PHL
Variable Insurance Company.
As Financial Agent to the Fund and to each Series, Phoenix Equity Planning
Corporation ("PEPCO"), an indirect majority-owned subsidiary of PHL,
receives a fee at an annual rate of 0.06% of the average daily net assets of
each Series for bookkeeping, administrative and pricing services.
At December 31, 1997, PHL and affiliates held shares in the Phoenix Edge
Series Fund and/or in the underlying unit investment trusts which had the
following aggregate value:
Growth Series .................... $ 7,997,177
Real Estate Series ............... 8,148,788
Aberdeen New Asia Series ......... 1,998,699
Enhanced Index Series ............ 15,783,780
63
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
Note 4--Purchases and Sales of Securities
Purchases and sales of securities during the year ended December 31, 1997
(excluding U.S. Government securities, short-term securities, options
written and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
----------------- -----------------
<S> <C> <C>
Growth Series ............................ $3,619,739,680 $3,651,711,268
Multi-Sector Fixed Income Series ......... 173,980,334 126,118,303
Strategic Allocation Series .............. 1,003,405,070 1,029,003,699
International Series ..................... 328,125,305 314,229,483
Balanced Series .......................... 297,177,203 293,887,898
Real Estate Series ....................... 37,529,880 15,045,654
Strategic Theme Series ................... 210,479,187 200,137,869
Aberdeen New Asia Series ................. 6,144,524 3,184,519
Enhanced Index Series .................... 30,496,809 2,269,834
</TABLE>
There were no purchases or sales of such securities in the Money Market
Series.
Purchases and sales of long-term U.S. Government securities during the year
ended December 31, 1997 aggregated the following:
Purchases Sales
--------------- ---------------
Multi-Sector Fixed Income Series ......... $105,010,870 $113,190,039
Strategic Allocation Series .............. 224,574,984 213,938,456
Balanced Series .......................... 52,738,999 75,575,712
There were no purchases or sales of long-term U.S. Government securities in
the Money Market, Growth, International, Real Estate, Strategic Theme,
Aberdeen New Asia or Enhanced Index Series.
At December 31, 1997, the Enhanced Index Series had entered into futures
contracts as follows:
<TABLE>
<CAPTION>
Value of
Number Contracts Market Net
of when Value of Unrealized
Description Contracts Opened Contracts Appreciation
- ---------------------------------------------------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Standard & Poor's 500 Index--March, '98 (Long)......... 5 $1,223,808 $1,223,875 $67
</TABLE>
Written call option activity for the year ended December 31, 1997
aggregated the following:
<TABLE>
<CAPTION>
Strategic Allocation Series Balanced Series Strategic Theme Series
--------------------------- ----------------------- ----------------------
# of Amount # of Amount # of Amount
Options of Premiums Options of Premiums Options of Premiums
----------- --------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at December 31, 1996 ......... -- $ -- -- $ -- -- $ --
Options written .................................. 5,299 1,543,694 1,088 164,786 40 33,879
Options canceled in closing purchase transactions (5,149) (1,503,833) (210) (62,250) (40) (33,879)
Options expired .................................. -- -- (516) (44,049) -- --
Options exercised ................................ (150) (39,861) (362) (58,487) -- --
------ ------------ ----- --------- --- ---------
Options outstanding at December 31, 1997 ......... -- $ -- -- $ -- -- $ --
====== ============ ===== ========= === =========
</TABLE>
Note 5--Forward Currency Contracts
At December 31, 1997, the International Series had entered into various
forward currency contracts which contractually obligate the Series to
deliver currencies at specified dates. Open contracts were as follows:
<TABLE>
<CAPTION>
Net
In Unrealized
Contracts Exchange Settlement Appreciation
to Deliver For Date Value (Depreciation)
- --------------------- ----------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
DM 23,000,000 US 12,954,462 3/2/98 $12,836,279 $118,183
UK 6,500,000 US 10,703,550 3/2/98 10,661,116 42,434
FL 15,200,000 US 7,594,307 3/2/98 7,526,703 67,604
FF 107,100,000 US 18,024,903 3/2/98 17,854,317 170,586
--------
$398,807
=========
</TABLE>
DM = German Deutschemark
UK = British Pounds Sterling
FL = Dutch Florin
FF = French Franc
US = U.S. Dollar
64
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1997
Note 6--Credit Risk
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of these investments and the income they generate, as well as a
fund's ability to repatriate such amounts.
Note 7--Loan Agreements
The Fund may invest in direct debt instruments which are interests in
amounts owned by a corporate, governmental, or other borrower to lenders or
lending syndicates. The Fund's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from
third parties. A loan is often administered by a bank or other financial
institution (the lender) that acts as agent for all holders. The agent
administers the terms of the loan, as specified in the loan agreement. When
investing in a loan participation, the Fund has the right to receive
payments of principal, interest and any fees to which it is entitled only
from the lender selling the loan agreement and only upon receipt by the
lender of payments from the borrower. The Fund generally has no right to
enforce compliance with the terms of the loan agreement with the borrower.
As a result, the Fund may be subject to the credit risk of both the borrower
and the lender that is selling the loan agreement. For loans which the Fund
is a participant, the Fund may not sell its participation in the loan
without the lender's prior consent. When the Fund purchases assignments from
lenders it acquires direct rights against the borrower on the loan. Direct
indebtedness of emerging countries involves a risk that the government
entities responsible for the repayment of the debt may be unable, or
unwilling to pay the principal and interest when due.
Note 8--Reclassification of Capital Accounts
In accordance with accounting pronouncements, the Series of the Fund have
recorded several reclassifications in the capital accounts. As of December
31, 1997, the Series recorded the following reclassifications to increase
(decrease) the accounts listed below:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gains/(losses) interest
---------------- ---------------- --------------
<S> <C> <C> <C>
Growth ............................ $ (19,655) $ 19,655 $ --
Multi-Sector Fixed Income ......... 187,722 (18,867) (168,855)
Health Care (Diversified) ......... 1.7 168,855 --
Strategic Allocation .............. 7,524 (7,524) --
International ..................... (1,568,096) 1,568,096 --
Balanced .......................... 15,200 (15,200) --
Aberdeen New Asia ................. (12,179) 12,179 --
</TABLE>
Note 9--Capital Loss Carryovers
At December 31, 1997, the Aberdeen New Asia Series had available for federal
income tax purposes unused capital losses of $143,419 expiring in 2005. In
addition, the Strategic Theme Series was able to utilize losses deferred in
the prior year against current year capital gains in the amount of $396,065.
Under current tax law, capital losses realized after October 31, 1997 may be
deferred and treated as occurring on the first day of the following tax
year. For the calendar year ended December 31, 1997 the Growth,
International, Strategic Theme, and Aberdeen New Asia Series elected to
defer $1,144, $770,654, $1,280,577 and $379,802, respectively, in losses
occurring between November 1, 1997 and December 31, 1997. In addition, the
Growth and Aberdeen New Asia Series were able to utilize losses deferred in
the prior year against current year capital gains in the amount of $613 and
$1,755, respectively.
- --------------------------------------------------------------------------------
TAX INFORMATION NOTICE (Unaudited)
For the fiscal year ended December 31, 1997, the following Series
distributed long-term capital gains dividends as follows:
Growth Series ............................ $91,409,290
Multi-Sector Fixed Income Series ......... 1,909,193
Strategic Allocation Series .............. 1,365,642
International Series ..................... 14,812,671
Balanced Series .......................... 5,139,202
Real Estate Series ....................... 936,899
65
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [LOGO]
To the Shareholders and Trustees of
The Phoenix Edge Series Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Money Market Series, Growth Series, Multi-Sector Fixed Income Series,
Strategic Allocation Series (formerly Total Return Series), International
Series, Balanced Series, Real Estate Series, Strategic Theme Series, Aberdeen
New Asia Series and Enhanced Index Series (constituting the Phoenix Edge Series
Fund, hereafter referred to as the "Fund") at December 31, 1997, and the
results of each of their operations, the changes in each of their net assets
and the financial highlights for each of the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the 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, 1997 by
correspondence with the custodians and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
February 19, 1998
<PAGE>
THE PHOENIX EDGE SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
Board of Trustees
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
James D. Wehr, Senior Vice President
Hugh Young, Senior Vice President
David L. Albrycht, Vice President
Curtiss O. Barrows, Vice President
Mary E. Canning, Vice President
Steven L. Colton, Vice President
Timothy Devlin, Vice President
Jeanne H. Dorey, Vice President
John D. Kattar, Vice President
William E. Keen, III, Vice President
David Lui, Vice President
William R. Moyer, Vice President
Scott C. Noble, Vice President
Barbara Rubin, Vice President
Leonard J. Saltiel, Vice President
Julie L. Sapia, Vice President
Michael Schatt, Vice President
Dorothy J. Skaret, Vice President
Piere G. Trinque, Vice President
James Wiess, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Advisers
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
Phoenix Realty Securities, Inc.
(Real Estate Securities Series)
38 Prospect Street
Hartford, Connecticut 06115-0479
Phoenix-Aberdeen International Advisors, LLC
(Aberdeen New Asia Series)
56 Prospect Street
Hartford, Connecticut 06115-0480
Custodians
The Chase Manhattan Bank
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
(Aberdeen New Asia Series and International Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust Company
(Real Estate Securities Series and
Research Enhanced Index Series)
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
This report is not authorized for distribution to prospective investors in The
Phoenix Edge Series Fund unless preceded or accompanied by an effective
Prospectus which includes information concerning the Fund's Record and other
pertinent information.
- --------------------------------------------------------------------------------
<PAGE>
THIS PAGE LEFT INTENTIONALLY BLANK.
<PAGE>
THIS PAGE LEFT INTENTIONALLY BLANK.
<PAGE>
[PHOENIX LOGO]PHOENIX -------------------
BULK RATE MAIL
U.S. POSTAGE
PAID
SPRINGFIELD, MA
PERMIT NO. 444
------------------
PHL Variable Insurance Company and
Phoenix Home Life Mutual Insurance Company
101 Munson Street
P.O. Box 810
Greenfield, MA 01302-0810
OL2531A (2/98) (Copyright) 1998 Phoenix Home Life Mutual Insurance Company
700.04
[RECYCLE LOGO] Printed on Recycled Paper.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> PHOENIX EDGE MONEY MARKET SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 122594
<INVESTMENTS-AT-VALUE> 122594
<RECEIVABLES> 4045
<ASSETS-OTHER> 61
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 126700
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93
<TOTAL-LIABILITIES> 93
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 126607
<SHARES-COMMON-STOCK> 12661
<SHARES-COMMON-PRIOR> 13136
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 126607
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6936
<OTHER-INCOME> 0
<EXPENSES-NET> (674)
<NET-INVESTMENT-INCOME> 6262
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6262
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6262)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35987
<NUMBER-OF-SHARES-REDEEMED> (37089)
<SHARES-REINVESTED> 626
<NET-CHANGE-IN-ASSETS> (4754)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 494
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 674
<AVERAGE-NET-ASSETS> 123513
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> PHOENIX EDGE GROWTH SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1373918
<INVESTMENTS-AT-VALUE> 1498696
<RECEIVABLES> 14186
<ASSETS-OTHER> 90
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1512972
<PAYABLE-FOR-SECURITIES> 5594
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1810
<TOTAL-LIABILITIES> 7404
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1330807
<SHARES-COMMON-STOCK> 78569
<SHARES-COMMON-PRIOR> 65391
<ACCUMULATED-NII-CURRENT> 876
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 49107
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 124778
<NET-ASSETS> 1505568
<DIVIDEND-INCOME> 13104
<INTEREST-INCOME> 5907
<OTHER-INCOME> 0
<EXPENSES-NET> (10190)
<NET-INVESTMENT-INCOME> 8821
<REALIZED-GAINS-CURRENT> 208505
<APPREC-INCREASE-CURRENT> 44028
<NET-CHANGE-FROM-OPS> 261354
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8665)
<DISTRIBUTIONS-OF-GAINS> (236147)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12503
<NUMBER-OF-SHARES-REDEEMED> (12075)
<SHARES-REINVESTED> 12751
<NET-CHANGE-IN-ASSETS> 270173
<ACCUMULATED-NII-PRIOR> 739
<ACCUMULATED-GAINS-PRIOR> 76729
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8659
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10190
<AVERAGE-NET-ASSETS> 1380669
<PER-SHARE-NAV-BEGIN> 18.89
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 3.70
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (3.43)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.16
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> PHOENIX EDGE MULTI-SECTOR FIXED INCOME SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 184010
<INVESTMENTS-AT-VALUE> 188815
<RECEIVABLES> 3260
<ASSETS-OTHER> 55
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 192130
<PAYABLE-FOR-SECURITIES> 330
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 173
<TOTAL-LIABILITIES> 503
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 185251
<SHARES-COMMON-STOCK> 18455
<SHARES-COMMON-PRIOR> 14026
<ACCUMULATED-NII-CURRENT> 336
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1234
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4806
<NET-ASSETS> 191627
<DIVIDEND-INCOME> 156
<INTEREST-INCOME> 12558
<OTHER-INCOME> 0
<EXPENSES-NET> (1046)
<NET-INVESTMENT-INCOME> 11668
<REALIZED-GAINS-CURRENT> 4695
<APPREC-INCREASE-CURRENT> 391
<NET-CHANGE-FROM-OPS> 16754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11946)
<DISTRIBUTIONS-OF-GAINS> (4694)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8084
<NUMBER-OF-SHARES-REDEEMED> (5265)
<SHARES-REINVESTED> 1610
<NET-CHANGE-IN-ASSETS> 46583
<ACCUMULATED-NII-PRIOR> 427
<ACCUMULATED-GAINS-PRIOR> 1251
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 805
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1059
<AVERAGE-NET-ASSETS> 160968
<PER-SHARE-NAV-BEGIN> 10.34
<PER-SHARE-NII> 0.75
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.77)
<PER-SHARE-DISTRIBUTIONS> (0.28)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.38
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> PHOENIX EDGE STRATEGIC ALLOCATION SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 401598
<INVESTMENTS-AT-VALUE> 422469
<RECEIVABLES> 9284
<ASSETS-OTHER> 2671
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 434424
<PAYABLE-FOR-SECURITIES> 5037
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 385
<TOTAL-LIABILITIES> 5422
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 392784
<SHARES-COMMON-STOCK> 30382
<SHARES-COMMON-PRIOR> 27418
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15315
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20871
<NET-ASSETS> 429002
<DIVIDEND-INCOME> 2775
<INTEREST-INCOME> 8530
<OTHER-INCOME> 0
<EXPENSES-NET> (2862)
<NET-INVESTMENT-INCOME> 8443
<REALIZED-GAINS-CURRENT> 63639
<APPREC-INCREASE-CURRENT> 3449
<NET-CHANGE-FROM-OPS> 75531
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8833)
<DISTRIBUTIONS-OF-GAINS> (52948)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3408
<NUMBER-OF-SHARES-REDEEMED> (4807)
<SHARES-REINVESTED> 4364
<NET-CHANGE-IN-ASSETS> 54758
<ACCUMULATED-NII-PRIOR> 415
<ACCUMULATED-GAINS-PRIOR> 4632
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2344
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2862
<AVERAGE-NET-ASSETS> 403522
<PER-SHARE-NAV-BEGIN> 13.65
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 2.46
<PER-SHARE-DIVIDEND> (0.33)
<PER-SHARE-DISTRIBUTIONS> (1.98)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.12
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> PHOENIX EDGE INTERNATIONAL SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 163202
<INVESTMENTS-AT-VALUE> 193771
<RECEIVABLES> 806
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 194587
<PAYABLE-FOR-SECURITIES> 6
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 472
<TOTAL-LIABILITIES> 478
<SENIOR-EQUITY> 0
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<OVERDISTRIBUTION-GAINS> 0
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<EXPENSES-NET> (1935)
<NET-INVESTMENT-INCOME> 1372
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<APPREC-INCREASE-CURRENT> 5898
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<DISTRIBUTIONS-OF-INCOME> (2639)
<DISTRIBUTIONS-OF-GAINS> (18496)
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<NUMBER-OF-SHARES-SOLD> 3309
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<NET-CHANGE-IN-ASSETS> 21441
<ACCUMULATED-NII-PRIOR> 1391
<ACCUMULATED-GAINS-PRIOR> 4615
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<GROSS-ADVISORY-FEES> 1435
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<GROSS-EXPENSE> 1935
<AVERAGE-NET-ASSETS> 191303
<PER-SHARE-NAV-BEGIN> 14.52
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<EXPENSE-RATIO> 1.01
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> PHOENIX EDGE BALANCED SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<TOTAL-ASSETS> 236702
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<TOTAL-LIABILITIES> 5522
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 210297
<SHARES-COMMON-STOCK> 18861
<SHARES-COMMON-PRIOR> 16942
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 53
<ACCUMULATED-NET-GAINS> 9048
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11782
<NET-ASSETS> 231180
<DIVIDEND-INCOME> 1284
<INTEREST-INCOME> 6557
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<EXPENSES-NET> (1528)
<NET-INVESTMENT-INCOME> 6313
<REALIZED-GAINS-CURRENT> 28929
<APPREC-INCREASE-CURRENT> 398
<NET-CHANGE-FROM-OPS> 35640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6627
<DISTRIBUTIONS-OF-GAINS> 25654
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2522
<NUMBER-OF-SHARES-REDEEMED> (3214)
<SHARES-REINVESTED> 2612
<NET-CHANGE-IN-ASSETS> 26895
<ACCUMULATED-NII-PRIOR> 351
<ACCUMULATED-GAINS-PRIOR> 5789
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1194
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1528
<AVERAGE-NET-ASSETS> 215870
<PER-SHARE-NAV-BEGIN> 12.06
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> 1.73
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> (1.51)
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<PER-SHARE-NAV-END> 12.26
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> PHOENIX EDGE REAL ESTATE SECURITIES SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 45361
<INVESTMENTS-AT-VALUE> 54818
<RECEIVABLES> 228
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55049
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390
<TOTAL-LIABILITIES> 390
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45076
<SHARES-COMMON-STOCK> 3336
<SHARES-COMMON-PRIOR> 1586
<ACCUMULATED-NII-CURRENT> 81
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 45
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9457
<NET-ASSETS> 54659
<DIVIDEND-INCOME> 1686
<INTEREST-INCOME> 107
<OTHER-INCOME> 0
<EXPENSES-NET> (391)
<NET-INVESTMENT-INCOME> 1402
<REALIZED-GAINS-CURRENT> 1766
<APPREC-INCREASE-CURRENT> 5042
<NET-CHANGE-FROM-OPS> 8210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1330)
<DISTRIBUTIONS-OF-GAINS> (1844)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2797
<NUMBER-OF-SHARES-REDEEMED> (1242)
<SHARES-REINVESTED> 196
<NET-CHANGE-IN-ASSETS> 31949
<ACCUMULATED-NII-PRIOR> 9
<ACCUMULATED-GAINS-PRIOR> 123
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 293
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 417
<AVERAGE-NET-ASSETS> 39048
<PER-SHARE-NAV-BEGIN> 14.32
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 2.62
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> (0.58)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.38
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> PHOENIX EDGE STRATEGIC THEME SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 49500
<INVESTMENTS-AT-VALUE> 52395
<RECEIVABLES> 27
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52423
<PAYABLE-FOR-SECURITIES> 4722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 81
<TOTAL-LIABILITIES> 4803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46330
<SHARES-COMMON-STOCK> 4208
<SHARES-COMMON-PRIOR> 2365
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1605)
<ACCUM-APPREC-OR-DEPREC> 2895
<NET-ASSETS> 47620
<DIVIDEND-INCOME> 174
<INTEREST-INCOME> 372
<OTHER-INCOME> 0
<EXPENSES-NET> (385)
<NET-INVESTMENT-INCOME> 161
<REALIZED-GAINS-CURRENT> 4294
<APPREC-INCREASE-CURRENT> 1374
<NET-CHANGE-FROM-OPS> 5829
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (161)
<DISTRIBUTIONS-OF-GAINS> (5461)
<DISTRIBUTIONS-OTHER> (23)
<NUMBER-OF-SHARES-SOLD> 2326
<NUMBER-OF-SHARES-REDEEMED> (987)
<SHARES-REINVESTED> 504
<NET-CHANGE-IN-ASSETS> 21648
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (438)
<GROSS-ADVISORY-FEES> 289
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 439
<AVERAGE-NET-ASSETS> 38536
<PER-SHARE-NAV-BEGIN> 10.98
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 1.82
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> (1.47)
<RETURNS-OF-CAPITAL> (0.01)
<PER-SHARE-NAV-END> 11.32
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 09
<NAME> PHOENIX EDGE ABERDEEN NEW ASIA SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 14123
<INVESTMENTS-AT-VALUE> 9723
<RECEIVABLES> 297
<ASSETS-OTHER> 65
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10085
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68
<TOTAL-LIABILITIES> 68
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15095
<SHARES-COMMON-STOCK> 1555
<SHARES-COMMON-PRIOR> 1163
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (160)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (514)
<ACCUM-APPREC-OR-DEPREC> (4404)
<NET-ASSETS> 10017
<DIVIDEND-INCOME> 352
<INTEREST-INCOME> 55
<OTHER-INCOME> (34)
<EXPENSES-NET> (162)
<NET-INVESTMENT-INCOME> 211
<REALIZED-GAINS-CURRENT> (526)
<APPREC-INCREASE-CURRENT> (4382)
<NET-CHANGE-FROM-OPS> (4697)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (355)
<DISTRIBUTIONS-OF-GAINS> (84)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1189
<NUMBER-OF-SHARES-REDEEMED> (863)
<SHARES-REINVESTED> 67
<NET-CHANGE-IN-ASSETS> (1568)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7
<OVERDISTRIB-NII-PRIOR> (4)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 130
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 260
<AVERAGE-NET-ASSETS> 12977
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> (3.36)
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> (0.05)
<PER-SHARE-NAV-END> 6.44
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> PHOENIX EDGE ENHANCED INDEX SERIES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-15-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 30219
<INVESTMENTS-AT-VALUE> 31051
<RECEIVABLES> 179
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31230
<PAYABLE-FOR-SECURITIES> 346
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 33
<TOTAL-LIABILITIES> 379
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29852
<SHARES-COMMON-STOCK> 2942
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 9
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 158
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 832
<NET-ASSETS> 30851
<DIVIDEND-INCOME> 175
<INTEREST-INCOME> 39
<OTHER-INCOME> 0
<EXPENSES-NET> (58)
<NET-INVESTMENT-INCOME> 156
<REALIZED-GAINS-CURRENT> 296
<APPREC-INCREASE-CURRENT> 832
<NET-CHANGE-FROM-OPS> 1284
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (146)
<DISTRIBUTIONS-OF-GAINS> (138)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3153
<NUMBER-OF-SHARES-REDEEMED> (238)
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 30851
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 112
<AVERAGE-NET-ASSETS> 23025
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.49
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
